-----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, QukuY416F+9BWLzX0UODpXAtsj5LbnVDPFf/s5TRc0E4m5naTiR8P4IDwQjtuEc4 l/VB+ubP02b7jq8I8oQtng== 0000950162-00-001381.txt : 20001228 0000950162-00-001381.hdr.sgml : 20001228 ACCESSION NUMBER: 0000950162-00-001381 CONFORMED SUBMISSION TYPE: S-1 PUBLIC DOCUMENT COUNT: 17 FILED AS OF DATE: 20001227 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MASCOTECH INC 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: S-1 SEC ACT: SEC FILE NUMBER: 333-52798 FILM NUMBER: 796347 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: MASCO INDUSTRIES INC DATE OF NAME CHANGE: 19930629 S-1 1 0001.txt FORM S-1 As filed with the Securities and Exchange Commission on December 27, 2000 Registration Statement No. 333- ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM S-1 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 -------------------- MASCOTECH, INC. (Exact name of registrant as specified in its charter) -------------
Delaware 3714 38-2513957 (State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer incorporation or organization) Classification Code Number) Identification Number)
Approximate date of commencement of proposed sale to the public: From time to time after this registration statement becomes effective. If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. [X] If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the offering. [ ] If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. [ ]
CALCULATION OF REGISTRATION FEE ================================================================================================================================= Amount to be Proposed Maximum Proposed Maximum Amount of Title of Securities to be Registered Offering Price Per Share (1) Aggregate Offering Price (1) Registration Fee Registered - --------------------------------------------------------------------------------------------------------------------------------- Common Stock, par value $1.00 per share 464,785 shares $16.90 $7,854,867 $1,964 =================================================================================================================================
(1) Estimated pursuant to Rule 457 solely for the purpose of calculating the amount of the registration fee. The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the registration statement shall become effective on such date as the Commission acting pursuant to Section 8(a) may determine. ================================================================================ The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and we are not soliciting an offer to buy these securities in any state where the offer or sale is not permitted. SUBJECT TO COMPLETION, DATED DECEMBER 27, 2000 PROSPECTUS 464,785 Shares MASCOTECH, INC. Common Stock -------------------- The selling stockholders named in this prospectus under the heading "Selling Stockholders" are offering for sale, from time to time, up to 464,785 shares of common stock of MascoTech, Inc. There is no public market for our common stock and none is expected to develop for any shares offered hereby for the foreseeable future. Our common stock traded on The New York Stock Exchange until November 28, 2000, when, as a result of a recapitalization merger, our common stock was delisted from The New York Stock Exchange. Purchasers of common stock hereby must be prepared to hold their shares indefinitely and be prepared to bear the risk of loss of their entire investment. This prospectus has been prepared in accordance with an agreement between MascoTech and the selling stockholders. Each selling stockholder, acting as principal for its own account or in brokerage transactions at prevailing market prices, if any, or in transactions at negotiated prices, may offer its shares for sale. We will not receive any proceeds from the sale of the shares by these selling stockholders, but will pay the registration fee and our own expenses for registering the shares to be sold. The selling stockholders will receive all of the proceeds from the sale of their shares and will pay underwriting discounts and selling commissions, if any, applicable to any sale of shares covered by this prospectus. It is not possible at the present time to determine the price to the public in any sale of the shares by the selling stockholders and each selling stockholder reserves the right to accept or reject, in whole or in part, any proposed purchase of shares. Accordingly, the public offering price, the underwriting discounts or selling commissions, if any, applicable to the sale of the shares covered by this prospectus and the net proceeds to the selling stockholders will be determined at the time of such sale by the selling stockholders. Investing in our common stock involves substantial risks. See "Risk Factors" beginning on page 5 to read about factors that you should consider before buying shares of our common stock. -------------------- Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense. The date of this prospectus is , 2001 You should rely only on the information contained in this prospectus. We have not authorized anyone to provide you with information different from that contained in this prospectus. The selling stockholders are offering to sell, and seeking offers to buy, shares of our common stock only in jurisdictions where offers and sales are permitted. The information in this prospectus is current only as of its date, regardless of the time of delivery of this prospectus or any offer or sale of our common stock. In this prospectus, "MascoTech," "we," "us" and "our" refer to MascoTech, Inc. and its subsidiaries. -------------------
TABLE OF CONTENTS Page Page Forward-Looking Statements.................i Management................................40 Prospectus Summary.........................1 Security Ownership of Certain The Offering...............................4 Beneficial Owners and Management..........48 Risk Factors...............................5 Related Party Transactions................51 The Recapitalization......................11 Description of Capital Stock..............55 Use of Proceeds...........................13 Description of Our Indebtedness...........59 Dividend Policy...........................13 Plan of Distribution......................63 Determination of Offering Price...........13 Legal Matters.............................64 Capitalization............................14 Experts...................................64 Selling Stockholders......................16 Where You Can Find Additional Pro Forma Financial Data..................17 Information...............................64 Selected Historical Financial Data........24 Index to Financial Statements............F-1 Management's Discussion and Analysis of Financial Condition and Results of Operations...........................25
-------------------- Until , 2001, all dealers that buy, sell or trade our common stock, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealers' obligation to deliver a prospectus when acting as an underwriter. forward-looking statements This prospectus contains forward-looking statements that are subject to a number of risks and uncertainties, many of which are beyond our control, which may include statements about: o our business strategy; o our liquidity and capital expenditures; o our debt levels and ability to obtain financing and service debt; o competitive pressures and trends in the automotive supply industry; o cyclicality and economic condition of the industries we currently serve; o uncertainty regarding our future operating results; -i- o prevailing levels of interest rates; and o plans, objectives, expectations and intentions contained in this prospectus that are not historical. All statements, other than statements of historical fact included in this prospectus, 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 prospectus, 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 prospectus. 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 prospectus are reasonable, we can give no assurance that these plans, intentions or expectations will be achieved. We disclose important factors that could cause our actual results to differ materially from our expectations under "Risk Factors," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and elsewhere in this prospectus. These cautionary statements qualify all forward-looking statements attributable to us or persons acting on our behalf. -ii- PROSPECTUS SUMMARY This summary highlights information contained elsewhere in this prospectus and may not contain all of the information you should consider before investing in the shares of common stock offered by this prospectus. You should read this entire prospectus carefully, including "Risk Factors" and our financial statements and the notes to those financial statements included elsewhere in this prospectus. Unless we indicate otherwise, all information in this prospectus which refers to MascoTech or "we" or "our" refers to the business of MascoTech prior to its acquisition of Simpson Industries, Inc. MascoTech, Inc. Our Company We are a global diversified industrial manufacturer of highly engineered products for the transportation, industrial and consumer markets. Our products include metal-formed and precision-engineered components and modular systems used in vehicle engine and drivetrain 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. Approximately 46% of our 1999 sales were of original equipment automotive products and services. We operate through two business groups. Our Metal Forming Group, accounts for approximately two-thirds of our sales and our Diversified Industrial Product Group, accounts for the remaining one-third of our sales. Metal Forming Group. Our Metal Forming Group manufactures a broad range of products used in automotive and industrial applications. 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, which are used in engine, transmission and drivetrain components, assemblies and subassemblies, include cold, warm and hot forged products, forged and conventional powdered metal products and tubular fabricated products. In addition, the Metal Forming Group manufactures specialty fasteners and other metal formed products used in a variety of industrial applications. Diversified Industrial Product Group. Our Diversified Industrial Product 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. 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. The Recapitalization On November 28, 2000, a recapitalization of MascoTech was consummated in accordance with the terms of a recapitalization agreement. Pursuant to the recapitalization agreement, 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 MascoTech. -1- 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, investment funds associated with Credit Suisse First Boston, or 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 new credit facility and (4) $118.5 million of proceeds from the sale of accounts receivable pursuant to a new accounts receivable facility. As a result of the recapitalization, we are controlled by Heartland and its affiliates. The purpose of the recapitalization was to enable us to pursue opportunities to acquire other companies and develop into a full-service provider of engineered metal products for automotive and industrial customers. We believe significant acquisition opportunities exist in both North America and Europe and we intend to selectively expand our international presence. These acquisitions may be financed through debt, equity or a combination thereof. Equity may be issued at prices which are dilutive to investors. We also expect to consider various alternatives for rationalizing and focusing our existing operations, including dispositions of assets and businesses. Since the recapitalization, we completed our first acquisition on December 15, 2000, of Simpson Industries, Inc., and are exploring numerous other potential acquisitions. Investors in our common stock are cautioned that we may announce material transactions after the date of this prospectus. We reserve the right to refuse to effect a transfer of shares of common stock offered hereby if, at the time that shares are presented to us for transfer, we determine that this prospectus contained a material misstatement or omission. We intend to notify the selling stockholders of any such circumstance and to request that they immediately cease to use this prospectus until we are in a position and are able to correct any potential misstatement or omission. Recent Developments Simpson Acquisition. On December 15, 2000, we acquired Simpson Industries, Inc. 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. Simpson's major product lines include vibration control products and modules; wheel-end and suspension components and assemblies; oil pumps, water pumps and other modular engine assemblies; and transmission and driveline components that are machined from castings and forgings. 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 new 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 are in the process of finalizing sale-leaseback transactions to yield gross proceeds to us of approximately $50 million. The net proceeds from the sale-leaseback transactions will be used to pay down our tranche C term loan. Divestiture of Equity Investments. To finance the recapitalization in part, we sold certain of our non-operating assets, consisting of minority investments in various companies, including our 44% equity interest in MSX International, Inc., for $123.8 million. --------------- We were incorporated in Delaware in 1984. Our principal executive offices are located at 21001 Van Born Road, Taylor, Michigan 48180. Our telephone number is (313) 274-7405. Our internet address is -2- www.mascotech.com. This internet address is provided for informational purposes only and is not intended to be used as a hyperlink. Information on our web site does not constitute part of this prospectus. -3-
The Offering Common stock offered by the selling stockholders..................................... 464,785 shares. Common stock to be outstanding after this offering...................................... 41,839,672 shares. This includes 3,741,325 shares of restricted stock held by our employees, of which approximately 935,330 were vested at the time of the recapitalization and the balance are subject to vesting through January 14, 2004. This information does not give effect to any elections for cash in lieu of restricted stock to which such employees may be entitled. Absence of Public Market......................... All of our outstanding common stock is subject to either restrictions on transfer under the federal securities laws or contractual restrictions under a shareholders agreement or the recapitalization agreement. No public market will develop for the shares offered hereby for the foreseeable future. Use of Proceeds.................................. We will not receive any proceeds from the sale of our common stock by the selling stockholders. See "Use of Proceeds."
-4- RISK FACTORS You should carefully consider each of the risks described below, together with all of the other information contained in this prospectus, before deciding to invest in shares of our common stock. If any of the following risks develop into actual events, our business, results of operations and financial condition could be materially adversely affected, the value of our common stock could decline and you may lose all or part of your investment. Lack of a Public Market for the Common Stock -- There will be no trading market for these shares of common stock for the foreseeable future. As a result of the recapitalization, no trading market for our common stock exists. No public market for our common stock will develop unless we or one of our stockholders undertakes a significant underwritten public offering. We do not expect this to happen in the foreseeable future. Should a market develop, it may not be active and our common stock could trade at prices lower than the price at which you purchased your shares. Moreover, while we currently report our financial results publicly due to the existence of the publicly traded 4 1/2% convertible subordinated debentures and to the number of holders of our common stock, we cannot assure you that we will continue to be so obligated. The lack of publicly available financial results will further adversely affect the market for, and value of, your shares. Should a market develop, its liquidity will be affected by a number of factors, including general economic conditions and changes or volatility in the financial markets, announcements or significant developments with respect to the automotive industry or labor relations, actual or anticipated variations in our quarterly or annual financial results, the introduction of new products or technologies by us or our competitors, changes in other conditions or trends in our industry or in the markets of any of our significant customers, changes in governmental regulation or changes in securities analysts' estimates of our future performance or that of our competitors or our industry. Recently, the stock market has experienced extreme price and volume volatility. These fluctuations may be unrelated to the operating performance of particular companies whose shares are traded. 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. We incurred indebtedness in connection with the recapitalization and the Simpson acquisition that is substantial in relation to our stockholders' equity. As of September 30, 2000, after giving effect to the recapitalization and the Simpson acquisition, but not assuming completion of contemplated sale-leaseback transactions, we had approximately $1.54 billion of outstanding debt and approximately $278.67 million of stockholders' equity. We expect our acquisition activities to be financed with further indebtedness. The degree to which we are leveraged will have important consequences, including the following: o our ability to obtain additional financing in the future for working capital, capital expenditures, acquisitions or general corporate purposes may be impaired; o a substantial portion of our cash flow from operations will be dedicated to the payment of interest and principal on our indebtedness, thereby reducing the funds available to us for other purposes; o our operations are restricted by our debt instruments, which contain material financial and operating covenants; o indebtedness under our credit facility is at variable rates of interest, which makes us vulnerable to increases in interest rates; -5- o indebtedness under our credit facility is secured by substantially all of our assets; and o our substantial degree of leverage will make us more vulnerable in the event of a downturn in general economic conditions or in our business. Our ability to satisfy our debt and other obligations will depend on our future operating performance, which will be affected by prevailing economic conditions and financial, business and other factors, many of which are beyond our control. See "Description of Our Indebtedness" and "Management's Discussion and Analysis of Financial Condition and Results of Operations--Liquidity and Capital Resources." Liquidity and Capital Resources -- If we are unable to raise junior capital, our liquidity and business strategies will be adversely impacted. Our principal sources of liquidity are our $300 million revolving credit facility and $225 million accounts receivable financing, but there are significant limitations on our use of these facilities by reason of the near-term maturity of our outstanding $305 million of convertible subordinated debentures. Our credit facility contains provisions that are designed to ensure that we have the necessary liquidity to repay the convertible subordinated debentures. We must maintain restricted cash either in escrow from the proceeds of other subordinated debt financing or equity financing or in the form of availability under our revolving credit facility and accounts receivable financing in increasing amounts at specified dates until the maturity of the convertible subordinated debentures, which total up to $205 million by the maturity date of the convertible subordinated debentures. To address the balance of the amount due on the convertible subordinated debentures, we have secured a commitment from Masco Corporation, one of our shareholders, to purchase up to $100 million of a new issue of MascoTech subordinated debt from us, subject to limited conditions, on or prior to October 31, 2003. We are obligated by our credit facility to utilize our subordinated loan commitment from Masco to satisfy our obligations in respect of the convertible subordinated debentures, upon maturity, conversion or otherwise, to the extent that we have not raised other subordinated debt or equity. Should Masco default in its obligations, we will be materially and adversely affected, will be in default under our credit facility and certain other obligations and may have difficulty in securing the necessary financing to meet our obligations, including in respect of the convertible subordinated debentures. Moreover, if we are not otherwise in compliance with the terms of our credit agreement we may not be able to satisfy such obligation. By reason of the foregoing, we do not expect to be able to utilize our full revolving credit commitments, absent being able to raise additional junior financing. In the event that we are unsuccessful in raising additional junior financing, our acquisition activities will also be materially impaired and we may have difficulty with respect to our liquidity should we encounter difficult business conditions. 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. One of the primary purposes of our recapitalization was to enable us to pursue acquisition opportunities to become a full-service provider of engineered metal products for our customers. We continually evaluate potential acquisitions and engage in discussions with acquisition candidates. We intend to actively pursue acquisition opportunities, some of which could be material. There can be no assurance that suitable acquisition candidates will be identified and acquired in the future, that the financing for any such acquisitions will be available on satisfactory terms or that we will be able to accomplish our strategic objectives as a result of any such acquisition. Nor can we assure you that we will be able to maintain or improve the operating results of any acquired company or that any acquired company, including Simpson, will be successfully integrated into our operations. We will encounter various risks in acquiring other companies, including the possible inability to integrate an acquired business into our operations, increased goodwill amortization, diversion of management's attention and unanticipated problems or liabilities, some or all of which could materially and adversely affect us. -6- Substantial Restrictions and Covenants -- Restrictions in our credit facility limit our ability to take certain actions. The value of our common stock will depend upon successful implementation of our acquisition strategies and our ability to respond to competitive and challenging market conditions. The agreements governing our new credit facility include covenants that may impact the value of our common stock by, among other matters, restricting our ability to: o pay dividends or redeem or repurchase capital stock; o incur additional indebtedness and grant liens; o make acquisitions and joint venture investments; o sell assets; and o make capital expenditures. Our credit facility also requires us to comply with financial covenants relating to interest coverage and leverage. There can be no assurance that we will be able to satisfy these covenants in the future or that we will be able to pursue our new business strategies within the constraints of these covenants. If we cannot comply, the value of our common stock may be materially and adversely affected. Our ability to comply with our covenants may be affected by events beyond our control, including prevailing economic, financial and industry conditions. The breach of our covenants could result in an event of default under our credit facility, which could cause an event of default under our accounts receivable facility and our equipment lease financing. Such breach would permit the lenders to declare all amounts borrowed thereunder to be due and payable, together with accrued interest, and the commitments of the lenders to make further extensions of credit under our credit facility could be terminated. In addition, such breach may cause a termination of our accounts receivable facility and our equipment lease financing. If we were unable to secure a waiver or repay such indebtedness, our secured lenders could proceed against their collateral. We do not presently expect that alternative sources of financing will be available to us under these circumstances or available on attractive terms. Dilution -- Future issuances of shares of our common stock may dilute the interests of our existing stockholders. In connection with our acquisition strategy, we expect to issue additional shares of our common stock to finance acquisitions and we expect to implement employee incentive and other programs involving issuances of additional common stock. In addition, our holders of restricted stock will receive additional shares of restricted stock over the next three years under the terms of the recapitalization agreement. Under the terms of a shareholders agreement, our shareholders that are parties thereto will have the right to participate in certain future issuances of our equity securities. Any issuance of additional shares of common stock may result in economic dilution of the interest of investors in the shares of common stock offered hereby. Dependence on Automotive Industry and Industry Cyclicality -- The industries in which we operate are dependent upon the economy and are cyclical. Our sales for use in the OEM segments of the automotive industry accounted for approximately one-half of our net sales. The effect of our acquisitions, including Simpson, will likely increase this percentage. The automotive industry is highly cyclical, is dependent on consumer spending and is subject to, among other things, general economic conditions and the impact of international trade. In addition, the automotive industry is sig- -7- nificantly unionized and subject to work slowdowns and stoppages resulting from labor disputes. We also sell products to customers in other industries that experience cyclicality in demand for products, such as the construction, industrial equipment, truck and electrical equipment industries. Recently reported results from North American automotive manufacturers reflect weakness in demand for their products which may continue well into 2001. For example, a major customer has announced a requirement that suppliers reduce, by 5%, their prices, effective January 1, 2001. A downturn in the North American automotive industry could have a material adverse effect on our financial condition, liquidity and results of operations. While our ten largest customers accounted for less than one half of our net sales for the nine month period as of September 30, 2000 and represent a range of industries, certain of our individual operating businesses have a larger concentration of sales to particular automotive or other customers. Although we consider our relations with our customers to be good, the loss of certain automotive or other customers could have a material adverse effect on us. Dependence on Third-Party Suppliers and Manufacturers -- The loss of a substantial number of our suppliers could affect our financial health. Generally, our raw materials requirements are obtainable from various sources and in quantities desired. While we currently maintain alternative sources for raw materials, our businesses are subject to the risk of price fluctuations and periodic delays in the delivery of certain specialty fasteners, raw materials and component parts. Failure by certain suppliers to continue to supply us with raw materials or such component parts on commercially reasonable terms, or at all, would have a material adverse effect on us. Our Industries Are Highly Competitive -- Recent trends among our customers will increase competitive pressures in our businesses. The markets for our products are highly competitive. Our competitors include driveline component manufacturing facilities of existing OEMs, as well as independent domestic and international suppliers. Certain of our competitors are large companies that have greater financial resources than us. We believe that the principal competitive factors are product quality and conformity to customer specifications, design and engineering capabilities, product development, timeliness of delivery and price. The rapidly evolving nature of the markets in which we compete may attract new entrants as they perceive opportunities, and our competitors may foresee the course of market development more accurately than we may. In addition, our competitors may develop products that are superior to our products or may adapt more quickly than us to new technologies or evolving customer requirements. In our fastener segment, we compete with domestic full-line industrial fastener distributors and other domestic distributors that offer fasteners in addition to other products, as well as a number of fastener manufacturers who, in certain circumstances, may sell directly to OEMs. Recent trends by OEMs to limit their number of outside vendors and moderate growth in the industrial fastener industry have resulted in increased competition as many manufacturers and distributors have reduced prices to compete more effectively. Management expects competitive pressures in our markets to remain strong. Such pressures arise from existing competitors, other companies that may enter our existing or future markets and, in certain cases, our customers, which may decide to move production in-house of certain items sold by us. There can be no assurance that we will be able to compete successfully with our existing competitors or with new competitors. Failure to compete successfully could have a material adverse effect on us. Product Liability -- Our businesses expose us to product liability risks that could materially and adversely impact us. Our businesses expose us to potential product liability risks that are inherent in the design, manufacture and sale of our products and products of third-party vendors that we use or resell. While we currently maintain what management believes to be suitable and adequate product liability insurance, there can be no assurance that we will be able to maintain such insurance on acceptable terms or that any such insurance will provide adequate protection against potential liabilities. In the event of a claim against us, a lack of sufficient insurance coverage could have a material adverse effect on us. -8- Dependence on Key Personnel and Relationships -- We are in the process of searching for a new chief executive officer and we depend on the services of other key individuals and relationships, the loss of which would materially harm us. Our success will depend, in part, on the efforts of our executive officers and other key employees. In connection with the recapitalization, our former chief executive officer was replaced by our current acting interim chief executive officer. We are presently engaged in a search for a permanent chief executive officer. If we are unable to identify and appoint a qualified and experienced chief executive officer in a timely manner, it may have a material adverse effect on us. In addition, our future success will depend on, among other factors, our ability to attract and retain other qualified personnel. The loss of the services of any of our key employees or the failure to attract or retain employees could have a material adverse effect on us. Our controlling stockholder, Heartland Industrial Partners, provides us with valuable strategic, operational and financial guidance and our former controlling stockholder, Masco Corporation, provides us with valuable transitional corporate services which transitional services are not required to be provided after calendar year 2002. Masco has provided corporate services to us since 1984. To the extent that we cannot provide either internally or through third parties the services provided to us by Masco, our business and financial results could be materially adversely affected. Labor Relations -- A portion of our workforce is unionized. As of September 30, 2000, approximately 18%, of our work force is unionized, principally through the United Auto Workers union. We have experienced labor difficulties in the past but we now consider our current relations with our employees to be good. We experienced a labor strike at our Fraser, Michigan plant which lasted from July 1997 to June 1998 and involved approximately 140 employees. If our unionized workers were to engage in a strike, work stoppage or other slowdown in the future, we could experience a significant disruption of our operations, which could have a material adverse effect on us. International Sales -- A growing portion of our revenue may be derived from international sources, which presents separate uncertainty for us. A portion of our revenue, 12% for the 12 months ended December 31, 1999, is derived from sales outside of the United States. As part of our business strategy, we intend to expand our international operations through internal growth and acquisitions. Sales outside of the United States, particularly sales to emerging markets, are subject to other various risks which are not present in sales within U.S. markets, including currency fluctuations, political and economic instability, and uncertainty and governmental embargoes or foreign trade restrictions such as antidumping duties. In addition, there are tax inefficiencies in repatriating cash flow from non-U.S. subsidiaries. To the extent such repatriation is necessary for us to meet our debt service or other obligations, this will adversely affect us. The occurrence of or increase in any adverse international economic conditions could have a material adverse effect on us. Environmental Matters -- We have been and may be subject in the future to potential exposure to environmental liabilities. 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. Our subsidiaries were named as potentially responsible parties in several sites requiring cleanup related to disposal of wastes we 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. -9- 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 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. Government Regulation -- Fastener Quality Act. The Fastener Quality Act of 1990 regulates the manufacture, importation and distribution of certain high-grade industrial fasteners in the United States. The Fastener Act, which was amended in June 1999, requires some testing, certification, quality control and recordkeeping by the manufacturers, importers and distributors of such fasteners. As a result, we, along with other fastener suppliers, are required to maintain records and product tracking systems. We have tracking and traceability systems, which, to date, have not materially increased expenses. However, there can be no assurance that future regulations will not result in materially increased costs for us. Control by Principal Stockholder -- We are controlled by Heartland, whose interests in our business may be different than yours. As a result of the recapitalization, Heartland Industrial Partners and its affiliates are able to control our affairs in all cases, except for certain actions specified in a shareholders agreement among Heartland, Credit Suisse First Boston Equity Partners, L.P., Masco Corporation, Richard Manoogian and their various affiliates and certain other investors. Under the shareholders agreement, holders of approximately 90% of our shares of common stock have agreed to vote their shares for directors representing a majority of our board that have been designated by Heartland. You should consider that the interests of Heartland, as well as our other owners, will likely differ from yours in material respects. See "Related Party Transactions" and "Security Ownership of Certain Beneficial Owners and Management." Terms of Shareholders Agreement -- Provisions of the shareholders agreement impose significant operating and financial restrictions on our business. Under the shareholders agreement, specified actions require the approval of representatives of Credit Suisse First Boston Corporation, until such time as we consummate a public common stock offering for at least $100 million in gross proceeds to us. Such actions include certain acquisitions by us, the selection of a chief executive officer, certain debt restructurings; and any liquidation or dissolution of us. You should consider that we and our stockholders may be unable to agree with CSFB on the implementation of such fundamental transactions and other matters. This sort of disagreement may materially and adversely affect us. In addition, directors designated by Heartland could block actions even if other directors deem them advisable. -10- THE RECAPITALIZATION On November 28, 2000, we completed a recapitalization in which we merged with Riverside Acquisition Corporation pursuant to a recapitalization agreement dated August 1, 2000, as amended, between us and Riverside Acquisition Corporation. Pursuant to the recapitalization agreement, each issued and outstanding share of our common stock at the time of the recapitalization (other than unvested shares of restricted stock and shares of common stock held by a merger subsidiary of Heartland) was converted into the right to receive $16.90 in cash plus additional cash amounts based upon the net proceeds of the disposition of the stock of Saturn Electronics & Engineering Inc. held by MascoTech. Although no disposition of the stock of Saturn Electronics & Engineering was made prior to the merger or has been made to date, former holders of our common stock as of the merger will be entitled to amounts based upon the net proceeds, if any, from any future disposition of that stock if and when a disposition is completed. 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% of any such proceeds in excess of $56.7 million. All other amounts of proceeds will be retained by MascoTech. Pursuant to the recapitalization agreement, each outstanding share of Riverside Acquisition Corporation immediately prior to the merger was converted into one share of common stock of MascoTech. Each unvested restricted stock award was canceled immediately prior to the recapitalization and after the recapitalization a new restricted stock award with the same number of shares was substituted for it having vesting terms set forth in the recapitalization agreement. 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. 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 in accordance with the recapitalization agreement. In connection with the recapitalization and in accordance with an exchange and voting agreement, Richard A. Manoogian, the Richard and Jane Manoogian Foundation, Masco Corporation and specified institutional investors converted a portion of their common stock into preferred stock of MascoTech. Such preferred stock was converted in the merger into common stock and/or preferred stock of MascoTech, as the survivor of the recapitalization merger. The following summarizes the sources and uses of funds for the recapitalization: Sources: New credit facility borrowings(1).......................... $1,016.0 New accounts receivable facility financing................. 118.5 Sale of equity investments................................. 123.8 Convertible subordinated debentures........................ 305.0 Series A preferred stock (2)............................... 36.1 Rollover of common stock (2)............................... 82.7 Rollover of stock awards (3)............................... 63.2 New cash equity............................................ 435.0 Cash on hand............................................... 3.7 ---------- Total sources......................................... $2,184.0 ========== -11- Uses: Merger consideration paid in cash (4)...................... 597.6 Repayment of indebtedness, including accrued interest, and retirement of former accounts receivable facility........ 1,017.4 Convertible subordinated debentures........................ 305.0 Rollover of common stock (2)............................... 82.7 Rollover of stock awards (3)............................... 63.2 Series A Preferred Stock (2)............................... 36.1 Estimated fees and expenses (5)............................ 82.0 ---------- Total uses............................................ $2,184.0 ========== - --------------------- (1) Includes $1,000 million of term loan borrowings and $16 million of revolving credit borrowings. (2) Richard A. Manoogian, the Richard and Jane Manoogian Foundation, Masco Corporation and specified institutional investors effectively continued their aggregate equity investment in MascoTech in the form of approximately $74.4 million of common stock (which is valued at $16.90 per share, but excludes Mr. Manoogian's restricted stock awards) and $36.1 million in liquidation value ($33.1 million estimated fair value for accounting purposes) of Series A preferred stock (held by Masco Corporation). Also included in such number is the $7.9 million in value of common stock issued to the selling stockholders to meet an obligation arising from the recapitalization. (3) An aggregate of 3,741,325 shares of unvested restricted stock were cancelled immediately prior to the recapitalization and a new 3,741,325 shares of new restricted stock were substituted therefor immediately following the recapitalization. The value of these restricted stock awards at $16.90 per share was approximately $63.2 million. While holders of restricted stock awards were entitled to make cash elections in respect of a portion of their restricted stock awards that vested upon the recapitalization, no cash was required at closing related to these cash elections. Approximately $6 million of cash was required in 2000 after the closing of the recapitalization and were financed with revolving credit borrowings or cash on hand. For information concerning our continuing restricted stock award obligations, see "Management - Restricted Stock Awards." (4) Includes payments in respect of in-the-money options. (5) Fees and expenses in excess of this estimate, if any, will be financed with revolving credit borrowings or cash on hand. -12- USE OF PROCEEDS We will not receive any of the proceeds from the sale of shares of our common stock by the selling stockholders. All of the proceeds from the sale of shares of our common stock by the selling stockholders will be received by the selling stockholders. DIVIDEND POLICY We do not currently pay dividends on our common stock and it is our current policy to retain earnings to repay debt and finance our operations and acquisition strategies. In addition, our credit facility restricts our payment of cash dividends on our common stock. See "Description of Our Indebtedness." Prior to the recapitalization we paid dividends of $0.08 per share during the first three quarters of 2000 and the last two quarters of 1999; $0.07 per share during the first two quarters of 1999 and the last two quarters of 1998; and $0.06 per share during the first two quarters of 1998. DETERMINATION OF OFFERING PRICE The offering price of the common stock offered by this prospectus is indeterminate as of the date of this prospectus. The common stock may be offered for sale by the selling stockholders from time to time in transactions on the over-the-counter market, in negotiated transactions, or otherwise, or by a combination of these methods, at fixed prices which may be changed, at market prices (if any should exist) at the time of sale, at prices related to market prices (if any should exist) or at negotiated prices. See "Plan of Distribution." -13- CAPITALIZATION The following table sets forth our unaudited capitalization as of September 30, 2000 and as adjusted for the recapitalization and the Simpson acquisition as if each had occurred on September 30, 2000. You should read this table in conjunction with our financial statements and the notes to those financial statements included elsewhere in this prospectus.
At September 30, 2000 ------------------------------------- Actual As Adjusted(1) ------------ ---------------- (In thousands) Cash and cash equivalents.................................. $ 14,100 $ 20,920(2) ===================================== Long-term debt: New Credit Facility (3).................................. $ -- $1,218,900 Old Credit Facility...................................... 934,000 -- 4.5% convertible subordinated debentures (4)............. 305,000 305,000 Other.................................................... 15,900 15,900 ---------- ---------- Total long-term debt.................................... 1,254,900 1,539,800 Redeemable preferred: 361,001 shares issued and outstanding (5)......................................... -- $ 33,100 Preferred stock: $1.00 par value; 25 million shares authorized; none and 361,001 shares issued and outstanding included above (5).......................... -- -- Redeemable restricted common stock....................... -- 47,420 Restricted stock awards (6).............................. -- (47,420) Shareholders' Equity: Common stock: $1.00 par value; 250 million shares authorized; 44.7 million and 41.8 million shares issued and outstanding (including shares included in redeemable restricted common stock)................ 44,730 38,700 Paid-in capital/retained earnings..................... 383,460 280,840 Less: Restricted stock awards (6).................... (43,730) -- ---------- ---------- Accumulated other comprehensive loss.................. (42,710) (40,880) Total shareholders' equity.......................... 341,750 278,660 ---------- ---------- Total capitalization................................ $1,596,650 $1,851,560 ========== ==========
- ---------------------- (1) In addition to the pro forma adjustments described in the pro forma financial statements included in the Pro Forma Financial Data section, the "As Adjusted" column includes the debt and equity issued in connection with the acquisition of Simpson Industries, Inc. These amounts do not reflect certain repayments of approximately $50 million of term debt incurred to acquire Simpson resulting from the pending sale-leaseback transactions. See "Management's Discussion and Analysis of Financial Condition and Results of Operations--Liquidity and Capital Resources." (2) The increase in cash and cash equivalents from the actual September 30, 2000 balance reflects the addition of cash from Simpson. The increase in debt at MascoTech and Simpson between September 30, 2000 and the dates of the recapitalization and acquisition, respectively, of about $45 million has been reflected in the adjusted debt balance and is assumed not to result from changes in cash and cash equivalents. -14- (3) Our credit facility is comprised of a $300 million revolving credit facility, a $500 million six and one-half year term loan, a $500 million eight year term loan and a $200 million eight and one-half year term loan. The table above excludes the repayment of approximately $50 million of the $200 million eight and one-half year term loan facility with proceeds of certain pending sale-leaseback transactions There are significant limitations on our ability to draw upon the revolving credit facility that increase over time. See "Description of Our Indebtedness." (4) These are convertible into the cash consideration paid in the recapitalization merger to our former common stockholders. They are convertible at a conversion price of $31.00 for the amount of the consideration payable in respect of a share of common stock and, accordingly, are not expected to be converted into cash absent a material adverse development. We have a commitment from one of our shareholders for a $100 million subordinated loan that is available to fund, in part, retirements of convertible subordinated debentures. See "Description of Our Indebtedness." (5) Shares of Series A Preferred Stock are issued and outstanding as a result of the recapitalization. Such shares constitute redeemable capital stock in accordance with Regulation S-X of the Securities and Exchange Commission since they are mandatorily redeemable in November 2012. See "Description of Capital Stock." As a result, the preferred stock is excluded from stockholders equity. The liquidation amount of such preferred stock is $36.1 million. However, for accounting purposes this preferred stock is valued at a discount, reflecting certain common stock also received by the holder of the preferred stock valued at $16.90 per share. (6) Since the Company has the obligation to pay cash in respect of these restricted stock awards at the option of the restricted stockholder, the awards have been excluded from stockholders equity, as some or all of these shares outstanding may represent temporary equity. For a discussion of our obligations to fund cash in respect of our restricted stock awards, see "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Liquidity and Capital Resources" and "Management - Restricted Stock Awards." -15- SELLING STOCKHOLDERS This prospectus relates to the proposed resale by the selling stockholders of 464,785 shares of our common stock. The selling stockholders named in the table below have sole voting and investment power with respect to all shares beneficially owned by them. Information with respect to beneficial ownership is based upon data supplied to us by, or available from, the selling stockholders. The selling stockholders may offer less than the amount of shares indicated. No representation is made that any shares will or will not be offered for sale. We will not receive any of the proceeds from the sale of the shares. The information shown under the heading "Shares Beneficially Owned After Offering" assumes that all shares owned by the selling stockholder which are offered are sold. The selling stockholders reserve the right to accept or reject, in whole or in part, any proposed purchase of shares. The selling stockholders listed below are former stockholders of K-Tech Mfg. Inc. They received shares of MascoTech common stock in exchange for K-Tech securities sold to us in August 1998, which shares were converted into cash upon the recapitalization. The shares covered by this prospectus relate to MascoTech shares of common stock issued following the recapitalization under the terms of the amended merger agreement under which the selling stockholders originally sold their K-Tech securities in August 1998. The amended merger agreement contains various indemnity provisions relating to the registration statement of which this prospectus is a part and the offering of MascoTech common stock by the selling stockholders. All of the MascoTech common stock owned by the selling stockholders (except restricted stock awards certain selling stockholders will continue to hold after the offering) is being offered by this prospectus. Certain donees, distributees, pledgees or personal representatives of the selling stockholders may in the future sell shares of MascoTech common stock under this prospectus and, in that event, MascoTech will provide information about them in a prospectus supplement.
Shares Beneficially Shares Covered Shares Beneficially Name Owned Before Offering by This Prospectus Owned After Offering - ---- Number Percent Number Percent Donald P. Kuhns(1)............. 194,959 * 185,913 9,046 * Michael L. Kuhns............... 123,911 * 123,911 0 -- Michael Martino................ 41,320 * 41,320 0 -- Andrew M. Yerkes............... 41,320 * 41,320 0 -- William A. Collopy(1).......... 47,170 * 41,320 5,850 * Gary J. VanderPoel(1).......... 37,031 * 31,001 6,030 *
- ---------------------- * Less than 1%. (1) Includes 9,046, 5,850 and 6,030 restricted stock awards held by Messrs. D. Kuhns, Collopy and VanderPoel, respectively, of which 7,538, 4,875 and 5,025 are unvested, respectively. -16- PRO FORMA FINANCIAL DATA The following unaudited pro forma financial data have been derived from our unaudited historical consolidated financial statements as of and for the nine months ended September 30, 2000 and from our audited historical consolidated financial statements for the year ended December 31, 1999. The unaudited pro forma consolidated balance sheet gives effect to the recapitalization as if it had occurred on September 30, 2000. The unaudited pro forma consolidated statements of income give effect to the recapitalization as if it had occurred at January 1, 1999. The unaudited pro forma financial data do not purport to represent what our results of operations or financial position would actually have been had the recapitalization occurred at such times. This data also does not purport to project our results of operations or financial position for or at any future period or date and does not include the effect of the acquisition of Simpson. The unaudited pro forma financial data should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the historical financial statements and the notes thereto included elsewhere in this prospectus. -17-
PRO FORMA CONSOLIDATED CONDENSED BALANCE SHEET As of September 30, 2000 Unaudited (amounts in thousands) Company Recapitalization Historical Adjustments Pro Forma ---------- ----------- --------- Current assets: Cash............................................. $14,100 $710(A) $14,810 Receivables...................................... 195,070 (69,200)(B) 125,870 Inventories...................................... 177,010 -- 177,010 Deferred and refundable income taxes............. 24,490 -- 24,490 Prepaid expenses and other assets................ 16,490 13,750(M) 30,240 ----------- -------------- ----------- Total current assets........................... 427,160 (54,740) 372,420 Equity and other investments in affiliates....... 115,530 (86,770)(C) 28,760 Property and equipment, net...................... 741,860 -- 741,860 Excess of cost over net assets of acquired companies 755,560 7,860(L) 763,420 Notes receivable and other assets................ 39,290 32,420(D) 71,710 ----------- ---------------- ----------- Total assets................................... $2,079,400 $(101,230) $1,978,170 =========== ================ =========== Current liabilities: Accounts payable................................. $138,990 -- $138,990 Accrued liabilities.............................. 116,970 $42,020(E) 158,990 ----------- ---------------- ----------- Total current liabilities...................... 255,960 42,020 297,980 Convertible subordinated debentures................. 305,000 -- 305,000 Other long-term debt: Bank debt........................................ 934,000 38,250(F) 972,250 Other............................................ 15,900 -- 15,900 Deferred income taxes and other long-term........ 226,790 (24,810)(G) 201,980 ----------- ---------------- ----------- Total liabilities.............................. 1,737,650 55,460 1,793,110 Redeemable preferred stock.......................... -- 33,100(H) 33,100 Redeemable restricted common stock.................. -- 47,420(I) 47,420 Less: restricted stock awards...................... -- (47,420)(N) (47,420) Shareholders equity: Preferred stock.................................. -- -- -- Common stock..................................... 44,730 (13,490)(J) 31,240 Paid in capital and retained earnings............ 383,460 (221,860)(J) 161,600 Accumulated other comprehensive loss............. (42,710) 1,830(C) (40,880) Less: restricted stock awards................... (43,730) 43,730(K) -- ----------- ---------------- ----------- Total shareholders equity...................... 341,750 (189,790) 151,960 ----------- ---------------- ----------- Total liabilities and shareholders equity.... $2,079,400 $(101,230) $1,978,170 =========== ================ ===========
-18- MascoTech, Inc. Footnotes to Pro Forma Consolidated Condensed Balance Sheet As of September 30, 2000 Reflects (A) The net cash increase as a result of the recapitalization. (B) The incremental securitization of approximately $69 million of accounts receivable to finance, in part, the recapitalization. (C) The sale of all equity interests in certain equity affiliates to finance, in part, the recapitalization (these represent all of our equity affiliates other than Saturn). (D) The sale of interests in certain equity affiliates ($6.5 million), the elimination of prepaid debt expense related to our old credit facility ($2.5 million) and the recognition of prepaid debt expense related to our new credit facility ($41.5 million). (E) The tax payable on the gains from the sale of certain equity affiliates ($23 million) and the termination of interest rate swap agreements ($5 million) entered into in respect of our old credit facility, and the liability for payments in respect of in-the-money options ($14 million). (F) The retirement of our old credit facility with our new credit facility. (G) The elimination of deferred taxes ($11.1 million) related to the sale of equity affiliates and the deferred gain ($13.7 million) related to the termination of interest rate swap agreements entered into in respect of our old credit facility. (H) The issuance of $36.1 million in liquidation value of preferred stock redeemable in 2012 ($33.1 million estimated fair value for accounting purposes) to Masco Corporation as part of the recapitalization. See "Description of Capital Stock - Preferred Stock." (I) The potential future cash payments, excluding accruals on such restricted stock awards, at the election of restricted stock award holders as a result of vesting of their restricted stock. See "Management - Restricted Stock Awards." (J) The cancellation for cash of approximately 34.6 million shares of common stock in the merger effected as part of the recapitalization and the issuance of equity to new investors. (K) The cancellation of 3,741,325 shares of the unvested restricted stock awards outstanding immediately prior to the recapitalization. (L) The issuance of shares to the selling stockholders. (M) Restricted cash for the payments in respect of in-the-money options. (N) The grant of 3,741,325 substitute shares of restricted common stock pursuant to the recapitalization agreement (fair value is $16.90 per share, the initial recapitalization consideration) less the 935,330 shares of restricted common stock which vested on the date of the recapitalization. -19-
PRO FORMA CONSOLIDATED CONDENSED STATEMENT OF INCOME For the Year Ended December 31, 1999 Unaudited (amounts in thousands) Company Recapitalization Historical Adjustments Pro Forma ------------- ------------------ ------------ Sales............................................... $1,679,690 -- $1,679,690 Cost of sales....................................... (1,246,660) -- (1,246,660) ------------- ------------------ ------------ Gross profit..................................... 433,030 -- 433,030 Selling, general and administrative expenses........ (214,530) $(11,940)(A) (226,470) Gains (charge) on disposition of businesses......... 14,440 -- 14,440 Charge for asset impairment......................... (17,510) -- (17,510) ------------- ------------------ ------------ Operating profit................................. 215,430 (11,940) 203,490 Other income (expense), net: Interest expense................................. (80,820) (41,800)(B) (122,620) Equity and other income from affiliates.......... 13,230 (9,260)(C) 3,970 Gain (charge) from disposition of, or changes in investments in equity affiliates.......... (3,150) -- (3,150) Other, net....................................... (5,220) (17,420)(D) (22,640) ------------- ------------------ ------------ (75,960) (68,480) (144,440) ------------- ------------------ ------------ Income before income taxes.......................... 139,470 (80,420) 59,050 Income taxes........................................ 47,040 (29,760)(E) 17,280 ------------- ------------------ ------------ Net income.......................................... $92,430 $(50,660) $41,770 ============= ================== ============ Preferred stock dividends........................... -- $4,690(F) $4,690 ------------- ------------------ ------------ Earnings attributable to common stock............... $92,430 $(55,350) $37,080 ============= ================== ============
-20- MascoTech, Inc. Footnotes to Pro Forma Consolidated Condensed Statement of Income For the Year Ended December 31, 1999 Reflects (A) The incremental amortization of restricted stock award expense related to the accelerated vesting of awards as a result of the recapitalization. (B) Incremental interest expense from borrowings under our new credit facility to finance the recapitalization. (C) The elimination of earnings from those equity affiliates sold to finance, in part, the recapitalization (this represents all equity affiliates other than Saturn). (D) The amortization of deferred financing costs related to our new credit facility ($6 million) and incremental expenses associated with our new accounts receivable financing ($11 million) and miscellaneous. (E) The related net tax provision of the pro forma adjustments at appropriate U.S. statutory rates including state tax provision, net of federal tax benefit. (F) Redeemable preferred stock dividends. -21-
PRO FORMA CONSOLIDATED CONDENSED STATEMENT OF INCOME For the Nine Months Ended September 30, 2000 Unaudited (amounts in thousands) Company Recapitalization Historical Adjustments Pro Forma -------------- ------------------ ------------ Sales............................................... $1,295,480 -- $1,295,480 Cost of sales....................................... (966,590) -- (966,590) -------------- ------------------ ------------ Gross profit..................................... 328,890 -- 328,890 Selling, general and administrative expenses........ (163,130) $(7,470)(A) (170,600) Gains (charge) on disposition of businesses......... 2,800 -- 2,800 -------------- ------------------ ------------ Operating profit................................. 168,560 (7,470) 161,090 Other income (expense), net: Interest expense................................. (64,500) (26,800)(B) (91,300) Equity and other income from affiliates.......... 9,170 (7,990)(C) 1,180 Other, net....................................... 2,120 (11,950)(D) (9,830) -------------- ------------------ ------------ (53,210) (46,740) (99,950) -------------- ------------------ ------------ Income before income taxes.......................... 115,350 (54,210) 61,140 Income taxes........................................ 45,490 (20,000)(E) 25,490 -------------- ------------------ ------------ Net income.......................................... $69,860 $(34,210) $35,650 ============== ================== ============ Preferred stock dividends........................... -- $3,520(F) $3,520 -------------- ------------------ ------------ Earnings attributable to common stock............... $69,860 $(37,730) $32,130 ============== ================== ============
-22- MascoTech, Inc. Footnotes to Pro Forma Consolidated Condensed Statement of Income For the Nine Months Ended September 30, 2000 Reflects (A) The incremental amortization of restricted stock award expense related to the accelerated vesting of awards as a result of the recapitalization. (B) Incremental interest expense from borrowings under our new credit facility to finance the recapitalization. (C) The elimination of earnings from those equity affiliates, sold to finance, in part, the recapitalization (this represents all equity affiliates other than Saturn). (D) The amortization of deferred financing costs related to our new credit facility ($4.5 million) and incremental expenses associated with our new accounts receivable financing ($7.2 million) and miscellaneous. (E) The related net tax provision of the pro forma adjustments at appropriate U.S. statutory rates, including state tax provision, net of federal tax benefit. (F) Redeemable preferred stock dividends. -23- SELECTED HISTORICAL FINANCIAL DATA The following table sets forth our selected financial and operating data for the five years ended December 31, 1999 and nine months ended September 30, 1999 and 2000. The financial data for the fiscal years ended December 31, 1997, 1998, 1999 have been derived from our consolidated financial statements included in this prospectus which have been audited by PricewaterhouseCoopers LLP, independent accountants. The financial data for the fiscal years ended December 31, 1995 and 1996 have been derived from our consolidated financial statements not included in this prospectus. The financial data for the nine months ended September 30, 1999 and 2000 have been derived from our unaudited consolidated financial statements included in this prospectus. The data set forth below should be read in conjunction with the report of PricewaterhouseCoopers LLP, our consolidated financial statements and related notes and "Management's Discussion and Analysis of Financial Condition and Results of Operations" included elsewhere in this prospectus.
For the Nine Months For the Years Ended December 31, Ended September 30, ------------------------------------------------------------- ---------------------- 1999 1998 1997 1996(1) 1995 2000 1999 ----------- ---------- ---------- ---------- ----------- ----------- ---------- Statement of Operations Data: Net Sales................ $1,679,690 $1,635,500 $ 922,130 $1,281,220 $1,678,210 $1,295,480 $1,284,470 Operating Profit......... $ 215,430 $ 206,810 $ 101,710 $ 69,330 $ 108,810 $ 168,560 $ 174,660 Net Income............... $ 92,430 $ 97,470 $ 115,240 $ 51,620 $ 59,190 $ 69,860 $ 70,170 Earnings attributable to common stock.......... $ 92,430 $ 97,470 $ 109,000 $ 38,660 $ 46,230 $ 69,860 $ 70,170 Earnings per share Basic................. $ 2.25 $ 2.23 $ 2.70 $ 0.77 $ 0.85 $ 1.71 $ 1.71 Diluted............... $ 1.84 $ 1.83 $ 2.12 $ 0.72 $ 0.81 $ 1.39 $ 1.39 Dividends declared per share................. $ 0.30 $ 0.20 $ 0.28 $ 0.18 $ 0.11 $ .24 $ .22 Balance Sheet Data (at end of the period): Total assets.......... $2,101,270 $2,090,540 $1,144,680 $1,202,840 $1,421,720 $2,079,400 $2,112,150 Long-term debt........ $1,372,890 $1,388,240 $ 592,000 $ 752,400 $ 701,910 $1,254,900 $1,374,360 Stockholders' equity.. $ 300,380 $ 253,880 $ 210,660 $ 138,820 $ 398,130 $ 341,750 $ 293,350 Other Data: Book value per common share (2)............. $ 6.73 $ 5.55 $ 4.46 $ 2.89 $ 6.00 $ 7.64 $ 6.58
- ---------------------- (1) Includes the cumulative effect of accounting change net of income taxes of $11.7 million or $0.22 per common share. (2) For 1996 and 1995, assumes conversion of MascoTech's dividend enhanced convertible preferred stock into 10.8 million shares of common stock. The dividend enhanced convertible preferred stock was redeemed into common stock in June 1997. -24- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Company Overview We are a global diversified industrial manufacturer of highly engineered products for the transportation, industrial and consumer markets. Our products include metal-formed and precision-engineered components and modular systems used in vehicle engine and drivetrain 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. Approximately 46% of our 1999 sales were of original equipment automotive products and services. We operate through two business groups. Our Metal Forming Group, accounts for approximately two-thirds of our sales and our Diversified Industrial Product Group, accounts for the remaining one-third of our sales. Recent Developments On November 28, 2000, a recapitalization of MascoTech was consummated 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 new 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. On December 15, 2000, we acquired Simpson Industries, Inc. for total consideration of $365 million, including fees and expenses 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 new 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 are in the process of finalizing sale-leaseback transactions to yield gross proceeds to us of approximately $50 million. The proceeds from the sale-leaseback transactions will be used to pay down our tranche C term loan. 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, 1999 and 1998 and the nine months ended September 30, 2000 and September 30, 1999, respectively, Simpson had net sales of $532.6 million, $496.4 million, $399.6 million and $396.7 million, respectively, and operating profit of $38.9 million, $31.6 million, $27.6 million and $30.0 million, respectively. During 1999, we acquired Windfall Products, Inc., a manufacturer of transportation-related components that utilizes powder metal technology, significantly expanding our powder metal manufacturing operations. -25- In January 1998, we completed the acquisition of TriMas Corporation, or TriMas, by purchasing all of the outstanding shares of TriMas not already owned by us (approximately 63%) for approximately $920 million. Disposition of Businesses In mid-1998, we adopted a plan to sell certain of our after market-related businesses and our vacuum metalizing operation and recorded a pre-tax loss of approximately $41 million. In early 1999, we 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. We recognized a pre-tax gain of approximately $26 million related to the disposition of these businesses, as an adjustment to the 1998 charge. The businesses sold had net sales of $39 million, $115 million and $130 million in 1999, 1998 and 1997, respectively, and operating profit of $4 million, $12 million and $16 million in 1999, 1998 and 1997, respectively. In 1999, we adopted a plan to sell our 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. Results of Operations -- Nine Months Ended September 30, 2000 Compared to Nine Months Ended September 30, 1999 Our sales for the third quarter 2000 decreased modestly to $394 million as compared with $399 million in 1999. Sales for the third quarter 2000, excluding the impact of acquisitions and dispositions, would have decreased approximately three percent, principally as a result of currency fluctuations which reduced third quarter 2000 sales by approximately $7 million. Income in the third quarter 2000 was $17.9 million or $.37 per share, compared with $20.2 million or $.41 per share in 1999. In addition to the decline in sales, operating performance for the third quarter of 2000 as compared with the comparable period in 1999 was negatively impacted by costs and expenses related to the previously announced closure of a manufacturing facility, the launch of certain new products including a new manufacturing facility and by a flood which adversely impacted our 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 operating losses and restructuring charges at two of our affiliates. This reduction in affiliate income was offset by insurance proceeds and reduced interest expense which reflects the benefit of interest rate swap agreements which were terminated in June of 2000. Aided by acquisitions, sales for our Specialty Metal Formed Products and Towing Systems products for third quarter 2000 were comparable with sales for third quarter 1999. Excluding the impact of acquisitions and dispositions, Specialty Metal Formed Products and Towing Systems sales for the third quarter of 2000 would have decreased approximately three percent and seven percent, respectively, reflecting inventory balancing by certain customers and currency fluctuations. Sales of Specialty Fasteners for third quarter 2000 declined approximately 13 percent reflecting the phase out of certain products resulting from a plant closure and softness in fastener applications in the heavy truck and off road markets. Excluding the impact of the plant closure, sales would have declined approximately seven percent. Third quarter sales for Specialty Packaging and Sealing Products increased three percent as a result of improved sales of specialty gaskets and cylinder related products. Sales of Specialty Industrial Products increased four percent in third quarter 2000 from 1999 levels. Sales for the nine months ended September 30, 2000 increased one percent to $1,295 million from $1,284 million in 1999 reflecting the impact of acquisitions and dispositions, which offset each other and the -26- impact of currency fluctuations, which reduced sales for the nine months ended September 30, 2000 by approximately $18 million. Income for the nine months ended September 30, 1999 benefitted from a gain of approximately $26.5 million pre-tax, related to the sale of our aftermarket-related businesses. This gain was offset by charges to reflect the impairment in value of certain assets related to our hydroforming process, $17.5 million pre-tax, and approximately $3 million pre-tax to reflect an other than temporary decline in the value of an equity affiliate. Operating profit, excluding the net gains on disposition of businesses and charge for asset impairment, for the nine months ended September 30, 2000 and 1999 was approximately $166 million for both periods. For the nine month period ended September 30, 2000, sales of Specialty Metal Formed Products and Towing Systems aided by acquisitions increased six and eight percent, respectively, as compared with 1999. Excluding the impact of acquisitions and dispositions, Specialty Metal Formed Products sales for the nine months ended September 30, 2000 would have approximated 1999 levels while sales of Towing Systems would have increased in excess of two percent, despite the negative impact of currency fluctuations. Sales for Specialty Fasteners decreased six percent as a result of the phase out of certain products related to a plant closure. Specialty Packaging and Sealing Products sales for the first nine months increased four percent as a result of improved sales of specialty gaskets and cylinder related products. Sales for Specialty Industrial Products for the first nine months of 2000 increased one percent. Excluding the impact of the gains on disposition and the non-recurring charge for asset impairment, operating margin for the nine months ended September 30, 2000 and 1999 would have been 12.8 percent and 12.9 percent, respectively. Higher than expected start-up costs related to the launch of new products and new manufacturing facilities negatively impacted operating performance in both periods. The tax rate for third quarter 2000 was 39.3 percent. The higher than statutory rate of 39.3 percent results primarily from non-deductible goodwill amortization for tax purposes. The tax rate for third quarter 1999 was 38.8 percent. In the second quarter 2000, we entered into a securitization agreement to sell, on an ongoing basis, a pool of our trade accounts receivable. The proceeds, approximately $48 million, from the sale were used for the reduction of long-term debt. In the second quarter 2000, our interest rate swap agreements covering a notional amount of $400 million expired or were terminated resulting in proceeds of approximately $15.8 million. The cash proceeds were used for the reduction of long-term debt. As a result of the expiration or termination of the interest rate swap agreements, we have greater exposure to interest rate fluctuations on our floating rate debt. Our new credit facility requires us to maintain in effect interest rate protection agreements with respect to at least $500.0 million of borrowings under our credit facility. Results of Operations -- Year Ended December 31, 1999 Compared to Year Ended December 31, 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 addition, 1999 results include charges of approximately $17.5 million pre-tax related to impairment of certain long-lived assets, which include our 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 or $1.78 per common share. -27- 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, we recorded a pre-tax gain of approximately $25 million related to the receipt of additional consideration based on the operating performance of our stamping businesses which were sold in 1996. Results in 1998 also benefitted from a gain (deferred at time of sale pending receipt of cash) of $7 million pre-tax related to the disposition of our Technical Services Group in 1997 and gains from our 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 our 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 our 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 benefitted from a gain (deferred at time of sale pending receipt of cash) of $7 million pre-tax related to the disposition of our Technical Services Group in 1997 and gains of approximately $3 million pre-tax from our marketable securities portfolio. Results of Operations -- Year Ended December 31, 1998 Compared to Year Ended December 31, 1997 Sales increased to $1.6 billion in 1998 from $922 million in 1997 principally as a result of acquisitions. Excluding acquisitions, sales would have increased approximately three percent over 1997. 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, we recorded a pre-tax gain of approximately $25 million related to the receipt of additional consideration based on the operating performance of our stamping businesses which were sold in 1996. Results in 1998 also benefitted -28- from a gain (deferred at time of sale pending receipt of cash) of $7 million pre-tax related to the disposition of our Technical Services Group in 1997 and gains from our 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. Income after preferred stock dividends in 1997 was $109 million or $2.12 per common share. Results in 1997 include pre-tax gains approximating $83 million principally related to the disposition of our equity ownership interest in Emco Limited, gains from our 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, our share of special charges recorded by equity affiliates, write-off of deferred charges, and employee termination and other expenses. Excluding these gains and unusual costs, income after preferred stock dividends in 1997 would have been approximately $73 million or $1.50 per common share. The following information is presented on a pro forma basis as though TriMas was acquired on January 1, 1997. Sales increased approximately five percent to $1.7 billion in 1998 from $1.6 billion in 1997. Excluding acquisitions other than TriMas, sales would have increased approximately four percent in 1998 as compared to 1997. Sales of Specialty Metal Formed Products increased approximately six percent in 1998 as compared to 1997. Towing Systems sales, driven by demand for new products, increased by 13 percent over 1997 levels. Sales of Specialty Packaging and Sealing Products and Specialty Fasteners, aided by acquisitions, increased modestly in 1998. Sales of Specialty Industrial Products approximated 1997 levels. Sales for certain of our aftermarket-related businesses that were being held for sale declined by 13 percent. Although 1998 results benefitted from increased sales, operating margins for our Specialty Metal Formed Products in 1998 were slightly below 1997 levels (excluding 1997 nonrecurring charges). Operating results for both 1998 and 1997 were hampered by work stoppages at major customers and at one of our manufacturing facilities. In addition, operating results for both 1998 and 1997 were adversely impacted by start-up costs associated with our hydroforming manufacturing process. Specialty Metal Formed Products' operating margins were also negatively impacted by launch costs related to a new facility in Spain to manufacture powder metal connecting rods. Operating margins in 1998 for our Specialty Fasteners, Towing Systems, Specialty Packaging and Sealing Products and Specialty Industrial Products approximated or slightly exceeded 1997 levels, while operating margins for aftermarket-related products decreased in 1998 from 1997 principally as a result of decreased sales volumes. Operating margins on a pro forma basis including increased amortization expense and before general corporate expense and gain (charge) on dispositions approximated 15 percent for the years 1998 and 1997. Our lower effective tax rate for 1998 is the result of the recognition of a non-taxable gain from the sale of MascoTech Stamping Technologies, Inc. and tax benefits from additional tax losses in excess of book losses related to the disposition of certain businesses. On a pro forma basis, excluding both the gain and charge, the effective tax rate would approximate 40 percent. We, through acquisitions and growth, have increased our foreign presence, principally in Europe. In the future, if our foreign operations contribute an increased percentage of pre-tax income, our effective tax rate could increase as a result of higher foreign tax rates versus the U.S. domestic tax rate. Profit Margins Operating profit margins, excluding net charges in 1999 and 1998 and net gains in 1997, were approximately 13.0 percent in 1999, 13.6 percent in 1998 and 10.5 percent in 1997. Operating profit margin in -29- 1999 was negatively impacted by decreased sales for certain products including tubular, aftermarket constant-velocity joints, cylinders, certain fastener applications including aerospace, agricultural and off-highway, and certain products impacted by oil and gas prices. Margins were also negatively impacted by higher than expected costs associated with capacity expansions, launches of new product and process capabilities and other growth initiatives. In addition, margins were hampered by disruptions associated with the integration of acquisitions, the divestiture of businesses and the restructuring of certain operations. Cash Flows and Capital Expenditures Net cash flows from operating activities decreased to approximately $153 million in 1999 from approximately $200 million in 1998. In 1998, net cash from operating activities included approximately $46 million from the liquidation of marketable securities. Reflecting the favorable long-term prospects for us, our board of directors authorized in 1994 the repurchase of 10 million shares of our common stock and convertible preferred stock (converted into common stock in 1997). This repurchase authorization was completed in 1998 and the board of directors in late 1998 authorized an additional repurchase of five million shares of our common stock. During 1998, we repurchased 3.6 million shares for approximately $64 million, including 0.4 million shares pursuant to the 1998 board authorization. We repurchased and retired approximately 1.3 million shares of our common stock in 1999. In 1999, we increased the quarterly dividend on our common stock to $.08 per share from $.07. Capital expenditures in 1999 were approximately $136 million as compared with $106 million and $55 million in 1998 and 1997, respectively. The increase in capital expenditures from 1998 is related to product line extensions, capacity expansions and expenditures for new advanced manufacturing technologies. The increase in capital expenditures from 1997 is principally related to the businesses acquired in 1998. Inventories Our investment in inventories for our businesses decreased to approximately $184 million at December 31, 1999 as compared with $198 million in 1998. The decrease is principally the result of the disposition of the aftermarket-related businesses and vacuum metalizing operation. Liquidity and Capital Resources In connection with the recapitalization, we and our subsidiaries entered into a new credit facility. Our 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, we utilized all of our tranche A, tranche B and tranche C term loans and approximately $19 million of our revolving credit facility commitments. Our revolving credit balances fluctuate daily based upon our working capital and other ordinary course needs and our credit facility is only available to a limited extent to fund future acquisitions. Our other important source of liquidity is our new $225 million accounts receivable financing arrangement, under which we have the ability to sell eligible accounts receivable to our special purpose finance subsidiary. In connection with the recapitalization and the Simpson acquisition, we utilized $155 million of our accounts receivable arrangement. Our new credit facility and accounts receivable financing replaced our prior credit facility and accounts receivable financing. In addition, we are currently negotiating two sale-leaseback financings relating to certain equipment of Simpson and the Simpson headquarter's building to yield gross proceeds to us of approximately $50 million. These proceeds will be used to pay down our $200 million tranche C term loan facility. In addition to our credit facility and the accounts receivable financing, we had approximately $15.9 million of other indebtedness outstanding as of September 30, 2000 which did not get repaid in connection with the recapitalization. We also have a commitment from Masco Corporation, one of our shareholders, to purchase up to $100 million of a new issue of MascoTech -30- subordinated debt, subject to limited conditions, on or prior to October 31, 2003. Our credit facility regulates how we draw upon this commitment, as described below. Our debt includes $305 million in principal amount of 4.5% 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. Our credit facility imposes significant restrictions upon the use of our revolving credit facility that are designed to ensure that we have the necessary liquidity to repay the convertible subordinated debentures. We must maintain restricted cash either in escrow from the proceeds of other subordinated debt financing or equity financing or in the form of availability under our 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, we are obligated by our credit facility to utilize our $100 million subordinated loan commitment from Masco to satisfy our obligations in respect of the convertible subordinated debentures, upon maturity, conversion or otherwise, to the extent that we have not raised other subordinated debt or equity. By reason of the foregoing, we do not expect to be able to utilize our full revolving credit commitments, absent being able to raise additional junior financing. The amortization of our bank term indebtedness following the recapitalization and the Simpson acquisition (but not assuming completion of our pending sale-leaseback transactions) is as follows (in millions): 2001............................ $33 2002............................ 53 2003............................ 73 2004............................ 83 2005............................ 83 2006............................ 93 2007............................ 273 2008............................ 386.7 2009............................ 123.3 In addition to our bank term debt amortization, our $305 million of convertible subordinated debentures mature in 2003 and we have approximately $16 million of other debt maturing at various dates. We have other cash commitments not relating to debt as well. Immediately following the recapitalization, we made restricted stock awards to our employees of approximately 3,741,325 shares of 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 and one quarter on each January 14 of 2002, 2003 and 2004. Holders of restricted stock are entitled to elect cash in lieu of 40% of their restricted stock which vested at closing and 100% 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% 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% accretion. Assuming restricted stock award holders elect to receive the maximum cash, we estimate our total potential cash restricted stock obligations at approximately $57 million. We also have outstanding $36.1 million in liquidation value of preferred stock in respect of which we are required to pay dividends initially at a rate of 13% per annum and to effect a mandatory redemption in December 2012. In November 2000, we 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 us. 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 -31- reduce previously sold receivables. We service, administer and collect 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. $118.5 million of the proceeds of the facility was used in order to consummate the recapitalization and $36.3 was used to consummate the Simpson acquisition. As a result of the recapitalization and Simpson acquisition, we are highly leveraged and we have significantly increased our interest expense relative to historical levels. We will need to dedicate significant portions of our cash flow to our debt service obligations. In addition, we expect that our capital expenditure requirements in 2001 will be approximately $100 million. We may incur material amounts of additional debt and further burden our cash flow in pursuit of our acquisition strategies. We believe that our liquidity and capital resources, including anticipated cash flow from operations, will be sufficient for us to meet our debt service, capital expenditure and other short-term and long-term obligations and needs, but we are subject to unforeseeable events and the risk that we are not successful in implementing our business strategies. We will also seek to extend the average maturities of our 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. See "Description of Our Indebtedness." New Accounting Pronouncements On June 15, 1998, the Financial Accounting Standards Board ("FASB") issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities." In June 1999, FASB issued SFAS No. 137, "Accounting for Derivative Instruments and Hedging Activities -- Deferral of the Effective Date of FASB Statement No. 133." In June 2000, FASB issued SFAS No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging Activities -- an Amendment of FASB Statement No. 133." SFAS No. 133, 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 SFAS 133, as amended by SFAS 133 and 138, is January 1, 2001. We are currently not involved in any derivative activity. We expect to enter into interest rate derivatives to satisfy requirements under our bank facilities, however, until we determine the nature of such derivatives, we cannot evaluate the impact on our financial statements, if any, of adopting these standards. 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 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. We are currently evaluating the impact SFAS No. 140 will have on our financial statements, if any. -32- BUSINESS General We are a leading global diversified manufacturer of highly engineered products for transportation, industrial and consumer markets. Our primary products include metal formed components used in vehicle engine and drivetrain applications, specialty fasteners, towing systems, packaging and sealing products and other industrial products. Our products for the original equipment and aftermarket segments of the global transportation industry include a broad range of semi-finished and finished components, subassemblies and assembled products. We utilize a number of advanced metalworking capabilities in a number of metal forming technologies including cold extrusions and Hatebur hot forming. We supply our metal formed components and industrial products to a diverse base of over 150 leading automotive, industrial and transportation customers around the world. Major end markets served include auto, aerospace, agricultural equipment, building materials, construction and other off-highway transportation equipment, chemicals, consumer markets for towing equipment and accessories, consumer packaging products, heavy duty trucks, marine, oil and gas production and refining. Our operations are presented in two primary groups: (i) Metal Forming Group and (ii) Diversified Industrial Product Group. The Metal Forming Group includes forged products, power metal products, tubular fabricated products, specialty fasteners, and compressed gas cylinders. The Diversified Industrial Product Group includes hitching and towing accessory products, closing and dispensing systems, gaskets, insulation products, and precision cutting tools. Simpson Simpson Industries, Inc. develops and produces precision-engineered automotive components and modular systems for automotive, sport utility, light- and heavy-duty truck and diesel engines. Its major product lines include vibration control products, air conditioning compressor components, wheel-end and suspension components and assemblies, oil pumps, water pumps and other modular engine assemblies and transmission and driveline components that are machined from castings and forgings. These products are produced principally for OEMs in North America and Europe. Simpson manages its business under three similar product groups that are aggregated together as one segment in the global vehicular industry. 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. Simpson designs and manufactures torsional crankshaft dampers, which reduce and eliminate engine and drivetrain noise and vibration. Simpson produces 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. Simpson also produces 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. Overview In early 1997, we completed the sale of our engineering and technical services businesses to MSX International, Inc. As part of that transaction, we acquired an approximately 45 percent common equity interest in MSX International, Inc. In 1999, we completed the planned sale of certain of our automotive aftermarket businesses and vacuum metalizing operation for total proceeds of approximately $105 million. Pursuant to a plan adopted in 1999, our specialty tubing business was sold for approximately $6 million in January 2000. The cash portion of the proceeds from these sales was applied to reduce our indebtedness. The disposition of these businesses did not meet the criteria for discontinued operations treatment for accounting purposes; accordingly, the -33- sales and results of operations of these businesses are included in the results of continuing operations through the respective dates of disposition. In January 1998, we completed the acquisition of TriMas Corporation, or TriMas, by purchasing all of the outstanding shares of TriMas not already owned by us for approximately $920 million. In connection with the TriMas acquisition, we entered into a $1.3 billion credit facility which is collateralized by a pledge of the stock of TriMas. The businesses that currently represent the Diversified Industrial Product Group are principally part of TriMas Corporation. In addition to the TriMas acquisition, in 1998 we acquired three companies and a product line with combined annual sales of approximately $60 million. These business complement our Specialty Fasteners and Specialty Industrial Products businesses. During 1999, we acquired Windfall Products, Inc., a manufacturer of transportation-related components that utilizes powder metal technology, significantly expanding our powder metal manufacturing operations. In November 2000, we completed a recapitalization as a result of which our common stock was delisted from The New York Stock Exchange. See "The Recapitalization." In December 2000, we completed our acquisition of Simpson. Operating Segments The following table sets forth for the three years ended December 31, the net sales and operating profit for our operating segments. Information for 1998 is presented on a pro forma basis, as though TriMas had been acquired at January 1, 1998. The Specialty Metal Formed Products segment and Specialty Fasteners segment are part of the Metal Forming Group. The Towing Systems, Specialty Packaging and Sealing Products and Specialty Industrial Products segments make up the Diversified Industrial Product Group.
Net Sales(l) (in Thousands) ---------------------------------------- 1999 1998 1997 ------------ ------------- ----------- Specialty Metal Formed Products................................. $817,000 $760,000 $711,000 Specialty Fasteners............................................. 241,000 226,000 44,000 Towing Systems.................................................. 260,000 238,000 -- Specialty Packaging and Sealing Products........................ 216,000 223,000 -- Specialty Industrial Products................................... 107,000 110,000 37,000 Companies Sold or Held for Sale................................. 39,000 115,000 130,000 ------------ ------------- ----------- $1,680,000 $1,672,000 $922,000 ============ ============= =========== Operating Profit(2)(3)(4) ---------------------------------------- 1999 1998 1997 ------------ ------------- ----------- Specialty Metal Formed Products................................. $112,000 $ 106,000 $ 88,000 Specialty Fasteners............................................. 35,000 38,000 8,000 Towing Systems.................................................. 37,000 34,000 -- Specialty Packaging and Sealing Products........................ 41,000 46,000 -- Specialty Industrial Products................................... 14,000 16,000 7,000 Companies Sold or Held for Sale................................. 4,000 12,000 16,000 ------------ ------------- ----------- $243,000 $252,000 $119,000 ============ ============= ===========
(1) The 1998 net sales amounts include TriMas sales occurring before the acquisition date of January 22, 1998. These sales amounted to approximately $36 million. (2) Amounts are before General Corporate Expense. (3) Segment operating profit in 1997 includes approximately $17 million of nonrecurring charges. -34- (4) 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 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 markets we serve. Approximately 46% of our 1999 sales were of original equipment automotive products and services. Sales to original equipment manufacturers are made through factory sales personnel and independent sales representatives. During 1999, sales to various divisions and subsidiaries of New Venture Gear, Inc. accounted for approximately 12% of our net sales. 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 systems products, including vehicle hitches, jacks, winches, couplers and related accessories for the passenger car, light truck, recreational vehicle, marine, agricultural and industrial markets. Towing systems products are sold to independent installers, distributors, manufacturers and aftermarket 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; high-pressure seamless compressed gas cylinders primarily used for shipping, storing and dispensing oxygen, nitrogen, argon and helium and a complete line of low-pressure welded cylinders used to contain and dispense acetylene gas for the welding and cutting 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, principally for commercial and industrial construction applications, pressure-sensitive specialty tape products and a variety of specialty precision tools such as center drills, cutters, end mills, reamers, master gears, gages and punches. These products are marketed to manufacturers and distributors by both our sales personnel and independent sales representatives. -35- Customers In 1999, approximately 46% of our sales were of original equipment automotive products and services. Sales to various divisions and subsidiaries of New Venture Gear, Inc. accounted for approximately 12% of our net sales. Except for sales to New Venture Gear, 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 and service generally. Materials and Supply Arrangements In general, raw materials required by us have been obtainable from various sources and in the quantities desired. 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 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 September 30, 2000, we employed approximately 9,431 people, of which approximately 17.8% were unionized (principally United Auto Workers). Approximately 20% 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 during the spring and summer periods; 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. Our subsidiaries were named as potentially responsible parties in several sites requiring clean up based on disposal there of wastes we 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 -36- 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, Germany, Italy, Mexico and Spain. Products manufactured by us outside of the United States include forged automotive component parts, 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. 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 Taylor, Michigan, and are provided by Masco Corporation under a corporate services agreement. 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), Elkhart(2)(2), Fort Wayne(1), Frankfort(4), Goshen(2), North Vernon(1) and Peru(2)(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), Livonia(4), Royal Oak(1), Troy(1), Warren(1)(3) New Jersey.......................................... Edison(3) and Netcong(3) Ohio................................................ Canal Fulton(1), Lakewood(4), Minerva(1), Newburgh Heights(4) and Port Clinton(1) Oklahoma............................................ Tulsa(3) Pennsylvania........................................ Ridgway(1) and St. Marys(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.............................................. Sao Paulo(1) -37- Canada.............................................. Fort Erie(5) and Oakville(2), Ontario Czech Republic...................................... Oslavany(1) England............................................. Leicester(5) and Wolverhampton(1) Germany............................................. Neunkirchen(5), Nurnberg(1) and Zell am Harmersbach(1) Italy............................................... Poggio Rusco(1) and Valmadrera(5) Mexico.............................................. Mexico City(5) and Ramos Arispe(1) Spain............................................... Almusaffes(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. 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 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 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 of the proposed settlement 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. -38- 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. -39- MANAGEMENT Directors and Executive Officers The following table sets forth certain information regarding our directors and executive officers. Name Age Position ---- --- -------- Gary Banks............................. 50 Director Cynthia Hess........................... 44 Director Perry J. Lewis......................... 62 Director J. Michael Losh........................ 54 Director Richard A. Manoogian................... 63 Director David I. Margolis...................... 70 Director Thomas Stallkamp....................... 53 Director David A. Stockman...................... 53 Director Daniel P. Tredwell..................... 42 Director William T. Anderson.................... 53 Vice President-Controller Lee M. Gardner......................... 53 President and Chief Executive Officer, Diversified Industrial Products Group and Director Eugene A. Gargaro...................... 57 Secretary Timothy D. Leuliette................... 49 Interim Chief Executive Officer, Metal Forming Group and Director David B. Liner......................... 45 Vice President and General Counsel James F. Tompkins...................... 45 Treasurer Timothy Wadhams........................ 52 Executive Vice President, Finance and Administration and Chief Financial Officer - -------------------- Gary M. Banks. Mr. Banks was elected as one of our directors in connection with the recapitalization. He has served as a Director of Documentum, Inc. since March 1999 and has served as Vice President and Chief Information Officer of Sithe Energies, an electricity generation trading company in New York. From August 1998 to July 1999, he was Vice President and Chief Information Officer for Xerox Corporation, a manufacturing company. From June 1992 to July 1998, Mr. Banks served as Director MIS for the agricultural division of Monsanto Inc., a life sciences company. Before joining Monsanto, he spent 15 years with Bristol-Myers Squibb Company, a pharmaceutical company, as Director MIS. Cynthia L. Hess. Ms. Hess was elected as one of our directors in connection with the recapitalization and is a partner of Heartland Industrial Partners. She was formerly vice president of corporate quality for DaimlerChrysler, where she led the corporate strategy for quality improvement and facilitated quality plan execution. In her 22 years with DaimlerChrysler, Ms. Hess held various engineering, manufacturing and procurement supply positions. Perry J. Lewis. Mr. Lewis was elected as one of our directors in connection with the recapitalization. He is a Director of Aon Corporation, and Clear Channel Communications, Inc. Mr. Lewis was also a founding partner of Morgan, Lewis, Githens & Ahn, an investment banking and leveraged buyout firm, and has served as a partner of that firm since 1982. He has been a general partner of MLGAL Partners, L.P. since April 1987. J. Michael Losh. Mr. Losh was elected as one of our directors in connection with the recapitalization. He is a Director of Cardinal Health Inc., and The Quaker Oats Company. He was a Director of Hughes Electronics from February 1995 to August 2000 and a Director of Delphi Automotive Systems Corp. in 1999. Formerly, he was the Executive Vice President and Chief Financial Officer of General Motors Corporation starting in 1994 and prior to that, Vice President and Group Executive of North American Vehicle Sales, Service and Marketing from 1992 to 1994. -40- Richard A. Manoogian. Mr. Manoogian has served as our Chairman of the Board and Director since our formation in 1984 and served as Chief Executive Officer until January 1998. He joined Masco Corporation in 1958, was elected Vice President and a Director in 1964, President in 1968 and Chairman and Chief Executive Officer in 1985. He served as Chairman of the Board of TriMas Corporation from 1989 until we acquired it in January 1998. He is also a director of Bank One Corporation, MSX International, Inc., a former affiliate of ours, Detroit Renaissance and The American Business Conference, Chairman of the Detroit Institute of Arts Board of Directors and a trustee of the Archives of American Art (Smithsonian Institution), Center for Creative Studies, The Fine Arts Committee of the State Department, Trustee, Council of the National Gallery of Art, Armenian General Benevolent Union, Detroit Investment Fund and the Henry Ford Museum and Greenfield Village. David I. Margolis. Mr. Margolis was elected as one of our directors in connection with the recapitalization. He was employed by Coltec, a manufacturer of aerospace, automotive and industrial products, for 33 years, where he was Chief Executive Officer and Chairman of the Board until his retirement in 1995. He recently retired as a Director of Burlington Industries, Inc., a manufacturer of textiles, and a Director of B F Goodrich Co. Thomas Stallkamp. Mr. Stallkamp was elected as one of our directors in connection with the recapitalization. He was appointed Vice Chairman and Chief Executive Officer of MSX International effective January 2000. He also serves on the Board of Directors for Kmart Corporation, bvertical.com and Baxter International. Prior to joining MSX International, Mr. Stallkamp was Vice Chairman for DaimlerChrysler Corporation and also served as President of Chrysler Corporation in 1998. David A. Stockman. Mr. Stockman was elected as one of our directors in connection with the recapitalization. He is the founder of Heartland Industrial Partners, a buyout firm, established in 1999, focused on industrial buyouts and buildups. Prior to founding Heartland Industrial Partners, he was a senior managing director of The Blackstone Group L.P. and had been with Blackstone since 1988. Daniel P. Tredwell. Mr. Tredwell was elected as one of our directors in connection with the recapitalization. He has more than a decade of leveraged financing experience. Mr. Tredwell served as a Managing Director at Chase Securities Inc. from 1985 until early 2000. From 1980 to 1985, Mr. Tredwell was employed as the Press Secretary to U.S. Representative Robert L. Livingston. William T. Anderson. Mr. Anderson has served as our Vice President-Controller since September 1998. He previously served as our Vice President of Operational Accounting from December 1990 until September 1998. Lee M. Gardner. Mr. Gardner served as our President from 1992 until November, 2000. Mr. Gardner joined MascoTech in 1987 with responsibility for the powertrain and chassis business serving the automobile industry. In October 1990, Mr. Gardner assumed responsibility for all of our companies serving the automobile marketplace. Prior to joining us, Mr. Gardner spent over 14 years with Borg-Warner Corporation. His last position before joining us was Vice President and General Manager of Borg-Warner's Transmission System Group. Eugene A. Gargaro. Mr. Gargaro has served as our corporate Secretary since January 1984 and Vice President and the corporate Secretary of Masco Corporation since October 1993. Timothy D. Leuliette. Mr. Leuliette was elected as one of our directors in connection with the recapitalization and currently serves as our interim Chief Executive Officer, Metal Forming Group. He is the former Vice Chairman of Detroit Diesel Corp. 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 & COO in 1996 to address operational and strategic issues. From 1991 to 1996 Mr. Leuliette served as President -41- & CEO of ITT Automotive. He also serves on a number of corporate and charitable boards, including serving as a director of The Federal Reserve of Chicago, Detroit Branch. David B. Liner. Mr. Liner had served as Associate Corporate Counsel of Masco Corporation for more than five years prior to joining us in February 1997 as our Vice President and Corporate Counsel. He was elected to his current position as General Counsel in September 1998. James F. Tompkins. Mr. Tompkins has served as our Treasurer 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. Board Committees. Prior to the recapitalization we had three standing committees: the compensation committee, the audit committee and the nominating committee. As a result of the recapitalization, our board has been reconstituted and we do not currently have board committees in place. It is our intention to, in the near future, form such committees as we deem vital to the operation of our business and appoint members of our board who will serve on such committees. Director Compensation. Directors do not receive any cash compensation for their service as members of the board of directors, but they are reimbursed for reasonable out-of-pocket expenses incurred in connection with their attendance at meetings of the board of directors and committee meetings. Directors are eligible to receive options to purchase common stock under our stock option plan. Pursuant to the recapitalization agreement all stock options, whether or not vested, were canceled and holders received the merger consideration, as adjusted, determined by the exercise price of their options. Director and Executive Officer Compensation Summary Compensation The following table summarizes the annual and long-term compensation of our chairman of the board, chief executive officer and the other four highest paid executive officers for 1999, 1998 and 1997. All of the individuals in the table are referred to collectively as the "named executive officers." Mr. Manoogian and Mr. Hennessey each received salary and bonus for 1999 of $1. Such rate had been in effect, at their request, since January 1998. However, Mr. Hennessey has received compensation of $1.7 million during calendar year 2000. Upon the recapitalization, Mr. Hennessey resigned as Chief Executive Officer. -42-
Long Term Annual Compensation(1) Compensation Awards ----------------------------- -------------------------------- Securities All Other Restricted Stock Underlying Compen- Name and Principal Position Year Salary Bonus Award(s)(2)(3) Options sation(4) - --------------------------- ------ ---------- --------------- ------------------ ---------- ----------- Richard A. Manoogian.. 1999 $ 1 $ 0 $1,150,000 60,000 $ 94,000 Chairman of the Board 1998 1 0 1,710,000 280,000 80,000 1997 400,000 173,000 131,000 0 38,000 Frank M. Hennessey.... 1999 $ 1 $ 0 $1,915,000 100,000 $ 0 Vice Chairman and Chief 1998 1 0 2,367,000 400,000 0 Executive Officer(4)(5) Lee M. Gardner........ 1999 $650,000 $231,000 $ 155,000 0 $116,000 President and Chief 1998 662,000 260,000 344,000 49,000 106,000 Operating Officer 1997 601,000 271,000 190,000 34,550 70,000 Timothy Wadhams....... 1999 $442,000 $157,000 $ 106,000 0 $ 73,000 Executive Vice President 1998 448,000 177,000 951,000 30,000 67,000 Finance and 1997 336,000 203,000 106,000 20,611 40,000 Administration William T. Anderson... 1999 $256,000 $ 93,000 $ 59,000 0 $ 42,000 Vice President-- 1998 246,000 105,000 292,000 20,000 38,000 Controller(5) David B. Liner........ 1999 $213,000 $ 80,000 $ 48,000 0 $ 21,000 Vice President and 1998 197,000 84,000 183,000 14,000 20,000 General Counsel(5)
- ---------------- (1) Officers may receive certain perquisites and personal benefits, the dollar amounts of which are below current Securities and Exchange Commission thresholds for reporting requirements. For purposes of applying these thresholds, Mr. Manoogian has been treated as if his 1999 salary and bonus equaled his 1997 salary and bonus of approximately $573,000. Mr. Hennessey has been treated as if his 1999 salary and bonus were also equal to $573,000. (2) This column sets forth the dollar value, as of the date of grant, of restricted stock awarded under our 1991 Long Term Stock Incentive Plan (the "1991 Plan"), without giving any effect to the recapitalization. In general, restricted stock awards shown in the table vest over a period of ten years from the date of grant with ten percent of each award vesting annually. Vesting is generally contingent on continuing employment or a consulting relationship with us. The following number of shares were awarded to the named executive officers in 1999: Mr. Manoogian -- 79,300 shares; Mr. Hennessey -- 132,100 shares; Mr. Gardner -- 10,700 shares; Mr. Wadhams -- 7,300 shares; Mr. Anderson -- 4,100 shares; and Mr. Liner -- 3,300 shares. A portion of the 1998 awards provide that vesting generally occurs over a three-year period after the recipients retire from MascoTech after reaching age 65; however, annual vesting of part or all of these shares begins earlier if our common stock attains certain price targets ($30 and $35 per share) or if earnings per share targets are met by specified dates. Even if these goals are reached, vesting still generally occurs in installments over a ten-year period. As of December 31, 1999, the aggregate number and market value of unvested restricted shares of Company Common Stock held by each of the named executive officers were: Mr. Manoogian -- 209,490 shares valued at $2,658,000; Mr. Hennessey -- 249,600 shares valued at $3,167,000; Mr. Gardner -- 109,900 shares valued at $1,394,000; Mr. Wadhams -- 94,520 shares valued at $1,199,000; Mr. Anderson -- 43,880 shares valued at $557,000; and Mr. Liner -- 20,800 shares valued at $264,000. Recipients of restricted stock awards have the right to receive dividends on unvested shares. (3) At the time of the recapitalization merger all existing restricted stock awards were canceled and replaced with new restricted stock awards. See "Management-- Restricted Stock Awards." (4) This column includes (a) MascoTech contributions and allocations under our defined contribution retirement plans for 1999 for the accounts of each of the named executive officers other than Mr. Manoogian, who does not participate in these plans (for 1999: Mr. Hennessey-- none; Mr. Gardner-- $46,000; Mr. Wadhams-- $31,000; Mr. Anderson-- $18,000; and Mr. Liner-- $15,000), and (b) cash payments made pursuant to certain tandem rights associated with the annual vesting of certain restricted stock awards granted in 1989 (in 1999: Mr. Manoogian-- $94,000; Mr. Hennessey-- none; Mr. Gardner-- -43- $71,000; Mr. Wadhams-- $42,000; Mr. Anderson-- $24,000; and Mr. Liner-- $6,000). For further information regarding these rights, see "Related Party Transactions." (5) Messrs. Hennessey, Anderson and Liner became executive officers in 1998. Consequently, the table does not set forth information for 1997, but information for 1998 includes the entire year. Option Grants The following table sets forth information concerning options granted to the named executive officers in 1999. All such options were cancelled in the recapitalization, as described under "The Recapitalization."
Individual Grants - ---------------------------------------------------------------------------------------- Number of % of Total Exercise Securities Options Price Underlying Granted to (Subject to Options Employees in Certain Expiration Name Granted 1999 Restrictions) Date Realized Value at $16.90 per Share - ----------------------- ------------ ------------- ------------- ------------ ----------------------------------- Richard A. Manoogian 60,000 32.4% $14 3/01/06 $174,000 Frank M. Hennessey.. 100,000 54.1% $14 3/01/06 $290,000 Lee M. Gardner...... -- -- -- -- -- Timothy Wadhams..... -- -- -- -- -- William T. Anderson. -- -- -- -- -- David B. Liner...... -- -- -- -- --
Securities and Exchange Commission regulations require information as to the potential realizable value of each of these options, assuming that the market price of our common stock appreciates in value from the date of grant to the end of the option term at annual rates of five percent and ten percent. Due to the cancellation of the options in the recapitalization, we determined these values on the basis of the $16.90 per share recapitalization consideration (without regard to proceeds from the disposition of Saturn Electronics & Engineering, Inc.). All options became exercisable upon the recapitalization. Option Exercises and Year-End Option Value The following table sets forth information concerning each exercise of stock options during 1999 by each named executive officer and the value at December 31, 1999 of unexercised options held by such individuals under our stock option plans. The value of the options is based upon $16.90 per share recapitalization consideration (without regard to proceeds from the disposition of Saturn Electronics & Engineering, Inc.). All options became exercisable upon the recapitalization and were canceled. Aggregated Option Exercises in 1999 and December 31, 1999 Option Values
Number of Securities Value Based Upon $16.90 Underlying Unexercised Per Share Recapitalization Options at Consideration at December 31, 1999 December 31, 1999 ---------------------------- ---------------------------- Shares Acquired Value Name on Exercise Realized Unexercisable Exercisable Unexercisable Exercisable - ----------------------- ----------- ---------- ------------- ----------- ------------- ----------- Richard A. Manoogian 80,000 $645,000 678,000 42,000 2,995,200 100,800 Frank M. Hennessey.. 0 0 500,000 0 290,000 -- Lee M. Gardner...... 0 0 219,000 288,061 520,500 2,484,100 Timothy Wadhams..... 0 0 114,000 143,769 201,600 1,388,400 William T. Anderson. 0 0 48,000 12,000 67,200 28,800 David B. Liner...... 0 0 14,000 0 -- --
-44- Pension Plans The executive officers other than Mr. Manoogian participate in pension plans maintained by us for certain of our salaried employees. The following table shows estimated annual retirement benefits payable for life at age 65 for various levels of compensation and service under these plans.
Remuneration(2) Years of Service(1) - --------------------- -------------------------------------------------------------------------------------- 5 10 15 20 25 30 ------------ ------------ ------------ ----------- ----------- ----------- $100,000 $5,645 $11,290 $16,935 $22,580 $28,225 $33,870 200,000 11,290 22,580 33,870 45,161 56,451 67,741 300,000 16,935 33,870 50,806 67,741 84,676 101,611 400,000 22,580 45,161 67,741 90,321 112,902 135,482 500,000 28,225 56,451 84,676 112,902 141,127 169,352 600,000 33,870 67,741 101,611 135,482 169,352 203,223 700,000 39,516 79,031 118,547 158,062 197,578 237,093 800,000 45,160 90,321 135,482 180,643 225,803 270,964
- ----------------------- (1) The plans provide for credit for employment with any of us or Masco Corporation and their subsidiaries. Vesting occurs after five full years of employment. The benefit amounts set forth in the table above have been converted from the plans' calculated five-year certain and life benefit and are not subject to reduction for social security benefits or for other offsets, except to the extent that pension or equivalent benefits are payable under a Masco Corporation plan. The table does not depict Code limitations on tax-qualified plans because one of the plans is a non-qualified plan established by us to restore for certain salaried employees (including certain of the named executive officers) benefits that are otherwise limited by the Code. (2) For purposes of determining benefits payable, remuneration in general is equal to the average of the highest five consecutive January 1 annual base salary rates paid by us prior to retirement. The compensation covered by the plans includes compensation paid to Mr. Hennessey by Masco Corporation prior to his employment with us, and equivalent estimates are used where compensation has been curtailed by agreement with us or Masco Corporation. Under our Supplemental Executive Retirement and Disability Plan, certain of our officers and other key executives, or any company in which we or a subsidiary owns at least 20 percent of the voting stock, may receive retirement benefits in addition to those provided under our other retirement plans and supplemental disability benefits. Each participant is designated by the Chairman of the Board (and approved by the Compensation Committee) to receive annually upon retirement on or after age 65, an amount which, when combined with benefits from our other retirement plans, and for most participants any retirement benefits payable by reason of employment by prior employers, equals 60 percent of the average of the participant's highest three years' cash compensation received from us (limited to base salary and regular year-end cash bonus). A participant may also receive supplemental medical benefits. A participant who has been employed at least two years and becomes disabled prior to retirement will receive annually 60 percent of the participant's total annualized cash compensation in the year in which the participant becomes disabled, subject to certain limitations on the maximum payment and reduced by benefits payable pursuant to our long-term disability insurance and similar plans. Upon a disabled participant's reaching age 65, such participant receives the annual cash benefits payable upon retirement, as determined above. A surviving spouse will receive reduced benefits upon the participant's death. Participants are required to agree that they will not engage in competitive activities for at least two years after termination of employment, and if employment terminates by reason of retirement or disability, during such longer period as benefits are received under this plan. Messrs. Gardner and Wadhams participate in this plan. -45- Restricted Stock Awards Immediately prior to the recapitalization, all existing restricted stock awards were canceled and, immediately following the recapitalization, these awards were replaced with new restricted stock awards. Twenty-five percent of the shares issued under the new restricted stock awards vested, subject to transfer restrictions, at the time of the recapitalization merger. Holders of the new restricted stock awards could have elected to receive the entire first installment in the form of shares or 60% in the form of shares and 40% in cash, with the amount of cash computed at $16.90 per share (the merger consideration per share). The balance of the shares issued under the new restricted stock awards will vest, subject to transfer restrictions, ratably on January 14, 2002, January 14, 2003 and January 14, 2004. Prior to each vesting date for the remaining installments, holders may elect to receive the entire installment in shares, 60% of the installment in shares and 40% in cash, or 100% in cash. Failure to make an election will result in the holder receiving 100% of the installment in cash. The amount of cash paid per share will be $16.90 plus 6% per annum from the date of issuance of the restricted stock award. If the participant chooses shares, the number of shares delivered will be increased by 6% per annum from the date of issuance of the restricted stock award. MascoTech will be entitled to defer any payment of cash if it is prohibited from making the payment under its credit facilities. In the event of deferral, the amount payable to holders will be increased by 12% per annum instead of 6% per annum. The recapitalization agreement provides for a portion of the net proceeds from the disposition of Saturn stock to be paid in respect of common stock (including the cancelled restricted stock awards) and eligible options outstanding immediately prior to the recapitalization. As of December 18, 2000, without giving effect to cash elections or immediate vesting provisions upon the recapitalization, the 3,741,325 shares subject to restricted stock awards represented approximately 8.9% of the outstanding MascoTech common stock. Employment/Consulting Agreements Frank M. Hennessey. Prior to the recapitalization, we entered into an agreement with Mr. Hennessey, our former Vice Chairman and Chief Executive Officer, to serve as a consultant to us through December 31, 2003 for an annual payment of $500,000. Such payments would also be in consideration of Mr. Hennessey's agreement not to engage in certain activities that would be competitive with us. Lee M. Gardner. Prior to the recapitalization, we entered into an employment/consulting agreement with Lee M. Gardner, our former President and Chief Operating Officer, to serve at his former rate of base pay plus a bonus which would equal at least 50% of his base pay. The agreement is terminable by either party generally on 60 days notice. At such time as Mr. Gardner ceases his employment, he is to be paid a stay bonus of $1,500,000 upon his execution of a release in our favor and he would continue for three years to be available as a consultant to us for an aggregate of $1,725,000 payable over three years which would accelerate and become payable on a present value basis upon a subsequent change in control. Such payments would also be in consideration of Mr. Gardner's agreeing not to engage in certain activities that would be competitive with us. Mr. Gardner would be entitled to continuation of health benefits under certain circumstances, and his supplemental executive retirement benefits would also be increased. Timothy Wadhams. Prior to the recapitalization, we entered into an employment/consulting agreement with Timothy Wadhams, our Executive Vice President--Finance and Administration, to serve at his current rate of base pay plus a bonus which would equal at least 50% of his base pay. The agreement is terminable by either party generally on 60 days notice. At such time as Mr. Wadhams ceases his employment, he is to be paid a stay bonus of $1,200,000 upon his execution of a release in our favor and he would continue for three years to be available as a consultant to us for an aggregate of $1,150,000 payable over three years, which would accelerate and become payable on a present value basis upon a subsequent change in control. Such payments would also be in consideration of Mr. Wadhams's agreeing not to engage in certain activities that would be competitive with us. Mr. Wadhams would be entitled to continuation of health benefits under certain circumstances, and his supplemental executive retirement benefits would also be increased. -46- Severance Agreements Messrs. William T. Anderson, David B. Liner and James F. Tompkins, our Vice President-Controller, Vice President-General Counsel and Treasurer, respectively, entered into change of control severance agreements with us in connection with the recapitalization. The respective severance arrangements provide for the cash payment of severance benefits equal to two years of base salary and target bonus and benefits continuation in the event that the officer's employment is terminated under specific circumstances within two years of a change of control. Additionally, such agreements provide that, in the event the officer's employment is terminated under certain circumstances within three years of a change of control, any stock awards held by such officer shall continue to stay outstanding and vest in accordance with their terms. The agreements "gross up" the officers to the extent any payments are subject to excise tax as a result of being deemed "excess parachute payments." The recapitalization merger constituted a change of control under these severance arrangements. -47- SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table sets forth information with respect to the beneficial ownership of our common stock as of December 18, 2000 by: o each person known by us to beneficially own more than 5% of our common stock; o each of our directors; o each of our named executive officers; and o all of our directors and named executive officers as a group. The amounts and percentages of common stock beneficially owned are reported on the basis of regulations of the Securities and Exchange Commission governing the determination of beneficial ownership of securities. Under the rules of the SEC, a person is deemed to be a beneficial owner of a security if that person has or shares voting power, which includes the power to vote or to direct the voting of the security, or investment power, which includes the power to dispose of or to direct the disposition of the security. Except as indicated in the footnotes to this table, we believe, each beneficial owner named in the table below has sole voting and sole investment power with respect to all shares beneficially owned by them. There are significant agreements relating to voting and transfers of common stock in the Shareholders Agreement described under "Related Party Transactions." Our outstanding number of shares of common stock assumes that no cash elections are made in respect of our restricted stock incentive plans and that all such restricted stock fully vests.
Beneficial Ownership of MascoTech ---------------------------------- Shares of Percent Name and Beneficial Owner Common Stock of Class ------------------------- --------------- ------------- Heartland Industrial Associates, L.L.C. 55 Railroad Avenue Greenwich, Connecticut(1)(2).................................... 17,527,522 41.9% Credit Suisse First Boston Equity Partners, L.P. 11 Madison Avenue New York, New York 10010(3).................................... 10,355,030 24.7% Masco Corporation 21001 Van Born Road Taylor, Michigan 48180.......... 2,492,248 6.0% William T. Anderson(4)............................................... 42,075 * Gary Banks(2)........................................................ -- -- Lee M. Gardner(4).................................................... 94,932 * Eugene A. Gargaro, Jr.(5)............................................ 681,613 * Cynthia Hess(2)...................................................... -- -- Tim Leuliette(2)..................................................... -- -- Perry J. Lewis(2).................................................... -- -- David B. Liner(4).................................................... 20,457 * J. Michael Losh...................................................... -- -- Richard A. Manoogian(5).............................................. 1,479,290 3.5% David Margolis(7).................................................... -- -- Thomas Stallkamp..................................................... -- -- -48- Beneficial Ownership of MascoTech ---------------------------------- Shares of Percent Name and Beneficial Owner Common Stock of Class ------------------------- --------------- ------------- David A. Stockman(2)................................................. -- -- James F. Tompkins(4)................................................. 28,728 * Daniel P. Tredwell(2)................................................ -- -- Timothy Wadhams(4)................................................... 81,801 * All executive officers and directors as a group (16 persons) (2) (6). 1,767,636 4.2
- ---------------------- * Less than 1%. (1) The 17,527,522 shares of common stock are beneficially owned indirectly by Heartland Industrial Associates, L.L.C. as the general partner of each of the limited partnerships which hold shares of common stock directly. These partnerships hold shares of common stock as follows: 16,696,477 shares are held by Heartland Industrial Partners, L.P.; 194,204 shares are held by Heartland Industrial Partners (FF), L.P.; 329,821 shares are held by Heartland Industrial Partners (E1), L.P.; 153,510 shares are held by Heartland Industrial Partners (K1), L.P.; and 153,510 shares are held by Heartland Industrial Partners (C1), L.P. In addition, by reason of the Shareholders Agreement summarized under "Related Party Transactions," Heartland Industrial Associates, L.L.C. may be deemed to share beneficial ownership of shares of common stock held by other stockholders party to the Shareholders Agreement. Such beneficial ownership is hereby disclaimed. (2) As described in footnote 1 above, 17,527,522 shares are beneficially owned by Heartland Industrial Associates, L.L.C. Mr. Stockman is the Managing Member of Heartland Industrial Associates, L.L.C., but disclaims beneficial ownership of such shares. Messrs. Banks, Leuliette, Lewis and Tredwell and Ms. Hess are also members of Heartland Industrial Associates, L.L.C. and also disclaim beneficial ownership of the shares. The business address for each such person is 55 Railroad Avenue, Greenwich, CT 06830. (3) Of the 10,355,030 shares of common stock beneficially owned by CSFB, 7,402,831 shares are held directly by Credit Suisse First Boston Equity Partners, L.P.; 2,069,282 shares are held by Credit Suisse First Boston Equity Partners (Bermuda), L.P.; 6,610 shares are held by Credit Suisse First Boston U.S. Executive Advisors, L.P.; 533,168 shares are held by EMA Partners Fund 2000, L.P.; 343,139 shares are held by EMA Private Equity Fund 2000, L.P. In addition, by reason of the Shareholders Agreement summarized under "Related Party Transactions," CSFB may be deemed to share beneficial ownership of shares of common stock held by other stockholders party to the Stockholders Agreement. Such beneficial ownership is hereby disclaimed. (4) Constitutes restricted stock, whether vested or not vested, issued under our restricted stock incentive plans. Holders have voting but no investment power over unvested restricted shares. Holders of restricted common stock may not prior to an underwritten public offering of at least 15% of our common stock transfer any shares of restricted common stock to a person other than a relative of such holder or a trust established for the benefit of a relative of such holder. (5) Includes 661,260 shares owned by The Richard and Jane Manoogian Foundation, for which Messrs. Manoogian and Gargaro serve as directors. The directors of the foundation share voting and investment power with respect to the securities owned by the foundation, but Messrs. Manoogian and Gargaro disclaim beneficial ownership of such securities. Mr. Manoogian is also chairman of the board of Masco -49- Corporation as well as its chief executive officer. None of the shares beneficially owned by Mr. Manoogian are attributed to, or reported as beneficially owned by, Masco Corporation. Also includes 196,860 shares of restricted stock, whether vested or not vested, owned by Mr. Manoogian. See note 4 above. (6) Includes 485,206 shares of restricted stock, whether vested or not vested, issued under our restricted stock incentive plans. Holders have voting but no investment power over unvested restricted shares. See note 4 above. (7) Mr. Margolis is a Managing Director of Credit Suisse First Boston Equity Partners and as such may be deemed to share beneficial ownership of the shares owned by Credit Suisse First Boston Equity Partners and described in footnote 3 above. Mr. Margolis's business address is Eleven Madison Avenue, New York, N.Y. 10010. Mr. Margolis disclaims beneficial ownership of such shares. -50- RELATED PARTY TRANSACTIONS Shareholders Agreement In connection with the recapitalization, Heartland, Credit Suisse First Boston Equity Partners, L.P., Masco Corporation, Richard Manoogian, their various affiliates and certain other stockholders of MascoTech, Inc. entered into a Shareholders Agreement regarding their ownership of our common stock. References to a shareholder below refer only to those that are party to the Shareholders Agreement. References to Heartland and CSFB refer to all of their respective affiliated entities collectively, unless otherwise noted. Owners of an aggregate of approximately 90% of our outstanding common stock are party to the Shareholders Agreement. Election of Directors. The Shareholders Agreement provides that the parties will vote their shares of common stock in order to cause: (1) an amendment to our Bylaws to provide that the authorized number of directors on our board of directors shall be as recommended by Heartland in its sole discretion. (2) the election to the board of directors of: o such number of directors as shall constitute a majority of the board of directors as designated by Heartland Industrial Partners, L.P.; o one director designated by Masco; and o one director designated by CSFB after consultation with Heartland. Masco's ability to designate one director to the board of directors will terminate when it ceases to own a majority of the shares of common stock held by it as of the closing of the recapitalization subject to certain exceptions. CSFB's ability to designate one director to the board of directors will terminate when it ceases to own a majority of the shares of common stock held by it as of the closing of the recapitalization. Transfers of Common Stock. Prior to the date we have consummated a public offering of our common stock of at least $100.0 million (a "Qualifying Public Equity Offering"), the Shareholders Agreement restricts transfers of common stock except for transfers: (1) to a permitted transferee of a stockholder, (2) pursuant to the "right of first offer" provision discussed below, (3) pursuant to the "tag-along" provision discussed below, (4) pursuant to the "drag-along" provision discussed below and (5) pursuant to an effective registration statement or pursuant to Rule 144 under the Securities Act. Right of First Offer. The Shareholders Agreement provides that prior to a Qualifying Public Equity Offering no stockholder may transfer any of its shares other than to a permitted transferee of such stockholder or pursuant to the "tag-along" and "drag-along" provisions unless such stockholder shall offer such shares to us. We shall have the option for 15 business days to purchase such shares. If we decline to purchase the shares, then Heartland shall have the right to purchase such shares for an additional 10 business day period. Any shares not purchased by us or Heartland can be sold by such stockholder at a price not less than 90% of the price offered to us or Heartland. Tag-Along Rights. The Shareholders Agreement grants to the stockholders party to the agreement, subject to certain exceptions, in connection with a proposed transfer of common stock by Heartland or its affili- -51- ates, the right to require the proposed transferee to purchase a proportionate percentage of the shares owned by the other stockholders at the same price and upon the same economic terms as are being offered to Heartland. These rights terminate upon a Qualifying Public Equity Offering. Drag-Along Rights. The Shareholders Agreement provides that when Heartland and its affiliates enter into a transaction resulting in a substantial change of control of MascoTech, Inc., Heartland has the right to require the other stockholders to sell a proportionate percentage of shares of common stock in such transaction as Heartland is selling and to otherwise vote in favor of the transactions effecting such substantial change of control. These rights terminate upon a Qualifying Public Equity Offering. Information. Pursuant to the Shareholders Agreement, each stockholder party to the agreement is entitled to receive our quarterly and annual financial statements. In addition, stockholders who maintain 25% of their original equity investment in us will be entitled to receive prior to a Qualifying Public Equity Offering certain monthly financial information and certain other information as they may reasonably request and will have the opportunity to meet with our senior management on an annual basis and certain stockholders will be able to meet quarterly with our senior management. Observer Rights. Our shareholders who are also investors ("HIP Co-Investor") in one of Heartland's funds and have invested at least $40.0 million in our common stock or own at least 10% of our outstanding common stock have the right to attend all meetings of the board of directors, including committees thereof, solely in a non-voting observer capacity. These rights terminate upon a Qualifying Public Equity Offering. Preemptive Rights. Subject to certain exceptions, the Shareholders Agreement provides that if we issue, sell or grant rights to acquire for cash any shares of common stock or options, warrants or similar instrument or any other security convertible or exchangeable therefor ("Equity Interests"), or any equity security linked to or offered or sold in connection with any of our Equity Interests, then we will be obligated to offer certain stockholders or Heartland the right to purchase at the sale price and on the same terms and conditions of the sale, such amount of shares of common stock or such other Equity Security as would be necessary for such stockholders or Heartland to maintain its then current beneficial ownership interest in us. These rights terminate upon a initial public offering by us. Affiliate Transactions. Subject to certain exceptions, the Shareholders Agreement provides that Heartland and its affiliates will not enter into transactions with us or our subsidiaries involving consideration in excess of $1.0 million without the approval of Masco Corporation and the HIP Co-Investors. Registration Rights. The Shareholders Agreement provides the stockholders party to the agreement with unlimited piggy-back rights each time we file a registration statement except for registrations relating to (1) shares underlying management options, (2) an initial public offering consisting of primary shares and (3) the shares being registered pursuant to this registration statement. In addition, on the earlier of (1) five years after the closing of the recapitalization or (2) an initial public offering of MascoTech, Inc., Heartland, CSFB, Masco Corporation and Richard Manoogian have the ability to demand the registration of their shares, subject to various hold back and other agreements. The Shareholders Agreement grants two demand registrations to Masco Corporation, one demand registration to Richard Manoogian, three demand registrations to CSFB and an unlimited number of demands to Heartland. Approval and Consultation Rights. The Shareholders Agreement provides that prior to a Qualifying Public Equity Offering we will consult with CSFB in respect to any issues that in our good faith judgment are -52- material to our business and operations. In addition, prior to a Qualifying Public Equity Offering, CSFB will have the right to approve: o certain acquisitions by us; o the selection of a chief executive officer; o certain debt restructurings; and o any liquidation or dissolution of us. Monitoring Agreement We and Heartland are parties to a Monitoring Agreement pursuant to which Heartland is engaged to provide consulting services to us with respect to financial and operational matters. Heartland will receive a fee of $4.0 million for such services in fiscal year 2001. After fiscal year 2001, Heartland will receive a fee for such services equal to the greater of (1) $4.0 million or (2) 0.25% of our total assets. In addition to providing ongoing consulting services, Heartland will also assist in acquisitions, divestitures and financings, for which Heartland will receive a fee equal to 1% of the value of such transaction. The monitoring agreement also provides that Heartland will be reimbursed for its reasonable out-of-pocket expenses. We paid Heartland approximately $24.0 million in fees and reimbursed it for its expenses in connection with the recapitalization and the acquisition of Simpson. Corporate Services Agreement Under a Corporate Services Agreement, Masco Corporation provides us and our subsidiaries with office space for executive offices, use of its data processing equipment and services, certain research and development services, corporate administrative staff and other support services in return for payment of an annual base service fee of .8% of our consolidated annual net sales, subject to adjustments. This agreement also provides for various license rights and confidential treatment of information which may arise from Masco Corporation's performance of research and development services on our behalf. As a result of the recapitalization, the Corporate Services Agreement was amended. Under the amended agreement the fee for such services will be mutually agreed to by us and Masco Corporation but will not exceed $3.0 million during fiscal year 2001 and $500,000 during fiscal year 2002. Corporate Opportunities Agreement Masco Corporation and we are parties to a Corporate Opportunities Agreement which prohibits either party from acquiring or otherwise making an investment in a business if the other party has an investment in such business excluding, however, any business engaged in home improvement or building products or services businesses. The agreement terminates on the earlier of November 28, 2002 or six months after corporate services are no longer required to provided under the Corporate Services Agreement. Subordinated Loan Agreement We are a party to a subordinated loan agreement with Masco Corporation pursuant to which Masco has agreed to purchase, at par, at any time on or before October 31, 2003 up to $100.0 million aggregate principal amount of subordinated notes from us. We are obligated to use any proceeds from the sale of the notes solely to -53- meet our obligations under our 4 1/2% Convertible Subordinated Debentures due 2003. The interest rate on the notes is based on a spread over the average treasury rate or a comparable debt issue rate subject to a cap of 14.5% at the time of issuance of the note subject to increase. We have agreed to pay Masco a commitment fee of 0.125% per annum on Masco's unused commitment under the subordinated loan agreement. Masco's obligation to purchase notes from us pursuant to the subordinated loan agreement is subject to the accuracy of our representations and warranties, the absence of any bankruptcy with respect to us, and the absence of an event of default under our credit facility. Notes under the subordinated loan agreement can be issued from time to time and mature on June 30, 2009. Any notes issued under the subordinated loan agreement are subordinate in right of payment to the prior indefeasible payment and satisfaction in full of all of our existing and future senior indebtedness. Other In connection with the recapitalization and the acquisition of Simpson we paid fees and expenses of approximately $11.2 million to affiliates of Credit Suisse First Boston Equity Partners, L.P. in consideration for providing us financial advisory services. -54- DESCRIPTION OF CAPITAL STOCK Capital Stock Authorized Capital Stock Under our certificate of incorporation, our authorized capital stock consists of 275,000,000 shares, of which 250,000,000 shares are common stock, par value $1.00 per share, and 25,000,000 shares are preferred stock, par value $1.00 per share. 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 MascoTech, Inc. entitled to vote, voting together as a single class. As of December 18, 2000, we had 41,839,672 shares of our common stock outstanding, of which 3,741,325 shares were subject to restricted stock awards (assuming no cash elections and disregarding vesting restrictions), and 361,001 shares of Series A Preferred Stock outstanding. None of these shares are freely transferable by their terms or by reason of securities law and contractual restrictions. Common Stock Holders of common stock are entitled to one vote per share with respect to each matter presented to our stockholders on which the holders of common stock are entitled to vote. Except as may be provided in connection with any preferred stock in a certificate of designation filed pursuant to the Delaware General Corporation Law, or the DGCL, or as may otherwise be required by law or our certificate of incorporation, the common stock is our only capital stock entitled to vote in the election of directors and on all other matters presented to our stockholders; provided that, except as required by law or our certificate of incorporation, holders of common stock are not entitled to vote on any amendment to our certificate of incorporation that solely relates to the terms of any outstanding series of preferred stock or the number of shares of such series and does not affect the number of authorized shares of preferred stock or the terms of the common stock if the holders of preferred stock are entitled to vote thereon. Upon our liquidation, dissolution or winding up, whether voluntary or involuntary, holders of common stock will be entitled to receive such assets as are available for distribution to our stockholders after there shall have been paid or set apart for payment the full amounts necessary to satisfy any preferential or participating rights to which the holders of each outstanding series of preferred stock are entitled by the express terms of the series. The outstanding shares of common stock are validly issued, fully paid and nonassessable. The common stock does not have any preemptive, subscription or conversion rights. Shares of common stock are freely alienable subject to compliance with securities laws except that holders of restricted common stock may not prior to an underwritten public offering of at least 15% of our common stock transfer any shares of restricted common stock to a person other than a relative of such holder or a trust established for the benefit of a relative of such holder. Preferred Stock Our board of directors is authorized from time to time, without stockholder approval, to issue up to an aggregate of 25,000,000 shares of preferred stock, $1.00 par value per share, in one or more series. Included in this amount are 370,000 shares of Series A Preferred Stock authorized for issuance, in connection with the recapitalization. Each series of preferred stock may have the rights and preferences, including voting rights, divi- -55- dend rights, conversion rights, redemption privileges and liquidation preferences that our board of directors determines. The rights of the holders of common stock will be subject to, and may be adversely affected by, the rights of holders of any preferred stock that may be issued in the future. We issued 361,001 shares of Series A Preferred Stock to Masco Corporation upon the recapitalization. Except as required by law or otherwise as set forth in our certificate of incorporation, the Series A Preferred Stock holders do not have any voting rights or power to vote on any question or in any proceeding or to be represented at, or to receive notice of, any stockholders meeting. Series A Preferred Stock holders are entitled to one vote per share regarding matters on which they are entitled to vote. Series A Preferred Stock holders are entitled to receive, when, as and if declared by our board of directors, out of funds legally available therefor pursuant to the DGCL, cumulative dividends on each share of Series A Preferred Stock for each quarterly dividend at a rate of 13% per annum for periods ending on or prior to December 31, 2005 and 15% per annum for periods after December 31, 2005, plus 2% per annum for any period for which there are any accrued and unpaid dividends. Our Series A Preferred Stock is not convertible and has no preemptive rights. All of the then outstanding Series A Preferred Stock is mandatorily redeemable by us out of legally available funds on December 31, 2012 in accordance with the provisions in our certificate of incorporation. Additionally, prior to that date, at our option, we can redeem the Series A Preferred Stock, in whole or in part, out of legally available funds, by a resolution of our board of directors, in accordance with the provisions in our certificate of incorporation. If a change of control, as defined in our certificate of incorporation, occurs at any time, or in the event of an equity offering triggering event, as defined in our certificate of incorporation, then each holder of Series A Preferred Stock has the right to require us to purchase such holder's Series A Preferred Stock in whole or in part, in accordance with the provisions of our certificate of incorporation. In the event of any liquidation, dissolution or winding up of our affairs, whether voluntary or otherwise, after payment or provision for payment of our debts and other liabilities, the holders of Series A Preferred Stock are entitled to receive, out of our remaining assets, $100 in cash for each share of Series A Preferred Stock they hold, plus an amount equal to all dividends (including additional dividends) accrued and unpaid on each such share up to the date fixed for distribution. The Series A Preferred Stock ranks ahead of all our other capital stock outstanding at the time it was issued and therefore has the right to receive such dividends before common stock or any stock that ranks junior to the Series A Preferred. Certificate of Incorporation and Bylaws Our bylaws contain provisions requiring that advance notice be delivered to us of any business to be brought by a stockholder before an annual meeting of stockholders and provide for certain procedures to be followed by stockholders in nominating persons for election to our board of directors. Generally, such advance notice provisions require that the stockholder must give written notice either by personal delivery to the Chairman of the Board or on notice to our Secretary: o not less than ten days nor more than sixty days before the date of the meeting. -56- Our bylaws provide, in accordance with our certificate of incorporation, the number of directors shall be fixed from time to time exclusively by a resolution adopted by the affirmative vote of a majority of the board of directors, but shall be at least one. Special meetings of stockholders may be called only 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 holders of at least a majority of all outstanding shares entitled to vote on the action proposed to be taken. In general, our bylaws may be amended or repealed at a meeting and new bylaws adopted by the holders of a majority of our voting stock, voting together as a single class, or by a vote of a majority of the whole board of directors, provided that notices of the proposed amendments shall have been sent to all the directors not less than three days before the meeting of the directors by the unanimous vote of all the directors present. Limitation on Liability and Indemnification of Directors and Officers Our certificate of incorporation provides, as authorized by Section 102(b)(7) of the DGCL, that a director will not be personally liable to us or our stockholders for monetary damages for breach of fiduciary duty as a director, except for liability imposed by law, as in effect from time to time: o for any breach of the director's duty of loyalty to us or our stockholders; o for any act or omission not in good faith or which involved intentional misconduct or a knowing violation of law; o for unlawful payments of dividends or unlawful stock repurchases or redemptions as provided in Section 174 of the DGCL; or o for any transaction from which the director derived an improper personal benefit. Section 145 of the DGCL provides that a Delaware corporation may indemnify any persons who were, are or are threatened to be made, parties to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, other than a "derivative" action by or in right of the corporation, by reason of the fact that the person is or was an officer, director, employee or agent of such corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation or enterprise. The indemnity may include expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by the person in connection with the action, suit or proceeding, provided the person acted in good faith and in a manner he reasonably believed to be in or not opposed to the corporation's best interests and, with respect to any criminal action or proceeding, had no reasonable cause to believe that his conduct was illegal. A similar standard of care is applicable in the case of derivative actions, except that no indemnification shall be made where the person is adjudged to be liable to the corporation unless and only to the extent that the Court of Chancery of the State of Delaware or the court in which such action was brought determines that the person is fairly and reasonably entitled to indemnity and expenses. Our certificate of incorporation and bylaws provide that we will indemnify our directors, officers, employees and agents to the fullest extent permitted by Section 145 of the DGCL and will advance expenses to our directors, officers, employees and agents in connection with legal proceedings, subject to limited exceptions. -57- We plan to maintain standard insurance policies under which coverage is provided for payments made by us to our directors and officers in respect of the indemnification provisions in our certificate of incorporation and bylaws. We believe that these indemnification provisions and insurance are necessary to attract and retain qualified directors and officers. The limitation on liability and indemnification provisions in our certificate of incorporation and bylaws may not be enforceable against us if someone challenges these provisions. Nonetheless, these provisions may discourage our stockholders from bringing a lawsuit against directors for breach of their fiduciary duty. These provisions may also have the effect of reducing the likelihood of derivative litigation against our directors and officers, even though such an action, if successful, might otherwise benefit us and our stockholders. Furthermore, a stockholder's investment may be adversely affected to the extent we pay costs of settlement and damage awards against directors and officers pursuant to these indemnification provisions. Transfer Agent and Registrar We act as the transfer agent and registrar for our common stock. -58- DESCRIPTION OF OUR INDEBTEDNESS Credit Facility Summarized below are the material terms of our new credit facility. This summary is not a complete description of all of the terms and provisions of the agreement governing this debt. Overview In connection with the recapitalization, MascoTech, Metalync Company, LLC, Lamons Metal Gasket Co., Lake Erie Screw Corporation, Compac Corporation, Fulton Performance Products, Inc., Norris Cylinder Company and Draw-Tite, Inc. (each of which is a direct or indirect wholly-owned subsidiary of MascoTech) entered into a new credit facility with The Chase Manhattan Bank, as administrative agent and collateral agent, Credit Suisse First Boston, as syndication agent, Comerica Bank, as documentation agent, First Union National Bank, as documentation agent, National City Bank, as documentation agent, Bank One, NA, as documentation agent, and the other lenders party thereto. The new credit facility consists of a senior revolving credit facility and two senior term loan facilities. The revolving credit facility is comprised of loans in a total principal amount of up to $300 million. The tranche A facility in comprised of loans in a total principal amount of $500 million. The tranche B facility is comprised of loans in a total principal amount of $500 million. The revolving credit facility and the tranche A facility will mature on May 28, 2007 and the tranche B facility will mature on November 28, 2008. The obligations under the new credit facility are secured and are unconditionally and irrevocably guaranteed jointly and severally by us and each existing and subsequently acquired or organized domestic subsidiary of MascoTech, other than MTSPC, Inc. and Saturn Holdings (the holder of the equity interests in Saturn), pursuant to the terms of a separate guarantee agreement. Although no foreign subsidiaries are currently borrowers under the new credit facility, such entities may borrow under the facility in the future. Incremental Facility The new credit facility also provides for an incremental facility, or tranche C facility, of up to an additional $200 million to be made available to Metalync. The credit facility permits us to seek an additional $50 million of commitments for the incremental facility in the future. We borrowed the full $200 million under the incremental facility in connection with our acquisition of Simpson, of which approximately $50 million is expected to be repaid with the proceeds of pending sale-leaseback transactions. The incremental loan facility matures on February 27, 2009. The incremental facility will be governed by the credit agreement and will be subject to the provisions thereof relating to the term loan facilities, with certain modifications. Interest rates, maturity and amortization under the incremental facility shall be agreed upon at the time the applicable lenders provide their commitment to make incremental loans. The proceeds of the incremental loans shall be used solely to finance permitted acquisitions. The amount available under the incremental facility is subject to reduction on a dollar-for-dollar basis to the extent that Metalync incurs any permitted unsecured debt. -59- Security Interests Our borrowings under the new credit facility are secured by a first priority perfected security interest in: o the capital stock of Metalync and all of the capital stock held by MascoTech, Metalync or any domestic subsidiary of MascoTech of each existing and subsequently acquired or organized subsidiary of MascoTech (which pledge, in the case of any foreign subsidiary, shall be limited to 65% of the capital stock of such foreign subsidiary to the extent the pledge of any greater percentage would result in adverse tax consequences to MascoTech or Metalync); and o all tangible and intangible assets of MascoTech, Metalync and each existing or subsequently acquired or organized domestic subsidiary of MascoTech, other than MTSPC, Inc. and Saturn Holdings, with certain exceptions as set forth in the credit facility; Interest Rates and Fees Borrowings under the new credit facility will bear interest, at our option, at either: o a base rate used by The Chase Manhattan Bank, plus an applicable margin; or o a eurocurrency rate on deposits for one, two, three or six month periods (or nine or twelve month periods if, at the time of the borrowing, all lenders agree to make such a duration available), plus the applicable margin. For the period beginning November 28, 2000 up to and including September 30, 2001, the applicable margin on revolving loans and tranche A loans which are base rate loans shall be 2.25% and on eurocurrency loans shall be 3.25%. After the period ending September 30, 2001, the applicable margin on revolving loans and tranche A loans is subject to reduction depending on the leverage ratio of Metalync. The applicable margin on tranche B loans which are base rate loans is 3.00% and on eurocurrency loans is 4.00%. The applicable margin on the incremental loan incurred in connection with the acquisition of Simpson is 2.75% on base rate loans and 3.75% on eurocurrency loans prior to March 31, 2001; from April 1, 2001 through December 31, 2001 3.00% on base rate loans and 4.00% on eurocurrency loans; and thereafter 3.25% on base rate loans and 4.25% on eurocurrency loans. We shall also pay the lenders a commitment fee on the unused commitments under the new credit facility equal to 0.75% per annum if less than 50% of the revolving facility commitments are outstanding and 0.50% per annum is to be paid if 50% or more of the revolving facility commitments are outstanding, in each case, payable quarterly in arrears. The commitment fee is subject to reduction depending on the leverage ratio of Metalync. Mandatory and Optional Repayment Subject to exceptions for reinvestment of proceeds and other exceptions and materiality thresholds, we are required to prepay outstanding loans under the new credit facility with excess cash flow, the net proceeds of certain asset dispositions, casualty and condemnation recovery events and incurrences of permitted debt. -60- We may voluntarily prepay loans under the new credit facility, in whole or in part, without penalty, subject to minimum prepayments. If we prepay eurodollar rate loans, we will be required to reimburse lenders for their breakage and redeployment costs. Covenants The new credit facility contains negative and affirmative covenants and requirements affecting us and our subsidiaries. The new credit facility contains the following negative covenants and restrictions, among others: restrictions on debt, liens, mergers, investments, loans, advances, guarantee obligations, acquisitions, asset dispositions, sale-leaseback transactions, hedging agreements, dividends and other restricted junior payments, stock repurchases, transactions with affiliates, restrictive agreements, amendments to charter, by-laws and other material documents and use of reserved funds. The new credit facility also requires us and our subsidiaries to meet certain financial covenants and ratios to be tested quarterly commencing on December 31, 2000. The credit facility requires us to maintain restricted cash either in escrow from the proceeds of other subordinated debt financing or equity financing or in the form of availability under our revolving credit facility and accounts receivable financing in increasing amounts at specified dates until the maturity of the convertible subordinated debentures which restricted cash amount totals $205 million by the maturity date of the convertible subordinated debentures. These amounts are $70 million from November 28, 2000 to September 30, 2002; $100 million from October 2002 to December 2002; $125 million from January 2003 to March 2003; $150 million from April 2003 to June 2003; $175 million from July 2003 to September 2003; and $205 million from October 2003 to December 15, 2003 and are reduced to the extent that convertible subordinated debentures are repaid from subordinated debt or equity proceeds prior to maturity. The new credit facility contains the following affirmative covenants, among others: mandatory reporting of financial and other information to the administrative agent, notice to the administrative agent upon the occurrence of certain events of default and other events, written notice of change of any information affecting the identity of the record owner or the location of collateral, preservation of existence and intellectual property, payment of obligations, maintenance of properties and insurance, notice of casualty and condemnation, access to properties and books by the lenders, compliance with laws, use of proceeds and letters of credit, additional subsidiaries, interest rate protection agreements, maintenance of stated available funds and contribution of additional equity by Metalync. Events of Default The new credit facility specifies certain customary events of default, including, among others, non-payment of principal, interest or fees, violation of covenants, cross-defaults and cross-accelerations, inaccuracy of representations and warranties in any material respect, bankruptcy and insolvency events, change of control, failure to maintain security interests, specified ERISA events, default by Masco Corporation to make loans under subordinated loan agreement or such subordinated loan agreement shall cease or be asserted not to be in full force and effect, one or more judgments for the payment of money in an aggregate amount in excess of $15.0 million, the guarantees shall cease to be in full force and effect or are found not to comprise senior indebtedness under the subordination provisions of the subordinated debt and the subordination provisions of the subordinated debt are found to be invalid. Subordinated Loan Agreement We are a party to a subordinated loan agreement with Masco Corporation pursuant to which Masco has agreed to purchase, at par, at any time on or before October 31, 2003 up to $100.0 million aggregate principal -61- amount of subordinated notes from us. We are obligated to use any proceeds from the sale of the notes solely to meet our obligations under our 4 1/2% Convertible Subordinated Debentures due 2003. The interest rate on the notes is based on a spread over the average treasury rate or a comparable debt issue rate subject to a cap of 14.5% at the time of issuance of the note subject to increase. We have agreed to pay Masco a commitment fee of 0.125% per annum on Masco's unused commitment under the subordinated loan agreement. Masco's obligation to purchase notes from us pursuant to the subordinated loan agreement is subject to the accuracy of our representations and warranties, the absence of any bankruptcy with respect to us, and the absence of an event of default under our credit facility. Notes under the subordinated loan agreement can be issued from time to time and mature on June 30, 2009. Any notes issued under the subordinated loan agreement are subordinate in right of payment to the prior indefeasible payment and satisfaction in full of all of our existing and future senior indebtedness. Convertible Subordinated Debentures We currently have $305 million of 4 1/2% Convertible Subordinated Debentures due December 15, 2003 outstanding. Each $1,000 principal amount of convertible debentures was convertible prior to the recapitalization into shares of our common stock at a conversion price of $31.00 a share. As a result of the recapitalization, the convertible debentures are convertible into the right to receive the merger consideration paid to common stockholders in the recapitalization at a conversion price of $31.00 per the consideration payable with respect to a share of common stock and are, accordingly, not expected to be converted. Interest at a rate of 4 1/2% is paid semi-annually on the convertible debentures on June 15 and December 15 to record holders of the convertible debentures on the preceding June 1 or December 1, respectively. The convertible debentures mature on December 15, 2003. The convertible debentures can be redeemed by us at any time, in whole or in part, upon not less than thirty days' nor more than sixty days' notice at a redemption price of 101.00% of the principal amount outstanding if such redemption is prior to December 15, 2001; 100.50% of the principal amount outstanding if such redemption is prior to December 15, 2002; and at 100.00% of the principal outstanding amount if such redemption is after December 15, 2002. The convertible debentures are subordinated in right or payment to the prior indefeasible payment and satisfaction in full of all of our existing and future senior indebtedness. The convertible debentures contain customary events of default for a debt security of such type and do not contain any negative covenants. Other Debt As of September 30, 2000, we had approximately $15.9 million of other debt consisting primarily of industrial revenue bonds and government loans. -62- PLAN OF DISTRIBUTION The shares offered may be sold by the selling stockholders. These sales may be made in negotiated transactions. The shares may be sold by each of the selling stockholders acting as principal for its own account or in ordinary brokerage transactions and transactions in which the broker solicits purchasers. In effecting sales, broker-dealers engaged by the selling stockholders may arrange for other broker-dealers to participate in the resales. Broker-dealers or agents may receive compensation in the form of commissions, discounts or concessions from selling stockholders in amounts to be negotiated in connection with the sale. These broker-dealers and any other participating broker-dealers may be deemed to be "underwriters" within the meaning of the Securities Act in connection with these sales, and any such commission, discount or concession may be deemed to be underwriting discounts or commissions under the Securities Act. It is not possible at the present time to determine the price to the public in any sale of the common stock by the selling stockholders. Accordingly, the public offering price and the amount of any applicable underwriting discounts and commissions will be determined at the time of such sale by the selling stockholders. The aggregate proceeds to the selling stockholders from the sale of the common stock will be the purchase price of the common stock sold less all applicable commissions and underwriter's discounts, if any. We will pay substantially all the expenses incident to the registration, offering and sale of the common stock to the public by the selling stockholders, other than fees, discounts and commissions of underwriters, dealers or agents, if any, and transfer taxes. -63- LEGAL MATTERS The validity of our common shares offered in this offering will be passed upon for us by Cahill Gordon & Reindel, New York, New York. EXPERTS The financial statements of MascoTech, Inc. as of December 31, 1999 and 1998 and for each of the three years in the period ended December 31, 1999 included in this prospectus have been so included in reliance on the report of PricewaterhouseCoopers LLP, independent accountants, given on the authority of said firm as experts in auditing and accounting. The financial statement schedule of MascoTech, Inc. for the years ended December 31, 1999, 1998 and 1997 and the financial statements of TriMas Corporation as of December 31, 1997 and 1996 and for each of the three years in the period ended December 31, 1997 incorporated in the registration statement by reference to MascoTech's 1999 Annual Report on Form 10-K for the year ended December 31, 1999 have been so incorporated in reliance on the report of PricewaterhouseCoopers LLP, independent accountants, given on the authority of said firm as experts in auditing and accounting. WHERE YOU CAN FIND ADDITIONAL INFORMATION MascoTech files annual, quarterly and special reports, proxy statements and other information with the Securities and Exchange Commission. You may read and copy any document MascoTech files at the SEC's public reference room at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for more information on the public reference rooms. MascoTech's SEC filings are also available to you at the SEC's Web site at http://www.sec.gov. -64- MASCOTECH, INC. INDEX TO FINANCIAL STATEMENTS Page No. -------- Report of Independent Accountants.................................... F-2 Consolidated Balance Sheet as of December 31, 1999 and 1998.......................................................... F-3 Consolidated Statements of Income for the Years Ended December 31, 1999, 1998 and 1997.................................. F-4 Consolidated Statement of Cash Flows for the Years Ended December 31, 1999, 1998 and 1997............................ F-5 Consolidated Statement of Shareholders' Equity for Years Ended December 31, 1999, 1998 and 1997...................... F-6 Notes to Consolidated Financial Statements........................... F-7 Consolidated Condensed Balance Sheet as of September 30, 2000 and December 31, 1999.................................... F-27 Consolidated Condensed Statements of Income for the Three and Nine Months Ended September 30, 2000 and 1999.............................................................. F-28 Consolidated Condensed Statement of Cash Flows for the Nine Months Ended September 30, 2000 and 1999................. F-29 Notes to Consolidated Condensed Financial Statements................. F-30 F-1 REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors of MascoTech, Inc.: In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of income, cash flows and shareholders' equity present fairly, in all material respects, the financial position of MascoTech, Inc. and its subsidiaries at December 31, 1999 and 1998, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1999, in conformity with accounting principles generally accepted in the United States. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. PRICEWATERHOUSECOOPERS LLP Detroit, Michigan February 25, 2000 F-2
MASCOTECH, INC. CONSOLIDATED BALANCE SHEET December 31, 1999 and 1998 ASSETS 1999 1998 -------------- -------------- Current assets: Cash and cash investments................................. $ 4,490,000 $ 29,390,000 Receivables............................................... 218,960,000 223,340,000 Inventories............................................... 183,600,000 198,350,000 Deferred and refundable income taxes...................... 46,750,000 26,590,000 Prepaid expenses and other assets......................... 16,320,000 23,710,000 -------------- -------------- Total current assets.................................. 470,120,000 501,380,000 Equity and other investments in affiliates................... 110,730,000 93,560,000 Property and equipment, net.................................. 722,680,000 678,130,000 Excess of cost over net assets of acquired companies......... 759,330,000 764,220,000 Notes receivable and other assets............................ 38,410,000 53,250,000 -------------- -------------- Total assets......................................... $2,101,270,000 $2,090,540,000 ============== ============== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable......................................... $ 114,490,000 $ 114,830,000 Accrued liabilities....................................... 113,910,000 135,230,000 -------------- -------------- Total current liabilities............................. 228,400,000 250,060,000 Convertible subordinated debentures.......................... 305,000,000 310,000,000 Other long-term debt......................................... 1,067,890,000 1,078,240,000 Deferred income taxes........................................ 100,680,000 88,140,000 Other long-term liabilities.................................. 98,920,000 110,220,000 -------------- -------------- Total liabilities..................................... 1,800,890,000 1,836,660,000 -------------- -------------- Shareholders' equity: Preferred stock, $1 par: Authorized: 25 million; Outstanding: None...................................... -- -- Common stock, $1 par: Authorized: 250 million; Outstanding: 44.6 million and 45.8 million............. 44,640,000 45,780,000 Paid-in capital.............................................. -- 16,820,000 Retained earnings............................................ 324,290,000 245,860,000 Accumulated other comprehensive loss......................... (24,870,000) (7,460,000) Less: Restricted stock awards............................... (43,680,000) (47,120,000) -------------- -------------- Total shareholders' equity............................ 300,380,000 253,880,000 -------------- -------------- Total liabilities and shareholders' equity............ $2,101,270,000 $2,090,540,000 ============== ============== The accompanying notes are an integral part of the consolidated financial statements.
F-3
MASCOTECH, INC. CONSOLIDATED STATEMENT OF INCOME for the years ended December 31, 1999, 1998 and 1997 1999 1998 1997 -------------- -------------- ------------- Net sales........................................ $1,679,690,000 $1,635,500,000 $ 922,130,000 Cost of sales.................................... (1,246,660,000) (1,208,930,000) (735,470,000) -------------- -------------- ------------- Gross profit.................................. 433,030,000 426,570,000 186,660,000 Selling, general and administrative expenses..... (214,530,000) (204,180,000) (89,930,000) Gains (charge) on disposition of businesses, net. 14,440,000 (15,580,000) 4,980,000 Charge for asset impairment...................... (17,510,000) -- -- -------------- -------------- ------------- Operating profit.............................. 215,430,000 206,810,000 101,710,000 -------------- -------------- ------------- Other income (expense), net: Interest expense, Masco Corporation........... -- -- (7,500,000) Other interest expense........................ (80,820,000) (81,500,000) (29,030,000) Equity and other income from affiliates....... 13,230,000 10,150,000 43,360,000 Gain (charge) from disposition of, or changes in, investments in equity affiliates........ (3,150,000) -- 64,350,000 Deferred gain recognized from disposition of -- 7,000,000 -- business.................................... Other, net.................................... (5,220,000) 2,060,000 17,400,000 -------------- -------------- ------------- (75,960,000) (62,290,000) 88,580,000 -------------- -------------- ------------- Income before income taxes.................. 139,470,000 144,520,000 190,290,000 Income taxes..................................... 47,040,000 47,050,000 75,050,000 Net income.................................... $ 92,430,000 $ 97,470,000 $ 115,240,000 ============= ============= ============= Preferred stock dividends........................ -- -- $ 6,240,000 ============= ============= ============= Earnings attributable to common stock......... $ 92,430,000 $ 97,470,000 $ 109,000,000 ============= ============= ============= Basic Diluted Basic Diluted Basic Diluted Earnings per common share: Earnings attributable to common stock. $ 2.25 $1.84 $2.23 $1.83 $2.70 $2.12 ====== ======= ===== ======= ===== ======== The accompanying notes are an integral part of the consolidated financial statements.
F-4
MASCOTECH, INC. CONSOLIDATED STATEMENT OF CASH FLOWS for the years ended December 31, 1999, 1998 and 1997 1999 1998 1997 ------------- -------------- -------------- CASH FROM (USED FOR): OPERATING ACTIVITIES: Net income......................................... $ 92,430,000 $ 97,470,000 $ 115,240,000 Adjustments to reconcile net income to net cash provided by operating activities: (Gains) charge on disposition of businesses, net... (14,440,000) 15,580,000 (4,980,000) Charges (gains) from disposition or other changes in investments in equity affiliates................ 6,270,000 (7,000,000) (64,350,000) Charge for asset impairment........................ 17,510,000 -- -- Depreciation and amortization...................... 83,300,000 83,640,000 43,460,000 Equity earnings, net of dividends.................. (10,100,000) (6,080,000) (27,180,000) Deferred income taxes.............................. 9,560,000 (110,000) 17,520,000 Decrease (increase) in marketable securities, net.. -- 45,970,000 (8,210,000) (Increase) decrease in receivables................. (3,500,000) (6,700,000) 2,670,000 Decrease (increase) in inventories................. 400,000 (19,640,000) 1,950,000 (Increase) decrease in prepaid expenses and other current assets..................................... (14,390,000) 1,240,000 (1,280,000) (Decrease) increase in accounts payable and accrued liabilities................................ (5,150,000) (6,060,000) 11,140,000 Other, net......................................... (9,260,000) 2,290,000 (7,480,000) ------------- -------------- -------------- Net cash from operating activities................. 152,630,000 200,600,000 78,500,000 ------------- -------------- -------------- FINANCING ACTIVITIES: Increase in debt................................... 28,540,000 1,162,670,000 7,080,000 Payment of debt.................................... (40,150,000) (410,660,000) (16,590,000) Payment of note due to Masco Corporation........... -- -- (45,580,000) Retirement of preferred stock...................... -- -- (8,360,000) Retirement of Company Common Stock................. (19,530,000) (63,550,000) (6,610,000) Payment of dividends............................... (13,470,000) (12,240,000) (15,900,000) Other, net......................................... (5,490,000) (13,480,000) (9,070,000) ------------- -------------- -------------- Net cash (used for) from financing activities...... (50,100,000) 662,740,000 (95,030,000) ------------- -------------- -------------- INVESTING ACTIVITIES: Cash received from sale of businesses, net......... 92,620,000 25,020,000 76,560,000 Acquisition of businesses, net of cash acquired.... (88,550,000) (879,370,000) (11,100,000) Capital expenditures............................... (135,740,000) (106,300,000) (54,780,000) Receipt of cash from notes receivable.............. 2,180,000 4,880,000 17,330,000 Proceeds from redemptions of debt by affiliates.... -- 80,500,000 -- Other, net......................................... 2,060,000 210,000 10,230,000 ------------- -------------- -------------- Net cash (used for) from investing activities...... (127,430,000) (875,060,000) 38,240,000 ------------- -------------- -------------- CASH AND CASH INVESTMENTS: (Decrease) increase for the year................... (24,900,000) (11,720,000) 21,710,000 At January 1....................................... 29,390,000 41,110,000 19,400,000 ------------- -------------- -------------- At December 31..................................... $ 4,490,000 $ 29,390,000 $ 41,110,000 ============= ============== ============== The accompanying notes are an integral part of the consolidated financial statements.
F-5
MASCOTECH, INC. CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY for the years ended December 31, 1999, 1998 and 1997 (In Thousands) Other Comprehensive Income ----------------------- Foreign Currency Minimum Restricted Total Preferred Common Paid-in Retained Translation Pension Stock Shareholders' Stock Stock Capital Earnings And Other Liability Awards Equity ----------- ---------- ----------- ---------- ----------- ---------- ---------- ------------- Balances, January 1, 1997... $ 10,800 $ 37,250 $ 47,800 $ 61,060 $ 8,050 $-- $ (26,140) $ 138,820 Comprehensive income: Net income............. 115,240 115,240 Foreign currency (9,220) (9,220) translation.......... Unrealized gain (loss) on securities (net of (1,390) (1,390) tax benefit, $(920))...... Total comprehensive income 104,630 Preferred stock dividends 150 2,850 (6,240) (3,240) Common stock dividends... (12,270) (12,270) Retirement of common (330) (6,280) (6,610) stock Retirement of preferred (450) (7,910) (8,360) stock Conversion of outstanding preferred (10,350) 9,750 600 -- stock.................. Exercise of stock options 430 4,000 4,430 Restricted stock awards, net of amortization.... (6,740) (6,740) ----------- ---------- ----------- ---------- ----------- ---------- ---------- ------------- Balances, December 31, 1997. -- 47,250 41,060 157,790 (2,560) -- (32,880) 210,660 Comprehensive income: Net income............. 97,470 97,470 Foreign currency 6,410 6,410 Translation Minimum pension liability (net of (10,700) (10,700) tax benefit $(6,700)) Unrealized gain (loss) on securities (net (610) (610) of tax benefit, $(420)).............. Total comprehensive income.. 92,570 Common stock dividends... (9,400) (9,400) Retirement of common (3,640) (60,170) (63,810) stock 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 (18,110) (18,110) translation............ Minimum pension liability (net of tax, 700 700 $450).................. Total comprehensive income. 75,020 Common stock dividends... (13,470) (13,470) Retirement of common (1,280) (18,580) (19,860) stock 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 =========== ========== =========== ========== =========== ========== ========== ============= The accompanying notes are an integral part of the consolidated financial statements.
F-6 MASCOTECH, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ACCOUNTING POLICIES: Principles of Consolidation. The consolidated financial statements include the accounts of the Company and all majority-owned subsidiaries. All significant intercompany transactions have been eliminated. Corporations that are 20 to 50 percent owned are accounted for by the equity method of accounting; ownership less than 20 percent is accounted for on the cost basis unless the Company exercises significant influence over the investee. Capital transactions by equity affiliates, which change the Company's ownership interest at amounts differing from the Company's carrying amount, are reflected in other income or expense and the investment in affiliates account. The Company has a corporate services agreement with Masco Corporation, which at December 31, 1999 owned approximately 17 percent of the Company's Common Stock. Under the terms of the agreement, the Company pays fees to Masco Corporation for various corporate staff support and administrative services, research and development and facilities. Such fees aggregated approximately $6.4 million in 1999, $8.7 million in 1998 and $5.5 million in 1997. The preparation of financial statements in conformity with generally accepted accounting principles requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements. Such estimates and assumptions also affect the reported amounts of revenues and expenses during the reporting periods. Actual results may differ from such estimates and assumptions. Cash and Cash Investments. The Company considers all highly liquid debt instruments with an initial maturity of three months or less to be cash and cash investments. Marketable Securities and Derivative Financial Instruments. In prior years, the Company had marketable equity securities holdings which were categorized as trading and, as a result, were stated at fair value. Changes in the fair value of trading securities were recognized in earnings. The Company may enter into futures contracts which are held for purposes other than trading and are carried at market value. Changes in market value of outstanding futures contracts are recognized in earnings. The Company may enter into interest rate swap agreements to limit the effect of changes in the interest rates on any floating rate debt. For interest rate instruments that effectively hedge interest rate exposures, the net cash amounts paid or received on the agreements are recognized as an adjustment to interest expense. Receivables. Receivables are presented net of allowances for doubtful accounts of approximately $4.3 million and $3.4 million at December 31, 1999 and 1998, respectively. The Company does a significant amount of business with a number of individual customers in the transportation industry. The Company monitors its exposure for credit losses and maintains adequate allowances for doubtful accounts; the Company does not believe that significant credit risk exists. Inventories. Inventories are stated at the lower of cost or net realizable value, with cost determined principally by use of the first-in, first-out method. Property and Equipment, Net. Property and equipment additions, including significant betterments, are recorded at cost. Upon retirement or disposal of property and equipment, the cost and accumulated depreciation are removed from the accounts, and any gain or loss is included in income. Repair and maintenance costs are charged to expense as incurred. Depreciation and Amortization. Depreciation is computed principally using the straight-line method over the estimated useful lives of the assets. Annual depreciation rates are as follows: buildings and land improvements, 2 1/2 to 10 percent, and machinery and equipment, 6 2/3 to 33 1/3 percent. Deferred financing costs are amortized F-7 MASCOTECH, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) over the lives of the related debt securities. The excess of cost over net assets of acquired companies is amortized using the straight-line method over the period estimated to be benefitted, not exceeding 40 years. At each balance sheet date, management assesses whether there has been a permanent impairment of the excess of cost over net assets of acquired companies by comparing anticipated undiscounted future cash flows from operating activities with the carrying amount of the excess of cost over net assets of acquired companies. The factors considered by management in performing this assessment include current operating results, business prospects, market trends, potential product obsolescence, competitive activities and other economic factors. Based on this assessment, there was no permanent impairment related to the excess of cost over net assets of acquired companies at December 31, 1999. At December 31, 1999 and 1998, accumulated amortization of the excess of cost over net assets of acquired companies and patents was $68.5 million and $56.4 million, respectively. Amortization expense was $28.4 million, $31.8 million and $9.3 million in 1999, 1998 and 1997, respectively. New Accounting Pronouncements and Reclassifications. On June 15, 1998, the Financial Accounting Standards Board ("FASB") issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities." SFAS No. 133 requires that all derivative instruments be recorded on the balance sheet at fair value. Changes in the fair value of derivatives are recorded each period in current earnings or other comprehensive income, depending on whether a derivative is designated as part of a hedge transaction and, if it is, the type of hedge transaction. In June 1999, FASB issued SFAS No. 137, "Accounting for Derivative Instruments and Hedging Activities-- Deferral of the Effective Date of FASB Statement No. 133." SFAS No. 137 defers the effective adoption date of SFAS No. 133 to January 1, 2001. The Company is currently evaluating the impact SFAS No. 133 will have on its financial statements, if any. The American Institute of Certified Public Accountants' Statement of Position No. 98-5, "Reporting on the Costs of Start-up Activities," became effective on January 1, 1999 and did not have a material impact on the Company's financial statements. F-8 MASCOTECH, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) EARNINGS PER SHARE: The following are reconciliations of the numerators and denominators used in the computations of basic and diluted earnings per common share:
(In Thousands Except Per Share Amounts) -------------------------------------------------- 1999 1998 1997 -------------- -------------- --------------- Weighted average number of shares outstanding...... 41,110 43,630 40,300 ============== ============== =============== Net income......................................... $ 92,430 $ 97,470 $ 115,240 Less: Preferred stock dividends................... -- -- (6,240) -------------- -------------- --------------- Earnings used for basic earnings per share $ 92,430 $ 97,470 $ 109,000 computation..................................... ============== ============== =============== Basic earnings per share........................... $ 2.25 $ 2.23 $ 2.70 ============== ============== =============== Total shares used for basic earnings per share 41,110 43,630 40,300 computation........................................ Dilutive securities: Stock options................................... 530 1,060 1,250 Assumed conversion of preferred stock at -- -- 5,210 January 1, 1997................................. Convertible debentures.......................... 9,840 10,000 10,000 Contingently issuable shares.................... 3,720 3,830 2,160 -------------- -------------- --------------- Total shares used for diluted earnings per 55,200 58,520 58,920 share computation........................... ============== ============== =============== Earnings used for basic earnings per share computation........................................ $ 92,430 $ 97,470 $ 109,000 Add back of preferred stock dividends.............. -- -- 6,240 Add back of debenture interest..................... 9,310 9,530 9,530 -------------- -------------- --------------- Earnings used for diluted earnings per share $ 101,740 $ 107,000 $ 124,770 computation..................................... ============== ============== =============== Diluted earnings per share...................... $ 1.84 $ 1.83 $ 2.12 ============== ============== ===============
Diluted earnings per share reflect the potential dilution that would occur if securities or other contracts to issue common stock were exercised or converted into common stock. SUPPLEMENTARY CASH FLOWS INFORMATION: Significant transactions not affecting cash were: in 1999, the assumption of approximately $10 million of liabilities in an acquisition; in 1998, the issuance of $22 million of Company Common Stock in partial exchange for the assets of an acquired company; the acquisition of TriMas for cash and the assumption of liabilities of approximately $179 million; and in 1997, the conversion of the Company's outstanding shares of Dividend Enhanced Convertible Preferred Stock for approximately 10 million shares of Company Common Stock (see "Shareholders' Equity" note); the exchange of approximately 9.9 million shares of the outstanding common stock of Emco Limited ("Emco") with a value of approximately $106 million, in addition to the cash payment of approximately $46 million, in payment of a promissory note due to Masco Corporation. Income taxes paid were $54 million, $38 million and $44 million in 1999, 1998 and 1997, respectively. Interest paid was $79 million, $79 million and $39 million in 1999, 1998 and 1997, respectively. F-9 MASCOTECH, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) ACQUISITIONS: In January 1998, the Company completed the acquisition of TriMas Corporation ("TriMas") by purchasing all the outstanding shares of TriMas not already owned by the Company for approximately $920 million. The Company previously owned 37 percent of TriMas. The results for 1998 reflect TriMas' sales and operating results from the date of acquisition. The acquisition has been accounted for as a purchase and the excess of the aggregate purchase price over the fair value of net assets acquired of approximately $680 million is being amortized over 40 years. The Company acquired a business operation and a product line extension in 1999, which will provide annual sales of approximately $85 million, for an aggregate purchase price of approximately $93 million. These transactions have been accounted for as purchases and the excess of the aggregate purchase price over the fair value of net assets acquired of approximately $51 million is being amortized over 40 years. The results for 1999 reflect sales and operating results from the dates of acquisition. DISPOSITIONS OF BUSINESSES: The Company received approximately $30 million of contingent consideration ($5 million in 1997 and $25 million in 1998) based on the subsequent operating performance of certain businesses sold in 1996. This gain, which is non-taxable, is included in the caption "gains (charge) on disposition of businesses, net" in the consolidated statement of income. On January 3, 1997, the Company sold its Technical Services Group (comprised of the Company's engineering and technical business services units) to MSX International, Inc. Also included in this transaction were the net assets of APX International which were acquired by the Company in November 1996 for approximately $44 million. The sale resulted in total proceeds to the Company of approximately $145 million, subject to certain adjustments, consisting of cash, $30 million of subordinated debentures, $18 million of preferred stock and an approximate 45 percent common equity interest in MSX International, Inc. valued at $2 million. In January 1998, the Company received $48 million of cash from MSX International, Inc. in payment of the subordinated debentures and other amounts due MascoTech, resulting in a realized gain in the first quarter 1998 of $7 million. The remaining deferred gain of approximately $20 million will be recognized upon the liquidation of the common and preferred stock holdings for cash. In the second quarter of 1998, the Company recorded a non-cash charge aggregating approximately $41 million pre-tax (approximately $22 million after-tax) to reflect the write-down of certain long-lived assets principally related to the plan to dispose of certain businesses and to accrue exit costs of approximately $8 million. In April 1999, the Company completed the sale of these aftermarket-related and vacuum metalizing businesses for total proceeds aggregating approximately $105 million, including $90 million of cash which was applied to reduce the Company's indebtedness, a note receivable of $6 million and retained equity interests in the ongoing businesses. These transactions resulted in a pre-tax gain of approximately $26 million ($15 million after-tax). In 1999, management adopted a plan to sell its specialty tubing business which resulted in a pre-tax loss of approximately $7 million and an after-tax gain of approximately $5.5 million, due to the tax basis in the net assets of the businesses exceeding book carrying values. This business was sold in January 2000 for proceeds of approximately $6 million consisting of cash and notes. F-10 MASCOTECH, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) In addition, the Company recorded in the second quarter 1999 a non-cash pre-tax charge of approximately $17.5 million related to impairment of certain long-lived assets, which included its hydroforming equipment and related intellectual property. In the fourth quarter 1999, the Company announced the closure of a plant and recorded a non-cash pre-tax charge of approximately $4 million ($2 million after-tax) related principally to employee benefit costs and asset impairments. Accrued exit costs at January 1, 1999 were approximately $12 million, new accruals in 1999 were approximately $2 million, payments and adjustments to accrued estimates approximated $2 million and the accrual at December 31, 1999 was approximately $12 million. INVENTORIES: (In Thousands) At December 31 ----------------------------------- 1999 1998 --------------- ---------------- Finished goods......................... $ 86,240 $ 87,810 Work in process........................ 45,940 47,960 Raw material........................... 51,420 62,580 --------------- ---------------- $ 183,600 $ 198,350 =============== ================ EQUITY AND OTHER INVESTMENTS IN AFFILIATES: Equity and other investments in affiliates consist of the following common stock interests in publicly traded affiliates:
At December 31 ---------------------------------------------------- 1999 1998 1997 --------------- --------------- --------------- TriMas Corporation............................... -- -- 37% Titan International, Inc......................... 16% 16% 15% Delco Remy International, Inc. (voting).......... 17% 17% 18%
Titan International, Inc. ("Titan") is a manufacturer of wheels, tires and other products for agricultural, construction and off-highway equipment markets. Delco Remy International, Inc. ("DRI") is a manufacturer of automotive electronic motors and other components. A representative of the Company serves on the Board of Directors of Titan and DRI. The above companies are accounted for under the equity method. F-11 MASCOTECH, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) The carrying amount of investments in affiliates at December 31, 1999 and 1998 and quoted market values at December 31, 1999 for publicly traded affiliates (which may differ from the amounts that could have been realized upon disposition) are as follows:
(In Thousands) -------------------------------------------------- 1999 Quoted 1999 Carrying 1998 Carrying Market Value Amount Amount --------------- --------------- ---------------- Common stock: Titan International, Inc...................... $ 21,550 $ 40,880 $ 46,900 Delco Remy International, Inc................. 24,960 15,300 10,920 -------------- --------------- ---------------- Investments in publicly traded affiliates..... $ 46,510 56,180 57,820 Other non-public affiliates................... 54,550 35,740 --------------- ---------------- Total....................................... $ 110,730 $ 93,560 =============== ================
The Company's carrying value in common stock of these equity affiliates exceeded its equity in the underlying net book value by approximately $12 million at December 31, 1999. This excess is being amortized over 40 years. In March 1997, TriMas called for redemption its 5% Convertible Subordinated Debentures which resulted in the issuance of approximately 4.7 million common shares, reducing the Company's common equity ownership in TriMas to approximately 37 percent. The Company recognized pre-tax income of approximately $13 million as a result of the change in the Company's common equity ownership interest in TriMas. In September 1997, the Company exchanged its equity holdings in Emco Limited, with a value approximating $106 million (resulting in a pre-tax gain of approximately $46 million), and approximately $46 million in cash to satisfy an indebtedness to Masco Corporation. In December 1997, DRI completed an initial public offering reducing the Company's common equity ownership interest in DRI to approximately 12 percent on a diluted basis. As a result of the change in the Company's common equity ownership interest in DRI, the Company recognized a pre-tax gain of approximately $5 million. In addition to its equity investments in publicly traded affiliates, the Company has equity and other investment interests in privately held automotive-related companies, including the Company's 36 percent common equity ownership in Saturn Electronics & Engineering, Inc., a manufacturer of electromechanical and electronic automotive components; a 45 percent common equity ownership in MSX International, Inc., a provider of technology-based business services and product development services; and a 16 percent common equity ownership in Qualitor, Inc., a supplier of automotive aftermarket products. Equity in undistributed earnings of affiliates of $15 million at December 31, 1999, $6 million at December 31, 1998 and $68 million at December 31, 1997 are included in consolidated retained earnings. F-12 MASCOTECH, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Approximate combined condensed financial data of the Company's equity affiliates (including TriMas through the date of acquisition in early 1998, Qualitor since its formation in early 1999, and Emco through the date of disposition September 30, 1997) accounted for under the equity method are as follows:
(In Thousands) At December 31 ------------------------------- 1999 1998 ------------- -------------- Current assets............................................... $ 1,180,990 $ 948,370 Current liabilities.......................................... (708,150) (451,200) ------------- -------------- Working capital........................................... 472,840 497,170 Property and equipment, net.................................. 632,530 473,460 Excess of cost over net assets of acquired companies and other assets 499,040 349,060 Long-term debt............................................... (1,087,650) (846,330) Deferred income taxes and other long-term liabilities........ (70,250) (52,030) ------------- -------------- Shareholders' equity...................................... $ 446,510 $ 421,330 ============= ============== (In Thousands) For The Years Ended December 31 ------------------------------------------ 1999 1998 1997 ------------ ------------- ------------- Net sales............................................. 3,304,610 2,764,860 3,484,540 ============ ============= ============= Operating profit...................................... 177,220 125,730 264,590 ============ ============= ============= Earnings attributable to common stock................. 41,070 32,480 108,230 ============ ============= ============= Equity and other income from affiliates consists of the following: (In Thousands) For The Years Ended December 31 ---------------------------------------------- 1999 1998 1997 ------------- ------------- --------------- The Company's equity in affiliates' earnings available for common shareholders................................... $ 10,300 $ 7,340 $ 31,330 Interest and dividend income.......................... 2,930 2,810 12,030 ------------- ------------- --------------- Equity and other income from affiliates............... $ 13,230 $ 10,150 $ 43,360 ============ ============= =============== PROPERTY AND EQUIPMENT, NET: (In Thousands) At December 31 --------------------------------- 1999 1998 -------------- --------------- Cost: Land and land improvements................................ $ 30,650 $ 33,160 Buildings................................................. 184,170 179,870 Machinery and equipment................................... 830,400 777,710 -------------- --------------- 1,045,220 990,740 Less: Accumulated depreciation.............................. 322,540 312,610 -------------- --------------- $ 722,680 $ 678,130 ============== ===============
F-13 MASCOTECH, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Depreciation expense totalled $55 million, $52 million and $34 million in 1999, 1998 and 1997, respectively. ACCRUED LIABILITIES: (In Thousands) At December 31 ----------------------------- 1999 1998 ------------ ------------- Salaries, wages and commissions............... $ 8,800 $ 16,550 Vacation, holiday and bonus................... 18,550 19,420 Income taxes.................................. 3,940 8,790 Interest...................................... 5,250 4,300 Insurance..................................... 24,130 22,470 Property, payroll and other taxes............. 5,380 5,490 Pension....................................... 20,850 13,600 Other......................................... 27,010 44,610 ------------ ------------- $ 113,910 $ 135,230 ============ ============= LONG-TERM DEBT:
(In Thousands) At December 31 ---------------------------- 1999 1998 ------------ ------------ 4 1/2% Convertible Subordinated Debentures, due 2003 and convertible into Company Common Stock at $31 per share........................ $ 305,000 $ 310,000 Bank revolving credit agreement.............................. 606,000 500,000 Bank term loan............................................... 383,000 475,000 Other........................................................ 85,660 108,060 ------------ ------------ 1,379,660 1,393,060 Less: Current portion of long-term debt..................... 6,770 4,820 ------------ ------------ Long-term debt............................................... $ 1,372,890 $ 1,388,240 ============ ============
In connection with the TriMas acquisition in early 1998 (see "Acquisitions" note), the Company entered into a new $1.3 billion credit facility. This facility includes a $500 million term loan with remaining principal payments as follows: 2000 -- $60 million; 2001 -- $75 million; 2002 -- $138 million; and 2003 -- $110 million. The credit facility also includes an $800 million revolver which terminates in 2003. The Company has recorded the $60 million principal payment due in 2000 as long-term because the Company has the ability and intent to refinance amounts due in 2000 on a long-term basis utilizing the revolver. Other debt at December 31, 1999 principally consists of borrowings denominated in foreign currencies under the revolving credit agreement by the Company's subsidiaries. At December 31, 1999, there was approximately $120 million unused under the revolving credit agreement. F-14 MASCOTECH, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) The interest rates applicable to the revolver and term loan are principally at alternative floating rates which approximated seven percent at December 31, 1999. Interest rate swaps covering a notional amount of $400 million of the Company's floating rate debt were entered into in 1998 at an aggregate interest rate of approximately seven percent including the current borrowing spread under the Company's revolving credit agreement. These swap agreements expire at various dates in 2000 through 2007. The credit facility requires the maintenance of a specified level of shareholders' equity plus subordinated debt, with limitations on the ratios of total debt to cash flow (as defined) and cash flow less capital expenditures (as defined) to interest plus taxes and scheduled debt payments. In addition, there are limitations on dividends, share repurchases and subordinated debt repurchases. Under the most restrictive of these provisions, approximately $26 million would have been available at December 31, 1999 for the payment of cash dividends and the acquisition of Company capital stock. The facility is collateralized by a pledge of the stock of TriMas. Masco Corporation has agreed to purchase from the Company, at the Company's option, up to $200 million of subordinated debentures through 2002. The maturities of debt as at December 31, 1999 during the next five years are as follows (in millions): 2000 -- $67; 2001 -- $84; 2002 -- $141; 2003 -- $1,033; and 2004 -- $2. SHAREHOLDERS' EQUITY: On June 27, 1997, the Company completed the conversion of all remaining issued and outstanding shares of its Dividend Enhanced Convertible Preferred Stock (DECS). Holders of DECS received in exchange for each share of DECS .955 of a share of the Company's Common Stock, par value $1.00 per share, resulting in the issuance of approximately 10 million shares of Company Common Stock. The Company repurchased and retired approximately 1.3 million shares of its common stock in 1999, 3.6 million shares of its common stock in 1998 and approximately .3 million shares of its common stock and approximately .5 million shares of its preferred stock in 1997, pursuant to Board of Directors' authorized repurchase programs. At December 31, 1999, the Company may repurchase approximately 3.3 million additional shares of Company Common Stock pursuant to the repurchase authorization. In 1996, the Company purchased from Masco Corporation 17 million shares of MascoTech common stock and warrants to purchase 10 million shares of MascoTech common stock for cash and notes approximating $266 million. In addition, Masco Corporation has agreed to purchase from the Company, at the Company's option, up to $200 million of subordinated debentures through 2002. MascoTech has the right of first refusal to purchase the approximate 7.8 million shares of MascoTech common stock that Masco Corporation continues to hold, should Masco Corporation decide to dispose of such shares. On the basis of amounts paid (declared), cash dividends per common share were $.30 ($.30) in 1999, $.26 ($.20) in 1998 and $.22 ($.28) in 1997. STOCK OPTIONS AND AWARDS: The Company's Long Term Stock Incentive Plan (the "Plan") provides for the issuance of stock-based incentives in various forms. At December 31, 1999, outstanding stock-based incentives are in the form of restricted long-term stock awards and stock options. F-15 MASCOTECH, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Pursuant to the Plan, the Company granted long-term stock awards, net, for 622,000, 908,000 and 565,000 shares of Company Common Stock during 1999, 1998 and 1997, respectively, to key employees of the Company. The weighted average fair value per share of long-term stock awards granted during 1999, 1998 and 1997 on the date of grant was $14, $19 and $19, respectively. Compensation expense for the vesting of long-term stock awards was approximately $4.7 million, $5.2 million and $4.7 million in 1999, 1998 and 1997, respectively. The unamortized value of unvested stock awards, aggregating approximately $44 million at December 31, 1999, are generally amortized over ten-year vesting periods and are recorded in the financial statements as a deduction from shareholders' equity. Fixed stock options are granted to key employees of the Company and have a maximum term of ten years. The exercise price of each fixed option equals the market price of Company Common Stock on the date of grant. These options either vest no later than ten years after grant or in installments beginning in the third year and extending through the eighth year after grant. A summary of the status of the Company's stock options granted under the Plan or prior plans for the three years ended December 31, 1999 is presented below.
(Shares In Thousands) ----------------------------------- 1999 1998 1997 --------- ---------- ---------- Option shares outstanding, January 1.................. 3,950 3,770 4,290 Weighted average exercise price.................... $ 14 $ 10 $ 10 Option shares granted................................. 180 1,480 80 Weighted average exercise price.................... $ 14 $ 19 $ 20 Option shares exercised............................... (140) (1,160) (500) Weighted average exercise price.................... $ 5 $ 10 $ 8 Option shares canceled................................ (110) (140) (100) Weighted average exercise price.................... $ 18 $ 15 $ 16 Option shares outstanding, December 31................ 3,880 3,950 3,770 Weighted average exercise price.................... $ 14 $ 14 $ 10 Weighted average remaining option term (in years).. 5.9 6.6 4.7 Option shares exercisable, December 31................ 1,200 750 1,430 Weighted average exercise price.................... $ 9 $ 9 $ 9
The following table summarizes information about stock options outstanding at December 31, 1999:
(Shares In Thousands) Number Weighted Av- Weighted Av- Number Weighted Av- Range of Outstanding erage erage Exercisable erage Exercise Prices At 12/31/99 Remaining Life Exercise Price At 12/31/99 Exercise Price - -------------------- -------------- -------------- --------------- ------------- ------------------ $4.50-- $14 1,060 1.6 $ 5.46 790 $ 5.06 $14-- $18 1,380 7.0 $ 14.51 360 $ 14.58 $18-- $25 1,440 7.9 $ 19.20 50 $ 22.16 ------- ------- Total Outstanding 3,880 Total Exercisable 1,200 ======= =======
F-16 MASCOTECH, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) At December 31, 1999, 1998 and 1997, a combined total of 3,450,000, 3,820,000 and 5,223,000 shares, respectively, of Company Common Stock were available for the granting of options and incentive awards under the above plans. The Company has elected to continue to apply the provisions of Accounting Principles Board Opinion No. 25 and, accordingly, no stock option compensation expense is included in the determination of net income in the statement of income. The weighted average fair value on the date of grant of options granted was $3.60, $6.30 and $7.70 in 1999, 1998 and 1997, respectively. Had stock option compensation expense been determined pursuant to the methodology of SFAS No. 123, "Accounting for Stock-Based Compensation," the pro forma effects on the Company's earnings per share would have been a reduction of approximately $.04, $.04 and $.02 in 1999, 1998 and 1997, respectively. The fair value for these options was estimated at the date of grant using a Black-Scholes option pricing model with the following weighted average assumptions:
1999 1998 1997 ---- ---- ---- Risk-free interest rate............. 5.1% 5.5% 6.5% Dividend yield...................... 1.9% 1.3% 1.4% Volatility factor................... 26.2% 28.8% 35.0% Expected option life (in years)..... 5.5 5.5 5.5
EMPLOYEE BENEFIT PLANS: Pension and Profit-Sharing Benefits. The Company sponsors defined-benefit pension plans for most of its employees. In addition, substantially all salaried employees participate in noncontributory profit-sharing plans, to which payments are approved annually by the Board of Directors. Aggregate charges to income under these plans were $21 million in 1999, $15 million in 1998 and $9 million in 1997. Net periodic pension cost for the Company's defined-benefit pension plans includes the following components for the three years ended December 31, 1999:
(In Thousands) -------------------------------------------- 1999 1998 1997 ------------- ------------- ------------ Service cost.......................................... $ 7,590 $ 6,470 $ 3,480 Interest cost......................................... 12,640 11,380 6,650 Expected return on assets............................. (9,670) (11,430) (6,600) Amortization of transition obligation (asset)......... 130 (170) (120) Amortization of prior-service cost.................... 650 750 690 Amortization of net loss.............................. 1,440 670 410 ------------- ------------- ------------ Net periodic pension cost............................. $ 12,780 $ 7,670 $ 4,510 ============= ============= ============
F-17 MASCOTECH, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Major assumptions used in accounting for the Company's defined-benefit pension plans are as follows:
1999 1998 1997 ---- ---- ---- Discount rate for obligations......................... 7.75% 6.75% 7.25% Rate of increase in compensation levels............... 5.00% 5.00% 5.00% Expected long-term rate of return on plan assets...... 9.00% 11.00% 11.00%
The following provides a reconciliation of the changes in the defined-benefit pension plans' projected benefit obligations and fair value of assets for each of the two years ended December 31, 1999, and the funded status as of December 31, 1999 and 1998:
(In Thousands) ---------------------------- 1999 1998 ------------- ------------- Changes in projected benefit obligations Benefit obligations at January 1............................. $ (184,030) $ (99,150) Acquisitions.............................................. -- (63,720) Service cost.............................................. (7,130) (5,900) Interest cost............................................. (12,640) (11,380) Plan amendments........................................... (1,460) (650) Actuarial gain (loss)..................................... 22,830 (9,580) Benefit payments.......................................... 8,660 6,350 ------------- ------------- Projected benefit obligations at December 31................. $ (173,770) $ (184,030) ------------- ------------- Changes in plan assets Fair value of plan assets at January 1....................... $ 110,760 $ 63,020 Actual return on plan assets.............................. (12,110) 1,890 Acquisitions.............................................. -- 46,420 Contributions............................................. 11,520 6,430 Benefit payments.......................................... (8,480) (6,350) Expenses/Other............................................ (430) (650) Fair value of plan assets at December 31..................... $ 101,260 $ 110,760 ============= ============= Funded status Plan assets less than projected benefits at December 31...... $ (72,510) $ (73,270) Unamortized transition obligation (asset)................. 270 (1,100) Unamortized prior-service cost............................ 7,500 7,640 Unamortized net loss...................................... 29,340 36,600 ------------- ------------- Net liability recognized at December 31...................... $ (35,400) $ (30,130) ============= =============
F-18 MASCOTECH, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) The following provides the amounts related to the plans at December 31, 1999 and 1998:
(In Thousands) ---------------------------- 1999 1998 ------------- ------------- Accrued benefit liability.................................... $ (56,650) $ (51,370) Intangible asset............................................. 11,250 10,540 Accumulated other comprehensive income....................... 10,000 10,700 ------------- ------------ Net liability recognized..................................... $ (35,400) $ (30,130) ============= ============
Postretirement Benefits. The Company provides postretirement medical and life insurance benefits, none of which are funded, for certain of its active and retired employees. Net periodic postretirement benefit cost includes the following components for the years ended December 31, 1999, 1998 and 1997:
(In Thousands) ------------------------------------------ 1999 1998 1997 ---------- ------------- ------------- Service cost......................................... $ 400 $ 300 $ 300 Interest cost........................................ 1,200 1,200 1,400 Net amortization..................................... 500 (100) 700 ---------- ------------- ------------- Net periodic postretirement benefit cost............. $ 2,100 $ 1,400 $ 2,400 ========== ============= =============
The following provides a reconciliation of the changes in the postretirement benefit plans' benefit obligations for each of the two years ended December 31, 1999 and the status as of December 31, 1999 and 1998:
(In Thousands) ------------------------------ 1999 1998 -------------- -------------- Changes in benefit obligations Benefit obligations at January 1............................. $ (18,900) $ (12,400) Acquisitions.............................................. -- (4,400) Service cost.............................................. (400) (300) Interest cost............................................. (1,200) (1,200) Employee contributions.................................... (100) (100) Actuarial gain (loss)..................................... 1,000 (1,900) Benefit payments.......................................... 1,300 1,200 Curtailment............................................... 100 200 -------------- -------------- Benefit obligations at December 31........................... $ (18,200) $ (18,900) ============== ============== Status Benefit obligations at December 31........................... $ (18,200) $ (18,900) Unamortized transition obligation......................... 8,400 9,300 Unrecognized prior-service cost........................... 400 500 Unrecognized net gain..................................... (6,700) (6,200) -------------- -------------- Net liability at December 31.............................. $ (16,100) $ (15,300) ============== ==============
F-19 MASCOTECH, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) The discount rate used in determining the accumulated postretirement benefit obligation increased from 6.75 percent in 1998 to 7.75 percent in 1999. The assumed health care cost trend rate in 1999 was eight percent, decreasing to an ultimate rate in the year 2007 of five percent. If the assumed medical cost trend rates were increased by one percent, the accumulated postretirement benefit obligations would increase by $1.3 million and the aggregate of the service and interest cost components of net periodic postretirement benefit obligations cost would increase by $.1 million. If the assumed medical cost trend rates were decreased by one percent, the accumulated postretirement benefit obligations would decrease by $1.1 million and the aggregate of the service and interest cost components of net periodic postretirement benefit cost would decrease by $.1 million. SEGMENT INFORMATION: The Company has defined a segment as a component, with business activity resulting in revenue and expense, that has separate financial information evaluated regularly by the Company's chief operating decision maker in determining resource allocation and assessing performance. The Company has five operating segments involving the manufacture and sale of the following: Specialty Metal Formed Products -- Precision products, principally engine and drivetrain components and subassemblies, generally produced using advanced metalworking technologies with significant proprietary content for the transportation industry. Towing Systems -- Vehicle hitches, jacks, winches, couplers and related towing accessories. Specialty Fasteners -- Cold formed fasteners and related metallurgical processing. Specialty Packaging and Sealing Products -- Industrial container closures, pressurized gas cylinders and metallic and nonmetallic gaskets. Specialty Industrial Products -- Specialty drills, cutters and specialized metal finishing services, and flame-retardant facings and jacketings and pressure-sensitive tapes. The Company purchased TriMas in January 1998 and the segment data for 1998 reflects TriMas as though the transaction had occurred on January 1, 1998, consistent with the Company's internal management reporting. Included in the Specialty Metal Formed Products segment are sales to one customer of $197 million, $184 million and $156 million in 1999, 1998 and 1997, respectively; sales to another customer, attributed mainly to the Specialty Metal Formed Products segment, of $140 million in 1997; sales to a third customer, attributed mainly to the Specialty Metal Formed Products segment, of $79 million in 1997; and sales to a fourth customer, attributed mainly to the Specialty Metal Formed Products segment, of $62 million in 1997. Specialty Metal Formed Products' operating profit for 1997 was reduced by $17 million of nonrecurring charges. The Company's export sales approximated $143 million, $142 million and $71 million in 1999, 1998 and 1997, respectively. Intersegment transactions represent principally transactions occurring in the ordinary course of business. F-20 MASCOTECH, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(In Thousands) ------------------------------------------------------------------------------------- Specialty Specialty Packaging Companies Metal and Specialty Sold or Formed Towing Specialty Sealing Industrial Held For 1999 Products Systems Fasteners Products Products Sale Total - ---- ---------- ---------- ----------- ----------- ----------- ----------- ------------ Revenue from external $ 817,000 $ 260,000 $ 241,000 $ 216,000 $ 107,000 $ 39,000 $ 1,680,000 customers................ Intersegment revenue........ 9,000 8,000 4,000 -- 1,000 1,000 23,000 Depreciation and 35,000 10,000 12,000 13,000 5,000 2,000 77,000 amortization............. Segment operating profit.... 112,000 37,000 35,000 41,000 14,000 4,000 243,000 Segment net assets.......... 602,000 289,000 329,000 422,000 140,000 -- 1,782,000 Capital expenditures........ 87,000 9,000 12,000 19,000 7,000 -- 134,000 1998 - ---- Revenue from external $ 760,000 $ 238,000 $ 226,000 $ 223,000 $ 110,000 $ 115,000 $ 1,672,000 customers................ Intersegment revenue........ 5,000 6,000 3,000 -- 1,000 3,000 18,000 Depreciation and 34,000 9,000 10,000 11,000 5,000 6,000 75,000 amortization............. Segment operating profit.... 106,000 34,000 38,000 46,000 16,000 12,000 252,000 Segment net assets.......... 494,000 281,000 328,000 423,000 140,000 102,000 1,768,000 Capital expenditures........ 63,000 8,000 14,000 16,000 4,000 3,000 108,000 1997 - ---- Revenue from external $ 711,000 -- $ 44,000 -- $ 37,000 $ 130,000 $ 922,000 customers................ Intersegment revenue........ 9,000 -- 1,000 -- -- 2,000 12,000 Depreciation and 29,000 -- 1,000 -- 2,000 6,000 38,000 amortization............. Segment operating profit.... 88,000 -- 8,000 -- 7,000 16,000 119,000 Segment net assets.......... 444,000 -- 17,000 -- 18,000 109,000 588,000 Capital expenditures........ 46,000 -- 1,000 -- 2,000 5,000 54,000
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) ----------------------------------------------------------------------------------- 1999 1998 1997 -------------------------- -------------------------- --------------------------- Sales Net Assets Sales Net Assets Sales Net Assets ---------- ------------- ------------ ------------ ------------ ------------- Europe................... $165,000 $182,000 $149,000 $171,000 $100,000 $111,000 Australia................ 23,000 14,000 18,000 10,000 -- -- Other North America...... 12,000 18,000 16,000 12,000 -- -- ---------- ------------- ------------ ------------ ------------ ------------- Total foreign........ $200,000 $214,000 $183,000 $193,000 $100,000 $111,000 ========== ============= ============ ============ ============ =============
F-21 MASCOTECH, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) The following is a reconciliation of reportable segment revenue from external customers, segment operating profit and segment net assets to the Company's consolidated totals:
(In Thousands) ------------------------------------------------- 1999 1998 1997 ------------- -------------- ---------------- Revenue from External Customers $ 1,680,000 $ 1,672,000 $ 922,000 Revenue from external customers for reportable segments............................................ TriMas sales prior to acquisition................... -- (36,000) -- ------------- -------------- ---------------- Total net sales............................ $ 1,680,000 $ 1,636,000 $ 922,000 ============= ============== ================ (In Thousands) 1999 1998 1997 ------------- -------------- ---------------- Operating Profit Total operating profit for reportable segments..... $ 243,000 $ 252,000 $ 119,000 General corporate expense.......................... (24,000) (24,000) (22,000) Gain (loss) on disposition of businesses........... 14,000 (41,000) -- Charge for asset impairment........................ (18,000) -- -- MSTI earnout....................................... -- 25,000 5,000 TriMas operating profit prior to acquisition....... -- (5,000) -- ------------- -------------- ---------------- Total operating profit.................... $ 215,000 $ 207,000 $ 102,000 ============= ============== ================ (In Thousands) ------------------------------------------------- 1999 1998 1997 ------------- -------------- ---------------- Net Assets at December 31 Total net operating assets for reportable segments. $ 1,782,000 $ 1,768,000 $ 588,000 Corporate net assets............................... 91,000 72,000 372,000 ------------- -------------- ---------------- Total net assets.......................... $ 1,873,000 $ 1,840,000 $ 960,000 ============= ============== ================
The information that the chief operating decision maker utilizes includes total net assets as presented in the table above. Total net assets is defined by the Company as total assets less current liabilities. Included in corporate net assets for 1999 were capital expenditures of $2 million. Other Significant Items
(In Thousands) ------------------------------------------------- 1999 1998 1997 ------------- -------------- ---------------- Depreciation and Amortization Segment totals..................................... $ 77,000 $ 75,000 $ 38,000 Adjustments........................................ 6,000 9,000 5,000 ------------- -------------- ---------------- Consolidated totals................................ $ 83,000 $ 84,000 $ 43,000 ============= ============== ================
F-22 MASCOTECH, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) The above 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) ----------------------------------------------- 1999 1998 1997 Other, net: ------------- --------------- ------------ Net realized and unrealized gains from marketable securities........................... $ -- $ 3,330 $ 13,130 Interest income.................................... 2,170 4,180 3,440 Other, net......................................... (7,390) (5,450) 830 ------------- --------------- ------------ $ (5,220) $ 2,060 $ 17,400 ============= =============== ============ INCOME TAXES: (In Thousands) ----------------------------------------------- 1999 1998 1997 Income before income taxes: ------------- --------------- ------------ Domestic........................................ $ 123,610 $ 115,630 $ 173,410 Foreign......................................... 15,860 28,890 16,880 ------------- --------------- ------------ $ 139,470 $ 144,520 $ 190,290 ============= =============== ============ Provision for income taxes: Currently payable: Federal....................................... $ 26,810 $ 28,210 $ 40,290 State and local............................... 5,450 3,950 6,810 Foreign....................................... 5,220 15,000 10,430 Deferred: Federal....................................... 7,390 590 18,840 Foreign....................................... 2,170 (700) (1,320) ------------- --------------- ------------ Income taxes.................................. $ 47,040 $ 47,050 $ 75,050 ============= =============== ============ The components of deferred taxes at December 31, 1999 and 1998 are as follows: (In Thousands) ------------------------------ 1999 1998 ------------- ------------- Deferred tax assets: Inventories............................................. $ 2,920 $ 2,990 Accrued liabilities and other long-term Liabilities..... 47,880 51,910 Expected capital loss benefit from disposition of 8,900 7,910 Businesses.............................................. ------------- ------------- 59,700 62,810 ------------- ------------- Deferred tax liabilities: Property and equipment.................................. 111,680 101,640 Other, principally equity investments in affiliates..... 26,710 26,170 ------------- ------------- 138,390 127,810 ------------- ------------- Net deferred tax liability................................. $ 78,690 $ 65,000 ============= =============
F-23 MASCOTECH, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) The following is a reconciliation of tax computed at the U.S. federal statutory rate to the provision for income taxes allocated to income before income taxes:
(In Thousands) -------------------------------------------------- 1999 1998 1997 -------------- --------------- --------------- U.S. federal statutory rate........................ 35% 35% 35% -------------- --------------- --------------- Tax at U.S. federal statutory rate................. $ 48,810 $ 50,580 $ 66,600 State and local taxes, net of federal tax benefit.. 3,540 2,570 4,430 Higher effective foreign tax rate.................. 1,840 4,210 3,200 Non-taxable additional consideration from previously sold business........................ -- (8,190) (1,710) Disposition of businesses.......................... (7,870) (2,400) -- Amortization in excess of tax, net................. 2,950 1,390 (760) Other, net......................................... (2,230) (1,110) 3,290 -------------- --------------- --------------- Income taxes.................................... $ 47,040 $ 47,050 $ 75,050 ============== =============== ===============
A provision has not been made at December 31, 1999 for U.S. or additional foreign withholding taxes on approximately $93 million of undistributed earnings of foreign subsidiaries as those earnings are intended to be permanently reinvested. Generally, such earnings become subject to U.S. tax upon the remittance of dividends and under certain other circumstances. It is not practicable to estimate the amount of deferred tax liability on such undistributed earnings. FAIR VALUE OF FINANCIAL INSTRUMENTS: In accordance with Statement of Financial Accounting Standards No. 107, "Disclosures about Fair Value of Financial Instruments," the following methods were used to estimate the fair value of each class of financial instruments: Cash and Cash Investments The carrying amount reported in the balance sheet for cash and cash investments approximates fair value. Marketable Securities, Notes Receivable and Other Assets Fair values of financial instruments included in marketable securities, notes receivable and other assets were estimated using various methods including quoted market prices and discounted future cash flows based on the incremental borrowing rates for similar types of investments. In addition, for variable-rate notes receivable that fluctuate with the prime rate, the carrying amounts approximate fair value. Long-Term Debt The carrying amount of bank debt and certain other long-term debt instruments approximate fair value as the floating rates inherent in this debt reflect changes in overall market interest rates. The fair values of the Company's subordinated debt instruments are based on quoted market prices. The fair values of certain other debt instruments are estimated by discounting future cash flows based on the Company's incremental borrowing rate for similar types of debt instruments. F-24 MASCOTECH, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Derivatives The Company has limited involvement with derivative financial instruments, and does not use derivatives for trading purposes. The derivatives, principally consisting of futures contracts and interest rate swap agreements, are intended to reduce the market risk associated with the Company's marketable equity securities portfolio and floating rate debt. The Company's investment in futures contracts increases in value as a result of decreases in the underlying index and decreases in value when the underlying index increases. The contracts are financial instruments (with off-balance sheet market risk), as they are required to be settled in cash. The Company's market risk is subject to the price differential between the contract market value and contract cost. The average monthly notional amount of futures contracts in 1997 was approximately $17 million. Futures contracts trade on organized exchanges, and as a result, settlement of such contracts has little credit risk. Initial margin requirements are met in cash or other instruments, and changes in the contract values are settled periodically. Initial margin requirements are recorded as cash investments in the balance sheet. Futures contracts are short-term in nature, usually less than six months. There were no contracts outstanding at December 31, 1999 or 1998. Interest rate swap agreements covering a notional amount of $400 million of the Company's floating rate debt were entered into in 1998 at an aggregate interest rate of approximately seven percent including the current borrowing spread under the Company's revolving credit agreement. The fair value of the swap agreements was not recognized in the consolidated financial statements since they are accounted for as hedges of the floating rate exposure. These swap agreements expire at various dates in 2000 to 2007. The estimated fair value of the interest rate swap agreements, based on current market rates, approximated a net receivable of $13 million at December 31, 1999. Exposure to credit loss occurs when the fair value of the agreements is a net receivable. The interest rate swaps are with major banks of high credit quality; therefore, the risk of non-performance by the counterparties is considered to be negligible. The carrying amounts and fair values of the Company's financial instruments at December 31, 1999 and 1998 are as follows:
(In Thousands) 1999 1998 ----------------------------- ------------------------------ Carrying Fair Carrying Fair Amount Value Amount Value ------------ ------------- -------------- ------------- Cash and cash investments.................... $ 4,490 $ 4,490 $ 29,390 $ 29,390 Notes receivable and other assets............ $ 4,180 $ 4,560 $ 5,290 $ 4,480 Long-term debt: Bank debt................................. $ 1,039,890 $ 1,039,890 $ 1,051,260 $ 1,051,260 41/2% Convertible Subordinated Debentures.............................. $ 305,000 $ 225,700 $ 310,000 $ 251,100 Other long-term debt......................... $ 28,000 $ 27,850 $ 26,980 $ 25,580
F-25 MASCOTECH, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 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 1999: ---------- ------------ ------------ ------------- - ---- Net sales................... $395,220 $399,300 $436,510 $448,660 Gross profit................ $103,980 $99,340 $113,690 $116,020 Net income.................. $ 22,260 $ 20,200 $ 26,110 $ 23,860 Per common share: Basic................ $ .54 $ .49 $ .64 $ .58 Diluted.............. $ .45 $ .41 $ .51 $ .47 Market price per common share: High........................ $ 17 1/16 $ 17 11/16 $ 17 3/4 $ 17 Low......................... $ 10 5/8 $ 15 9/16 $ 15 1/8 $ 14 1998: Net sales................... $401,760 $399,500 $433,480 $400,760 Gross profit................ $104,960 $100,150 $117,070 $104,390 Net income.................. $ 18,120 $ 16,790 $ 29,820 $ 32,740 Per common share: Basic................ $ .43 $ .38 $ .68 $ .74 Diluted.............. $ .36 $ .33 $ .54 $ .60 Market price per common share: High..................... $ 18 3/4 $ 24 1/8 $ 26 7/16 $ 23 1/4 Low...................... $ 15 1/4 $ 16 1/4 $ 22 5/16 $ 17 11/16
In the first quarter and second quarter of 1999, the Company recognized non-cash charges aggregating approximately $6 million pre-tax to reflect the other than temporary decline in value of equity affiliates of the Company. In 1999, the Company completed the sale of its aftermarket-related and vacuum metalizing businesses. These transactions resulted in a pre-tax gain of approximately $26 million, of which approximately $10 million was recognized in the first quarter 1999 and approximately $16 million in the second quarter 1999. In the second quarter 1999, the Company recorded a non-cash pre-tax charge of approximately $17.5 million related to impairment of certain long-lived assets, which included its hydroforming equipment and related intellectual property. In the fourth quarter 1999, the Company recognized pre-tax charges aggregating approximately $12 million, principally related to the closure of a plant and the sale of a business. In January 1998, the Company completed the acquisition of TriMas Corporation ("TriMas") by purchasing all the outstanding shares of TriMas not already owned by the Company for approximately $920 million. The results for 1998 reflect TriMas' sales and operating results from the date of acquisition. Results for first quarter 1998 benefitted from pre-tax gains aggregating approximately $12 million which resulted from partial recognition of a deferred gain related to the 1997 divestiture of a business and gains from the Company's marketable securities portfolio. Second quarter results for 1998 were impacted by a charge (approximately $41 million pre-tax) principally related to the disposition of certain businesses. This charge more than offset the gain related to additional consideration received by the Company in the second quarter of 1998 resulting from the disposition of MascoTech Stamping Technologies, Inc. in 1996. F-26
MASCOTECH, INC. CONSOLIDATED CONDENSED BALANCE SHEET September 30, 2000 and December 31, 1999 (Dollars in Thousands) September 30, December 31, ASSETS 2000 1999 ------------- -------------- Current assets: Cash and cash investments.......................................... $ 14,100 $ 4,490 Receivables........................................................ 195,070 218,960 Inventories........................................................ 177,010 183,600 Deferred and refundable income taxes............................... 24,490 46,750 Prepaid expenses and other assets.................................. 16,490 16,320 ---------- ---------- Total current assets......................................... 427,160 470,120 Equity and other investments in affiliates............................. 115,530 110,730 Property and equipment, net............................................ 741,860 722,680 Excess of cost over net assets of acquired Companies 755,560 759,330 Notes receivable and other assets...................................... 39,290 38,410 ---------- ---------- Total assets................................................. $2,079,400 $2,101,270 ========== ========== LIABILITIES Current liabilities: Accounts payable................................................... $ 138,990 $ 114,490 Accrued liabilities................................................ 116,970 113,910 ---------- ---------- Total current liabilities.................................... 255,960 228,400 Convertible subordinated debentures.................................... 305,000 305,000 Long-term debt......................................................... 949,900 1,067,890 Deferred income taxes and other long-term Liabilities.................. 226,790 199,600 ---------- ---------- Total liabilities............................................ 1,737,650 1,800,890 ---------- ---------- SHAREHOLDERS' EQUITY Preferred stock, $1 par: Authorized: 25 million; Outstanding: None................................................. --- --- Common stock, $1 par: Authorized: 250 million; Outstanding: 44.7 million and 44.6 million........................ 44,730 44,640 Paid-in capital........................................................ 10 --- Retained earnings...................................................... 383,450 324,290 Accumulated other comprehensive loss................................... (42,710) (24,870) Less: Restricted stock awards......................................... (43,730) (43,680) ---------- ---------- Total shareholders' equity................................... 341,750 300,380 ---------- ---------- Total liabilities and shareholders' equity................... $2,079,400 $2,101,270 ========== ========== The accompanying notes are an integral part of the consolidated condensed financial statements.
F-27
MASCOTECH, INC. CONSOLIDATED CONDENSED STATEMENTS OF INCOME For The Three and Nine Months Ended September 30, 2000 and 1999 (Dollars In Thousands Except Per Share Amounts) Three Months Ended Nine Months Ended September 30 September 30 ------------------------------- ------------------------------- 2000 1999 2000 1999 ----------- ------------- --------------- ------------- Net sales................................... $ 393,770 $ 399,300 $1,295,480 $1,284,470 Cost of sales............................... (298,360) (299,960) (966,590) (955,420) Selling, general and administrative expenses (49,970) (51,030) (163,130) (163,430) Gain (charge) for disposition of businesses, net 2,800 --- 2,800 26,550 Charge for asset impairment................. --- --- --- (17,510) --------- --------- ---------- ---------- Operating profit..................... 48,240 48,310 168,560 174,660 --------- --------- ---------- ---------- Other income (expense), net: Interest expense........................ (20,720) (20,010) (64,500) (61,280) Equity and interest income from affiliates, (520) 5,000 9,170 10,530 net Loss from change in investment of an equity affiliate..................... --- --- --- (3,150) Other, net.............................. 2,420 (280) 2,120 (2,320) --------- --------- ---------- ---------- (18,820) (15,290) (53,210) (56,220) --------- --------- ---------- ---------- Income before income taxes.................. 29,420 33,020 115,350 118,440 Income taxes................................ 11,560 12,820 45,490 48,270 --------- --------- ---------- ---------- Net income.................................. $ 17,860 $ 20,200 $ 69,860 $ 70,170 ========= ========= ========== ========== Basic earnings per share.................... $ .44 $ .49 $ 1.71 $ 1.71 ========== ========== ========== ========== Diluted earnings per share.................. $ .37 $ .41 $ 1.39 $ 1.39 ========== ========== ========== ========== Cash dividends declared per share........... $ .08 $ .08 $ .24 $ .22 ========== ========== ========== ========== Cash dividends paid per share............... $ .08 $ .08 $ .24 $ .22 ========== ========== ========== ========== The accompanying notes are an integral part of the consolidated condensed financial statements.
F-28
MASCOTECH, INC. CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS For The Nine Months Ended September 30, 2000 and 1999 (Dollars In Thousands) Nine Months Ended September 30 ------------------------------- 2000 1999 ------------ ------------- CASH FROM (USED FOR): OPERATIONS: Net cash from earnings............................................. $ 147,150 $ 138,030 Decrease in inventories............................................ 9,570 11,100 (Increase) in receivables.......................................... (23,670) (21,350) Proceeds from accounts receivable sale............................. 48,260 --- Increase (decrease) in accounts payable and accrued liabilities.... 22,740 (13,020) Decrease in prepaid expenses and other current assets.............. 20,460 6,510 Other, net......................................................... (6,760) (2,420) --------- --------- Net cash from operating activities.............................. 217,750 118,850 --------- --------- FINANCING: Payment of debt.................................................... (154,450) (35,190) Increase in debt................................................... 31,620 22,240 Payment of common stock dividends.................................. (10,700) (9,900) Retirement of Company common stock................................. --- (19,530) Proceeds from interest rate swap settlement........................ 15,820 --- Other, net......................................................... (5,100) 680 --------- --------- Net cash (used for) financing Activities........................ (122,810) (41,700) --------- --------- INVESTMENTS: Capital expenditures............................................... (78,790) (100,800) Cash received from sale of businesses, net......................... 3,200 90,470 Acquisition of businesses, net of cash acquired.................... (21,090) (87,670) Other, net......................................................... 11,350 3,810 --------- --------- Net cash (used for) investing Activities........................ (85,330) (94,190) --------- --------- CASH AND CASH INVESTMENTS: (Decrease) increase for the nine months............................ 9,610 (17,040) At January 1....................................................... 4,490 29,390 --------- --------- At September 30.................................................... $ 14,100 $ 12,350 ========= ========= SUPPLEMENTAL CASH FLOW INFORMATION: Net cash (received)/paid during the period for: Interest........................................................ $ 57,170 $ 55,570 ========= ========= Income taxes.................................................... $ (900) $ 27,220 ========= ========= The accompanying notes are an integral part of the consolidated condensed financial statements.
F-29 MASCOTECH, INC. NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS A. In the opinion of the Company, the accompanying unaudited consolidated condensed financial statements contain all adjustments, which are normal and recurring in nature, necessary to present fairly its financial position as at September 30, 2000 and the results of operations for the three and nine months ended September 30, 2000 and 1999 and cash flows for the nine months ended September 30, 2000 and 1999. Certain amounts for the period ended September 30, 1999 have been reclassified to conform to the presentation adopted in 2000. B. Inventories by component are as follows (in thousands): September 30, December 31, 2000 1999 ------------- ------------ Finished goods..................... $ 78,490 $ 86,240 Work in process.................... 50,250 45,940 Raw materials...................... 48,270 51,420 -------- --------- $177,010 $ 183,600 C. Property and equipment, net reflects accumulated depreciation of $360 million and $323 million as at September 30, 2000 and December 31, 1999, respectively. D. The Company's total comprehensive income for the period was as follows (in thousands):
Three Months Ended Nine Months Ended September 30, September 30, ------------------------- -------------------------- 2000 1999 2000 1999 -------- ---------- ------------ ----------- Net income................................................. $17,860 $20,200 $ 69,860 $70,170 Other comprehensive (loss)/Income.......................... (9,580) 4,110 (17,840) (9,580) ------- ------- --------- ------- Total comprehensive income.......................... $ 8,280 $24,310 $ 52,020 $60,590 ======= ======= ========= =======
The majority of other comprehensive loss relates to foreign currency translation. E. In March 2000, the Company acquired a manufacturer of towing equipment and accessories. The acquisition was accounted for as a purchase and results are included from date of acquisition. F. Interest rate swap agreements covering a notional debt amount of $400 million expired or were terminated in June 2000 at a gain, and the Company received proceeds of approximately $15.8 million. The Company has deferred a portion of the gain in the amount of approximately $13.7 million at September 30, 2000, which will be recognized through a reduction in annual interest expense through 2003. The cash proceeds were used for the reduction of long-term debt and are reflected as financing activities in the Consolidated Condensed Statement of Cash Flows. F-30 G. Segment activity for the three and nine months ended September 30, 2000 and 1999 is as follows:
Three Months Ended Nine Months Ended September 30 September 30 ------------------------- --------------------------- 2000 1999 2000 1999 ----------- ------------ ------------ ------------- REVENUES FROM EXTERNAL CUSTOMERS Specialty Metal Formed Products....................... $197,230 $197,880 $ 643,410 $ 606,830 Towing Systems........................................ 65,640 65,670 230,570 213,820 Specialty Fasteners................................... 51,390 58,800 170,640 180,940 Specialty Packaging & Sealing Products................ 52,020 50,440 169,870 163,950 Specialty Industrial Products......................... 27,490 26,510 80,990 80,120 -------- -------- ---------- Companies Sold or Held for Sale....................... --- --- --- 38,810 -------- -------- ---------- ---------- Total.......................................... $393,770 $399,300 $1,295,480 $1,284,470 ======== ======== ========== ========== INTERSEGMENT REVENUES Specialty Metal Formed Products....................... $ 1,860 $ 2,180 $ 6,290 $ 6,710 Towing Systems........................................ 1,840 1,980 7,630 6,230 Specialty Fasteners................................... 410 1,020 2,070 2,590 Specialty Packaging & Sealing Products................ 50 --- 150 --- Specialty Industrial Products......................... 130 210 440 570 Companies Sold or Held for Sale....................... --- --- --- 930 -------- -------- ---------- ---------- Total.......................................... $ 4,290 $ 5,390 $ 16,580 $ 17,030 ======== ======== ========== ========== OPERATING PROFIT Specialty Metal Formed Products....................... $ 27,940 $ 24,860 $ 91,120 $ 82,430 Towing Systems........................................ 6,830 8,500 34,080 31,660 Specialty Fasteners................................... 6,990 7,370 19,920 23,780 Specialty Packaging & Sealing Products................ 10,210 9,420 31,890 29,770 Specialty Industrial Products......................... (1,580) 3,080 4,040 9,690 Companies Sold or Held for Sale....................... --- --- --- 4,390 -------- -------- ---------- ---------- Total.......................................... $ 50,390 $ 53,230 $ 181,050 $ 181,720 ======== ======== ========== ========== OPERATING PROFIT Total operating profit for reportable Segments........ $ 50,390 $ 53,230 $181,050 $181,720 General corporate expenses............................ (4,950) (4,920) (15,290) (16,100) Gain (charge) for disposition of businesses, net...... 2,800 --- 2,800 26,550 Charge for asset impairment........................... --- --- --- (17,510) -------- -------- -------- -------- Total operating profit......................... $ 48,240 $ 48,310 $168,560 $174,660 ======== ======== ======== ========
F-31 H. The following are reconciliations of the numerators and denominators used in the computations of basic and diluted earnings per share:
Three Months Ended Nine Months Ended September 30 September 30 ----------------------- ----------------------- 2000 1999 2000 1999 ---------- ----------- ---------- ---------- Weighted average number of shares outstanding............. 40,930 41,280 40,970 41,120 ======== ======== ======== ======== Earnings used for basic earnings per share computation.... $ 17,860 $ 20,200 $ 69,860 $ 70,170 ======== ======== ======== ======== Basic earnings per share.................................. $ .44 $ .49 $ 1.71 $ 1.71 ======== ======== ======== ======== Total shares used for basic earnings per share computation 40,930 41,280 40,970 41,120 Dilutive securities: Stock options......................................... 400 610 370 590 Convertible debentures................................ 9,840 9,840 9,840 9,840 Contingently issuable shares.......................... 4,030 3,570 4,100 3,760 -------- -------- -------- -------- Total shares used for diluted earnings per share 55,200 55,300 55,280 55,310 ======== ======== ======== ======== computation............................................... Earnings used for basic earnings per share computation.... $ 17,860 $ 20,200 $ 69,860 $ 70,170 Add back of debenture interest............................ 2,340 2,340 7,020 6,970 -------- -------- -------- -------- Earnings used for diluted earnings per share computation $ 20,200 $ 22,540 $ 76,880 $ 77,140 ======== ======== ======== ======== Diluted earnings per share................................ $ .37 $ .41 $ 1.39 $ 1.39 ======== ======== ======== ========
Diluted earnings per share reflect the potential dilution that would occur if securities or other contracts to issue common stock were converted or exercised into common stock. I. During June 2000, the Company entered into an agreement to sell, on an ongoing basis, the trade accounts receivable of certain business operations to a wholly owned, bankruptcy-remote, special purpose subsidiary ("MTSPC") of 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 receivables up to approximately $50 million to a third party multi-seller receivables funding company (the "conduit"). Upon sale to the conduit, MTSPC holds a subordinated retained interest in the receivables. The estimated fair value of the subordinated retained interest, excluding allowance for doubtful accounts, was approximately $19.9 million at September 30, 2000, which is included in the receivables balance. 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 of approximately $1 million included in other expense. The initial proceeds were used for the reduction of long-term debt and are reflected as operating cash flows in the accompanying Consolidated Condensed Statement of Cash Flows. J. The Company completed the sale of its aftermarket-related and vacuum metalizing businesses in 1999. These transactions resulted in a pre-tax gain of approximately $26 million. K. In the second quarter of 1999, the Company recognized a non-cash charge of $3.1 million pre-tax to reflect the other than temporary decline in value of an equity affiliate of the Company. F-32 L. In the second quarter 1999, the Company recorded a non-cash charge of $17.5 million related to an impairment of certain long lived assets, related to its hydroforming equipment and intellectual property. The revised carrying values of these assets were generally calculated based on expected future cash flows which were determined to be insufficient to recover the related carrying value. M. On August 2, 2000, the Company entered into a definitive agreement to merge with Riverside Company LLC, an affiliate of Heartland Industrial Partners, L.P. in a going private transaction. The value of the recapitalization transaction, including the assumption of debt, is expected to exceed $2 billion. Holders of common stock at the time of the recapitalization merger will be entitled to receive, in exchange for each share of MascoTech common stock, $16.90 in cash. In addition, such shareholders will be entitled to additional amounts from the net proceeds of the disposition of the Company's interest in Saturn Electronics & Engineering, Inc. There is no assurance as to the amount of payments, if any, to the stockholders as a result of the disposition of the Company's interest in Saturn. The transaction is subject to certain conditions, including the completion of financing and a stockholder vote, currently scheduled for November 28, 2000. F-33 ================================================================================ MascoTech, Inc. 464,785 Shares Common Stock ------------------------------------------ PROSPECTUS ------------------------------------------- , 2001 ================================================================================ PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION. The following is a list of the estimated costs and expenses to be incurred by us in connection with the offering of the shares of common stock being registered hereby. Except for the Securities and Exchange Commission Registration Fee, all amounts are estimates. Securities and Exchange Commission Registration Fee............... $1,964 Accountant's Fees and Expenses.................................... * Legal Fees and Expenses .......................................... * Miscellaneous Fees and Expenses................................... * ------- Total.................................................... $ * ======= - --------------------- * To be provided by amendment. ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS. Section 145 of the General Corporation Law of Delaware empowers us to indemnify, subject to the standards therein prescribed, any person in connection with any action, suit or proceeding brought or threatened by reason of the fact that such person is or was a director, officer, employee or agent of MascoTech or is or was serving as such with respect to another corporation or other entity at our request. Article 12 of our certificate of incorporation provides that each person who was or is made a party to (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 one of our directors or officers shall be indemnified and held harmless by us to the fullest extent authorized by the General Corporation Law of Delaware against all expenses, liability and loss (including without limitation attorneys' fees, judgments, fines and amounts paid in settlement) reasonably incurred by such person in connection therewith. The rights conferred by Article 12 are contractual rights and include the right to be paid by us the expenses incurred in defending such action, suit or proceeding in advance of the final disposition thereof. Article 11 of our certificate of incorporation provides that our directors will not be personally liable to us or our stockholders for monetary damages resulting from breaches of their fiduciary duty as directors except (a) for any breach of the duty of loyalty to us or our 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 General Corporation Law of Delaware, which makes directors liable for unlawful dividends or unlawful stock repurchases or redemptions, or (d) for transactions from which a director derives improper personal benefit. Our directors and officers are covered by insurance policies indemnifying them against certain civil liabilities, including liabilities under the federal securities laws (other than liability under Section 16(b) of the 1934 Act), which might be incurred by them in such capacities. ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES. 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: II-1 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. 2. On November 28, 2000, we issued a total of 30,118,771 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 7,455,614 shares of common stock 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. ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES. (a) Exhibits: The following exhibits are filed as part of this registration statement: Exhibit Number Description - ------- ----------- 2 Recapitalization Agreement dated as of August 1, 2000 between MascoTech, Inc. and Riverside Company LLC, as amended. 3.1 Certificate of incorporation of the registrant. 3.2 Amended bylaws of the registrant. 4.1 Specimen common stock certificate. 4.2 Indenture dated as of November 2, 1986 between Masco Industries, Inc. (now known as MascoTech, Inc.) and Morgan Guaranty Trust Company of New York, as Trustee; Agreement of Appointment and Acceptance of Successor Trustee dated as of August 4, 1994 among MascoTech, Inc., Morgan Guaranty Trust Company of New York and The First National Bank of Chicago; Supplemental Indenture dated as of August 5, 1994, between MascoTech, Inc. and The First National Bank of Chicago, as Trustee; Directors' resolutions establishing the Company's 4 1/2% Convertible Subordinated Debentures Due 2003; and Form of Note (incorporated by reference from Exhibit 4.9 to the Registrant's Form 10-K for the year ended December 31, 1999). 4.3 Supplemental Indenture No. 2 dated November 28, 2000 to the Indenture dated as of November 1, 1986 between Masco Industries (now known as MascoTech, Inc.) and Morgan Guaranty Trust Company of New York. 4.4 Supplemental Indenture No. 3 dated November 28, 2000 to the Indenture dated as of November 1, 1986 between Masco Industries (now known as MascoTech, Inc.) and Morgan Guaranty Trust Company of New York. 5* Opinion of Cahill Gordon & Reindel as to the legality of securities being offered. II-2 10.1 Credit Agreement dated as of November 28, 2000 among MascoTech, Inc., Metalync 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. 10.2 Receivables Purchase Agreement dated as of November 28, 2000 among MascoTech, the Sellers named therein and MTSPC, Inc. as Purchaser. 10.3 Receivables Transfer Agreement dated as of November 28, 2000 by and among MTSPC, Inc., MascoTech, Inc., The Chase Manhattan Bank, and the other parties named therein. 10.4 Subordinated Loan Agreement dated as of November 28, 2000 between MascoTech, Inc. and Masco Corporation. 10.5* Master Lease Agreement dated as of December 2000 between General Electric Capital Corporation and Simpson Industries, Inc. 10.6* Master Lease Agreement dated as of December 2000 between General Electric Capital Corporation and Simpson Industries, Inc. 10.7 Change of Control Agreement with William T. Anderson, dated September 21, 2000 (incorporated by reference to Exhibit 10.b of the Registrant's report on Form 10-Q for the period ended September 30, 2000). 10.8 Change of Control Agreement with David B. Liner, dated September 21, 2000 (incorporated by reference to Exhibit 10.c of the Registrant's report on Form 10-Q for the period ended September 30, 2000). 10.9 Change of Control Agreement with Leroy H. Runk, dated September 21, 2000 (incorporated by reference to Exhibit 10.d of the Registrant's report on Form 10-Q for the period ended September 30, 2000). 10.10 Change of Control Agreement with James F. Tompkins, dated September 21, 2000 (incorporated by reference to Exhibit 10.e of the Registrant's report on Form 10-Q for the period ended September 30, 2000). 10.11* Consulting Agreement with Frank Hennessey, dated November 2000. 10.12* Employment and Consulting Agreement with Lee M. Gardner, dated November 2000. 10.13* Employment and Consulting Agreement with Timothy Wadhams, dated November 2000. 10.14 Amendment No. 1 dated as of October 23, 2000 (incorporated by reference to Exhibit 10.f of the Registrant's report on Form 10-Q for the period ended September 30, 2000) to Recapitalization Agreement dated as of August 1, 2000 (filed as an exhibit to the Current Report on Form 8-K dated August 7, 2000, Commission File No. 001-12068). 10.15 Stock Purchase Agreement by and between MascoTech, Inc. and Citicorp Venture Capital, Ltd, dated as of August 1, 2000 (incorporated by reference to Annex D to the Proxy Statement dated October 26, 2000, Commission File No. 001-12068). 10.16 Corporate Services Agreement and Annex dated as of January 1, 1987 between Masco Industries, Inc. (now known as MascoTech, Inc.) and Masco Corporation, Amendment No. 1 dated January 22, 1998 and June 17, 1998 (incorporated by reference to Exhibit 10.b of the Registrant's report on 10-K for the year ended December 31, 1999). 10.17 Corporate Opportunities Agreement dated as of May 1, 1984 between Masco Corporation and Masco Industries, Inc. (now known as MascoTech, Inc.)(1) and Amendment No. 1 dated as of October 31, 1996 (incorporated by reference to Exhibit 10.b of the Registrant's report on 10-K for the year ended December 31, 1999). 10.18 Amendment No. 2 to the Corporate Series Agreement between Masco Industries (now known as MascoTech, Inc.) and Masco Corporation. 10.19 Amendment No. 2 to Corporate Opportunities Agreement between Masco Industries, Inc. (now II-3 known as MascoTech, Inc.) and Masco Corporation. 10.20 Shareholders Agreement by and among MascoTech, Inc., Masco Corporation, Richard Manoogian, certain of their respective affiliates and other co-investors a party thereto, dated as of November 28, 2000. 21 Subsidiaries of the registrant. 23.1* Consent of Cahill Gordon & Reindel (included in their opinion filed as Exhibit 5.1). 23.2 Consent of PricewaterhouseCoopers LLP. 24 Power of attorney (included on signature page to this registration statement). - --------------- * To be filed by amendment. (b) Financial Statement Schedules: (i) Financial statements of TriMas Corporation as of December 31, 1997 and 1996 and for each of the three years in the period ended December 31, 1997 (and PricewaterhouseCoopers LLP's opinion thereon) (incorporated by reference to the Registrant's Form 10-K for the year ended December 31, 1999). (ii) Financial Statement Schedule of the Registrant (II. Valuation and Qualifying Accounts) for the years ended December 31, 1999, 1998, and 1997 (and PricewaterhouseCoopers LLP's opinion thereon) (incorporated by reference to the Registrant's report on Form 10-K for the year ended December 31, 1999). ITEM 17. UNDERTAKINGS. The undersigned registrant, MascoTech, Inc., hereby undertakes: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement: (i) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933, as amended; (ii) To reflect in the prospectus any facts or events arising after the effective date of this registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus files with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement; and (iii) To include any material information with respect to the plan of distribution not previously disclosed in this registration statement or any material change to such information in this registration statement; II-4 provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if the information required to be included is a post-effective amendment by those paragraphs is contained in periodic reports filed by the company pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934, as amended , that are incorporated by reference in this registration statement. (2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. II-5 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Taylor, State of Michigan, on December 27, 2000. MASCOTECH, INC. By: /s/ Timothy Wadhams ------------------------------------------ Name: Timothy Wadhams Title: Chief Financial Officer, Executive Vice President, Finance and Administration II-6 POWER OF ATTORNEY Each of the undersigned hereby constitutes and appoints David A. Stockman, a director of the registrant, and Daniel P. Tredwell, a director of the registrant, or any one or more of them, its attorneys-in-fact and agents, each with full power of substitution and resubstitution for any of them in any and all capacities, to sign any or all amendments or post-effective amendments to this registration statement, and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto each of such attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary in connection with such matters and hereby ratifying and confirming all that each of such attorneys-in-fact and agents or his or her substitute or substitutes may do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the date indicated.
Signature Title Date /s/ Timothy D. Leuliette Chief Executive Officer and Director December 27, 2000 - ----------------------------------------------- (Principal Executive Officer) Timothy D. Leuliette /s/ Timothy Wadhams Executive Vice President, Finance and December 27, 2000 - ----------------------------------------------- Administration, Chief Financial Officer Timothy Wadhams (Principal Financial Officer) /s/ William T. Anderson Vice President--Controller December 27, 2000 - ----------------------------------------------- (Principal Accounting Officer) William T. Anderson /s/ Gary M. Banks Director December 27, 2000 - ----------------------------------------------- Gary M. Banks /s/ Lee M. Gardner Director December 27, 2000 - ----------------------------------------------- Lee M. Gardner /s/ Cynthia L. Hess Director December 27, 2000 - ----------------------------------------------- Cynthia L. Hess /s/ Perry J. Lewis Director December 27, 2000 - ----------------------------------------------- Perry J. Lewis /s/ J. Michael Losh Director December 27, 2000 - ----------------------------------------------- J. Michael Losh /s/ Richard A. Manoogian Director December 27, 2000 - ----------------------------------------------- Richard A. Manoogian /s/ David I. Margolis Director December 27, 2000 - ----------------------------------------------- David I. Margolis /s/ Thomas Stallkamp Director December 27, 2000 - ----------------------------------------------- Thomas Stallkamp /s/ David A. Stockman Director December 27, 2000 - ----------------------------------------------- David A. Stockman /s/ Daniel P. Tredwell Director December 27, 2000 - ----------------------------------------------- Daniel P. Tredwell
II-7 EXHIBIT INDEX Exhibit Number Description - ------- ----------- 2 Recapitalization Agreement dated as of August 1, 2000 between MascoTech, Inc. and Riverside Company LLC, as amended. 3.1 Certificate of incorporation of the registrant. 3.2 Amended bylaws of the registrant. 4.1 Specimen common stock certificate. 4.2 Indenture dated as of November 2, 1986 between Masco Industries, Inc. (now known as MascoTech, Inc.) and Morgan Guaranty Trust Company of New York, as Trustee; Agreement of Appointment and Acceptance of Successor Trustee dated as of August 4, 1994 among MascoTech, Inc., Morgan Guaranty Trust Company of New York and The First National Bank of Chicago; Supplemental Indenture dated as of August 5, 1994, between MascoTech, Inc. and The First National Bank of Chicago, as Trustee; Directors' resolutions establishing the Company's 4 1/2% Convertible Subordinated Debentures Due 2003; and Form of Note (incorporated by reference from Exhibit 4.9 to the Registrant's Form 10-K for the year ended December 31, 1999). 4.3 Supplemental Indenture No. 2 dated November 28, 2000 to the Indenture dated as of November 1, 1986 between Masco Industries (now known as MascoTech, Inc.) and Morgan Guaranty Trust Company of New York. 4.4 Supplemental Indenture No. 3 dated November 28, 2000 to the Indenture dated as of November 1, 1986 between Masco Industries (now known as MascoTech, Inc.) and Morgan Guaranty Trust Company of New York. 5* Opinion of Cahill Gordon & Reindel as to the legality of securities being offered. 10.1 Credit Agreement dated as of November 28, 2000 among MascoTech, Inc., Metalync 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. 10.2 Receivables Purchase Agreement dated as of November 28, 2000 among MascoTech, the Sellers named therein and MTSPC, Inc. as Purchaser. 10.3 Receivables Transfer Agreement dated as of November 28, 2000 by and among MTSPC, Inc., MascoTech, Inc., The Chase Manhattan Bank, and the other parties named therein. 10.4 Subordinated Loan Agreement dated as of November 28, 2000 between MascoTech, Inc. and Masco Corporation. 10.5* Master Loan Agreement dated as of December 2000 between General Electric Capital Corporation and Simpson Industries, Inc. 10.6* Master Lease Agreement dated as of December 2000 between General Electric Capital Corporation and Simpson Industries, Inc. 10.7 Change of Control Agreement with William T. Anderson, dated September 21, 2000 (incorporated by reference to Exhibit 10.b of the Registrant's report on Form 10-Q for the period ended September 30, 2000). 10.8 Change of Control Agreement with David B. Liner, dated September 21, 2000 (incorporated by reference to Exhibit 10.c of the Registrant's report on Form 10-Q for the period ended September 30, 2000). 10.9 Change of Control Agreement with Leroy H. Runk, dated September 21, 2000 (incorporated by reference to Exhibit 10.d of the Registrant's report on Form 10-Q for the period ended September 30, 2000). 10.10 Change of Control Agreement with James F. Tompkins, dated September 21, 2000 (incorporated by reference to Exhibit 10.e of the Registrant's report on Form 10-Q for the period ended September 30, 2000). 10.11* Consulting Agreement with Frank Hennessey, dated November 2000. 10.12* Employment and Consulting Agreement with Lee M. Gardner, dated November 2000. 10.13* Employment and Consulting Agreement with Timothy Wadhams, dated November 2000. 10.14 Amendment No. 1 dated as of October 23, 2000 (incorporated by reference to Exhibit 10.f of the Registrant's report on Form 10-Q for the period ended September 30, 2001) to Recapitalization Agreement dated as of August 1, 2000 (filed as an exhibit to the Current Report on Form 8-K dated August 7, 2000, Commission File No. 001-12068). 10.15 Stock Purchase Agreement by and between MascoTech, Inc. and Citicorp Venture Capital, Ltd, dated as of August 1, 2000 (incorporated by reference to Annex D to the Proxy Statement dated October 26, 2000, Commission File No. 001-12068). 10.16 Corporate Services Agreement and Annex dated as of January 1, 1987 between Masco Industries, Inc. (now known as MascoTech, Inc.) and Masco Corporation, Amendment No. 1 dated January 22, 1998 and June 17, 1998 (incorporated by reference to Exhibit 10.b of the Registrant's report on 10-K for the year ended December 31, 1999). 10.17 Corporate Opportunities Agreement dated as of May 1, 1984 between Masco Corporation and Masco Industries, Inc. (now known as MascoTech, Inc.)(1) and Amendment No. 1 dated as of October 31, 1996 (incorporated by reference to Exhibit 10.b of the Registrant's report on 10-K for the year ended December 31, 1999). 10.18 Amendment No. 2 to the Corporate Series Agreement between Masco Industries (now known as MascoTech, Inc.) and Masco Corporation. 10.19 Amendment No. 2 to Corporate Opportunities Agreement between Masco Industries, Inc. (now known as MascoTech, Inc.) and Masco Corporation. 10.20 Shareholders Agreement by and among MascoTech, Inc., Masco Corporation, Richard Manoogian, certain of their respective affiliates and other co-investors a party thereto, dated as of November 28, 2000. 21 Subsidiaries of the registrant. 23.1* Consent of Cahill Gordon & Reindel (included in their opinion filed as Exhibit 5.1). 23.2 Consent of PricewaterhouseCoopers LLP. 24 Power of attorney (included on signature page to this registration statement). - --------------- * To be filed by amendment. EX-2 2 0002.txt RECAPITALIZATION AGREEMENT EXHIBIT 2 RECAPITALIZATION AGREEMENT dated as of August 1, 2000 between MASCOTECH, INC. and RIVERSIDE COMPANY LLC TABLE OF CONTENTS Page ARTICLE 1 DEFINITIONS SECTION 1.01. Definitions...................................................2 ARTICLE 2 THE MERGER SECTION 2.01. The Merger...................................................11 SECTION 2.02. Effective Time...............................................11 SECTION 2.03. Effect of the Merger.........................................11 SECTION 2.04. Effect on Securities, Etc....................................12 SECTION 2.05. Dissenting Shares............................................14 SECTION 2.06. Treatment of Options and Restricted Stock....................14 SECTION 2.07. Surrender of Shares..........................................17 SECTION 2.08. Lost, Stolen or Destroyed Certificates.......................19 SECTION 2.09. Further Action...............................................19 ARTICLE 3 THE SURVIVING CORPORATION SECTION 3.01. Certificate of Incorporation; By-Laws........................20 SECTION 3.02. Directors and Officers.......................................20 ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE COMPANY SECTION 4.01. Corporate Existence and Power................................21 SECTION 4.02. Corporate Authorization......................................21 SECTION 4.03. Governmental Authorization...................................22 SECTION 4.04. Non-contravention............................................22 SECTION 4.05. Capitalization...............................................23 SECTION 4.06. Subsidiaries; Equity Investments.............................24 SECTION 4.07. SEC Filings..................................................24 SECTION 4.08. Financial Statements.........................................25 -i- Page SECTION 4.09. Disclosure Documents.........................................25 SECTION 4.10. Absence of Certain Changes...................................26 SECTION 4.11. No Undisclosed Material Liabilities..........................27 SECTION 4.12. Compliance with Laws and Court Orders........................27 SECTION 4.13. Litigation...................................................27 SECTION 4.14. Finders' Fees................................................28 SECTION 4.15. Opinion of Financial Advisor.................................28 SECTION 4.16. Taxes........................................................28 SECTION 4.17. Employee Benefit Plans.......................................29 SECTION 4.18. Environmental Matters........................................31 SECTION 4.19. Antitakeover Statutes and Rights Agreement; Company/Subsidiary Merger..................................32 SECTION 4.20. Disclaimer of Other Representations and Warranties...........32 ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF MERGER SUBSIDIARY SECTION 5.01. Existence and Power..........................................32 SECTION 5.02. Authorization................................................33 SECTION 5.03. Governmental Authorization...................................33 SECTION 5.04. Non-contravention............................................33 SECTION 5.05. Disclosure Documents.........................................34 SECTION 5.06. Finders' Fees................................................34 SECTION 5.07. Financing....................................................34 SECTION 5.08. Member Appraisal Rights......................................35 ARTICLE 6 COVENANTS OF THE COMPANY SECTION 6.01. Conduct of the Company.......................................35 SECTION 6.02. Access to Information........................................37 SECTION 6.03. Stockholder Meeting; Proxy Material..........................37 SECTION 6.04. No Solicitation..............................................38 SECTION 6.05. State Takeover Laws..........................................39 SECTION 6.06. Reports......................................................39 SECTION 6.07. Plans........................................................39 SECTION 6.08. Equity Investments...........................................40 SECTION 6.09. Confidentiality Agreement....................................40 SECTION 6.10. Issuance of Class A Preferred Stock and Class B Preferred Stock....................................40 -ii- Page SECTION 6.11. Saturn Escrow................................................41 ARTICLE 7 COVENANTS OF MERGER SUBSIDIARY SECTION 7.01. Obligations of Merger Subsidiary.............................41 SECTION 7.02. Voting of Shares.............................................41 SECTION 7.03. Director and Officer Liability...............................41 SECTION 7.04. Employee Benefits After the Merger...........................42 SECTION 7.05. Financing Arrangements.......................................43 ARTICLE 8 COVENANTS OF MERGER SUBSIDIARY AND THE COMPANY SECTION 8.01. Commercially Reasonable Efforts..............................44 SECTION 8.02. Certain Filings..............................................44 SECTION 8.03. Public Announcements.........................................45 SECTION 8.04. Notices of Certain Events....................................45 SECTION 8.05. Confidentiality..............................................46 SECTION 8.06. Saturn Sales.................................................46 ARTICLE 9 CONDITIONS TO THE MERGER SECTION 9.01. Conditions to Obligations of Each Party......................47 SECTION 9.02. Conditions to the Obligations of Merger Subsidiary...........49 SECTION 9.03. Conditions to the Obligations of the Company.................50 ARTICLE 10 TERMINATION SECTION 10.01. Termination..................................................51 SECTION 10.02. Effect of Termination........................................52 ARTICLE 11 MISCELLANEOUS SECTION 11.01. Notices......................................................52 -iii- Page SECTION 11.02. Survival of Representations and Warranties...................54 SECTION 11.03. Amendments; No Waivers.......................................54 SECTION 11.04. Expenses; Topping Fee........................................54 SECTION 11.05. Successors and Assigns.......................................55 SECTION 11.06. Governing Law................................................55 SECTION 11.07. Jurisdiction.................................................55 SECTION 11.08. Waiver of Jury Trial.........................................56 SECTION 11.09. Counterparts; Effectiveness..................................56 SECTION 11.10. Entire Agreement.............................................56 SECTION 11.11. Captions.....................................................56 SECTION 11.12. Severability.................................................56 SECTION 11.13. Specific Performance.........................................57 EXHIBITS Exhibit A - Exchange and Voting Agreement Exhibit B - Form of Company/Subsidiary Merger Agreement Exhibit C - Equity Investments Sale Agreement Exhibit D - Form of Certificate of Merger Exhibit E - Form of Certificate of Incorporation of Surviving Corporation Exhibit F - Form of Amended By-laws Exhibit G - Form of Certificate of Designation of Class A Preferred Stock Exhibit H - Form of Certificate of Designation of Class B Preferred Stock Exhibit I - Form of Subordinated Loan Agreement SCHEDULES Schedule A - Equity Investments Schedule B - Knowledge of Officers -iv- RECAPITALIZATION AGREEMENT RECAPITALIZATION AGREEMENT dated as of August 1, 2000 between MascoTech, Inc., a Delaware corporation (the "Company"), and Riverside Company LLC, a Delaware limited liability company ("Merger Subsidiary"). W I T N E S S E T H : WHEREAS, the managers and members of Merger Subsidiary seek to acquire a controlling interest in the Company through a transaction to be accounted for as a recapitalization under generally accepted accounting principles; and WHEREAS, a Special Committee (as defined herein) of the board of directors of the Company (the "Board of Directors") has (i) approved the Company/ Subsidiary Merger (as defined herein) and the Merger (as defined herein), (ii) has recommended the approval of the Company/Subsidiary Merger and the Merger by the Board of Directors, (iii) has determined that the Company/Subsidiary Merger and the Merger are advisable to and in the best interests of the holders of the Company's capital stock (the "Company Stockholders"), other than the Continuing Shareholders (as defined herein), (iv) has determined that the Merger Consideration (as defined herein) is fair to the Company Stockholders, other than the Continuing Shareholders, and (v) has approved and recommended the approval of the Company/Subsidiary Merger Agreement and this Agreement to the Board of Directors; and WHEREAS, the Board of Directors, subsequent to the recommendation of the Special Committee, has approved the Company/Subsidiary Merger, the Company/Subsidiary Merger Agreement, the Merger and this Agreement and determined that it is advisable and in the best interests of the Company Stockholders, other than the Continuing Shareholders, for the Company to consummate the Company/Subsidiary Merger and the Merger and the other transactions contemplated by this Agreement (collectively, the "Transactions"), upon the terms and subject to the conditions set forth herein; and WHEREAS, as an inducement to the parties to enter into this Agreement, the Continuing Shareholders have entered into an Exchange and Voting Agreement in substantially the form attached hereto as Exhibit A (the "Exchange and Voting Agreement"), whereby they have agreed to exchange certain Shares (as defined herein) owned by them for (x) newly issued shares of Class A Preferred Stock, par value $1.00 per share and liquidation preference $10.00 per share, of the Company ("Class A Preferred Stock") and (y) in the case of the Company Shareholder (as defined herein), newly issued shares of Class B Preferred Stock, par value $1.00 per share and liquidation preference $10.00 per share, of the Company ("Class B Preferred Stock") prior to the Merger and they have agreed to vote their Shares, Class A Preferred Stock and Class B Preferred Stock in favor of the Transactions; and WHEREAS, the recapitalization will involve a merger (the "Merger") in which Merger Subsidiary will merge with and into the Company, with the shares of the Company being converted into the right to receive the Merger Consideration, subject to certain exceptions described in this Agreement; and WHEREAS, the managers of Merger Subsidiary have approved this Agreement and the Merger in accordance with the applicable provisions of the Limited Liability Company Act of the State of Delaware (the "DLLCA") and upon the terms and subject to the conditions set forth herein; and WHEREAS, the Board of Directors has approved this Agreement and the Exchange and Voting Agreement such that the transactions contemplated by this Agreement and the Exchange and Voting Agreement are not subject to the restrictions on "business combinations" contained in Section 203 of the General Corporation Law of the State of Delaware (the "DGCL"). NOW, THEREFORE, in consideration of the foregoing and the mutual promises herein made, and in consideration of the representations, warranties and covenants herein contained, the parties hereto hereby agree as follows: ARTICLE 1 Definitions SECTION 1.01. Definitions. (a) The following terms, as used herein, have the following meanings: "Acquisition Proposal" means any offer or proposal for, or any indication of interest in, (i) any acquisition or purchase of 30% or more of the consolidated assets of the Company and its Subsidiaries, (ii) any acquisition or purchase of an equity interest in the Company representing in excess of 30% of the power to vote for the election of a majority of the directors of the Company, or any tender offer or exchange offer for equity securities of the Company as a result of which the offeror would hold such an equity interest in the Company or (iii) any merger, consolidation, business combination, sale of substantially all assets, recapitalization, liquidation, dissolution or similar transaction involving the Company, or any of its Subsidiaries whose assets, individually or in the aggregate, constitute more than 30% of the consolidated assets of the Company and its Subsidiaries, in each case other than the transactions contemplated by this Agreement. -2- "Adjustment Amount" means an amount equal to the sum of: (i) an amount equal to the portion of proceeds (as defined herein) realized from all transfers, sales or dispositions (including as a result of any merger, consolidation, liquidation or winding-up of Saturn) of all or any part of the Saturn Equity Investment (the "Saturn Sales") that exceed $18 million and are less than or equal to $40 million (the "Initial Adjustment Amount"); (ii) an amount equal to 60% of the portion of proceeds realized from Saturn Sales that exceeds $56.7 million; (iii) an amount equal to 60% of the portion of proceeds realized from the sales of Equity Investments that exceeds $125 million; and (iv) an amount equal to 60% of any interest actually earned on proceeds referred to in clauses (i), (ii) and (iii) of this definition prior to payment of the Merger Consideration Adjustments and the Option Consideration Adjustments (clauses (ii), (iii) and (iv), the "Subsequent Adjustment Amount"). As used in this definition, proceeds means the cash proceeds after deducting all applicable out-of-pocket costs and expenses (including, without limitation, underwriting discounts, commissions and fees and financial advisory fees, but excluding taxes) directly incurred by the Company or the Surviving Corporation in connection with such transfers, sales or dispositions. "Adjustment Committee" shall mean Peter Dow, Roger Fridholm, William Howenstein and Helmet Stern, each of whom is a member of the Special Committee as of the date hereof, or any successors designated by the majority of the remaining members of such committee. "Affiliate" means, with respect to any Person, any other Person directly or indirectly controlling, controlled by, or under common control with such Person. "Antitrust Laws" means the Sherman Act, as amended, the Clayton Act, as amended, the HSR Act, the Federal Trade Commission Act, as amended, and all other federal, state and foreign statutes, rules, regulations, orders, decrees, administrative and judicial doctrines and other laws that are designed or intended to prohibit, restrict or regulate actions having the purpose or effect of monopolization or restraint of trade or lessening of competition through merger or acquisition. "Benefit Plan" means any Plan, other than a Multiemployer Plan, existing at the Effective Time established or to which contributions have at any time been made by the Company or any Subsidiary thereof, or any predecessor of the Company or any Subsidiary thereof, or with respect to which the Company or any Subsidiary is a party, under which any -3- employee, former employee or director of the Company or any Subsidiary thereof, or any beneficiary thereof, is covered, is eligible for coverage or has benefit rights in respect of service to the Company or any Subsidiary thereof and any other Plan with respect to which the Company or any Subsidiary currently has liability. "Business Day" means a day other than Saturday, Sunday or other day on which commercial banks in New York, New York are authorized or required by law to close. "Code" means the Internal Revenue Code of 1986, as amended. "Common Stock" means the common stock, par value $1.00 per share, of the Company. "Company Balance Sheet" means the consolidated balance sheet of the Company as of December 31, 1999 and the footnotes thereto set forth in the Company 10-K. "Company Balance Sheet Date" means December 31, 1999. "Company Shareholder" means Masco Corporation, a Delaware corporation, provided that such definition and any other definition in this Agreement utilizing such definition shall be amended, to the extent and in the manner such definition is amended pursuant to any amendment to the Exchange and Voting Agreement as a result of one or more Transfers in accordance with Section 2.2 of the Exchange and Voting Agreement. "Company Shareholder Exchange Shares" has the meaning specified in the Exchange and Voting Agreement. "Company Subsidiary" means MascoTech Harbor, Inc., a Delaware corporation and a wholly owned subsidiary of the Company. "Company/Subsidiary Merger" means the merger in accordance with the Company/Subsidiary Merger Agreement in which the Company Subsidiary will merge with and into the Company, with the Company being the surviving corporation. "Company/Subsidiary Merger Agreement" means the merger agreement in the form attached hereto as Exhibit B, between the Company and the Company Subsidiary, including all exhibits, pursuant to which the Company/Subsidiary Merger is to be consummated. "Company 10-K" means the Company's annual report on Form 10-K for the fiscal year ended December 31, 1999. "Continuing Shareholder Exchange Shares" has the meaning specified in the Exchange and Voting Agreement. -4- "Continuing Shareholders" means, collectively, Company Shareholder, IS and FS. "Corporate Services Agreement" means the Corporate Services Agreement between the Company and the Original Company Shareholder dated as of January 1, 1987, as amended by Amendment No. 1 dated as of October 31, 1996 and related letter agreements dated January 22, 1998 and June 17, 1998. "Credit Agreement" means the Credit Agreement dated as of January 16, 1998 among the Company, MascoTech Acquisition, Inc., the banks party thereto from time to time, the First National Bank of Chicago, as Administrative Agent and Bank of America NT&SA and Nations Bank N.A., as Syndication Agents, as amended to the date hereof. "Employee Retention Committee" means Richard A. Manoogian, Timothy Wadhams and Daniel P. Tredwell and any successor thereto appointed by a designee of Richard A. Manoogian, in the case of Richard A. Manoogian's resignation from such committee, Richard A. Manoogian, in the case of Timothy Wadhams' resignation from such committee, or appointed by a designee of Daniel P. Tredwell, in the case of Daniel P. Tredwell's resignation from such committee, serving as the committee appointed hereby to determine employee matters as soon as practicable after the date hereof, but no later than the Effective Time. "Environmental Laws" means the common law and any federal, state, local or foreign law, treaty, judicial decision, regulation, rule, judgment, order, decree, injunction, permit or governmental restriction or requirement, in each case as currently in effect, relating to pollution or protection of the environment (including, without limitation, ambient air, indoor air, surface water, groundwater, land surface, subsurface strata, and natural resources). "Environmental Permits" means all permits, licenses, franchises, certificates, approvals and other similar authorizations of governmental authorities relating to or required by Environmental Laws and affecting, or relating to, the business of the Company or any Subsidiary as currently conducted. "Equity Investments" means the equity investments of the Company and its subsidiaries listed on Schedule A hereto. "Equity Investments Sale" means the sale of the Equity Investments by the Company as contemplated by the Equity Investments Sale Agreement. "Equity Investments Sale Agreement" means the agreement between the Company and Citicorp Venture Capital, Ltd. dated as of the date hereof and in the form attached hereto as Exhibit C pursuant to which the Equity Investments Sale will be consummated. "ERISA" means the Employee Retirement Income Security Act of 1974. -5- "ERISA Affiliate" of any entity means any other Person that, together with such Person, would be treated as a single employer under Section 414 of the Code. "Exchange Date" has the meaning specified in the Exchange and Voting Agreement. "Exchanged Preferred Stock" shall mean the Class A Preferred Stock and the Class B Preferred Stock. "Facilities" means the "Facilities" as defined in the Commitment Letter or any replacement, refinancing, extension, amendment or restatement of the Facilities. "FS" means the Richard and Jane Manoogian Foundation. "Governmental Authority" means any federal, state or local government or any court, administrative agency or commission or other governmental or regulatory agency, authority or official, whether domestic, foreign or supranational. "HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations promulgated thereunder. "IS" means Richard Manoogian. "knowledge" of the Company or the "Company's knowledge" means the actual knowledge of the senior officers of the Company listed on Schedule B attached hereto. "Lien" means, with respect to any property or asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such property or asset. "Material Adverse Effect" means either (i) a material adverse effect on the condition (financial or otherwise), business or results of operations of the Company and its Subsidiaries, taken as a whole, or (ii) an effect which is materially adverse to the ability of the Company or Merger Subsidiary to consummate the Transactions; provided that with respect to subclause (i) of this definition, any such effect resulting or arising from (w) this Agreement or the transactions contemplated hereby or the announcement hereof, (x) changes in circumstances or conditions affecting industrial manufacturing companies in general, and not specifically relating to the Company and its Subsidiaries, (y) changes in general economic, regulatory or political conditions or in financial markets in the United States or Europe or (z) changes in generally accepted accounting principles shall not be considered a Material Adverse Effect, and with respect to subclause (ii) of this definition, any such effect resulting or arising from subclause (x), (y) or (z) above, shall not be considered a Material Adverse Effect. -6- "Material Subsidiary" means, with respect to any Person, a Subsidiary that would constitute a "significant subsidiary" of such Person within the meaning of Rule 1-02 of Regulation S-X under the 1934 Act. "Multiemployer Plan" means a multiemployer plan within the meaning of Section 4001(a)(3) of ERISA with respect to which the Company has an obligation to contribute or has or could have withdrawal liability under Section 4201 of ERISA. "1934 Act" means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder. "1933 Act" means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder. "Option Plans" means, collectively, the 1991 Long Term Stock Incentive Plan, the 1984 Restricted Stock Incentive Plan, the 1984 Stock Option Plan and the 1997 Non-Employee Directors Stock Plan. "Original Company Shareholder" means Masco Corporation, without giving effect to any Transfer pursuant to Section 2.2 of the Exchange and Voting Agreement or any amendment to the Exchange and Voting Agreement. "PBGC" means the Pension Benefit Guaranty Corporation established pursuant to Section 4002 of ERISA, or any successor thereto. "Person" means an individual, corporation, partnership, limited liability company, association, trust or other entity or organization, including a Governmental Authority. "Plan" means any bonus, incentive compensation, deferred compensation, pension, profit sharing, retirement, stock purchase, stock option, stock ownership, stock appreciation rights, phantom stock, leave of absence, layoff, vacation, day or dependent care, legal services, cafeteria, life, health, accident, disability, workmen's compensation or other insurance, severance, separation, other employee benefit, employment, consulting or change of control agreement, plan, practice, policy or arrangement of any kind, whether written or oral, or whether for the benefit of a single individual or more than one individual, including, without limitation, any "employee benefit plan" within the meaning of Section 3(3) of ERISA (whether or not subject thereto). "Restricted Stock Permitted Transferee" means, with respect to any holder of Restricted Stock, the spouse or any lineal descendant (including by adoption and stepchildren) of such holder of Restricted Stock, any trust of which such holder of Restricted Stock is the trustee and which is established solely for the benefit of any of the foregoing individuals, any private charitable foundations of any such holder of Restricted Stock and such other Persons as may be approved from time to time by authority of the board of directors of the Sur- -7- viving Corporation; provided that, following an underwritten public offering of Common Stock of the Surviving Corporation as a result of which 15% or more of the outstanding Common Stock of the Surviving Corporation is registered under the 1933 Act, any Person shall be a Restricted Stock Permitted Transferee. "Restricted Stock Plans" means any Plan of the Company that allows the award of restricted shares. "Rights" means the rights granted under the Rights Agreement. "Rights Agreement" means the Rights Agreement between the Company and the Bank of New York dated February 20, 1998, as amended as of September 22, 1998. "Saturn" means Saturn Electronics and Engineering, Inc. and any successor thereto. "Saturn Equity Investment" means the equity interests of Saturn beneficially owned by the Company and/or its Subsidiaries and listed on Schedule 4.06(c) on the date hereof and any additional securities issued or received as a distribution to holders of such securities in respect thereof or in exchange therefor. "SEC" means the Securities and Exchange Commission. "Shares" means shares of Common Stock. "Special Committee" means the Special Committee of the Board of Directors formed to, among other things, evaluate the Transactions. "Sponsor" means Heartland Industrial Partners, L.P., a Delaware limited partnership. "Subsidiary" means, with respect to any Person, any corporation, partnership, association, limited liability company or other organization, whether incorporated or unincorporated, of which the securities or other ownership interests having ordinary voting power to elect a majority of the board of directors or other persons performing similar functions with respect to such corporation, partnership, association, limited liability company or other organization are at any time directly or indirectly owned or controlled by such Person or by any one or more of its Subsidiaries, or by such Person and one or more of its Subsidiaries. "Surviving Corporation Common Shares" means the common stock, par value $1.00 per share, of the Surviving Corporation. "Third Party" means any Person as defined in Section 13(d) of the 1934 Act, other than Merger Subsidiary or Sponsor or any of Sponsor's Affiliates. -8- "Topping Fee" means a fee of $16.0 million, less any amount of expense reimbursement paid by the Company pursuant to Section 11.04(b), payable by wire transfer in same day funds to a bank account designated by Merger Subsidiary. Any reference in this Agreement to a statute shall be to such statute, as amended from time to time, and to the rules and regulations promulgated thereunder. (b) Each of the following terms is defined in the Section set forth opposite such term: Term Section Accrual Amount............................................. 2.06 Bank....................................................... 5.07 Base Merger Consideration.................................. 2.04 Board of Directors......................................... Recitals Cash Out Amount............................................ 2.06 Cash Out Options........................................... 2.06 Cash Out New Restricted Stock.............................. 2.06 Certificate of Merger...................................... 2.02 Class A Base Merger Consideration.......................... 2.04 Class A Exchanged Shares................................... 2.04 Class A Merger Consideration............................... 2.04 Class A Merger Consideration Adjustment.................... 2.04 Class A Preferred Stock.................................... Recitals Class B Exchanged Shares................................... 2.04 Class B Base Merger Consideration.......................... 2.04 Class B Merger Consideration............................... 2.04 Class B Merger Consideration Adjustment.................... 2.04 Class B Preferred Stock.................................... Recitals Commitment Letter.......................................... 5.07 Company.................................................... Recitals Company Proxy Statement.................................... 4.09 Company Representatives.................................... 6.02 Company SEC Documents...................................... 4.07 Company Securities......................................... 4.05 Company Stockholder Meeting................................ 6.03 Company Stockholders....................................... Recitals Company Subsidiary Securities.............................. 4.06 Company/Subsidiary Certificate of Merger................... 4.19 Confidentiality Agreement.................................. 6.02 Debentures................................................. 4.05 Denominator................................................ 2.04 -9- Term Section DGCL....................................................... Recitals DLLCA...................................................... Recitals Dissenting Shares.......................................... 2.05 DOJ........................................................ 8.01 Effective Time............................................. 2.02 Effective Time Merger Consideration........................ 2.07 Effective Time Option Consideration........................ 2.06 End Date................................................... 10.01 Equity Commitment Letters.................................. 5.07 Equity Investors........................................... 5.07 Exchange Agent............................................. 2.07 Exchange and Voting Agreement.............................. Recitals Exchanged Preferred Stock.................................. 2.04 Exchanged Share............................................ 2.04 Financing Agreements....................................... 7.05 Foreign Plan............................................... 4.17 FTC........................................................ 8.01 GAAP....................................................... 4.08 Indemnified Person......................................... 7.03 Initial Adjustment Amount.................................. 1.01 Initial Denominator........................................ 2.04 IRS........................................................ 4.16 Merger..................................................... Recitals Merger Consideration....................................... 2.04 Merger Consideration Adjustment............................ 2.04 Merger Subsidiary.......................................... Recitals Merger Subsidiary Common Shares............................ 2.04 Merger Subsidiary Representatives.......................... 6.02 New Awards................................................. 2.06 New Restricted Stock....................................... 2.06 Option..................................................... 2.06 Option Consideration....................................... 2.06 Option Consideration Adjustment............................ 2.06 Preferred Stock............................................ 4.05 Required Amount............................................ 5.07 Restricted Stock........................................... 2.06 Restrictions............................................... 2.06 Saturn Sales............................................... 1.01 Saturn Subsidiary.......................................... 9.01 Schedule 13E-3............................................. 4.09 Series A Preferred Stock................................... 2.04 -10- Term Section Surviving Corporation...................................... 2.01 Tax Return................................................. 4.16 Taxes...................................................... 4.16 Taxing Authority........................................... 4.16 Transactions............................................... Recitals ARTICLE 2 The Merger SECTION 2.01. The Merger. At the Effective Time, and subject to and upon the terms and conditions of this Agreement, the DGCL and the DLLCA, Merger Subsidiary shall be merged with and into the Company, the separate existence of Merger Subsidiary shall cease, and the Company shall continue as the surviving corporation (hereinafter sometimes referred to as the "Surviving Corporation"). SECTION 2.02. Effective Time. Unless this Agreement shall have been terminated and the transactions herein contemplated shall have been abandoned pursuant to Section 10.01, as promptly as practicable (and in any event within two Business Days) after the satisfaction or waiver of the conditions set forth in Article 9 hereof, the parties hereto shall cause the Merger to be consummated by filing a certificate of merger as contemplated by the DGCL and the DLLCA (the "Certificate of Merger") in the form of Exhibit D attached hereto, together with any required related certificates, with the Secretary of State of the State of Delaware, in such form as required by, and executed in accordance with the relevant provisions of, the DGCL and the DLLCA. The Merger shall become effective at the time of such filing or at such later time, which will be as soon as reasonably practicable, specified in the Certificate of Merger (the "Effective Time"). Prior to such filing, a closing shall be held at such time as may be agreed upon by Merger Subsidiary and the Company, at the offices of Cahill Gordon & Reindel, 80 Pine Street, New York, New York 10005, unless another place is agreed to in writing by the parties hereto, for the purpose of confirming the satisfaction or waiver, as the case may be, of the conditions set forth in Article 9 hereof. SECTION 2.03. Effect of the Merger. At the Effective Time, the effect of the Merger shall be as provided in this Agreement, the Certificate of Merger and the applicable provisions of the DGCL and the DLLCA. -11- SECTION 2.04. Effect on Securities, Etc. (a) Capital Stock of Merger Subsidiary. At the Effective Time, each membership interest of Merger Subsidiary ("Merger Subsidiary Common Shares") issued and outstanding immediately prior to the Effective Time shall be converted into one validly issued, fully paid and non-assessable Surviving Corporation Common Share. (b) Cancellation of Treasury Stock. Each Share that is owned by the Company shall automatically be canceled and retired and shall cease to exist, and no cash or other consideration shall be delivered or deliverable in exchange therefor. (c) Conversion of Shares. Each Share issued and outstanding immediately prior to the Effective Time (other than (x) Shares constituting Restricted Stock, which shall be treated as provided in Section 2.06(b), (y) Dissenting Shares and (z) Shares owned by any Subsidiary of the Company) (each of such Shares, other than Shares referred to in clauses (x), (y) and (z), an "Exchanged Share") shall, by virtue of the Merger, be converted into the right to receive from the Surviving Corporation after the Merger cash in an amount equal to (i) $16.90 (the "Base Merger Consideration") and (ii) all Merger Consideration Adjustments (as defined herein) with respect to each Exchanged Share (clauses (i) and (ii) together, the "Merger Consideration"). Each such Exchanged Share shall no longer be outstanding, shall automatically be canceled and retired and shall cease to exist, and each holder of a certificate formerly representing any such Exchanged Shares shall, to the extent such certificate formerly represented such Exchanged Shares, cease to have any rights with respect thereto, except the right to receive the Merger Consideration applicable thereto, upon surrender of such certificate in accordance with Section 2.07 hereof. (d) Conversion of Class A Preferred Stock. Each share of Class A Preferred Stock issued and outstanding immediately prior to the Effective Time (the "Class A Exchanged Shares") shall, by virtue of the Merger, be converted into (i) one Surviving Corporation Common Share (the "Class A Base Merger Consideration") and (ii) the right to receive all Merger Consideration Adjustments with respect to each Class A Exchanged Share (the "Class A Merger Consideration Adjustment") (clauses (i) and (ii) together, the "Class A Merger Consideration"). Each such Class A Exchanged Share shall no longer be outstanding, shall automatically be canceled and retired and shall cease to exist, and each such holder of a certificate formerly representing any such Class A Exchanged Shares shall, to the extent such certificate formerly represented such Class A Exchanged Shares, cease to have any rights with respect thereto, except the right to receive the Class A Merger Consideration applicable thereto, upon surrender of such certificate in accordance with Section 2.07 hereof. (e) Conversion of Class B Preferred Stock. Each share of Class B Preferred Stock issued and outstanding immediately prior to the Effective Time (the "Class B Exchanged Shares," and, together with the Class A Exchange Shares, the "Exchanged Pre- -12- ferred Stock") shall, by virtue of the Merger, be converted into (i) 0.169 of a fully paid and nonassessable share of Series A Preferred Stock, par value $1.00 per share and liquidation preference $100 per share, of the Surviving Corporation (the "Series A Preferred Stock"), having the terms set forth in the certificate of incorporation of the Surviving Corporation set forth in Exhibit E attached hereto, (ii) 0.086392 of a fully paid and nonassessable Surviving Corporation Common Share (clauses (i) and (ii) together, the "Class B Base Merger Consideration") and (iii) the right to receive all Merger Consideration Adjustments with respect to each Class B Exchanged Share (the "Class B Merger Consideration Adjustment") (clauses (i), (ii) and (iii) together, the "Class B Merger Consideration"). Each such Class B Exchanged Share shall no longer be outstanding, shall automatically be canceled and retired and shall cease to exist, and each holder of a certificate that formerly represented any such Class B Exchanged Shares shall, to the extent such certificate formerly represented such Class B Exchanged Shares, cease to have any rights with respect thereto, except the right to receive the Class B Merger Consideration applicable thereto, upon surrender of such certificate in accordance with Section 2.07 hereof. (f) Calculation and Payment of Merger Consideration Adjustment; Escrow. A "Merger Consideration Adjustment" means an amount per Share, Class A Exchanged Share and Class B Exchanged Share, as the case may be, calculated by adding (1) all unpaid Initial Adjustment Amounts divided by the number equal to the number outstanding immediately prior to the Effective Time (but after the Exchange Date and before the cancellation of the Restricted Stock under Section 2.06), of (i) Exchanged Shares, (ii) Class A Exchanged Shares and Class B Exchanged Shares, (iii) Shares subject to Cash Out Options, (iv) Shares subject to Options with an exercise price below the Merger Consideration (after giving effect to Adjustment Amounts previously paid or being paid to such Option holder at the time of the calculation) and (v) 10% of the Shares of New Restricted Stock ( as defined herein) (clauses (i), (ii), (iii), (iv) and (v) together, the "Initial Denominator") and (2) all unpaid Subsequent Adjustment Amounts divided by the Denominator (as defined herein). "Denominator" shall mean a number equal to sum of (i) the Initial Denominator and (ii) 90% of the Shares of the Restricted Stock outstanding immediately prior to the Effective Time and before the cancellation of the Restricted Stock under Section 2.06(b). To the extent any part of the Merger Consideration Adjustment is received prior to the Effective Time, that part of the Merger Consideration Adjustment shall be paid with the Base Merger Consideration, Class A Base Merger Consideration and Class B Base Merger Consideration, as the case may be, in accordance with Section 2.07. To the extent any part of the Adjustment Amount is received after the Effective Time, that part of the Merger Consideration Adjustments shall be paid by the Surviving Corporation at the 30th day after the earlier of (i) receipt by the Surviving Corporation of proceeds representing Adjustment Amounts aggregating $5.0 million in excess of previously paid Adjustment Amounts and (ii) the date upon which all amounts which could represent an Adjustment Amount are received by the Company or the Surviving Corporation, as the case may be. Payment of Merger Consideration Adjustments shall be without interest thereon. -13- SECTION 2.05. Dissenting Shares. (a) Notwithstanding any provision of this Agreement to the contrary, any Shares or Exchanged Preferred Stock issued and outstanding immediately prior to the Effective Time, and held by a holder who has the right to demand payment for and any appraisal of such shares in accordance with Section 262 of the DGCL (or any successor provision), who perfects his demand for the appraisal of the fair value of his Shares or Exchanged Preferred Stock in accordance with the DGCL and, as of the Effective Time, has neither effectively withdrawn nor lost his right to make such demand (such Shares or Exchanged Preferred Stock, the "Dissenting Shares"), shall not be converted into or represent a right to receive the consideration for his Shares or Exchanged Preferred Stock specified in Section 2.04, but the holder thereof shall be entitled to only such rights as are granted by the DGCL. (b) Notwithstanding the provisions of Section 2.05(a), if any holder of Dissenting Shares effectively withdraws or loses (through failure to perfect or otherwise) his right to make such demand, then as of the Effective Time or the occurrence of such event, whichever occurs later, such dissenting holder's Shares or Exchanged Preferred Stock shall thereafter represent only the right to receive the consideration for Shares or Exchanged Preferred Stock specified in Section 2.04, without interest thereon, upon surrender of the certificates representing such Shares or Exchanged Preferred Stock. (c) The Company shall give Merger Subsidiary, prior to the Effective Time, and the Surviving Corporation, after the Effective Time, (i) prompt notice of any written demands for appraisal of the fair value of any Shares or Exchanged Preferred Stock, withdrawals of such demands and any other instruments served pursuant to the DGCL received by the Company after the date hereof and (ii) the opportunity to direct all negotiations and proceedings with respect to demands for appraisal or the payment of the fair cash value of any such Shares or Exchanged Preferred Stock under the DGCL. The Company shall not voluntarily make any payment with respect to any demands for appraisal or the payment of the fair cash value of any Shares or Exchanged Preferred Stock and shall not, except with the prior written consent of Merger Subsidiary, settle or offer to settle any such demands. SECTION 2.06. Treatment of Options and Restricted Stock. (a) At or immediately prior to the Effective Time, each outstanding stock option (each, an "Option") to purchase Shares granted under any of the Option Plans, whether or not vested, shall be canceled and holders of such Options with an exercise price below the Effective Time Option Consideration (as defined herein) (the "Cash Out Options") shall receive from the Surviving Corporation (subject to any applicable withholding taxes) an amount equal to the Base Merger Consideration plus any Option Consideration Adjustments (as defined herein) received prior to the Effective Time ("Effective Time Option Consideration") in respect of the number of Shares subject to such Options; provided that the Effective Time Option Consideration for each Share shall be reduced by the exercise price for such Option; provided, further that, notwithstanding any action taken pursuant to Section 6.07(a) hereof, for purposes -14- of this Agreement, each Option will be considered vested upon the occurrence of the Merger without regard to the applicable Option Plan or option agreement or any performance-based criteria. Each Option whether vested or unvested that has an exercise price equal to or greater than the Effective Time Option Consideration shall be canceled as of the Effective Time without consideration; provided that holders of such Options at the Effective Time shall retain the right to receive any Option Consideration Adjustments following the Effective Time only on the terms and to the extent provided in this Section 2.06. Holders of Cash Out Options shall be entitled to receive in respect of the number of Shares subject to such Cash Out Options, Option Consideration Adjustments received after the Effective Time. Holders of Options with an exercise price below the Effective Time Consideration (after giving effect to all Option Consideration Adjustments previously paid or being paid at the time of calculation) shall be entitled to receive Option Consideration Adjustments in respect of the number of Shares subject to such Option. "Option Consideration" means the Effective Time Option Consideration plus all Option Consideration Adjustments previously paid or being paid at the time of calculation. The "Option Consideration Adjustment" means an amount per Share underlying Cash Out Options and Options with an exercise price below the Option Consideration calculated by dividing all unpaid Initial Adjustment Amounts by the Initial Denominator and all unpaid Subsequent Adjustment Amounts by the Denominator. With respect to Options that have an exercise price above the Effective Time Option Consideration and below the Option Consideration, the portion of the Option Consideration Adjustments that shall be paid to such holder in respect of the number of Shares underlying such Options shall equal the difference between (x) the Effective Time Option Consideration plus all Option Consideration Adjustments previously paid or being paid at the time of the calculation and (y) the exercise price of such Option. Thereafter, for purposes of future Option Consideration Adjustments, such holder in respect of the number of Shares underlying such Options shall receive such Option Consideration Adjustments as if they were holders of Cash Out Options. To the extent any part of the Adjustment Amount that represents an Option Consideration Adjustment is received prior to the Effective Time, that part of the Option Consideration Adjustment shall be paid in accordance with the first sentence of this Section 2.06(a). To the extent any part of the Adjustment Amount that represents an Option Consideration Adjustment is received after the Effective Time, that part of Option Consideration Adjustments shall be paid by the Surviving Corporation at the 30th day after the earlier of (i) receipt by the Surviving Corporation of proceeds representing Adjustment Amounts aggregating $5.0 million in excess of previously paid Adjustment Amounts and (ii) the date upon which all amounts which could represent Adjustment Amounts are received by the Surviving Corporation or the Company, as the case may be. Payment of Option Consideration Adjustments shall be without interest thereon. (b) Notwithstanding any provision of this Agreement to the contrary, none of the restrictions relating to any restricted stock awards ("Restricted Stock") granted under any Restricted Stock Plan of the Company shall terminate, be removed or modified as a result of the Transactions. Immediately prior to the Merger, the Committee(s) administering the Restricted Stock Plans will (i) cancel all Restricted Stock awards that are then subject to any restrictions under the terms of the applicable award, and (ii) make new awards ("New Awards") -15- under the applicable Restricted Stock Plan to each participant whose awards were canceled under the preceding subclause (i) as to the same number of shares of common stock as the canceled award and with such New Award taking effect immediately following the Merger and relating to Surviving Corporation Common Shares (the "New Restricted Stock") rather than Shares, provided that such New Awards will provide, except as set forth on the disclosure schedule, as follows: (1) 15% of each participant's New Restricted Stock will be available upon the effectiveness of the New Award to the participant free of restrictions under the Restricted Stock Plans (other than a prohibition on transfer of such New Restricted Stock to persons other than Restricted Stock Permitted Transferees and securities law restrictions on transferability (collectively, the "Restrictions")), and, in lieu of 10% of an additional amount of New Restricted Stock ("Cash Out New Restricted Stock") the participants will receive cash (valuing a Share of the New Restricted Stock for these purposes at the Base Merger Consideration plus any Merger Consideration Adjustment determined with reference to Initial Adjustment Amounts received prior to the Effective Time (the "Cash Out Amount"), subject to applicable withholding taxes, (2) the balance of each participant's New Restricted Stock will become free of restrictions under the Restricted Stock Plans (other than the Restrictions) ratably on each anniversary of the Merger, commencing on the first anniversary of the Merger through the third anniversary of the Merger, provided that upon the termination of such Restrictions as contemplated under this clause (2), such participant shall be entitled to elect, at his or her option, to receive, in lieu of any share of New Restricted Stock, an amount in cash equal to the sum of (i) the Cash Out Amount, (ii) any Merger Consideration Adjustments determined with respect to Initial Adjustment Amounts received subsequent to the Effective Time and prior to the applicable anniversary date, and (iii) an amount (the "Accrual Amount") equal to 6% per annum of the Cash Out Amount from the date of the Merger through the applicable anniversary date and of any such Merger Consideration Adjustments from the date of the payment to holders of the Shares through the applicable anniversary date, subject to the balance of this Section 2.06(b); provided, further, that the New Restricted Stock awards will allow the Surviving Corporation to defer the payment of such cash if the Surviving Corporation is prevented under the Facilities from making such payments due to a default, or an event which with notice or lapse of time or both, would constitute a default (without giving effect to any grace period) under the Facilities. In the event the Surviving Corporation defers such payment, the Surviving Corporation will make such payment as soon as practicable after the Surviving Corporation is no longer in default and any event that would constitute a default has been cured or waived. For any such deferral period in respect of a Share of New Restricted Stock, the Accrual Amount in respect of such Share shall be calculated based upon 12% per annum of the deferred amount for the period of deferral. Each individual entitled to shares of Cash Out New Restricted Stock shall be entitled to receive with respect to each share of Cash Out New Restricted Stock from the Surviving Corporation amounts equal to all Merger Consideration Adjustments per Share determined with respect to all Initial Adjustment Amounts received after the Effective Time, payable at the same time such amounts are paid to holders of Shares. The Surviving Corporation shall pay with respect to each share of New Restricted Stock which is free of restriction upon the effectiveness of the New Award pursu- -16- ant to clause (ii)(1) of this paragraph, amounts equal to (1) any Merger Consideration Adjustment determined with reference to Initial Adjustment Amounts received by the Company prior to the Effective Time, which amount shall be payable immediately prior to the Merger, and (2) any Merger Consideration Adjustments determined with reference to Initial Adjustment Amounts received by the Surviving Corporation and paid to a holder of a Share, which shall be payable at the same time as paid to holders of Shares. The Surviving Corporation shall pay with respect to each share of New Restricted Stock which becomes free of restrictions on the first, second or third anniversary of the Effective Time and with respect to which the holder does not elect to receive cash pursuant to clause (ii)(2) of this paragraph, amounts equal to any Merger Consideration Adjustments determined with reference to Initial Adjustment Amounts received after the Effective Time, which shall be payable upon the later of (x) the first, second or third anniversary, as the case may be, on which the restrictions lapse and the holder does not elect to receive cash, and (y) the time such Merger Adjustment Amounts are paid to holders of Shares. Each holder of the New Restricted Stock also shall be entitled to receive with respect to each share of New Restricted Stock (whether or not Cash Out New Restricted Stock) all Merger Consideration Adjustments determined with respect to the Subsequent Adjustment Amounts (whether received prior to or after the Effective Time), payable at the time such amounts are paid to holders of Shares. SECTION 2.07. Surrender of Shares. (a) Prior to the Effective Time, Merger Subsidiary shall appoint a bank or trust company which is reasonably satisfactory to the Company to act as the exchange agent (the "Exchange Agent") for the payment of the Base Merger Consideration and any Merger Consideration Adjustment available at the Effective Time (the "Effective Time Merger Consideration") with respect to Shares and the Class A Merger Consideration Adjustment and the Class B Merger Consideration Adjustment available at the Effective Time. All of the fees and expenses of the Exchange Agent shall be borne by the Surviving Corporation. The Surviving Corporation will serve in the capacity of exchange agent with respect to the Class A Base Merger Consideration and Class B Base Merger Consideration and will, at the Effective Time, upon receipt of the stock certificates for Class A Exchanged Shares and Class B Exchanged Shares duly endorsed and in form for transfer with accompanying stock powers duly executed in blank, exchange such stock certificates for new stock certificates, shares of the Class A Merger Consideration and Class B Merger Consideration, respectively, in accordance with Section 2.04(d) and (e). After the Effective Time, the Surviving Corporation shall be responsible for all Merger Consideration Adjustments, Class A Merger Consideration Adjustments and Class B Merger Consideration Adjustments in accordance with Section 2.04. (b) At or prior to the Effective Time, there will be deposited with the Exchange Agent cash in an amount equal to the aggregate Effective Time Merger Consideration (in an amount equal to the number of Exchanged Shares multiplied by the Effective Time Merger Consideration), the Class A Merger Consideration Adjustments available at the Effective Time and the Class B Merger Consideration Adjustment available at the Effective -17- Time in immediately available funds. The Exchange Agent shall invest the funds as directed by the Surviving Corporation on a daily basis. Any interest and other income resulting from such investments shall be paid to the Surviving Corporation. (c) Promptly following the Effective Time, the Surviving Corporation shall instruct the Exchange Agent to mail, no later than three Business Days after the Effective Time, to each holder of record of a certificate representing Exchanged Shares converted upon the Merger pursuant to this Agreement (i) a letter of transmittal (which shall specify that delivery shall be effected, and risk of loss and title to the certificates shall pass, only upon delivery of the certificates to the Exchange Agent and shall be in such form and have such other provisions as Merger Subsidiary or the Surviving Corporation may reasonably specify) and (ii) instructions for use in effecting the surrender of the certificates. The Exchange Agent shall accept such certificates upon compliance with such reasonable terms and conditions as the Exchange Agent may impose to effect an orderly exchange thereof in accordance with normal exchange practices. Each holder of a certificate or certificates representing Exchanged Shares converted upon the Merger pursuant to this Agreement may thereafter surrender such certificate or certificates to the Exchange Agent, as agent for such holder, to effect the surrender of such certificate or certificates on such holder's behalf for a period ending six months after the Effective Time. Upon the due surrender of certificates representing Exchanged Shares, the Surviving Corporation shall cause the Exchange Agent to pay the holder of such certificates in exchange therefor the Effective Time Merger Consideration multiplied by the number of Exchanged Shares represented by such certificate that have been so converted. Until so surrendered, each such certificate shall represent solely the right to receive the Merger Consideration. With respect to Class A Merger Consideration Adjustments to be paid to Class A Exchanged Shares and Class B Merger Consideration Adjustments to be paid to Class B Exchanged Shares, in each case, to be paid at the Effective Time, the Exchange Agent shall not require surrender of certificates pursuant to this Section 2.07 but rather, shall be directed by the Company, by written instructions as to the recipients of such funds and directions for payment. (d) If any payment or issuance in respect of Shares, Class A Preferred Stock or Class B Preferred Stock under this Section 2.07 is to be made to a Person other than the Person in whose name a surrendered certificate is registered, it shall be a condition to such payment or issuance that the certificate so surrendered shall be properly endorsed or shall be otherwise in proper form for transfer and that the Person requesting such payment or issuance shall have paid any transfer and other taxes required by reason of such payment or issuance in a name other than that of the registered holder of the certificate or instrument surrendered or shall have established to the satisfaction of the Surviving Corporation or the Exchange Agent that such tax either has been paid or is not payable. (e) At and after the Effective Time, no further transfer of Shares or Exchanged Preferred Stock which have been converted pursuant to Section 2.04 of this Agreement shall be made, other than transfers of such securities that have occurred prior to the Effective Time. -18- In the event that, after the Effective Time, certificates representing Shares or Exchanged Preferred Stock which have been converted pursuant to Section 2.04 of this Agreement are presented to the Surviving Corporation, they shall be canceled and exchanged in the manner contemplated by Section 2.04 and as provided in this Section 2.07. (f) The Merger Consideration paid in the Merger shall be paid in full to the holder of Shares without interest thereon, and shall be subject to reduction only for any applicable United States federal or other withholding or stock transfer taxes payable by such holder. (g) Promptly following the date which is six months after the Effective Time, the Exchange Agent shall deliver to the Surviving Corporation all cash, certificates and other documents in its possession relating to the Transactions, and the Exchange Agent's duties shall terminate. Thereafter, each holder of a certificate representing Shares may surrender such certificate to the Surviving Corporation and (subject to any applicable abandoned property, escheat or similar law) receive in consideration therefor the consideration due to such holder pursuant to Section 2.04 of this Agreement, without any interest thereon. (h) None of Merger Subsidiary, the Surviving Corporation or the Exchange Agent shall be liable to any holder of Shares or Exchanged Preferred Stock for any cash or securities delivered to a public official pursuant to any abandoned property, escheat or similar law, rule, regulation, statute, order, judgment or decree. SECTION 2.08. Lost, Stolen or Destroyed Certificates. In the event any certificates representing Exchanged Shares or Exchanged Preferred Stock shall have been lost, stolen or destroyed, the Exchange Agent or the Surviving Corporation, as applicable, shall deliver the Effective Time Merger Consideration, Class A Merger Consideration or Class B Merger Consideration pursuant to Section 2.04 hereof, in exchange for such lost, stolen or destroyed certificates upon the making of an affidavit of that fact by the holder thereof; provided, however, that the Surviving Corporation may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed certificates to deliver an indemnity against any claim that may be made against the Surviving Corporation or the Exchange Agent with respect to the certificates alleged to have been lost, stolen or destroyed. SECTION 2.09. Further Action. If, at any time after the Effective Time, any further action is necessary or desirable to carry out the purposes of this Agreement and to put the Surviving Corporation in possession of all assets and property of every description and every interest, wherever located, and the rights, privileges, immunities, powers, franchises and authority, of a public as well as of a private nature, of the Company and Merger Subsidiary, the officers and directors of the Surviving Corporation are fully authorized in the name of their respective corporations immedi- -19- ately prior to the Effective Time or otherwise to take, and will take, all such lawful and necessary action. ARTICLE 3 The Surviving Corporation SECTION 3.01. Certificate of Incorporation; By-Laws. (a) Certificate of Incorporation. The certificate of incorporation of the Company, as changed and as set forth on Exhibit E hereto, shall from and after the Effective Time be the certificate of incorporation of the Surviving Corporation until thereafter amended as provided by the DGCL and such certificate of incorporation. (b) By-laws. The by-laws of the Company, as changed and as set forth on Exhibit F hereto, shall be the by-laws of the Surviving Corporation until thereafter amended as provided in its certificate of incorporation and by the DGCL. SECTION 3.02. Directors and Officers. (a) The board of managers of Merger Subsidiary immediately prior to the Effective Time shall be the initial directors of the Surviving Corporation and the Board of Directors will approve, prior to the Merger, the managers of Merger Subsidiary as the directors of the Surviving Corporation, each to hold office in accordance with the certificate of incorporation and by-laws of the Surviving Corporation. (b) The officers of the Company immediately prior to the Effective Time shall be the initial officers of the Surviving Corporation, in each case until their respective successors are duly elected or appointed or until their earlier resignation, removal from office or death. ARTICLE 4 Representations and Warranties of the Company The Company represents and warrants to Merger Subsidiary that, except as set forth in the disclosure schedule delivered by the Company to Merger Subsidiary immediately prior to execution of this Agreement: -20- SECTION 4.01. Corporate Existence and Power. The Company is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware and has all corporate powers and all governmental licenses, authorizations, permits, consents and approvals required to carry on its business as now conducted, except for those licenses, authorizations, permits, consents and approvals the absence of which would not be reasonably expected to have, individually or in the aggregate, a Material Adverse Effect. The Company is duly qualified to do business as a foreign corporation and is in good standing in each jurisdiction where such qualification is necessary, except for those jurisdictions where failure to be so qualified would not be reasonably expected to have, individually or in the aggregate, a Material Adverse Effect. The Company has heretofore delivered to Merger Subsidiary true and complete copies of the certificate of incorporation and by-laws of the Company as currently in effect. SECTION 4.02. Corporate Authorization. (a) The execution, delivery and performance by the Company of this Agreement and the consummation by the Company of the Transactions are within the Company's corporate powers and, except for the required approval of the Company Stockholders in connection with the consummation of the Company/Subsidiary Merger and the Merger, have been duly authorized by all necessary corporate action on the part of the Company. The affirmative vote of the holders of a majority of the Company's outstanding capital stock entitled to vote for directors (voting as a class) is the only vote of the holders of the Company's capital stock necessary in connection with the consummation of the Company/Subsidiary Merger. The affirmative vote of the holders of a majority of the Company's outstanding capital stock entitled to vote for directors (voting as one class) and the affirmative vote of the holders of a majority of outstanding capital stock entitled to vote for directors (other than the Continuing Shareholders) are the only votes of the holders of any of the Company's capital stock necessary by law or contract in connection with the consummation of the Merger. This Agreement and the Equity Investments Sale Agreement constitute valid and binding agreements of the Company. (b) At a meeting duly called and held, the Board of Directors, subsequent to the unanimous recommendation of the Special Committee, (i) unanimously approved the Company/Subsidiary Merger and the Company/Subsidiary Merger Agreement, determined that it is advisable and in the best interests of Company Stockholders (other than the Continuing Shareholders) to consummate the Company/Subsidiary Merger, and resolved to recommend approval of the Company/Subsidiary Merger and the Company/Subsidiary Merger Agreement by Company Stockholders, and (ii) approved the Merger and this Agreement, determined that it is advisable and in the best interests of Company Stockholders (other than Continuing Shareholders) to consummate the Merger and the other Transactions, and (iii) resolved to recommend approval of the Company/Subsidiary Merger, the Company/Subsidiary Merger Agreement, the Merger and this Agreement by Company Stockholders. -21- (c) At a meeting duly called and held, the Special Committee has (i) unanimously resolved to recommend that the Board of Directors approve and declare advisable the Company/Subsidiary Merger and the Company/Subsidiary Merger Agreement, (ii) determined that this Agreement and the Transactions are advisable and fair to and in the best interests of the Company Stockholders (other than Merger Subsidiary and its Affiliates, Company Shareholder and its Subsidiaries, IS and FS) and (iii) resolved (subject to Section 6.04 hereof) to recommend that the Board of Directors approve and declare advisable this Agreement and the Transactions. SECTION 4.03. Governmental Authorization. The execution, delivery and performance by the Company of the Company/Subsidiary Merger Agreement, this Agreement and the consummation by the Company of the Transactions require no action by or in respect of, or filing with, or notification or reporting to, any Governmental Authority, other than (i) the filing of a certificate of merger with respect to the Company/Subsidiary Merger and the Merger with the Delaware Secretary of State and appropriate documents with the relevant authorities of other states in which Company is qualified to do business, (ii) compliance with any applicable requirements of the HSR Act and of the Antitrust Laws of the foreign jurisdictions set forth on Schedule 4.03, (iii) compliance with any applicable requirements of the 1933 Act, 1934 Act and any other applicable securities laws, whether state or foreign, and (iv) any actions or filings the absence of which would not be reasonably expected to have, individually or in the aggregate, a Material Adverse Effect on the Company. SECTION 4.04. Non-contravention. The execution, delivery and performance by the Company of the Company/Subsidiary Merger Agreement, this Agreement and the consummation of the Transactions do not and will not (i) contravene, conflict with, or result in any violation or breach of any provision of the certificate of incorporation or by-laws of the Company, (ii) assuming compliance with the matters referred to in Section 4.03 hereof, contravene, conflict with or result in a violation or breach of any provision of any applicable law, statute, ordinance, rule, regulation, judgment, injunction, order, or decree, (iii) require any consent or other action by any Person under, constitute a default under, or cause or permit the termination, cancellation, acceleration or other change of any right or obligation or the loss of any benefit to which the Company or any of its Subsidiaries is entitled under any provision of any agreement or other instrument binding upon the Company or any of its Subsidiaries or any license, franchise, permit, certificate, approval or other similar authorization affecting, or relating in any way to, the assets or business of the Company and its Subsidiaries or under any agreement or instrument relating to any of the Equity Investments or (iv) result in the creation or imposition of any Lien on any asset of the Company or any of its Subsidiaries, except for such contraventions, conflicts and violations referred to in clause (ii) and for such failures to obtain any such consent or other action, defaults, terminations, cancellations, accelerations, changes, losses or Liens referred to in clauses (iii) and (iv) that would not be reasonably expected to have, individually or in the aggregate, a Material Adverse Effect. -22- SECTION 4.05. Capitalization. (a) The authorized capital stock of the Company consists of 250,000,000 Shares and 25,000,000 shares, par value $1.00 per share, of preferred stock (the "Preferred Stock"). As of the close of business on July 31, 2000, (i) 44,740,401 Shares were issued and outstanding, (ii) no shares of Preferred Stock were issued or outstanding and (iii) no Shares were held by the Company in its treasury. All outstanding Shares have been duly authorized and validly issued and are fully paid and nonassessable. (b) As of the close of business on July 31, 2000, 250,000 shares of Preferred Stock have been designated as Series A Preferred and are reserved for issuance pursuant to the Rights (as defined in the Rights Agreement) issued under the Rights Agreement. (c) As of the close of business on July 31, 2000, 9,838,710 Shares were issuable upon conversion of the Company's 4.5% Convertible Subordinated Debentures due 2003 (the "Debentures") at a conversion price of $31.00 per Share. (d) As of the close of business on July 31, 2000: (i) 3,770,198 Shares were reserved for issuance pursuant to options granted under the Option Plans which options are outstanding on the date hereof and, of such options, 1,612,078 are vested and exercisable as of the date hereof without regard to any "change of control" trigger in an Option Plan or option agreement governing such Options, (ii) 3,678,811 shares of Restricted Stock were the subject of awards under the Restricted Stock Plans and will remain subject to restrictions until the End Date (as defined herein) (disregarding matters contemplated by Section 2.06 hereof and the effect of the Transactions) under the Restricted Stock Plans or an award agreement governing them, and (iii) 224,826 shares of phantom stock were the subject of awards under the Company's Phantom Stock Plans, which awards are outstanding on the date hereof. (e) Except as set forth in this Section 4.05 or as contemplated by Section 2.06(b), 6.10 or 9.01(g), there are no outstanding (i) shares of capital stock or voting securities of the Company, (ii) securities of the Company convertible into or exchangeable for shares of capital stock or voting securities of the Company, (iii) options or other rights to acquire from the Company, or other obligation of the Company to issue, any capital stock, voting securities or securities convertible into or exchangeable for capital stock or voting securities of the Company or (iv) stock appreciation, phantom stock or similar rights with respect to the Company (the items in clauses (i), (ii), (iii) and (iv) being referred to collectively as the "Company Securities"). Except with respect to the Debentures, there are no outstanding obligations of the Company or any of its Subsidiaries to repurchase, redeem or otherwise acquire any of the Company Securities. -23- SECTION 4.06. Subsidiaries; Equity Investments. (a) Each Subsidiary of the Company is a corporation duly incorporated, validly existing and in good standing under the laws of its jurisdiction of incorporation and has all corporate powers and all governmental licenses, authorizations, permits, consents and approvals required to carry on its business as now conducted, except for those licenses, authorizations, permits, consents and approvals the absence of which would not be reasonably expected to have, individually or in the aggregate, a Material Adverse Effect. Each such Subsidiary is duly qualified to do business as a foreign corporation and is in good standing in each jurisdiction where such qualification is necessary, except for those jurisdictions where the failure to be so qualified would not be reasonably expected to have, individually or in the aggregate, a Material Adverse Effect. (b) All of the outstanding capital stock of, or other voting securities or ownership interests in, each Subsidiary of the Company is owned by the Company, directly or indirectly, free and clear of any Lien and free of any other limitation or restriction (including any restriction on the right to vote, sell or otherwise dispose of such capital stock or other voting securities or ownership interests). All of the outstanding shares of capital stock of each subsidiary of the Company have been validly issued and are fully paid and non-assessable. There are no outstanding (i) securities of the Company or any of its Subsidiaries convertible into or exchangeable for shares of capital stock or other voting securities or ownership interests in any Subsidiary or the Company or (ii) options or other rights to acquire from the Company or any of its Subsidiaries, or other obligation of the Company or any of its Subsidiaries to issue, any capital stock or other voting securities or ownership interests in, or any securities convertible into or exchangeable for any capital stock or other voting securities or ownership interests in, any Subsidiary of the Company (the items in clauses (i) and (ii) being referred to collectively as the "Company Subsidiary Securities"). There are no outstanding obligations of the Company or any of its Subsidiaries to repurchase, redeem or otherwise acquire any of the Company Subsidiary Securities. (c) Schedule 4.06(c) lists (x) any equity interest in any subsidiary of the Company or any other corporation, partnership, joint venture or other business association or entity owned directly or indirectly by the Company and having a fair market value or book value in excess of $1.0 million and (y) the Company's reasonably approximate tax basis in each Equity Investment. SECTION 4.07. SEC Filings. (a) The Company has delivered to Merger Subsidiary (i) the Company's annual reports on Form 10-K for its fiscal years ended December 31, 1999, 1998 and 1997, (ii) its quarterly report on Form 10-Q for its fiscal quarter ending March 31, 2000, (iii) its proxy statements relating to meetings of the Company Stockholders held since December 31, 1999 and (iv) all of its other reports, statements, schedules and registration statements filed with the -24- SEC since December 31, 1999 (the documents referred to in this Section 4.07(a), collectively, the "Company SEC Documents"). (b) As of its filing date, each Company SEC Document complied as to form in all material respects with the applicable requirements of the 1934 Act. (c) As of its filing date, each Company SEC Document did not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading. SECTION 4.08. Financial Statements. The audited consolidated financial statements and unaudited consolidated interim financial statements of the Company included in the Company SEC Documents fairly present, in conformity with generally accepted accounting principles ("GAAP") applied on a consistent basis (except as may be indicated in the notes thereto), the consolidated financial position of the Company and its consolidated Subsidiaries as of the dates thereof and their consolidated results of operations and cash flows for the periods then ended (subject to normal year-end adjustments and the absence of notes in the case of any unaudited interim financial statements). SECTION 4.09. Disclosure Documents. (i) The proxy statement of the Company to be filed with the SEC in connection with the Merger (the "Company Proxy Statement") and any amendments or supplements thereto and (ii) the statement on Schedule 13E-3 to be filed by the Company concurrently with the filing of the Company Proxy Statement (such statement, as amended or supplemented, is referred to herein as the "Schedule 13E-3") and any amendments or supplements thereto will each, when filed, comply as to form in all material respects with the applicable requirements of the 1934 Act. At the time the Company Proxy Statement or any amendment or supplement thereto is first mailed to Company Stockholders, and at the time such stockholders vote on the adoption of the Company/Subsidiary Merger Agreement and this Agreement, the Company Proxy Statement, as supplemented or amended, if applicable, will not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading. The Schedule 13E-3 will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. The representations and warranties contained in this Section 4.09 will not apply to statements or omissions included in the Company Proxy Statement or the Schedule 13E-3 based upon information furnished to the Company by or on behalf of Merger Subsidiary for use therein. -25- SECTION 4.10. Absence of Certain Changes. Since the Company Balance Sheet Date, the business of the Company and its Subsidiaries has been conducted in the ordinary course consistent with past practices and there has not been: (a) any event, occurrence, development or state of circumstances or facts that has or could be reasonably expected to have, individually or in the aggregate, a Material Adverse Effect on the Company; (b) any declaration, setting aside or payment of any dividend or other distribution with respect to any shares of capital stock of the Company (other than quarterly cash dividends on the Shares not in excess of $.08 per share per quarter and having customary record and payment dates), or any repurchase, redemption or other acquisition by the Company or any of its Subsidiaries of any outstanding shares of capital stock or other securities of, or other ownership interests in, the Company or any of its Subsidiaries (other than ordinary course open market purchases made in connection with the Company's stock incentive plan); (c) any amendment of any material term of any outstanding security of the Company or any of its Material Subsidiaries; (d) any incurrence, assumption or guarantee by the Company or any of its Subsidiaries of any indebtedness in excess of $5.0 million, individually or in the aggregate, other than (i) under the Credit Agreement in the ordinary course of business consistent with past practices to fund general corporate purposes, (ii) between the Company and its Subsidiaries or between two or more of the Company's Subsidiaries or (iii) trade payables in the ordinary course of business; (e) any creation or other incurrence by the Company or any of its Subsidiaries of any Lien on any asset that is material to the Company and its Subsidiaries, taken as a whole, other than in the ordinary course of business consistent with past practices; (f) any making of any material loan, advance or capital contribution to or investment in any Person other than loans, advances or capital contributions to or investments in its wholly-owned Subsidiaries or by its wholly-owned Subsidiaries to or in the Company or other Subsidiaries of the Company; (g) any damage, destruction or other casualty loss (whether or not covered by insurance) affecting the business or assets of the Company or any of its Subsidiaries that has or could be reasonably expected to have, individually or in the aggregate, a Material Adverse Effect; (h) any change in any method of accounting, method of tax accounting or accounting principles or practice by the Company or any of its Subsidiaries, except for -26- any such change required by reason of a concurrent change in GAAP, Regulation S-X under the 1934 Act or other applicable law or regulation; or (i) except for the severance plans established pursuant to an agreement by the majority of the members of the Employee Retention Committee and except as required by law, any adoption or amendment in any respect of any bonus, profit sharing, compensation, severance, termination, stock option, stock appreciation right, pension, retirement, employment or other employee benefit agreement, trust, plan or other arrangement for the benefit or welfare of any director or elected officer of the Company or increase in any manner of the compensation or fringe benefits of any director or elected officer of the Company or payment of any benefit not required by any existing agreement or placement of any assets in any trust for the benefit of any director or elected officer of the Company not required by any existing agreement. SECTION 4.11. No Undisclosed Material Liabilities. There are no liabilities or obligations of the Company or any of its Subsidiaries of any kind whatsoever, whether accrued, contingent, absolute, determined, determinable or otherwise, other than: (a) liabilities or obligations disclosed or provided for in the Company Balance Sheet or in the notes thereto or in any of the Company SEC Documents filed prior to the date hereof; (b) liabilities or obligations incurred in the ordinary course of business consistent with past practice since the Company Balance Sheet Date; (c) liabilities or obligations under this Agreement; and (d) liabilities or obligations that would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on the Company. SECTION 4.12. Compliance with Laws and Court Orders. The Company and each of its Subsidiaries are, and since January 1, 1999 have been, in compliance with any applicable law, statute, ordinance, rule, regulation, judgment, injunction, order or decree, except for failures to comply or violations that have not and would not be reasonably expected to have, individually or in the aggregate, a Material Adverse Effect. SECTION 4.13. Litigation. There is no action, suit, investigation or proceeding pending against, or, to the knowledge of the Company, threatened against, the Company or any of its Subsidiaries or any of their respective properties before any court or arbitrator, or before or by any Governmental Authority, -27- that would reasonably be expected to have, individually or in the aggregate, together with all other such actions, suits, investigations or proceedings, a Material Adverse Effect. SECTION 4.14. Finders' Fees. Except for Salomon Smith Barney Inc., McDonald Investments, Inc. and Morgan Lewis Githens & Ahn, copies of whose engagement agreements have been provided to Merger Subsidiary, there is no investment banker, broker, finder or other intermediary that has been retained by or is authorized to act on behalf of the Company or any of its Subsidiaries who might be entitled to any fee or commission from the Company or any of its Affiliates in connection with the Transactions. SECTION 4.15. Opinion of Financial Advisor. (a) The Board of Directors has received the opinion of the financial advisor to the Company to the effect that, as of the date of this Agreement, the Merger Consideration is fair, from a financial point of view, to the holders of Shares (other than Merger Subsidiary and its Affiliates and the Continuing Shareholders and their respective Affiliates). (b) The Special Committee has received the opinion of the financial advisor to the Special Committee to the effect that, as of the date of this Agreement, the Merger Consideration is fair, from a financial point of view, to the holders of Shares (other than Merger Subsidiary and its Affiliates and the Continuing Shareholders and their Affiliates). SECTION 4.16. Taxes. (a) The Company and each of its Subsidiaries has timely filed (or has had timely filed on its behalf), taking into account any extension of time within which to file, all material Tax Returns required to be filed by it and all such material Tax Returns are true and complete in all material respects. (b) The Company and each of its Subsidiaries has paid (or has had paid on its behalf), or, where payment is not yet due, has established (or has had established on its behalf) or will establish or cause to be established in accordance with GAAP on or before the Effective Time an adequate accrual for the payment of, all taxes shown on such Tax Returns. (c) There are no material Liens or encumbrances for Taxes on any of the assets of the Company or any of its Subsidiaries. (d) No material federal, state, local or foreign audits or administrative proceedings are pending or, to the Company's knowledge, threatened, with regard to any Taxes or any Tax Return of the Company or its Subsidiaries. (e) Except for the severance, Option Plans, Supplemental Executive Retirement and Disability Plan and stay bonus plans described in Section 7.04(b) no amount that could be received (whether in cash or property or the vesting of property) as a result of any of -28- the Transactions by any employee, officer or director of the Company or any of its affiliates who is a "disqualified individual" (as such term is defined in proposed Treasury Regulation Section 1.280G-1) under any employment, severance or termination agreement, other compensation arrangement or Benefit Plan currently in effect could be characterized as an "excess parachute payment" (as such term is defined in Section 280G(b)(1) of the Code). "Taxes" shall mean any and all taxes, charges, fees, levies or other assessments, including income, gross receipts, excise, real or personal property, sales, withholding, social security, retirement, unemployment, occupation, use, goods and services, service use, license, value added, capital, net worth, payroll, profits, withholding, franchise, transfer and recording taxes, fees and charges, and any other taxes, assessments or similar charges imposed by the Internal Revenue Service ("IRS") or any taxing authority (whether domestic or foreign including any state, county, local or foreign government or any subdivision or taxing agency thereof (including a United States possession)) (a "Taxing Authority"), whether computed on a separate, consolidated, unitary, combined or any other basis; and such term shall include any interest whether paid or received, fines, penalties or additional amounts attributable to, or imposed upon, or with respect to, any such taxes, charges, fees, levies or other assessments. "Tax Return" shall mean any report, return, document, declaration or other information or filing required to be supplied to any taxing authority or jurisdiction (foreign or domestic) with respect to Taxes, including information returns, any documents with respect to or accompanying payments of estimated Taxes, or with respect to or accompanying requests for the extension of time in which to file any such report, return, document, declaration or other information. SECTION 4.17. Employee Benefit Plans. (a) Schedule 4.17 lists (i) those Benefit Plans that are "employee welfare benefit plans" within the meaning of Section 3(1) of ERISA the liabilities of which would reasonably be expected to have a Material Adverse Effect on the Company, (ii) all Benefit Plans that are "employee pension benefit plans" within the meaning of Section 3(2) of ERISA, and (iii) all Multiemployer Plans. Between the date hereof and 10 days prior to the Company's Stockholder's Meeting, the Company will use its reasonable best efforts to revise Schedule 4.17 to list all Benefit Plans and Multiemployer Plans. Copies of all written Benefit Plans, summary plan descriptions, trust agreements, actuarial valuation reports and the most recent annual return and IRS determination letters have been, or will have been, at least 10 days prior to the Company's Stockholders Meeting, made available to Merger Subsidiary. (b) Except as would not be reasonably expected to have, individually or in the aggregate, a Material Adverse Effect: (i) each Benefit Plan has at all times been maintained and administered in all respects in accordance with its terms and with the requirements of all applicable law, including ERISA and the Code. Each Benefit Plan intended to qualify under Section 401(a) of the Code has been determined by the IRS to be qualified under Sec- -29- tion 401(a) of the Code, and the Company knows of no fact or circumstance giving rise to a material likelihood that the plan would not be treated as so qualified by the IRS; (ii) all required contributions to any Benefit Plans and Multiemployer Plans that are "defined benefit pension plans" required to be made by the Company or any Subsidiary in accordance Section 302 of ERISA or Section 412 of the Code, have been timely made; there has been no application for or waiver of the minimum funding standards imposed by Section 412 of the Code with respect to any Benefit Plan; and no Benefit Plan has incurred any "accumulated funding deficiency" within the meaning of Section 302 of ERISA or Section 412 of the Code; (iii) no "reportable event" (within the meaning of Section 4043 of ERISA) has occurred with respect to any Benefit Plan or any Plan maintained by an ERISA Affiliate since the effective date of said Section 4043; (iv) no liability has been incurred or is expected to be incurred by the Company or any Subsidiary thereof under Title IV of ERISA with respect to any Benefit Plan or Multiemployer Plan, or with respect to any other Plan presently or heretofore maintained or contributed to during the 5 year period prior to the Effective Time by any ERISA Affiliate; (v) with respect to each Multiemployer Plan, (i) no withdrawal liability (within the meaning of Section 4201(b) of ERISA) has been incurred by the Company or any ERISA Affiliate, and the Company has no reason to believe that any such withdrawal liability will be incurred, (ii) no such Multiemployer Plan is in "reorganization" (within the meaning of Section 4241 of ERISA), (iii) no notice has been received that increased contributions may be required to avoid a reduction in plan benefits or the imposition of an excise tax, or that such Multiemployer Plan is or may become "insolvent" (within the meaning of Section 4241 of ERISA), (iv) to the knowledge of the Company or any Subsidiary thereof, no proceedings have been instituted by the PBGC against such Multiemployer Plan, (v) neither the Company nor any Subsidiary thereof has sold assets in a transaction intended to satisfy the requirements of Section 4204 of ERISA, and (vi) if the Company or any ERISA Affiliate were to have a complete or partial withdrawal under Section 4203 of ERISA as of the Effective Time, no withdrawal liability would exist on the part of the Company or any ERISA Affiliate; (vi) neither the Company nor any ERISA Affiliate has incurred any liability for any tax imposed under Sections 4971 through 4980E of the Code or civil liability under Section 502(i) or (l) of ERISA; (vii) no Tax has been incurred under Section 511 of the Code with respect to any Benefit Plan (or trust or other funding vehicle pursuant thereto); -30- (viii) there is no commitment or agreement that would prevent the termination or modification as to employees or former employees of the Company of any Benefit Plan under which obligations to provide post-retirement welfare benefits arise other than with respect to benefits the liabilities of which are disclosed in the audited financial statements of the Company in accordance with FAS 106; and (ix) no action (excluding claims for benefits incurred in the ordinary course of Plan activities) has been brought or, to the knowledge of the Company, threatened against or with respect to any Benefit Plan and there are no facts or circumstances known to the Company or any Subsidiary thereof that could reasonably be expected to give rise to any such action. (c) Except as would not, individually or in the aggregate, be reasonably expected to have a Material Adverse Effect, (i) all contributions required to be made by the Company or any Subsidiary with respect to a Foreign Plan have been timely made, (ii) each Foreign Plan has been maintained in substantial compliance with its terms and with the requirements of any and all applicable laws and has been maintained, where required, in good standing with the applicable Governmental Authority, and (iii) neither the Company nor any Subsidiary has incurred any obligation in connection with the termination or withdrawal from any Foreign Plan. To the knowledge of the Company, each of the Foreign Plans that is a defined benefit plan has plan assets with aggregate fair market value that is greater than such plan's liabilities, as determined in accordance with applicable laws using reasonable actuarial assumptions. For purposes hereof, the term "Foreign Plan" shall mean any plan, program, policy, arrangement or agreement maintained or contributed to by, or entered into with, the Company or any Subsidiary with respect to employees (or former employees) employed outside the United States. SECTION 4.18. Environmental Matters. Except as disclosed in the Company SEC Documents filed prior to the date hereof and except as would not be reasonably expected to have, individually or in the aggregate, a Material Adverse Effect: (i) no notice, notification, demand, request for information, citation, summons or order has been received, no complaint has been filed, no penalty has been assessed, and no investigation, action, claim, suit, proceeding or review is pending or, to the knowledge of the Company, is threatened by any governmental entity or other Person, nor is the Company subject to any judgment, decree, or agreement, relating to or arising out of any Environmental Law; and (ii) the Company is in compliance with, and has no liability under, all Environmental Laws and all Environmental Permits. -31- SECTION 4.19. Antitakeover Statutes and Rights Agreement; Company/Subsidiary Merger. (a) The Company has taken all action necessary to exempt the Merger, this Agreement, the Exchange and Voting Agreement and the Transactions from the restrictions on "business combinations" contained in Section 203 of the DGCL, and, accordingly, neither the restrictions of such Section nor any other antitakeover or similar statute or regulation applies or purports to apply to any such Transactions. (b) The Company has taken all action necessary to render the Rights issued pursuant to the terms of the Rights Agreement inapplicable to the Merger, this Agreement, and the Transactions. The Rights Agreement has been amended such that it will expire and all Rights will be canceled immediately prior to the Effective Time and the Rights Agreement will have no force or effect on or after the Effective Time. (c) The Company/Subsidiary Merger will be effective upon the affirmative vote of the majority of the outstanding Shares and Exchanged Preferred Stock held by the Company Stockholders (voting as one class) and the filing of the certificate of merger (in the form attached as Exhibit B to the Company/Subsidiary Merger Agreement) (the "Company/Subsidiary Certificate of Merger") with the Secretary of State of the State of Delaware. SECTION 4.20. Disclaimer of Other Representations and Warranties. The Company does not make, and has not made, any representations or warranties in connection with the Merger other than those expressly set forth herein. It is understood that any data, any financial information or any memoranda or offering materials or presentations (including but not limited to the Confidential Information Memorandum dated August, 1999) are not and shall not be deemed to be or to include representations or warranties of the Company. Except as expressly set forth herein, no Person has been authorized by the Company to make any representation or warranty relating to the Company or any Subsidiary thereof or their respective businesses, or otherwise in connection with the Merger and, if made, such representation or warranty may not be relied upon as having been authorized by the Company. ARTICLE 5 Representations and Warranties of MERGER SUBSIDIARY Merger Subsidiary represents and warrants to the Company that: SECTION 5.01. Existence and Power. Merger Subsidiary is a limited liability company duly formed, validly existing and in good standing under the laws of Delaware and has all limited liability -32- company powers and all governmental licenses, authorizations, permits, consents and approvals required to carry on its business as now conducted. Merger Subsidiary was formed solely for the purpose of engaging in the Transactions. Since the date of its formation, Merger Subsidiary has not engaged in any activities other than in connection with or as contemplated by this Agreement. Merger Subsidiary has no Subsidiaries. SECTION 5.02. Authorization. The execution, delivery and performance by Merger Subsidiary of this Agreement and the consummation by Merger Subsidiary of the Transactions are within the limited liability company powers of Merger Subsidiary and have been duly authorized by all necessary limited liability company action. This Agreement constitutes a valid and binding agreement of Merger Subsidiary. SECTION 5.03. Governmental Authorization. The execution, delivery and performance by Merger Subsidiary of this Agreement and the consummation by Merger Subsidiary of the Transactions require no action by or in respect of, or filing with, or notification or reporting to, any Governmental Authority other than (i) the filing of a certificate of merger with respect to the Merger with the Delaware Secretary of State and appropriate documents with the relevant authorities of other states in which Merger Subsidiary is qualified to do business, (ii) compliance with any applicable requirements of the Antitrust Laws of the foreign jurisdictions set forth on Schedule 5.03 hereof, (iii) compliance with any applicable requirements of the 1933 Act, the 1934 Act and any other securities laws, whether state or foreign, and (iv) any actions or filings the absence of which would not be reasonably expected to materially impair the ability of Merger Subsidiary to consummate the Transactions. SECTION 5.04. Non-contravention. The execution, delivery and performance by Merger Subsidiary of this Agreement and the consummation by Merger Subsidiary of the Transactions do not and will not (i) contravene, conflict with, or result in any violation or breach of any provision of any limited liability company agreement or organizational document of Merger Subsidiary, (ii) assuming compliance with the matters referred to in Section 5.03 hereof, contravene, conflict with or result in a violation or breach of any provision of any law, rule, regulation, judgment, injunction, order or decree, (iii) require any consent or other action by any Person under, constitute a default under, or cause or permit the termination, cancellation, acceleration or other change of any right or obligation or the loss of any benefit to which Merger Subsidiary is entitled under any provision of any agreement or other instrument binding upon Merger Subsidiary or any license, franchise, permit, certificate, approval or other similar authorization affecting, or relating in any way to, the assets or business of Merger Subsidiary or (iv) result in the creation or imposition of any Lien on any asset of Merger Subsidiary, except for such contraventions, conflicts and violations referred to in clause (ii) and for such failures to obtain any such consent or other action, defaults, terminations, cancellations, accelerations, changes, -33- losses or Liens referred to in clauses (iii) and (iv) that would not be reasonably expected to materially impair the ability of Merger Subsidiary to consummate the Transactions. SECTION 5.05. Disclosure Documents. None of the information provided by Merger Subsidiary for inclusion (i) in the Company Proxy Statement or any amendment or supplement thereto, at the time the Company Proxy Statement or any amendment or supplement thereto is first mailed to the Company Stockholders and at the time the Company Stockholders vote on adoption of the Company/Subsidiary Merger Agreement and this Agreement or (ii) in the Schedule 13E-3 will contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading. SECTION 5.06. Finders' Fees. Except for Chase Securities Inc., Credit Suisse First Boston Corporation and Donaldson, Lufkin & Jenrette Securities Corporation, whose fees will be paid by the Surviving Corporation only if the Transactions are consummated, there is no investment banker, broker, finder or other intermediary that has been retained by or is authorized to act on behalf of Merger Subsidiary who might be entitled to any fee or commission from the Company or any of its Affiliates upon consummation of the Transactions. SECTION 5.07. Financing. (a) Merger Subsidiary has received and furnished copies to the Company of (i) a commitment letter to provide financing to the Company or a Subsidiary of the Company (including the Summary of Terms and Conditions annexed thereto, the "Commitment Letter") with The Chase Manhattan Bank (the "Bank") dated as of July 31, 2000, and (ii) the Exchange and Voting Agreement. The funds which Bank has agreed, subject to the terms and conditions of the Commitment Letter, to provide will be sufficient, when taken together with other funds available to Merger Subsidiary and assuming compliance by the Company Shareholder, IS and FS with the Exchange and Voting Agreement, to enable it to provide to the Exchange Agent the aggregate Merger Consideration and other amounts owing as a result of the Transactions, to refinance substantially all of the existing debt of the Company and its Subsidiaries, to the extent contemplated by the Transactions as contemplated by the Commitment Letter, and to pay all related fees and expenses (collectively, the "Required Amount"). (b) As of the date hereof (i) the Commitment Letter has not been withdrawn and is in full force and effect and (ii) Merger Subsidiary has no reason to believe that any of the conditions set forth in the Commitment Letter will not be satisfied. (c) Merger Subsidiary has received and furnished a copy to the Company of the equity commitment letters (the "Equity Commitment Letters") addressed to Merger Subsidiary from Sponsor and each of the other equity investors in Merger Subsidiary (the "Equity Investors"), each dated as of July 31, 2000 pursuant to which the Equity Investors -34- have committed to make available to Merger Subsidiary certain funds, subject to the terms and conditions contained therein, for the purpose of consummating the Transactions. As of the date hereof, (i) no Equity Commitment Letter has been withdrawn and each Equity Commitment Letter is in full force and effect and (ii) Merger Subsidiary has no reason to believe that any of the conditions set forth in any Equity Commitment Letter will not be satisfied. (d) Immediately after the consummation of the Transactions, the Surviving Corporation (i) will not be insolvent, (ii) will not be left with unreasonably small capital, and (iii) will not have debts beyond its ability to pay such debts as they mature. SECTION 5.08. Member Appraisal Rights. The members of the Merger Subsidiary are not entitled by law or by contract to receive appraisal rights as a result of the Merger. ARTICLE 6 Covenants of the Company The Company agrees that, except as set forth in the disclosure schedule delivered by the Company to Merger Subsidiary immediately prior to the execution of this Agreement: SECTION 6.01. Conduct of the Company. Except as contemplated by this Agreement or as expressly agreed to in writing by Merger Subsidiary, during the period from the date of this Agreement to the Effective Time, the Company shall, and shall cause each of its Subsidiaries to, conduct its operations according to its ordinary and usual course of business and consistent with past practice and use all commercially reasonable efforts to preserve intact their current business organizations, keep available the services of their current officers and employees and preserve their relationships with customers, suppliers, licensors, licensees, advertisers, distributors and others having business dealings with them and to preserve goodwill. Without limiting the generality of the foregoing, and except as (x) otherwise expressly provided in this Agreement or (y) required by law, prior to the Effective Time, the Company shall not, and shall cause its Subsidiaries not to, without the consent of Merger Subsidiary: (a) expend funds for capital expenditures that in the aggregate would cause total capital expenditures for the period from January 1, 2000 to the Effective Time to exceed 110% of the amounts set forth in the most recent version of the business plan previously provided to Merger Subsidiary; -35- (b) sell, lease, license or otherwise dispose of any Material Subsidiary or any material amount of assets, securities or property of the Company and its Subsidiaries, taken as a whole, except (i) pursuant to existing contracts or commitments and (ii) other dispositions pursuant to the Company's disposition program set forth on Schedule 6.01(b) or otherwise in the ordinary course consistent with past practice; (c) amend its certificate of incorporation, by-laws or equivalent organizational documents or alter through merger, liquidation, reorganization, restructuring or in any other fashion the corporate structure or ownership of any Material Subsidiary of the Company; or split, combine or reclassify any of its capital stock or issue or authorize the issuance of any other securities in respect of, in lieu of or in substitution for shares of its capital stock; (d) except for issuances (i) upon exercise of presently outstanding awards under any Plan, (ii) upon conversion of the Debentures outstanding on the date hereof, or (iii) as previously disclosed in writing to Merger Subsidiary or its affiliates, authorize for issuance, issue, deliver, sell or agree or commit to issue, sell or deliver (whether through the issuance or granting of options, warrants, commitments, subscriptions, rights to purchase or otherwise), pledge or otherwise encumber any shares of its capital stock or the capital stock of any of its Subsidiaries, any other voting securities or any securities convertible into, or any rights, warrants or options to acquire, any such shares, voting securities or convertible securities or any other securities or equity equivalents (including without limitation stock appreciation rights); (e) make or agree to make any acquisition of equity interest (whether through a purchase of stock, establishment of a joint venture or otherwise) or assets which is material to the Company and its Subsidiaries, taken as a whole, except for (i) purchases of inventory and supplies in the ordinary course of business, (ii) pursuant to purchase orders entered into in the ordinary course of business or (iii) acquisitions disclosed on Schedule 6.01(e) on terms agreed to with Merger Subsidiary; (f) settle or compromise (i) any shareholder derivative suits arising out of the Transactions or (ii) any other material litigation (whether or not commenced prior to the date of this Agreement) set forth on Schedule 6.01(f) or settle, pay or compromise any claims not required to be paid, other than, in each case, in consultation and cooperation with Merger Subsidiary and, with respect to any such settlement, with the prior written consent of Merger Subsidiary; (g) directly or indirectly, sell, convey, transfer or otherwise dispose (collectively, a "Transfer") of any of the Equity Investments or amend or modify the Equity Investments Sale Agreement or enter into any agreement to do any of the foregoing other than pursuant to the Equity Investments Sale Agreement; provided that the Company shall be permitted to Transfer an Equity Investment other than pursuant to -36- the Equity Investments Sale Agreement so long as the Company has deposited the funds received from such Transfer in an escrow account to fund the Transactions, on reasonably acceptable terms, and otherwise complied with Section 9.02(d); provided, however, that in the event such escrow arrangement would cause the Company to be in default under the Credit Agreement, the Company shall take all action to comply with the Credit Agreement (including using the proceeds of any such sale to repay outstanding borrowings under the Credit Agreement) and, if permitted under the Credit Agreement, make borrowings as soon as practicable thereafter under the Credit Agreement in the amount of such proceeds for deposit in an escrow account to fund the Transactions on reasonably satisfactory terms and otherwise in compliance with Section 9.02(d); (h) (i) take any action that would make any representation and warranty of the Company hereunder inaccurate in any material respect at, or as of any time prior to, the Effective Time or (ii) omit to take any action necessary to prevent any such representation or warranty from being materially inaccurate in any respect at any such time; (i) waive or amend any provision of the Rights Agreement or otherwise take any action with respect to the Rights Agreement; or (j) authorize, or commit or agree to take, any of the foregoing actions. SECTION 6.02. Access to Information. From the date of this Agreement until the Effective Time, the Company shall, and shall cause its Subsidiaries, and each of their respective officers, directors, employees, counsel, advisors and representatives (collectively, the "Company Representatives") to, give Merger Subsidiary and its members, managers, employees, counsel, advisors, representatives (collectively, the "Merger Subsidiary Representatives") and representatives of financing sources identified by Merger Subsidiary reasonable access, upon reasonable notice and during normal business hours, to the offices and other facilities and to the books and records of the Company and its Subsidiaries and will cause the Company Representatives and the Company's Subsidiaries to furnish Merger Subsidiary and the Merger Subsidiary Representatives and representatives of financing sources identified by Merger Subsidiary with such financial and operating data and such other information with respect to the business and operations of the Company and its Subsidiaries as Merger Subsidiary and representatives of financing sources identified by Merger Subsidiary may from time to time reasonably request. Merger Subsidiary agrees that any information furnished pursuant to this Section 6.02 shall be subject to the provisions of the letter agreement dated April 27, 2000 between Sponsor and the Company (the "Confidentiality Agreement"). SECTION 6.03. Stockholder Meeting; Proxy Material. The Company shall cause a meeting of the Company Stockholders (the "Company Stockholder -37- Meeting") to be duly called and held as soon as reasonably practicable for the purpose of voting on the adoption of the Company/Subsidiary Merger Agreement and the Company/Subsidiary Merger and the adoption of this Agreement and the Merger. Subject to Section 6.04 hereof, the Board of Directors and the Special Committee shall recommend adoption of the Company/Subsidiary Merger Agreement and the Company/Subsidiary Merger and shall recommend adoption of this Agreement and the Merger by the Company Stockholders. In connection with such meeting, the Company will (i) promptly prepare and file with the SEC, use all commercially reasonable efforts to have cleared by the SEC and thereafter mail to the Company Stockholders as promptly as practicable the Company Proxy Statement and all other proxy materials for such meeting, (ii) subject to Section 6.04, use all commercially reasonable efforts to obtain the necessary approvals by the Company Stockholders of the Company/Subsidiary Merger Agreement, the Company/Subsidiary Merger, this Agreement and the Transactions and (iii) otherwise comply with all legal requirements applicable to such meeting. SECTION 6.04. No Solicitation. (a) The Company agrees that it will not, directly or indirectly through any officer, subsidiary, affiliate, director, employee, stockholder, representative, agent or other person, (i) seek, initiate, solicit or encourage any Person to make an Acquisition Proposal, (ii) engage in negotiations or discussions concerning an Acquisition Proposal with any person or group, (iii) disclose any non-public information relating to the Company or give access to the properties, employees, books or records of the Company or any of its subsidiaries to any person or group in connection with any Acquisition Proposal or (iv) approve or recommend or agree to approve or recommend any Acquisition Proposal; provided that nothing herein shall prevent the Board of Directors from (a) furnishing information to any person that has made an Acquisition Proposal not solicited in violation of this paragraph or (b) subject to the other provisions of this paragraph, entering into or participating in discussions or negotiations concerning an Acquisition Proposal not solicited in violation of this paragraph so long as, in any case, (x) the Board of Directors or the Special Committee shall have concluded in good faith, after receiving and considering the advice of its outside legal counsel, that failing to participate in such discussions or negotiations or furnishing such information would cause the Board of Directors or the Special Committee to be in breach of its respective fiduciary responsibilities to the Company Stockholders under applicable law, and (y) prior to participating in such discussions or negotiations or furnishing any such information, the Company and the party making such offer agrees to a confidentiality agreement on terms that are, in the aggregate, no less favorable to the Company than those of the Confidentiality Agreement to which Sponsor is a party (other than the standstill provisions thereof) and Merger Subsidiary is given concurrent or advance written notice thereof unless the Board of Directors or the Special Committee shall have concluded in good faith, after receiving and considering the advice of its outside counsel, that doing so would cause it to be in breach of its respective fiduciary responsibilities to the Company Stockholders under applicable law. The Board of Directors or the Special Committee may (x) fail to make, withdraw, or modify in a manner adverse to Merger Subsidiary its recommendation to its stockholders referred to in Section 6.03 hereof, (y) take and disclose to -38- the Company Stockholders a position contemplated by Rule 14e-2 under the 1934 Act or otherwise complying with its disclosure obligations and/or (z) take any non-appealable, final action ordered to be taken by the Company by any court of competent jurisdiction, but in each case only if the Board of Directors or the Special Committee determines, in good faith after consultation with outside legal counsel to the Company, that such action is required in the exercise of its respective fiduciary duties under applicable law. (b) The Company shall notify Merger Subsidiary in writing no later than the end of the next business day after receipt thereof of the receipt of any Acquisition Proposal (including a copy thereof if in writing), the terms and conditions of such Acquisition Proposal and the identity of the person making it. The Company also shall promptly notify Merger Subsidiary no later than the end of the next Business Day of any change to or modification of such Acquisition Proposal. (c) The Company shall, and shall cause its Subsidiaries and the advisors, employees and other agents of the Company and any of its Subsidiaries to, cease immediately and cause to be terminated any and all existing activities, discussions or negotiations, if any, with any Third Party conducted prior to the date hereof with respect to any Acquisition Proposal and shall use commercially reasonable efforts to cause any such Party (or its agents or advisors) in possession of confidential information about the Company that was furnished by or on behalf of the Company to return or destroy all such information. SECTION 6.05. State Takeover Laws. The Company shall, upon the request of Merger Subsidiary, take all reasonable steps to assist in any challenge by Merger Subsidiary to the validity or applicability to the Transactions, including the Merger, of any state takeover law. SECTION 6.06. Reports. During the period from the date of this Agreement to the Effective Time, the Company shall provide Merger Subsidiary with monthly financial statements in the existing reporting format (balance sheet, cash flow statement, income statement and, if available, notes thereto), broken out by operating unit (except as to the cash flow statement, which shall be a consolidated statement), no later than the fifteenth Business Day following the end of each calendar month following the date of this Agreement; provided that for calendar months that are also the end of a calendar quarter, the Company may provide such financial information to Merger Subsidiary on the same date such information is publicly released in accordance with the past practice of the Company. SECTION 6.07. Plans. (a) The Company covenants and agrees that it will take any and all necessary action including, without limitation, actions contemplated by Section 3.02 hereof to ensure that the Transactions will not constitute a "change of control" under any Option Plan or Restricted Stock -39- Plan or option agreement or award agreement, except, in the case of the Options, to the extent contemplated by Section 2.06 hereof. (b) The Company covenants and agrees that the Committees administering the Restricted Stock Plans will take any and all necessary action to ensure that awards of Restricted Stock are replaced with the New Awards, and any necessary adjustments or actions in respect of the Restricted Stock Plans or reasonably requested by Merger Subsidiary are made to provide for the treatment of Restricted Stock required by Section 2.06 hereof. (c) The Company covenants and agrees that it will take all necessary action to ensure that the Options that are not Cash Out Options will be canceled in accordance with Section 2.06(a). SECTION 6.08. Equity Investments. Except as set forth in Section 6.01(g), the Company covenants and agrees that it will use commercially reasonable efforts to cause the Equity Investments to be sold on or prior to the Effective Time pursuant to the terms and conditions set forth in the Equity Investments Sale Agreement, as in effect on the date hereof. The Company shall not amend, modify or terminate the Equity Investments Sale Agreement without the prior written consent of Merger Subsidiary. SECTION 6.09. Confidentiality Agreement. The Company agrees to waive the application of the standstill provisions of the Confidentiality Agreement to the transactions contemplated by the Exchange and Voting Agreement. SECTION 6.10. Issuance of Class A Preferred Stock and Class B Preferred Stock. Promptly after the date hereof, the Company shall file with the Secretary of State of the State of Delaware a certificate of designation having the terms set forth as Exhibit G attached hereto establishing and designating 4,250,000 shares of Class A Preferred Stock and a certificate of designation establishing and designating 2,150,000 shares of Class B Preferred Stock. Upon the surrender of each Continuing Shareholder Exchange Share on the Exchange Date in accordance with the Exchange and Voting Agreement, the Company shall promptly on such date issue one share of Class A Preferred Stock, without additional consideration therefor to the holder thereof, and such shares of Class A Preferred Stock shall be validly issued, fully paid and nonassessable. Upon the surrender of each Company Shareholder Exchange Share on the Exchange Date in accordance with the Exchange and Voting Agreement, the Company shall promptly on such date issue one share of Class B Preferred Stock to the holder thereof, and such shares of Class B Preferred Stock shall be validly issued, fully paid and nonassessable. The Shares so exchanged for Class A Preferred Stock or Class B Preferred Stock shall be treasury shares. -40- SECTION 6.11. Saturn Escrow. In the event the Company Transfers the Saturn Equity Investment prior to Closing, the Company shall, in accordance with 2.04(f) and 2.06(a), deposit an amount equal to the proceeds from such sale in an escrow arrangement on terms reasonably satisfactory to Merger Subsidiary; provided, however, in the event such escrow arrangement would cause the Company to be in default under the Credit Agreement, the Company shall take all action to comply with the Credit Agreement (including using the proceeds of any such sale to repay outstanding borrowings under the Credit Agreement) and, if permitted under the Credit Agreement, make borrowings as soon as practicable thereafter under the Credit Agreement in the amount of such proceeds for deposit in such an escrow account. ARTICLE 7 Covenants of MERGER SUBSIDIARY Merger Subsidiary agrees that: SECTION 7.01. Obligations of Merger Subsidiary. Merger Subsidiary covenants and agrees that it will use commercially reasonable efforts to consummate the Merger on the terms and conditions set forth in this Agreement. SECTION 7.02. Voting of Shares. Merger Subsidiary agrees to vote all Shares beneficially owned by it in favor of adoption of the Company/Subsidiary Merger Agreement and this Agreement at the Company Stockholder Meeting. SECTION 7.03. Director and Officer Liability. The Surviving Corporation hereby agrees to do the following: (a) For six years after the Effective Time, the Surviving Corporation shall indemnify and hold harmless the present and former officers and directors of the Company and each of its Subsidiaries (each an "Indemnified Person") in respect of acts or omissions occurring at or prior to the Effective Time to the fullest extent permitted by the DGCL or any other applicable laws or provided under the Company's certificate of incorporation and by-laws in effect on the date hereof, provided that such indemnification shall be subject to any limitation imposed from time to time under applicable law. (b) For six years after the Effective Time, the Surviving Corporation shall provide officers' and directors' liability insurance in respect of acts or omissions occur- -41- ring prior to the Effective Time covering each such Indemnified Person currently covered by the Company's officers' and directors' liability insurance policy on terms with respect to coverage and amount no less favorable than those of such policy in effect on the date hereof; provided that the Surviving Corporation shall not be obligated to make annual premium payments for such insurance to the extent such annual premiums exceed 225% of the annual premiums paid as of the date hereof the by Company for such insurance and provided, further, that if the premiums with respect to such insurance exceed 225% of the annual premiums paid as of the date hereof by the Company for such insurance, the Surviving Corporation shall be obligated to obtain such insurance with the maximum coverage as can be obtained at an annual premium equal to 225% of the annual premiums paid by the Company as of the date hereof. (c) If the Surviving Corporation or any of its successors or assigns (i) consolidates with or merges into any other Person and shall not be the continuing or surviving corporation or entity of such consolidation or merger, or (ii) transfers or conveys all or substantially all of its properties and assets to any Person, then, and in each such case, to the extent necessary, proper provision shall be made so that the successors and assigns of Merger Subsidiary or the Surviving Corporation, as the case may be, shall assume the obligations set forth in this Section 7.03. (d) The rights of each Indemnified Person under this Section 7.03 shall be in addition to any rights such Person may have under the certificate of incorporation or by-laws of the Company or any of its Subsidiaries, or under the DGCL or any other applicable laws or under any agreement of any Indemnified Person with the Company or any of its Subsidiaries. These rights shall survive consummation of the Merger and are intended to benefit, and shall be enforceable by, each Indemnified Person. SECTION 7.04. Employee Benefits After the Merger. (a) Merger Subsidiary agrees that for a period of two years following the Effective Time, the Surviving Corporation shall provide (i) compensation programs and plans, and (ii) employee benefit and welfare plans, programs, contracts, agreements and policies, fringe benefits and vacation policies, substantially equivalent to the ones which are currently provided by the Company; provided that notwithstanding anything in this Agreement to the contrary the Surviving Corporation shall not be required to maintain any individual plan or program, other than those contemplated by Section 2.06 and Section 9.01(g); provided, that this provision shall terminate with respect to the participation in any plans or programs by employees of any business transferred to any third party after the Effective Time; and provided, further, that the Surviving Corporation may offer all employees of the Surviving Corporation employee benefits under "Wellness First" or "Choices" or substantially similar plans, notwithstanding the fact that some employees may not be covered by such plan at the Effective Time. -42- (b) Notwithstanding the foregoing, nothing in this Section 7.04 shall preclude Surviving Corporation from seeking to (i) modify any employment agreement with the consent of the affected employee or employees or (ii) modify any Plan to the extent such modification is permitted by the terms of such Plan and is consistent with Section 7.04(a). (c) Notwithstanding Section 7.04(a), employment of any of the employees by the Surviving Corporation will be "at will" and may be terminated by the Surviving Corporation at any time for any reason (subject to any legally binding agreement other than this Agreement, or any applicable laws or collective bargaining agreement, or any other arrangement or commitment). No provision of this Section 7.04 shall confer any third party beneficiary rights or benefits to any employee of the Surviving Corporation under this Agreement. SECTION 7.05. Financing Arrangements. (a) Merger Subsidiary shall use its commercially reasonable efforts to obtain financing in an amount at least equal to the Required Amount, including by executing definitive agreements for the Facilities on or prior to the Effective Time. The Commitment Letter and the definitive agreements for the Facilities (along with any other document pursuant to which Merger Subsidiary intends to obtain financing of all or a portion of the Required Amount) are referred to herein collectively as the "Financing Agreements." The Company will be afforded a reasonable opportunity to review and comment on the representations and warranties contained in the Financing Agreements and no such representation or warranty, insofar as it relates to facts and circumstances relating to the Company and its Subsidiaries, shall be included therein that the Company shall have advised Merger Subsidiary is incorrect or inaccurate. Merger Subsidiary shall use commercially reasonable efforts to ensure that the representations and warranties contained in the Financing Agreements shall be consistent with the Commitment Letter. (b) Without limiting the generality of the foregoing, in the event that at any time funds are not or have not been made available under the Financing Agreements so as to enable Merger Subsidiary to proceed with the Merger in a timely manner, Merger Subsidiary shall (i) use its commercially reasonable efforts to obtain alternative funding in an amount at least equal to the Required Amount on terms and conditions comparable to those provided in such Financing Agreements or otherwise on terms reasonably acceptable to Merger Subsidiary and (ii) shall continue to use its commercially reasonable efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable under applicable laws and regulations to consummate the transactions contemplated by this Agreement; provided, however, nothing contained herein shall require Merger Subsidiary to obtain equity financing in excess of the amount of equity financing contemplated in the Commitment Letter. -43- ARTICLE 8 Covenants of MERGER SUBSIDIARY and the Company The parties hereto agree that: SECTION 8.01. Commercially Reasonable Efforts. (a) Subject to the terms and conditions of this Agreement and to the fiduciary duties of the Board of Directors and the Special Committee under applicable law (as determined by such directors in good faith), the Company and Merger Subsidiary will use commercially reasonable efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable under applicable laws and regulations to consummate the Transactions, including, to assist Merger Subsidiary and cooperate with Merger Subsidiary and the Bank and other lenders in order for Merger Subsidiary to establish its contemplated debt financing arrangements. In furtherance and not in limitation of the foregoing, the Company agrees to make, if required, an appropriate filing of a Notification and Report Form pursuant to the HSR Act with respect to the Equity Sale Investments Agreement as promptly as practicable and in any event within 15 Business Days of the date hereof and to supply as promptly as practicable any additional information and documentary material that may be requested pursuant to the HSR Act and to take all other actions necessary to cause the expiration or termination of the applicable waiting periods under the HSR Act as soon as practicable. (b) In connection with the efforts referenced in Section 8.01(a) to obtain all requisite approvals and authorizations for the Transactions under any other Antitrust Law, each of Merger Subsidiary and the Company shall use all commercially reasonable efforts to (i) cooperate in all respects with each other in connection with any filing or submission and in connection with any investigation or other inquiry, including any proceeding initiated by a private party, (ii) keep the other party informed in all material respects of any material communication received by such party from, or given by such party to, the Federal Trade Commission (the "FTC"), the Antitrust Division of the Department of Justice (the "DOJ") or any other Governmental Authority and of any material communication received or given in connection with any proceeding by a private party, in each case regarding any of the Transactions and (iii) permit the other party to review any material communication given by it to, and consult with each other in advance of any meeting or conference with, the FTC, the DOJ or any such other Governmental Authority or, in connection with any proceeding by a private party, with any other Person. SECTION 8.02. Certain Filings. The Company and Merger Subsidiary shall cooperate with one another (i) in connection with the preparation of the Company Proxy Statement and the Schedule 13E-3, (ii) in determining whether any action by or in respect of, or filing with, any Governmental Author- -44- ity is required, or any actions, consents, approvals or waivers are required to be obtained from parties to any material contracts, in connection with the consummation of the Transactions, and (iii) in taking such actions or making any such filings, furnishing information required in connection therewith or with the Company Proxy Statement and seeking timely to obtain any such actions, consents, approvals or waivers. In addition, the Company will cooperate and utilize all reasonable commercial efforts to obtain any and all necessary consents required to consummate the sale of equity investments pursuant to the Equity Investments Sale Agreement. SECTION 8.03. Public Announcements. Merger Subsidiary and the Company will consult with each other before issuing any press release or making any public statement with respect to this Agreement or the Transactions and, except as may be required by applicable law or any listing agreement with any national securities exchange, will not issue any such press release or make any such public statement prior to such consultation. SECTION 8.04. Notices of Certain Events. Each of the Company and Merger Subsidiary shall promptly notify the other of: (a) any notice or other communication from any Person alleging that the consent of such Person is or may be required in connection with the Transactions; (b) any notice or other communication from any Governmental Authority in connection with the Transactions; (c) any actions, suits, claims, investigations or proceedings commenced or, to its knowledge, threatened against, relating to or involving or otherwise affecting the Company or any of its Subsidiaries that, if pending on the date of this Agreement, would have been required to have been disclosed pursuant to Section 4.12 or 4.13 hereof, or that relate to the consummation of the Transactions; (d) the occurrence or non-occurrence of any fact or event which would be reasonably likely: (i) to cause any representation or warranty contained in this Agreement to be untrue or inaccurate in any material respect at any time from the date hereof to the Effective Time, or (ii) to cause any covenant, condition or agreement under this Agreement not to be complied with or satisfied; and (e) any failure of the Company or Merger Subsidiary, as the case may be, to comply with or satisfy any covenant, condition or agreement to be complied with or -45- satisfied by it hereunder; provided, however, that no such notification shall affect the representations or warranties of any party or the conditions to the obligations of any party hereunder. SECTION 8.05. Confidentiality. Prior to the Effective Time and after any termination of this Agreement, each of Merger Subsidiary and the Company will hold, and will use all commercially reasonable efforts to cause its officers, directors, employees, accountants, counsel, consultants, advisors and agents to hold, in confidence, all confidential documents and information concerning the other party furnished to it or its Affiliates in connection with the Transactions in accordance with the terms of the Confidentiality Agreement. SECTION 8.06. Saturn Sales. (a) The Company hereby appoints the Adjustment Committee (in their capacity as directors of the Saturn Subsidiary) the Adjustment Committee and authorizes them to be in sole control in accordance with the terms of this Agreement of the Saturn Sales, the Merger Consideration Adjustment and the Option Consideration Adjustment to the extent the Saturn Sales are not consummated prior to the Effective Time, including, without limitation, to take any and all necessary, advisable or desirable action that they deem appropriate in their sole discretion to direct the Saturn Sales and administer the Merger Consideration Adjustment and the Option Consideration Adjustment. Notwithstanding the foregoing, the consideration for the Saturn Sales shall only be cash. Any proceeds that, in accordance with this Agreement, constitute an Adjustment Amount shall be deposited in an escrow account on terms satisfactory to the Adjustment Committee, pending payment of the Merger Consideration Adjustment and the Option Consideration Adjustment with reference thereto pursuant to the terms of this Agreement. (b) The Surviving Corporation agrees to indemnify the Adjustment Committee to the extent provided in Section 8.06(c) for a period of six years from the date of the consummation of all Saturn Sales. For a period of six years from the consummation of the Saturn Sales in full, the Surviving Corporation agrees to provide officers and directors' liability insurance to the Adjustment Committee comparable to that provided in Section 7.03(b). After the Effective Time, each member of the Adjustment Committee shall be entitled to a fee, in cash, per meeting (whether in person or via telephone conference), in an amount equal to the amount payable prior to the Effective Time to members of the Special Committee per meeting. Such fee will be payable upon consummation of the Saturn Sales in full. (c) So long as the Saturn Sales have not been consummated in full, the Saturn Subsidiary shall have (x) the Adjustment Committee appointed as its board of directors, (y) a certificate of incorporation and/or bylaws that provide: (i) that the corporation only has the power and authority to own the Saturn Equity Investment and to conduct the Saturn Sales and shall have no authority to conduct business, other than to consummate the Saturn Sales in accordance with the terms of this Agreement, and other business activities ancillary to the own- -46- ership, voting and disposition of the Saturn Equity Investment and contain such restrictions, which shall include, without limitation, a prohibition on the incurrence of indebtedness and any other obligations that are not related to its corporate purpose, (ii) that the members of the board of directors may not be removed except for cause, (iii) that the Saturn Subsidiary and its board of directors be indemnified by such subsidiary and the Surviving Corporation and exculpated by such subsidiary in its certificate of incorporation to the maximum extent permitted by law, except in each case, for action or inaction by such member of the board of directors determined by a final judgment by a court of law to have been taken with willful misconduct or gross negligence and, in the case of indemnification, met any applicable standard of conduct required by law and (iv) the stockholder of such subsidiary be unable to cause such subsidiary to be in any type of bankruptcy or other similar proceeding. (d) The Company or the Surviving Corporation, as the case may be, shall have no further responsibility with respect to proceeds of Equity Investment Sales or are Saturn Sales, upon payment of all Merger Consideration Adjustments and Option Consideration Adjustments required to be paid pursuant to the terms of this Agreement. ARTICLE 9 Conditions to the Merger SECTION 9.01. Conditions to Obligations of Each Party. The obligations of the Company and Merger Subsidiary to consummate the Merger are subject to the satisfaction of the following conditions: (a) (i) the Company/Subsidiary Merger Agreement and the Company/Subsidiary Merger shall have been approved by the holders of a majority of the Company's outstanding capital stock entitled to vote for directors (voting as a class) in accordance with the DGCL and the Company/Subsidiary Certificate of Merger shall have been filed with the Secretary of State of the State of Delaware in accordance with the DGCL, in each case prior to the approvals contemplated by Section 9.01(a)(ii), and (ii) this Agreement and the Merger shall have been approved by the holders of (x) a majority of the Company's outstanding capital stock entitled to vote for directors (voting as a class) in accordance with the DGCL and (y) the majority of the Company's outstanding capital stock entitled to vote for directors (other than the Continuing Shareholders) at the Company Stockholder Meeting; (b) any applicable waiting period under the HSR Act relating to the sale of the Equity Investments pursuant to the Equity Investments Sale Agreement shall have expired or been terminated; -47- (c) no provision of any applicable law or regulation and no judgment, injunction, order or decree shall prohibit the consummation of the Merger; (d) all actions by or in respect of, or filings with, any Governmental Authority required to permit the consummation of the Merger, shall have been taken, made or obtained; (e) receipt of a solvency opinion addressed to each of the Special Committee, the Board of Directors, Merger Subsidiary, the Sponsor and each of the Equity Investors, as to the solvency of the Surviving Corporation after giving effect to the Transactions; (f) (i) the Equity Investments shall have been purchased pursuant to the terms and conditions of the Equity Investments Sale Agreement (without waiver, consent or amendment not previously approved by Merger Subsidiary in writing) and the Company shall have received no less than $125.0 million in cash (or, no less than $116.0 million in cash to the extent a right of first refusal process has not been completed prior to the Effective Time with respect to certain Equity Investments (but not by virtue of a refusal to consent to any such sale)) from such sale less any amounts placed in escrow or used to pay outstanding borrowings under the Credit Agreement pursuant to Section 6.01(g) and (ii) any amounts placed in escrow pursuant to Section 6.01(g) shall have been released from escrow; (g) the Employee Retention Committee will address various matters related to the Company's employees pursuant to an agreement of the majority of the members of such committee on terms consistent with Schedule 9.01(g); (h) all licenses, permits, qualifications, consents, waivers, approvals, authorizations or orders shall have been obtained and made by the Company, except where the failure to receive such licenses, permits, qualifications, consents, waivers, approvals, authorizations or orders, individually or in the aggregate with all other such failures, would not be reasonably expected to have a Material Adverse Effect (either before or after giving effect to the Transactions); and (i) unless the Saturn Sales have been consummated in full prior to the Effective Time, the Company shall have transferred the Saturn Equity Investment to a newly-formed wholly owned subsidiary (the "Saturn Subsidiary") of the Company; provided, that the obligation of the Company to pay any Merger Consideration Adjustment and the Option Consideration Adjustment shall continue to be the obligation of the Company or the Surviving Corporation, as the case may be, and shall not be shifted to Saturn Subsidiary. -48- SECTION 9.02. Conditions to the Obligations of Merger Subsidiary. The obligations of Merger Subsidiary to consummate the Merger are subject to the satisfaction of the following further conditions: (a) (i) the Company shall have performed in all material respects all of its obligations hereunder required to be performed by it at or prior to the Effective Time, (ii) the representations and warranties of the Company contained in this Agreement and in any certificate or other writing delivered by the Company pursuant hereto that are qualified by materiality or Material Adverse Effect shall be true, and all other such representations and warranties of the Company shall be true in all material respects, in each case at and as of the Effective Time as if made at and as of such time and (iii) Merger Subsidiary shall have received a certificate signed by a duly authorized officer of the Company to the foregoing effect; (b) no court, arbitrator or Governmental Authority, shall have issued any order, and there shall not be any statute, rule or regulation, restraining or prohibiting the consummation of the Merger or the effective operation of any material portion of the business of Surviving Corporation and its Subsidiaries after the Effective Time; (c) the financing contemplated by the Commitment Letter to be provided by the Bank shall have been completed on substantially the terms and conditions identified in such Commitment Letter or on such other terms and conditions or involving such other financing sources, as are acceptable to Merger Subsidiary and the Company and are not materially more onerous; provided, however, that this condition shall be deemed satisfied if the failure of this condition is due to a willful breach by Merger Subsidiary of any covenant or willful failure to perform any agreement or a willful breach by Merger Subsidiary of any representation or warranty contained in any of the Financing Agreements with the Bank; (d) the Corporate Services Agreement shall have been modified by an amendment, in form reasonably satisfactory to the Original Company Shareholder and Merger Subsidiary, to provide for transitional services by the Original Company Shareholder to the Surviving Corporation identical to those services provided under the Corporate Services Agreement on the date hereof and on the same terms as in effect on the date hereof; provided such transitional services need not be provided beyond 18 months after the Effective Time and legal services which may be provided under such agreement need not be provided beyond 6 months after the Effective Time; (e) Merger Subsidiary shall have received copies of the resolutions of the Board of Directors of the Company dated prior to the Effective Time approving the directors of Merger Subsidiary as the directors of the Surviving Corporation and Merger Subsidiary shall be satisfied that the Transactions will not constitute a "change of con- -49- trol" under any Restricted Stock Plan; Merger Subsidiary shall have received copies of the resolutions of the Committees administering the Option Plan and Restricted Stock Plans approving the matters contemplated by Section 2.06 hereof and shall have received copies of the New Awards; (f) the Amended and Restated Securities Purchase Agreement dated as of November 23, 1993 as amended on October 1, 1996 between the Company and the Original Company Shareholder shall have been terminated. The Company and the Company Subsidiaries shall have entered into the Subordinated Loan Agreement in the form attached hereto as Exhibit I; (g) the Company shall have obtained from the New Jersey Department of Environmental Protection either (i) a declaration of non-applicability of the ISRA to the Merger or any other transactions contemplated thereby, or (ii) approval of a negative declaration or other action required to comply with ISRA, in each case, which is not in excess of $2.0 million; (h) each of the Company Shareholder, IS and FS shall have performed in all material respects all of its obligations required to be performed by it at or prior to the Effective Time and the representations and warranties of each of Company Shareholder, IS and FS contained in the Exchange and Voting Agreement shall be true as if made at the Effective Time; (i) the Class A Preferred Stock and Class B Preferred Stock shall have been issued prior to the Effective Time to the Continuing Shareholders in accordance with the terms of this Agreement and the Exchange and Voting Agreement; and (j) stockholders of the Company representing not more than 10% of the Shares shall have demanded appraisal rights pursuant to Section 262 of the DGCL. SECTION 9.03. Conditions to the Obligations of the Company. The obligations of the Company to consummate the Merger are subject to the satisfaction of the following further conditions: (a) (i) Merger Subsidiary shall have performed in all material respects all of its obligations hereunder required to be performed by it at or prior to the Effective Time, (ii) the representations and warranties of Merger Subsidiary contained in this Agreement and in any certificate or other writing delivered by Merger Subsidiary pursuant hereto that are qualified by materiality or Material Adverse Effect shall be true, and all other such representations or warranties of Merger Subsidiary shall be true in all material respects, in each case at and as of the Effective Time as if made at and as of such -50- time and (iii) the Company shall have received a certificate signed by a duly authorized manager of Merger Subsidiary to the foregoing effect; and (b) no court, arbitrator or governmental body, agency or official, domestic or foreign, shall have issued any order, and there shall not be any statute, rule or regulation, restraining or prohibiting the consummation of the Merger. ARTICLE 10 Termination SECTION 10.01. Termination. This Agreement may be terminated and the Merger may be abandoned at any time prior to the Effective Time (notwithstanding any approval of this Agreement by the Company Stockholders): (a) by mutual written agreement of the Company and Merger Subsidiary; (b) by either the Company or Merger Subsidiary, if: (i) the Merger has not been consummated on or before December 20, 2000 (the "End Date"), provided that the right to terminate this Agreement pursuant to this Section 10.01(b)(i) shall not be available to any party whose breach of any provision of this Agreement results in the failure of the Merger to be consummated by such time; (ii) there shall be any law or regulation that makes consummation of the Merger illegal or otherwise prohibited or any judgment, injunction, order or decree of any Governmental Authority having competent jurisdiction enjoining Company or Merger Subsidiary from consummating the Merger is entered and such judgment, injunction, order or decree shall have become final and nonappealable; (iii) the Company/Subsidiary Merger Agreement, the Company/Subsidiary Merger, this Agreement and the Merger shall not have been adopted in accordance with this Agreement, the DGCL and the DLLCA by the Company Stockholders at the Company Stockholder Meeting (or any adjournment thereof); or (iv) as permitted by Section 6.04 hereof, the Special Committee or Board of Directors shall have failed to make or withdrawn, or modified in a -51- manner adverse to Merger Subsidiary, its approval or recommendation of this Agreement or the Merger; (c) by Merger Subsidiary, if a breach of or failure to perform any representation, warranty, covenant or agreement set forth in this Agreement shall have occurred that would cause the condition set forth in Section 9.02(a) hereof not to be satisfied, and such condition is incapable of being satisfied by the End Date; or (d) by the Company, if a breach of or failure to perform any representation, warranty, covenant or agreement on the part of the Merger Subsidiary or Merger Subsidiary set forth in this Agreement shall have occurred that would cause the condition set forth in Section 9.03(a) hereof not to be satisfied, and such condition is incapable of being satisfied by the End Date. The party desiring to terminate this Agreement pursuant to this Section 10.01 (other than pursuant to Section 10.01(a)) shall give notice of such termination to the other party. SECTION 10.02. Effect of Termination. If this Agreement is terminated pursuant to Section 10.01 hereof, this Agreement shall become void and of no effect without liability of any party (or any stockholder, member, manager, director, officer, employee, agent, consultant or representative of such party) to the other party hereto. The provisions of Sections 8.05, 11.04, 11.06, 11.07 and 11.08 shall survive any termination hereof pursuant to Section 10.01. ARTICLE 11 Miscellaneous SECTION 11.01. Notices. All notices, requests and other communications to any party hereunder shall be in writing (including facsimile transmission) and shall be given, if to Merger Subsidiary, to: Heartland Industrial Partners, L.P. 320 Park Avenue, 33rd Floor New York, New York 10022 Fax: (212) 981-3535 Attn: David A. Stockman -52- with a copy to: Cahill Gordon & Reindel 80 Pine Street New York, New York 10005 Fax: (212) 269-5420 Attn: W. Leslie Duffy, Esq. Jonathan A. Schaffzin, Esq. if to the Company, to: MascoTech, Inc. 21001 Van Born Road Taylor, Michigan 48180 Fax: (313) 792-6135 Attn: Chairman of Board General Counsel with a copy to: Davis Polk & Wardwell 450 Lexington Avenue New York, New York 10017 Fax: (212) 450-4800 Attn: Leonard Kreynin, Esq. and to: The Special Committee of the Company c/o Dykema Gossett PLLC 400 Renaissance Center Detroit, Michigan 48243-1668 Fax: (313) 568-6545 Attn: Fredrick Miller, Esq. with a copy to: Dykema Gossett PLLC 400 Renaissance Center Detroit, Michigan 48243-1668 Fax: (313) 568-6545 Attn: Fredrick Miller, Esq. -53- or such other address or facsimile number as such party may hereafter specify for the purpose by notice to the other parties hereto. All such notices, requests and other communications shall be deemed received on the date of receipt by the recipient thereof if received prior to 5:00 p.m., and such day is a Business Day, in the place of receipt. Otherwise, any such notice, request or communication shall be deemed not to have been received until the next succeeding Business Day in the place of receipt. SECTION 11.02. Survival of Representations and Warranties. The representations and warranties and agreements contained herein and in any certificate or other writing delivered pursuant hereto shall not survive the Effective Time or the termination of this Agreement, except for the agreements set forth in Sections 2.04(c) and (f), 2.06, 7.03, 7.04, 8.05, 8.06, 10.02, 11.04, 11.06, 11.07 and 11.08. SECTION 11.03. Amendments; No Waivers. (a) Any provision of this Agreement may be amended or waived prior to the Effective Time if, but only if, such amendment or waiver is in writing and is signed, in the case of an amendment, by each party to this Agreement or, in the case of a waiver, by each party against whom the waiver is to be effective, provided that, after the adoption of this Agreement by the Company Stockholders and without their further approval, no such amendment or waiver shall reduce the amount or change the kind of consideration to be received in exchange for any shares of capital stock of the Company or change the certificate of incorporation of the Surviving Corporation. (b) No failure or delay by any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law. SECTION 11.04. Expenses; Topping Fee. (a) Except as otherwise provided in this Section, all costs and expenses incurred in connection with this Agreement shall be paid by the party incurring such cost or expense. (b) If (x) this Agreement is terminated by the Company or Merger Subsidiary, (y) the conditions set forth in Section 9.02(a)(i) would not be satisfied at the date of termination and the condition set forth in Section 9.03(a)(i) would be satisfied at the date of termination, and (z) the Company has not previously paid to Merger Subsidiary the Topping Fee in accordance with Section 11.04(c), the Company shall promptly reimburse Merger Subsidiary for all reasonable and documented out-of-pocket expenses and fees (including, without limitation, expenses payable to all banks, investment banking firms and other financial institutions (which shall include, without limitation, fees and expenses of such banks', firms' and institu- -54- tions' legal counsel), and all reasonable fees and expenses of counsel, accountants, financial printers, experts and consultants to Merger Subsidiary and its affiliates), whether incurred prior to, on or after the date hereof, in connection with the Transactions and the other matters contemplated by this Agreement, and the financing thereof; provided, however, that the reimbursement for costs and expenses provided in this Section 11.04(b) shall not exceed $2.0 million. (c) (i) If (x) any Third Party shall have made, proposed, communicated or disclosed an Acquisition Proposal in a manner which is or otherwise becomes public prior to the termination of this Agreement, (y) this Agreement is terminated by either Merger Subsidiary or the Company pursuant to Section 10.01(b)(iii) or Section 10.01(b)(iv) and (z) within six months of such termination the Company or any of its Subsidiaries shall have entered into a definitive agreement with respect to an Acquisition Proposal or consummated an Acquisition Proposal, the Company shall promptly pay Merger Subsidiary the Topping Fee immediately prior to the earlier of (a) the execution of a definitive agreement with respect to such Acquisition Proposal or (b) the consummation of the Acquisition Proposal. (ii) If (x) any Third Party shall have made, proposed, communicated or disclosed an Acquisition Proposal in a manner which is or otherwise becomes public prior to the termination of this Agreement, (y) this Agreement is terminated pursuant to Section 10.01(b)(i) or Section 10.01(c) and (z) within six months of such termination, the Company or any of its Subsidiaries shall have entered into a definitive agreement with respect to an Acquisition Proposal with such Third Party or consummated an Acquisition Proposal with such Third Party, the Company shall promptly pay Merger Subsidiary the Topping Fee immediately prior to the earlier of (a) the execution of a definitive agreement with respect to such Acquisition Proposal or (b) the consummation of such Acquisition Proposal. SECTION 11.05. Successors and Assigns. The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, provided that no party may assign, delegate or otherwise transfer any of its rights or obligations under this Agreement without the consent of each other party hereto, except that Merger Subsidiary may transfer or assign, in whole or from time to time in part, to one or more of their Affiliates, the right to enter into the transactions contemplated by this Agreement, but any such transfer or assignment will not relieve Merger Subsidiary of its obligations hereunder. SECTION 11.06. Governing Law. The validity, construction and effect of this Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Delaware, without giving effect to the principles of conflicts of law of such state. SECTION 11.07. Jurisdiction. Any suit, action or proceeding seeking to enforce any provision of, or based on any -55- matter arising out of or in connection with, this Agreement or the Transactions shall be brought in any federal court located in the State of Delaware or any Delaware state court, and each of the parties hereby consents to the jurisdiction of such courts (and of the appropriate appellate courts therefrom) in any such suit, action or proceeding and irrevocably waives, to the fullest extent permitted by law, any objection that it may now or hereafter have to the laying of the venue of any such suit, action or proceeding in any such court or that any such suit, action or proceeding brought in any such court has been brought in an inconvenient form. Process in any such suit, action or proceeding may be served on any party anywhere in the world, whether within or without the jurisdiction of any such court. Without limiting the foregoing, each party agrees that service of process on such party as provided in Section 11.01 hereof shall be deemed effective service of process on such party. SECTION 11.08. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS. SECTION 11.09. Counterparts; Effectiveness. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Agreement shall become effective when each party hereto shall have received counterparts hereof signed by all of the other parties hereto. Except as provided in Section 7.03 and with respect to the indemnification and compensation to be provided to the Adjustment Committee pursuant to Section 8.06 and Section 9.01(i), no provision of this Agreement is intended to confer any rights, benefits, remedies, obligations or liabilities hereunder upon any Person other than the parties hereto and their respective successors and assigns. SECTION 11.10. Entire Agreement. This Agreement and the Confidentiality Agreement constitute the entire agreement between the parties with respect to the subject matter of this Agreement and supersede agreements and understandings, both oral and written, between the parties with respect to the subject matter of this Agreement. Exhibits referred to herein are incorporated by reference herein and shall constitute a part of this Agreement. SECTION 11.11. Captions. The captions herein are included for convenience of reference only and shall be ignored in the construction or interpretation hereof. SECTION 11.12. Severability. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction or other authority to be invalid, void or unenforceable, the remainder of -56- the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated. Upon such a determination, the parties shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner so that the Transactions be consummated as originally contemplated to the fullest extent possible. SECTION 11.13. Specific Performance. The parties hereto agree that irreparable damage would occur if any provision of this Agreement were not performed in accordance with the terms hereof and that the parties shall be entitled to an injunction or injunctions to prevent breaches of this Agreement or to enforce specifically the performance of the terms and provisions hereof in any federal court located in the State of Delaware or any Delaware state court, in addition to any other remedy to which they are entitled at law or in equity. -57- IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written. MASCOTECH, INC. By: ------------------------------------------ Name: Title: RIVERSIDE COMPANY LLC By: ------------------------------------------ Name: Title: -58- Exhibit A Exchange and Voting Agreement Exhibit B Form of Company/Subsidiary Merger Agreement Exhibit C Equity Investments Sale Agreement Exhibit D Form of Certificate of Merger Exhibit E Form of Amended Certificate of Incorporation of Surviving Corporation Exhibit F Form of Amended By-laws Exhibit G Form of Certificate of Designation of Class A Preferred Stock Exhibit H Form of Certificate of Designation of Class B Preferred Stock Exhibit I Form of Subordinated Loan Agreement Schedule A Equity Investments Schedule B Knowledge of Officers AMENDMENT NO. 1 TO RECAPITALIZATION AGREEMENT THIS AMENDMENT NO. 1 to the Recapitalization Agreement dated as of August 1, 2000 (the "Recapitalization Agreement") is made on October __, 2000 by MascoTech, Inc., a Delaware corporation (the "Company"), and Riverside Company LLC, a Delaware limited liability company ("Merger Subsidiary"). WHEREAS, the Company and the Merger Subsidiary entered into a Recapitalization Agreement on August 1, 2000; and WHEREAS, the Company and the Merger Subsidiary desire to amend the Recapitalization Agreement to reflect a change to the treatment of restricted stock awards; and WHEREAS, the parties to the Exchange and Voting Agreement dated as of August 1, 2000 desire to amend the Exchange and Voting Agreement simultaneously with the execution of this Amendment to reflect a change in (i) the timing of the exchange of shares of common stock, par value $1.00 per share, of MascoTech, Inc. held by Masco Corporation, the Richard and Jane Manoogian Foundation and Richard A. Manoogian into Class A Preferred Stock and Class B Preferred Stock, as the case may be, and (ii) the terms of the stockholders agreement attached to the Exchange and Voting Agreement as Exhibit A (the "Stockholders Agreement"); NOW THEREFORE, the parties hereto hereby amend the Recapitalization Agreement as follows: Section 1.01. Exchange and Voting Agreement. Upon execution of Amendment No. 1 to the Exchange and Voting Agreement on the date hereof by each of the parties thereto, the Exchange and Voting Agreement attached to the Recapitalization Agreement as Exhibit A (including the Stockholders Agreement) shall be amended in accordance with such Amendment No. 1 to the Exchange and Voting Agreement. Section 1.02. Restricted Stock Awards. (a) Section 2.06(b) of the Recapitalization Agreement is amended by replacing each reference to "anniversary date" with "vesting date". (b) Section 2.06(b)(2) of the Recapitalization Agreement is further amended by (i) deleting the words "on each anniversary of the Merger, commencing on the first anniversary of the Merger through the third anniversary of the Merger" and inserting in their place the words "on each January 14, 2002, 2003 and 2004 (or if such date is not a Business Day, on the next succeeding Business Day)", (ii) deleting the words "the first, second or third anniversary of the Effective Time" and inserting in their place the words "January 14, -2- 2002, January 14, 2003 and January 14, 2004 (or if such date is not a Business Day, on the next succeeding Business Day)" and (iii) deleting the words "the first, second or third anniversary, as the case may be," and inserting in their place the words "January 14, 2002, January 14, 2003 and January 14, 2004, as the case may be, (or if such date is not a Business Day, on the next succeeding Business Day)". Section 1.03. Effect ofAmendment; Governing Law. Except as expressly amended hereby, the Recapitalization Agreement shall remain unchanged. The Recapitalization Agreement, as amended hereby shall remain in full force and effect. The validity, construction and effect of this Amendment shall be governed by and construed and enforced in accordance with the laws of the State of Delaware, without giving effect to the principles of conflicts of law of such state. Section 1.04. Defined Terms. Capitalized terms used herein but not defined herein shall have the terms ascribed to them in the Recapitalization Agreement. Section 1.05. Counterparts. This Amendment may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed by their respective authorized officers as of the day and year first above written. MASCOTECH, INC. By: ------------------------------------- Name: Title: RIVERSIDE COMPANY LLC By: ------------------------------------- Name: Title: AMENDMENT NO. 2 TO RECAPITALIZATION AGREEMENT THIS AMENDMENT NO. 2 to the Recapitalization Agreement dated as of August 1, 2000, as amended by Amendment No. 1 to the Recapitalization Agreement dated as of October 23, 2000 (the "Agreement"), is made on November 28, 2000 by MascoTech, Inc., a Delaware corporation (the "Company"), and Riverside Acquisition Corporation (formerly Riverside Company LLC), a Delaware limited liability company ("Merger Subsidiary"). WHEREAS, the Company and Merger Subsidiary entered into the Recapitalization Agreement on August 1, 2000 and entered into Amendment No. 1 to the Recapitalization Agreement on October 23, 2000; and WHEREAS, the parties hereto desire to amend the Agreement; NOW THEREFORE, the parties hereto hereby amend the Agreement as follows: Section 1.01. Merger Subsidiary. The Company hereby consents to Merger Subsidiary converting into a Delaware corporation. As of the date and time of the filing of the conversion certificate with the Secretary of State in the State of Delaware, (i) each reference to the Merger Subsidiary as a "limited liability company" or as a "Delaware limited liability company" shall be deleted and replaced with a reference to it being a "Delaware corporation", (ii) each reference to the Delaware Limited Liability Company Act or the DLLCA shall be deleted and replaced with the "Delaware General Corporation Law" or "DGCL", (iii) each reference to "membership interests of Merger Subsidiary" shall be deleted and replaced with "common stock of Merger Subsidiary", (iv) each reference to "manager" or "managers" of Merger Subsidiary shall be deleted and replaced with "director" or "directors" of Merger Subsidiary, (v) Section 5.08 shall be amended by deleting it in its entirety and replacing it with the following: "SECTION 5.08. The stockholders of the Merger Subsidiary are not entitled to appraisal rights under Section 262 of the DGCL as a result of the Merger." and (vi) all of the representations, warranties, covenants and any other provisions of the Agreement shall be amended to reflect that Merger Subsidiary has been converted from a Delaware limited liability company into a Delaware corporation. Section 1.02. Restricted Stock. (a) Section 2.06(b) of the Agreement is amended by deleting it in its entirety and replacing it with the following: Notwithstanding any provision of this Agreement to the contrary, none of the restrictions relating to any restricted stock awards ("Restricted Stock") granted under any Restricted Stock Plan of the Company shall terminate, be removed or modified as a result of the -2- Transactions. Immediately prior to the Merger, the Committee(s) administering the Restricted Stock Plans will (i) cancel all Restricted Stock awards that are then subject to any restrictions under the terms of the applicable award, and (ii) make new awards ("New Awards") under the applicable Restricted Stock Plan to each participant whose awards were canceled under the preceding subclause (i) as to the same number of shares of common stock as the canceled award and with such New Award taking effect immediately following the Merger and relating to Surviving Corporation Common Shares (the "New Restricted Stock") rather than Shares, provided that such New Awards will provide, except as set forth on the disclosure schedule, as follows: (1) 15% of each participant's New Restricted Stock will be available upon the effectiveness of the New Award to the participant free of restrictions under the Restricted Stock Plans (other than a prohibition on transfer of such New Restricted Stock to persons other than Restricted Stock Permitted Transferees and securities law restrictions on transferability (collectively, the "Restrictions")), (2) with respect to 10% of each participant's New Restricted Stock ("Cash Out New Restricted Stock"), the participants will receive cash (valuing a Share of the New Restricted Stock for these purposes at the Base Merger Consideration plus any Merger Consideration Adjustment determined with reference to Initial Adjustment Amounts received prior to the Effective Time (the "Cash Out Amount")), subject to applicable withholding taxes, unless such participant elects to receive shares of New Restricted Stock, in which case such participant will receive 10% of such participant's New Restricted Stock and it will be available upon the effectiveness of the New Award to the participant free of restrictions under the Restricted Stock Plans (other than the Restrictions) and (3) the balance of each participant's New Award will become free of restrictions under the Restricted Stock Plans (other than the Restrictions) ratably on January 14, 2002, January 14, 2003 and January 14, 2004 (or if such date is not a Business Day, on the next succeeding Business Day), provided that upon the termination of such restrictions as contemplated under this clause (3) with respect to the New Restricted Stock, such participant shall receive, in lieu of any share of New Restricted Stock, an amount in cash equal to the sum of (A) the Cash Out Amount, (B) any Merger Consideration Adjustments determined with respect to Initial Adjustment Amounts received subsequent to the Effective Time and prior to the applicable vesting date (the "New Restricted Stock Adjustment Amount"), and (C) an amount (the "Accrual Amount") equal to 6% per annum of the Base Merger Consideration from the date of the Merger through the applicable vesting date and of any such Merger Consideration Adjustments from the date of the payment to holders of the Shares through the applicable vesting date, subject to the balance of this Section 2.06(b), unless such participant elects to receive its vested New Restricted Stock in shares of New Restricted Stock; provided, further, that if such participant elects to receive shares of New Restricted Stock in lieu of cash pursuant to this clause (3), such participant will receive (in addition to the New Restricted Stock pursuant to this Section) the number of shares of New Restricted Stock equal to the value of the New Restricted Stock Adjustment Amount and Accrual Amount (the "Accrual Amount New Restricted Stock"), which shall be determined by dividing the dollar amount such participant would have received as the cash New Restricted Stock Adjustment Amount and Accrual -3- Amount pursuant to clauses (B) and (C) by $16.90. At the election of each participant, such participant may receive (in lieu of 100% cash or 100% New Restricted Stock pursuant to clause (3)), 60% of its vested New Restricted Stock in shares of New Restricted Stock and 40% of its New Restricted Stock in cash, in each case calculated pursuant to clause (3). Notwithstanding the foregoing, the New Restricted Stock awards will allow the Surviving Corporation to defer the payment of such cash if the Surviving Corporation is prevented under the Facilities from making such payments due to a default, or an event which with notice or lapse of time or both, would constitute a default (without giving effect to any grace period) under the Facilities. In the event the Surviving Corporation defers such payment, the Surviving Corporation will make such payment as soon as practicable after the Surviving Corporation is no longer in default and any event that would constitute a default has been cured or waived. For any such deferral period in respect of a Share of New Restricted Stock, the Accrual Amount in respect of such Share shall be calculated based upon 12% per annum of the deferred amount for the period of deferral. Each individual entitled to shares of Cash Out New Restricted Stock shall be entitled to receive with respect to each share of Cash Out New Restricted Stock from the Surviving Corporation amounts equal to all Merger Consideration Adjustments per Share determined with respect to all Initial Adjustment Amounts received after the Effective Time, payable at the same time such amounts are paid to holders of Shares. The Surviving Corporation shall pay with respect to each share of New Restricted Stock which is free of restriction upon the effectiveness of the New Award pursuant to clause (ii)(1) of this paragraph, amounts equal to (1) any Merger Consideration Adjustment determined with reference to Initial Adjustment Amounts received by the Company prior to the Effective Time, which amount shall be payable immediately prior to the Merger, and (2) any Merger Consideration Adjustments determined with reference to Initial Adjustment Amounts received by the Surviving Corporation and paid to a holder of a Share, which shall be payable at the same time as paid to holders of Shares. The Surviving Corporation shall pay with respect to each share of New Restricted Stock which becomes free of restrictions on January 14, 2002, January 14, 2003 and January 14, 2004 (or if such date is not a Business Day, or the next succeeding Business Day) and with respect to which the holder does not elect to receive cash pursuant to clause (ii) (3) of this paragraph, amounts equal to any Merger Consideration Adjustments determined with reference to Initial Adjustment Amounts received after the Effective Time, which shall be payable upon the later of (x) January 14, 2002, January 14, 2003 and January 14, 2004, as the case may be, (or if such date is not a Business Day, on the next succeeding Business Day) on which the restrictions lapse and the holder does not elect to receive cash, and (y) the time such Merger Adjustment Amounts are paid to holders of Shares. Each holder of the New Restricted Stock (other than Accrual Amount New Restricted Stock) also shall be entitled to receive with respect to each share of New Restricted Stock (whether or not Cash Out New Restricted Stock) all Merger Consideration Adjustments determined with respect to the Subsequent Adjustment Amounts (whether received prior to or after the Effective Time), payable at the time such amounts are paid to holders of Shares. -4- (b) Section 6.07(b) shall be amended by adding the following to the end thereof: "The Company covenants and agrees to take any and all necessary action to ensure that the issuance of the New Awards complies with all applicable laws, including applicable securities laws." Section 1.03. Effect of Amendment; Governing Law. Except as expressly amended hereby, the Agreement shall remain unchanged. The Agreement as amended hereby shall remain in full force and effect. The validity, construction and effect of this Amendment shall be governed by and construed and enforced in accordance with the laws of the State of Delaware, without giving effect to the principles of conflicts of law of such state. Section 1.04. Defined Terms. Capitalized terms used herein but not defined herein shall have the terms ascribed to them in the Recapitalization Agreement. Section 1.05. Counterparts. This Amendment may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. -5- IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed by their respective authorized officers as of the day and year first above written. RIVERSIDE ACQUISITION CORPORATION By: ----------------------------------------- Name: Title: MASCOTECH, INC. By: ----------------------------------------- Name: Title: ACCEPTED AND AGREED: MASCO CORPORATION By: ---------------------------------------------- Name: Title: RICHARD A. MANOOGIAN By: ---------------------------------------------- Name: Title: RICHARD AND JANE MANOOGIAN FOUNDATION By: ----------------------------------------------- Name: Title: EX-3.1 3 0003.txt CERTIFICATE OF INCORPORATION EXHIBIT 3.1 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 or not have voting rights 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 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 -2- 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; 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 -3- 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 Stock 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 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 -4- 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 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 -5- 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. (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 pur- -6- chase 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. (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 in order to amend (in its sole discretion) this Certificate of Incorporation; provided that the foregoing subclauses (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 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 Pay- -8- ment") 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 to the extent of the Excess Proceeds or Subsequent Offering Proceeds, as the case may be, 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 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 pur- -9- chase 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. (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 -10- 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. (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. -11- (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 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 -12- 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 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 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 Di- -13- rectors of the Company) of property received after the issuance date of the Series A Prefer-red 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 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 -14- 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 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. -15- (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 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. -16- 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. (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 -17- 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. 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 -18- 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 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, such payment of expenses 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 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 -19- would have the power to indemnify him against such liability under the provisions of the Delaware General Corporation Law. EX-3.2 4 0004.txt BYLAWS EXHIBIT 3.2 BYLAWS OF MASCOTECH, INC. (A DELAWARE CORPORATION) (AS AMENDED FEBRUARY 17, 1998) ARTICLE I MEETINGS OF STOCKHOLDERS Section 1.01. Annual Meetings. The annual meeting of stockholders for election of Directors and for the transaction of such other proper business, notice of which was given in the notice of the meeting, shall be held on a date (other than a legal holiday) in May or June of each year which shall be designated by the Board of Directors, or on such other date to which a meeting may be adjourned or re-scheduled, at such time and place within or without the State of Delaware as shall be designated in the notice of such meeting. Section 1.02. Special Meetings. Except as otherwise required by law, special meetings of stockholders of the Corporation may be called only by the Chairman of the Board, the Chief Executive Officer or a majority of the Board of Directors, subject to the rights of holders of any one or more classes or series of preferred stock or any other class of stock issued by the Corporation which shall have the right, voting separately by class or series, to elect Directors. Special meetings shall be held at such place within or without the State of Delaware and at such hour as may be designated in the notice of such meeting and the business transacted shall be confined to the object stated in the notice of the meeting. Section 1.03. Re-scheduling and Adjournment of Meetings. Notwithstanding Sections 1.01 and 1.02 of this Article, the Board of Directors may postpone and re-schedule any previously scheduled annual or special meeting of stockholders. The person presiding at any meeting is empowered to adjourn the meeting at any time after it has been convened. Section 1.04. Notice of Stockholders' Meetings. The notice of all meetings of stockholders shall be in writing and shall state the place, date and hour of the meeting. The notice of an annual meeting shall state that the meeting is called for the election of the Directors to be elected at such meeting and for the transaction of such other business as is stated in the notice of the meeting. The notice of a special -2- meeting shall state the purpose or purposes for which the meeting is called and shall also indicate that it is being issued by or at the direction of the person or persons calling the meeting. If, at any meeting, action is proposed to be taken which would, if taken, entitle stockholders fulfilling the requirements of the General Corporation Law to receive payment for their shares, the notice of such meeting shall include a statement to that effect. A copy of the notice of each meeting of stockholders shall be given, personally or by mail, not less than ten days nor more than sixty days before the date of the meeting, to each stockholder entitled to vote at such meeting at his record address or at such other address as he may have furnished by request in writing to the Secretary of the Corporation. If a meeting is adjourned to another time or place, and, if any announcement of the adjourned time or place is made at the meeting, it shall not be necessary to give notice of the adjourned meeting unless the adjournment is for more than thirty days or the Directors, after adjournment, fix a new record date for the adjourned meeting. Notice of a meeting need not be given to any stockholder who submits a signed waiver of notice, in person or by proxy, whether before or after the meeting. The attendance of a stockholder at a meeting, in person or by proxy, without protesting prior to the meeting the lack of notice of such meeting shall constitute a waiver of notice of the meeting. Section 1.05. Business to be Considered. Only those matters stated to be considered in the notice of the meeting, or of which written notice has been given to the Corporation either by personal delivery to the Chairman of the Board or the Secretary or by U.S. mail, postage prepaid, of a stockholder's intent to bring the matter before the meeting, may be considered at the Annual Meeting of Stockholders. Such notice shall be received no later than 120 days in advance of the date on which the Corporation's proxy statement was released to stockholders in connection with the previous year's Annual Meeting. Only that business brought before a special meeting pursuant to the notice of the meeting may be conducted or considered at such meeting. Only such business brought before an annual or special meeting of stockholders pursuant to these bylaws shall be eligible to be conducted or considered at such meetings. -3- Section 1.06. Quorum. Except as otherwise required by law, by the Certificate of Incorporation or by these bylaws, the presence, in person or by proxy, of stockholders holding a majority of the stock of the Corporation entitled to vote shall constitute a quorum at all meetings of the stockholders. In case a quorum shall not be present at any meeting, a majority in interest of the stockholders entitled to vote thereat, present in person or by proxy, shall have power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until the requisite amount of stock entitled to vote shall be present. At any such adjourned meeting at which the requisite amount of stock entitled to vote shall be represented, any business may be transacted which might have been transacted at the meeting as originally noticed; but only those stockholders entitled to vote at the meeting as originally noticed shall be entitled to vote at any adjournment or adjournments thereof. Directors shall be elected by a plurality of the votes cast at a meeting of stockholders by the holders of shares entitled to vote in the election. Whenever any corporate action, other than the election of Directors, is to be taken by vote of the stockholders, except as otherwise required by the General Corporation Law, the Certificate of Incorporation or these bylaws, it shall be authorized by a majority of the votes cast on the proposal by the holders of shares entitled to vote thereon at a meeting of stockholders. Section 1.07. Inspectors at Stockholders' Meetings. The Board of Directors, in advance of any stockholders' meeting, shall appoint one or more inspectors to act at the meeting or any adjournment thereof and to make a written report thereof. In case any inspector or alternate appointed is unable to act, the person presiding at the meeting shall appoint one or more inspectors to act at the meeting. Each inspector, before entering upon the discharge of his duties, shall take and sign an oath faithfully to execute the duties of inspector at such meeting with strict impartiality and according to the best of his ability. The inspectors shall determine the number of shares outstanding and the voting power of each, and shares represented at the meeting, the existence of a quorum, and the validity and effect of proxies, and shall receive votes, ballots or consents, hear and determine all challenges and questions arising in connection with the right to vote, count and tabulate all votes, ballots or consents, determine the result, and do such acts as are proper to conduct the election or vote with -4- fairness to all stockholders. On request of the person presiding at the meeting or any stockholder entitled to vote thereat, the inspectors shall make a report in writing of any challenge, question or matter determined by them and execute a certificate of any fact found by them. Any report or certificate made by them shall be prima facie evidence of the facts stated and of the vote as certified by them. Section 1.08. Presiding Officer at Stockholders' Meetings. The Chairman of the Board or in his absence the Chief Executive Officer shall preside at Stockholders' Meetings as more particularly provided in Article III hereof. In the event that both the Chairman and the Chief Executive Officer shall be absent or otherwise unable to preside, then a majority of the Directors present at the meeting shall appoint one of the Directors or some other appropriate person to preside. ARTICLE II DIRECTORS Section 2.01. Qualifications and Number; Term; Vacancies. A Director need not be a stockholder, a citizen of the United States, or a resident of the State of Delaware. The number of Directors constituting the entire Board shall be not less than five nor more than twelve, the exact number of Directors to be determined from time to time by resolution adopted by affirmative vote of a majority of the entire Board of Directors. The Directors shall be divided into three classes, designated Class I, Class II and Class III. Each class shall consist, as nearly as may be possible, of one-third of the total number of Directors constituting the entire Board of Directors. Directors shall be nominated and serve for such terms, and vacancies shall be filled, as provided in the Certificate of Incorporation. Directors may be removed only for cause. Section 2.02. Place and Time of Meetings of the Board. Regular and special meetings of the Board shall be held at such places (within or without the State of Delaware) and at such times as may be fixed by the Board or upon call of the Chairman of the Board of the Corporation or of the executive committee or of any two Directors, provided that the Board of Directors shall hold at least four meetings a year. Section 2.03. Quorum and Manner of Acting. A majority of the entire Board of Directors shall constitute a quorum for the transaction of business, but if there shall be less than a quorum at any meeting of the Board, a majority of those -5- present (or if only one be present, then that one) may adjourn the meeting from time to time and the meeting may be held as adjourned without further notice. Except as provided to the contrary by the General Corporation Law, by the Certificate of Incorporation or by these bylaws, at all meetings of Directors, a quorum being present, all matters shall be decided by the vote of a majority of the Directors present at the time of the vote. Section 2.04. Remuneration of Directors. In addition to reimbursement for his reasonable expenses incurred in attending meetings or otherwise in connection with his attention to the affairs of the Corporation, each Director as such, and as a member of any committee of the Board, shall be entitled to receive such remuneration as may be fixed from time to time by the Board. Section 2.05. Notice of Meetings of the Board. Regular meetings of the Board may be held without notice if the time and place of such meetings are fixed by the Board. All regular meetings of the Board, the time and place of which have not been fixed by the Board, and all special meetings of the Board shall be held upon twenty-four hours' notice to the Directors given by letter or telegram. No notice need specify the purpose of the meeting. Any requirement of notice shall be effectively waived by any Director who signs a waiver of notice before or after the meeting or who attends the meeting without protesting (prior thereto or at its commencement) the lack of notice to him; provided, however, that a regular meeting of the Board may be held without notice immediately following the annual meeting of the stockholders at the same place as such meeting was held, for the purpose of electing officers and a Chairman of the Board for the ensuing year. Section 2.06. Executive Committee and Other Committees. The Board of Directors, by resolution adopted by a majority of the entire Board, may designate from among its members an Executive Committee and other committees to serve at the pleasure of the Board. Each Committee shall consist of such number of Directors as shall be specified by the Board in the resolution designating the Committee. Except as set forth below, the Executive Committee shall have all of the authority of the Board of Directors. Each other committee shall be empowered to perform such functions, as may, by resolution, be delegated to it by the Board. The Board of Directors may designate one or more Directors as alternate members of any such committee, who may re- -6- place any absent member or members at any meetings of such committee. Vacancies in any committee, whether caused by resignation or by increase in the number of members constituting said committee, shall be filled by a majority of the entire Board of Directors. The Executive Committee may fix its own quorum and elect its own Chairman. In the absence or disqualification of any member of any such committee, the member or members thereof present at any meeting and not disqualified from voting whether or not he or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in place of any such absent or disqualified member. Section 2.07. Action Without Meeting. Any action required or permitted to be taken at any meeting of the Board of Directors, or of any committee thereof, may be taken without a meeting, if prior to such action a written consent thereto is signed by all members of the Board, or of such committee as the case may be, and such written consent is filed with the minutes of proceedings of the Board or committee. ARTICLE III OFFICERS Section 3.01. Officers. The Board of Directors, at its first meeting held after the annual meeting of stockholders in each year may elect such officers as the Board of Directors may determine, and such officers may include a Chairman of the Board, a Chief Executive Officer, one or more Vice Chairman, one or more Presidents, one or more Vice Presidents, a Secretary, a Treasurer and a Controller. In addition, the Board of Directors may, in its discretion, also appoint from time to time, such other officers or agents as it may deem proper. The Chairman of the Board shall be elected from among the members of the Board of Directors. Any two or more offices may be held by the same person. Unless otherwise provided in the resolution of election or appointment, each officer shall hold office until the meeting of the Board of Directors following the next annual meeting of stockholders and until his successor has been elected and qualified; provided, however, that the Board of Directors may remove any officer for cause or without cause at any time. -7- Section 3.02. Chairman of the Board. The Chairman of the Board shall preside, unless he designates another to act in his stead, at all meetings of the stockholders, the Board of Directors, and the Executive Committee and shall be a member ex officio of all committees appointed by the Board of Directors, except that the Board may, at his request, excuse him from membership on a committee. The Chairman of the Board shall have the power on behalf of the Corporation to enter into, execute, or deliver all contracts, instruments, conveyances, or documents and to affix the corporate seal thereto. The Chairman shall do and perform all acts and duties herein specified or which may be assigned to him from time to time by the Board of Directors. Section 3.03. Chief Executive Officer. The Chief Executive Officer of the Corporation shall have general supervision of the affairs of the Corporation subject to the control of the Board of Directors and the Chairman of the Board. At the request of the Chairman of the Board or in his absence or inability to act, the Chief Executive Officer shall preside at meetings of the stockholders. The Chief Executive Officer shall also perform such other duties as may be prescribed by the Board of Directors or the Executive Committee or the Chairman of the Board. Section 3.04. President(s). The President or Presidents shall perform such duties as may be prescribed by the Board of Directors or the Executive Committee or the Chairman of the Board or the Chief Executive Officer. Section 3.05. Secretary. The Secretary shall keep minutes of the proceedings taken and the resolutions adopted at all meetings of the stockholders, the Board of Directors and the Executive Committee, and shall give due notice of the meetings of the stockholders, the Board of Directors and the Executive Committee. He shall have charge of the seal and all books and papers of the Corporation, and shall perform all duties incident to his office. In case of the absence or disability of the Secretary, his duties and powers may be exercised by such person as may be appointed by the Board of Directors or the Executive Committee. Section 3.06. Treasurer. The Treasurer shall receive all the monies belonging to the Corporation, and shall forthwith deposit the same to the credit of the Corporation in such financial institutions as may be selected by the Board of Directors or the Executive Committee. He shall keep books of account and vouchers for all monies disbursed. He shall also -8- perform such other duties as may be prescribed by the Board of Directors or Executive Committee, the Chairman of the Board or the Chief Executive Officer, and, in case of the absence or disability of the Treasurer, his duties and powers may be exercised by such person as may be appointed by the Board of Directors or Executive Committee. Section 3.07. Controller. The Controller shall have custody of the financial records of the Corporation and shall keep full and accurate books and records of the financial transactions of the Corporation. He shall determine the methods of accounting and reporting for all entities comprising the Corporation, and shall be responsible for assuring adequate systems of internal control. The Controller shall render to the Chairman of the Board of Directors, the Chief Executive Officer and the Board of Directors, whenever they may request it, a report on the financial condition of the Corporation and on the results of its operations. ARTICLE IV CAPITAL STOCK Section 4.01. Share Certificates. Each certificate representing shares of the Corporation shall be in such form as may be approved by the Board of Directors, and, when issued, shall contain upon the face or back thereof the statements prescribed by the General Corporation Law and by any other applicable provision of law. Each such certificate shall be signed by the Chairman of the Board, the Chief Executive Officer, a President or a Vice President and by the Secretary or Treasurer or an Assistant Secretary or Assistant Treasurer. The signatures of said officers upon a certificate may be facsimile if the certificate is countersigned by a transfer agent or registered by a registrar other than the Corporation itself or its employee. In case any officer who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer before such certificate is issued, it may be issued by the Corporation with the same effect as if he were such officer at the date of issue. Section 4.02. Lost, Destroyed or Stolen Certificates. No certificate representing shares shall be issued in place of any certificate alleged to have been lost, destroyed or stolen, except on production of evidence of such loss, destruction or theft and, unless waived by the Board of Directors, on delivery to the Corporation, if the Board of Directors shall so require, of a bond of indemnity in such amount, upon -9- such terms and secured by such surety as the Board of Directors may in its discretion require. Section 4.03. Transfer of Shares. The shares of stock of the Corporation shall be transferable or assignable on the books of the Corporation only by the person to whom may have been issued or his legal representative, in person or by attorney, and only upon surrender of the certificate or certificates representing such shares properly assigned. The person in whose name shares of stock shall stand on the record of stockholders of the Corporation shall be deemed the owner thereof for all purposes as regards the Corporation. Section 4.04. Record Dates. For the purpose of determining the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other action, the Board may fix, in advance, a date as the record date of any such determination of stockholders. Such date shall not be more than sixty nor less than ten days before the date of such meeting, nor more than sixty days prior to any other action. ARTICLE V MISCELLANEOUS Section 5.01. Signing of Instruments. All checks, drafts, notes, acceptances, bills of exchange, and orders for the payment of money shall be signed in such manner as may be provided and by such person or persons as may be authorized from time to time by resolution of the Board of Directors or the Executive Committee or these bylaws. Section 5.02. Corporate Seal. The seal of the Corporation shall consist of a metal disc having engraved thereon the words "MascoTech, Inc., Delaware." Section 5.03. Fiscal Year. The fiscal year of the Corporation shall begin on the first day of January of each year and shall end on the thirty-first day of December following. -10- ARTICLE VI AMENDMENTS OF BYLAWS Section 6.01. Amendments. Except as provided to the contrary by the General Corporation Law, by the Certificate of Incorporation or by these bylaws, these bylaws may be amended or repealed at a meeting, (1) by vote of a majority of the whole Board of Directors, provided that notices of the proposed amendments shall have been sent to all the Directors not less than three days before the meeting at which they are to be acted upon, or at any regular meeting of the Directors by the unanimous vote of all the Directors present, or (2) by the affirmative vote of the holders of at least 80% of the stock of the Corporation generally entitled to vote, voting together as a single class. -11- Amendments to By-laws of MascoTech FIRST, Section 1.02 of Article I is amended by deleting such Section in its entirety and replacing it with the following: Special Meetings. Except as otherwise required by law, special meetings of stockholders of the Corporation 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. SECOND, Section 2.01 of Article II is amended by deleting such Section in its entirety and replacing it with the following: Qualifications and Number; Term; Vacancies. A Director need not be a stockholder, a citizen of the United States, or a resident of the State of Delaware. The number constituting the entire Board shall be at least one, 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. Directors shall be nominated and serve for such terms, and vacancies shall be filled, as provided in the Certificate of Incorporation. Directors may be removed only for cause. -12- THIRD, Clause (2) of Section 6.01 of Article IV is amended by deleting such Clause in its entirety and replacing it with the following: by the affirmative vote of the holders of at least a majority of the stock of the Corporation generally entitled to vote, voting together as a single class. Dated as of November 28, 2000 EX-4.1 5 0005.txt CERTIFICATE EXHIBIT 4.1 NUMBER SHARES Incorporated under the laws of the State of Delaware MascoTech, Inc. Authorized To Issue: 275,000,000 Shares See Reverse for Certain Definitions 250,000,000 Common Shares 25,000,000 Preferred Shares Par Value $1.00 Each Par Value $1.00 Each This is to Certify that _____________________________________________________________ is the owner of _____________________________________________________________________ fully paid and non-assessable shares of the above Corporation transferable only on the books of the Corporation by the holder hereof in person or by duly authorized Attorney upon surrender of this Certificate properly endorsed. Witness, the seal of the Corporation and the signatures of its duly authorized officers. Dated [SEAL] - -------------------------------------- Secretary Vice President The following abbreviations, when used in the inscription on the face of this certificate, shall be construed as though they were written out in full according to applicable laws or regulations:
TEN COM - as tenants in common UNIF GIFT MIN ACT - ______ Custodian _______ (Cust) (Minor) TEN ENT - as tenants by the entireties under Uniform Gifts to Minors Act _____________________ JT TEN - as joint tenants with right of (State) survivorship and not as tenants in common Additional abbreviations may also be used though not in the above list
For value received _____________ hereby sell, assign and transfer unto PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE - ----------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS INCLUDING POSTAL ZIP CODE OF ASSIGNEE) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- __________________________________________________________________________Shares represented by the within Certificate, and do hereby irrevocably constitute and appoint ________________________________________________________________________Attorney to transfer the said Shares on the books of the within named Corporation with full power of substitution in the premises. Dated ______________________ ________ In presence of _____________________________________ ___________________________ EX-4.3 6 0006.txt SECOND SUPPLEMENTAL INDENTURE EXHIBIT 4.3 - -------------------------------------------------------------------------------- MASCOTECH, INC. AND BANK ONE TRUST COMPANY, N.A. (as successor in interest to THE FIRST NATIONAL BANK OF CHICAGO), Trustee ---------------------- Second Supplemental Indenture Dated as of November 28, 2000 ---------------------- Indenture, Dated as of November 1, 1986, as supplemented and amended by the First Supplemental Indenture, Dated as of August 5, 1994 Between MascoTech, Inc. and The First National Bank of Chicago, as successor Trustee to Morgan Guaranty Trust Company of New York, Relating to the 4 1/2% Convertible Subordinated Debentures Due 2003 - -------------------------------------------------------------------------------- SECOND SUPPLEMENTAL INDENTURE SECOND SUPPLEMENTAL INDENTURE (this "Second Supplemental Indenture"), dated as of November 28, 2000, between MascoTech, Inc., a Delaware corporation (the "Company"), having its principal office at 21001 Van Born Road, Taylor, Michigan 48180, and Bank One Trust Company, N.A. (as successor in interest to The First National Bank of Chicago), a national banking association as Trustee (the "Trustee"). RECITALS WHEREAS, the Company, formerly known as Masco Industries, Inc., heretofore executed and delivered an Indenture, dated as of November 1, 1986 and a Supplemental Indenture, dated as of August 5, 1994 (together, the "Indenture") with the Trustee (capitalized terms used but not otherwise defined in this Second Supplemental Indenture shall have the meanings ascribed to such terms in the Indenture); and WHEREAS, pursuant to the Indenture, the Company issued and the Trustee authenticated and delivered $345,000,000 aggregate principal amount of the Company's 4 1/2% Convertible Subordinated Debentures Due 2003 (the "Convertible Securities"); and WHEREAS, the Company has entered into a Recapitalization Agreement dated as of August 1, 2000, between the Company and Riverside Company LLC, a Delaware limited liability company ("Riverside"), as amended (the "Recapitalization Agreement"), pursuant to which Riverside will merge with and into the Company (the "Merger") with the Company continuing as the surviving corporation (the "Surviving Corporation"); and WHEREAS, pursuant to the Recapitalization Agreement, on the date of the Merger, each issued and outstanding share of common stock of the Company (other than (x) shares constituting Restricted Stock (as defined in the Recapitalization Agreement), (y) dissenting shares and (z) shares owned by any subsidiary of the Company) shall be converted into the right to receive from the Surviving Corporation cash in an amount equal to (i) $16.90 (the "Base Merger Consideration") and (ii) all Merger Consideration Adjustments (as defined in the Recapitalization Agreement) with respect to each share (other than shares referred to in clauses (x), (y) and (z) above) (clauses (i) and (ii) together, the "Merger Consideration"); and -2- WHEREAS, pursuant to Section 3.06 of the Indenture, the parties hereto are entering into this Second Supplemental Indenture to provide that the holder of each Convertible Security outstanding at the time of the Merger shall have the right thereafter, during the period such Convertible Security shall be convertible as specified in Section 3.01 of the Indenture, to convert such Convertible Security only into the Merger Consideration receivable at the effective time of the Merger by a holder of common shares of the Company and as adjusted thereafter pursuant to the Recapitalization Agreement; and WHEREAS, pursuant to Section 11.01 of the Indenture, the Company and the Trustee may enter into this Second Supplemental Indenture without the consent of any holders of the Convertible Securities; and WHEREAS, this Second Supplemental Indenture has been duly authorized by all necessary corporate action on the part of the Company; and NOW, THEREFORE, the Company hereby covenants and agrees with the Trustee for the equal and proportionate benefit of all holders of the Convertible Securities, as follows: ARTICLE ONE CONVERSION OF CONVERTIBLE SECURITIES Section 1.1. Amendment of Certain Sections of Indenture. Subject to the other provisions hereof, and pursuant to Section 11.01(f) of the Indenture, the Indenture is hereby amended and supplemented in the following respects: (a) Section 3.05 of the Indenture is hereby amended and supplemented by adding the following at the end thereof: "(j) From and after the effective time of the merger (the "Merger") pursuant to the Recapitalization Agreement dated as of August 1, 2000, as amended, by and between the Company and Riverside Company LLC, a Delaware limited liability company (the "Recapitalization Agreement"), the holder of each Convertible Security then outstanding shall have the right thereafter, during the period such Convertible Security shall be convertible as specified in Section 3.01, to convert each such Convertible Security only into -3- (i) $16.90 (the "Base Merger Consideration") and (ii) all Merger Consideration Adjustments (as defined in the Recapitalization Agreement) with respect to each Exchanged Share (as defined in the Recapitalization Agreement) (clauses (i) and (ii) together, the "Merger Consideration"); provided, however, that at such time after the Merger that any holder of Convertible Securities elects to convert such Convertible Securities pursuant to this Section 3.05(j), the Trustee shall notify the Company of such election and the Company shall provide to the Trustee, a certification (in the form of an Officer's Certificate) as to the amount of Merger Consideration then owed to such holder." ARTICLE TWO MISCELLANEOUS Section 2.1. Effect of Second Supplemental Indenture. Upon the execution and delivery of this Second Supplemental Indenture by the Company and the Trustee, the Indenture shall be supplemented in accordance herewith, and this Second Supplemental Indenture shall form a part of the Indenture for all purposes, and every holder of Securities heretofore or hereafter authenticated and delivered under the Indenture shall be bound thereby; provided, however, that Article 1 of this Second Supplemental Indenture shall be effective only upon the effectiveness of the Merger. Section 2.2. Indenture Remains in Full Force and Effect. Except as supplemented hereby, all provisions in the Indenture shall remain in full force and effect. Section 2.3. Indenture and Second Supplemental Indenture Construed Together. This Second Supplemental Indenture is an indenture supplemental to the Indenture, and forms a part of the Indenture for all purposes. Section 2.4. Conflict with Trust Indenture Act. If and to the extent that any provision of this Second Supplemental Indenture limits, qualifies or conflicts with any provision included in the Indenture or this Second Supplemental Indenture which is required to be included in the Indenture or this Second Supplemental Indenture, as the case may be, by any of Sections 310 through 317, inclusive, of the Trust Indenture Act of 1939, such required provision shall control. Section 2.5. Separability Clause. In case any provision in this Second Supplemental Indenture shall be invalid, illegal or unenforceable, the validity, legality -4- and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. Section 2.6. Effect of Headings. The Article and Section headings herein are for convenience only and shall not affect the construction hereof. Section 2.7. Benefits of Second Supplemental Indenture, Etc. Nothing in this Second Supplemental Indenture, express or implied, shall give to any Person, other than the parties hereto and thereto and their successors hereunder, any benefit or any legal or equitable right, remedy or claim under this Second Supplemental Indenture. Section 2.8. Successors and Assigns. All covenants and agreements in this Second Supplemental Indenture by the Company shall bind its successors and assigns, whether so expressed or not. Section 2.9. Trustee Not Responsible for Recitals. The recitals contained herein shall be taken as the statements of the Company, and the Trustee assumes no responsibility for their correctness. The Trustee makes no representations as to the validity or sufficiency of this Second Supplemental Indenture. Section 2.10. Certain Duties and Responsibilities of the Trustee. In entering into this Second Supplemental Indenture, the Trustee shall be entitled to the benefit of every provision of the Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee, whether or not elsewhere herein so provided. Section 2.11. Governing Law. This Second Supplemental Indenture shall be governed by and construed in accordance with the laws of the State of New York. Section 2.12. Counterparts. This Second Supplemental Indenture may be executed in counterparts, each of which, when so executed, shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument. [Signature Page Follows] -5- IN WITNESS WHEREOF, the parties hereto have caused this Second Supplemental Indenture to be duly executed and attested, all as of the date and year first above written. MASCOTECH, INC. By: ---------------------------------------- Title: ---------------------------------------- Attest: - ------------------------------ Title: ---------------------- BANK ONE TRUST COMPANY, N.A. (as successor in interest to THE FIRST NATIONAL BANK OF CHICAGO), as Trustee By: --------------------------------------- Title: --------------------------------------- Attest: - ------------------------------ Title: ---------------------- EX-4.4 7 0007.txt THIRD SUPPLEMENTAL INDENTURE EXHIBIT 4.4 - -------------------------------------------------------------------------------- MASCOTECH, INC., METALYNC COMPANY LLC AND BANK ONE TRUST COMPANY, N.A. (as successor in interest to THE FIRST NATIONAL BANK OF CHICAGO), Trustee ---------------------- Third Supplemental Indenture Dated as of November 28, 2000 ---------------------- Indenture, Dated as of November 1, 1986, as supplemented and amended by the First Supplemental Indenture, Dated as of August 5, 1994, and the Second Supplemental Indenture, Dated as of November 28, 2000 Between MascoTech, Inc. and The First National Bank of Chicago, as successor Trustee to Morgan Guaranty Trust Company of New York, Relating to the 4 1/2% Convertible Subordinated Debentures Due 2003 - -------------------------------------------------------------------------------- THIRD SUPPLEMENTAL INDENTURE THIRD SUPPLEMENTAL INDENTURE (this "Third Supplemental Indenture"), dated as of November 28, 2000, between MascoTech, Inc., a Delaware corporation (the "Company"), Metalync Company LLC, a Delaware limited liability company and a wholly-owned subsidiary of the Company ("Metalync"), both having their principal offices at 21001 Van Born Road, Taylor, Michigan 48180, and Bank One Trust Company, N.A. (as successor in interest to The First National Bank of Chicago), a national banking association as Trustee (the "Trustee"). RECITALS WHEREAS, the Company, formerly known as Masco Industries, Inc., heretofore executed and delivered an Indenture, dated as of November 1, 1986, a Supplemental Indenture, dated as of August 5, 1994, and a Second Supplemental Indenture, dated as of November 28, 2000 (together, the "Indenture") with the Trustee (capitalized terms used but not otherwise defined in this Third Supplemental Indenture shall have the meanings ascribed to such terms in the Indenture); and WHEREAS, pursuant to the Indenture, the Company issued and the Trustee authenticated and delivered $345,000,000 aggregate principal amount of the Company's 4 1/2% Convertible Subordinated Debentures Due 2003 (the "Convertible Securities"); and WHEREAS, pursuant to Section 11.01(g) of the Indenture, Metalync, the Company and the Trustee may enter into this Third Supplemental Indenture without the consent of any holders of the Convertible Securities to make provisions in regard to matters arising under the Indenture which do not materially adversely affect the interests of the holders of Securities; and WHEREAS, the Company will assign certain of its assets to Metalync; and WHEREAS, Metalync and the Company desire to join Metalync as a party to the Indenture pursuant to Section 12.01 of the Indenture; and -2- WHEREAS, this Third Supplemental Indenture has been duly authorized by all necessary corporate action on the part of Metalync and the Company; and NOW, THEREFORE, Metalync and the Company hereby covenant and agree with the Trustee for the equal and proportionate benefit of all holders of the Convertible Securities, as follows: ARTICLE ONE AMENDMENT Section 1.1. Amendment of Certain Sections of Indenture. Subject to the other provisions hereof, and pursuant to Section 11.01(g) of the Indenture, the Indenture is hereby amended and supplemented in the following respects: (a) Section 3.06(a) of the Indenture is hereby amended by deleting the text contained in the third line of subpart (a) thereof and replacing it with the following: "continuing corporation or limited liability company and which does not result in any reclassification of, or" (b) Section 3.06(b) of the Indenture is hereby amended by deleting the text contained in the first two lines of subpart (b) thereof and replacing it with the following: "(b) any sale or conveyance to another corporation or limited liability company of the assets of the Company as an entirety or substantially" (c) Section 11.01(a) of the Indenture is hereby amended by deleting the text thereof and replacing it with the following: "(a) to evidence the succession of another corporation or limited liability company to the Company, or successive succession, and the assumption by the successor corporation or limited liability company of the covenants, agreements and obligations of the Company pursuant to Article Twelve hereof;" -3- (d) Section 12.01 of the Indenture is hereby amended by deleting the text thereof and replacing it with the following: "SECTION 12.01. Consolidation, Merger and Sale of Assets Permitted. The Company covenants and agrees that it will not consolidate with, merge into, or sell or otherwise dispose of all or substantially all of its property as an entirety to, any person other than a corporation or a limited liability company organized under the laws of the United States of America or any State or Territory thereof or of the District of Columbia, lawfully entitled to acquire the same. The Company will not so consolidate or merge, or make any such sale or other disposition, unless, and the Company covenants and agrees that any such consolidation, merger, sale or other disposition shall be on the condition that, (1) the provisions of Section 3.06 are complied with and (2) such corporation or limited liability company shall expressly assume the due and punctual payment of the principal of and premium, if any, and interest on all the Securities, accordingly to their tenor, and the due and punctual performance and observance of all of the covenants and conditions of this Indenture to be performed by the Company, by supplemental indenture satisfactory to the Trustee, executed and delivered to the Trustee by such corporation or limited liability company. The Company covenants and agrees that it will not so consolidate or merge or make any such sale or other disposition, or permit any corporation to merge into the Company, if immediately thereafter the Company or such successor corporation or limited liability company, as the case may be, shall be in default in the performance or observance of any of the covenants or conditions of this Indenture. (d) Section 12.02 of the Indenture is hereby amended by deleting the text thereof and replacing it with the following: "SECTION 12.02 Successor Corporation or Limited Liability Company to Be Substituted for Company. In case of any such merger, consolidation, sale or conveyance and upon any such assumption by the successor corporation or limited liability company, such successor corporation or limited liability company shall succeed to and be substituted for the Company, with the same effect as if it had been named herein as the party of the first part, and, in case of such a sale or conveyance other than a lease, the Company thereupon shall be relieved of any further obligation or liability hereunder or upon the Securities, and may thereupon or at any time thereafter be dissolved, wound up or -4- liquidated. Such successor corporation or limited liability company thereupon may cause to be signed, and may issue either in its own name or in the name of MascoTech, Inc. any or all of the Securities issuable hereunder which theretofore shall not have been signed by the Company and delivered to the Trustee or Authenticating Agent; and, upon the order of such successor corporation or limited liability company (instead of the Company) and subject to all the terms, conditions and limitations in this Indenture prescribed, the Trustee or the Authenticating Agent shall authenticate and deliver any Securities which previously shall have been signed and delivered by the officers of the Company to the Trustee or the Authenticating Agent for authentication, and any Securities which such successor corporation or limited liability company thereafter shall cause to be signed and delivered to the Trustee or the Authenticating Agent for that purpose. All the Securities so issued shall in all respects have the same legal rank and benefit under this Indenture as the Securities theretofore or thereafter issued in accordance with the terms of this Indenture as though all of such Securities had been issued at the date of the execution hereof. In case of any such consolidation, merger, sale or conveyance, such changes in phraseology and form (but not in substance) may be made in the Securities thereafter to be issued as may be appropriate." (e) Section 14.01 of the Indenture is hereby amended by deleting the text thereof and replacing it with the following: "SECTION 14.01. Indenture and Securities Solely Obligations of Company and Any Successor Corporation or Limited Liability Company. No recourse for the payment of the principal of or premium, if any, or interest on any Security, or for any claim based thereon or otherwise in respect thereof, and no recourse under or upon any obligation, covenant or agreement of the Company in this Indenture or in any supplemental indenture, or in any Security, or because of the creation of any indebtedness represented thereby, shall be had against any incorporator, stockholder or other interestholder, officer, director, manager or member, as such, past, present or future of the Company or of any successor corporation or limited liability company of the Company, either directly or through the Company or any successor corporation or limited liability company of the Company, whether by virtue of any constitution, statute or rule of law, or by the enforcement of any assessment or penalty or -5- otherwise; it being expressly understood that all such liability is hereby expressly waived and released as a condition of, and as a consideration for, the execution of this Indenture and the issue of the Securities." (f) Section 15.02 of the Indenture is hereby amended by deleting the text thereof and replacing it with the following: "SECTION 15.02. Official Acts by Successor Corporation or Limited Liability Company. Any act or proceeding by any provision of this Indenture authorized or required to be done or performed by any board, committee or officer of the Company shall and may be done and performed with the like force and effect by the like board, member, committee, manager or officer of any corporation or limited liability company that shall at the time be the lawful sole successor of the Company." ARTICLE TWO ASSUMPTION Section 2.1. For value received, pursuant to Section 12.01 of the Indenture, Metalync hereby jointly and severally assumes the due and punctual payment of the principal of and premium, if any, and interest on all of the Convertible Securities, according to their tenor, and the due and punctual performance and observance of all of the covenants and conditions of the Indenture on the part of the Company to be performed or observed. Section 2.2. Metalync shall join, and may exercise every right and power of, the Company under the Indenture with the same effect as if Metalync had been named along with the Company therein. -6- ARTICLE THREE MISCELLANEOUS Section 3.1. Effect of Third Supplemental Indenture. Upon the execution and delivery of this Third Supplemental Indenture by Metalync, the Company and the Trustee, the Indenture shall be supplemented in accordance herewith, and this Third Supplemental Indenture shall form a part of the Indenture for all purposes, and every holder of Securities heretofore or hereafter authenticated and delivered under the Indenture shall be bound thereby; provided, however, that Article 1 and Article 2 of this Third Supplemental Indenture shall be effective only upon the consummation of the transactions contemplated by the Contribution Agreement dated as of November 28, 2000 between the Company and Metalync. Section 3.2. Indenture Remains in Full Force and Effect. Except as supplemented hereby, all provisions in the Indenture shall remain in full force and effect. Section 3.3. Indenture and Third Supplemental Indenture Construed Together. This Third Supplemental Indenture is an indenture supplemental to the Indenture, and forms a part of the Indenture for all purposes. Section 3.4. Conflict with Trust Indenture Act. If and to the extent that any provision of this Third Supplemental Indenture limits, qualifies or conflicts with any provision included in the Indenture or this Third Supplemental Indenture which is required to be included in the Indenture or this Third Supplemental Indenture, as the case may be, by any of Sections 310 through 317, inclusive, of the Trust Indenture Act of 1939, such required provision shall control. Section 3.5. Separability Clause. In case any provision in this Third Supplemental Indenture shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. Section 3.6. Effect of Headings. The Article and Section headings herein are for convenience only and shall not affect the construction hereof. Section 3.7. Benefits of Third Supplemental Indenture, Etc. Nothing in this Third Supplemental Indenture, express or implied, shall give to any Person, other than -7- the parties hereto and thereto and their successors hereunder, any benefit or any legal or equitable right, remedy or claim under this Third Supplemental Indenture. Section 3.8. Successors and Assigns. All covenants and agreements in this Third Supplemental Indenture by Metalync and the Company shall bind their successors and assigns, whether so expressed or not. Section 3.9. Trustee Not Responsible for Recitals. The recitals contained herein shall be taken as the statements of Metalync and the Company, and the Trustee assumes no responsibility for their correctness. The Trustee makes no representations as to the validity or sufficiency of this Third Supplemental Indenture. Section 3.10. Certain Duties and Responsibilities of the Trustee. In entering into this Third Supplemental Indenture, the Trustee shall be entitled to the benefit of every provision of the Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee, whether or not elsewhere herein so provided. Section 3.11. Governing Law. This Third Supplemental Indenture shall be governed by and construed in accordance with the laws of the State of New York. Section 3.12. Counterparts. This Third Supplemental Indenture may be executed in counterparts, each of which, when so executed, shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument. [Signature Page Follows] -8- IN WITNESS WHEREOF, the parties hereto have caused this Third Supplemental Indenture to be duly executed and attested, all as of the date and year first above written. METALYNC COMPANY LLC By: ------------------------------------ Title: ------------------------------------ Attest: - ---------------------------------- Title: -------------------------- MASCOTECH, INC. By: ------------------------------------ Title: ------------------------------------ Attest: - ---------------------------------- Title: -------------------------- BANK ONE TRUST COMPANY, N.A. (as successor in interest to THE FIRST NATIONAL BANK OF CHICAGO), as Trustee By: ------------------------------------ Title: ------------------------------------ Attest: - ----------------------------------- Title: --------------------------- EX-10.1 8 0008.txt CREDIT AGREEMENT EXHIBIT 10.1 ================================================================================ CREDIT AGREEMENT dated as of November 28, 2000, among MASCOTECH, INC., METALYNC COMPANY LLC, The Subsidiary Term Borrowers Party Hereto, The Foreign Subsidiary Borrowers Party Hereto, The Lenders Party Hereto, THE CHASE MANHATTAN BANK, as Administrative Agent and Collateral Agent CREDIT SUISSE FIRST BOSTON, as Syndication Agent COMERICA BANK, as Documentation Agent FIRST UNION NATIONAL BANK, as Documentation Agent NATIONAL CITY BANK, as Documentation Agent and BANK ONE, NA, as Documentation Agent ---------------------------- CHASE SECURITIES INC., as Arranger ================================================================================ TABLE OF CONTENTS Page ARTICLE I Definitions SECTION 1.01. Defined Terms...........................................1 SECTION 1.02. Classification of Loans and Borrowings.................48 SECTION 1.03. Terms Generally........................................48 SECTION 1.04. Accounting Terms; GAAP.................................49 SECTION 1.05. Exchange Rates.........................................49 SECTION 1.06. Redenomination of Certain Foreign Currencies...........50 ARTICLE II The Credits SECTION 2.01. Commitments............................................50 SECTION 2.02. Loans and Borrowings...................................51 SECTION 2.03. Requests for Borrowings................................52 SECTION 2.04. Swingline Loans........................................53 SECTION 2.05. Letters of Credit......................................55 SECTION 2.06. Funding of Borrowings..................................61 SECTION 2.07. Interest Elections.....................................62 SECTION 2.08. Termination and Reduction of Commitments...............63 SECTION 2.09. Repayment of Loans; Evidence of Debt...................64 SECTION 2.10. Amortization of Term Loans.............................65 SECTION 2.11. Prepayment of Loans....................................67 SECTION 2.12. Fees...................................................70 SECTION 2.13. Interest...............................................72 SECTION 2.14. Alternate Rate of Interest.............................73 SECTION 2.15. Increased Costs........................................73 SECTION 2.16. Break ]Funding Payments................................75 SECTION 2.17. Taxes..................................................75 SECTION 2.18. Payments Generally; Pro Rata Treatment; Sharing of Set-offs............................77 SECTION 2.19. Mitigation Obligations; Replacement of Lenders.........79 SECTION 2.20. Additional Reserve Costs...............................81 SECTION 2.21. Designation of Foreign Subsidiary Borrowers............81 -i- Page SECTION 2.22. Foreign Subsidiary Borrower Costs......................82 ARTICLE III Representations and Warranties SECTION 3.01. Organization; Powers...................................83 SECTION 3.02. Authorization; Enforceability..........................83 SECTION 3.03. Governmental Approvals; No Conflicts...................83 SECTION 3.04. Financial Condition; No Material Adverse Change........84 SECTION 3.05. Properties.............................................84 SECTION 3.06. Litigation and Environmental Matters...................85 SECTION 3.07. Compliance with Laws and Agreements....................86 SECTION 3.08. Investment and Holding Company Status..................86 SECTION 3.09. Taxes..................................................86 SECTION 3.10. ERISA..................................................86 SECTION 3.11. Disclosure.............................................86 SECTION 3.12. Subsidiaries...........................................87 SECTION 3.13. Insurance..............................................87 SECTION 3.14. Labor Matters..........................................87 SECTION 3.15. Solvency...............................................87 SECTION 3.16. Senior Indebtedness....................................88 SECTION 3.17. Security Documents.....................................88 SECTION 3.18. Federal Reserve Regulations............................89 ARTICLE IV Conditions SECTION 4.01. Effective Date.........................................90 SECTION 4.02. Each Credit Event......................................93 SECTION 4.03. Credit Events Relating to Foreign Subsidiary Borrowers............................................94 ARTICLE V Affirmative Covenants SECTION 5.01. Financial Statements and Other Information.............95 SECTION 5.02. Notices of Material Events.............................97 SECTION 5.03. Information Regarding Collateral.......................97 SECTION 5.04. Existence; Conduct of Business; Asset Dropdown.........98 SECTION 5.05. Payment of Obligations.................................99 -ii- Page SECTION 5.06. Maintenance of Properties..............................99 SECTION 5.07. Insurance..............................................99 SECTION 5.08. Casualty and Condemnation.............................100 SECTION 5.09. Books and Records; Inspection and Audit Rights........100 SECTION 5.10. Compliance with Laws..................................100 SECTION 5.11. Use of Proceeds and Letters of Credit.................100 SECTION 5.12. Additional Subsidiaries...............................101 SECTION 5.13. Further Assurances....................................101 SECTION 5.14. Interest Rate Protection..............................102 SECTION 5.15. Available Funds; Additional Equity....................102 ARTICLE VI Negative Covenants SECTION 6.01. Indebtedness; Certain Equity Securities...............102 SECTION 6.02. Liens.................................................105 SECTION 6.03. Fundamental Changes...................................106 SECTION 6.04. Investments, Loans, Advances, Guarantees and Acquisitions....................................107 SECTION 6.05. Asset Sales...........................................109 SECTION 6.06. Sale and Leaseback Transactions.......................110 SECTION 6.07. Hedging Agreements....................................111 SECTION 6.08. Restricted Payments; Certain Payments of Indebtedness........................................111 SECTION 6.09. Transactions with Affiliates..........................113 SECTION 6.10. Restrictive Agreements................................114 SECTION 6.11. Amendment of Material Documents.......................115 SECTION 6.12. Use of Available Funds; Convertible Debentures........115 SECTION 6.13. Interest Expense Coverage Ratio.......................116 SECTION 6.14. Leverage Ratio........................................117 SECTION 6.15. Capital Expenditures..................................117 SECTION 6.16. Consolidated Lease Expense............................118 -iii- Page ARTICLE VII Events of Default ARTICLE VIII The Administrative Agent ARTICLE IX Collection Allocation Mechanism SECTION 9.01. Implementation of CAM..................................124 SECTION 9.02. Letters of Credit......................................125 ARTICLE X Miscellaneous SECTION 10.01. Notices................................................127 SECTION 10.02. Waivers; Amendments....................................128 SECTION 10.03. Expenses; Indemnity; Damage Waiver.....................130 SECTION 10.04. Successors and Assigns.................................131 SECTION 10.05. Survival...............................................135 SECTION 10.06. Counterparts; Integration; Effectiveness...............135 SECTION 10.07. Severability...........................................136 SECTION 10.08. Right of Setoff........................................136 SECTION 10.09. Governing Law; Jurisdiction; Consent to Service of Process...........................................136 SECTION 10.10. WAIVER OF JURY TRIAL...................................137 SECTION 10.11. Headings...............................................137 SECTION 10.12. Confidentiality........................................137 SECTION 10.13. Interest Rate Limitation...............................138 SECTION 10.14. Judgment Currency......................................139 SECTION 10.15. Obligations Joint and Several..........................139 SCHEDULES: Schedule 1.01(a) -- Existing Letters of Credit Schedule 1.01(b) -- Mortgaged Property -iv- Schedule 2.01 -- Commitments Schedule 3.05 -- Real Property Schedule 3.06 -- Disclosed Matters Schedule 3.12 -- Subsidiaries Schedule 3.13 -- Insurance Schedule 3.17(d) -- Mortgage Filing Offices Schedule 6.01 -- Existing Indebtedness Schedule 6.02 -- Existing Liens Schedule 6.04 -- Existing Investments Schedule 6.05 -- Asset Sales Schedule 6.09 -- Existing Affiliate Transactions Schedule 6.10 -- Existing Restrictions EXHIBITS: Exhibit A -- Form of Assignment and Acceptance Exhibit B-1 -- Form of Opinion of Parent Borrower's Counsel Exhibit B-2 -- Forms of Opinions of Parent Borrower's U.S. Local Counsel Exhibit C-1 -- Form of Collateral Assignment Exhibit C-2 -- Form of Consent Agreement Exhibit D -- Form of Debenture Account Exhibit E -- Form of Foreign Subsidiary Borrowing Agreement Exhibit F -- Form of Guarantee Agreement Exhibit G -- Form of Incremental Term Loan Activation Notice Exhibit H -- Form of Indemnity, Subrogation and Contribution Agreement Exhibit I -- Form of Mortgage Exhibit J -- Form of Pledge Agreement Exhibit K -- Form of Security Agreement Exhibit L -- Form of Subordination and Other Provisions Exhibit M -- Mandatory Costs Rate -v- CREDIT AGREEMENT dated as of November 28, 2000, among MASCOTECH, INC., METALYNC COMPANY LLC, the Subsidiary Term Borrowers party hereto, the FOREIGN SUBSIDIARY BORROWERS party hereto, the LENDERS party hereto, THE CHASE MANHATTAN BANK, as Administrative Agent and Collateral Agent, FIRST UNION NATIONAL BANK, as Documentation Agent, CREDIT SUISSE FIRST BOSTON, as Syndication Agent, COMERICA BANK, as Documentation Agent, NATIONAL CITY BANK, as Documentation Agent and BANK ONE, NA, as Documentation Agent. The parties hereto agree as follows: ARTICLE I Definitions SECTION 1.01. Defined Terms. As used in this Agreement, the following terms have the meanings specified below: "ABR", when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are bearing interest at a rate determined by reference to the Alternate Base Rate. "Acquired Assets" means (a) with respect to any fiscal year, the consolidated tangible assets acquired pursuant to a Permitted Acquisition during such fiscal year determined in accordance with GAAP (the "Specified Amount"), provided that if such Permitted Acquisition is not consummated during the first quarter of such fiscal year (it being understood that Permitted Acquisitions occurring during the Interim Period shall be deemed to have occurred during the first quarter of the fiscal year ending December 31, 2001), Acquired Assets shall be determined for purposes of this clause (a) by multiplying the Specified Amount by (i) .75 if such Permitted Acquisition is consummated during the second quarter of such fiscal year, (ii) .50 if such Permitted Acquisition is consummated during the third quarter of such fiscal year and (iii) .25 if such Permitted Acquisition is consummated during the fourth quarter of such fiscal year and (b) with respect to any fiscal year thereafter, the Specified Amount. "Acquisition Lease Financing" means any sale or transfer by the Parent Borrower or any Subsidiary of any Specified Acquired Property that is rented or leased by the Parent Borrower or such Subsidiary so long as (a) the proceeds from such transaction consist solely of cash, (b) such transaction is consummated within 90 days after the completion of the -2- applicable Permitted Acquisition and (c) the proceeds from such transaction are applied as contemplated by Section 2.11(e). "Additional Acquisition Indebtedness" means Indebtedness of Holdings, the Parent Borrower, or, in the case of assumed Indebtedness described in clause (c)(i) below only, a Person that becomes a Subsidiary Loan Party upon completion of the applicable Permitted Acquisition in an aggregate principal amount not to exceed at any time $250,000,000, less the liquidation value of any applicable Qualified Holdings Preferred Stock issued and outstanding pursuant to clause (b) of the definition of Qualified Holdings Preferred Stock, ;provided that (a) such Indebtedness and any related Guarantees shall not be secured by any Lien, (b) such Indebtedness shall be subject to subordination and intercreditor provisions that are no more favorable to the holders or obligees thereof than the subordination or intercreditor provisions attached hereto as Exhibit L in any material respect, (c) (i) such Indebtedness is assumed by virtue of consummation of a Permitted Acquisition or (ii) the proceeds from such Indebtedness shall be used only for Permitted Acquisitions or, pursuant to Section 2.11(e), to repay then outstanding Incremental Term Loans and to pay fees and expenses related to the foregoing, (d) such Indebtedness shall not have any principal payments due prior to the date that is 12 months after the Tranche B Maturity Date, whether at maturity or otherwise, except upon the occurrence of a change of control or similar event (including asset sales), in each case so long as the provisions relating to change of control or similar events (including asset sales) included in the governing instrument of such Indebtedness provide that the provisions of this Agreement must be satisfied prior to the satisfaction of such provisions of such Indebtedness, (e) such Indebtedness bears interest at a fixed rate, which rate shall be, in the good faith judgment of the Parent Borrower's board of directors, consistent with the market at the time of incurrence for similar Indebtedness for comparable issuers or borrowers and (f) after giving effect to the incurrence of such Indebtedness and the use of proceeds thereof as described in clause (c) above, (i) the Leverage Ratio shall be less than the lower of (A) the applicable ratio that Holdings and the Parent Borrower are obligated to maintain at such time pursuant to Section 6.14 minus 0.50 (with any such incurrence that occurs prior to the first testing period under such Section being deemed to have occurred during such first testing period) and (B) 4.25 to 1.00 and (ii) no Default or Event of Default shall have occurred and be continuing. In the case of any assumed Indebtedness described in clause (c)(i) above only, Additional Acquisition Indebtedness shall include the Indebtedness incurred pursuant to any refinancing, refunding, renewal or extension of any such Indebtedness, provided that, (i) the principal amount of any such Indebtedness is not increased above the principal amount thereof outstanding immediately prior to such refinancing, refunding, renewal or extension, (ii) the direct and contingent obligors with respect to such Indebtedness are not changed, (iii) the Indebtedness incurred pursuant to such refinancing, refunding, renewal or extension satisfies the requirements of clauses (a), (b), (d), (e) and (f) above and (iv) the terms of the Indebtedness incurred pursuant to such refinancing, refunding, renewal or extension shall otherwise be no less favorable to the Lenders, in the aggregate, than the terms of such assumed Indebtedness, pro- -3- vided further, that for purposes of the defined term "Specified Prepayment Event", such Additional Acquisition Indebtedness shall not be deemed to be incurred. "Adjusted LIBO Rate" means, with respect to any Eurocurrency Borrowing for any Interest Period, an interest rate per annum (rounded upwards, if necessary, to the next 1/16 of 1%) equal to (a) the LIBO Rate for such Interest Period multiplied by (b) the Statutory Reserve Rate. "Administrative Agent" means Chase, in its capacity as administrative agent for the Lenders hereunder. With respect to Foreign Currency Borrowings, the Administrative Agent may be an Affiliate of Chase for purposes of administering such Borrowings, and all references herein to the term "Administrative Agent" shall be deemed to refer to the Administrative Agent in respect of the applicable Borrowing or to all Administrative Agents, as the context requires. "Administrative Questionnaire" means an Administrative Questionnaire in a form supplied by the Administrative Agent. "Affiliate" means, with respect to a specified Person, another Person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the Person specified. "Alternate Base Rate" means, for any day, a rate per annum equal to the greatest of (a) the Prime Rate in effect on such day, (b) the Base CD Rate in effect on such day plus 1% and (c) the Federal Funds Effective Rate in effect on such day plus 1 1/2 of 1%. Any change in the Alternate Base Rate due to a change in the Prime Rate, the Base CD Rate or the Federal Funds Effective Rate shall be effective from and including the effective date of such change in the Prime Rate, the Base CD Rate or the Federal Funds Effective Rate, respectively. "Applicable Percentage" means, with respect to any Revolving Lender, the percentage of the total Revolving Commitments represented by such Lender's Revolving Commitment. If the Revolving Commitments have terminated or expired, the Applicable Percentages shall be determined based upon the Revolving Commitments most recently in effect, giving effect to any assignments. "Applicable Rate" means, for any day (a) with respect to any Tranche B Term Loan, (i) 3.00% per annum, in the case of an ABR Loan, or (ii) 4.00% per annum, in the case of a Eurocurrency Loan, and (b) with respect to any ABR Loan or Eurocurrency Loan that is a Revolving Loan or a Tranche A Term Loan, or with respect to the commitment fees payable hereunder, as the case may be, the applicable rate per annum set forth below under the caption "ABR Spread", "Eurocurrency Spread" or "Commitment Fee Rate", as the case may be, based upon the Leverage Ratio as of the most recent determination date; provided that up to and in- -4- cluding September 30, 2001, the "Applicable Rate" for purposes of clause (b) shall be the applicable rate per annum set forth below in Category 1:
================================================================================================================== Leverage Ratio: ABR Spread Eurocurrency Spread -------------- ---------- ------------------- - ------------------------------------------------------------------------------------------------------------------ Category 1 Greater than 3.75 to 1.00 2.25% 3.25% - ------------------------------------------------------------------------------------------------------------------ Category 2 ---------- Less than or equal to 3.75 to 1.00 but greater than 3.50 to 1.00 2.00% 3.00% - ------------------------------------------------------------------------------------------------------------------ Category 3 ---------- Less than or equal to 3.50 to 1.00 but greater than 3.00 to 1.00 1.75% 2.75% - ------------------------------------------------------------------------------------------------------------------ Category 4 ---------- Less than or equal to 3.00 to 1.00 but greater than 2.50 1.50% 2.50% - ------------------------------------------------------------------------------------------------------------------ Category 5 ---------- Less than or equal to 2.50 to 1.00 but greater than 2.00 to 1.00 1.25% 2.25% - ------------------------------------------------------------------------------------------------------------------ Category 6 Less than or equal to 2.00 to 1.00 1.00% 2.00% ================================================================================================================== ================================================================================================================== Commitment Fee Rates - ------------------------------------------------------------------------------------------------------------------ Leverage Ratio: High Usage Period Low Usage Period -------------- ----------------- ---------------- - ------------------------------------------------------------------------------------------------------------------ Category 1 Greater than 3.50 to 1.00 .50% .75% - ------------------------------------------------------------------------------------------------------------------ Category 2 ---------- Less than or equal to 3.50 to 1.00 but greater than 3.00 to 1.00 .50% .75% - ------------------------------------------------------------------------------------------------------------------ -5- Category 3 ---------- Less than or equal to 3.00 to 1.00 but greater than 2.50 .50% .75% - ------------------------------------------------------------------------------------------------------------------ Category 4 ---------- Less than or equal to 2.50 to 1.00 but greater than 2.00 to 1.00 .375% .625% - ------------------------------------------------------------------------------------------------------------------ Category 5 Less than or equal to 2.00 to 1.00 .375% .625% ==================================================================================================================
For purposes of the foregoing, (i) the Leverage Ratio shall be determined as of the end of each fiscal quarter of the Parent Borrower's fiscal year based upon Holdings' consolidated financial statements delivered pursuant to Section 5.01(a) or (b) and (ii) each change in the Applicable Rate resulting from a change in the Leverage Ratio shall be effective during the period commencing on and including the date of delivery to the Administrative Agent of such consolidated financial statements indicating such change and ending on the date immediately preceding the effective date of the next such change; provided that the Leverage Ratio shall be deemed to be in Category 1 (A) at any time that an Event of Default has occurred and is continuing or (B) if the Parent Borrower fails to deliver the consolidated financial statements required to be delivered by it pursuant to Section 5.01(a) or (b), during the period from the expiration of the time for delivery thereof until such consolidated financial statements are delivered. The rate per annum for Incremental Term Loans shall be the rate specified, or the rate per annum determined pursuant to a pricing grid specified, in the applicable Incremental Term Loan Activation Notice as agreed to by the Parent Borrower and the applicable Incremental Lenders; provided that if and for so long as the Applicable Rate with respect to any Incremental Term Loans is greater than 0.25% per annum in excess of the then existing Applicable Rate for Tranche B Term Loans, the Applicable Rate for Tranche B Term Loans shall be increased automatically for such period so that the Applicable Rate for such Incremental Term Loans is no greater than 0.25% per annum in excess of the Applicable Rate for Tranche B Term Loans. "Assessment Rate" means, for any day, the annual assessment rate in effect on such day that is payable by a member of the Bank Insurance Fund classified as "well-capitalized" and within supervisory subgroup "B" (or a comparable successor risk classification) within the meaning of 12 C.F.R. Part 327 (or any successor provision) to the Federal Deposit Insurance Corporation for insurance by such Corporation of time deposits made in dollars at the offices of such member in the United States; provided that if, as a result of any change in any law, rule or regulation, it is no longer possible to determine the Assessment -6- Rate as aforesaid, then the Assessment Rate shall be such annual rate as shall be determined by the Administrative Agent to be representative of the cost of such insurance to the Lenders. "Asset Dropdown" means (a) the contribution by Holdings to the Parent Borrower of all of its assets (other than Saturn, the Saturn Subsidiary, the Specified Assets and the Specified Cash and other assets approved by the Administrative Agent) and (b) immediately after completion of such contribution, the execution of the Supplemental Indenture by the parties thereto. "Assignment and Acceptance" means an assignment and acceptance entered into by a Lender and an assignee (with the consent of any party whose consent is required by Section 10.04), and accepted by the Administrative Agent, in the form of Exhibit A or any other form approved by the Administrative Agent. "Assumed Preferred Stock" means any preferred stock or preferred equity interests of any Person that becomes a Subsidiary after the date hereof; provided that (a) such preferred stock or preferred equity interests exists at the time such Person becomes a Subsidiary and is not created in contemplation of or in connection with such Person becoming a Subsidiary and (b) the aggregate liquidation value of all such outstanding preferred stock and preferred equity interests shall not exceed $25,000,000 at any time outstanding, less the aggregate principal amount of Indebtedness incurred pursuant to Section 6.01(a)(xiii). "Available Funds" means collectively, at any time, (a) the amount of cash in the Debenture Account at such time (including proceeds from the issuance of Permitted Subordinated Indebtedness or Equity Interests by Holdings), (b) the amount of unused Revolving Commitments at such time and (c) the amount of proceeds that are unused and available to be obtained from the Permitted Receivables Financing at such time. "Available Funds Date" means each of the Effective Date, October 1, 2002, January 1, 2003, April 1, 2003, July 1, 2003, October 1, 2003 and the Debenture Maturity Date. "Available Funds Reserve Amount" means, with respect to any period, the amount set forth opposite such period in the table below: -7- Period Amount ------ ------ Effective Date - September 30, 2002 $70,000,000 October 1, 2002 - December 31, 2002 $100,000,000 January 1, 2003 - March 31, 2003 $125,000,000 April 1, 2003 - June 30, 2003 $150,000,000 July 1, 2003 - September 30, 2003 $175,000,000 October 1, 2003 - Debenture Maturity Date $205,000,000 Each amount set forth above, with respect to any date, shall be reduced on a dollar-for-dollar basis with respect to such date by the face value of any Convertible Debentures redeemed, converted or repurchased on or prior to such date pursuant to Permitted Debenture Purchases. "Base CD Rate" means the sum of (a) the Three-Month Secondary CD Rate multiplied by the Statutory Reserve Rate plus (b) the Assessment Rate. "Board" means the Board of Governors of the Federal Reserve System of the United States of America. "Borrowing" means (a) Loans of the same Class and Type, made, converted or continued on the same date and, in the case of Eurocurrency Loans, as to which a single Interest Period is in effect, or (b) a Swingline Loan. "Borrowing Request" means a request by the Parent Borrower, a Subsidiary Term Borrower or a Foreign Subsidiary Borrower, as the case may be, for a Borrowing in accordance with Section 2.03. "Business Day" means any day that is not a Saturday, Sunday or other day on which commercial banks in New York City are authorized or required by law to remain closed; provided that (a) when used in connection with any Eurocurrency Loan denominated in dollars or Sterling, the term "Business Day" shall also exclude any day on which banks are not open for dealings in dollar deposits in the London interbank market and (b) when used in connection with any Revolving Loan denominated in Euro, the term "Business Day" shall also exclude any day on which the TARGET payment system is not open for the settlement of payment in Euro. "Calculation Date" means (a) each date on which a Revolving Borrowing is made and (b) the last Business Day of each calendar month. "CAM" shall mean the mechanism for the allocation and exchange of interests in the Credit Facilities and collections thereunder established under Article IX. -8- "CAM Exchange" shall mean the exchange of the Lender's interests provided for in Section 9.01. "CAM Exchange Date" shall mean the date on which (a) any event referred to in paragraph (h) or (i) of Article VII shall occur in respect of Holdings, the Parent Borrower, any Subsidiary Term Borrower or any Foreign Subsidiary Borrower or (b) an acceleration of the maturity of the Loans pursuant to Article VII shall occur. "CAM Percentage" shall mean, as to each Lender, a fraction, expressed as a decimal, of which (a) the numerator shall be the aggregate Dollar Equivalent (determined on the basis of Exchange Rates prevailing on the CAM Exchange Date) of the Specified Obligations owed to such Lender and such Lender's participation in undrawn amounts of Letters of Credit immediately prior to the CAM Exchange Date and (a) the denominator shall be the aggregate Dollar Equivalent (as so determined) of the Specified Obligations owed to all the Lenders and the aggregate undrawn amount of outstanding Letters of Credit immediately prior to such CAM Exchange Date. "Capital Expenditures" means, for any period, without duplication, (a) the additions to property, plant and equipment and other capital expenditures of Holdings, the Parent Borrower and its consolidated Subsidiaries (including the Receivables Subsidiary) that are (or would be) set forth in a consolidated statement of cash flows of Holdings for such period prepared in accordance with GAAP and (b) Capital Lease Obligations incurred by Holdings, the Parent Borrower and its consolidated Subsidiaries (including the Receivables Subsidiary) during such period. "Capital Lease Obligations" of any Person means the obligations of such Person to pay rent or other amounts under any lease of (or other arrangement conveying the right to use) real or personal property, or a combination thereof, which obligations are required to be classified and accounted for as capital leases on a balance sheet of such Person under GAAP, and the amount of such obligations shall be the capitalized amount thereof determined in accordance with GAAP. "Change in Control" means (a) the acquisition of ownership, directly or indirectly, beneficially or of record, by any Person other than Holdings of any Equity Interest in the Parent Borrower; (b) prior to the date of an IPO, either (i) Heartland, together with its Affiliates and the HIP Co-Investors (together with such HIP Co-Investors' Permitted Transferees (as such terms are defined in the Shareholder Agreement as in effect on the date hereof)), shall cease to beneficially own, directly or indirectly, Equity Interests in Holdings representing at least a majority of the aggregate ordinary voting power represented by the issued and outstanding Equity Interests in Holdings, (ii) Heartland and its Affiliates shall cease to beneficially own, directly or indirectly, Equity Interests in Holdings representing at least 30% of each of the aggregate ordinary voting power represented by the issued and outstanding Equity -9- Interests in Holdings or (iii) any Person or group (within the meaning of the Securities Exchange Act of 1934 and the rules of the Securities and Exchange Commission thereunder as in effect on the date hereof) other than Heartland and its Affiliates shall beneficially own at any time, directly or indirectly (without giving effect, for avoidance of doubt, to shares owned by Heartland and its Affiliates), a greater percentage of the aggregate ordinary voting power of Holdings than the aggregate ordinary voting power of Holdings that is beneficially owned at such time, directly or indirectly (without giving effect, for avoidance of doubt, to shares owned by such Person), by Heartland and its Affiliates; (c) on or after an IPO, the acquisition of beneficial ownership, directly or indirectly, by any Person or group (within the meaning of the Securities Exchange Act of 1934 and the rules of the Securities and Exchange Commission thereunder as in effect on the date hereof) other than Heartland and its Affiliates, of Equity Interests representing more than 25% of either the aggregate ordinary voting power represented by the issued and outstanding Equity Interests in Holdings and such Person or group beneficially owns at such time, directly or indirectly (without giving effect, for avoidance of doubt, to shares owned by Heartland and its Affiliates), a greater percentage of the aggregate ordinary voting power of Holdings than the aggregate ordinary voting power of Holdings that is beneficially owned at such time, directly or indirectly (without giving effect, for avoidance of doubt, to shares owned by such Person), by Heartland and its Affiliates; (d) occupation of a majority of the seats on the board of directors of Holdings by Persons who were not nominated by Heartland and its Affiliates; or (e) the occurrence of any change in control (or similar event, however denominated) with respect to Holdings or the Parent Borrower under (i) any indenture or agreement in respect of Material Indebtedness to which Holdings, the Parent Borrower or any Subsidiary is a party, (ii) any instrument governing any preferred stock of Holdings, the Parent Borrower or any Subsidiary having a liquidation value or redemption value in excess of $15,000,000 or (iii) the Permitted Receivables Financing. "Change in Law" means (a) the adoption of any law, rule or regulation after the date of this Agreement, (b) any change in any law, rule or regulation or in the interpretation or application thereof by any Governmental Authority after the date of this Agreement or (c) compliance by any Lender or the Issuing Bank (or, for purposes of Section 2.15(b), by any lending office of such Lender or by such Lender's or the Issuing Bank's holding company, if any) with any request, guideline or directive (whether or not having the force of law) of any Governmental Authority made or issued after the date of this Agreement. "Chase" means The Chase Manhattan Bank. "Class", when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are Revolving Loans, Tranche A Term Loans, Tranche B Term Loans, Incremental Term Loans or Swingline Loans and, when used in reference to any Commitment, refers to whether such Commitment is a Revolving Commitment, Tranche A Commitment, Tranche B Commitment or Incremental Commitment. -10- "Code" means the Internal Revenue Code of 1986, as amended from time to time. "Collateral" means any and all "Collateral", as defined in any applicable Security Document. "Collateral Agent" means Chase, in its capacity as collateral agent for the Lenders under the Security Documents. With respect to Foreign Currency Borrowings, the Collateral Agent may be an Affiliate of Chase, for purposes of administering the collateralization of such Borrowings, and all references herein to the term "Collateral Agent" shall be deemed to refer to the Collateral Agent in respect of the applicable Borrowing or to all Collateral Agents, as the context requires. "Collateral Assignment" means the Collateral Assignment substantially in the form of Exhibit C-1, made by Holdings in favor of the Collateral Agent for the benefit of the Secured Parties. "Collateral and Guarantee Requirement" means the requirement that: (a) the Collateral Agent shall have received from each party thereto (other than the Collateral Agent) either (i) a counterpart of (A) the Guarantee Agreement, (B) the Indemnity, Subrogation and Contribution Agreement, (C) the Pledge Agreement, (D) the Security Agreement, (E) the Collateral Assignment and (F) the Consent Agreement, in each case duly executed and delivered on behalf of such Loan Party and (in case of the Consent Agreement) Masco or (ii) in the case of any Person that becomes a Loan Party after the Effective Date, a supplement to each of the Guarantee Agreement, the Indemnity, Subrogation and Contribution Agreement, the Pledge Agreement and the Security Agreement, in each case in the form specified therein, duly executed and delivered on behalf of such Loan Party; (b) all outstanding Equity Interests of the Parent Borrower and each Subsidiary (including the Receivables Subsidiary) owned by or on behalf of any Loan Party shall have been pledged pursuant to the Pledge Agreement (except that the Loan Parties shall not be required to pledge more than 65% of the outstanding voting Equity Interests of any Foreign Subsidiary, it being understood that this exception shall not limit the application of the Foreign Security Collateral and Guarantee Requirement) and the Collateral Agent shall have received certificates or other instruments representing all such Equity Interests, together with stock powers or other instruments of transfer with respect thereto endorsed in blank; (c) all Indebtedness of Holdings, the Parent Borrower and each Subsidiary in an aggregate principal amount that exceeds $500,000 that is owing to any Loan -11- Party shall be evidenced by a promissory note and shall have been pledged pursuant to the Pledge Agreement and the Collateral Agent shall have received all such promissory notes, together with instruments of transfer with respect thereto endorsed in blank; (d) all documents and instruments, including Uniform Commercial Code financing statements, required by law or reasonably requested by the Collateral Agent to be filed, registered or recorded to create the Liens intended to be created by the Security Agreement, the Pledge Agreement and the Collateral Assignment and perfect such Liens to the extent required by, and with the priority required by, the Security Agreement, the Pledge Agreement and the Collateral Assignment, shall have been filed, registered or recorded or delivered to the Collateral Agent for filing, registration or recording; (e) the Collateral Agent shall have received (i) counterparts of a Mortgage with respect to each Mortgaged Property duly executed and delivered by the record owner of such Mortgaged Property, (ii) a policy or policies of title insurance issued by a nationally recognized title insurance company insuring the Lien of each such Mortgage as a valid first Lien on the Mortgaged Property described therein, free of any other Liens except as expressly permitted by Section 6.02, together with such endorsements, coinsurance and reinsurance as the Administrative Agent or the Required Lenders may reasonably request, and (iii) such surveys, abstracts, appraisals, legal opinions and other documents as the Administrative Agent or the Required Lenders may reasonably request with respect to any such Mortgage or Mortgaged Property; and (f) each Loan Party (other than the Foreign Subsidiary Borrowers) shall have obtained all consents and approvals required to be obtained by it in connection with the execution and delivery of all Security Documents to which it is a party, the performance of its obligations thereunder and the granting by it of the Liens thereunder. "Commitment" means a Revolving Commitment, Tranche A Commitment, Tranche B Commitment or Incremental Commitment, or any combination thereof (as the context requires). "Compac Event" means the damage to any property owned by Compac Corporation and its subsidiaries resulting from floods occurring in August, 2000. "Consent Agreement" means the Consent Agreement substantially in the form of Exhibit C-2, among Masco, Holdings and the Collateral Agent for the benefit of the Secured Parties. -12- "Consolidated Cash Interest Expense" means, for any period, the excess of (a) the sum, without duplication, of (i) the interest expense (including imputed interest expense in respect of Capital Lease Obligations) of Holdings, the Parent Borrower and the Subsidiaries (including the Receivables Subsidiary) for such period, determined on a consolidated basis in accordance with GAAP, (ii) any interest accrued during such period in respect of Indebtedness of Holdings, the Parent Borrower or any Subsidiary (including the Receivables Subsidiary) that is required to be capitalized rather than included in consolidated interest expense for such period in accordance with GAAP, plus (iii) any cash payments made during such period in respect of obligations referred to in clause (b)(iii) below that were amortized or accrued in a previous period, plus (iv) interest-equivalent costs associated with any Permitted Receivables Financing, whether accounted for as interest expense or loss on the sale of receivables minus (b) the sum of, without duplication, (i) interest income of Holdings, the Parent Borrower and the Subsidiaries (including the Receivables Subsidiary) for such period, determined on a consolidated basis in accordance with GAAP, (ii) to the extent included in such consolidated interest expense for such period, noncash amounts attributable to amortization of financing costs paid in a previous period, plus (iii) to the extent included in such consolidated interest expense for such period, noncash amounts attributable to amortization of debt discounts or accrued interest payable in kind for such period, plus (iv) to the extent included in such consolidated interest expense for such period, all financing fees incurred in connection with the Transactions. For purposes of calculating Consolidated Cash Interest Expense for each of the four-fiscal-quarter periods ending December 31, 2000, March 31, 2001 and June 30, 2001, Consolidated Cash Interest Expense for such four-fiscal-quarter period shall equal Consolidated Cash Interest Expense for the period commencing October 1, 2000 and ending on (a) December 31, 2000, multiplied by 4, (b) March 31, 2001, multiplied by 2 and (c) June 30, 2001, multiplied by 4/3. "Consolidated EBITDA" means, for any period, Consolidated Net Income for such period plus (a) without duplication and to the extent deducted in determining such Consolidated Net Income, the sum of (i) consolidated interest expense for such period, (ii) consolidated income tax expense for such period (including all single business tax expenses imposed by state law), (iii) all amounts attributable to depreciation and amortization for such period, (iv) any extraordinary noncash charges for such period, (v) all management fees and other fees paid during such period to Heartland and/or its Affiliates pursuant to the Heartland Management Agreement to the extent permitted by Section 6.09, (vi) all payments made during and expenses recorded in such period in respect of the Restricted Stock Obligation and all items expensed at the Effective Date in respect of Restricted Stock Awards, (vii) any losses incurred during such period in connection with the sale of receivables pursuant to the Permitted Receivables Financing, (viii) all extraordinary losses during such period, (ix) noncash expenses during such period resulting from the grant of Equity Interests to management and employees of Holdings, the Parent Borrower or any of the Subsidiaries, (x) the aggregate amount of deferred financing expenses for such period, (xi) all other noncash expenses or losses of -13- Holdings, the Parent Borrower or any of the Subsidiaries for such period (excluding any such charge that constitutes an accrual of or a reserve for cash charges for any future period), (xii) any nonrecurring fees, expenses or charges realized by Holdings, the Parent Borrower or any of the Subsidiaries for such period related to any offering of Equity Interests or incurrence of Indebtedness, (xiii) with respect to any four-fiscal-quarter period ending prior to or on December 31, 2001, operating expense and other expense reductions and other synergistic benefits relating to the Transactions, not to exceed the applicable Excluded Amount for such period, (xiv) Excluded Severance Charges for such period, (xv) fees and expenses in connection with the Transactions that are expensed and (xvi) any nonrecurring costs and expenses arising from the integration of any business acquired pursuant to any Permitted Acquisition; provided that the aggregate amount of costs and expenses that may be included in Consolidated EBITDA pursuant to this clause (xvi) during the term of this Agreement shall not exceed $5,000,000 and minus (b) without duplication and to the extent included in determining such Consolidated Net Income, any extraordinary gains for such period, all determined on a consolidated basis in accordance with GAAP. For purposes of calculating Consolidated EBITDA for each of the four-fiscal-quarter periods ending December 31, 2000, March 31, 2001, and June 30, 2001, Consolidated EBITDA for such four-fiscal-quarter period shall equal Consolidated EBITDA for the period commencing on October 1, 2000 and ending on (a) December 31, 2000, plus $240,500,000, (b) March 31, 2001, plus $154,800,000 and (c) June 30, 2001, plus $74,000,000. "Consolidated Lease Expense" shall mean, for any period, all rental expenses of Holdings, the Parent Borrower and the Subsidiaries (including the Receivables Subsidiary) during such period under operating leases for real or personal property, excluding real estate taxes, insurance costs and common area maintenance charges and net of sublease income, other than Capitalized Lease Obligations, all as determined on a consolidated basis in accordance with GAAP. "Consolidated Net Income" means, for any period, the net income or loss of Holdings, the Parent Borrower and the Subsidiaries (including the Receivables Subsidiary) for such period determined on a consolidated basis in accordance with GAAP; provided that there shall be excluded (a) the income of any Person (other than the Parent Borrower) in which any other Person (other than the Parent Borrower or any Subsidiary or any director holding qualifying shares in compliance with applicable law) owns an Equity Interest, except to the extent of the amount of dividends or other distributions actually paid to the Parent Borrower or any of the Subsidiaries during such period, and (b) the income or loss of any Person accrued prior to the date it becomes a Subsidiary or is merged into or consolidated with the Parent Borrower or any Subsidiary or the date that such Person's assets are acquired by the Parent Borrower or any Subsidiary. -14- "Control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ability to exercise voting power, by contract or otherwise. "Controlling" and "Controlled" have meanings correlative thereto. "Conversion Right" means the right of the Debenture Holders after the Merger to convert their Convertible Debentures into the amount of cash that the Debenture Holders would have received if such Convertible Debentures had been converted into common stock of Holdings immediately prior to the Merger, as provided in Section 3.06 of the Convertible Debentures Indenture. "Convertible Debentures" means the 4-1/2% Convertible Subordinated Debentures of Holdings issued under the Convertible Debentures Indenture in an aggregate principal amount not greater than $305,000,000, which after the Asset Dropdown will become joint and several obligations of the Parent Borrower and Holdings. "Convertible Debentures Indenture" means the Indenture dated as of November 1, 1986, between Holdings and Morgan Guaranty Trust Company of New York, as amended by the two Supplemental Indentures dated the Effective Date. "Credit Facility" means a category of Commitments and extensions of credit thereunder. "Debenture Account" means an account established with the Administrative Agent in the name of the Administrative Agent and for the benefit of the Lenders having the terms specified in Exhibit D, all proceeds in which will be used to defease, redeem, repay or repurchase or otherwise retire Convertible Debentures as specified in this Agreement. "Debenture Holders" means the holders of record, from time to time, of the Convertible Debentures. "Debenture Maturity Date" means December 15, 2003. "Default" means any event or condition which constitutes an Event of Default or which upon notice, lapse of time or both would, unless cured or waived, become an Event of Default. "Deferred Amount" means the amount representing the portion of the Merger Consideration to be paid after the Effective Date in accordance with the Recapitalization Agreement to holders of options to acquire common stock of Holdings existing immediately prior to the Merger; provided that such entire amount shall be placed in escrow on the Effec- -15- tive Date with the Administrative Agent in a manner satisfactory to the Administrative Agent and the Parent Borrower. "Disclosed Matters" means the actions, suits and proceedings and the environmental matters disclosed in Schedule 3.06. "dollars" or "$" refers to lawful money of the United States of America. "Dollar Equivalent" means, on any date of determination, (a) with respect to any amount in dollars, such amount, and (b) with respect to any amount in any Foreign Currency, the equivalent in dollars of such amount, determined by the Administrative Agent pursuant to Section 1.05(b) using the Exchange Rate with respect to such Foreign Currency at the time in effect under the provisions of such Section. "Domestic Loan Party" means any Loan Party, other than the Foreign Subsidiary Borrowers. "Effective Date" means the date on which the conditions specified in Section 4.01 are satisfied (or waived in accordance with Section 10.02). "EMU Legislation" means the legislative measures of the European Union for the introduction of, changeover to or operation of the Euro in one or more member states. "Environmental Laws" means all laws, rules, regulations, codes, ordinances, orders, decrees, judgments, injunctions, notices or binding agreements issued, promulgated or entered into by any Governmental Authority, relating in any way to the environment, preservation or reclamation of natural resources, the management, Release or threatened Release of any Hazardous Material or to health and safety matters. "Environmental Liability" means any liabilities, obligations, damages, losses, claims, actions, suits, judgments, or orders, contingent or otherwise (including any liability for damages, costs of environmental remediation, costs of administrative oversight, fines, natural resource damages, penalties or indemnities), of Holdings, the Parent Borrower or any Subsidiary (including the Receivables Subsidiary) directly or indirectly resulting from or relating to (a) compliance or non-compliance with any Environmental Law, (b) the generation, use, handling, transportation, storage, treatment or disposal of any Hazardous Materials, (c) any actual or alleged exposure to any Hazardous Materials, (d) the Release or threatened Release of any Hazardous Materials or (e) any contract, agreement or other consensual arrangement pursuant to which liability is assumed or imposed with respect to any of the foregoing. "Equity Contribution" means the contribution by the Investors of not less than $433,200,000 in cash to Merger Subsidiary as common equity. -16- "Equity Interests" means shares of capital stock, partnership interests, membership interests in a limited liability company, beneficial interests in a trust or other equity ownership interests in a Person or any warrants, options or other rights to acquire such interests. "Equity Rollover" means the issuance of common stock of Holdings on the Effective Date to the Continuing Shareholders (as defined in the Recapitalization Agreement) or their permitted transferees under the Exchange and Voting Agreement (as defined in the Recapitalization Agreement), in each case pursuant to and in accordance with Section 2.04(d) of the Recapitalization Agreement. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time. "ERISA Affiliate" means any trade or business (whether or not incorporated) that, together with the Parent Borrower, is treated as a single employer under Section 414(b) or (c) of the Code or, solely for purposes of Section 302 of ERISA and Section 412 of the Code, is treated as a single employer under Section 414 of the Code. "ERISA Event" means (a) any "reportable event", as defined in Section 4043 of ERISA or the regulations issued thereunder with respect to a Plan (other than an event for which the 30-day notice period is waived); (b) the existence with respect to any Plan of an "accumulated funding deficiency" (as defined in Section 412 of the Code or Section 302 of ERISA), whether or not waived; (c) the filing pursuant to Section 412(d) of the Code or Section 303(d) of ERISA of an application for a waiver of the minimum funding standard with respect to any Plan; (d) the incurrence by the Parent Borrower or any of its ERISA Affiliates of any liability under Title IV of ERISA with respect to the termination of any Plan; (e) the receipt by the Parent Borrower or any ERISA Affiliate from the PBGC or a plan administrator of any notice relating to an intention to terminate any Plan or Plans or to appoint a trustee to administer any Plan; (f) the incurrence by the Parent Borrower or any of its ERISA Affiliates of any liability with respect to the withdrawal or partial withdrawal from any Plan or Multiemployer Plan; or (g) the receipt by the Parent Borrower or any ERISA Affiliate of any notice, or the receipt by any Multiemployer Plan from the Parent Borrower or any ERISA Affiliate of any notice, concerning the imposition of Withdrawal Liability or a determination that a Multiemployer Plan is, or is expected to be, insolvent or in reorganization, within the meaning of Title IV of ERISA. "Euro" or "Eurodollar symbol" means the single currency of the European Union as constituted by the Treaty on European Union and as referred to in the EMU Legislation. "Eurocurrency", when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are bearing interest at a rate determined by reference to the Adjusted LIBO Rate. -17- "Event of Default" has the meaning assigned to such term in Article VII. "Excess Cash Flow" means, for any fiscal year, the sum (without duplication) of: (a) the consolidated net income (or loss) of Holdings, the Parent Borrower and its consolidated Subsidiaries (including the Receivables Subsidiary) for such fiscal year, adjusted to exclude any gains or losses attributable to Prepayment Events; plus (b) the excess, if any, of the Net Proceeds received during such fiscal year by Holdings, the Parent Borrower and its consolidated Subsidiaries (including the Receivables Subsidiary) in respect of any Prepayment Events over the aggregate principal amount of Term Loans prepaid pursuant to Section 2.11(d) in respect of such Net Proceeds; plus (c) depreciation, amortization and other noncash charges or losses deducted in determining such consolidated net income (or loss) for such fiscal year; plus (d) the sum of (i) the amount, if any, by which Net Working Capital (adjusted to exclude changes arising from Permitted Acquisitions) decreased during such fiscal year plus (ii) the net amount, if any, by which the consolidated deferred revenues and other consolidated accrued long-term liability accounts of Holdings, the Parent Borrower and its consolidated Subsidiaries (including the Receivables Subsidiary) (adjusted to exclude changes arising from Permitted Acquisitions) increased during such fiscal year plus (iii) the net amount, if any, by which the consolidated accrued long-term asset accounts of Holdings, Parent Borrower and its consolidated Subsidiaries (including the Receivables Subsidiary) (adjusted to exclude changes arising from Permitted Acquisitions) decreased during such fiscal year; minus (e) the sum of (i) any noncash gains included in determining such consolidated net income (or loss) for such fiscal year plus (ii) the amount, if any, by which Net Working Capital (adjusted to exclude changes arising from Permitted Acquisitions) increased during such fiscal year plus (iii) the net amount, if any, by which the consolidated deferred revenues and other consolidated accrued long-term liability accounts of Holdings, the Parent Borrower and its consolidated Subsidiaries (including the Receivables Subsidiary) (adjusted to exclude changes arising from Permitted Acquisitions) decreased during such fiscal year plus (iv) the net amount, if any, by which the consolidated accrued long-term asset accounts of Holdings, the Parent Borrower and its consolidated Subsidiaries (including the Receivables Subsidiary) (adjusted to exclude changes arising from Permitted Acquisitions) increased during such fiscal year; minus -18- (f) the sum of (i) Capital Expenditures for such fiscal year (except to the extent attributable to the incurrence of Capital Lease Obligations or otherwise financed by incurring Long-Term Indebtedness) plus (ii) cash consideration paid during such fiscal year to make acquisitions or other capital investments (except to the extent financed by incurring Long-Term Indebtedness); minus (g) the aggregate principal amount of Long-Term Indebtedness repaid or prepaid by Holdings, the Parent Borrower and its consolidated Subsidiaries (including the Receivables Subsidiary) during such fiscal year, excluding (i) Indebtedness in respect of Revolving Loans and Letters of Credit, (ii) Term Loans prepaid pursuant to Section 2.11(c) or (d), and (iii) repayments or prepayments of Long-Term Indebtedness financed by incurring other Long-Term Indebtedness; minus (h) commencing with the fiscal year ending December 31, 2002, the aggregate principal amount of Indebtedness in respect of Revolving Loans repaid or prepaid by the Parent Borrower or any Foreign Subsidiary Borrower after July 1, 2002, to the extent that the unused portion of Revolving Commitments arising as a result of such repayment or prepayment is reserved as Available Funds pursuant to Section 5.15; minus (i) the noncash impact of currency translations and other adjustments to the equity account, including adjustments to the carrying value of marketable securities and to pension liabilities, in each case to the extent such items would otherwise constitute Excess Cash Flow; minus (j) the Net Proceeds, to the extent such Net Proceeds would otherwise constitute Excess Cash Flow, arising from the exercise of options resulting from the payment of the Deferred Amount in respect of such options. "Exchange Rate" means on any day, with respect to any Foreign Currency, the rate at which such Foreign Currency may be exchanged into dollars, as set forth at approximately 11:00 a.m., London time, on such day on the Reuters World Currency Page for such Foreign Currency. In the event that such rate does not appear on any Reuters World Currency Page, the Exchange Rate shall be determined by reference to such other publicly available service for displaying exchange rates as may be agreed upon by the Administrative Agent and the Parent Borrower, or, in the absence of such agreement, such Exchange Rate shall instead be the arithmetic average of the spot rates of exchange of the Administrative Agent in the market where its foreign currency exchange operations in respect of such Foreign Currency are then being conducted, at or about 10:00 a.m., local time, on such date for the purchase of dollars for delivery two Business Days later; provided that if at the time of any such determination, for any reason, no such spot rate is being quoted, the Administrative Agent, after con- -19- sultation with the Parent Borrower, may use any reasonable method it deems appropriate to determine such rate, and such determination shall be conclusive absent manifest error. "Excluded Amount" means, with respect to any fiscal period ending on the date specified below, the amount set forth opposite such date: Date Amount ---- ------ December 31, 2000 $15,000,000 March 31, 2001 $15,000,000 June 30, 2001 $12,500,000 September 20, 2001 $10,000,000 December 31, 2001 $ 7,500,000 "Excluded Severance Charges" means any nonrecurring severance or similar costs relating to the termination of employment of any employees arising during any four-fiscal-quarter period ending on or prior to December 31, 2003, not to exceed in the aggregate for all such periods $12,500,000. "Excluded Taxes" means, with respect to the Administrative Agent, any Lender, the Issuing Bank or any other recipient of any payment to be made by or on account of any obligation of the Parent Borrower, the Subsidiary Term Borrowers or any Foreign Subsidiary Borrower hereunder, (a) income or franchise taxes imposed on (or measured by) its net income by the United States of America, or by the jurisdiction under the laws of which such recipient is organized or in which its principal office is located or, in the case of any Lender, in which its applicable lending office is located, (b) any branch profits Taxes imposed by the United States of America or any similar Tax imposed by any other jurisdiction described in clause (a) above and (c) in the case of a Foreign Lender (other than an assignee pursuant to a request by the Parent Borrower under Section 2.19(b)), (i) any United States withholding Tax that is in effect and would apply to amounts payable to such Foreign Lender at the time such Foreign Lender becomes a party to this Agreement (or designates a new lending office), except to the extent that such Foreign Lender (or its assignor, if any) was entitled, at the time of designation of a new lending office (or assignment), to receive additional amounts from the Parent Borrower with respect to any United States withholding Tax pursuant to Section 2.17(a) and (ii) any withholding Tax that is attributable to such Foreign Lenders' failure to comply with Section 2.17(e). "Existing Letters of Credit" means the letters of credit issued prior to and outstanding as of the Effective Date, which are listed on Schedule 1.01(a). "Federal Funds Effective Rate" means, for any day, the weighted average (rounded upwards, if necessary, to the next 1/100 of 1%) of the rates on overnight Federal -20- funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so published for any day that is a Business Day, the average (rounded upwards, if necessary, to the next 1/100 of 1%) of the quotations for such day for such transactions received by the Administrative Agent from three Federal funds brokers of recognized standing selected by it. "Financial Officer" means the chief financial officer, principal accounting officer, treasurer or controller of the Parent Borrower. "Financing Transactions" means (a) the execution, delivery and performance by each Loan Party of the Loan Documents to which it is to be a party, the borrowing of Loans, the use of the proceeds thereof and the issuance of Letters of Credit hereunder, (b) the execution, delivery and performance by the Receivables Subsidiary and each other party thereto of the Permitted Receivables Documents and the use of the proceeds thereof and (c) the Equity Contribution. "Foreign Currencies" means Euro and Sterling. "Foreign Currency Commitment" means, with respect to each Revolving Lender, the commitment of such Revolving Lender to make Foreign Currency Loans and to acquire participations in Foreign Currency Letters of Credit, expressed as an amount representing the maximum aggregate amount of such Revolving Lender's Foreign Currency Exposure hereunder, as such commitment may be reduced from time to time pursuant to Section 2.08 and (b) reduced or increased from time to time pursuant to assignments by or to such Revolving Lender pursuant to Section 10.04. The initial amount of each Revolving Lender's Foreign Currency Commitment is set forth on Schedule 2.01, or in the Assignment and Acceptance pursuant to which such Revolving Lender shall have assumed its Foreign Currency Commitment, as applicable. The initial aggregate amount of the Revolving Lenders' Foreign Currency Commitments is the Dollar Equivalent of $75,000,000. "Foreign Currency Exposure" means, with respect to any Revolving Lender at any time, the Dollar Equivalent of the sum of the outstanding principal amount of such Lender's Foreign Currency Loans and its Foreign Currency LC Exposure at such time. "Foreign Currency LC Exposure" means, at any time, the sum of (a) the aggregate undrawn amount of all outstanding Foreign Currency Letters of Credit at such time plus (b) the aggregate amount of all LC Disbursements in respect of Foreign Currency Letters of Credit that have not yet been reimbursed by or on behalf of the Foreign Subsidiary Borrowers at such time. The Foreign Currency LC Exposure of any Revolving Lender at any time shall be its Applicable Percentage of the total Foreign Currency LC Exposure at such time. -21- "Foreign Currency Letter of Credit" means a Letter of Credit denominated in a Foreign Currency. "Foreign Currency Loan" means a Revolving Loan denominated in a Foreign Currency. "Foreign Lender" means any Lender that is organized under the laws of a jurisdiction other than that in which the Parent Borrower or any Foreign Subsidiary Borrower, as the case may be, is located. For purposes of this definition, the United States of America, each State thereof and the District of Columbia shall be deemed to constitute a single jurisdiction. "Foreign Security Collateral and Guarantee Requirement" means the requirement that: (a) the Collateral Agent shall have received from the applicable Foreign Subsidiary Borrower and its subsidiaries a counterpart of each Foreign Security Document relating to the assets (including the capital stock of its subsidiaries) of such Foreign Subsidiary Borrower, excluding assets as to which the Collateral Agent shall determine in its reasonable discretion, after consultation with the Parent Borrower, that the costs and burdens of obtaining a security interest are excessive in relation to the value of the security afforded thereby; (b) all documents and instruments (including legal opinions) required by law or reasonably requested by the Collateral Agent to be filed, registered or recorded to create the Liens intended to be created over the assets specified in clause (a) above and perfect such Liens to the extent required by, and with priority required by, such Foreign Security Documents, shall have been filed, registered or recorded or delivered to the Collateral Agent for filing, registration or recording; (c) such Foreign Subsidiary Borrower and its subsidiaries shall become a guarantor of the obligations under the Loan Documents of other Foreign Subsidiary Borrowers, if any, under a guarantee agreement reasonably acceptable to the Collateral Agent, in either case duly executed and delivered on behalf of such Foreign Subsidiary Borrower and such subsidiaries, except that such guarantee shall not be required if the Collateral Agent shall determine in its reasonable discretion, after consultation with the Parent Borrower, that the benefits of such a guarantee are limited and such limited benefits are not justified in relation to the burdens imposed by such guarantee on the Parent Borrower and its Subsidiaries; and (d) such Foreign Subsidiary Borrower shall have obtained all consents and approvals required to be obtained by it in connection with the execution of such For- -22- eign Security Documents, the performance and obligations thereunder and the granting by it of the Liens thereunder. "Foreign Security Documents" means any agreement or instrument entered into by any Foreign Subsidiary Borrower that is reasonably requested by the Collateral Agent providing for a Lien over the assets (including shares of other Subsidiaries) of such Foreign Subsidiary Borrower. "Foreign Subsidiary" means any Subsidiary that is organized under the laws of a jurisdiction other than the United States of America or any State thereof or the District of Columbia. "Foreign Subsidiary Borrowers" means any wholly owned Foreign Subsidiary of the Parent Borrower organized under the laws of England and Wales, any member nation of the European Union or any other nation in Europe reasonably acceptable to the Collateral Agent that becomes a party to this Agreement pursuant to Section 2.21. "Foreign Subsidiary Borrowing Agreement" means an agreement substantially in the form of Exhibit E. "GAAP" means generally accepted accounting principles in the United States of America. "Governmental Authority" means the government of the United States of America, any other nation or any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government. "Guarantee" of or by any Person (the "guarantor") means any obligation, contingent or otherwise, of the guarantor guaranteeing or having the economic effect of guaranteeing any Indebtedness or other obligation of any other Person (the "primary obligor") in any manner, whether directly or indirectly, and including any obligation of the guarantor, direct or indirect, (a) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other obligation or to purchase (or to advance or supply funds for the purchase of) any security for the payment thereof, (b) to purchase or lease property, securities or services for the purpose of assuring the owner of such Indebtedness or other obligation of the payment thereof, (c) to maintain working capital, equity capital or any other financial statement condition or liquidity of the primary obligor so as to enable the primary obligor to pay such Indebtedness or other obligation or (d) as an account party in respect of any letter of credit or letter of guaranty issued to support such Indebtedness or obligation; provided, that -23- the term Guarantee shall not include endorsements for collection or deposit in the ordinary course of business. "Guarantee Agreement" means the Guarantee Agreement, substantially in the form of Exhibit F, made by Holdings, the Parent Borrower and the Subsidiary Loan Parties party thereto in favor of the Collateral Agent for the benefit of the Secured Parties. "Hazardous Materials" means all explosive, radioactive, hazardous or toxic substances, wastes or other pollutants, including petroleum or petroleum distillates, asbestos or asbestos containing materials, polychlorinated biphenyls, radon gas, infectious or medical wastes and all other substances or wastes of any nature regulated pursuant to any Environmental Law. "Heartland" means Heartland Industrial Partners, L.P., a Delaware limited partnership. "Heartland Management Agreement" means the monitoring agreement dated as of the Effective Date between Heartland and Holdings. "Hedging Agreement" means any interest rate protection agreement, foreign currency exchange agreement, commodity price protection agreement or other interest or currency exchange rate or commodity price hedging arrangement. "High Usage Period" means any day that the unused amount of Revolving Commitments is less than 50% of the Revolving Commitments. "HIP Co-Investor" means a shareholder of Holdings that is a limited partner, or an Affiliate of a limited partner, in Heartland or in any other fund or investment vehicle established or managed by Heartland or an Affiliate of Heartland and shall in any event include those Persons constituting HIP Co-Investors under the Shareholder Agreement on the Effective Date. "Holdings" means MascoTech, Inc., a Delaware corporation. "Holdings Preferred Dividends" means (a) dividend payments due in respect of the Holdings Preferred Stock pursuant to Article 4(c)(2) of Holdings' Certificate of Designation and (b) any cash dividend payments in respect of any Qualified Holdings Preferred Stock. "Holdings Preferred Stock" means the Series A Preferred Stock issued by Holdings, having an aggregate liquidation value of $36,100,100 and the other terms specified in Holdings' Certificate of Incorporation. -24- "Incremental Lenders" means (a) on any Incremental Term Loan Activation Date, the Lenders signatory to the Incremental Term Loan Activation Notice and (b) thereafter, each Lender that has made, or acquired pursuant to an assignment made pursuant to Section 10.04, an Incremental Term Loan. "Incremental Maturity Date" means, as to the Incremental Term Loans to be made pursuant to any Incremental Term Loan Activation Notice, the maturity date specified in such Incremental Term Loan Activation Notice, which date shall be a date at least 91 days after the Tranche B Maturity Date. "Incremental Term Loan Activation Date" means each date, which shall be a Business Day on or before the Incremental Term Loan Termination Date, on which any Lender shall execute and deliver to the Administrative Agent an Incremental Term Loan Activation Notice pursuant to Section 2.01(b). "Incremental Term Loan Activation Notice" means a notice substantially in the form of Exhibit G. "Incremental Term Loan Amount" means, as to each Incremental Lender, on and after the effectiveness of any Incremental Term Loan Activation Notice, the obligation of such Incremental Lender to make Incremental Term Loans hereunder in a principal amount equal to the amount set forth under the heading "Incremental Term Loan Amount" opposite such Incremental Lender's name on such Incremental Term Loan Activation Notice. "Incremental Term Loan Effective Date" means each date, which shall be a Business Day on or before the Incremental Term Loan Termination Date, designated as such in an Incremental Term Loan Activation Notice. "Incremental Term Loans" means a Loan made pursuant to clause (b) of Section 2.01. "Incremental Term Loan Termination Date" means the Tranche B Maturity Date. "Indebtedness" of any Person means, without duplication, (a) all obligations of such Person for borrowed money or with respect to advances of any kind, (b) all obligations of such Person evidenced by bonds, debentures, notes or similar instruments, (c) all obligations of such Person upon which interest charges are customarily paid, (d) all obligations of such Person under conditional sale or other title retention agreements relating to property acquired by such Person, (e) all obligations of such Person in respect of the deferred purchase price of property or services (excluding current accounts payable incurred in the ordinary course of business), (f) all Indebtedness of others secured by (or for which the holder of such Indebted- -25- ness has an existing right, contingent or otherwise, to be secured by) any Lien on property owned or acquired by such Person, whether or not the Indebtedness secured thereby has been assumed, (g) all Guarantees by such Person of Indebtedness of others, (h) all Capital Lease Obligations of such Person, (i) all obligations, contingent or otherwise, of such Person as an account party in respect of letters of credit and letters of guaranty and (j) all obligations, contingent or otherwise, of such Person in respect of bankers' acceptances. The Indebtedness of any Person shall include the Indebtedness of any other entity (including any partnership in which such Person is a general partner) to the extent such Person is liable therefor as a result of such Person's ownership interest in or other relationship with such entity, except to the extent the terms of such Indebtedness provide that such Person is not liable therefor. Notwithstanding anything to the contrary in this paragraph, the term "Indebtedness" shall not include (a) the Restricted Stock Obligation, (b) any obligation in respect of the Saturn Proceeds Distribution, (c) any obligations in respect of options or other Equity Interests held by the Pre-Merger Stockholders to the extent surviving the Recapitalization Transactions, (d) agreements providing for indemnification, purchase price adjustments or similar obligations incurred or assumed in connection with the acquisition or disposition of assets or capital stock and (e) trade payables and accrued expenses in each case arising in the ordinary course of business. "Indemnified Taxes" means Taxes other than Excluded Taxes. "Indemnity, Subrogation and Contribution Agreement" means the Indemnity, Subrogation and Contribution Agreement, substantially in the form of Exhibit H, among the Parent Borrower, the Subsidiary Loan Parties party thereto and the Collateral Agent. "Information Memorandum" means the Confidential Information Memorandum dated October, 2000, relating to the Parent Borrower and the Transactions. "Initial Receivables Proceeds" means the proceeds from the Permitted Receivables Financing on the Effective Date in an amount equal to $118,500,000, all of which will be used as part of the Intercompany Transfer. "Initial Revolving Borrowing" means the Revolving Borrowing on the Effective Date not in excess of $16,000,000, all the proceeds of which will be used as part of the Intercompany Transfer, plus such additional amounts satisfactory to the Administrative Agent as necessary to account for increases to Net Working Capital. "Intercompany Transfer" means the dividend or other intercompany distribution on the Effective Date by the Parent Borrower (after giving effect to applicable dividends or other distributions to the Parent Borrower from the Subsidiary Term Borrowers) to Holdings of all of (a) the proceeds from the Term Loan Borrowings and the Initial Revolving Borrowing and (b) the Initial Receivables Proceeds, all of which will be used by Holdings as payment, in part, of the Merger Consideration. -26- "Interest Election Request" means a request by the Parent Borrower, a Subsidiary Term Borrower or a Foreign Subsidiary Borrower, as the case may be, to convert or continue a Revolving Borrowing or Term Borrowing in accordance with Section 2.07. "Interest Payment Date" means (a) with respect to any ABR Loan (other than a Swingline Loan), the last day of each March, June, September and December, (b) with respect to any Eurocurrency Loan, the last day of the Interest Period applicable to the Borrowing of which such Loan is a part and, in the case of a Eurocurrency Borrowing with an Interest Period of more than three months' duration, each day prior to the last day of such Interest Period that occurs at intervals of three months' duration after the first day of such Interest Period, and (c) with respect to any Swingline Loan, the day that such Loan is required to be repaid. "Interest Period" means, with respect to any Eurocurrency Borrowing, the period commencing on the date of such Borrowing and ending on the numerically corresponding day in the calendar month that is one, two, three or six months thereafter (or nine or twelve months thereafter if, at the time of the relevant Borrowing, all Lenders participating therein agree to make an interest period of such duration available), as the Parent Borrower, a Subsidiary Term Borrower or a Foreign Subsidiary Borrower, as the case may be, may elect; provided, that (a) if any Interest Period would end on a day other than a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless such next succeeding Business Day would fall in the next calendar month, in which case such Interest Period shall end on the next preceding Business Day and (b) any Interest Period that commences on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the last calendar month of such Interest Period) shall end on the last Business Day of the last calendar month of such Interest Period. For purposes hereof, the date of a Borrowing initially shall be the date on which such Borrowing is made and thereafter shall be the effective date of the most recent conversion or continuation of such Borrowing. "Interim Period" means the period commencing on the Effective Date and ending on December 31, 2000. "Investors" means Heartland, its Affiliates and the other entities identified by Heartland as "Investors" to the Administrative Agent prior to the date of this Agreement. "IPO" means an underwritten public offering by Holdings of Equity Interests of Holdings pursuant to a registration statement filed with the Securities and Exchange Commission in accordance with the Securities Act of 1933. "Issuing Bank" means Chase, in its capacity as the issuer of Letters of Credit hereunder, and its successors in such capacity as provided in Section 2.05(i). The Issuing Bank may, in its discretion, arrange for one or more Letters of Credit to be issued by Affiliates of the Issuing Bank, including with respect to Foreign Currency Letters of Credit, and in each -27- such case the term "Issuing Bank" shall include any such Affiliate with respect to Letters of Credit issued by such Affiliate. In the event that there is more than one Issuing Bank at any time, references herein and in the other Loan Documents to the Issuing Bank shall be deemed to refer to the Issuing Bank in respect of the applicable Letter of Credit or to all Issuing Banks, as the context requires. Notwithstanding the foregoing, each institution listed in Schedule 1.01(a) shall be deemed to be an Issuing Bank with respect to the Existing Letters of Credit issued by it. "Judgment Currency" has the meaning set forth in Section 10.14. "Judgment Currency Conversion Date" has the meaning set forth in Section 10.14. "LC Disbursement" means a payment made by the Issuing Bank pursuant to a Letter of Credit. "LC Exposure" means, at any time, the sum of (a) the aggregate undrawn amount of all outstanding Letters of Credit at such time plus (b) the aggregate amount of all LC Disbursements that have not yet been reimbursed by or on behalf of the Parent Borrower or the Foreign Subsidiary Borrowers, as the case may be, at such time. The LC Exposure of any Revolving Lender at any time shall be its Applicable Percentage of the total LC Exposure at such time. "LC Reserve Account" has the meaning set forth in Section 9.02(a). "Lender Affiliate" means, (a) with respect to any Lender, (i) an Affiliate of such Lender or (ii) any entity (whether a corporation, partnership, trust or otherwise) that is engaged in making, purchasing, holding or otherwise investing in bank loans and similar extensions of credit in the ordinary course of its business and is administered or managed by a Lender or an Affiliate of such Lender and (b) with respect to any Lender that is a fund that invests in bank loans and similar extensions of credit, any other fund that invests in bank loans and similar extensions of credit and is managed by the same investment advisor as such Lender or by an Affiliate of such investment advisor. "Lenders" means the Persons listed on Schedule 2.01 and any other Person that shall have become a party hereto pursuant to an Assignment and Acceptance or an Incremental Term Loan Activation Notice, as the case may be, other than any such Person that ceases to be a party hereto pursuant to an Assignment and Acceptance. Unless the context otherwise requires, the term "Lenders" includes the Swingline Lender. -28- "Letter of Credit" means any letter of credit issued pursuant to this Agreement. Each Existing Letter of Credit shall be deemed to constitute a Letter of Credit issued hereunder on the Effective Date for all purposes of the Loan Documents. "Leverage Ratio" means, on any date, the ratio of (a) Total Indebtedness as of such date to (b) Consolidated EBITDA for the period of four consecutive fiscal quarters of Holdings ended on such date (or, if such date is not the last day of a fiscal quarter, ended on the last day of the fiscal quarter of Holdings most recently ended prior to such date for which financial statements are available). If the Parent Borrower or any Subsidiary has made any Permitted Acquisition or any sale, transfer, lease or other disposition of assets outside of the ordinary course of business permitted by Section 6.05 during the relevant period for determining the Leverage Ratio, Consolidated EBITDA for the relevant period shall be calculated only for purposes of determining Leverage Ratio after giving pro forma effect thereto, as if such Permitted Acquisition or sale, transfer, lease or other disposition of assets (and, in each case, any related incurrence, repayment or assumption of Indebtedness, with any new Indebtedness being deemed to be amortized over the relevant period in accordance with its terms, and assuming that any Revolving Loans borrowed in connection with such acquisition are repaid with excess cash balances when available) had occurred on the first day of the relevant period for determining Consolidated EBITDA. Any such pro forma calculations may include operating and other expense reductions and other adjustments for such period resulting from any Permitted Acquisition that is being given pro forma effect to the extent that such operating and other expense reductions and other adjustments would be permitted pursuant to Article XI of Regulation S-X under the Securities Act of 1933. "LIBO Rate" means, with respect to any Eurocurrency Borrowing (other than such Borrowings denominated in a Foreign Currency) for any Interest Period, the rate appearing on Page 3750 of the Dow Jones Market Service (or on any successor or substitute page of such Service, or any successor to or substitute for such Service, providing rate quotations comparable to those currently provided on such page of such Service, as determined by the Administrative Agent from time to time for purposes of providing quotations of interest rates applicable to dollar deposits in the London interbank market) at approximately 11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period, as the rate for dollar deposits with a maturity comparable to such Interest Period. With respect to Eurocurrency Borrowings denominated in a Foreign Currency, the LIBO Rate for any Interest Period shall be determined by the Administrative Agent at approximately 11:00 a.m., London time, on the Quotation Day for such Interest Period by reference to the British Bankers' Association Interest Settlement Rates for deposits in the currency of such Borrowing (as reflected on the applicable Telerate screen) for a period equal to such Interest Period. In the event that such rate is not available at such time for any reason, then the "LIBO Rate" with respect to such Eurocurrency Borrowing for such Interest Period shall be the rate at which deposits in the applicable currency for the Dollar Equivalent of $5,000,000 and for a maturity comparable -29- to such Interest Period are offered by the principal London office of the Administrative Agent in immediately available funds in the London interbank market at approximately 11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period. "Lien" means, with respect to any asset, (a) any mortgage, deed of trust, lien, pledge, hypothecation, encumbrance, charge or security interest in, on or of such asset, (b) the interest of a vendor or a lessor under any conditional sale agreement, capital lease or title retention agreement (or any financing lease having substantially the same economic effect as any of the foregoing) relating to such asset and (c) in the case of securities, any purchase option, call or similar right of a third party with respect to such securities. "Loan Documents" means this Agreement and the Security Documents. "Loan Parties" means Holdings, the Parent Borrower, the Subsidiary Term Borrowers, the Foreign Subsidiary Borrowers and the other Subsidiary Loan Parties. "Loans" means the loans made by the Lenders to the Parent Borrower, the Subsidiary Term Borrowers and the Foreign Subsidiary Borrowers pursuant to this Agreement. "Long-Term Indebtedness" means any Indebtedness that, in accordance with GAAP, constitutes (or, when incurred, constituted) a long-term liability, including the current portion of any Long-Term Indebtedness. "Low Usage Period" means any day that does not fall within a High Usage Period. "Margin Stock" shall have the meaning assigned to such term in Regulation U. "Masco" means Masco Corporation, a Delaware corporation, or any successor thereto. "Material Adverse Effect" means a material adverse effect on (a) the business, operations, properties, assets, financial condition, contingent or otherwise, or material agreements of Holdings, the Parent Borrower and the Subsidiaries (including the Receivables Subsidiary), taken as a whole (it being understood that any effect on the business, operations, properties, assets, financial condition, contingent or otherwise or material agreements of Holdings, the Parent Borrower and the Subsidiaries (including the Receivables Subsidiary) resulting from the Asset Dropdown will not constitute a material adverse effect for purposes of this clause (a)), (b) the ability of any Loan Party in any material respect to perform any of its obligations under any Loan Document or (c) the rights of or benefits available to the Lenders under any Loan Document. -30- "Material Agreements" means (a) any agreements or instruments relating to Material Indebtedness and (b) the Heartland Management Agreement. "Material Indebtedness" means (a) Indebtedness in respect of the Shareholder Loan Agreement, Convertible Debentures, the Additional Acquisition Indebtedness, the Permitted Subordinated Indebtedness and the Specified Unsecured Indebtedness, (b) obligations in respect of the Permitted Receivables Financing and (c) any other Indebtedness (other than the Loans and Letters of Credit), or obligations in respect of one or more Hedging Agreements, of any one or more of Holdings, the Parent Borrower and its Subsidiaries evidencing an aggregate outstanding principal amount exceeding $15,000,000. For purposes of determining Material Indebtedness, the "principal amount" of the obligations of Holdings, the Parent Borrower or any Subsidiary in respect of any Hedging Agreement at any time shall be the maximum aggregate amount (giving effect to any netting agreements) that Holdings, the Parent Borrower or such Subsidiary would be required to pay if such Hedging Agreement were terminated at such time. "Merger" means the merger of Merger Subsidiary with and into Holdings, with Holdings being the surviving entity as contemplated by the Recapitalization Agreement. "Merger Consideration" means the cash payment on the Effective Date to the Pre-Merger Stockholders in accordance with the Recapitalization Agreement in an amount not exceeding $609,200,000. "Merger Subsidiary" means Riverside Acquisition Corporation, a Delaware corporation, all the Equity Interests of which are owned by Heartland, its Affiliate and the other Investors. "Moody's" means Moody's Investors Service, Inc. "Mortgage" means a mortgage, deed of trust, assignment of leases and rents, leasehold mortgage or other security document granting a Lien on any Mortgaged Property to secure the Obligations. Each Mortgage shall be substantially in the form of Exhibit I with such changes as are necessary under applicable local law. "Mortgaged Property" means, initially, each parcel of real property and the improvements thereto owned by a Loan Party and identified on Schedule 1.01(a), and includes each other parcel of real property and improvements thereto with respect to which a Mortgage is granted pursuant to Section 5.12 or 5.13. "Multiemployer Plan" means a multiemployer plan as defined in Section 4001(a)(3) of ERISA. -31- "Net Proceeds" means, with respect to any event (a) the cash proceeds received in respect of such event including (i) any cash received in respect of any noncash proceeds, but only as and when received, (ii) in the case of a casualty, insurance proceeds in excess of $1,000,000 (excluding proceeds arising from the Compac Event), and (iii) in the case of a condemnation or similar event, condemnation awards and similar payments, net of (b) the sum of (i) all reasonable fees and out-of-pocket expenses paid by Holdings, the Parent Borrower and the Subsidiaries to third parties (other than Affiliates) in connection with such event, (ii) in the case of a sale, transfer or other disposition of an asset (including pursuant to a sale and leaseback transaction or a casualty or a condemnation or similar proceeding), the amount of all payments required to be made by Holdings, the Parent Borrower and the Subsidiaries as a result of such event to repay Indebtedness (other than Loans) secured by such asset or otherwise subject to mandatory prepayment as a result of such event, and (iii) the amount of all Taxes paid (or reasonably estimated to be payable) by Holdings, the Parent Borrower and the Subsidiaries, and the amount of any reserves established by Holdings, the Parent Borrower and the Subsidiaries to fund contingent liabilities reasonably estimated to be payable, in each case during the 24-month period immediately following such event and that are directly attributable to such event (as determined reasonably and in good faith by the chief financial officer of Holdings or the Parent Borrower) to the extent such liabilities are actually paid within such applicable time periods. Notwithstanding anything to the contrary set forth above, the proceeds of any sale, transfer or other disposition of receivables (or any interest therein) pursuant to any Permitted Receivables Financing shall not be deemed to constitute Net Proceeds. "Net Working Capital" means, at any date, (a) the consolidated current assets of Holdings, the Parent Borrower and its consolidated Subsidiaries (including the Receivables Subsidiary) as of such date (excluding cash and Permitted Investments) minus (b) the consolidated current liabilities of Holdings, the Parent Borrower and its consolidated Subsidiaries (including the Receivables Subsidiary) as of such date (excluding current liabilities in respect of Indebtedness). Net Working Capital at any date may be a positive or negative number. Net Working Capital increases when it becomes more positive or less negative and decreases when it becomes less positive or more negative. "Obligations" has the meaning assigned to such term in the Security Agreement. "Other Taxes" means any and all present or future recording, stamp, documentary, excise, transfer, sales, property or similar taxes, charges or levies imposed by any Governmental Authority arising from any payment made under any Loan Document or from the execution, delivery or enforcement of, or otherwise with respect to, any Loan Document, other than Excluded Taxes. -32- "Parent Borrower" means Metalync Company LLC, a Delaware limited liability company. "PBGC" means the Pension Benefit Guaranty Corporation referred to and defined in ERISA and any successor entity performing similar functions. "Perfection Certificate" means a certificate in the form of Annex I to the Security Agreement or any other form approved by the Collateral Agent. "Permitted Acquisition" means any acquisition, whether by purchase, merger, consolidation or otherwise, by the Parent Borrower or a Subsidiary of all or substantially all the assets of, or all the Equity Interests in, a Person or a division, line of business or other business unit of a Person so long as (a) such acquisition shall not have been preceded by a tender offer that has not been approved or otherwise recommended by the board of directors of such Person, (b) such assets are to be used in, or such Person so acquired is engaged in, as the case may be, a business of the type conducted by the Parent Borrower and its Subsidiaries on the date of execution of this Agreement or in a business reasonably related thereto, (c) such acquisition shall be financed with proceeds from (i) Revolving Loans (subject to Section 6.01(a)(i)), Incremental Term Loans, Additional Acquisition Indebtedness and/or Specified Permitted Unsecured Indebtedness and/or Qualified Holdings Preferred Stock issued and outstanding pursuant to clause (b) of the definition of Qualified Holdings Preferred Stock, (ii) the issuance of Equity Interests by Holdings, (iii) Excess Cash Flow not required to be used to prepay Term Loans pursuant to Section 2.11(e) or (iv) any combination thereof and (d) immediately after giving effect thereto, (i) no Default has occurred and is continuing or would result therefrom, (ii) all transactions related thereto are consummated in all material respects in accordance with applicable laws, (iii) all the Equity Interests (other than Assumed Preferred Stock) of each Subsidiary formed for the purpose of or resulting from such acquisition shall be owned directly by the Parent Borrower or a Subsidiary and all actions required to be taken under Sections 5.12 and 5.13 have been taken, (iv) Holdings, the Parent Borrower and its Subsidiaries are in compliance, on a pro forma basis after giving effect to such acquisition, with the covenants contained in Sections 6.13 and 6.14 recomputed as at the last day of the most recently ended fiscal quarter of Holdings for which financial statements are available, as if such acquisition (and any related incurrence or repayment of Indebtedness) had occurred on the first day of each relevant period for testing such compliance (provided that any acquisition that occurs prior to the first testing period under such Sections shall be deemed to have occurred during such first testing period), (v) any Indebtedness or any preferred stock that is incurred, acquired or assumed in connection with such acquisition shall be in compliance with Section 6.01 and (vi) the Parent Borrower has delivered to the Administrative Agent an officers' certificate to the effect set forth in clauses (a), (b), (c) and (d)(i) through (vi) above, together with all relevant financial information for the Person or assets to be acquired. -33- "Permitted Acquisition Amount" means $50,000,000, provided, however, that such amount shall be increased to $75,000,000 on any date that the following conditions are satisfied: (a) the Parent Borrower has received net proceeds in aggregate amount equal to or greater than $205,000,000 (i) from issuances of Permitted Subordinated Indebtedness or (ii) resulting from issuances of Equity Interests by Holdings or capital contributions to Holdings, (b) the Parent Borrower has caused the entire amount of such proceeds not to exceed $205,000,000 to be (i) deposited in the Debenture Account or (ii) applied to redeem, convert, repurchase, repay, defease or otherwise retire Convertible Debentures as permitted by Sections 5.15 and 6.12 and (c) the aggregate face amount of all Convertible Debentures outstanding on such date (plus any accrued interest thereon) is equal to or less than the sum of (i) the aggregate amount of Shareholder Loans that may be borrowed on such date under the Shareholder Loan Agreement and (ii) the aggregate amount held on such date in the Debenture Account. Any Revolving Borrowing used to finance a Permitted Acquisition shall be deemed to have been applied against the Permitted Acquisition Amount by the amount of such Revolving Borrowing, without regard to any subsequent repayment of such amount, unless the Parent Borrower notifies the Administrative Agent on or prior to the date such Permitted Acquisition is consummated that it intends to repay such Revolving Borrowing within 90 days of such Permitted Acquisition with the proceeds of (i) any Additional Acquisition Indebtedness, (ii) any Specified Permitted Unsecured Indebtedness, (iii) any Permitted Receivables Financing, (iv) any Acquisition Lease Financing, (v) any Qualified Holdings Preferred Stock or (vi) any issuance of Equity Interests by Holdings, and such Revolving Borrowing is so repaid with such proceeds within such 90-day period. "Permitted Capital Expenditure Amount" means (a) with respect to the Interim Period, $30,000,000 and (b) with respect to any fiscal year thereafter, the sum of (i) the Base Amount for such fiscal year as specified below, (ii) 20% of Acquired Assets (the "Acquired Assets Amount") and (iii) for each fiscal year after any Acquired Assets Amount are initially included in clause (ii) above, 5% of such Acquired Assets Amount, calculated on a cumulative basis. Fiscal Year Ended Base Amount ----------------- ----------- 2001 $120,000,000 2002 $115,000,000 2003 $100,000,000 2004 $110,000,000 2005 $115,000,000 2006 $125,000,000 2007 $130,000,000 2008 $140,000,000 -34- "Permitted Debenture Purchases" has the meaning assigned to such term in Section 6.12(a). "Permitted Encumbrances" means: (a) Liens imposed by law for taxes that are not yet due or are being contested in compliance with Section 5.05; (b) carriers', warehousemen's, mechanics', materialmen's, repairmen's and other like Liens imposed by law, arising in the ordinary course of business and securing obligations that are not overdue by more than 30 days or are being contested in compliance with Section 5.05; (c) pledges and deposits made in the ordinary course of business in compliance with workers' compensation, unemployment insurance and other social security laws or regulations; (d) deposits to secure the performance of bids, trade contracts, leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature, in each case in the ordinary course of business; (e) judgment Liens in respect of judgments that do not constitute an Event of Default under clause (k) of Article VII; (f) easements, zoning restrictions, rights-of-way and similar encumbrances on real property imposed by law or arising in the ordinary course of business that do not secure any monetary obligations and do not materially detract from the value of the affected property or interfere with the ordinary conduct of business of the Parent Borrower or any Subsidiary; (g) ground leases in respect of real property on which facilities owned or leased by the Parent Borrower or any of the Subsidiaries are located, other than any Mortgaged Property; (h) Liens in favor or customs and revenue authorities arising as a matter of law to secure payment of customs duties in connection with the importation of goods in the ordinary course of business; (i) Leases or subleases granted to other Persons and not interfering in any material respect with the business of Holdings, the Parent Borrower and the Subsidiaries, taken as a whole; -35- (j) banker's liens, rights of set-off or similar rights, in each case arising by operation of law; and (k) Liens in favor of a landlord on leasehold improvements in leased premises; provided that the term "Permitted Encumbrances" shall not include any Lien securing Indebtedness. "Permitted Investments" means: (a) direct obligations of, or obligations the principal of and interest on which are unconditionally guaranteed by, the United States of America (or by any agency thereof to the extent such obligations are backed by the full faith and credit of the United States of America), in each case maturing within one year from the date of acquisition thereof; (b) investments in commercial paper maturing within one year from the date of acquisition thereof and having, at such date of acquisition, the highest credit rating obtainable from S&P or from Moody's; (c) investments in certificates of deposit, banker's acceptances and time deposits maturing within one year from the date of acquisition thereof issued or guaranteed by or placed with, and money market deposit accounts issued or offered by, any domestic office of any commercial bank organized under the laws of the United States of America or any State thereof which has a combined capital and surplus and undivided profits of not less than $500,000,000; (d) fully collateralized repurchase agreements with a term of not more than 30 days for securities described in clause (a) above and entered into with a financial institution satisfying the criteria described in clause (c) above; (e) securities issued by any state of the United States of America or any political subdivision of any such state or any public instrumentality thereof having maturities of not more than six months from the date of acquisition thereof and, at the time of acquisition, having the highest credit rating obtainable from S&P or from Moody's; (f) securities issued by any foreign government or any political subdivision of any foreign government or any public instrumentality thereof having maturities of not more than six months from the date of acquisition thereof and, at the time of acquisition, having the highest credit rating obtainable from S&P or from Moody's; -36- (g) investments of the quality as those identified on Schedule 6.04 as "Qualified Foreign Investments" made in the ordinary course of business; (h) cash; and (i) investments in funds that invest solely in one or more types of securities described in clauses (a), (e) and (f) above. "Permitted Receivables Documents" means the Receivable Purchase Agreement, the Receivables Transfer Agreement and all other documents and agreements relating to the Permitted Receivables Financing. "Permitted Receivables Financing" means (a) the sale by the Parent Borrower and certain Subsidiaries (other than Foreign Subsidiaries) of accounts receivable to the Receivables Subsidiary pursuant to the Receivables Sale Agreement and (b) the sale of such accounts receivable (or participations therein) by the Receivables Subsidiary to certain purchasers pursuant to the Receivables Transfer Agreement, provided that the aggregate net investment of the purchasers under the Receivables Transfer Agreement in such accounts receivables so sold by the Parent Borrower and such Subsidiaries shall not exceed in the aggregate $250,000,000. "Permitted Subordinated Indebtedness" means Indebtedness of Holdings or the Parent Borrower in an aggregate principal amount not to exceed at any time the sum of (x) $305,000,000 and (y) the amount of any underwriting or placement discounts, fees or commissions and other financing expenses incurred to yield net proceeds of $305,000,000, less the liquidation value of any applicable Qualified Holdings Preferred Stock issued and outstanding pursuant to clause (b) of the definition of Qualified Holdings Preferred Stock, provided that (a) such Indebtedness and any related Guarantees shall not be secured by any Lien, (b) such Indebtedness shall be subject to subordination and intercreditor provisions that are no more favorable to the holders or obligees thereof than the subordination or intercreditor provisions attached hereto as Exhibit L in any material respect, (c) the proceeds from such Indebtedness shall be used to (x) retire, redeem, repurchase, defease or otherwise acquire or retire the Convertible Debentures as permitted by Sections 5.15 and 6.12, (y) deposited in the Debenture Account or (z) used to refinance any outstanding Shareholder Loans once the Convertible Debentures have been indefeasibly paid in full, (d) such Indebtedness shall not have any principal payments due prior to the date that is 12 months after the Tranche B Maturity Date, whether at maturity or otherwise, except upon the occurrence of a change of control or similar event (including asset sales), in each case so long as the provisions relating to change of control or similar events (including asset sales) included in the governing instrument of such Indebtedness provide that the provisions of this Agreement must be satisfied prior to the satisfaction of such provisions of such Indebtedness and (e) such Indebtedness bears interest at a fixed rate, which rate shall be, in the good faith judgment of the Parent Borrower's board of -37- directors, consistent with the market at the time of issuance for similar Indebtedness for comparable issuers or borrowers. "Person" means any natural person, corporation, limited liability company, trust, joint venture, association, company, partnership, Governmental Authority or other entity. "Plan" means any employee pension benefit plan (other than a Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section 412 of the Code or Section 302 of ERISA, and in respect of which the Parent Borrower or any ERISA Affiliate is (or, if such plan were terminated, would under Section 4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5) of ERISA. "Pledge Agreement" means the Pledge Agreement, substantially in the form of Exhibit J, among Holdings, the Parent Borrower, the Subsidiary Loan Parties party thereto and the Collateral Agent for the benefit of the Secured Parties. "Pre-Merger Stockholders" means the common stockholders of Holdings and holders of options to acquire common stock of Holdings immediately prior to the Merger. "Prepayment Event" means: (a) any sale, transfer or other disposition (including pursuant to a sale and leaseback transaction) of any property or asset of Holdings, the Parent Borrower or any Subsidiary, other than dispositions described in clauses (a), (b), (c), (d), (e), (g), (h) and (i) of Section 6.05; or (b) any casualty or other insured damage to, or any taking under power of eminent domain or by condemnation or similar proceeding of, any property or asset of Holdings, the Parent Borrower or any Subsidiary having a book value or fair market value in excess of $1,000,000 (other than damage arising from the Compac Event), but only to the extent that the Net Proceeds therefrom have not been applied to repair, restore or replace such property or asset within 365 days after such event; or (c) the incurrence by Holdings, the Parent Borrower or any Subsidiary of any Indebtedness, other than Indebtedness permitted by Section 6.01(a); provided that, in no event shall the sale, transfer or other disposition of the Saturn Subsidiary or the Saturn Sale constitute a Prepayment Event. "Prime Rate" means the rate of interest per annum publicly announced from time to time by The Chase Manhattan Bank as its prime rate in effect at its principal office in -38- New York City; each change in the Prime Rate shall be effective from and including the date such change is publicly announced as being effective. "Qualified Holding's Preferred Stock" means any preferred capital stock or preferred equity interest of Holdings (a) (i) that does not provide for any cash dividend payments or other cash distributions in respect thereof prior to the Tranche B Term Loan Maturity Date and (ii) that by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable or exercisable) or upon the happening of any event does not (A) (x) mature or become mandatorily redeemable pursuant to a sinking fund obligation or otherwise; (y) become convertible or exchangeable at the option of the holder thereof for Indebtedness or preferred stock that is not Qualified Holdings Preferred Stock; or (z) become redeemable at the option of the holder thereof (other than as a result of a change of control event), in whole or in part, in each case on or prior to the first anniversary of the Tranche B Term Loan Maturity Date and (B) provide holders thereunder with any rights upon the occurrence of a "change of control" event prior to the repayment of the Obligations under the Loan Documents or (b) with respect to which Holdings has delivered a notice to the Administrative Agent that it has issued preferred stock or preferred equity interest in lieu of incurring Indebtedness otherwise permitted by clauses (vi), (vii) or (xv) under Section 6.01(a) and, in the case of clause (vi), whether such preferred stock or preferred equity interest relates to Specified Permitted Unsecured Indebtedness or Permitted Subordinated Indebtedness, with such notice specifying the applicable clause; provided that (i) the aggregate liquidation value of all such preferred stock or preferred equity interest issued pursuant to this clause (b) shall not exceed at any time the dollar limitation specified in such applicable clause, less the aggregate principal amount of Indebtedness outstanding pursuant to such paragraph and (ii) the terms of such preferred stock or preferred equity interests (x) shall provide that upon a default thereof, the remedies of the holders thereof shall be limited to the right to additional representation on the board of directors of Holdings and (y) shall otherwise be no less favorable to the Lenders, in the aggregate, than the terms of any Indebtedness that may be incurred pursuant to such paragraph. "Quotation Day" means, with respect to any Eurocurrency Borrowing denominated in a Foreign Currency and any Interest Period, the day on which it is market practice in the relevant interbank market for prime banks to give quotations for deposits in the currency of such Borrowing for delivery on the first day of such Interest Period. If such quotations would normally be given by prime banks on more than one day, the Quotation Day will be the last of such days. "Recapitalization" means the recapitalization of Holdings effected pursuant to the Merger as contemplated by the Recapitalization Agreement. -39- "Recapitalization Agreement" means the Recapitalization Agreement dated as of August 1, 2000, between Holdings and Merger Subsidiary, as amended. "Recapitalization Documents" means the Recapitalization Agreement and the other agreements and documents relating to the Recapitalization Transactions. "Recapitalization Transactions" means (a) the Recapitalization, (b) the Specified Asset Sales, (c) the Saturn Sale, (d) the Asset Dropdown, (e) the Restricted Stock Award and the performance of the Restricted Stock Obligation, (f) the Intercompany Transfer, (g) the payment of the Merger Consideration and the Saturn Proceeds Distribution, (h) the issuance of the Holdings Preferred Stock to Masco, (i) the repayment of the Repaid Indebtedness, (j) the Equity Rollover, (k) the execution of the Shareholder Loan Agreement by the parties thereto and (1) the other transactions contemplated by the Recapitalization Agreement. "Receivables Purchase Agreement" means (a) the Receivables Purchase Agreement dated as of November 28, 2000 among the Receivables Subsidiary, Holdings, the Parent Borrower and the Subsidiaries party thereto, related to the Permitted Receivables Financing, as may be amended, supplemented or otherwise modified to the extent permitted by Section 6.11 and (b) any agreement replacing such Receivables Purchase Agreement, provided that such replacing agreement contains terms that are substantially similar to such Receivables Purchase Agreement and that are otherwise no more adverse to the Lenders than the applicable terms of such Receivables Purchase Agreement. "Receivables Subsidiary" means MTSPC, Inc., a Delaware corporation. "Receivables Transfer Agreement" means (a) the Receivables Transfer Agreement dated as of November 28, 2000, among the Receivables Subsidiary, Holdings and the purchasers party thereto, relating to the Permitted Receivables Financing, as may be amended, supplemented or otherwise modified to the extent permitted by Section 6.11 and (b) any agreement replacing such Receivables Transfer Agreement, provided that such replacing agreement contains terms that are substantially similar to such Receivables Transfer Agreement and that are otherwise no more adverse to the Lenders than the applicable terms of such Receivables Transfer Agreement. "Register" has the meaning set forth in Section 10.04. "Regulation U" shall mean Regulation U of the Board as from time to time in effect and all official rulings and interpretations thereunder or thereof. "Regulation X" shall mean Regulation X of the Board as from time to time in effect and all official rulings and interpretations thereunder or thereof. -40- "Related Parties" means, with respect to any specified Person, such Person's Affiliates and the respective directors, officers, employees, agents and advisors of such Person and such Person's Affiliates. "Release" means any release, spill, emission, leaking, dumping, injection, pouring, deposit, disposal, discharge, dispersal, leaching or migration into or through the environment (including ambient air, surface water, groundwater, land surface or subsurface strata) or within any building, structure, facility or fixture. "Repaid Indebtedness" has the meaning set forth in Section 4.01(k). "Required Lenders" means, at any time, Lenders having Revolving Exposures, Term Loans and unused Commitments representing more than 50% of the sum of the total Revolving Exposures, outstanding Term Loans and unused Commitments at such time. "Restricted Indebtedness" means Indebtedness of Holdings, the Parent Borrower or any Subsidiary, the payment, prepayment, redemption, repurchase or defeasance of which is restricted under Section 6.08(b). "Restricted Payment" means any dividend or other distribution (whether in cash, securities or other property) with respect to any Equity Interests in Holdings, the Parent Borrower or any Subsidiary (including the Receivables Subsidiary), or any payment (whether in cash, securities or other property), including any sinking fund or similar deposit, on account of the purchase, redemption, retirement, acquisition, cancelation or termination of any Equity Interests in Holdings, the Parent Borrower or any Subsidiary (including the Receivables Subsidiary) or any option, warrant or other right to acquire any such Equity Interests in Holdings, the Parent Borrower or any Subsidiary (including the Receivables Subsidiary). "Restricted Stock Award" means the granting on the Effective Date of new restricted stock awards (including phantom restricted stock awards) of Holdings, having the terms set forth in the Recapitalization Agreement in substitution of restricted stock awards (including phantom restricted stock awards) of Holdings existing immediately prior to the Effective Date. "Restricted Stock Obligation" means the obligation following the Effective Date of Holdings to make deferred cash payments in an aggregate amount not to exceed $47,500,000 over a 38 month period, plus (i) any accretion thereto and (ii) any deferred payments required to be made in connection with the Saturn Sale, in each case in accordance with the Recapitalization Agreement following the Effective Date, pursuant to the terms of the new restricted stock granted pursuant to the Restricted Stock Award. -41- "Revolving Availability Period" means the period from and including the Effective Date to but excluding the earlier of the Revolving Maturity Date and the date of termination of the Revolving Commitments. "Revolving Commitment" means, with respect to each Lender, the commitment, if any, of such Lender to make Revolving Loans, including Foreign Currency Loans, and to acquire participations in Letters of Credit, including Foreign Currency Letters of Credit and Swingline Loans hereunder, expressed as an amount representing the maximum aggregate amount of such Lender's Revolving Exposure, including Foreign Currency Exposure, hereunder, as such commitment may be (a) reduced from time to time pursuant to Section 2.08 and (b) reduced or increased from time to time pursuant to assignments by or to such Lender pursuant to Section 10.04. The initial amount of each Lender's Revolving Commitment is set forth on Schedule 2.01, or in the Assignment and Acceptance pursuant to which such Lender shall have assumed its Revolving Commitment, as applicable. The initial aggregate amount of the Lenders' Revolving Commitments is $300,000,000. "Revolving Exposure" means, with respect to any Lender at any time, the sum of the outstanding principal amount of such Lender's Revolving Loans and its LC Exposure and Swingline Exposure at such time. "Revolving Lender" means a Lender with a Revolving Commitment or, if the Revolving Commitments have terminated or expired, a Lender with Revolving Exposure. "Revolving Loan" means a Loan made pursuant to clause (iii) of Section 2.01(a). "Revolving Maturity Date" means May 28, 2007, or, if such day is not a Business Day, the first Business Day thereafter. "S&P" means Standard & Poor's. "Saturn" means Saturn Electronics and Engineering Inc. or any successor thereto by merger or otherwise. "Saturn Proceeds Distribution" means the cash payments to be made as a result of any Saturn Sale in an amount based upon the net proceeds resulting from the Saturn Sale and determined in accordance with and pursuant to the Recapitalization Agreement. "Saturn Sale" means one or more sales by the Saturn Subsidiary of any Equity Interests (or other property received in respect thereof) in Saturn. -42- "Saturn Subsidiary" means a special purpose wholly owned subsidiary of Holdings which will hold any Equity Interests (or other property received in respect thereof) in Saturn pending the completion of the Saturn Sale and any other special purpose wholly owned subsidiary of Holdings that holds any proceeds from the Saturn Sale not required to be paid to Pre-Merger Stockholders or on account of taxes from any Saturn Sale. "Secured Parties" has the meaning assigned to such term in the Security Agreement. "Security Agreement" means the Security Agreement, substantially in the form of Exhibit K, among Holdings, the Parent Borrower, the Subsidiary Loan Parties party thereto and the Collateral Agent for the benefit of the Secured Parties. "Security Documents" means the Security Agreement, the Pledge Agreement, the Mortgages, the Guarantee Agreement, the Indemnity, Subrogation and Contribution Agreement, the Collateral Assignment, each Foreign Security Document entered into pursuant to Section 2.21 and Section 4.03 and each other security agreement or other instrument or document executed and delivered pursuant to Section 5.12 or 5.13 to secure any of the Obligations. "Shareholder Agreement" means the Shareholders Agreement dated as of November 28, 2000, among Holdings, Heartland and the other parties thereto, as amended from time to time. "Shareholder Loans" means the unsecured, unguaranteed, subordinated loans in aggregate principal amount of up to $100,000,000 that may be made by Masco to Holdings pursuant to and in accordance with the Shareholder Loan Agreement. "Shareholder Loan Agreement" means the Subordinated Loan Agreement dated as of November 28, 2000 between Masco and Holdings, as amended from time to time in accordance with this Agreement. "Specified Acquired Property" means any property, real or personal, (a) that is acquired pursuant to a Permitted Acquisition or (b) that is owned by the Parent Borrower or any Subsidiary immediately prior to such Permitted Acquisition and that is combined with any such acquired property for purposes of any Acquisition Lease Financing, provided that the fair value of the property described in this clause (b) shall not exceed in the aggregate during the term of this Agreement, $25,000,000. "Specified Asset Sale Proceeds" means the net proceeds from the Specified Asset Sales, in an amount not less than $123,800,000. -43- "Specified Asset Sales" means the sale by Holdings of its equity investments in the Specified Assets. "Specified Assets" means Advanced Accessories Systems LLC, Titan International Inc., Delco Remy International Inc., MSX International Inc., Innovative Coatings Technology, Inc., Qualitor, Inc. and Tower Automotive Inc. "Specified Cash" means the cash held by Holdings on the Effective Date in an amount equal to $3,700,000. "Specified Obligations" means Obligations consisting of the principal and interest on Loans, reimbursement obligations in respect of LC Disbursements and fees. "Specified Permitted Unsecured Indebtedness" means Indebtedness of Holdings, the Parent Borrower or, in the case of assumed Indebtedness described in clause (c)(i) below only, a Person that becomes a Subsidiary Loan Party upon completion of the applicable Permitted Acquisition in an aggregate principal amount not to exceed at any time $250,000,000, less the aggregate principal amount of Incremental Term Loans borrowed hereunder and less the liquidation value of any applicable Qualified Holdings Preferred Stock issued and outstanding pursuant to clause (b) of the definition of Qualified Holdings Preferred Stock, provided that (a) such Indebtedness and any related Guarantees shall not be secured by any Lien, (b) to the extent such Indebtedness is subordinated, the subordination and intercreditor provisions of such Indebtedness are no more favorable to the holders or obligees thereof than the subordination or intercreditor provisions attached hereto as Exhibit L in any material respect, (c) (i) such Indebtedness is assumed by virtue of consummation of a Permitted Acquisition or (ii) the proceeds from such Indebtedness shall be used only for Permitted Acquisitions or, pursuant to Section 2.11(e), to repay then outstanding Incremental Term Loans and to pay fees and expenses related to the foregoing, (d) such Indebtedness shall not have any principal payments due prior to the date that is 12 months after the Tranche B Maturity Date, whether at maturity or otherwise, except upon the occurrence of a change of control or similar event (including asset sales), in each case so long as the provisions relating to change of control or similar events (including asset sales) included in the governing instrument of such Indebtedness provide that the provisions of this Agreement must be satisfied prior to the satisfaction of such provisions of such Indebtedness, (e) such Indebtedness bears interest at a fixed rate, which rate shall be, in the good faith judgment of the Parent Borrower's board of directors, consistent with the market at the time of incurrence for similar Indebtedness for comparable issuers or borrowers and (f) after giving effect to the incurrence of such Indebtedness and the use of proceeds thereof as described in clause (c) above, (i) the Leverage Ratio shall be less than the lower of (A) the applicable ratio that Holdings and the Parent Borrower are obligated to maintain at such time pursuant to Section 6.14 minus 0.50 (with any such incurrence that occurs prior to the first testing period under such Section being -44- deemed to have occurred during such first testing period) and (B) 4.25 to 1.00 and (ii) no Default or Event of Default shall have occurred and be continuing. In the case of any assumed Indebtedness described in clause (c)(i) above only, Specified Permitted Unsecured Indebtedness shall include the Indebtedness incurred pursuant to any refinancing, refunding, renewal or extension of any such Indebtedness, provided that, (i) the principal amount of any such Indebtedness is not increased above the principal amount thereof outstanding immediately prior to such refinancing, refunding, renewal or extension, (ii) the direct and contingent obligors with respect to such Indebtedness are not changed, (iii) the Indebtedness incurred pursuant to such refinancing, refunding, renewal or extension satisfies the requirements of clauses (a), (b), (d), (e) and (f) above and (iv) the terms of the Indebtedness incurred pursuant to such refinancing, refunding, renewal or extension shall otherwise be no less favorable to the Lenders, in the aggregate, than the terms of such assumed Indebtedness, provided further, that for purposes of the defined term "Specified Prepayment Event", such Additional Acquisition Indebtedness shall not be deemed to be incurred. "Specified Prepayment Event" means: (a) the incurrence by Holdings or the Parent Borrower of any Additional Acquisition Indebtedness or any Specified Permitted Unsecured Indebtedness; or (b) any sale, transfer or other disposition constituting an Acquisition Lease Financing. "Statutory Reserve Rate" means a fraction (expressed as a decimal), the numerator of which is the number one and the denominator of which is the number one minus the aggregate of the maximum reserve percentages (including any marginal, special, emergency or supplemental reserves) expressed as a decimal established by the Board (or in the case of Foreign Currency Borrowings, the applicable Governmental Authority) to which the Administrative Agent is subject (a) with respect to the Base CD Rate, for new negotiable nonpersonal time deposits in dollars of over $100,000 with maturities approximately equal to three months and (b) with respect to the Adjusted LIBO Rate, for eurocurrency funding (currently referred to as "Eurocurrency Liabilities" in Regulation D of the Board). Such reserve percentages shall include those imposed pursuant to such Regulation D. Eurocurrency Loans shall be deemed to constitute eurocurrency funding and to be subject to such reserve requirements without benefit of or credit for proration, exemptions or offsets that may be available from time to time to any Lender under any applicable law, rule or regulation. The Statutory Reserve Rate shall be adjusted automatically on and as of the effective date of any change in any reserve percentage. "Sterling" or "(pound)" means the lawful money of the United Kingdom. -45- "Subordinated Debt" means (a) the Convertible Debentures, (b) the Shareholder Loans and (c) any other subordinated Indebtedness of Holdings, the Parent Borrower or any Subsidiary (including any Permitted Subordinated Indebtedness and Additional Acquisition Indebtedness). "Subordinated Debt Documents" means (a) the Convertible Debentures Indenture, (b) the Shareholder Loan Agreement and (c) any indenture or other instruments under which any other Subordinated Debt (including any Permitted Subordinated Indebtedness and Additional Acquisition Indebtedness) is issued or incurred. "subsidiary" means, with respect to any Person (the "parent") at any date, any corporation, limited liability company, partnership, association or other entity the accounts of which would be consolidated with those of the parent in the parent's consolidated financial statements if such financial statements were prepared in accordance with GAAP as of such date, as well as any other corporation, limited liability company, partnership, association or other entity (a) of which securities or other ownership interests representing more than 50% of the ordinary voting power or, in the case of a partnership, more than 50% of the general partnership interests are, as of such date, owned, controlled or held, or (b) that is, as of such date, otherwise Controlled, by the parent or one or more subsidiaries of the parent or by the parent and one or more subsidiaries of the parent. "Subsidiary" means any subsidiary of the Parent Borrower or Holdings, as the context requires, including the Subsidiary Term Borrowers and the Foreign Subsidiary Borrowers. Unless expressly otherwise provided, the term "Subsidiary" shall not include the Receivables Subsidiary, the Saturn Subsidiary and, for so long as Acme Office Group, Inc. ("Acme") is inactive, holds no assets and conducts no business, Acme. "Subsidiary Loan Party" means (a) any Subsidiary that is not a Foreign Subsidiary (other than the Foreign Subsidiary Borrowers), (b) any Subsidiary Term Borrower and (c) any Foreign Subsidiary Borrower and any other Foreign Subsidiary that executes a guarantee agreement pursuant to paragraph (c) of the Collateral and Guarantee Requirement. "Subsidiary Term Borrowers" means each direct or indirect wholly owned domestic Subsidiary of the Parent Borrower listed on the signature page hereof. "Supplemental Indenture" means the supplement to the Convertible Debenture Indenture among the Parent Borrower, Holdings and Morgan Guaranty Trust Company of New York, as trustee, pursuant to which the Parent Borrower will become a co-obligor (together with Holdings) under Convertible Debenture Indenture. -46- "Swingline Exposure" means, at any time, the aggregate principal amount of all Swingline Loans outstanding at such time. The Swingline Exposure of any Lender at any time shall be its Applicable Percentage of the total Swingline Exposure at such time. "Swingline Lender" means Chase, in its capacity as lender of Swingline Loans hereunder. "Swingline Loan" means a Loan made pursuant to Section 2.04. "Synthetic Purchase Agreement" means any swap, derivative or other agreement or combination of agreements pursuant to which Holdings, the Parent Borrower or a Subsidiary is or may become obligated to make (i) any payment (other than in the form of Equity Interests of Holdings) in connection with a purchase by a third party from a Person other than Holdings, the Parent Borrower or a Subsidiary of any Equity Interest or Restricted Indebtedness or (ii) any payment (other than on account of a permitted purchase by it of any Equity Interest or any Restricted Indebtedness) the amount of which is determined by reference to the price or value at any time of any Equity Interest or Restricted Indebtedness; provided that no Restricted Stock Award and no phantom stock or similar plan providing for payments only to current or former directors, officers, consultants, advisors or employees of Holdings, the Parent Borrower or the Subsidiaries (or to their heirs or estates) shall be deemed to be Synthetic Purchase Agreement. "Taxes" means any and all present or future taxes (of any nature whatsoever), levies, imposts, duties, deductions, charges or withholdings imposed by any Governmental Authority. "Term Loans" means Tranche A Term Loans, Tranche B Term Loans and the Incremental Term Loans. "Three-Month Secondary CD Rate" means, for any day, the secondary market rate for three-month certificates of deposit reported as being in effect on such day (or, if such day is not a Business Day, the next preceding Business Day) by the Board through the public information telephone line of the Federal Reserve Bank of New York (which rate will, under the current practices of the Board, be published in Federal Reserve Statistical Release H.15(519) during the week following such day) or, if such rate is not so reported on such day or such next preceding Business Day, the average of the secondary market quotations for three-month certificates of deposit of major money center banks in New York City received at approximately 10:00 a.m., New York City time, on such day (or, if such day is not a Business Day, on the next preceding Business Day) by the Administrative Agent from three negotiable certificate of deposit dealers of recognized standing selected by it. -47- "Total Indebtedness" means, as of any date, the sum of, without duplication, (a) the aggregate principal amount of Indebtedness of Holdings, the Parent Borrower and the Subsidiaries outstanding as of such date, in the amount that would be reflected on a balance sheet prepared as of such date on a consolidated basis in accordance with GAAP, plus (b) the aggregate principal amount of Indebtedness of Holdings, the Parent Borrower and the Subsidiaries outstanding as of such date that is not required to be reflected on a balance sheet in accordance with GAAP, determined on a consolidated basis; provided that, for purposes of clause (b) above, the term "Indebtedness" shall not include (i) contingent obligations of Holdings, the Parent Borrower or any Subsidiary as an account party in respect of any letter of credit or letter of guaranty unless, without duplication, such letter of credit or letter of guaranty supports an obligation that constitutes Indebtedness and (ii) Indebtedness described in Section 6.01(a)(xiv); and provided further that "Total Indebtedness" shall not include any obligation arising in respect of the Permitted Receivables Financing. "Tranche A Borrowers" means the Parent Borrower and the Subsidiary Term Borrowers. "Tranche A Commitment" means, with respect to each Lender, the commitment, if any, of such Lender to make a Tranche A Term Loan hereunder on the Effective Date, expressed as an amount representing the maximum principal amount of the Tranche A Term Loan to be made by such Lender hereunder, as such commitment may be (a) reduced from time to time pursuant to Section 2.08 and (b) reduced or increased from time to time pursuant to assignments by or to such Lender pursuant to Section 10.04. The initial amount of each Lender's Tranche A Commitment is set forth on Schedule 2.01, or in the Assignment and Acceptance pursuant to which such Lender shall have assumed its Tranche A Commitment, as applicable. The initial aggregate amount of the Lenders' Tranche A Commitments is $500,000,000. "Tranche A Lender" means a Lender with a Tranche A Commitment or an outstanding Tranche A Term Loan. "Tranche A Maturity Date" means May 28, 2007, or if such day is not a Business Day, the first Business Day thereafter. "Tranche A Term Loan" means a Loan made pursuant to clause (i) of Section 2.01(a). "Tranche B Commitment" means, with respect to each Lender, the commitment, if any, of such Lender to make a Tranche B Term Loan hereunder on the Effective Date, expressed as an amount representing the maximum principal amount of the Tranche B Term Loan to be made by such Lender hereunder, as such commitment may be (a) reduced from time to time pursuant to Section 2.08 and (b) reduced or increased from time to time pursuant -48- to assignments by or to such Lender pursuant to Section 10.04. The initial amount of each Lender's Tranche B Commitment is set forth on Schedule 2.01, or in the Assignment and Acceptance pursuant to which such Lender shall have assumed its Tranche A Commitment, as applicable. The initial aggregate amount of the Lenders' Tranche B Commitments is $500,000,000. "Tranche B Lender" means a Lender with a Tranche B Commitment or an outstanding Tranche B Term Loan. "Tranche B Maturity Date" means November 28, 2008, or if such day is not a Business Day, the first Business Day thereafter. "Tranche B Term Loan" means a Loan made pursuant to clause (ii) of Section 2.01(a). "Transactions" means the Recapitalization Transactions and the Financing Transactions. "Type", when used in reference to any Loan or Borrowing, refers to whether the rate of interest on such Loan, or on the Loans comprising such Borrowing, is determined by reference to the Adjusted LIBO Rate or the Alternate Base Rate. "Withdrawal Liability" means liability to a Multiemployer Plan as a result of a complete or partial withdrawal from such Multiemployer Plan, as such terms are defined in Part I of Subtitle E of Title IV of ERISA. SECTION 1.02. Classification of Loans and Borrowings. For purposes of this Agreement, Loans may be classified and referred to by Class (e.g., a "Revolving Loan") or by Type (e.g., a "Eurocurrency Loan") or by Class and Type (e.g., a "Eurocurrency Revolving Loan"). Borrowings also may be classified and referred to by Class (e.g., a "Revolving Borrowing") or by Type (e.g., a "Eurocurrency Borrowing") or by Class and Type (e.g., a "Eurocurrency Revolving Borrowing"). SECTION 1.03. Terms Generally. The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words "include", "includes" and "including" shall be deemed to be followed by the phrase "without limitation". The word "will" shall be construed to have the same meaning and effect as the word "shall". Unless the context requires otherwise (a) any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other -49- document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein), (b) any reference herein to any Person shall be construed to include such Person's successors and assigns, (c) the words "herein", "hereof" and "hereunder", and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof, (d) all references herein to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Exhibits and Schedules to, this Agreement and (e) the words "asset" and "property" shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and contract rights. SECTION 1.04. Accounting Terms; GAAP. Except as otherwise expressly provided herein, all terms of an accounting or financial nature shall be construed in accordance with GAAP, as in effect from time to time; provided that, if the Parent Borrower notifies the Administrative Agent that the Parent Borrower requests an amendment to any provision hereof to eliminate the effect of any change occurring after the date hereof in GAAP or in the application thereof on the operation of such provision (or if the Administrative Agent notifies the Parent Borrower that the Required Lenders request an amendment to any provision hereof for such purpose), regardless of whether any such notice is given before or after such change in GAAP or in the application thereof, then such provision shall be interpreted on the basis of GAAP as in effect and applied immediately before such change shall have become effective until such notice shall have been withdrawn or such provision amended in accordance herewith. SECTION 1.05. Exchange Rates. (a) Not later than 1:00 p.m., New York City time, on each Calculation Date beginning with the date on which the initial Foreign Currency Borrowing is made or the initial Foreign Currency Letter of Credit is issued, the Administrative Agent shall (i) determine the Exchange Rate as of such Calculation Date with respect to each Foreign Currency and (ii) give notice thereof to the Revolving Lenders and the Parent Borrower (on behalf of itself and the Foreign Subsidiary Borrowers). The Exchange Rates so determined shall become effective on the first Business Day immediately following the relevant Calculation Date (a "Recalculation Date"), shall remain effective until the next succeeding Recalculation Date, and shall for all purposes of this Agreement (other than Section 9.01, Section 10.14 or any other provision expressly requiring the use of a current Exchange Rate) be the Exchange Rates employed in converting any amounts between dollars and Foreign Currencies. (b) Not later than 5:00 p.m., New York City time, on each Recalculation Date and each date on which Revolving Loans denominated in any Foreign Currency are made, the Administrative Agent shall (i) determine the aggregate amount of the Dollar Equivalents of (A) the principal amounts of the Foreign Currency Loans then outstanding -50- (after giving effect to any Foreign Currency Loans made or repaid on such date), (B) the face value of outstanding Foreign Currency Letters of Credit and (C) unreimbursed drawings in respect of Foreign Currency Letters of Credit and (ii) notify the Revolving Lenders and the Parent Borrower (on behalf of itself and the Foreign Subsidiary Borrowers) of the results of such determination. SECTION 1.06. Redenomination of Certain Foreign Currencies. (a) Each obligation of any party to this Agreement to make a payment denominated in the national currency unit of any member state of the European Union that adopts the Euro as its lawful currency after the date hereof shall be redenominated into Euro at the time of such adoption (in accordance with the EMU Legislation). If, in relation to the currency of any such member state, the basis of accrual of interest expressed in this Agreement in respect of that currency shall be inconsistent with any convention or practice in the London Interbank Market for the basis of accrual of interest in respect of the Euro, such expressed basis shall be replaced by such convention or practice with effect from the date on which such member state adopts the Euro as its lawful currency; provided that if any Foreign Currency Borrowing in the currency of such member state is outstanding immediately prior to such date, such replacement shall take effect, with respect to such Foreign Currency Borrowing, at the end of the then current Interest Period. (b) Each provision of this Agreement shall be subject to such reasonable changes of construction as the Administrative Agent may from time to time specify to be appropriate to reflect the adoption of the Euro by any member state of the European Union and any relevant market conventions or practices relating to the Euro. ARTICLE II The Credits SECTION 2.01. Commitments. (a) Subject to the terms and conditions set forth herein, each Lender agrees (i) to make a Tranche A Term Loan to the Parent Borrower and the Subsidiary Term Borrowers, as the case may be, on the Effective Date in a principal amount not exceeding its Tranche A Commitment, (ii) to make a Tranche B Term Loan to the Parent Borrower on the Effective Date in a principal amount not exceeding its Tranche B Commitment and (iii) to make Revolving Loans to the Parent Borrower and the Foreign Subsidiary Borrowers, as the case may be, from time to time during the Revolving Availability Period in an aggregate principal amount that will not result in such Lender's (A) Revolving Exposure exceeding such Lender's Revolving Commitment or (B) Foreign Currency Exposure exceeding such Lender's Foreign Currency Commitment. -51- (b) The Parent Borrower and all or certain of the Lenders may, up to three times during the period from and including the Effective Date to but excluding the Incremental Term Loan Termination Date, agree that such Lenders shall become Incremental Lenders or increase the principal amount of their Incremental Term Loans by executing and delivering to the Administrative Agent an Incremental Term Loan Activation Notice specifying (i) the respective Incremental Term Loan Amount of such Incremental Lenders, (ii) the applicable Incremental Term Loan Effective Date, (iii) the applicable Incremental Maturity Date, (iv) the amortization schedule for the applicable Incremental Term Loans, which shall comply with subsection 2.10(c), (v) whether such Incremental Lenders may elect to decline prepayments as specified in Section 2.11(h), (vi) whether prepayments of such Incremental Loans will be subject to premium payments under the circumstances specified in Section 2.11(g) and (vii) the Applicable Rate for the Incremental Term Loans to be made pursuant to such Incremental Term Loan Activation Notice, and which shall be otherwise duly completed. Each Incremental Lender that is a signatory to an Incremental Term Loan Activation Notice severally agrees, on the terms and conditions of this Agreement, to make an Incremental Term Loan to the Parent Borrower on the Incremental Term Loan Effective Date specified in such Incremental Term Loan Activation Notice in a principal amount not to exceed the amount of the Incremental Term Loan Amount of such Incremental Lender specified in such Incremental Term Loan Activation Notice. Subject to the terms and conditions of this Agreement, the Parent Borrower may convert Incremental Term Loans of one Type into Incremental Term Loans of another Type (as provided in Section 2.07) or continue Incremental Term Loans of one Type as Incremental Term Loans of the same Type (as provided in Section 2.07). Nothing in this subsection 2.01(b) shall be construed to obligate any Lender to execute an Incremental Term Loan Activation Notice. Notwithstanding the foregoing, the aggregate amount of Incremental Term Loans shall not exceed $250,000,000, less the aggregate principal amount of Specified Permitted Unsecured Indebtedness incurred during the term of this Agreement. (c) Within the foregoing limits and subject to the terms and conditions set forth herein, the Parent Borrower and the Foreign Subsidiary Borrowers, as the case may be, may borrow, prepay and reborrow Revolving Loans. Amounts repaid in respect of Term Loans may not be reborrowed. SECTION 2.02. Loans and Borrowings. (a) Each Loan (other than a Swingline Loan) shall be made as part of a Borrowing consisting of Loans of the same Class and Type made by the Lenders ratably in accordance with their respective Commitments of the applicable Class. The failure of any Lender to make any Loan required to be made by it shall not relieve any other Lender of its obligations hereunder; provided that the Commitments of the Lenders are several and no Lender shall be responsible for any other Lender's failure to make Loans as required. -52- (b) Subject to Section 2.14, each Revolving Borrowing (other than Foreign Currency Borrowings) and Term Borrowing shall be comprised entirely of ABR Loans or Eurocurrency Loans as the Parent Borrower may request in accordance herewith; provided that all Borrowings made on the Effective Date must be made as ABR Borrowings. All Foreign Currency Borrowings shall be comprised entirely of Eurocurrency Loans. Each Swingline Loan shall be an ABR Loan. Each Lender at its option may make any Eurocurrency Loan by causing any domestic or foreign branch or Affiliate of such Lender to make such Loan; provided that any exercise of such option shall not affect the obligation of any Borrower to repay such Loan in accordance with the terms of this Agreement. (c) At the commencement of each Interest Period for any Eurocurrency Borrowing, such Borrowing shall be in an aggregate amount that is an integral multiple of $1,000,000 (or 1,000,000 units of the applicable Foreign Currency) and not less than $5,000,000 (or 5,000,000 units in the applicable Foreign Currency). At the time that each ABR Revolving Borrowing is made, such Borrowing shall be in an aggregate amount that is an integral multiple of $1,000,000 and not less than $5,000,000; provided that (i) an ABR Revolving Borrowing may be in an aggregate amount that is equal to the entire unused balance of the total Revolving Commitments and (ii) an ABR Revolving Borrowing or a Eurocurrency Revolving Borrowing, in the case of Foreign Currency Letters of Credit, may be in an aggregate amount that is equal to the amount that is required to finance the reimbursement of an LC Disbursement as contemplated by Section 2.05(e). Each Swingline Loan shall be in an amount that is an integral multiple of $100,000 and not less than $500,000. Borrowings of more than one Type and Class may be outstanding at the same time; provided that there shall not at any time be more than a total of 12 Eurocurrency Borrowings outstanding. (d) Notwithstanding any other provision of this Agreement, none of the Parent Borrower, any Subsidiary Term Borrower or any Foreign Subsidiary Borrower shall be entitled to request, or to elect to convert or continue, any Borrowing if the Interest Period requested with respect thereto would end after the Revolving Maturity Date, Tranche A Maturity Date, Tranche B Maturity Date or Incremental Maturity Date, as applicable. SECTION 2.03. Requests for Borrowings. To request a Revolving Borrowing or Term Borrowing, the Parent Borrower or the applicable Subsidiary Term Borrower or, in the case of a Foreign Currency Borrowing, the applicable Foreign Subsidiary Borrower, shall notify the Administrative Agent of such request by telephone (a) in the case of a Eurocurrency Borrowing, not later than 12:00 noon, New York City time, three Business Days before the date of the proposed Borrowing or (b) in the case of an ABR Borrowing, not later than 12:00 noon, New York City time, one Business Day before the date of the proposed Borrowing; provided that any such notice of an ABR Revolving Borrowing to finance the reimbursement of an LC Disbursement as contemplated by Section 2.05(e) may be given not later than 10:00 a.m., New York City -53- time, on the date of the proposed Borrowing. Each such telephonic Borrowing Request shall be irrevocable and shall be confirmed promptly by hand delivery or telecopy to the Administrative Agent of a written Borrowing Request in a form approved by the Administrative Agent and signed by the Parent Borrower or Subsidiary Term Borrower, as the case may be, and, in the case of a Foreign Currency Borrowing, the applicable Foreign Subsidiary Borrower. Each such telephonic and written Borrowing Request shall specify the following information in compliance with Section 2.02: (i) whether the requested Borrowing is to be a Revolving Borrowing, Tranche A Term Borrowing, Tranche B Term Borrowing or Incremental Term Borrowing; (ii) the aggregate amount of such Borrowing; (iii) the date of such Borrowing, which shall be a Business Day; (iv) whether such Borrowing is to be an ABR Borrowing or a Eurocurrency Borrowing, unless such Borrowing is a Foreign Currency Borrowing; (v) if such Borrowing is a Foreign Currency Borrowing, the relevant Foreign Currency; (vi) in the case of a Eurocurrency Borrowing, the initial Interest Period to be applicable thereto, which shall be a period contemplated by the definition of the term "Interest Period"; and (vii) the location and number of the Parent Borrower's, the applicable Subsidiary Term Borrower's or the applicable Foreign Subsidiary Borrower's, as the case may be, account to which funds are to be disbursed, which shall comply with the requirements of Section 2.06. If no election as to the Type of Borrowing is specified, then the requested Borrowing shall be an ABR Borrowing, unless such Borrowing is a Foreign Currency Borrowing, in which case such Borrowing shall be a Eurocurrency Borrowing. If no Interest Period is specified with respect to any requested Eurocurrency Revolving Borrowing, then the Parent Borrower shall be deemed to have selected an Interest Period of one month's duration. Promptly following receipt of a Borrowing Request in accordance with this Section, the Administrative Agent shall advise each Lender of the details thereof and of the amount of such Lender's Loan to be made as part of the requested Borrowing. SECTION 2.04. Swingline Loans. (a) Subject to the terms and conditions set forth herein, the Swingline Lender -54- agrees to make Swingline Loans to the Parent Borrower from time to time during the Revolving Availability Period, in an aggregate principal amount at any time outstanding that will not result in (i) the aggregate principal amount of outstanding Swingline Loans exceeding $30,000,000 or (ii) the sum of the total Revolving Exposures exceeding the total Revolving Commitments; provided that the Swingline Lender shall not be required to make a Swingline Loan to refinance an outstanding Swingline Loan. Within the foregoing limits and subject to the terms and conditions set forth herein, the Parent Borrower may borrow, prepay and reborrow Swingline Loans. (b) To request a Swingline Loan, the Parent Borrower shall notify the Administrative Agent of such request by telephone (confirmed by telecopy), not later than 12:00 noon, New York City time, on the day of a proposed Swingline Loan. Each such notice shall be irrevocable and shall specify the requested date (which shall be a Business Day) and amount of the requested Swingline Loan. The Administrative Agent will promptly advise the Swingline Lender of any such notice received from the Parent Borrower. The Swingline Lender shall make each Swingline Loan available to the Parent Borrower by means of a credit to the general deposit account of the Parent Borrower with the Swingline Lender (or, in the case of a Swingline Loan made to finance the reimbursement of an LC Disbursement as provided in Section 2.05(e), by remittance to the Issuing Bank) by 3:00 p.m., New York City time, on the requested date of such Swingline Loan. (c) The Swingline Lender may by written notice given to the Administrative Agent not later than 12:00 noon, New York City time, on any Business Day require the Revolving Lenders to acquire participations on such Business Day in all or a portion of the Swingline Loans outstanding. Such notice shall specify the aggregate amount of Swingline Loans in which Revolving Lenders will participate. Promptly upon receipt of such notice, the Administrative Agent will give notice thereof to each Revolving Lender, specifying in such notice such Lender's Applicable Percentage of such Swingline Loan or Loans. Each Revolving Lender hereby absolutely and unconditionally agrees, upon receipt of notice as provided above, to pay to the Administrative Agent, for the account of the Swingline Lender, such Lender's Applicable Percentage of such Swingline Loan or Loans. Each Revolving Lender acknowledges and agrees that its obligation to acquire participations in Swingline Loans pursuant to this paragraph is absolute and unconditional and shall not be affected by any circumstance whatsoever, including the occurrence and continuance of a Default or reduction or termination of the Commitments, and that each such payment shall be made without any offset, abatement, withholding or reduction whatsoever (provided that such payment shall not cause such Lender's Revolving Exposure to exceed such Lender's Revolving Commitment). Each Revolving Lender shall comply with its obligation under this paragraph by wire transfer of immediately available funds, in the same manner as provided in Section 2.06 with respect to Loans made by such Lender (and Section 2.06 shall apply, mutatis mutandis, to the payment obligations of the Revolving Lenders), and the Administrative Agent shall promptly pay to the -55- Swingline Lender the amounts so received by it from the Revolving Lenders. The Administrative Agent shall notify the Parent Borrower of any participations in any Swingline Loan acquired pursuant to this paragraph, and thereafter payments in respect of such Swingline Loan shall be made to the Administrative Agent and not to the Swingline Lender. Any amounts received by the Swingline Lender from the Parent Borrower (or other party on behalf of the Parent Borrower) in respect of a Swingline Loan after receipt by the Swingline Lender of the proceeds of a sale of participations therein shall be promptly remitted to the Administrative Agent; any such amounts received by the Administrative Agent shall be promptly remitted by the Administrative Agent to the Revolving Lenders that shall have made their payments pursuant to this paragraph and to the Swingline Lender, as their interests may appear. The purchase of participations in a Swingline Loan pursuant to this paragraph shall not relieve the Parent Borrower of any default in the payment thereof. SECTION 2.05. Letters of Credit. (a) General. Subject to the terms and conditions set forth herein, the Parent Borrower may request the issuance of Letters of Credit for its own account or the account of a Subsidiary and any Foreign Subsidiary Borrower may request the issuance of Foreign Currency Letters of Credit for its own account or the account of a Subsidiary of such Foreign Subsidiary Borrower, in each case in a form reasonably acceptable to the Administrative Agent and the Issuing Bank, at any time and from time to time during the Revolving Availability Period (provided that the Parent Borrower or a Foreign Subsidiary Borrower, as the case may be, shall be a co-applicant with respect to each Letter of Credit issued for the account of or in favor of a Subsidiary that is not a Foreign Subsidiary Borrower). In the event of any inconsistency between the terms and conditions of this Agreement and the terms and conditions of any form of letter of credit application or other agreement submitted by the Parent Borrower or any Foreign Subsidiary Borrower, as the case may be, to, or entered into by the Parent Borrower or any Foreign Subsidiary Borrower, as the case may be, with, the Issuing Bank relating to any Letter of Credit, the terms and conditions of this Agreement shall control. (b) Notice of Issuance, Amendment, Renewal, Extension; Certain Conditions. To request the issuance of a Letter of Credit (or the amendment, renewal or extension of an outstanding Letter of Credit), the Parent Borrower or the applicable Foreign Subsidiary Borrower, as the case may be, shall hand deliver or telecopy (or transmit by electronic communication, if arrangements for doing so have been approved by the Issuing Bank) to the Issuing Bank and the Administrative Agent (reasonably in advance of the requested date of issuance, amendment, renewal or extension) a notice requesting the issuance of a Letter of Credit, or identifying the Letter of Credit to be amended, renewed or extended, and specifying the date of issuance, amendment, renewal or extension (which shall be a Business Day), the date on which such Letter of Credit is to expire (which shall comply with paragraph (c) of this Section), the amount of such Letter of Credit, the name and address of the beneficiary thereof and such other information as shall be necessary to prepare, amend, renew or extend such -56- Letter of Credit. If requested by the Issuing Bank, the Parent Borrower or the applicable Foreign Subsidiary Borrower, as the case may be, also shall submit a letter of credit application on the Issuing Bank's standard form in connection with any request for a Letter of Credit. A Letter of Credit shall be issued, amended, renewed or extended only if (and upon issuance, amendment, renewal or extension of each Letter of Credit the Parent Borrower or the applicable Foreign Subsidiary Borrower, as the case may be, shall be deemed to represent and warrant that), after giving effect to such issuance, amendment, renewal or extension (i) the LC Exposure shall not exceed $50,000,000, (ii) the total Revolving Exposures shall not exceed the total Revolving Commitments and (iii) the total Foreign Currency Exposures shall not exceed the total Foreign Currency Commitments. (c) Expiration Date. Each Letter of Credit shall expire at or prior to the close of business on the earlier of (i) the date one year after the date of the issuance of such Letter of Credit (or, in the case of any renewal or extension thereof, one year after such renewal or extension) and (ii) the date that is five Business Days prior to the Revolving Maturity Date. (d) Participations. By the issuance of a Letter of Credit (or an amendment to a Letter of Credit increasing the amount thereof) and without any further action on the part of the Issuing Bank or the Lenders, the Issuing Bank hereby grants to each Revolving Lender, and each Revolving Lender hereby acquires from the Issuing Bank, a participation in such Letter of Credit equal to such Lender's Applicable Percentage of the aggregate amount available to be drawn under such Letter of Credit. In consideration and in furtherance of the foregoing, each Revolving Lender hereby absolutely and unconditionally agrees to pay to the Administrative Agent, for the account of the Issuing Bank, such Lender's Applicable Percentage of each LC Disbursement made by the Issuing Bank and not reimbursed by the Parent Borrower or the applicable Foreign Subsidiary Borrower, as the case may be, on the date due as provided in paragraph (e) of this Section, or of any reimbursement payment required to be refunded to the Parent Borrower or the applicable Foreign Subsidiary Borrower, as the case may be, for any reason. Each Lender acknowledges and agrees that its obligation to acquire participations pursuant to this paragraph in respect of Letters of Credit is absolute and unconditional and shall not be affected by any circumstance whatsoever, including any amendment, renewal or extension of any Letter of Credit or the occurrence and continuance of a Default or reduction or termination of the Commitments, and that each such payment shall be made without any offset, abatement, withholding or reduction whatsoever. (e) Reimbursement. If the Issuing Bank shall make any LC Disbursement in respect of a Letter of Credit, the Parent Borrower or the applicable Foreign Subsidiary Borrower, as the case may be, shall reimburse such LC Disbursement by paying to the Administrative Agent an amount equal to such LC Disbursement not later than 12:00 noon, New York City time, on the date that such LC Disbursement is made, if the Parent Borrower or the appli- -57- cable Foreign Subsidiary Borrower, as the case may be, shall have received notice of such LC Disbursement prior to 10:00 a.m., New York City time or London time (in the case of Foreign Currency Letters of Credit), on such date, or, if such notice has not been received by the Parent Borrower or the applicable Foreign Subsidiary Borrower, as the case may be, prior to such time on such date, then not later than 12:00 noon, New York City time or London time (in the case of Foreign Currency Letters of Credit), on (i) the Business Day that the Parent Borrower or the applicable Foreign Subsidiary Borrower, as the case may be, receives such notice, if such notice is received prior to 10:00 a.m., New York City time or London time (in the case of Foreign Currency Letters of Credit), on the day of receipt, or (ii) the Business Day immediately following the day that the Parent Borrower or the applicable Foreign Subsidiary Borrower, as the case may be, receives such notice, if such notice is not received prior to such time on the day of receipt; provided that (i) the Parent Borrower may, subject to the conditions to borrowing set forth herein, request in accordance with Section 2.03 or 2.04 that such payment be financed with an ABR Revolving Borrowing or Swingline Loan in an equivalent amount and, to the extent so financed, the Parent Borrower's obligation to make such payment shall be discharged and replaced by the resulting ABR Revolving Borrowing or Swingline Loan and (ii) such Foreign Subsidiary Borrower may, subject to the conditions to borrowing set forth herein, request in accordance with Section 2.03 that such payment be financed with a Eurocurrency Revolving Borrowing in an equivalent amount in the applicable Foreign Currency and, to the extent so financed, such Foreign Subsidiary Borrower's obligation to make such payment shall be discharged and replaced by the resulting Eurocurrency Revolving Borrowing. If the Parent Borrower or the applicable Foreign Subsidiary Borrower, as the case may be, fails to make such payment when due, the Administrative Agent shall notify each Revolving Lender of the applicable LC Disbursement, the payment then due from the Parent Borrower or the applicable Foreign Subsidiary Borrower, as the case may be, in respect thereof and such Lender's Applicable Percentage thereof. Promptly following receipt of such notice, each Revolving Lender shall pay to the Administrative Agent its Applicable Percentage of the unreimbursed LC Disbursement in the same manner as provided in Section 2.06 with respect to Loans made by such Lender (and Section 2.06 shall apply, mutatis mutandis, to the payment obligations of the Revolving Lenders), and the Administrative Agent shall promptly pay to the Issuing Bank the amounts so received by it from the Revolving Lenders. Promptly following receipt by the Administrative Agent of any payment from the Parent Borrower or any applicable Foreign Subsidiary Borrower, as the case may be, pursuant to this paragraph, the Administrative Agent shall distribute such payment to the Issuing Bank or, to the extent that Revolving Lenders have made payments pursuant to this paragraph to reimburse the Issuing Bank, then to such Lenders and the Issuing Bank as their interests may appear. Any payment made by a Revolving Lender pursuant to this paragraph to reimburse the Issuing Bank for any LC Disbursement (other than the funding of ABR Revolving Loans or a Swingline Loan as contemplated above) shall not constitute a Loan and shall not relieve the Parent Borrower or any applicable Foreign Subsidiary Borrower, as the case may be, of its obligation to reimburse such LC Disbursement. -58- (f) Obligations Absolute. The obligation of the Parent Borrower or any Foreign Subsidiary Borrower to reimburse LC Disbursements as provided in paragraph (e) of this Section shall be absolute, unconditional and irrevocable, and shall be performed strictly in accordance with the terms of this Agreement under any and all circumstances whatsoever and irrespective of (i) any lack of validity or enforceability of any Letter of Credit or this Agreement, or any term or provision therein, (ii) any draft or other document presented under a Letter of Credit proving to be forged, fraudulent or invalid in any respect or any statement therein being untrue or inaccurate in any respect, (iii) payment by the Issuing Bank under a Letter of Credit against presentation of a draft or other document that does not comply with the terms of such Letter of Credit, or (iv) any other event or circumstance whatsoever, whether or not similar to any of the foregoing, that might, but for the provisions of this Section, constitute a legal or equitable discharge of, or provide a right of setoff against, the obligations of the Parent Borrower or any Foreign Subsidiary Borrower hereunder. Neither the Administrative Agent, the Lenders nor the Issuing Bank, nor any of their Related Parties, shall have any liability or responsibility by reason of or in connection with the issuance or transfer of any Letter of Credit or any payment or failure to make any payment thereunder (irrespective of any of the circumstances referred to in the preceding sentence), or any error, omission, interruption, loss or delay in transmission or delivery of any draft, notice or other communication under or relating to any Letter of Credit (including any document required to make a drawing thereunder), any error in interpretation of technical terms or any consequence arising from causes beyond the control of the Issuing Bank; provided that the foregoing shall not be construed to excuse the Issuing Bank from liability to the Parent Borrower or any applicable Foreign Subsidiary Borrower, as the case may be, to the extent of any direct damages (as opposed to consequential damages, claims in respect of which are hereby waived by the Parent Borrower or any applicable Foreign Subsidiary Borrower, as the case may be, to the extent permitted by applicable law) suffered by the Parent Borrower or any applicable Foreign Subsidiary Borrower, as the case may be, that are caused by the Issuing Bank's failure to exercise care when determining whether drafts and other documents presented under a Letter of Credit comply with the terms thereof. The parties hereto expressly agree that, in the absence of gross negligence or wilful misconduct on the part of the Issuing Bank (as finally determined by a court of competent jurisdiction), the Issuing Bank shall be deemed to have exercised care in each such determination. In furtherance of the foregoing and without limiting the generality thereof, the parties agree that, with respect to documents presented which appear on their face to be in substantial compliance with the terms of a Letter of Credit, the Issuing Bank may, in its sole discretion, either accept and make payment upon such documents without responsibility for further investigation, regardless of any notice or information to the contrary, or refuse to accept and make payment upon such documents if such documents are not in strict compliance with the terms of such Letter of Credit. (g) Disbursement Procedures. The Issuing Bank shall, promptly following its receipt thereof, examine all documents purporting to represent a demand for payment under -59- a Letter of Credit. The Issuing Bank shall promptly notify the Administrative Agent and the Parent Borrower or any applicable Foreign Subsidiary Borrower, as the case may be, by telephone (confirmed by telecopy) of such demand for payment and whether the Issuing Bank has made or will make an LC Disbursement thereunder; provided that any failure to give or delay in giving such notice shall not relieve the Parent Borrower or any applicable Foreign Subsidiary Borrower, as the case may be, of its obligation to reimburse the Issuing Bank and the Revolving Lenders with respect to any such LC Disbursement (other than with respect to the timing of such reimbursement obligation set forth in Section 2.05(e)). (h) Interim Interest. If the Issuing Bank shall make any LC Disbursement, then, unless the Parent Borrower or any applicable Foreign Subsidiary Borrower, as the case may be, shall reimburse such LC Disbursement in full on the date such LC Disbursement is made, the unpaid amount thereof shall bear interest, for each day from and including the date such LC Disbursement is made to but excluding the date that the Parent Borrower or any applicable Foreign Subsidiary Borrower, as the case may be, reimburses such LC Disbursement, at the rate per annum then applicable to ABR Revolving Loans; provided that, if the Parent Borrower or any applicable Foreign Subsidiary Borrower, as the case may be, fails to reimburse such LC Disbursement when due pursuant to paragraph (e) of this Section, then Section 2.13(c) shall apply. Interest accrued pursuant to this paragraph shall be for the account of the Issuing Bank, except that interest accrued on and after the date of payment by any Revolving Lender pursuant to paragraph (e) of this Section to reimburse the Issuing Bank shall be for the account of such Lender to the extent of such payment. (i) Replacement of the Issuing Bank; Additional Issuing Banks. The Issuing Bank may be replaced at any time by written agreement among the Parent Borrower (on behalf of itself and the Foreign Subsidiary Borrowers), the Administrative Agent, the replaced Issuing Bank and the successor Issuing Bank. One or more Lenders may be appointed as additional Issuing Banks by written agreement among the Parent Borrower (on behalf of itself and the Foreign Subsidiary Borrowers), the Administrative Agent (whose consent will not be unreasonably withheld) and the Lender that is to be so appointed. The Administrative Agent shall notify the Lenders of any such replacement of the Issuing Bank or any such additional Issuing Bank. At the time any such replacement shall become effective, the Parent Borrower (on behalf of itself and the Foreign Subsidiary Borrowers) shall pay all unpaid fees accrued for the account of the replaced Issuing Bank pursuant to Section 2.12(b). From and after the effective date of any such replacement or addition, as applicable, (i) the successor or additional Issuing Bank shall have all the rights and obligations of the Issuing Bank under this Agreement with respect to Letters of Credit to be issued thereafter and (ii) references herein to the term "Issuing Bank" shall be deemed to refer to such successor or such addition or to any previous Issuing Bank, or to such successor or such addition and all previous Issuing Banks, as the context shall require. After the replacement of an Issuing Bank hereunder, the replaced Issuing Bank shall remain a party hereto and shall continue to have all the rights and obliga- -60- tions of an Issuing Bank under this Agreement with respect to Letters of Credit issued by it prior to such replacement, but shall not be required to issue additional Letters of Credit. If at any time there is more than one Issuing Bank hereunder, the Parent Borrower (on behalf of itself and the Foreign Subsidiary Borrowers) may, in its discretion, select which Issuing Bank is to issue any particular Letter of Credit. (j) Cash Collateralization. If any Event of Default shall occur and be continuing, on the Business Day that the Parent Borrower or any Foreign Subsidiary Borrower receives notice from the Administrative Agent or the Required Lenders (or, if the maturity of the Loans has been accelerated, Revolving Lenders with LC Exposure representing greater than 50% of the total LC Exposure) demanding the deposit of cash collateral pursuant to this paragraph, the Parent Borrower and the Foreign Subsidiary Borrowers, as the case may be, shall deposit in an account with the Administrative Agent, in the name of the Administrative Agent and for the benefit of the Lenders, an amount in cash in the applicable currency equal to the LC Exposure as of such date plus any accrued and unpaid interest thereon; provided that the obligation to deposit such cash collateral shall become effective immediately, and such deposit shall become immediately due and payable, without demand or other notice of any kind, upon the occurrence of any Event of Default with respect to the Parent Borrower or any Foreign Subsidiary Borrower described in clause (h) or (i) of Article VII. Each such deposit shall be held by the Administrative Agent as collateral for the payment and performance of the obligations of the Parent Borrower and the Foreign Subsidiary Borrower under this Agreement. The Administrative Agent shall have exclusive dominion and control, including the exclusive right of withdrawal, over such account. Other than any interest earned on the investment of such deposits, which investments shall be made at the option and sole discretion of the Administrative Agent and at the risk and expense of the Parent Borrower and the Foreign Subsidiary Borrower, such deposits shall not bear interest. Interest or profits, if any, on such investments shall accumulate in such account. Moneys in such account shall be applied by the Administrative Agent to reimburse the Issuing Bank for LC Disbursements for which it has not been reimbursed and, to the extent not so applied, shall be held for the satisfaction of the reimbursement obligations of the Parent Borrower and the Foreign Subsidiary Borrower for the LC Exposure at such time or, if the maturity of the Loans has been accelerated (but subject to the consent of Revolving Lenders with LC Exposure representing greater than 50% of the total LC Exposure), be applied to satisfy other obligations of the Parent Borrower and the Foreign Subsidiary Borrower under this Agreement. If the Parent Borrower or any Foreign Subsidiary Borrower is required to provide an amount of cash collateral hereunder as a result of the occurrence of an Event of Default, such amount plus any accrued interest or realized profits of such amounts (to the extent not applied as afore- -61- said) shall be returned to the Parent Borrower or such Foreign Subsidiary Borrower within three Business Days after all Events of Default have been cured or waived. If the Parent Borrower is required to provide an amount of such collateral hereunder pursuant to Section 2.11(b), such amount plus any accrued interest or realized profits on account of such amount (to the extent not applied as aforesaid) shall be returned to the Parent Borrower as and to the extent that, after giving effect to such return, the Parent Borrower would remain in compliance with Section 2.11(b) and no Default or Event of Default shall have occurred and be continuing. SECTION 2.06. Funding of Borrowings. (a) Each Lender shall make each Loan to be made by it hereunder on the proposed date thereof by wire transfer of immediately available funds by 12:00 noon, New York City time, or in the case of Foreign Currency Borrowings, London time, to the account of the Administrative Agent most recently designated by it for such purpose by notice to the Lenders; provided that Swingline Loans shall be made as provided in Section 2.04. The Administrative Agent will make such Loans available to the Parent Borrower, the applicable Subsidiary Term Borrower or the applicable Foreign Subsidiary Borrower, as the case may be, by promptly crediting the amounts so received, in like funds, to an account of the Parent Borrower, such Subsidiary Term Borrower or such Foreign Subsidiary Borrower, as the case may be, maintained with the Administrative Agent in New York City, or in the case of Foreign Currency Borrowings, London, and designated by the Parent Borrower such Subsidiary Term Borrower or such Foreign Subsidiary Borrower, in the applicable Borrowing Request; provided that ABR Revolving Loans made to finance the reimbursement of an LC Disbursement as provided in Section 2.05(e) shall be remitted by the Administrative Agent to the Issuing Bank. (b) Unless the Administrative Agent shall have received notice from a Lender prior to the proposed date of any Borrowing that such Lender will not make available to the Administrative Agent such Lender's share of such Borrowing, the Administrative Agent may assume that such Lender has made such share available on such date in accordance with paragraph (a) of this Section and may, in reliance upon such assumption, make available to the Parent Borrower, the applicable Subsidiary Term Borrower or the applicable Foreign Subsidiary Borrower, as the case may be, a corresponding amount. In such event, if a Lender has not in fact made its share of the applicable Borrowing available to the Administrative Agent, then the applicable Lender and the Parent Borrower, the applicable Subsidiary Term Borrower or the applicable Foreign Subsidiary Borrower, as the case may be, severally agree to pay to the Administrative Agent forthwith on demand such corresponding amount with interest thereon, for each day from and including the date such amount is made available to the Parent Borrower, the applicable Subsidiary Term Borrower or the applicable Foreign Subsidiary Borrower, as the case may be, to but excluding the date of payment to the Administrative Agent, at (i) in the case of such Lender, the greater of (x) the Federal Funds Effective Rate and (y) a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation, except with respect to Foreign Currency Borrowings, the applicable rate shall be determined as specified in clause (y) above, or (ii) in the case of the Parent Borrower, any Subsidiary Term Borrower or any Foreign Subsidiary Borrower, the interest rate -62- applicable to ABR Loans. If such Lender pays such amount to the Administrative Agent, then such amount shall constitute such Lender's Loan included in such Borrowing. SECTION 2.07. Interest Elections. (a) Each Revolving Borrowing and Term Borrowing initially shall be of the Type specified in the applicable Borrowing Request and, in the case of a Eurocurrency Borrowing, shall have an initial Interest Period as specified in such Borrowing Request. Thereafter, the Parent Borrower, the applicable Subsidiary Term Borrower or the applicable Foreign Subsidiary Borrower, as the case may be, may elect to convert such Borrowing to a different Type or to continue such Borrowing and, in the case of a Eurocurrency Borrowing, may elect Interest Periods therefor, all as provided in this Section. The Parent Borrower, the applicable Subsidiary Term Borrower or the applicable Foreign Subsidiary Borrower, as the case may be, may elect different options with respect to different portions of the affected Borrowing, in which case each such portion shall be allocated ratably among the Lenders holding the Loans comprising such Borrowing, and the Loans comprising each such portion shall be considered a separate Borrowing. This Section shall not apply to Swingline Borrowings, which may not be converted or continued. (b) To make an election pursuant to this Section, the Parent Borrower, the applicable Subsidiary Term Borrower or the applicable Foreign Subsidiary Borrower, as the case may be, shall notify the Administrative Agent of such election by telephone by the time that a Borrowing Request would be required under Section 2.03 if the Parent Borrower, the applicable Subsidiary Term Borrower or the applicable Foreign Subsidiary Borrower, as the case may be, were requesting a Revolving Borrowing or Term Borrowing of the Type resulting from such election to be made on the effective date of such election. Each such telephonic Interest Election Request shall be irrevocable and shall be confirmed promptly by hand delivery or telecopy to the Administrative Agent of a written Interest Election Request in a form approved by the Administrative Agent and signed by the Parent Borrower, the applicable Subsidiary Term Borrower or the applicable Foreign Subsidiary Borrower, as the case may be. (c) Each telephonic and written Interest Election Request shall specify the following information in compliance with Section 2.02: (i) the Borrowing to which such Interest Election Request applies and, if different options are being elected with respect to different portions thereof, the portions thereof to be allocated to each resulting Borrowing (in which case the information to be specified pursuant to clauses (iii) and (iv) below shall be specified for each resulting Borrowing); (ii) the effective date of the election made pursuant to such Interest Election Request, which shall be a Business Day; -63- (iii) whether the resulting Borrowing is to be an ABR Borrowing or a Eurocurrency Borrowing; and (iv) if the resulting Borrowing is a Eurocurrency Borrowing, the Interest Period to be applicable thereto after giving effect to such election, which shall be a period contemplated by the definition of the term "Interest Period". If any such Interest Election Request requests a Eurocurrency Borrowing but does not specify an Interest Period, then the Parent Borrower, the applicable Subsidiary Term Borrower or the applicable Foreign Subsidiary Borrower, as the case may be, shall be deemed to have selected an Interest Period of one month's duration. (d) Promptly following receipt of an Interest Election Request, the Administrative Agent shall advise each Lender of the details thereof and of such Lender's portion of each resulting Borrowing. (e) If an Interest Election Request with respect to a Eurocurrency Borrowing is not timely delivered prior to the end of the Interest Period applicable thereto, then, unless such Borrowing is repaid as provided herein, at the end of such Interest Period such Borrowing shall be converted to an ABR Borrowing (unless such Borrowing is a Foreign Currency Borrowing, in which case such Borrowing shall become due and payable on the last day of such Interest Period). Notwithstanding any contrary provision hereof, if an Event of Default has occurred and is continuing and the Administrative Agent, at the request of the Required Lenders, so notifies the Parent Borrower (on behalf of itself, the Subsidiary Term Borrowers and the Foreign Subsidiary Borrowers), then, so long as an Event of Default is continuing (i) no outstanding Borrowing (other than a Foreign Currency Borrowing) may be converted to or continued as a Eurocurrency Borrowing and (ii) unless repaid, each Eurocurrency Borrowing (other than a Foreign Currency Borrowing) shall be converted to an ABR Borrowing at the end of the Interest Period applicable thereto. SECTION 2.08. Termination and Reduction of Commitments. (a) Unless previously terminated, (i) the Tranche A Commitments and Tranche B Commitments shall terminate at 5:00 p.m., New York City time, on the Effective Date and (ii) the Revolving Commitments shall terminate on the Revolving Maturity Date. (b) The Parent Borrower (on behalf of itself, the Subsidiary Term Borrowers and the Foreign Subsidiary Borrowers) may at any time terminate, or from time to time reduce, the Commitments of any Class (it being understood that reductions of Revolving Commitments will automatically reduce Foreign Currency Commitments on a pro rata basis); provided that (i) each reduction of the Commitments of any Class shall be in an amount that is an integral multiple of $1,000,000 and not less than $5,000,000 and (ii) the Revolving Com- -64- mitments shall not be terminated or reduced if, after giving effect to any concurrent prepayment of the Revolving Loans in accordance with Section 2.11, the sum of the Revolving Exposures would exceed the total Revolving Commitments. (c) The Parent Borrower (on behalf of itself, the Subsidiary Term Borrowers and the Foreign Subsidiary Borrowers) shall notify the Administrative Agent of any election to terminate or reduce the Commitments under paragraph (b) of this Section at least three Business Days prior to the effective date of such termination or reduction, specifying such election and the effective date thereof. Promptly following receipt of any notice, the Administrative Agent shall advise the Lenders of the contents thereof. Each notice delivered by the Parent Borrower (on behalf of itself, the Subsidiary Term Borrowers and the Foreign Subsidiary Borrowers) pursuant to this Section shall be irrevocable; provided that a notice of termination of the Revolving Commitments delivered by the Parent Borrower (on behalf of itself, the Subsidiary Term Borrowers and the Foreign Subsidiary Borrowers) may state that such notice is conditioned upon the effectiveness of other credit facilities or the occurrence of another transaction, in which case such notice may be revoked by the Parent Borrower (on behalf of itself, the Subsidiary Term Borrowers and the Foreign Subsidiary Borrowers) (by notice to the Administrative Agent on or prior to the specified effective date) if such condition is not satisfied. Any termination or reduction of the Commitments of any Class shall be permanent. Each reduction of the Commitments of any Class shall be made ratably among the Lenders in accordance with their respective Commitments of such Class. SECTION 2.09. Repayment of Loans; Evidence of Debt. (a) The Parent Borrower, each Subsidiary Term Borrower (with respect to Tranche A Loans made to such Subsidiary Term Borrower) and each Foreign Subsidiary Borrower (with respect to Foreign Currency Loans made to such Foreign Subsidiary Borrower) hereby unconditionally promises to pay (i) to the Administrative Agent for the account of each Lender the then unpaid principal amount of each Revolving Loan of such Lender on the Revolving Maturity Date, (ii) to the Administrative Agent for the account of each Lender the then unpaid principal amount of each Term Loan of such Lender as provided in Section 2.10 and (iii) to the Swingline Lender the then unpaid principal amount of each Swingline Loan on the earlier of the Revolving Maturity Date and the first date after such Swingline Loan is made that is the 15th or last day of a calendar month and is at least two Business Days after such Swingline Loan is made; provided that on each date that a Revolving Borrowing (other than a Foreign Currency Borrowing) is made, the Parent Borrower shall repay all Swingline Loans that were outstanding on the date such Borrowing was requested. (b) Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing the indebtedness of the Parent Borrower, the Subsidiary Term Borrowers and the Foreign Subsidiary Borrowers to such Lender resulting from each Loan -65- made by such Lender, including the amounts of principal and interest payable and paid to such Lender from time to time hereunder. (c) The Administrative Agent shall maintain accounts in which it shall record (i) the amount of each Loan made hereunder, the Class and Type thereof and the Interest Period applicable thereto, (ii) the amount of any principal or interest due and payable or to become due and payable from the Parent Borrower, the Subsidiary Term Borrowers and the Foreign Subsidiary Borrowers to each Lender hereunder and (iii) the amount of any sum received by the Administrative Agent hereunder for the account of the Lenders and each Lender's share thereof. (d) The entries made in the accounts maintained pursuant to paragraph (b) or (c) of this Section shall be prima facie evidence of the existence and amounts of the obligations recorded therein; provided that the failure of any Lender or the Administrative Agent to maintain such accounts or any error therein shall not in any manner affect the obligation of the Parent Borrower, the Subsidiary Term Borrowers and the Foreign Subsidiary Borrowers to repay the Loans in accordance with the terms of this Agreement. (e) Any Lender may request that Loans of any Class made by it be evidenced by a promissory note. In such event, the Parent Borrower, the applicable Subsidiary Term Borrower or the applicable Foreign Subsidiary Borrower, as the case may be, shall prepare, execute and deliver to such Lender a promissory note payable to the order of such Lender (or, if requested by such Lender, to such Lender and its registered assigns) and in a form approved by the Administrative Agent. Thereafter, the Loans evidenced by such promissory note and interest thereon shall at all times (including after assignment pursuant to Section 10.04) be represented by one or more promissory notes in such form payable to the order of the payee named therein (or, if such promissory note is a registered note, to such payee and its registered assigns). SECTION 2.10. Amortization of Term Loans. (a) Subject to adjustment pursuant to paragraph (e) of this Section, the Tranche A Borrowers shall repay Tranche A Term Borrowings on each date set forth below in the aggregate principal amount set forth opposite such date: Date Amount June 30, 2001 ....................................... $ 10,000,000 December 31, 2001.................................... $ 20,000,000 June 30, 2002........................................ $ 20,000,000 December 31, 2002.................................... $ 30,000,000 June 30, 2003........................................ $ 35,000,000 -66- Date Amount December 31, 2003.................................... $ 35,000,000 June 30, 2004........................................ $ 40,000,000 December 31, 2004.................................... $ 40,000,000 June 30, 2005........................................ $ 40,000,000 December 31, 2005.................................... $ 40,000,000 June 30, 2006........................................ $ 45,000,000 December 31, 2006.................................... $ 45,000,000 Tranche A Maturity Date.............................. $100,000,000 (b) Subject to adjustment pursuant to paragraph (e) of this Section, the Parent Borrower shall repay Tranche B Term Borrowings on each date set forth below in the aggregate principal amount set forth opposite such date: Date Amount June 30, 20.01....................................... $ 500,000 December 31, 2001.................................... $ 500,000 June 30, 2002........................................ $ 500,000 December 31, 2002.................................... $ 500,000 June 30, 2003........................................ $ 500,000 December 31, 2003.................................... $ 500,000 June 30, 2004........................................ $ 500,000 December 31, 2004.................................... $ 500,000 June 30, 2005........................................ $ 500,000 December 31, 2005.................................... $ 500,000 June 30, 2006........................................ $ 500,000 December 31, 2006.................................... $ 500,000 June 30, 2007........................................ $ 62,500,000 December 31, 2007.................................... $107,500,000 June 30, 2008........................................ $162,000,000 Tranche B Maturity Date.............................. $162,000,000 (c) The Incremental Term Loans, if any, of each Incremental Lender shall mature in installments as specified in the Incremental Term Loan Activation Notice pursuant to which such Incremental Term Loans were made; provided that prior to the date that is six months prior to the Tranche B Maturity Date the amounts of such installments for any twelve consecutive months shall not exceed 1% of the aggregate principal amount of such Incremental Term Loans on the date such Loans were first made. -67- (d) To the extent not previously paid, (i) all Tranche A Term Loans shall be due and payable on the Tranche A Maturity Date, (ii) all Tranche B Term Loans shall be due and payable on the Tranche B Maturity Date and (iii) all Incremental Term Loans shall be due and payable on the applicable Incremental Maturity Date. (e) Any prepayment of a Term Borrowing of any Class shall be applied to reduce the subsequent scheduled repayments of the Term Borrowings of such Class to be made pursuant to this Section ratably; provided that (i) any prepayment made pursuant to Section 2.11(a) shall be applied, first, to reduce the next two scheduled repayments of the Term Borrowings of such Class due to be made within the next twelve months pursuant to this Section unless and until such next scheduled repayment has been eliminated as a result of reductions hereunder (provided, further, that the amount of such prepayment that may be allocated as provided in clause (i) of this proviso may not exceed the greater of 50% of such prepayment and the amount of such two scheduled repayments) and (ii) any prepayment of Tranche A Borrowings made pursuant to Section 2.11(f) during the period when any Convertible Debentures are outstanding shall be applied to reduce the next scheduled repayments of Tranche A Borrowings pursuant to Section 2.10(a). Notwithstanding the foregoing, any prepayment of Eurocurrency Term Borrowings made pursuant to Section 2.11(a) on a date that is (x) the last day of an Interest Period and (y) no more than five days prior to a scheduled amortization payment pursuant this Section shall be applied, first, to reduce such scheduled payment, and any excess shall be applied as required by the first sentence of this Section 2.10(e). (f) Prior to any repayment of any Term Borrowings of either Class hereunder, the Parent Borrower (on behalf of itself and, in the case of Tranche A Borrowings, the applicable Subsidiary Term Borrower) shall select the Borrowing or Borrowings of the applicable Class to be repaid and shall notify the Administrative Agent by telephone (confirmed by telecopy) of such selection not later than 11:00 a.m., New York City time, three Business Days before the scheduled date of such repayment. Each repayment of a Borrowing shall be applied ratably to the Loans included in the repaid Borrowing. Repayments of Term Borrowings shall be accompanied by accrued interest on the amount repaid. SECTION 2.11. Prepayment of Loans. (a) The Parent Borrower, the Subsidiary Term Borrowers and the Foreign Subsidiary Borrowers, as the case may be, shall have the right at any time and from time to time to prepay any Borrowing in whole or in part, subject to the requirements of this Section. (b) In the event and on such occasion that the sum of the Revolving Exposures exceeds the total Revolving Commitments, the Parent Borrower and the Foreign Subsidiary Borrowers, as the case may be, shall prepay Revolving Borrowings or Swingline Bor- -68- rowings (or, if no such Borrowings are outstanding, deposit cash collateral in an account with the Administrative Agent pursuant to Section 2.05(j)) in an aggregate amount equal to such excess. (c) In the event that the sum of the Foreign Currency Exposures exceeds (i) 105% of the total Foreign Currency Commitments solely as a result of currency fluctuations or (ii) the total Foreign Currency Commitments (other than as a result of currency fluctuations), the Foreign Subsidiary Borrowers shall prepay Foreign Currency Borrowings (or if no such Borrowings are outstanding, deposit cash collateral in an account with the Administrative Agent pursuant to Section 2.05(j)) in an amount equal to the amount by which the sum of Foreign Currency Exposures exceed the total Foreign Currency Commitments no later than in the case of clause (i) above the next Interest Payment Date and in the case of clause (ii), the first Business Day that such excess exists. (d) In the event and on each occasion that any Net Proceeds are received by or on behalf of Holdings, the Parent Borrower or any Subsidiary in respect of any Prepayment Event, the Parent Borrower (on behalf of itself and, in the case of Tranche A Borrowings, the Subsidiary Term Borrowers) shall, within three Business Days after such Net Proceeds are received, prepay Term Borrowings in an aggregate amount equal to such Net Proceeds; provided that, in the case of any event described in clause (a) of the definition of the term Prepayment Event, if Holdings or the Parent Borrower shall deliver, within such three Business Days, to the Administrative Agent a certificate of a Financial Officer to the effect that Holdings, the Parent Borrower and the Subsidiaries intend to apply the Net Proceeds from such event (or a portion thereof specified in such certificate), within 365 days after receipt of such Net Proceeds, to acquire real property, equipment or other tangible assets to be used in the business of the Parent Borrower and the Subsidiaries, and certifying that no Default has occurred and is continuing, then no prepayment shall be required pursuant to this paragraph in respect of the Net Proceeds in respect of such event (or the portion of such Net Proceeds specified in such certificate, if applicable) except to the extent of any such Net Proceeds therefrom that have not been so applied by the end of such 365-day period, at which time a prepayment shall be required in an amount equal to such Net Proceeds that have not been so applied. (e) In the event and on each occasion that any Net Proceeds are received by or on behalf of Holdings, the Parent Borrower or any Subsidiary in respect of any Specified Prepayment Event, the Parent Borrower (on behalf of itself and, in the case of Tranche A Borrowings, the Subsidiary Term Borrowers) shall, within three Business Days after such Net Proceeds are received, prepay (i) Incremental Term Borrowings and (ii) to the extent that (x) there are no Incremental Term Borrowings outstanding and (y) such Net Proceeds arise from an event described in clause (b) of the definition of the term Specified Prepayment Event, other Term Borrowings, in each case in an aggregate amount equal to such Net Proceeds. -69- (f) Following the end of each fiscal year of the Parent Borrower, commencing with the fiscal year ending December 31, 2001, the Parent Borrower (on behalf of itself and, in the case of Tranche A Borrowings, the Subsidiary Term Borrowers) shall prepay Term Borrowings in an aggregate amount equal to 75% of Excess Cash Flow for such fiscal year; provided that such percentage shall be reduced from 75% to 50% with respect to the prepayment under this paragraph (e), if the Parent Borrower's Leverage Ratio as of the last fiscal quarter preceding the applicable prepayment date is less than 3.00 to 1.00. Each prepayment pursuant to this paragraph shall be made on or before the date on which financial statements are delivered pursuant to Section 5.01 with respect to the fiscal year for which Excess Cash Flow is being calculated (and in any event within 95 days after the end of such fiscal year). (g) Whenever any (i) prepayment of any Tranche B Term Loans is made pursuant to Section 2.11 or (ii) repayment of any Tranche B Loans is required as a result of a declaration pursuant to Article VII, following the occurrence of a Change of Control, that such Tranche B Loans are due and payable, in either case within two years after the Effective Date, the Parent Borrower shall on the date of such prepayment or declaration, as the case may be, pay to the Tranche B Lenders that hold such Tranche B Loans a prepayment premium equal to (A) if such prepayment or declaration occurs within one year after the Effective Date, 2.0% of the principal amount of such Tranche B Loans being so prepaid or repaid or (B) if such prepayment or declaration occurs after one year after the Effective Date but within two years after the Effective Date, 1.0% of the principal amount of such Tranche B Loans being so prepaid or repaid. The Incremental Term Loan Activation Notice may provide that the applicable Incremental Loans shall be entitled to prepayment premium payments under the circumstances specified in the immediately preceding sentence, provided that such provisions shall not be more favorable to such Incremental Lenders than the provisions of the immediately preceding sentence are to Tranche B Lenders. (h) Prior to any optional or mandatory prepayment of Borrowings hereunder, the Parent Borrower (on behalf of itself, the Subsidiary Term Borrowers and the Foreign Subsidiary Borrowers) shall select the Borrowing or Borrowings to be prepaid and shall specify such selection in the notice of such prepayment pursuant to paragraph (i) of this Section. Subject to Section 2.11(e), in the event of any optional or mandatory prepayment of Term Borrowings made at a time when Term Borrowings of more than one Class remain outstanding, the Parent Borrower (on behalf of itself and, in the case of Tranche A Borrowings, the Subsidiary Term Borrowers) shall select Term Borrowings to be prepaid so that the aggregate amount of such prepayment is allocated between the Tranche A Term Borrowings, Tranche B Term Borrowings and Incremental Term Borrowings pro rata based on the aggregate principal amount of outstanding Borrowings of each such Class; provided that any Tranche B Lender may elect, by notice to the Administrative Agent by telephone (confirmed by telecopy) at least one Business Day prior to the prepayment date, to decline all or any portion of any prepay- -70- ment of its Tranche B Term Loans pursuant to this Section (other than an optional prepayment pursuant to Section 2.11(a), which may not be declined), in which case the aggregate amount of the prepayment that would have been applied to prepay Tranche B Term Loans but was so declined shall be applied to prepay Tranche A Term Borrowings. In the event that the Incremental Term Loan Activation Notice provides that the Incremental Lenders have the right to decline prepayments pursuant to the immediately preceding sentence, the proviso in the immediately preceding sentence shall be automatically deemed amended to provide that such Incremental Lenders may decline prepayments of the Incremental Loans subject to such Incremental Term Loan Activation Notice to the same extent that the Tranche B Lenders have the right to decline Tranche B Term Loans pursuant to such proviso. (i) The Parent Borrower (on behalf of itself, the Subsidiary Term Borrowers and the Foreign Subsidiary Borrowers) shall notify the Administrative Agent (and, in the case of prepayment of a Swingline Loan, the Swingline Lender) by telephone (confirmed by telecopy) of any prepayment hereunder (i) in the case of prepayment of a Eurocurrency Borrowing, not later than 12:00 noon, New York City time, three Business Days before the date of prepayment, (ii) in the case of prepayment of an ABR Borrowing, not later than 12:00 noon, New York City time, one Business Day before the date of prepayment or (iii) in the case of prepayment of a Swingline Loan, not later than 12:00 noon, New York City time, on the date of prepayment. Each such notice shall be irrevocable and shall specify the prepayment date, the principal amount of each Borrowing or portion thereof to be prepaid and, in the case of a mandatory prepayment, a reasonably detailed calculation of the amount of such prepayment; provided that, if a notice of optional prepayment is given in connection with a conditional notice of termination of the Revolving Commitments as contemplated by Section 2.08, then such notice of prepayment may be revoked if such notice of termination is revoked in accordance with Section 2.08. Promptly following receipt of any such notice (other than a notice relating solely to Swingline Loans), the Administrative Agent shall advise the Lenders of the contents thereof. Each partial prepayment of any Borrowing shall be in an amount that would be permitted in the case of an advance of a Borrowing of the same Type as provided in Section 2.02, except as necessary to apply fully the required amount of a mandatory prepayment. Each prepayment of a Borrowing shall be applied ratably to the Loans included in the prepaid Borrowing. Prepayments shall be accompanied by accrued interest to the extent required by Section 2.13. SECTION 2.12. Fees. (a) The Parent Borrower (on behalf of itself, the Subsidiary Term Borrowers and the Foreign Subsidiary Borrowers) agrees to pay to the Administrative Agent for the account of each Lender a commitment fee, which shall accrue at the Applicable Rate on the average daily unused amount of each Commitment of such Lender during the period from and including the Effective Date to but excluding the date on which such Commitment terminates. Accrued commitment fees shall be payable in arrears (i) in the case of commitment fees in respect of the Revolving -71- Commitments, on the last day of March, June, September and December of each year and on the date on which the Revolving Commitments terminate, commencing on the first such date to occur after the date hereof, (ii) in the case of commitment fees in respect of the Tranche A Term Commitments and Tranche B Term Commitments, on the Effective Date or any earlier date on which such Commitments terminate and (iii) in the case of commitment fees in respect of Incremental Term Commitments, as specified in the applicable Incremental Term Loan Activation Notice. All commitment fees shall be computed on the basis of a year of 360 days and shall be payable for the actual number of days elapsed (including the first day but excluding the last day). For purposes of computing commitment fees with respect to Revolving Commitments, a Revolving Commitment of a Lender shall be deemed to be used to the extent of the outstanding Revolving Loans and LC Exposure of such Lender (and the Swingline Exposure of such Lender shall be disregarded for such purpose). (b) The Parent Borrower (on behalf of itself and the Foreign Subsidiary Borrowers) agrees to pay (i) to the Administrative Agent for the account of each Revolving Lender a participation fee with respect to its participations in Letters of Credit, which shall accrue at the same Applicable Rate as interest on Eurocurrency Revolving Loans on the average daily amount of such Lender's LC Exposure (excluding any portion thereof attributable to unreimbursed LC Disbursements) during the period from and including the Effective Date to but excluding the later of the date on which such Lender's Revolving Commitment terminates and the date on which such Lender ceases to have any LC Exposure, and (ii) to the Issuing Bank a fronting fee, which shall accrue at the rate of 0.25% per annum on the average daily amount of the LC Exposure (excluding any portion thereof attributable to unreimbursed LC Disbursements) during the period from and including the Effective Date to but excluding the later of the date of termination of the Revolving Commitments and the date on which there ceases to be any LC Exposure, as well as the Issuing Bank's standard fees with respect to the issuance, amendment, renewal or extension of any Letter of Credit or processing of drawings thereunder. Participation fees and fronting fees accrued through and including the last day of March, June, September and December of each year shall be payable on the third Business Day following such last day, commencing on the first such date to occur after the Effective Date; provided that all such fees shall be payable on the date on which the Revolving Commitments terminate and any such fees accruing after the date on which the Revolving Commitments terminate shall be payable on demand. Any other fees payable to the Issuing Bank pursuant to this paragraph shall be payable within 10 days after demand. All participation fees and fronting fees shall be computed on the basis of a year of 360 days and shall be payable for the actual number of days elapsed (including the first day but excluding the last day). (c) The Parent Borrower (on behalf of itself, the Subsidiary Term Borrowers and the Foreign Subsidiary Borrowers) agrees to pay to the Administrative Agent, for its own account, fees payable in the amounts and at the times separately agreed upon between the Parent Borrower and the Administrative Agent. -72- (d) All fees payable hereunder shall be paid on the dates due, in immediately available funds, to the Administrative Agent (or to the Issuing Bank, in the case of fees payable to it) for distribution, in the case of commitment fees and participation fees, to the Lenders entitled thereto. Fees paid shall not be refundable under any circumstances. SECTION 2.13. Interest. (a) The Loans comprising each ABR Borrowing (including each Swingline Loan) shall bear interest at the Alternate Base Rate plus the Applicable Rate. (b) The Loans comprising each Eurocurrency Borrowing shall bear interest at the Adjusted LIBO Rate for the Interest Period in effect for such Borrowing plus the Applicable Rate. (c) Notwithstanding the foregoing, if any principal of or interest on any Loan or any fee or other amount payable by the Parent Borrower, the Subsidiary Term Borrowers or the Foreign Subsidiary Borrowers, as the case may be, hereunder is not paid when due, whether at stated maturity, upon acceleration or otherwise, such overdue amount shall bear interest, after as well as before judgment, at a rate per annum equal to (i) in the case of overdue principal of any Loan, 2% plus the rate otherwise applicable to such Loan as provided in the preceding paragraphs of this Section or (ii) in the case of any other amount, 2% plus the rate applicable to ABR Revolving Loans as provided in paragraph (a) of this Section. (d) Accrued interest on each Loan shall be payable in arrears on each Interest Payment Date for such Loan and, in the case of Revolving Loans, upon termination of the Revolving Commitments; provided that (i) interest accrued pursuant to paragraph (c) of this Section shall be payable on demand, (ii) in the event of any repayment or prepayment of any Loan (other than a prepayment of an ABR Revolving Loan prior to the end of the Revolving Availability Period), accrued interest on the principal amount repaid or prepaid shall be payable on the date of such repayment or prepayment and (iii) in the event of any conversion of any Eurocurrency Loan prior to the end of the current Interest Period therefor, accrued interest on such Loan shall be payable on the effective date of such conversion. (e) All interest hereunder shall be computed on the basis of a year of 360 days, except that (i) interest on a Foreign Currency Borrowing denominated in Sterling and (ii) interest computed by reference to the Alternate Base Rate at times when the Alternate Base Rate is based on the Prime Rate shall be computed on the basis of a year of 365 days (or 366 days in a leap year), and in each case shall be payable for the actual number of days elapsed (including the first day but excluding the last day). The applicable Alternate Base Rate or Adjusted LIBO Rate shall be determined by the Administrative Agent, and such determination shall be conclusive absent manifest error. -73- SECTION 2.14. Alternate Rate of Interest. If prior to the commencement of any Interest Period for a Eurocurrency Borrowing denominated in any currency: (a) the Administrative Agent determines (which determination shall be conclusive absent manifest error) that adequate and reasonable means do not exist for ascertaining the Adjusted LIBO Rate for such Interest Period; or (b) the Administrative Agent is advised by the Required Lenders that the Adjusted LIBO Rate for such Interest Period will not adequately and fairly reflect the cost to such Lenders of making or maintaining their Loans included in such Borrowing for such Interest Period; then the Administrative Agent shall give notice thereof to the Parent Borrower (on behalf of itself, the Subsidiary Term Borrowers and the Foreign Subsidiary Borrowers) and the Lenders by telephone or telecopy as promptly as practicable thereafter and, until the Administrative Agent notifies the Parent Borrower (on behalf of itself, the Subsidiary Term Borrowers and the Foreign Subsidiary Borrowers) and the Lenders that the circumstances giving rise to such notice no longer exist, (i) any Interest Election Request that requests the conversion of any Borrowing denominated in such currency to, or continuation of any Borrowing denominated in such currency as, a Eurocurrency Borrowing shall be ineffective, and any Eurocurrency Borrowing denominated in such currency that is requested to be continued (A) if such currency is the dollar, shall be converted to an ABR Borrowing on the last day of the Interest Period applicable thereto and (B) if such currency is a Foreign Currency, shall be repaid on the last day of the Interest Period applicable thereto and (ii) if any Borrowing Request requests a Eurocurrency Borrowing denominated in such currency (A) if such currency is the dollar, such Borrowing shall be made as an ABR Borrowing and (B) if such currency is a Foreign Currency, such Borrowing Request shall be ineffective. SECTION 2.15. Increased Costs. (a) If any Change in Law shall: (i) impose, modify or deem applicable any reserve, special deposit or similar requirement against assets of, deposits with or for the account of, or credit extended by, any Lender (except any such reserve requirement reflected in the Adjusted LIBO Rate) or the Issuing Bank; or (ii) impose on any Lender or the Issuing Bank or the London interbank market any other condition affecting this Agreement or Eurocurrency Loans made by such Lender or any Letter of Credit or participation therein; -74- and the result of any of the foregoing shall be to increase the cost to such Lender of making or maintaining any Eurocurrency Loan (or of maintaining its obligation to make any such Loan) or to increase the cost to such Lender or the Issuing Bank of participating in, issuing or maintaining any Letter of Credit or to reduce the amount of any sum received or receivable by such Lender or the Issuing Bank hereunder (whether of principal, interest or otherwise), then the Parent Borrower, the applicable Subsidiary Term Borrowers or the applicable Foreign Subsidiary Borrowers, as the case may be, will pay to such Lender or the Issuing Bank, as the case may be, such additional amount or amounts as will compensate such Lender or the Issuing Bank, as the case may be, for such additional costs incurred or reduction suffered. (b) If any Lender or the Issuing Bank determines that any Change in Law regarding capital requirements has or would have the effect of reducing the rate of return on such Lender's or the Issuing Bank's capital or on the capital of such Lender's or the Issuing Bank's holding company, if any, as a consequence of this Agreement or the Loans made by, or participations in Letters of Credit held by, such Lender, or the Letters of Credit issued by the Issuing Bank, to a level below that which such Lender or the Issuing Bank or such Lender's or the Issuing Bank's holding company could have achieved but for such Change in Law (taking into consideration such Lender's or the Issuing Bank's policies and the policies of such Lender's or the Issuing Bank's holding company with respect to capital adequacy), then from time to time the Parent Borrower, the applicable Subsidiary Term Borrowers or the applicable Foreign Subsidiary Borrowers, as the case may be, will pay to such Lender or the Issuing Bank, as the case may be, such additional amount or amounts as will compensate such Lender or the Issuing Bank or such Lender's or the Issuing Bank's holding company for any such reduction suffered. (c) A certificate of a Lender or the Issuing Bank setting forth the amount or amounts necessary to compensate such Lender or the Issuing Bank or its holding company, as the case may be, as specified in paragraph (a) or (b) of this Section shall be delivered to the Parent Borrower (on behalf of itself, the Subsidiary Term Borrowers and the Foreign Subsidiary Borrowers) and shall be conclusive absent manifest error. The Parent Borrower, the applicable Subsidiary Term Borrowers or the applicable Foreign Subsidiary Borrowers, as the case may be, shall pay such Lender or the Issuing Bank, as the case may be, the amount shown as due on any such certificate within 10 days after receipt thereof. (d) Failure or delay on the part of any Lender or the Issuing Bank to demand compensation pursuant to this Section shall not constitute a waiver of such Lender's or the Issuing Bank's right to demand such compensation; provided that neither the Parent Borrower, any Subsidiary Term Borrower nor any Foreign Subsidiary Borrower shall be required to compensate a Lender or the Issuing Bank pursuant to this Section for any increased costs or reductions incurred more than 270 days prior to the date that such Lender or the Issuing Bank, as the case may be, notifies the Parent Borrower (on behalf of itself, the Subsidiary Term Bor- -75- rowers and the Foreign Subsidiary Borrowers) of the Change in Law giving rise to such increased costs or reductions and of such Lender's or the Issuing Bank's intention to claim compensation therefor; provided further that, if the Change in Law giving rise to such increased costs or reductions is retroactive, then the 270-day period referred to above shall be extended to include the period of retroactive effect thereof. SECTION 2.16. Break Funding Payments. In the event of (a) the payment of any principal of any Eurocurrency Loan other than on the last day of an Interest Period applicable thereto (including as a result of an Event of Default), (b) the conversion of any Eurocurrency Loan other than on the last day of the Interest Period applicable thereto, (c) the failure to borrow, convert, continue or prepay any Revolving Loan or Term Loan on the date specified in any notice delivered pursuant hereto (regardless of whether such notice may be revoked under Section 2.11(f) and is revoked in accordance therewith), or (d) the assignment of any Eurocurrency Loan other than on the last day of the Interest Period applicable thereto as a result of a request by the Parent Borrower, any Subsidiary Term Borrower or any Foreign Subsidiary Borrower pursuant to Section 2.19, then, in any such event, the Parent Borrower, the applicable Subsidiary Term Borrower or the applicable Foreign Subsidiary Borrower, as the case may be, shall compensate each Lender for the loss, cost and expense attributable to such event. In the case of a Eurocurrency Loan, such loss, cost or expense to any Lender shall be deemed to include an amount determined by such Lender to be the excess, if any, of (i) the amount of interest which would have accrued on the principal amount of such Loan had such event not occurred, at the Adjusted LIBO Rate that would have been applicable to such Loan, for the period from the date of such event to the last day of the then current Interest Period therefor (or, in the case of a failure to borrow, convert or continue, for the period that would have been the Interest Period for such Loan), over (ii) the amount of interest which would accrue on such principal amount for such period at the interest rate which such Lender would bid were it to bid, at the commencement of such period, for deposits in the applicable currency of a comparable amount and period from other banks in the Eurocurrency market. A certificate of any Lender setting forth any amount or amounts that such Lender is entitled to receive pursuant to this Section shall be delivered to the Parent Borrower (on behalf of itself, the Subsidiary Term Borrowers and the Foreign Subsidiary Borrowers) and shall be conclusive absent manifest error. The Parent Borrower, the applicable Subsidiary Term Borrower or the applicable Foreign Subsidiary Borrower, as the case may be, shall pay such Lender the amount shown as due on any such certificate within 10 days after receipt thereof. SECTION 2.17. Taxes. (a) Any and all payments by or on account of any obligation of the Parent Borrower, any Subsidiary Term Borrower or any Foreign Subsidiary Borrower hereunder or under any other Loan Document shall be made free and clear of and without deduction for any Indemnified Taxes or Other Taxes; provided that if the Parent Borrower, any Subsidiary Term Borrower or -76- any Foreign Subsidiary Borrower shall be required to deduct any Indemnified Taxes or Other Taxes from such payments, then (i) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section) the Administrative Agent, Lender or Issuing Bank (as the case may be) receives an amount equal to the sum it would have received had no such deductions been made, (ii) the Parent Borrower, such Subsidiary Term Borrower or such Foreign Subsidiary Borrower, as the case may be, shall make such deductions and (iii) the Parent Borrower, such Subsidiary Term Borrower or such Foreign Subsidiary Borrower, as the case may be, shall pay the full amount deducted to the relevant Governmental Authority in accordance with applicable law. (b) In addition, the Parent Borrower, each Subsidiary Term Borrower and each Foreign Subsidiary Borrower shall pay any Other Taxes to the relevant Governmental Authority in accordance with applicable law. (c) The Parent Borrower, each Subsidiary Term Borrower and each Foreign Subsidiary Borrower, as the case may be, shall indemnify the Administrative Agent, each Lender and the Issuing Bank, within 10 Business Days after written demand therefor, for the full amount of any Indemnified Taxes or Other Taxes paid by the Administrative Agent, such Lender or the Issuing Bank, as the case may be, on or with respect to any payment by or on account of any obligation of the Parent Borrower, each Subsidiary Term Borrower and each Foreign Subsidiary Borrower, as the case may be, hereunder or under any other Loan Document (including Indemnified Taxes or Other Taxes imposed or asserted on or attributable to amounts payable under this Section) and any penalties, interest and reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes or Other Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability delivered to the Parent Borrower, any Subsidiary Term Borrower or any Foreign Subsidiary Borrower, as the case may be, by a Lender or the Issuing Bank, or by the Administrative Agent on its own behalf or on behalf of a Lender or the Issuing Bank, shall be conclusive absent manifest error. (d) As soon as practicable after any payment of Indemnified Taxes or Other Taxes by the Parent Borrower, any Subsidiary Term Borrower or any Foreign Subsidiary Borrower to a Governmental Authority, the Parent Borrower, such Subsidiary Term Borrower or such Foreign Subsidiary Borrower, as the case may be, shall deliver to the Administrative Agent the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to the Administrative Agent. (e) Any Lender that is entitled to an exemption from or reduction of withholding tax under the law of the jurisdiction in which the Parent Borrower, any Subsidiary -77- Term Borrower or any Foreign Subsidiary Borrower, as the case may be, is located, or any treaty to which such jurisdiction is a party, with respect to payments under this Agreement shall deliver to the Parent Borrower (on behalf of itself, the Subsidiary Term Borrowers and the Foreign Subsidiary Borrowers) (with a copy to the Administrative Agent), at the time or times prescribed by applicable law, such properly completed and executed documentation prescribed by applicable law or reasonably requested by the Parent Borrower (on behalf of itself, the Subsidiary Term Borrowers and the Foreign Subsidiary Borrowers) as will permit such payments to be made without withholding or at a reduced rate. (f) If the Administrative Agent or a Lender (or a transferee) determines, in its sole discretion, that it has received a refund of any Taxes or Other Taxes as to which it has been indemnified by the Parent Borrower, any Subsidiary Term Borrower or any Foreign Subsidiary Borrower or with respect to which the Parent Borrower (on behalf of itself, the Subsidiary Term Borrowers and the Foreign Subsidiary Borrowers) has paid additional amounts pursuant to this Section 2.17, it shall pay over such refund to the Parent Borrower (but only to the extent, of indemnity payments made, or additional amounts paid, by the Parent Borrower, any Subsidiary Term Borrower or any Foreign Subsidiary Borrower under this Section 2.17 with respect to the Taxes or the Other Taxes giving rise to such refund), net of all out-of-pocket expenses of the Administrative Agent or such Lender (or Transferee) and without interest (other than any interest paid by the relevant Governmental Authority with respect to such refund); provided, however, that the Parent Borrower, any Subsidiary Term Borrower or any Foreign Subsidiary Borrower, upon the request of the Administrative Agent or such Lender (or Transferee), agrees to repay the amount paid over to the Parent Borrower (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) to the Administrative Agent or such Lender (or Transferee) in the event the Administrative Agent or such Lender (or Transferee) is required to repay such refund to such Governmental Authority. Nothing contained in this Section 2.17(f) shall require the Administrative Agent or any Lender to make available its tax returns or any other information relating to its taxes which it deems confidential to the Parent Borrower or any other person. SECTION 2.18. Payments Generally; Pro Rata Treatment; Sharing of Set-offs. (a) The Parent Borrower (on behalf of itself, the Subsidiary Term Borrowers and the Foreign Subsidiary Borrowers) shall make each payment required to be made by it hereunder or under any other Loan Document (whether of principal, interest, fees or reimbursement of LC Disbursements, or of amounts payable under Section 2.15, 2.16 or 2.17, or otherwise) on or before the time expressly required hereunder or under such other Loan Document for such payment (or, if no such time is expressly required, prior to 12::00 noon, New York City time, or if the applicable Loan is a Foreign Currency Loan, London time), on the date when due, in immediately available funds, without set-off or counterclaim. Any amounts received after such time on any date may, in the discretion of the Administrative Agent, be -78- deemed to have been received on the next succeeding Business Day for purposes of calculating interest thereon. All such payments shall be made to the Administrative Agent at its offices at 270 Park Avenue, New York, New York (unless otherwise instructed in the case of Foreign Currency Loans), except payments to be made directly to the Issuing Bank or Swingline Lender as expressly provided herein and except that payments pursuant to Sections 2.15, 2.16, 2.17 and 10.03 shall be made directly to the Persons entitled thereto and payments pursuant to other Loan Documents shall be made to the Persons specified therein. The Administrative Agent shall distribute any such payments received by it for the account of any other Person to the appropriate recipient promptly following receipt thereof. If any payment under any Loan Document shall be due on a day that is not a Business Day, the date for payment shall be extended to the next succeeding Business Day, and, in the case of any payment accruing interest, interest thereon shall be payable for the period of such extension. Subject to Section 9.01, all payments under each Loan Document of principal or interest in respect of any Loan or LC Disbursement shall be made in the currency of such Loan or LC Disbursement; all other payments hereunder and under each other Loan Document shall be made in dollars. (b) If at any time insufficient funds are received by and available to the Administrative Agent to pay fully all amounts of principal, unreimbursed LC Disbursements, interest and fees then due hereunder, such funds shall be applied (i) first, towards payment of interest and fees then due hereunder, ratably among the parties entitled thereto in accordance with the amounts of interest and fees then due to such parties, and (ii) second, towards payment of principal and unreimbursed LC Disbursements then due hereunder, ratably among the parties entitled thereto in accordance with the amounts of principal and unreimbursed LC Disbursements then due to such parties. (c) If any Lender shall, by exercising any right of set-off or counterclaim or otherwise, obtain payment in respect of any principal of or interest on any of its Revolving Loans, Term Loans or participations in LC Disbursements or Swingline Loans resulting in such Lender receiving payment of a greater proportion of the aggregate amount of its Revolving Loans, Term Loans and participations in LC Disbursements and Swingline Loans and accrued interest thereon than the proportion received by any other Lender, then the Lender receiving such greater proportion shall purchase (for cash at face value) participations in the Revolving Loans, Term Loans and participations in LC Disbursements and Swingline Loans of other Lenders to the extent necessary so that the benefit of all such payments shall be shared by the Lenders ratably in accordance with the aggregate amount of principal of and accrued interest on their respective Revolving Loans, Term Loans and participations in LC Disbursements and Swingline Loans; provided that (i) if any such participations are purchased and all or any portion of the payment giving rise thereto is recovered, such participations shall be rescinded and the purchase price restored to the extent of such recovery, without interest, and (ii) the provisions of this paragraph shall not be construed to apply to any payment made -79- by the Parent Borrower, any Subsidiary Term Borrower or any Foreign Subsidiary Borrower pursuant to and in accordance with the express terms of this Agreement or any payment obtained by a Lender as consideration for the assignment of or sale of a participation in any of its Loans or participations in LC Disbursements to any assignee or participant, other than to the Parent Borrower or any Subsidiary or Affiliate thereof (as to which the provisions of this paragraph shall apply). The Parent Borrower, each Subsidiary Term Borrower and each Foreign Subsidiary Borrower consents to the foregoing and agrees, to the extent it may effectively do so under applicable law, that any Lender acquiring a participation pursuant to the foregoing arrangements may exercise against the Parent Borrower, any Subsidiary Term Borrower or any Foreign Subsidiary Borrower, as the case may be, rights of set-off and counterclaim with respect to such participation as fully as if such Lender were a direct creditor of the Parent Borrower, such Subsidiary Term Borrower or such Foreign Subsidiary Borrower in the amount of such participation. (d) Unless the Administrative Agent shall have received notice from the Parent Borrower (on behalf of itself, the Subsidiary Term Borrowers and the Foreign Subsidiary Borrowers) prior to the date on which any payment is due to the Administrative Agent for the account of the Lenders or the Issuing Bank hereunder that the Parent Borrower, any Subsidiary Term Borrower or any Foreign Subsidiary Borrower, as the case may be, will not make such payment, the Administrative Agent may assume that the Parent Borrower, such Subsidiary Term Borrower or such Foreign Subsidiary Borrower, as the case may be, has made such payment on such date in accordance herewith and may, in reliance upon such assumption, distribute to the Lenders or the Issuing Bank, as the case may be, the amount due. In such event, if the Parent Borrower, such Subsidiary Term Borrower or such Foreign Subsidiary Borrower, as the case may be, has not in fact made such payment, then each of the Lenders or the Issuing Bank, as the case may be, severally agrees to repay to the Administrative Agent forthwith on demand the amount so distributed to such Lender or Issuing Bank with interest thereon, for each day from and including the date such amount is distributed to it to but excluding the date of payment to the Administrative Agent, at the greater of the Federal Funds Effective Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation. (e) If any Lender shall fail to make any payment required to be made by it pursuant to Section 2.04(c), 2.05(d) or (e), 2.06(b), 2.18(d) or 10.03(c), then the Administrative Agent may, in its discretion (notwithstanding any contrary provision hereof), apply any amounts thereafter received by the Administrative Agent for the account of such Lender to satisfy such Lender's obligations under such Sections until all such unsatisfied obligations are fully paid. SECTION 2.19. Mitigation Obligations; Replacement of Lenders. (a) If -80- any Lender requests compensation under Section 2.15, or if the Parent Borrower, any Subsidiary Term Borrower or any Foreign Subsidiary Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 2.17, then such Lender shall use reasonable efforts to designate a different lending office for funding or booking its Loans hereunder or to assign its rights and obligations hereunder to another of its offices, branches or affiliates, if, in the judgment of such Lender, such designation or assignment (i) would eliminate or reduce amounts payable pursuant to Section 2.15 or 2.17, as the case may be, in the future and (ii) would not subject such Lender to any unreimbursed cost or expense and would not otherwise be disadvantageous to such Lender. The Parent Borrower (on behalf of itself, the Subsidiary Term Borrowers and the Foreign Subsidiary Borrowers) hereby agrees to pay all reasonable costs and expenses incurred by any Lender in connection with any such designation or assignment. (b) If any Lender requests compensation under Section 2.15, or if the Parent Borrower, any Subsidiary Term Borrower or any Foreign Subsidiary Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 2.17, or if any Lender defaults in its obligation to fund Loans hereunder, then the Parent Borrower (on behalf of itself, the Subsidiary Term Borrowers and the Foreign Subsidiary Borrowers) may, at its sole expense and effort, upon notice to such Lender and the Administrative Agent, require such Lender to assign and delegate, without recourse (in accordance with and subject to the restrictions contained in Section 10.04), all its interests, rights and obligations under this Agreement to an assignee selected by the Parent Borrower that shall assume such obligations (which assignee may be another Lender, if a Lender accepts such assignment); provided that (i) the Parent Borrower (on behalf of itself, the Subsidiary Term Borrowers and the Foreign Subsidiary Borrowers) shall have received the prior written consent of the Administrative Agent (and, if a Revolving Commitment is being assigned, the Issuing Bank and Swingline Lender), which consent shall not unreasonably be withheld, (ii) such Lender shall have received payment of an amount equal to the outstanding principal of its Loans and participations in LC Disbursements and Swingline Loans, accrued interest thereon, accrued fees and all other amounts payable to it hereunder, from the assignee (to the extent of such outstanding principal and accrued interest and fees) or the Parent Borrower, the Subsidiary Term Borrowers and the Foreign Subsidiary Borrowers (in the case of all other amounts) and (iii) in the case of any such assignment resulting from a claim for compensation under Section 2.15 or payments required to be made pursuant to Section 2.17, such assignment will result in a material reduction in such compensation or payments. A Lender shall not be required to make any such assignment and delegation if, prior thereto, as a result of a waiver by such Lender or otherwise, the circumstances entitling the Parent Borrower, any Subsidiary Term Borrower or any Foreign Subsidiary Borrower to require such assignment and delegation cease to apply. -81- SECTION 2.20. Additional Reserve Costs. (a) If and so long as any Revolving Lender is required to make special deposits with the Bank of England, to maintain reserve asset ratios or to pay fees, in each case in respect of such Revolving Lender's Foreign Currency Loans, such Revolving Lender may require the relevant Foreign Subsidiary Borrower to pay, contemporaneously with each payment of interest on each of such Foreign Currency Loans, additional interest on such Foreign Currency Loan at a rate per annum equal to the Mandatory Costs Rate calculated in accordance with the formula and in the manner set forth in Exhibit M hereto. (b) If and so long as any Revolving Lender is required to comply with reserve assets, liquidity, cash margin or other requirements of any monetary or other authority (including any such requirement imposed by the European Central Bank or the European System of Central Banks, but excluding requirements reflected in the Statutory Reserve Rate or the Mandatory Costs Rate) in respect of any of such Revolving Lender's Foreign Currency Loans, such Revolving Lender may require the relevant Foreign Subsidiary Borrower to pay, contemporaneously with each payment of interest on each of such Revolving Lender's Foreign Currency Loans subject to such requirements, additional interest on such Foreign Currency Loan at a rate per annum specified by such Revolving Lender to be the cost to such Revolving Lender of complying with such requirements in relation to such Foreign Currency Loan. (c) Any additional interest owed pursuant to paragraph (a) or (b) above shall be determined by the relevant Revolving Lender, which determination shall be conclusive absent manifest error, and notified to the Parent Borrower (on behalf of the relevant Foreign Subsidiary Borrower (with a copy to the Administrative Agent)) at least five Business Days before each date on which interest is payable for the relevant Foreign Currency Loan, and such additional interest so notified by such Revolving Lender shall be payable to the Administrative Agent for the account of such Revolving Lender on each date on which interest is payable for such Foreign Currency Loan. SECTION 2.21. Designation of Foreign Subsidiary Borrowers. The Parent Borrower may at any time and from time to time designate any Foreign Subsidiary as a Foreign Subsidiary Borrower, by delivery to the Administrative Agent of a Foreign Subsidiary Borrowing Agreement executed by such Foreign Subsidiary and the Parent Borrower, and upon such delivery such Foreign Subsidiary shall for all purposes of this Agreement and the other Loan Documents be a Foreign Subsidiary Borrower until the Parent Borrower shall terminate such designation pursuant to a termination agreement satisfactory to the Administrative Agent, whereupon such Foreign Subsidiary shall cease to be a Foreign Subsidiary Borrower and a party to this Agreement and any other applicable Loan Documents. Notwithstanding the preceding sentence, no such termination will become effective as to any Foreign -82- Subsidiary Borrower at a time when any principal of or interest on any Loan to such Foreign Subsidiary Borrower is outstanding. As soon as practicable upon receipt of a Foreign Subsidiary Borrowing Agreement, the Administrative Agent shall send a copy thereof to each Lender. SECTION 2.22. Foreign Subsidiary Borrower Costs. (a) If the cost to any Revolving Lender of making or maintaining any Foreign Currency Loan to a Foreign Subsidiary Borrower is increased (or the amount of any sum received or receivable by any Revolving Lender (or its applicable lending office) is reduced) by an amount deemed in good faith by such Revolving Lender to be material, by reason of the fact that such Foreign Subsidiary Borrower is incorporated in, or conducts business in, a jurisdiction outside the United States, such Foreign Subsidiary Borrower shall indemnify such Revolving Lender for such increased cost or reduction within 15 days after demand by such Revolving Lender (with a copy to the Administrative Agent). A certificate of such Revolving Lender claiming compensation under this paragraph and setting forth the additional amount or amounts to be paid to it hereunder (and the basis for the calculation of such amount or amounts) shall be conclusive in the absence of manifest error. (b) Each Revolving Lender will promptly notify the Parent Borrower (on behalf of the relevant Foreign Subsidiary Borrower) and the Administrative Agent of any event of which it has knowledge that will entitle such Revolving Lender to additional interest or payments pursuant to paragraph (a) above, but in any event within 45 days after such Revolving Lender obtains actual knowledge thereof; provided that (i) if any Revolving Lender fails to give such notice within 45 days after it obtains actual knowledge of such an event, such Revolving Lender shall, with respect to compensation payable pursuant to this Section 2.21 in respect of any costs resulting from such event, only be entitled to payment under this Section 2.21 for costs incurred from and after the date 45 days prior to the date that such Revolving Lender does give such notice and (ii) each Revolving Lender will designate a different applicable lending office, if, in the judgment of such Revolving Lender, such designation will avoid the need for, or reduce the amount of, such compensation and will not be otherwise disadvantageous to such Revolving Lender. ARTICLE III Representations and Warranties Each of Holdings, the Parent Borrower, each Subsidiary Term Borrower (as to itself only) and each Foreign Subsidiary Borrower (as to itself only) represents and warrants to the Lenders that: -83- SECTION 3.01. Organization; Powers. Each of Holdings, the Parent Borrower and its Subsidiaries (including the Receivables Subsidiary) is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, has all requisite power and authority to carry on its business as now conducted and, except where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect, is qualified to do business in, and is in good standing in, every jurisdiction where such qualification is required. SECTION 3.02. Authorization; Enforceability. The Transactions to be entered into by each Loan Party are within such Loan Party's powers and have been duly authorized by all necessary action. This Agreement has been duly executed and delivered by each of Holdings and the Parent Borrower and constitutes, and each other Loan Document to which any Loan Party is to be a party, when executed and delivered by such Loan Party, will constitute, a legal, valid and binding obligation of Holdings, the Parent Borrower or such Loan Party (as the case may be), enforceable in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting creditors' rights generally and subject to general principles of equity, regardless of whether considered in a proceeding in equity or at law. SECTION 3.03. Governmental Approvals; No Conflicts. The Transactions (a) do not require any consent or approval of, registration or filing with, or any other action by, any Governmental Authority, except (x) such as have been obtained or made and are in full force and effect, (y) filings necessary to perfect Liens created under the Loan Documents and (z) consents, approvals, registrations, filings or actions the failure of which to obtain or perform could not reasonably be expected to result in a Material Adverse Effect, (b) will not violate any applicable law or regulation or the charter, by-laws or other organizational documents of Holdings, the Parent Borrower or any of its Subsidiaries (including the Receivables Subsidiary) or any order of any Governmental Authority, (c) will not violate or result in a default under any indenture, agreement or other instrument binding upon Holdings, the Parent Borrower or any of its Subsidiaries (including the Receivables Subsidiary) or its assets, or give rise to a right thereunder to require any payment to be made by Holdings, the Parent Borrower or any of its Subsidiaries (including the Receivables Subsidiary), except for violations, defaults or the creation of such rights that could not reasonably be expected to result in a Material Adverse Effect, and (d) will not result in the creation or imposition of any Lien on any asset of Holdings, the Parent Borrower or any of its Subsidiaries (including the Receivables Subsidiary), except Liens created under the Loan Documents and Liens permitted by Section 6.02. -84- SECTION 3.04. Financial Condition; No Material Adverse Change. (a) Holdings has heretofore furnished to the Lenders its consolidated balance sheet and statements of income, stockholders equity and cash flows (i) as of and for the fiscal year ended December 31, 1999, reported on by PricewaterhouseCoopers LLP, independent public accountants, and (ii) as of and for the fiscal quarter and the portion of the fiscal year ended September 30, 2000, certified by its chief financial officer. Such financial statements present fairly, in all material respects, the financial position and results of operations and cash flows of Holdings and its consolidated Subsidiaries as of such dates and for such periods in accordance with GAAP, subject to year-end audit adjustments and the absence of footnotes in the case of the statements referred to in clause (ii) above. (b) Holdings has heretofore furnished to the Lenders its pro forma consolidated balance sheet as of a recent date prior to the Effective Date, prepared giving effect to the Transactions as if the Transactions had occurred on such date. Such pro forma consolidated balance sheet (i) has been prepared in good faith based on the same assumptions used to prepare the pro forma financial statements included in the Information Memorandum (which assumptions are believed by Holdings and the Parent Borrower to be reasonable), (ii) is based on the best information available to Holdings and the Parent Borrower after due inquiry, (iii) accurately reflects all adjustments necessary to give effect to the Transactions and (iv) presents fairly, in all material respects, the pro forma financial position of Holdings and its consolidated Subsidiaries as of such date as if the Transactions had occurred on such date. (c) Except as disclosed in the financial statements referred to above or the notes thereto or in the Information Memorandum, except for the Disclosed Matters and except for liabilities arising as a result of the Transactions, after giving effect to the Transactions, none of Holdings, the Parent Borrower or the Subsidiaries (including the Receivables Subsidiary and the Saturn Subsidiary) has, as of the Effective Date, any contingent liabilities that would be material to Holdings, the Parent Borrower and the Subsidiaries (including the Receivables Subsidiary and the Saturn Subsidiary), taken as a whole. (d) Since December 31, 1999, there has been no event, change or occurrence that, individually or in the aggregate, has had or could reasonably be expected to result in a Material Adverse Effect. SECTION 3.05. Properties. (a) Each of Holdings, the Parent Borrower and its Subsidiaries has good title to, or valid leasehold interests in, all its real and personal property material to its business (including its Mortgaged Properties), except for minor defects in title that do not interfere with its ability to conduct its business as currently conducted or to utilize such properties for their intended purposes. -85- (b) Each of Holdings, the Parent Borrower and its Subsidiaries owns, or is licensed to use, all trademarks, tradenames, copyrights, patents and other intellectual property material to its business, and the use thereof by Holdings, the Parent Borrower and its Subsidiaries does not infringe upon the rights of any other Person, except for any such infringements that, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect. (c) Schedule 3.05 sets forth the address of each real property that is owned or leased by Holdings, the Parent Borrower or any of its Subsidiaries as of the Effective Date after giving effect to the Transactions. (d) As of the Effective Date, neither Holdings, the Parent Borrower nor any of its Subsidiaries has received written notice of any pending or contemplated condemnation proceeding affecting any Mortgaged Property or any sale or disposition thereof in lieu of condemnation. Neither any Mortgaged Property nor any interest therein is subject to any right of first refusal, option or other contractual right to purchase such Mortgaged Property or interest therein. SECTION 3.06. Litigation and Environmental Matters. (a) There are no actions, suits or proceedings by or before any arbitrator or Governmental Authority pending against or, to the knowledge of Holdings or the Parent Borrower, threatened against or affecting Holdings, the Parent Borrower or any of its Subsidiaries (including the Receivables Subsidiary) (i) as to which there is a reasonable possibility of an adverse determination and that, if adversely determined, could reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect (other than the Disclosed Matters) or (ii) that involve any of the Loan Documents or the Transactions. (b) Except for the Disclosed Matters and except with respect to any other matters that, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect, neither Holdings, the Parent Borrower nor any of its Subsidiaries (including the Receivables Subsidiary) (i) has failed to comply with any Environmental Law or to obtain, maintain or comply with any permit, license or other approval required under any Environmental Law, (ii) has become subject to any Environmental Liability, (iii) has received notice of any claim with respect to any Environmental Liability or (iv) knows of any basis for any Environmental Liability. (c) Since the date of this Agreement, there has been no change in the status of the Disclosed Matters that, individually or in the aggregate, has resulted in, or materially increased the likelihood of, a Material Adverse Effect. -86- SECTION 3.07. Compliance with Laws and Agreements. Each of Holdings, the Parent Borrower and its Subsidiaries (including the Receivables Subsidiary) is in compliance with all laws, regulations and orders of any Governmental Authority applicable to it or its property and all indentures, agreements and other instruments binding upon it or its property, except where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect. No Default has occurred and is continuing. SECTION 3.08. Investment and Holding Company Status. Neither Holdings, the Parent Borrower nor any of its Subsidiaries (including the Receivables Subsidiary) is (a) an "investment company" as defined in, or subject to regulation under, the Investment Company Act of 1940 or (b) a "holding company" as defined in, or subject to regulation under, the Public Utility Holding Company Act of 1935. SECTION 3.09. Taxes. Each of Holdings, the Parent Borrower and its Subsidiaries (including the Receivables Subsidiary) has timely filed or caused to be filed all Tax returns and reports required to have been filed and has paid or caused to be paid all Taxes required to have been paid by it, except (a) any Taxes that are being contested in good faith by appropriate proceedings and for which Holdings, the Parent Borrower or such Subsidiary (including the Receivables Subsidiaries), as applicable, has set aside on its books adequate reserves or (b) to the extent that the failure to do so could not reasonably be expected to result in a Material Adverse Effect. SECTION 3.10. ERISA. No ERISA Event has occurred or is reasonably expected to occur that, when taken together with all other such ERISA Events for which liability is reasonably expected to occur, could reasonably be expected to result in a Material Adverse Effect. As of the Effective Date, the present value of all accumulated benefit obligations under any one Plan (based on the assumptions used for purposes of Statement of Financial Accounting Standards No. 87) did not, as of the date of the most recent financial statements reflecting such amounts, exceed by more than $23,000,000 the fair market value of the assets of such Plan, and the present value of all accumulated benefit obligations of all underfunded Plans (based on the assumptions used for purposes of Statement of Financial Accounting Standards No. 87) did not, as of the date of the most recent financial statements reflecting such amounts, exceed by more than $40,000,000 the fair market value of the assets of all such underfunded Plans. SECTION 3.11. Disclosure. Each of Holdings and the Parent Borrower has disclosed to the Lenders all agreements, instruments and corporate or other restrictions to which Holdings, the Parent Borrower or any of its Subsidiaries (including the Receivables Subsidiary) is subject, and all other matters known -87- to any of them, that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect. Neither the Information Memorandum nor any of the other reports, financial statements, certificates or other information furnished by or on behalf of any Loan Party to the Administrative Agent or any Lender in connection with the negotiation of this Agreement or any other Loan Document or delivered hereunder or thereunder (as modified or supplemented by other information so furnished) contains any material misstatement of fact or omits to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided that, with respect to projected financial information, Holdings and the Parent Borrower represent only that such information was prepared in good faith based upon assumptions believed to be reasonable at the time such projections were prepared. SECTION 3.12. Subsidiaries. Holdings does not have any subsidiaries other than the Parent Borrower, the Saturn Subsidiary and the Parent Borrower's Subsidiaries. Schedule 3.12 sets forth the name of, and the ownership interest of the Parent Borrower in, each Subsidiary of the Parent Borrower and identifies each Subsidiary that is a Subsidiary Loan Party, in each case as of the Effective Date. SECTION 3.13. Insurance. Schedule 3.13 sets forth a description of all material insurance policies maintained by or on behalf of Holdings, the Parent Borrower and the Subsidiaries as of the Effective Date. As of the Effective Date, all premiums due in respect of such insurance have been paid. SECTION 3.14. Labor Matters. As of the Effective Date, there are no strikes, lockouts or slowdowns against Holdings, the Parent Borrower or any Subsidiary pending or, to the knowledge of Holdings or the Parent Borrower, threatened that could reasonably be expected to have a Material Adverse Effect. All payments due from Holdings, the Parent Borrower or any Subsidiary, or for which any claim may be made against Holdings, the Parent Borrower or any Subsidiary, on account of wages and employee health and welfare insurance and other benefits, have been paid or accrued as a liability on the books of Holdings, the Parent Borrower or such Subsidiary. The consummation of the Transactions will not give rise to any right of termination or right of renegotiation on the part of any union under any collective bargaining agreement to which Holdings, the Parent Borrower or any Subsidiary is bound. SECTION 3.15. Solvency. Immediately after the consummation of the Transactions to occur on the Effective Date and immediately following the making of each Loan made on the Effective Date and after giving effect to the application of the proceeds of such Loans, (a) the fair value of the assets of each Loan Party, at a fair valuation, will exceed its debts and liabilities, subordinated, contingent or otherwise; (b) the present fair saleable value of the property of each Loan Party will be greater -88- than the amount that will be required to pay the probable liability of its debts and other liabilities, subordinated, contingent or otherwise, as such debts and other liabilities become absolute and matured; (c) each Loan Party will be able to pay its debts and liabilities, subordinated, contingent or otherwise, as such debts and liabilities become absolute and matured; and (d) the Loan Parties, on a consolidated basis, will not have unreasonably small capital with which to conduct the business in which it is engaged as such business is now conducted and is proposed to be conducted following the Effective Date. SECTION 3.16. Senior Indebtedness. To the extent any Subordinated Debt is outstanding, the Obligations constitute "Senior Indebtedness" under and as defined in the Subordinated Debt Documents. SECTION 3.17. Security Documents. (a) The Pledge Agreement is effective to create in favor of the Collateral Agent, for the benefit of the Secured Parties, a legal, valid and enforceable security interest in the Collateral (as defined in the Pledge Agreement) and, when such Collateral is delivered to the Collateral Agent and for so long as the Collateral Agent remains in possession of such Collateral, the security interest created by the Pledge Agreement shall constitute a perfected first priority security interest in all right, title and interest of the pledgor thereunder in such Collateral, in each case prior and superior in right to any other Person. (b) The Security Agreement is effective to create in favor of the Collateral Agent, for the benefit of the Secured Parties, a legal, valid and enforceable security interest in the Collateral (as defined in the Security Agreement) and, when financing statements in appropriate form are filed in the offices specified on Schedule 6 to the Perfection Certificate, the security interest created by the Security Agreement shall constitute a perfected security interest in all right, title and interest of the grantors thereunder in such Collateral (other than the Intellectual Property (as defined in the Security Agreement)), in each case prior and superior in right to any other Person, other than with respect to Liens permitted by Section 6.02. (c) When the Security Agreement (or a summary thereof) is filed in the United States Patent and Trademark Office and the United States Copyright Office and the financing statements referred to in Section 3.17(b) above are appropriately filed, the security interest created by the Security Agreement shall constitute a perfected security interest in all right, title and interest of the grantors thereunder in the Intellectual Property (as defined in the Security Agreement) in which a security interest may be perfected by filing, recording or registering a security agreement, financing statement or analogous document in the United States Patent and Trademark Office or the United States Copyright Office, as applicable, in each case prior and superior in right to any other Person (it being understood that subsequent recordings in the United States Patent and Trademark Office and the United States Copyright Office and subsequent UCC filings may be necessary to perfect a lien on registered trade- -89- marks, trademark applications and copyrights acquired by the Loan Parties after the Effective Date), other than with respect to Liens permitted by Section 6.02. (d) The Mortgages are effective to create, subject to the exceptions listed in each title insurance policy covering such Mortgage, in favor of the Collateral Agent, for the benefit of the Secured Parties, a legal, valid and enforceable Lien on all of the applicable mortgagor's right, title and interest in and to the Mortgaged Properties thereunder and the proceeds thereof, and when the Mortgages are filed in the offices specified on Schedule 3.17(d), the Lien created by each Mortgage shall constitute a perfected Lien on all right, title and interest of the applicable mortgagor in such Mortgaged Properties and the proceeds thereof, in each case prior and superior in right to any other Person, other than with respect to the rights of Persons pursuant to Liens permitted by Section 6.02. (e) The Collateral Assignment is effective to create in favor of the Collateral Agent for the benefit of the Secured Parties, a legal, valid and enforceable security interest in the Collateral (as defined in the Collateral Assignment) and, when financing statements in appropriate form are filed in designated filing offices, the security interest created by the Collateral Assignment shall constitute a perfected security interest created by the security interest in all right, title and interest of Holdings in such Collateral in which a security interest may be perfected by filing such financing statements, in each case prior and superior in right to any other person, other than with respect to Liens permitted by Section 6.02. (f) Following the execution of any Foreign Security Document pursuant to Section 4.03, each Foreign Security Document shall be effective to create in favor of the Collateral Agent, for the benefit of the Secured Parties, a legal, valid and enforceable security interest in the applicable collateral covered by such Foreign Security Document, and when the actions specified in such Foreign Security Document, if any, are completed, the security interest created by such Foreign Security Document shall constitute a perfected security interest in all right, title and interest of the grantors thereunder in such collateral to the full extent possible under the laws of the applicable foreign jurisdiction, in each case prior and superior in right to any other Person, other than with respect to Liens permitted by Section 6.02. SECTION 3.18. Federal Reserve Regulations. (a) None of Holdings, the Parent Borrower or any of the Subsidiaries (including the Receivables Subsidiary) is engaged principally, or as one of its important activities, in the business of extending credit for the purpose of buying or carrying Margin Stock. (b) No part of the proceeds of any Loan or any Letter of Credit will be used, whether directly or indirectly, and whether immediately, incidentally or ultimately, for any purpose that entails a violation of the provisions of the Regulations of the Board, including Regulation U or X. -90- ARTICLE IV Conditions SECTION 4.01. Effective Date. The obligations of the Lenders to make Loans and of the Issuing Bank to issue Letters of Credit hereunder shall not become effective until the date on which each of the following conditions is satisfied (or waived in accordance with Section 10.02): (a) The Administrative Agent (or its counsel) shall have received from each party hereto either (i) a counterpart of this Agreement signed on behalf of such party or (ii) written evidence satisfactory to the Administrative Agent (which may include telecopy transmission of a signed signature page of this Agreement) that such party has signed a counterpart of this Agreement. (b) The Administrative Agent shall have received a favorable written opinion (addressed to the Administrative Agent and the Lenders and dated the Effective Date) of each of (i) Cahill Gordon & Reindel, special counsel for the Parent Borrower, substantially in the form of Exhibit B-1, and (ii) local counsel for the Parent Borrower in each jurisdiction where a Mortgaged Property and certain other specified Collateral is located, substantially in the form of Exhibit B-2, and, in the case of each such opinion required by this paragraph, covering such other matters relating to the Loan Parties, the Loan Documents or the Transactions as the Required Lenders shall reasonably request. Each of Holdings and the Parent Borrower hereby requests such counsel to deliver such opinions. (c) The Administrative Agent shall have received such documents and certificates as the Administrative Agent or its counsel may reasonably request relating to the organization, existence and good standing of each Loan Party, the authorization of the Transactions and any other legal matters relating to the Loan Parties, the Loan Documents or the Transactions, all in form and substance satisfactory to the Administrative Agent and its counsel. (d) The Administrative Agent shall have received a certificate, dated the Effective Date and signed by the President, a Vice President or a Financial Officer of Holdings and the Parent Borrower, confirming compliance with the conditions set forth in paragraphs (a) and (b) of Section 4.02. (e) The Administrative Agent shall have received all fees and other amounts due and payable on or prior to the Effective Date, including, to the extent invoiced, reimbursement or payment of all out-of-pocket expenses (including fees, -91- charges and disbursements of counsel) required to be reimbursed or paid by any Loan Party hereunder or under any other Loan Document. (f) The Collateral and Guarantee Requirement shall have been satisfied and the Administrative Agent shall have received a completed Perfection Certificate dated the Effective Date and signed by an executive officer or Financial Officer of the Parent Borrower, together with all attachments contemplated thereby, including the results of a search of the Uniform Commercial Code (or equivalent) filings made with respect to the Loan Parties in the jurisdictions contemplated by the Perfection Certificate and copies of the financing statements (or similar documents) disclosed by such search and evidence reasonably satisfactory to the Administrative Agent that the Liens indicated by such financing statements (or similar documents) are permitted by Section 6.02 or have been released or will be released pursuant to UCC-3 financing statements or other release documentation delivered to the Collateral Agent. (g) The Administrative Agent shall have received evidence that the insurance required by Section 5.07 and the Security Documents is in effect. (h) All material consents and approvals required to be obtained from any Governmental Authority or other Person in connection with the Transactions shall have been obtained, and all applicable waiting periods and appeal periods shall have expired and there shall be no governmental or judicial action, actual or threatened, that could reasonably be expected to restrain, prevent or impose burdensome conditions on the Transactions. (i) The Recapitalization shall have been, or substantially simultaneously with the initial funding of Loans on the Effective Date shall be, consummated in accordance with the Recapitalization Documents and applicable law, and the Administrative Agent shall be satisfied that the fees and expenses related to the Transactions payable on the Effective Date will not exceed approximately $78,900,000 plus any additional fees and expenses funded with a common equity contribution in excess of the amount specified in the defined term "Equity Contribution." Immediately following the completion of the Transactions, the Investors will own not less than 75% of Holdings' common stock, and Masco and certain other Pre-Merger Stockholders will own on the Effective Date the remainder of such common stock. (j) The Parent Borrower shall have received not less than $100,000,000 in cash proceeds from sales of receivables under the Permitted Receivables Facility. The terms and conditions of the Permitted Receivables Facility (including terms and conditions relating to interest rates, fees, amortization, maturity, redemption, covenants, events of default and remedies) shall be reasonably satisfactory in all respects to the Administrative Agent (it being understood that the terms and conditions of the Per- -92- mitted Receivables Financing as provided to the Administrative Agent prior to the date hereof are satisfactory to the Administrative Agent and the parties thereto shall not be entitled to effect material amendments or waivers to the agreements relating thereto without the approval of the Administrative Agent). (k) After giving effect to the Transactions, none of Holdings, the Parent Borrower or any of the Subsidiaries shall have outstanding any shares of preferred stock or any Indebtedness to a Person other than Holdings, the Parent Borrower or any Subsidiary, other than (i) Indebtedness incurred under the Loan Documents, (ii) the Convertible Debentures, (iii) the Holdings Preferred Stock, (iv) the Permitted Receivables Financing and (v) Indebtedness listed on Schedule 6.01. Except for the Indebtedness described in the immediately preceding sentence, all principal, interest and other amounts in respect of the Indebtedness of Holdings, the Parent Borrower and the Subsidiaries (the "Repaid Indebtedness") shall have been repaid in full and all obligations thereunder shall have been terminated in a manner satisfactory to the Administrative Agent. (l) The Administrative Agent shall be reasonably satisfied with the terms and conditions of (a) the Recapitalization Documents, (b) the Shareholder Loan Agreement and the terms of the Shareholder Loans set forth therein, (c) the Holdings Preferred Stock, (d) the Restricted Stock Award and (e) the terms and conditions of all Indebtedness to remain outstanding after the Effective Date (it being understood and agreed that the terms and conditions of the Recapitalization Documents, the Shareholder Loan Agreement, the Shareholder Loans, the Preferred Stock, the Restricted Stock Award, the Convertible Debentures and all other Indebtedness to remain outstanding after the Effective Date, in each case as provided to the Administrative Agent prior to the date hereof, are acceptable to the Administrative Agent, and the parties thereto shall not be entitled to effect any material amendments or waivers to such documents not approved by the Administrative Agent). (m) The Equity Contribution and the Specified Asset Sale Proceeds shall have been received, Holdings shall hold the Specified Cash and the Shareholder Subordinated Loan Agreement shall have been executed by Masco and Holdings. (n) The Lenders shall have received unaudited consolidated balance sheets and related statements of income and stockholders' equity of Holdings for (a) each 2000 fiscal quarter ended 45 days prior to the Effective Date (which shall include cash flows) and (b) each fiscal month after the most recent 2000 fiscal quarter for which financial statements were received by the Lenders as described above and ended 30 days before the Effective Date. -93- (o) The Lenders shall have received a pro forma consolidated balance sheet of Holdings described in Section 3.04(b), after giving effect to the Transactions, which balance sheet shall not be materially inconsistent with the forecasts previously provided to the Lenders. (p) The Administrative Agent shall not have discovered or otherwise become aware of information not previously disclosed to the Administrative Agent that the Administrative Agent believes to be inconsistent, in a manner that is material and adverse, with its understanding, based on information provided to the Administrative Agent prior to the date hereof, as to the amount and nature of the environmental and employee health and safety exposures to which Holdings, the Parent Borrower and the Subsidiaries may be subject after giving effect to the Transactions, and the plans of Holdings, the Parent Borrower or such Subsidiaries with respect thereto. (q) The Administrative Agent shall not have discovered or otherwise become aware of information not previously disclosed to the Administrative Agent that the Administrative Agent believes to be inconsistent, in a manner that is material and adverse, with its understanding, based on information provided to the Administrative Agent prior to the date hereof, as to the tax position and the contingent tax and other liabilities of Holdings, the Parent Borrower and the Subsidiaries after giving effect to the Transactions, and the plans of Holdings, the Parent Borrower or such Subsidiaries with respect thereto. (r) The Administrative Agent shall have received a solvency letter, in form and substance satisfactory to the Lenders, from Murray, Devine & Co., Inc., confirming the solvency of Holdings, the Parent Borrower and the Subsidiaries on a consolidated basis after giving effect to the Transactions. The Administrative Agent shall notify the Parent Borrower and the Lenders of the Effective Date, and such notice shall be conclusive and binding. Notwithstanding the foregoing, the obligations of the Lenders to make Loans and of the Issuing Bank to issue Letters of Credit hereunder shall not become effective unless each of the foregoing conditions is satisfied (or waived pursuant to Section 10.02) at or prior to 5:00 p.m., New York City time, on December 5, 2000 (and, in the event such conditions are not so satisfied or waived, the Commitments shall terminate at such time). SECTION 4.02. Each Credit Event. The obligation of each Lender to make a Loan on the occasion of any Borrowing (other than (i) any Revolving Borrowing made pursuant to Section 2.05(d) and (ii) any continuation or conversion of a Borrowing pursuant to the terms hereof that does not result in the increase of the aggregate principal amount of the Borrowings then outstanding), and of the -94- Issuing Bank to issue, amend, renew or extend any Letter of Credit, is subject to receipt of the request therefor in accordance herewith and to the satisfaction of the following conditions: (a) The representations and warranties of each Loan Party set forth in the Loan Documents shall be true and correct on and as of the date of such Borrowing or the date of issuance, amendment, renewal or extension of such Letter of Credit, as applicable. (b) At the time of and immediately after giving effect to such Borrowing or the issuance, amendment, renewal or extension of such Letter of Credit, as applicable, no Default shall have occurred and be continuing. Each Borrowing and each issuance, amendment, renewal or extension of a Letter of Credit shall be deemed to constitute a representation and warranty by Holdings and the Parent Borrower on the date thereof as to the matters specified in paragraphs (a) and (b) of this Section. SECTION 4.03. Credit Events Relating to Foreign Subsidiary Borrowers. The obligation of each Lender to make Loans to any Foreign Subsidiary Borrower is subject to the satisfaction of the following conditions: (a) With respect to the initial Credit Event relating to such Foreign Subsidiary Borrower; (i) the Administrative Agent (or its counsel) shall have received such Foreign Subsidiary Borrower's Foreign Subsidiary Borrowing Agreement duly executed by all parties thereto; and (ii) the Administrative Agent shall have received such documents (including legal opinions) and certificates as the Administrative Agent or its counsel may reasonably request relating to the formation, existence and good standing of such Foreign Subsidiary Borrower, the authorization of the Foreign Currency Borrowings as they relate to such Foreign Subsidiary Borrower and any other legal matters relating to such Foreign Subsidiary Borrower or its Foreign Subsidiary Borrowing Agreement, all in form and substance satisfactory to the Administrative Agent and its counsel. (b) With respect to any Credit Event following which (x) such Foreign Subsidiary Borrower will have borrowed more than the Dollar Equivalent of $5,000,000 of Foreign Currency Borrowings or (y) the aggregate amount of outstanding Foreign Currency Borrowings exceeds the Dollar Equivalent of $15,000,000, the Administrative Agent shall be satisfied that the Foreign Security Collateral and Guar- -95- antee Agreement shall be satisfied with respect to such Foreign Subsidiary Borrower in the case of clause (x) and all Foreign Subsidiary Borrowers in the case of clause (y). ARTICLE V Affirmative Covenants Until the Commitments have expired or been terminated and the principal of and interest on each Loan and all fees payable hereunder shall have been paid in full and all Letters of Credit shall have expired or terminated and all LC Disbursements shall have been reimbursed, each of Holdings, the Parent Borrower, each Subsidiary Term Borrower (as to itself only) and each Foreign Subsidiary Borrower (as to itself only) covenants and agrees with the Lenders that: SECTION 5.01. Financial Statements and Other Information. Holdings or the Parent Borrower will furnish to the Administrative Agent and each Lender: (a) within 95 days after the end of each fiscal year of Holdings, its audited consolidated and unaudited consolidating balance sheet and related statements of operations, stockholders' equity and cash flows as of the end of and for such year, setting forth in each case in comparative form the figures for the previous fiscal year, all reported on by PricewaterhouseCoopers LPL or other independent public accountants of recognized national standing (without a "going concern" or like qualification or exception and without any qualification or exception as to the scope of such audit) to the effect that such consolidated financial statements present fairly in all material respects the financial condition and results of operations of Holdings and its consolidated subsidiaries on a consolidated basis in accordance with GAAP consistently applied (it is understood that such financial statements shall also present separately financial information with respect to the Receivables Subsidiary and the Saturn Subsidiary); (b) within 50 days after the end of each of the first three fiscal quarters of each fiscal year of Holdings, its consolidated balance sheet and related statements of operations, stockholders' equity and cash flows as of the end of and for such fiscal quarter and the then elapsed portion of the fiscal year, setting forth in each case in comparative form the figures for the corresponding period or periods of (or, in the case of the balance sheet, as of the end of) the previous fiscal year, all certified by one of its Financial officers as presenting fairly in all material respects the financial condition and results of operations of Holdings and its consolidated subsidiaries on a consolidated basis in accordance with GAAP consistently applied, subject to normal year-end audit adjustments and the absence of footnotes (it is understood that such financial -96- statements shall also present separately financial information with respect to the Receivables Subsidiary and the Saturn Subsidiary); (c) concurrently with any delivery of financial statements under clause (a) or (b) above, a certificate of a Financial Officer of Holdings or the Parent Borrower (i) certifying as to whether a Default has occurred and, if a Default has occurred, specifying the details thereof and any action taken or proposed to be taken with respect thereto, (ii) setting forth reasonably detailed calculations demonstrating compliance with Sections 6.13, 6.14 and 6.15, (iii) stating whether any change in GAAP or in the application thereof has occurred since the date of Holdings' audited financial statements referred to in Section 3.04 and, if any such change has occurred, specifying the effect of such change on the financial statements accompanying such certificate, (iv) identifying all Subsidiaries existing on the date of such certificate and indicating, for each such Subsidiary, whether such Subsidiary is a Subsidiary Loan Party or a Foreign Subsidiary and whether such Subsidiary was formed or acquired since the end of the previous fiscal quarter and (v) to the extent that the Asset Dropdown has not been completed, describing the status of the Asset Dropdown; (d) concurrently with any delivery of financial statements under clause (a) above, (i) a certificate of the accounting firm that reported on such financial statements stating whether they obtained knowledge during the course of their examination of such financial statements of any Default (which certificate may be limited to the extent required by accounting rules or guidelines) and (ii) a certificate of a Financial Officer of Holdings or the Parent Borrower (A) identifying any parcels of real property or improvements thereto with a value exceeding $750,000 that have been acquired by any Loan Party since the end of the previous fiscal year, (B) identifying any changes of the type described in Section 5.03(a) that have not been previously reported by the Parent Borrower, (C) identifying any Permitted Acquisitions that have been consummated since the end of the previous fiscal year, including the date on which each such Permitted Acquisition was consummated and the consideration therefor, (D) identifying any Intellectual Property (as defined in the Security Agreement) with respect to which a notice is required to be delivered under the Security Agreement and has not been previously delivered and (E) identifying any Prepayment Events that have occurred since the end of the previous fiscal year and setting forth a reasonably detailed calculation of the Net Proceeds received from Prepayment Events since the end of such previous fiscal year; (e) at least 30 days prior to the commencement of each fiscal year of Holdings (commencing with the fiscal year ending December 31, 2002), a detailed consolidated budget for such fiscal year (including a projected consolidated balance sheet and related statements of projected operations and cash flow as of the end of and -97- for such fiscal year and setting forth the assumptions used for purposes of preparing such budget) and, promptly when available, any material revisions of such budget that have been approved by senior management of Holdings; (f) promptly after the same become publicly available, copies of all periodic and other reports, proxy statements and other materials filed by Holdings, the Parent Borrower or any Subsidiary with the Securities and Exchange Commission, or any Governmental Authority succeeding to any or all of the functions of said Commission, or with any national securities exchange, as the case may be; and (g) promptly following any request therefor, such other information regarding the operations, business affairs and financial condition of Holdings, the Parent Borrower or any Subsidiary, or compliance with the terms of any Loan Document, as the Administrative Agent or any Lender may reasonably request. SECTION 5.02. Notices of Material Events. Holdings and the Parent Borrower will furnish to the Administrative Agent and each Lender prompt written notice of the following: (a) the occurrence of any Default; (b) the filing or commencement of any action, suit or proceeding by or before any arbitrator or Governmental Authority against or affecting Holdings, the Parent Borrower or any Affiliate thereof that, if adversely determined, could reasonably be expected to result in a Material Adverse Effect; (c) the occurrence of any ERISA Event that, alone or together with any other ERISA Events that have occurred, could reasonably be expected to result in liability of Holdings, the Parent Borrower and its Subsidiaries in an aggregate amount exceeding $10,000,000; and (d) any other development that results in, or could reasonably be expected to result in, a Material Adverse Effect. Each notice delivered under this Section shall be accompanied by a statement of a Financial Officer or other executive officer of the Parent Borrower setting forth the details of the event or development requiring such notice and any action taken or proposed to be taken with respect thereto. SECTION 5.03. Information Regarding Collateral. (a) The Parent Borrower will furnish to the Administrative Agent prompt written notice of any change (i) in any Loan Party's legal -98- name or in any trade name used to identify it in the conduct of its business or in the ownership of its properties, (ii) in the location of any Loan Party's chief executive office, its principal place of business, any office in which it maintains books or records relating to Collateral owned by it or any office or facility at which Collateral owned by it is located (including the establishment of any such new office or facility), (iii) in any Loan Party's identity or structure or (iv) in any Loan Party's Federal Taxpayer Identification Number. The Parent Borrower agrees not to effect or permit any change referred to in the preceding sentence unless written notice has been delivered to the Collateral Agent, together with all applicable information to enable the Administrative Agent to make all filings under the Uniform Commercial Code or otherwise that are required in order for the Collateral Agent (on behalf of the Secured Parties) to continue at all times following such change to have a valid, legal and perfected security interest in all the Collateral. (b) Each year, at the time of delivery of annual financial statements with respect to the preceding fiscal year pursuant to clause (a) of Section 5.01, Holdings (on behalf of itself and the other Loan Parties) shall deliver to the Administrative Agent a certificate of a Financial Officer of Holdings (i) setting forth the information required pursuant to the Perfection Certificate or confirming that there has been no change in such information since the date of the Perfection Certificate delivered on the Effective Date or the date of the most recent certificate delivered pursuant to this Section and (ii) certifying that all Uniform Commercial Code financing statements (including fixture filings, as applicable) or other appropriate filings, recordings or registrations, including all refilings, rerecordings and reregistrations, containing a description of the Collateral have been filed of record in each governmental, municipal or other appropriate office in each jurisdiction identified pursuant to clause (i) above to the extent necessary to protect and perfect the security interests under the Collateral Agreement for a period of not less than 18 months after the date of such certificate (except as noted therein with respect to any continuation statements to be filed within such period). SECTION 5.04. Existence; Conduct of Business; Asset Dropdown. (a) Each of Holdings, the Parent Borrower and the Foreign Subsidiary Borrowers will, and will cause each of the Subsidiaries to, do or cause to be done all things necessary to preserve, renew and keep in full force and effect its legal existence and the rights, licenses, permits, privileges, franchises, patents, copyrights, trademarks and trade names the loss of which would have a Material Adverse Effect; provided that the foregoing shall not prohibit any merger, consolidation, liquidation or dissolution permitted under Section 6.03 or disposition by Section 6.05. Holdings and the Parent Borrower will cause all the Equity Interests of the Subsidiary Term Borrowers and the Foreign Subsidiary Borrowers to be owned, directly or indirectly, by the Parent Borrower or any Subsidiary, and the Subsidiary Term Borrowers shall at all times remain a guarantor under the Guarantee Agreement. -99- (b) Holdings shall complete the Asset Dropdown as soon as reasonably practicable and in any event on or prior to the date that is six months after the Effective Date. SECTION 5.05. Payment of Obligations. Each of Holdings, the Parent Borrower, the Subsidiary Term Borrowers and the Foreign Subsidiary Borrowers will, and will cause each of the Subsidiaries (including the Receivables Subsidiary and the Saturn Subsidiary) to, pay its Indebtedness and other obligations, including Tax liabilities, before the same shall become delinquent or in default, except where (a) the validity or amount thereof is being contested in good faith by appropriate proceedings, (b) Holdings, the Parent Borrower, the Subsidiary Term Borrowers, the Foreign Subsidiary Borrowers or such Subsidiary has set aside on its books adequate reserves with respect thereto in accordance with GAAP, (c) such contest effectively suspends collection of the contested obligation and the enforcement of any Lien securing such obligation and (d) the failure to make payment pending such contest could not reasonably be expected to result in a Material Adverse Effect. SECTION 5.06. Maintenance of Properties. Each of Holdings, the Parent Borrower, the Subsidiary Term Borrowers and the Foreign Subsidiary Borrowers will, and will cause each of the Subsidiaries to, keep and maintain all property material to the conduct of their business, taken as a whole, in good working order and condition, ordinary wear and tear excepted; provided that the foregoing shall not prohibit any merger, consolidation, liquidation or dissolution permitted under Section 6.03 or disposition by Section 6.05. SECTION 5.07. Insurance. Each of Holdings, the Parent Borrower, the Subsidiary Term Borrowers and the Foreign Subsidiary Borrowers will, and will cause each of the Subsidiaries to, maintain insurance in such amounts (with no greater risk retention) and against such risks as are customarily maintained by companies of established repute engaged in the same or similar businesses operating in the same or similar locations, except where the failure to do so could not reasonably be expected to result in a Material Adverse Effect. Such insurance shall be maintained with financially sound and reputable insurance companies, except that a portion of such insurance program (not to exceed that which is customary in the case of companies engaged in the same or similar business or having similar properties similarly situated) may be effected through self-insurance, provided adequate reserves therefor, in accordance with GAAP, are maintained. In addition, each of Holdings, the Parent Borrower the Subsidiary Term Borrowers and the Foreign Subsidiary Borrowers will, and will cause each of its Subsidiaries to, maintain all insurance required to be maintained pursuant to the Security Documents. The Parent Borrower will furnish to the Lenders, upon request of the Administrative Agent, information in reasonable detail as to the insurance so maintained. All insurance policies or certificates (or certified copies thereof) with respect to such insurance shall be endorsed to the Collateral Agent's rea- -100- sonable satisfaction for the benefit of the Lenders (including, without limitation, by naming the Collateral Agent as loss payee or additional insured, as appropriate). SECTION 5.08. Casualty and Condemnation. The Parent Borrower (a) will furnish to the Administrative Agent and the Lenders prompt written notice of casualty or other insured damage to any material portion of any Collateral having a book value or fair market value of $1,000,000 or more or the commencement of any action or proceeding for the taking of any Collateral having a book value or fair market value of $1,000,000 or more or any part thereof or interest therein under power of eminent domain or by condemnation or similar proceeding and (b) will ensure that the Net Proceeds of any such event (whether in the form of insurance proceeds, condemnation awards or otherwise) are collected and applied in accordance with the applicable provisions of this Agreement and the Security Documents. SECTION 5.09. Books and Records; Inspection and Audit Rights. Each of Holdings, the Parent Borrower, the Subsidiary Term Borrowers and the Foreign Subsidiary Borrowers will, and will cause each of the Subsidiaries to, keep proper books of record and account in which full, true and correct entries are made of all dealings and transactions in relation to its business and activities. Each of Holdings, the Parent Borrower, the Subsidiary Term Borrowers and the Foreign Subsidiary Borrowers will, and will cause each of the Subsidiaries to, permit any representatives designated by the Administrative Agent or any Lender, upon reasonable prior notice, to visit and inspect its properties, to examine and make extracts from its books and records, and to discuss its affairs, finances and condition with its officers and independent accountants, all at such reasonable times and as often as reasonably requested. SECTION 5.10. Compliance with Laws. Each of Holdings, the Parent Borrower, the Subsidiary Term Borrowers and the Foreign Subsidiary Borrowers will, and will cause each of the Subsidiaries to, comply with all laws, rules, regulations and orders of any Governmental Authority applicable to it or its property, except where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect. SECTION 5.11. Use of Proceeds and Letters of Credit. The Parent Borrower and the Subsidiary Term Borrowers will use on the Effective Date the proceeds of the Term Loans, together with the Initial Receivables Proceeds and the proceeds of the Initial Revolving Borrowing, only for the payment of the Intercompany Transfer, and Holdings will use on the Effective Date the proceeds of the Intercompany Transfer, together with the Specified Asset Sale Proceeds, the proceeds from the Equity Contribution and the Specified Cash only for the pay- -101- ment of (a) the Merger Consideration, (b) fees and expenses payable in connection with the Transactions and (c) all principal, interest, fees and other amounts outstanding under, or due in connection with the repayment of, the Repaid Indebtedness. The proceeds of the Revolving Loans (other than the proceeds from the Initial Revolving Borrowing) and Swingline Loans will be used only for general corporate purposes, and to the extent permitted by Section 6.01(a)(i), Permitted Acquisitions. The proceeds of the Incremental Term Loans will be used only for Permitted Acquisitions. No part of the proceeds of any Loan will be used, whether directly or indirectly, for any purpose that entails a violation of any of the Regulations of the Board, including Regulations T, U and X. SECTION 5.12. Additional Subsidiaries. If any additional Subsidiary is formed or acquired after the Effective Date, the Parent Borrower will, within five Business Days after such Subsidiary is formed or acquired, notify the Administrative Agent and the Lenders thereof and, within five Business Days after such Subsidiary is formed or acquired, cause the Collateral and Guarantee Requirement to be satisfied with respect to any Equity Interest in or Indebtedness of such Subsidiary owned by or on behalf of any Loan Party. SECTION 5.13. Further Assurances. (a) Each of Holdings, the Parent Borrower, the Subsidiary Term Borrowers and the Foreign Subsidiary Borrowers will, and will cause each Subsidiary Loan Party to, execute any and all further documents, financing statements, agreements and instruments, and take all such further actions (including the filing and recording of financing statements, fixture filings, mortgages, deeds of trust, landlord waivers and other documents), which may be required under any applicable law, or which the Administrative Agent or the Required Lenders may reasonably request, to cause the Collateral and Guarantee Requirement to be and remain satisfied, all at the expense of the Loan Parties. Holdings, the Parent Borrower, the Subsidiary Term Borrowers and the Foreign Subsidiary Borrowers also agree to provide to the Administrative Agent, from time to time upon request, evidence reasonably satisfactory to the Administrative Agent as to the perfection and priority of the Liens created or intended to be created by the Security Documents. (b) If any assets (including any real property or improvements thereto or any interest therein) having a book value or fair market value of $1,000,000 or more in the aggregate are acquired by the Parent Borrower or any Subsidiary Loan Party after the Effective Date or through the acquisition of a Subsidiary Loan Party under Section 5.12 (other than, in each case, assets constituting Collateral under the Security Agreement or the Pledge Agreement that become subject to the Lien of the Security Agreement or the Pledge Agreement upon acquisition thereof), the Parent Borrower or, if applicable, the relevant Foreign Subsidiary Borrower will notify the Administrative Agent and the Lenders thereof, and, if reasonably requested by the Administrative Agent or the Required Lenders, the Parent Borrower -102- will cause such assets to be subjected to a Lien securing the Obligations and will take, and cause the Subsidiary Loan Parties to take, such actions as shall be necessary or reasonably requested by the Administrative Agent to grant and perfect such Liens, including actions described in paragraph (a) of this Section, all at the expense of the Loan Parties. SECTION 5.14. Interest Rate Protection. As promptly as practicable, and in any event within 90 days after the Effective Date, the Parent Borrower will enter into, and thereafter for a period of not less than three years will maintain in effect, one or more interest rate protection agreements on such terms as shall be reasonably satisfactory to the Administrative Agent, the effect of which shall be to fix or limit the interest cost to the Parent Borrower with respect to at least 50% of the outstanding Term Loans. SECTION 5.15. Available Funds; Additional Equity. (a) Until the date that the Convertible Debentures have been irrevocably repaid or repurchased in full, the Parent Borrower will maintain Available Funds in an aggregate amount equal to the Available Funds Reserve Amount. On each Available Funds Date, the Parent Borrower shall deliver a certificate of a Financial Officer of the Parent Borrower dated as of such date certifying in reasonable detail that the Available Funds equal the applicable Available Funds Reserve Amount on such date. Upon delivery of such certificate, such Available Funds shall be deemed "reserved" for purposes of this Agreement and may only be used as permitted by Section 6.12. (b) Prior to or on March 1, 2001, Holdings shall obtain and contribute to the Parent Borrower as common equity an amount of cash equal to no less than $5,200,000 from the issuance of Equity Interests of Holdings, including by means of a capital contribution, all in a manner reasonably satisfactory (including the identity of any Persons investing in Holdings) to the Administrative Agent. ARTICLE VI Negative Covenants Until the Commitments have expired or terminated and the principal of and interest on each Loan and all fees payable hereunder have been paid in full and all Letters of Credit have expired or terminated and all LC Disbursements shall have been reimbursed, each of Holdings, the Parent Borrower, each Subsidiary Term Borrower (as to itself only) and each Foreign Subsidiary Borrower (as to itself only) covenants and agrees with the Lenders that: SECTION 6.01. Indebtedness; Certain Equity Securities. (a) None of Holdings, the Par- -103- ent Borrower, any Subsidiary Term Borrower or any Foreign Subsidiary Borrower will, nor will they permit any Subsidiary to, create, incur, assume or permit to exist any Indebtedness, except: (i) Indebtedness created under the Loan Documents, including the Incremental Term Loans; provided that Revolving Borrowings used to finance Permitted Acquisitions shall not exceed at any time the Permitted Acquisition Amount; (ii) the Permitted Receivables Financing; (iii) Indebtedness existing on the date hereof and set forth in Schedule 6.01 and extensions, renewals and replacements of any such Indebtedness that do not increase the outstanding principal amount as specified on such Schedule 6.01 or result in an earlier maturity date or decreased weighted average life thereof; (iv) the Convertible Debentures; (v) subject to Section 6.12(b), the Shareholder Loans; (vi) the Specified Permitted Unsecured Indebtedness and Permitted Subordinated Indebtedness; (vii) Additional Acquisition Indebtedness; (viii) Indebtedness of the Parent Borrower to any Subsidiary and of any Subsidiary to the Parent Borrower or any other Subsidiary; provided that Indebtedness of any Subsidiary that is not a Domestic Loan Party to the Parent Borrower or any Subsidiary Loan Party shall be subject to Section 6.04; (ix) Guarantees by the Parent Borrower of Indebtedness of any Subsidiary and by any Subsidiary of Indebtedness of the Parent Borrower or any other Subsidiary; provided that (a) Guarantees by the Parent Borrower or any Subsidiary Loan Party of Indebtedness of any Subsidiary that is not a Domestic Loan Party shall be subject to Section 6.04 and (b) this clause (ix) shall not apply to Guarantees of the Shareholder Loans, the Specified Permitted Unsecured Indebtedness, Permitted Subordinated Indebtedness and Additional Acquisition Indebtedness; (x) Guarantees by Holdings, the Parent Borrower or any Subsidiary, as the case may be, in respect of Specified Permitted Unsecured Indebtedness, Permitted Subordinated Indebtedness and Additional Acquisition Indebtedness; provided that none of Holdings, the Parent Borrower or any Subsidiary, as the case may be, shall Guarantee the Specified Permitted Unsecured Indebtedness, Permitted Subordinated -104- Indebtedness or Additional Acquisition Indebtedness unless (A) it also has Guaranteed the Obligations pursuant to the Guarantee Agreement and (B) such Guarantee of the Specified Permitted Unsecured Indebtedness (to the extent such Indebtedness is subordinated), the Permitted Subordinated Indebtedness or Additional Acquisition Indebtedness, as the case may be, is subordinated to such Guarantee of the Obligations on terms no less favorable to the Lenders than the subordination provisions of the Specified Permitted Unsecured Indebtedness (to the extent such Indebtedness is subordinated), Permitted Subordinated Indebtedness and Additional Acquisition Indebtedness, as the case may be; (xi) Indebtedness of the Parent Borrower or any Subsidiary incurred to finance the acquisition, construction or improvement of any fixed or capital assets, including Capital Lease Obligations and any Indebtedness assumed in connection with the acquisition of any such assets or secured by a Lien on any such assets prior to the acquisition thereof, and extensions, renewals and replacements of any such Indebtedness that do not increase the outstanding principal amount thereof or result in an earlier maturity date or decreased weighted average life thereof; provided that (A) such Indebtedness is incurred prior to or within 180 days after such acquisition or the completion of such construction or improvement and (B) the aggregate principal amount of Indebtedness permitted by this clause (xi) shall not exceed $50,000,000 at any time outstanding; (xii) Indebtedness arising as a result of an Acquisition Lease Financing; (xiii) Indebtedness of any Person that becomes a Subsidiary after the date hereof; provided that (A) such Indebtedness exists at the time such Person becomes a Subsidiary and is not created in contemplation of or in connection with such Person becoming a Subsidiary and (B) the aggregate principal amount of Indebtedness permitted by this clause (xiii) shall not exceed $25,000,000 at any time outstanding, less the liquidation value of any outstanding Assumed Preferred Stock; (xiv) Indebtedness of Holdings, the Parent Borrower or any Subsidiary in respect of workers' compensation claims, self-insurance obligations, performance bonds, surety appeal or similar bonds and completion guarantees provided by Holdings, the Parent Borrower and the Subsidiaries in the ordinary course of their business; and (xv) other unsecured Indebtedness of Holdings, the Parent Borrower or any Subsidiary in an aggregate principal amount not exceeding $20,000,000 at any time outstanding, less the liquidation value of any applicable Qualified Holdings Preferred Stock issued and outstanding pursuant to clause (b) of the definition of Qualified Holdings Preferred Stock. -105- (b) None of Holdings, the Parent Borrower, any Subsidiary Term Borrower or any Foreign Subsidiary Borrower will, nor will they permit any Subsidiary to, issue any preferred stock or other preferred Equity Interests, except (i) Holdings Preferred Stock, (ii) Qualified Holdings Preferred Stock, (iii) Assumed Preferred Stock and (iv) preferred stock or preferred Equity Interests held by Holdings, the Parent Borrower or any Subsidiary. SECTION 6.02. Liens. None of Holdings, the Parent Borrower or any Foreign Subsidiary Borrower will, nor will they permit any Subsidiary to, create, incur, assume or permit to exist any Lien on any property or asset now owned or hereafter acquired by it, or assign or sell any income or revenues (including accounts receivable) or rights in respect of any thereof, except: (a) Liens created under the Loan Documents; (b) Permitted Encumbrances; (c) Liens in respect of the Permitted Receivables Financing; (d) any Lien on any property or asset of the Parent Borrower or any Subsidiary existing on the date hereof and set forth in Schedule 6.02; provided that (i) such Lien shall not apply to any other property or asset of the Parent Borrower or any Subsidiary and (ii) such Lien shall secure only those obligations which it secures on the date hereof and extensions, renewals and replacements thereof that do not increase the outstanding principal amount thereof; (e) any Lien existing on any property or asset prior to the acquisition thereof by the Parent Borrower or any Subsidiary or existing on any property or asset of any Person that becomes a Subsidiary after the date hereof prior to the time such Person becomes a Subsidiary; provided that (A) such Lien is not created in contemplation of or in connection with such acquisition or such Person becoming a Subsidiary , as the case may be, (B) such Lien shall not apply to any other property or assets of the Parent Borrower or any Subsidiary and (C) such Lien shall secure only those obligations which it secures on the date of such acquisition or the date such Person becomes a Subsidiary, as the case may be; (f) Liens on fixed or capital assets acquired, constructed or improved by, or in respect of Capital Lease Obligations of, the Parent Borrower or any Subsidiary; provided that (A) such security interests secure Indebtedness permitted by clause (xi) of Section 6.01(a), (B) such security interests and the Indebtedness secured thereby are incurred prior to or within 180 days after such acquisition or the completion of such construction or improvement, (C) the Indebtedness secured thereby does not exceed the cost of acquiring, constructing or improving such fixed or capital assets and (D) -106- such security interests shall not apply to any other property or assets of the Parent Borrower or any Subsidiary; (g) Liens, with respect to any Mortgaged Property, described in Schedule B-2 of the title policy covering such Mortgaged Property; and (h) other Liens securing liabilities permitted hereunder in an aggregate amount not exceeding (i) in respect of consensual Liens, $5,000,000 and (ii) in respect of all such Liens, $10,000,000, in each case at any time outstanding. SECTION 6.03. Fundamental Changes. (a) None of Holdings, the Parent Borrower, any Subsidiary Term Borrower or any Foreign Subsidiary Borrower will, nor will they permit any Subsidiary to, merge into or consolidate with any other Person, or permit any other Person to merge into or consolidate with it, or liquidate or dissolve, except that, if at the time thereof and immediately after giving effect thereto no Default shall have occurred and be continuing (i) any Subsidiary may merge into the Parent Borrower in a transaction in which the Parent Borrower is the surviving corporation, (ii) any Subsidiary may merge into any Subsidiary in a transaction in which the surviving entity is a Subsidiary and (if any party to such merger is a Subsidiary Loan Party) is a Subsidiary Loan Party (provided that, with respect to any such mergers involving the Subsidiary Term Borrowers or the Foreign Subsidiary Borrower, the surviving entity of such mergers shall be a Subsidiary Borrower or a Foreign Subsidiary Borrower, as the case may be) and (iii) any Subsidiary (other than a Subsidiary Loan Party) may liquidate or dissolve if the Parent Borrower determines in good faith that such liquidation or dissolution is in the best interests of the Parent Borrower and is not materially disadvantageous to the Lenders; provided that any such merger involving a Person that is not a wholly owned Subsidiary immediately prior to such merger shall not be permitted unless also permitted by Section 6.04. (b) The Parent Borrower will not, and will not permit any of its Subsidiaries to, engage to any material extent in any business other than businesses of the type conducted by the Parent Borrower and its Subsidiaries on the date of execution of this Agreement and businesses reasonably related thereto. (c) Holdings will not engage in any business or activity other than (i) the ownership of all the outstanding shares of capital stock of the Parent Borrower and the Saturn Subsidiary, (ii) performing its obligations in respect of the Restricted Stock Award, (iii) performing its obligations (A) under the Loan Documents, (B) under the Shareholder Loan Agreement, subject to Section 6.12(b), (C) as co-obligor with the Parent Borrower in respect of the Convertible Debentures and (D) under the Permitted Receivables Financing, (iv) activities incidental thereto and to Holdings' existence, (v) activities related to the performance of all its obligations under the Recapitalization Agreement and in respect of the Transactions and -107- (vi) other activities (including the incurrence of Indebtedness and the issuance of its Equity Interests) that are permitted by this Agreement. Holdings will not own or acquire any assets (other than shares of capital stock of the Parent Borrower and the Saturn Subsidiary, any assets that are intended to be transferred to the Parent Borrower pending completion of the Asset Dropdown and any immaterial assets not subject to the Asset Dropdown, cash and Permitted Investments) or incur any liabilities (other than liabilities imposed by law, including tax liabilities, liabilities related to its existence and permitted business and activities specified in the immediately preceding sentence). (d) The Saturn Subsidiary will not engage in any business or business activity other than (i) holding Equity Interests in Saturn held on the date of the execution of this Agreement and any property received in respect thereof, (ii) performing its obligations in respect of the Saturn Sale and the Saturn Proceeds Distribution, (iii) activities permitted by its certificate of incorporation and (iv) activities incidental thereto and to the Saturn Subsidiary's existence. The Saturn Subsidiary will not own or acquire any assets (other than such equity investments in Saturn) or incur any liabilities (other than liabilities imposed by law, including tax liabilities, and other liabilities related to its existence and permitted business and activities specified in the immediately preceding sentence). (e) The Receivables Subsidiary will not engage in any business or business activity other than the activities related to the Permitted Receivables Financing and its existence. The Receivables Subsidiary will not own or acquire any assets (other than the receivables subject to the Permitted Receivables Financing) or incur any liabilities (other than the liabilities imposed by law including tax liabilities, and other liabilities related to its existence and permitted business and activities specified in the immediately preceding sentence, including liabilities arising under the Permitted Receivables Financing). SECTION 6.04. Investments, Loans, Advances, Guarantees and Acquisitions. None of the Parent Borrower, any Subsidiary Loan Party or any Foreign Subsidiary Borrower will, nor will they permit any Subsidiary to, purchase, hold or acquire (including pursuant to any merger with any Person that was not a wholly owned Subsidiary prior to such merger) any Equity Interests in or evidences of indebtedness or other securities (including any option, warrant or other right to acquire any of the foregoing) of, make or permit to exist any loans or advances to, Guarantee any obligations of, or make or permit to exist any investment or any other interest in, any other Person, or purchase or otherwise acquire (in one transaction or a series of transactions) any assets of any other Person constituting a business unit, except: (a) Permitted Investments; (b) investments existing on the date hereof and set forth on Schedule 6.04; -108- (c) Permitted Acquisitions; (d) investments by the Parent Borrower and the Subsidiaries in Equity Interests in their respective Subsidiaries that exist immediately prior to any applicable transaction; provided that (i) any such Equity Interests held by a Loan Party shall be pledged pursuant to the Pledge Agreement or any applicable Foreign Security Documents, as the case may be, to the extent required by this Agreement and (ii) the aggregate amount of investments (excluding any such investments, loans, advances and Guaranties to such Subsidiaries that are assumed and exist on the date any Permitted Acquisition is consummated and that are not made, incurred or created in contemplation of or in connection with such Permitted Acquisition) by Loan Parties in, and loans and advances by Loan Parties to, and Guarantees by Loan Parties of Indebtedness of, Subsidiaries that are not Domestic Loan Parties made after the Effective Date shall not exceed 5% of Holdings' consolidated total assets determined in accordance with GAAP at any time outstanding; (e) loans or advances made by the Parent Borrower to any Subsidiary and made by any Subsidiary to the Parent Borrower or any other Subsidiary; provided that (i) any such loans and advances made by a Loan Party shall be evidenced by a promissory note pledged pursuant to the Pledge Agreement and (ii) the amount of such loans and advances made by Loan Parties to Subsidiaries that are not Loan Parties shall be subject to the limitation set forth in clause (d) above; (f) Guarantees permitted by Section 6.01(a)(x); (g) investments arising as a result of the Permitted Receivables Financing; (h) investments constituting permitted Capital Expenditures under Section 6.15; (i) investments received in connection with the bankruptcy or reorganization of, or settlement of delinquent accounts and disputes with, customers and suppliers, in each case in the ordinary course of business; (j) any investments in or loans to any other Person received as noncash consideration for sales, transfers, leases and other dispositions permitted by Section 6.05; (k) Guarantees by the Parent Borrower and the Subsidiaries of leases entered into by any Subsidiary as lessee; provided that the amount of such Guarantees made by Loan Parties to Subsidiaries that are not Loan Parties shall be subject to the limitation set forth in clause (d) above; -109- (l) extensions of credit in the nature of accounts receivable or notes receivable in the ordinary course of business; (m) loans or advances to employees made in the ordinary course of business consistent with prudent business practice and not exceeding $5,000,000 in the aggregate outstanding at any one time; (n) investments in the form of Hedging Agreements permitted under Section 6.07; (o) investments by the Parent Borrower or any Subsidiary in (i) the capital stock of a Receivables Subsidiary and (ii) other interests in a Receivables Subsidiary, in each case to the extent required by the terms of the Permitted Receivables Financing; (p) payroll, travel and similar advances to cover matters that are expected at the time of such advances ultimately to be treated as expenses for accounting purposes and that are made in the ordinary course of business; and (q) investments, loans or advances in addition to those permitted by clauses (a) through (p) above not exceeding in the aggregate $10,000,000 at any time outstanding. SECTION 6.05. Asset Sales. None of Holdings, the Parent Borrower, any Subsidiary Term Borrower or any Foreign Subsidiary Borrower will, nor will they permit any Subsidiary to, sell, transfer, lease or otherwise dispose of any asset, including any Equity Interest owned by it, nor will they permit any Subsidiary to issue any additional Equity Interest in such Subsidiary, except: (a) sales, transfers, leases and other dispositions of inventory, used or surplus equipment, Permitted Investments and Investments referred to in Section 6.04(i) in the ordinary course of business; (b) sales, transfers and dispositions to the Parent Borrower or a Subsidiary; provided that any such sales, transfers or dispositions involving a Subsidiary that is not a Domestic Loan Party shall be made in compliance with Section 6.09; (c) the Saturn Sale or the disposition of Equity Interests in the Saturn Subsidiary in lieu thereof and the Asset Dropdown; (d) sales of accounts receivables and related assets pursuant to the Permitted Receivables Financing; -110- (e) the creation of Liens permitted by Section 6.02 and dispositions as a result thereof; (f) sales or transfers that are permitted sale and leaseback transactions pursuant to Section 6.06(a); (g) sales and transfers that constitute part of an Acquisition Lease Financing; (h) Restricted Payments permitted by Section 6.08; (i) transfers and dispositions constituting investments permitted under Section 6.04; (j) sales, transfers and other dispositions of property identified on Schedule 6.05; and (k) sales, transfers and other dispositions of assets (other than Equity Interests in a Subsidiary) that are not permitted by any other clause of this Section; provided that the aggregate fair market value of all assets sold, transferred or otherwise disposed of in reliance upon this clause (k) shall not exceed $15,000,000 during any fiscal year of the Parent Borrower; provided that such amount shall be increased, in respect of the fiscal year ending on December 31, 2002, and each fiscal year thereafter by an amount equal to the total unused amount of such permitted sales, transfers and other dispositions for the immediately preceding fiscal year (without giving effect to the amount of any unused permitted sales, transfers and other dispositions that were carried forward to such preceding fiscal year); provided that (x) all sales, transfers, leases and other dispositions permitted hereby (other than those permitted by clause (b) above) shall be made for fair value and (y) all sales, transfers, leases and other dispositions permitted by clauses (j) and (k) above shall be for at least 85% cash consideration. SECTION 6.06. Sale and Leaseback Transactions. None of the Parent Borrower, any Subsidiary Term Borrower or any Foreign Subsidiary Borrower will, nor will they permit any Subsidiary to, enter into any arrangement, directly or indirectly, whereby it shall sell or transfer any property, real or personal, used or useful in its business, whether now owned or hereinafter acquired, and thereafter rent or lease such property or other property that it intends to use for substantially the same purpose or purposes as the property sold or transferred, except for (a) any such sale of any fixed or capital assets that is made for cash consideration in an amount not less than the cost of such fixed or capital asset and is consummated within 180 days after the Par- -111- ent Borrower, such Subsidiary Term Borrower, such Foreign Subsidiary Borrower or such Subsidiary acquires or completes the construction of such fixed or capital asset, so long as the Capital Lease Obligations associated therewith are permitted by Section 6.01(a)(xi) and (b) any Acquisition Lease Financing. SECTION 6.07. Hedging Agreements. None of the Parent Borrower, any Subsidiary Term Borrower or any Foreign Subsidiary Borrower will, nor will they permit any Subsidiary to, enter into any Hedging Agreement, other than (a) Hedging Agreements required by Section 5.14 and (b) Hedging Agreements entered into in the ordinary course of business and which are not speculative in nature to hedge or mitigate risks to which the Parent Borrower, any Subsidiary Term Borrower or any Subsidiary is exposed in the conduct of its business or the management of its assets or liabilities. SECTION 6.08. Restricted Payments; Certain Payments of Indebtedness. (a) None of Holdings, the Parent Borrower, any Subsidiary Term Borrower or any Foreign Subsidiary Borrower will, nor will they permit any Subsidiary to, declare or make, or agree to pay or make, directly or indirectly, any Restricted Payment, or incur any obligation (contingent or otherwise) to do so, except: (i) Holdings may declare and pay dividends with respect to its Equity Interests payable solely in additional Equity Interests of Holdings; (ii) Subsidiaries may declare and pay dividends ratably with respect to their capital stock; (iii) the Parent Borrower may make payments to Holdings to permit it to make, and Holdings may make, Restricted Payments, not exceeding $2,000,000 during any fiscal year (provided that such amount shall be increased, in respect of the fiscal year ending on December 31, 2002, and each fiscal year thereafter by an amount equal to the total unused amount of such Restricted Payments for the immediately preceding fiscal year (without giving effect to the amount of any unused amounts that were carried forward to such preceding fiscal year) not to exceed in the aggregate $16,000,000), in each case pursuant to and in accordance with stock option plans, equity purchase programs or agreements or other benefit plans, in each case for management or employees or former employees of the Parent Borrower and the Subsidiaries; (iv) the Parent Borrower may pay dividends to Holdings at such times and in such amounts (A) as shall be necessary to enable Holdings to make payments permitted by Section 6.08(a) (v) and (vi) and (B) as shall be necessary to permit Holdings to discharge its other permitted liabilities; -112- (v) Holdings may pay Holdings Preferred Dividends and interest in respect of the Shareholder Loans and its other Indebtedness permitted hereunder, provided that, at the time of such payment and after giving effect thereto, no Default or Event of Default shall have occurred and be continuing and Holdings and the Parent Borrower are in compliance with Sections 6.13 and 6.14; (vi) Holdings may make payments to the extent contemplated by the Recapitalization Agreement, including payments in respect of the restricted stock granted pursuant to the Restricted Stock Obligation, provided that, at the time of such payment in respect of the Restricted Stock Obligation and after giving effect thereto, no Event of Default shall have occurred and be continuing; (vii) Holdings may pay the Saturn Proceeds Distribution; (viii) Parent Borrower may make payments to Holdings to permit it to make, and Holdings may make payments permitted by Sections 6.09(f), (g), (h) and (i); provided that, at the time of such payment and after giving effect thereto, no Default or Event of Default shall have occurred and be continuing and Holdings and the Parent Borrower are in compliance with Sections 6.13 and 6.14; provided, further, that any payments that are prohibited because of the immediately preceding proviso shall accrue and may be made as so accrued upon the curing or waiver of such Default, Event of Default or noncompliance; and (ix) the Intercompany Transfer. (b) None of Holdings, the Parent Borrower, any Subsidiary Term Borrower or any Foreign Subsidiary Borrower will, nor will they permit any Subsidiary to, make or agree to pay or make, directly or indirectly, any payment or other distribution (whether in cash, securities or other property) of or in respect of principal of or interest on any Indebtedness, or any payment or other distribution (whether in cash, securities or other property), including any sinking fund or similar deposit, on account of the purchase, redemption, retirement, acquisition, cancellation or termination of any Indebtedness, except: (i) payment of Indebtedness created under the Loan Documents; (ii) the repurchase, redemption, repayment or other retirement of the Convertible Debentures as permitted by Sections 5.15 and 6.12; (iii) payment of regularly scheduled interest and principal payments as and when due in respect of any Indebtedness, other than payments in respect of the subordinated Indebtedness prohibited by the subordination provisions thereof; -113- (iv) refinancings of Indebtedness to the extent permitted by Section 6.01; and (v) payment of secured Indebtedness out of the proceeds of any sale or transfer of the property or assets securing such Indebtedness. (c) None of Holdings, the Parent Borrower or any Foreign Subsidiary Borrower will, nor will they permit any Subsidiary to, enter into or be party to, or make any payment under, any Synthetic Purchase Agreement unless (i) in the case of any Synthetic Purchase Agreement related to any Equity Interest of Holdings, the payments required to be made by Holdings are limited to amounts permitted to be paid under Section 6.08(a), (ii) in the case of any Synthetic Purchase Agreement related to any Restricted Indebtedness, the payments required to be made by Holdings, the Parent Borrower or the Subsidiaries thereunder are limited to the amount permitted under Section 6.08(b) and (iii) in the case of any Synthetic Purchase Agreement, the obligations of Holdings, the Parent Borrower and the Subsidiaries thereunder are subordinated to the Obligations on terms satisfactory to the Required Lenders. SECTION 6.09. Transactions with Affiliates. None of Holdings, the Parent Borrower, any Subsidiary Term Borrower or any Foreign Subsidiary Borrower will, nor will they permit any Subsidiary to, sell, lease or otherwise transfer any property or assets to, or purchase, lease or otherwise acquire any property or assets from, or otherwise engage in any other transactions with, any of its Affiliates, except: (a) transactions in the ordinary course of business that do not involve Holdings and are at prices and on terms and conditions not less favorable to the Parent Borrower or such Subsidiary than could be obtained on an arm's-length basis from unrelated third parties; (b) transactions between or among the Parent Borrower and the Subsidiaries not involving any other Affiliate (to the extent not otherwise prohibited by other provisions of this Agreement); (c) any Restricted Payment permitted by Section 6.08; (d) transactions pursuant to agreements in effect on the Effective Date and listed on Schedule 6.09 (provided that this clause (d) shall not apply to any extension, or renewal of, or any amendment or modification of such agreements that is less favorable to the Parent Borrower or the applicable Subsidiaries, as the case may be); (e) the Transactions; -114- (f) the payment, on a quarterly basis, of management fees to Heartland and/or its Affiliates in accordance with the Heartland Management Agreement, provided that the annual amount of such management fees shall not exceed $4,000,000; (g) the reimbursement of Heartland and/or its Affiliates for their reasonable out-of-pocket expenses incurred by them in connection with the Transactions and performing management services to Holdings, the Parent Borrower and the Subsidiaries, pursuant to the Heartland Management Agreement; (h) the payment of one time fees to Heartland and/or its Affiliates in connection with any Permitted Acquisition, such fees to be payable at the time of each such acquisition and not to exceed the percentage of the aggregate consideration paid by Holdings, the Parent Borrower and its Subsidiaries for any such acquisition as specified in the Heartland Management Agreement; and (i) payments to Heartland and/or its Affiliates for any financial advisor, underwriter or placement services or other investment banking activities rendered to Holdings, the Parent Borrower or the Subsidiaries, pursuant to the Heartland Management Agreement. SECTION 6.10. Restrictive Agreements. None of Holdings, the Parent Borrower, any Subsidiary Term Borrower or any Foreign Subsidiary Borrower will, nor will they permit any Subsidiary to, directly or indirectly, enter into, incur or permit to exist any agreement or other arrangement that prohibits, restricts or imposes any condition upon (a) the ability of Holdings, the Parent Borrower or any Subsidiary to create, incur or permit to exist any Lien upon any of its property or assets, or (b) the ability of any Subsidiary to pay dividends or other distributions with respect to any shares of its capital stock or to make or repay loans or advances to the Parent Borrower or any other Subsidiary or to Guarantee Indebtedness of the Parent Borrower or any other Subsidiary; provided that (i) the foregoing shall not apply to restrictions and conditions imposed by law or by any (A) Loan Document or Permitted Receivables Document or (B) any Permitted Subordinated Indebtedness, Specified Permitted Unsecured Indebtedness and Additional Acquisition Indebtedness that are customary, in the reasonable judgment of the board of directors thereof, for the market in which such Indebtedness is issued so long as such restrictions do not prevent, impede or impair (x) the creation of Liens and Guarantees in favor of the Lenders under the Loan Documents or (y) the satisfaction of the obligations of the Loan Parties under the Loan Documents, (ii) the foregoing shall not apply to restrictions and conditions existing on the date hereof identified on Schedule 6.10 (but shall apply to any extension or renewal of, or any amendment or modification expanding the scope of, any such restriction or condition), (iii) the foregoing shall not apply to customary restrictions and conditions contained in agreements relating to the sale of a Subsidiary pending such sale, provided, further, -115- that such restrictions and conditions apply only to the Subsidiary that is to be sold and such sale is permitted hereunder, (iv) clause (a) of the foregoing shall not apply to restrictions or conditions imposed by any agreement relating to secured Indebtedness permitted by this Agreement if such restrictions or conditions apply only to the property or assets securing such Indebtedness and (v) clause (a) of the foregoing shall not apply to customary provisions in leases and other agreements restricting the assignment thereof. SECTION 6.11. Amendment of Material Documents. None of Holdings, the Parent Borrower, any Subsidiary Term Borrower or any Foreign Subsidiary Borrower will, nor will they permit any Subsidiary (including the Receivables Subsidiary and the Saturn Subsidiary) to, amend, modify or waive any of its rights under (a) its certificate of incorporation, by-laws or other organizational documents, (b) the Recapitalization Documents and (c) any Material Agreement, in each case to the extent such amendment, modification or waiver is adverse to the Lenders. SECTION 6.12. Use of Available Funds; Convertible Debentures. (a) Upon the reservation of Available Funds pursuant to Section 5.15 and for so long as any of the Convertible Debentures are outstanding, none of Holdings, the Parent Borrower, any Subsidiary Term Borrower or any Foreign Subsidiary Borrower will, nor will they permit any Subsidiary to, use such reserved Available Funds in a manner that would result in the Available Funds being less than the Available Funds Reserve Amount, other than for the redemption or repurchase of the Convertible Debentures at maturity on the Debenture Maturity Date, provided that (i) the Parent Borrower shall be entitled to use Available Funds (including borrowings under the Revolving Facility) in an amount not to exceed $10,000,000 outstanding at any time to (A) redeem Convertible Debentures pursuant to the exercise of any Conversion Right or pursuant to the optional redemption provisions of the Convertible Debentures or (B) make purchases of Convertible Debentures (whether in the form of open-market or privately negotiated purchases or pursuant to a debt tender offer) at a price no greater than the face amount of any Convertible Debentures so purchased (plus any accrued interest thereon) (collectively, the "Permitted Debenture Purchases"), provided, further, that any Available Funds used for Permitted Debenture Purchases shall be immediately (or shall have been) repaid or replaced with an equivalent amount of Shareholder Loans and (ii) none of the Available Funds consisting of unused Revolving Commitments or unused and available proceeds from the Permitted Receivables Financing shall be used to redeem or repurchase any Convertible Debentures unless and until the Available Funds consisting of proceeds (A) of any Permitted Subordinated Indebtedness, (B) resulting from any issuance of Equity Interests by Holdings or capital contributions to Holdings and (C) of any Shareholder Loans have been applied to make such redemption or repurchase. -116- (b) Holdings shall only be entitled, and shall be obligated, to incur Shareholder Loans in the following circumstances: (i) if, on the earlier of the Debenture Maturity Date and the date that is 30 days prior to the expiration of the commitments of Masco under the Shareholder Loan Agreement, the Convertible Debentures have not been redeemed or repurchased in full pursuant to the exercise of the Conversion Right or otherwise, Holdings will obtain Shareholder Loans in an aggregate principal amount equal to $100,000,000 (less the aggregate amount of any Shareholder Loans made prior to such time); (ii) upon any conversion of any Convertible Debentures on or following the Effective Date and prior to the Debenture Maturity Date pursuant to the Conversion Right, Holdings will obtain Shareholder Loans in an aggregate principal amount equal to the lesser of (A) the amount of cash payable to the Debenture Holders in respect of the exercise of such Conversion Right less the amount of any proceeds from Permitted Subordinated Indebtedness held in the Debenture Account at such time and (B) $100,000,000 (less the aggregate amount of any Shareholder Loans made prior to such time); (iii) if Available Funds have been used to make Permitted Debenture Purchases, Holdings shall obtain, at any time it is requested to do so by the Administrative Agent or the Required Lenders, Shareholder Loans in the amount of such Available Funds so used; and (iv) Holdings may obtain Shareholder Loans in such circumstances as the Administrative Agent agrees, provided that (A) the aggregate amount of Shareholder Loans made pursuant to clauses (i), (ii), (iii) and (iv) above shall not exceed $100,000,000, (B) notwithstanding the foregoing, unless otherwise requested by the Administrative Agent or the Required Lenders pursuant to clause (iii) above, Holdings shall not be obligated to obtain Shareholder Loans if the aggregate principal amount of such Shareholder Loans then obtained would be less than $10,000,000 and (C) notwithstanding the foregoing, (i) if an Event of Default has occurred and is continuing, Masco shall not be obligated to make (and Holdings shall not be obligated to incur) Shareholder Loans except to the extent necessary (x) to fund the aggregate amount of cash payable to Debenture Holders who have exercised their Conversion Right (whether before or after the occurrence of such event of Default) and (y) on the earlier of the Debenture Maturity Date and the date that is 30 days prior to the expiration of the commitments of Masco under the Shareholder Loan Agreement, to pay the aggregate amount that is (or will be) payable to Debenture Holders in respect of the maturity of any Convertible Debentures that remain outstanding on such date and (ii) if a "Bankruptcy Event" (as such term is defined in the Shareholder Loan Agreement as in effect on the date hereof) has occurred and is continuing. Until applied as specified above, all proceeds of Shareholder Loans shall be deposited in the Debenture Account. SECTION 6.13. Interest Expense Coverage Ratio. Neither Holdings nor the Parent Borrower will permit the ratio of (a) Consolidated EBITDA to (b) the sum of (i) Consolidated Cash Interest Expense and (ii) Holdings Preferred Dividends, in each case for any period of four consecutive fiscal quarters ending on any date during any period set forth below, to be less than the ratio set forth below opposite such period: -117- Period Ratio December 31, 2000, to December 30, 2001 1.75 to 1.00 December 31, 2001, to June 29, 2002 1.80 to 1.00 June 30, 2002, to March 30, 2003 2.00 to 1.00 March 31, 2003, to September 29, 2003 2.25 to 1.00 September 30, 2003, to December 30, 2003 2.50 to 1.00 December 31, 2003, to September 29, 2004 2.75 to 1.00 September 30, 2004, to December 30, 2005 3.00 to 1.00 December 31, 2005, to December 30, 2006 3.25 to 1.00 December 31, 2006, and thereafter 3.50 to 1.00 SECTION 6.14. Leverage Ratio. Neither Holdings nor the Parent Borrower will permit the Leverage Ratio as of any date during any period set forth below to exceed the ratio set forth opposite such period: Period Ratio December 31, 2000, to December 30, 2001 4.75 to 1.00 December 31, 2001, to June 29, 2002 4.65 to 1.00 June 30, 2002, to September 29, 2002 4.50 to 1.00 September 30, 2002, to March 30, 2003 4.25 to 1.00 March 31, 2003, to June 29, 2003 4.00 to 1.00 June 30, 2003, to December 30, 2003 3.75 to 1.00 December 31, 2003, to September 29, 2004 3.50 to 1.00 September 30, 2004, to December 30, 2005 3.25 to 1.00 December 31, 2005, to December 30, 2006 3.00 to 1.00 December 31, 2006, and thereafter 2.75 to 1.00 SECTION 6.15. Capital Expenditures. (a) Neither Holdings nor the Parent Borrower will permit the aggregate amount of Capital Expenditures for any period to exceed the applicable Permitted Capital Expenditure Amount for such period. (b) Notwithstanding the foregoing, the Parent Borrower may in respect of the fiscal year ending on December 31, 2002, and each fiscal year thereafter, increase the amount of Capital Expenditures permitted to be made during such fiscal year pursuant to Section 6.15(a) by an amount equal to the total unused amount of permitted Capital Expenditures for the immediately preceding fiscal year (without giving effect to the amount of any unused permitted Capital Expenditures that were carried forward to such preceding fiscal year). -118- SECTION 6.16. Consolidated Lease Expense. Neither Holdings nor the Parent Borrower will permit Consolidated Lease Expense for any fiscal year to exceed 30% of Capital Expenditures for such fiscal year. ARTICLE VII Events of Default If any of the following events ("Events of Default") shall occur: (a) the Parent Borrower, any Subsidiary Term Borrower or any Foreign Subsidiary Borrower shall fail to pay any principal of any Loan or any reimbursement obligation in respect of any LC Disbursement when and as the same shall become due and payable, whether at the due date thereof or at a date fixed for prepayment thereof or otherwise; (b) the Parent Borrower, any Subsidiary Term Borrower or any Foreign Subsidiary Borrower shall fail to pay any interest on any Loan or any fee or any other amount (other than an amount referred to in clause (a) of this Article) payable under this Agreement or any other Loan Document, when and as the same shall become due and payable, and such failure shall continue unremedied for a period of five Business Days; (c) any representation or warranty made or deemed made by or on behalf of Holdings, the Parent Borrower, any Subsidiary Term Borrower, any Foreign Subsidiary Borrower or any Subsidiary in or in connection with any Loan Document or any amendment or modification thereof or waiver thereunder, or in any report, certificate, financial statement or other document furnished pursuant to or in connection with any Loan Document or any amendment or modification thereof or waiver thereunder, shall prove to have been incorrect in any material respect when made or deemed made; (d) Holdings, the Parent Borrower, any Subsidiary Term Borrower or any Foreign Subsidiary Borrower shall fail to observe or perform any covenant, condition or agreement contained in Section 5.02, 5.04(a) (with respect to the existence of Holdings, the Parent Borrower, any Subsidiary Term Borrower or any Foreign Subsidiary Borrower and ownership of the Subsidiary Term Borrowers and the Foreign Subsidiary Borrowers), 5.04(b), 5.11 or 5.15 or in Article VI; (e) any Loan Party shall fail to observe or perform any covenant, condition or agreement contained in any Loan Document (other than those specified in clause -119- (a), (b) or (d) of this Article), and such failure shall continue unremedied for a period of 30 days after notice thereof from the Administrative Agent to the Parent Borrower (which notice will be given at the request of any Lender); (f) Holdings, the Parent Borrower or any Subsidiary shall fail to make any payment of principal or interest in respect of any Material Indebtedness, when and as the same shall become due and payable after giving effect to any applicable grace period with respect thereto; (g) any event or condition occurs that results in any Material Indebtedness becoming due prior to its scheduled maturity or that enables or permits the holder or holders of any Material Indebtedness or any trustee or agent on its or their behalf to cause any Material Indebtedness to become due, or to require the prepayment, repurchase, redemption or defeasance thereof, prior to its scheduled maturity; provided that this clause (g) shall not apply to secured Indebtedness that becomes due as a result of the voluntary sale or transfer of the property or assets securing such Indebtedness; (h) an involuntary proceeding shall be commenced or an involuntary petition shall be filed seeking (i) liquidation, reorganization or other relief in respect of Holdings, the Parent Borrower, any Subsidiary Term Borrower or any Subsidiary or its debts, or of a substantial part of its assets, under any Federal, state or foreign bankruptcy, insolvency, receivership or similar law now or hereafter in effect or (ii) the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for Holdings, the Parent Borrower or any Subsidiary or for a substantial part of its assets, and, in any such case, such proceeding or petition shall continue undismissed for 60 days or an order or decree approving or ordering any of the foregoing shall be entered; (i) Holdings, the Parent Borrower or any Subsidiary shall (i) voluntarily commence any proceeding or file any petition seeking liquidation, reorganization or other relief under any Federal, state or foreign bankruptcy, insolvency, receivership or similar law now or hereafter in effect, (ii) consent to the institution of, or fail to contest in a timely and appropriate manner, any proceeding or petition described in clause (h) of this Article, (iii) apply for or consent to the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for Holdings, the Parent Borrower or any Subsidiary or for a substantial part of its assets, (iv) file an answer admitting the material allegations of a petition filed against it in any such proceeding, (v) make a general assignment for the benefit of creditors or (vi) take any action for the purpose of effecting any of the foregoing; -120- (j) Holdings, the Parent Borrower or any Subsidiary shall become unable, admit in writing in a court proceeding its inability or fail generally to pay its debts as they become due; (k) Masco shall have defaulted in its obligation to make Shareholder Loans or any of its or other material obligations under the Shareholder Loan Agreement; (l) The Shareholder Loan Agreement shall cease, except in accordance with its terms, to be, or shall have been asserted not to be, in full force and effect; (m) one or more judgments for the payment of money in an aggregate amount in excess of $15,000,000 shall be rendered against Holdings, the Parent Borrower, any Subsidiary or any combination thereof and the same shall remain undischarged for a period of 30 consecutive days during which execution shall not be effectively stayed, or any action shall be legally taken by a judgment creditor to attach or levy upon any assets of Holdings, the Parent Borrower or any Subsidiary to enforce any such judgment; (n) an ERISA Event shall have occurred that, in the opinion of the Required Lenders, when taken together with all other ERISA Events that have occurred, could reasonably be expected to result in a Material Adverse Effect on Holdings, the Parent Borrower and its Subsidiaries; (o) any Lien covering property having a book value or fair market value of $1,000,000 or more purported to be created under any Security Document shall cease to be, or shall be asserted by any Loan Party not to be, a valid and perfected Lien on any Collateral, except (i) as a result of the sale or other disposition of the applicable Collateral in a transaction permitted under the Loan Documents or (ii) as a result of the Administrative Agent's failure to maintain possession of any stock certificates, promissory notes or other instruments delivered to it under the Collateral Agreement; (p) the Guarantee Agreement shall cease to be, or shall have been asserted not to be, in full force and effect; (q) the Parent Borrower, Holdings or any Subsidiary shall challenge the subordination provisions of the Subordinated Debt or assert that such provisions are invalid or unenforceable or that the Obligations of the Parent Borrower, any Subsidiary Term Borrower or any Foreign Subsidiary Borrower, or the Obligations of Holdings or any Subsidiary under the Guarantee Agreement, are not senior indebtedness under the subordination provisions of the Subordinated Debt, or any court, tribunal or government authority of competent jurisdiction shall judge the subordination provisions of the Subordinated Debt to be invalid or unenforceable or such obligations to be not -121- senior indebtedness under such subordination provisions or otherwise cease to be, or shall be asserted not to be, legal, valid and binding obligations of the parties thereto, enforceable in accordance with their terms; or (r) a Change in Control shall occur; then, and in every such event (other than an event with respect to the Parent Borrower described in clause (h) or (i) of this Article), and at any time thereafter during the continuance of such event, the Administrative Agent may, and at the request of the Required Lenders shall, by notice to the Parent Borrower, take either or both of the following actions, at the same or different times: (i) terminate the Commitments, and thereupon the Commitments shall terminate immediately, and (ii) declare the Loans then outstanding to be due and payable in whole (or in part, in which case any principal not so declared to be due and payable may thereafter be declared to be due and payable), and thereupon the principal of the Loans so declared to be due and payable, together with accrued interest thereon and all fees and other obligations of the Parent Borrower, any Subsidiary Term Borrower or any Foreign Subsidiary Borrower accrued hereunder, shall become due and payable immediately, without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Parent Borrower, the Subsidiary Term Borrowers and the Foreign Subsidiary Borrowers; and in case of any event with respect to the Parent Borrower, any Subsidiary Term Borrower or any Foreign Subsidiary Borrower described in clause (h) or (i) of this Article, the Commitments shall automatically terminate and the principal of the Loans then outstanding, together with accrued interest thereon and all fees and other obligations of the Parent Borrower, any Subsidiary Term Borrower or any Foreign Subsidiary Borrower accrued hereunder, shall automatically become due and payable, without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Parent Borrower and the Foreign Subsidiary Borrowers. ARTICLE VIII The Administrative Agent Each of the Lenders and the Issuing Bank hereby irrevocably appoints the Administrative Agent (it being understood that reference in this Article VIII to the Administrative Agent shall be deemed to include the Collateral Agent) as its agent and authorizes the Administrative Agent to take such actions on its behalf and to exercise such powers as are delegated to the Administrative Agent by the terms of the Loan Documents, together with such actions and powers as are reasonably incidental thereto. The bank serving as the Administrative Agent hereunder shall have the same rights and powers in its capacity as a Lender as any other Lender and may exercise the same as though it were not the Administrative Agent, and such bank and its Affiliates may accept de- -122- posits from, lend money to and generally engage in any kind of business with Holdings, the Parent Borrower or any Subsidiary or other Affiliate thereof as if it were not the Administrative Agent hereunder. The Administrative Agent shall not have any duties or obligations except those expressly set forth in the Loan Documents. Without limiting the generality of the foregoing, (a) the Administrative Agent shall not be subject to any fiduciary or other implied duties, regardless of whether a Default has occurred and is continuing, (b) the Administrative Agent shall not have any duty to take any discretionary action or exercise any discretionary powers, except discretionary rights and powers expressly contemplated by the Loan Documents that the Administrative Agent is required to exercise in writing by the Required Lenders (or such other number or percentage of the Lenders as shall be necessary under the circumstances as provided in Section 10.02), and (c) except as expressly set forth in the Loan Documents, the Administrative Agent shall not have any duty to disclose, and shall not be liable for the failure to disclose, any information relating to Holdings, the Parent Borrower or any of its Subsidiaries that is communicated to or obtained by the bank serving as Administrative Agent or any of its Affiliates in any capacity. The Administrative Agent shall not be liable for any action taken or not taken by it with the consent or at the request of the Required Lenders (or such other number or percentage of the Lenders as shall be necessary under the circumstances as provided in Section 10.02) or in the absence of its own gross negligence or wilful misconduct. The Administrative Agent shall not be deemed not to have knowledge of any Default unless and until written notice thereof is given to the Administrative Agent by Holdings, the Parent Borrower, a Subsidiary Term Borrower, a Foreign Subsidiary Borrower or a Lender, and the Administrative Agent shall not be responsible for or have any duty to ascertain or inquire into (i) any statement, warranty or representation made in or in connection with any Loan Document, (ii) the contents of any certificate, report or other document delivered thereunder or in connection therewith, (iii) the performance or observance of any of the covenants, agreements or other terms or conditions set forth in any Loan Document, (iv) the validity, enforceability, effectiveness or genuineness of any Loan Document or any other agreement, instrument or document, or (v) the satisfaction of any condition set forth in Article IV or elsewhere in any Loan Document, other than to confirm receipt of items expressly required to be delivered to the Administrative Agent. The Administrative Agent shall be entitled to rely upon, and shall not incur any liability for relying upon, any notice, request, certificate, consent, statement, instrument, document or other writing believed by it to be genuine and to have been signed or sent by the proper Person. The Administrative Agent also may rely upon any statement made to it orally or by telephone and believed by it to be made by the proper Person, and shall not incur any liability for relying thereon. The Administrative Agent may consult with legal counsel (who may be counsel for the Parent Borrower, any Subsidiary Term Borrower or any Foreign Subsidiary Borrower), independent accountants and other experts selected by it, and shall not be -123- liable for any action taken or not taken by it in accordance with the advice of any such counsel, accountants or experts. The Administrative Agent may perform any and all its duties and exercise its rights and powers by or through any one or more sub-agents appointed by the Administrative Agent. The Administrative Agent and any such sub-agent may perform any and all its duties and exercise its rights and powers through their respective Related Parties. The exculpatory provisions of the preceding paragraphs shall apply to any such sub-agent and to the Related Parties of each Administrative Agent and any such sub-agent, and shall apply to their respective activities in connection with the syndication of the credit facilities provided for herein as well as activities as Administrative Agent. Subject to the appointment and acceptance of a successor Administrative Agent as provided in this paragraph, the Administrative Agent may resign at any time by notifying the Lenders, the Issuing Bank and the Parent Borrower (on behalf of itself, the Subsidiary Term Borrowers and the Foreign Subsidiary Borrowers). Upon any such resignation, the Required Lenders shall have the right, in consultation with the Parent Borrower and, if applicable, the relevant Subsidiary Term Borrower and Foreign Subsidiary Borrower, to appoint a successor from among the Lenders, if no successor shall have been so appointed by the Required Lenders and shall have accepted such appointment within 30 days after the retiring Administrative Agent gives notice of its resignation, then the retiring Administrative Agent may, on behalf of the Lenders and the Issuing Bank, appoint a successor Administrative Agent which shall be a bank with an office in New York, New York, or an Affiliate of any such bank. Upon the acceptance of its appointment as Administrative Agent hereunder by a successor, such successor shall succeed to and become vested with all the rights, powers, privileges and duties of the retiring Administrative Agent, and the retiring Administrative Agent shall be discharged from its duties and obligations hereunder. The fees payable by the Parent Borrower (on behalf of itself, the Subsidiary Term Borrowers and the Foreign Subsidiary Borrowers) to a successor Administrative Agent shall be the same as those payable to its predecessor unless otherwise agreed between the Parent Borrower (on behalf of itself, the Subsidiary Term Borrowers and the Foreign Subsidiary Borrowers) and such successor. After the Administrative Agent's resignation hereunder, the provisions of this Article and Section 10.03 shall continue in effect for the benefit of such retiring Administrative Agent, its sub-agents and their respective Related Parties in respect of any actions taken or omitted to be taken by any of them while it was acting as Administrative Agent. Each Lender acknowledges that it has, independently and without reliance upon the Administrative Agent or any other Lender and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender also acknowledges that it will, independently and without reliance upon the Administrative Agent or any other Lender and based on such documents and -124- information as it shall from time to time deem appropriate, continue to make its own decisions in taking or not taking action under or based upon this Agreement, any other Loan Document or related agreement or any document furnished hereunder or thereunder. The Lenders identified in this Agreement as the Syndication Agent and the Documentation Agents shall not have any right, power, obligation, liability, responsibility or duty under this Agreement other than those applicable to all Lenders. Without limiting the foregoing, none of the Syndication Agent or the Documentation Agents shall have or be deemed to have a fiduciary relationship with any Lender. Each Lender hereby makes the same acknowledgments with respect to the Syndication Agent and the Documentation Agents as it makes with respect to the Administrative Agent or any other Lender in this Article VIII. ARTICLE IX Collection Allocation Mechanism SECTION 9.01. Implementation of CAM. (a) On the CAM Exchange Date, (i) the Commitments shall automatically and without further act be terminated as provided in Article VII, (ii) all Foreign Currency Borrowings and the Commitments to make Foreign Currency Loans shall be converted into, and all such amounts due thereunder shall accrue and be payable in, dollars at the Exchange Rate on such date and (iii) the Lenders shall automatically and without further act (and without regard to the provisions of Section 10.04) be deemed to have exchanged interests in the Credit Facilities such that in lieu of the interest of each Lender in each Credit Facility in which it shall participate as of such date (including such Lender's interest in the Specified Obligations of each Loan Party in respect of each such Credit Facility), such Lender shall hold an interest in every one of the Credit Facilities (including the Specified Obligations of each Loan Party in respect of each such Credit Facility and each LC Reserve Account established pursuant to Section 9.02 below), whether or not such Lender shall previously have participated therein, equal to such Lender's CAM Percentage thereof. Each Lender and each Loan Party hereby consents and agrees to the CAM Exchange, and each Lender agrees that the CAM Exchange shall be binding upon its successors and assigns and any person that acquires a participation in its interests in any Credit Facility. Each Loan Party agrees from time to time to execute and deliver to the Administrative Agent all promissory notes and other instruments and documents as the Administrative Agent shall reasonably request to evidence and confirm the respective interests of the Lenders after giving effect to the CAM Exchange, and each Lender agrees to surrender any promissory notes originally received by it in connection with its Loans hereunder to the Administrative Agent against delivery of new promissory notes evidencing its interests in the Credit Facilities; provided, however, that the failure of any Loan Party to execute or deliver or of any Lender to accept any such promissory -125- note, instrument or document shall not affect the validity or effectiveness of the CAM Exchange. (b) As a result of the CAM Exchange, upon and after the CAM Exchange Date, each payment received by the Administrative Agent or the Collateral Agent pursuant to any Loan Document in respect of the Specified Obligations, and each distribution made by the Collateral Agent pursuant to any Security Documents in respect of the Specified Obligations, shall be distributed to the Lenders pro rata in accordance with their respective CAM Percentages. Any direct payment received by a Lender upon or after the CAM Exchange Date, including by way of setoff, in respect of a Specified Obligation shall be paid over to the Administrative Agent for distribution to the Lenders in accordance herewith. SECTION 9.02. Letters of Credit. (a) In the event that on the CAM Exchange Date any Letter of Credit shall be outstanding and undrawn in whole or in part, or any amount drawn under a Letter of Credit shall not have been reimbursed either by the Parent Borrower or any Foreign Subsidiary Borrower, as the case may be, or with the proceeds of a Revolving Borrowing, each Revolving Lender shall promptly pay over to the Administrative Agent, in immediately available funds and in the currency that such Letters of Credit are denominated, an amount equal to such Revolving Lender's Applicable Percentage (as notified to such Lender by the Administrative Agent) of such Letter of Credit's undrawn face amount or (to the extent it has not already done so) such Letter of Credit's unreimbursed drawing, together with interest thereon from the CAM Exchange Date to the date on which such amount shall be paid to the Administrative Agent at the rate that would be applicable at the time to an ABR Revolving Loan in a principal amount equal to such amount, as the case may be. The Administrative Agent shall establish a separate account or accounts for each Lender (each, an "LC Reserve Account") for the amounts received with respect to each such Letter of Credit pursuant to the preceding sentence. The Administrative Agent shall deposit in each Lender's LC Reserve Account such Lender's CAM Percentage of the amounts received from the Revolving Lenders as provided above. The Administrative Agent shall have sole dominion and control over each LC Reserve Account, and the amounts deposited in each LC Reserve Account shall be held in such LC Reserve Account until withdrawn as provided in paragraph (b), (c), (d) or (e) below. The Administrative Agent shall maintain records enabling it to determine the amounts paid over to it and deposited in the LC Reserve Accounts in respect of each Letter of Credit and the amounts on deposit in respect of each Letter of Credit attributable to each Lender's CAM Percentage. The amounts held in each Lender's LC Reserve Account shall be held as a reserve against the LC Exposure, shall be the property of such Lender, shall not constitute Loans to or give rise to any claim of or against any Loan Party and shall not give rise to any obligation on the part of the Parent Borrower or the Foreign Subsidiary Borrowers to pay interest to such Lender, it being agreed that the reimbursement obligations in respect of Letters of Credit shall arise only at such times as drawings are made thereunder, as provided in Section 2.05. -126- (b) In the event that after the CAM Exchange Date any drawing shall be made in respect of a Letter of Credit, the Administrative Agent shall, at the request of the Issuing Bank withdraw from the LC Reserve Account of each Lender any amounts, up to the amount of such Lender's CAM Percentage of such drawing, deposited in respect of such Letter of Credit and remaining on deposit and deliver such amounts to the Issuing Bank in satisfaction of the reimbursement obligations of the Revolving Lenders under Section 2.05(e) (but not of the Parent Borrower and the Foreign Subsidiary Borrowers under Section 2.05(f), respectively). In the event any Revolving Lender shall default on its obligation to pay over any amount to the Administrative Agent in respect of any Letter of Credit as provided in this Section 9.02, the Issuing Bank shall, in the event of a drawing thereunder, have a claim against such Revolving Lender to the same extent as if such Lender had defaulted on its obligations under Section 2.05(e), but shall have no claim against any other Lender in respect of such defaulted amount, notwithstanding the exchange of interests in the reimbursement obligations pursuant to Section 9.01. Each other Lender shall have a claim against such defaulting Revolving Lender for any damages sustained by it as a result of such default, including, in the event such Letter of Credit shall expire undrawn, its CAM Percentage of the defaulted amount. (c) In the event that after the CAM Exchange Date any Letter of Credit shall expire undrawn, the Administrative Agent shall withdraw from the LC Reserve Account of each Lender the amount remaining on deposit therein in respect of such Letter of Credit and distribute such amount to such Lender. (d) With the prior written approval of the Administrative Agent and the Issuing Bank, any Lender may withdraw the amount held in its LC Reserve Account in respect of the undrawn amount of any Letter of Credit. Any Lender making such a withdrawal shall be unconditionally obligated, in the event there shall subsequently be a drawing under such Letter of Credit, to pay over to the Administrative Agent, for the account of the Issuing Bank on demand, its CAM Percentage of such drawing. (e) Pending the withdrawal by any Lender of any amounts from its LC Reserve Account as contemplated by the above paragraphs, the Administrative Agent will, at the direction of such Lender and subject to such rules as the Administrative Agent may prescribe for the avoidance of inconvenience, invest such amounts in Permitted Investments. Each Lender that has not withdrawn its CAM Percentage of amounts in its LC Reserve Account as provided in paragraph (d) above shall have the right, at intervals reasonably specified by the Administrative Agent, to withdraw the earnings on investments so made by the Administrative Agent with amounts in its LC Reserve Account and to retain such earnings for its own account. -127- ARTICLE X Miscellaneous SECTION 10.01. Notices. Except in the case of notices and other communications expressly permitted to be given by telephone, all notices and other communications provided for herein shall be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail or sent by telecopy, as follows: (a) if to Holdings, the Parent Borrower, any Subsidiary Term Borrower or any Foreign Subsidiary Borrower, to the Parent Borrower (on behalf of itself, Holdings, any Subsidiary Term Borrower and any Foreign Subsidiary Borrower) at MascoTech, Inc., 21001 Van Born Road, Taylor, Michigan 48180, Attention of David Liner, Esq. (Telecopy No. (313) 792-6136), with a copy to Jonathan A. Schaffzin, Esq. Cahill Gordon & Reindel 80 Pine Street New York, New York (Telecopy No. (212) 269-5420); (b) if to the Administrative Agent, to The Chase Manhattan Bank, Loan and Agency Services Group, One Chase Manhattan Plaza, 8th Floor, New York, New York 10081, Attention of Jesus Sang (Telecopy No. (212) 552-5650), with a copy to The Chase Manhattan Bank, 270 Park Avenue, New York, New York 10017, Attention of Richard Duker (Telecopy No. 212-270-5127); (c) if to the Issuing Bank, to it at 4 Chase Metrotech Center, 8th Floor, Brooklyn, New York 11245, Attention of Rebecca McNally (Telecopy No. (718) 242-6537), and in the event that there is more than one Issuing Bank, to such other Issuing Bank at its address (or telecopy number) set forth in its Administrative Questionnaire; (d) if to the Swingline Lender, to it at One Chase Manhattan Plaza, 8th Floor, New York, New York 10081, Attention of Jesus Sang (Telecopy No. (212) 552-5650); and (e) if to any other Lender, to it at its address (or telecopy number) set forth in its Administrative Questionnaire. -128- Any party hereto may change its address or telecopy number for notices and other communications hereunder by notice to the other parties hereto. All notices and other communications given to any party hereto in accordance with the provisions of this Agreement shall be deemed to have been given on the date of receipt. SECTION 10.02. Waivers; Amendments. (a) No failure or delay by the Administrative Agent, the Issuing Bank or any Lender in exercising any right or power hereunder or under any other Loan Document shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of the Administrative Agent, the Issuing Bank and the Lenders hereunder and under the other Loan Documents are cumulative and are not exclusive of any rights or remedies that they would otherwise have. No waiver of any provision of any Loan Document or consent to any departure by any Loan Party therefrom shall in any event be effective unless the same shall be permitted by paragraph (b) of this Section, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. Without limiting the generality of the foregoing, the making of a Loan or issuance of a Letter of Credit shall not be construed as a waiver of any Default, regardless of whether the Administrative Agent, any Lender or the Issuing Bank may have had notice or knowledge of such Default at the time. (b) Neither this Agreement nor any other Loan Document nor any provision hereof or thereof may be waived, amended or modified except, in the case of this Agreement, pursuant to an agreement or agreements in writing entered into by Holdings, the Parent Borrower, each Subsidiary Term Borrower (but only to the extent such waiver, amendment or modification relates to such Subsidiary Term Borrower), each Foreign Subsidiary Borrower (but only to the extent such waiver, amendment or modification relates to such Foreign Subsidiary Borrower) and the Required Lenders or, in the case of any other Loan Document, pursuant to an agreement or agreements in writing entered into by the Administrative Agent and the Loan Party or Loan Parties that are parties thereto, in each case with the consent of the Required Lenders; provided that no such agreement shall (i) increase the Commitment of any Lender without the written consent of such Lender, (ii) reduce the principal amount of any Loan or LC Disbursement or reduce the rate of interest thereon, or reduce any fees payable hereunder, without the written consent of each Lender affected thereby, (iii) postpone the maturity of any Loan, or any scheduled date of payment of the principal amount of any Term Loan under Section 2.10, or the required date of reimbursement of any LC Disbursement, or any date for the payment of any interest or fees payable hereunder, or reduce the amount of, waive or excuse any such payment, or postpone the scheduled date of expiration of any Commitment or postpone the scheduled date of expiration of any Letter of Credit beyond the Revolving Maturity Date, without the written consent of each Lender affected thereby, (iv) -129- change Section 2.18(b) or (c) in a manner that would alter the pro rata sharing of payments required thereby, without the written consent of each Lender, (v) change the percentage set forth in the definition of "Required Lenders" or any other provision of any Loan Document (including this Section) specifying the number or percentage of Lenders (or Lenders of any Class) required to waive, amend or modify any rights thereunder or make any determination or grant any consent thereunder, without the written consent of each Lender (or each Lender of such Class, as the case may be), (vi) release Holdings or any Subsidiary Loan Party from its Guarantee under the Guarantee Agreement (except as expressly provided in the Guarantee Agreement), or limit its liability in respect of such Guarantee, without the written consent of each Lender, (vii) release all or substantially all of the Collateral from the Liens of the Security Documents, without the written consent of each Lender, (viii) change any provisions of any Loan Document in a manner that by its terms adversely affects the rights in respect of payments due to Lenders holding Loans of any Class differently than those holding Loans of any other Class, without the written consent of Lenders holding a majority in interest of the outstanding Loans and unused Commitments of each affected Class or (ix) change the rights of the Tranche B Lenders and any Incremental Lenders that have such rights (A) to decline mandatory prepayments as provided in Section 2.11(h) or (B) to prepayment premium payments as provided in Section 2.11(g), in each case without the written consent of Tranche B Lenders and such Incremental Lenders holding a majority of the outstanding Tranche B Loans and applicable Incremental Term Loans held by such Incremental Lenders; provided, further, that (A) no such agreement shall amend, modify or otherwise affect the rights or duties of the Administrative Agent, the Issuing Bank or the Swingline Lender without the prior written consent of the Administrative Agent, the Issuing Bank or the Swingline Lender, as the case may be, and (B) any waiver, amendment or modification of this Agreement that by its terms affects the rights or duties under this Agreement of the Revolving Lenders (but not the Tranche A Lenders, Tranche B Lenders and Incremental Lenders), the Tranche A Lenders (but not the Revolving Lenders, Tranche B Lenders and Incremental Lenders), the Tranche B Lenders (but not the Revolving Lenders, Tranche A Lenders and Incremental Lenders) or the Incremental Lenders (but not the Revolving Lenders, Tranche A Lenders and Tranche B Lenders) may be effected by an agreement or agreements in writing entered into by Holdings, the Parent Borrower, each Subsidiary Term Borrower (but only to the extent such waiver, amendment or modification relates to such Subsidiary Term Borrower), each Foreign Subsidiary Parent Borrower (but only to the extent such waiver, amendment or modification relates to such Foreign Subsidiary Borrower) and requisite percentage in interest of the affected Class of Lenders that would be required to consent thereto under this Section if such Class of Lenders were the only Class of Lenders hereunder at the time. Notwithstanding the foregoing, any provision of this Agreement may be amended by an agreement in writing entered into by Holdings, the Parent Borrower, each Subsidiary Term Borrower (but only to the extent such waiver, amendment or modification relates to such Subsidiary Term Borrower), each Foreign Subsidiary Borrower (but only to the extent such waiver, amendment or modification relates to such Foreign Subsidiary Borrower), the Required Lenders and the Administrative Agent -130- (and, if their rights or obligations are affected thereby, the Issuing Bank and the Swingline Lender) if (i) by the terms of such agreement the Commitment of each Lender not consenting to the amendment provided for therein shall terminate upon the effectiveness of such amendment and (ii) at the time such amendment becomes effective, each Lender not consenting thereto receives payment in full of the principal of and interest accrued on each Loan made by it and all other amounts owing to it or accrued for its account under this Agreement. SECTION 10.03. Expenses; Indemnity; Damage Waiver. (a) Holdings, the Parent Borrower, each Subsidiary Term Borrower and each Foreign Subsidiary Borrower, jointly and severally, shall pay (i) all reasonable out-of-pocket expenses incurred by the Administrative Agent and its Affiliates, including the reasonable fees, charges and disbursements of one counsel in each applicable jurisdiction for the Administrative Agent, in connection with the syndication of the credit facilities provided for herein, due diligence investigation, the preparation and administration of the Loan Documents or any amendments, modifications or waivers of the provisions thereof (whether or not the transactions contemplated hereby or thereby shall be consummated), (ii) all reasonable out-of-pocket expenses incurred by the Issuing Bank in connection with the issuance, amendment, renewal or extension of any Letter of Credit or any demand for payment thereunder and (iii) all out-of-pocket expenses incurred by the Administrative Agent, the Issuing Bank or any Lender, including the fees, charges and disbursements of any counsel for the Administrative Agent, the Issuing Bank or any Lender, in connection with the enforcement or protection of its rights in connection with the Loan Documents, including its rights under this Section, or in connection with the Loans made or Letters of Credit issued hereunder, including all such out-of-pocket expenses incurred during any workout, restructuring or negotiations in respect of such Loans or Letters of Credit. (b) Holdings, the Parent Borrower, each Subsidiary Term Borrower and each Foreign Subsidiary Borrower, jointly and severally, shall indemnify the Administrative Agent, the Issuing Bank and each Lender, and each Related Party of any of the foregoing Persons (each such Person being called an "Indemnitee") against, and hold each Indemnitee harmless from, any and all losses, claims, damages, liabilities and related expenses, including the fees, charges and disbursements of any counsel for any Indemnitee, incurred by or asserted against any Indemnitee arising out of, in connection with, or as a result of (i) the execution or delivery of any Loan Document or any other agreement or instrument contemplated hereby, the performance by the parties to the Loan Documents of their respective obligations thereunder or the consummation of the Transactions or any other transactions contemplated hereby, (ii) any Loan or Letter of Credit or the use of the proceeds therefrom (including any refusal by the Issuing Bank to honor a demand for payment under a Letter of Credit if the documents presented in connection with such demand do not strictly comply with the terms of such Letter of Credit), (iii) any actual or alleged presence or release of Hazardous Materials on or from any Mortgaged Property or any other property currently or formerly owned or operated by the -131- Parent Borrower or any of its Subsidiaries, or any Environmental Liability related in any way to the Parent Borrower or any of its Subsidiaries, or (iv) any actual or prospective claim, litigation, investigation or proceeding relating to any of the foregoing, whether based on contract, tort or any other theory and regardless of whether any Indemnitee is a party thereto; provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses are determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted from the gross negligence or wilful misconduct of such Indemnitee. (c) To the extent that Holdings, the Parent Borrower, the Subsidiary Term Borrowers and the Foreign Subsidiary Borrowers fail to pay any amount required to be paid by it to the Administrative Agent, the Issuing Bank or the Swingline Lender under paragraph (a) or (b) of this Section, each Lender severally agrees to pay to the Administrative Agent, the Issuing Bank or the Swingline Lender, as the case may be, such Lender's pro rata share (determined as of the time that the applicable unreimbursed expense or indemnity payment is sought) of such unpaid amount; provided that the unreimbursed expense or indemnified loss, claim, damage, liability or related expense, as the case may be, was incurred by or asserted against the Administrative Agent, the Issuing Bank or the Swingline Lender in its capacity as such. For purposes hereof, a Lender's "pro rata share" shall be determined based upon its share of the sum of the total Revolving Exposures, outstanding Term Loans and unused Commitments at the time. (d) To the extent permitted by applicable law, none of Holdings, the Parent Borrower, any Subsidiary Term Borrower or any Foreign Subsidiary Borrower shall assert, and each hereby waives, any claim against any Indemnitee, on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Agreement or any agreement or instrument contemplated hereby, the Transactions, any Loan or Letter of Credit or the use of the proceeds thereof. (e) All amounts due under this Section shall be payable promptly after written demand therefor. (f) Neither Heartland nor any director, officer, employee, stockholder or member, as such, of any Loan Party or Heartland shall have any liability for the Obligations or for any claim based on, in respect of or by reason of the Obligations or their creation; provided that the foregoing shall not be construed to relieve any Loan Party of its Obligations under any Loan Document. SECTION 10.04. Successors and Assigns. (a) The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted -132- hereby (including any Affiliate of the Issuing Bank that issues any Letter of Credit), except that none of Holdings, the Parent Borrower, any Subsidiary Term Borrower or any Foreign Subsidiary Borrower may assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of each Lender (and any attempted assignment or transfer by the Parent Borrower, any Subsidiary Term Borrower or any Foreign Subsidiary Borrower without such consent shall be null and void). Nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby (including any Affiliate of the Issuing Bank that issues any Letter of Credit) and, to the extent expressly contemplated hereby, the Related Parties of each of the Administrative Agent, the Issuing Bank and the Lenders) any legal or equitable right, remedy or claim under or by reason of this Agreement. (b) Any Lender may assign to one or more assignees all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitment and the Loans at the time owing to it); provided that (i) except in the case of an assignment to a Lender or a Lender Affiliate, each of the Parent Borrower, each Subsidiary Term Borrower (but only to the extent such assignment relates to Tranche A Commitment or Tranche A Loan to such Subsidiary Term Borrower), each Foreign Subsidiary Borrower (but only to the extent such assignment relates to Foreign Currency Commitments or Foreign Currency Loans relating to such Foreign Subsidiary Borrower) and the Administrative Agent (and, in the case of an assignment of all or a portion of a Revolving Commitment or any Lender's obligations in respect of its LC Exposure or Swingline Exposure, the Issuing Bank and the Swingline Lender) must give their prior written consent to such assignment (which consent shall not be unreasonably withheld or delayed), (ii) except in the case of an assignment to a Lender or a Lender Affiliate or an assignment of the entire remaining amount of the assigning Lender's Commitment or Loans, the amount of the Commitment or Loans of the assigning Lender subject to each such assignment (determined as of the date the Assignment and Acceptance with respect to such assignment is delivered to the Administrative Agent) shall not be less than (x) in the case of Revolving and Tranche A Commitments and Revolving and Tranche A Loans, $5,000,000, and (y) in the case of Tranche B and Incremental Term Commitments and Tranche B and Incremental Term Loans, $1,000,000 unless each of the Parent Borrower, each Foreign Subsidiary Borrower (but only to the extent such assignment relates to Foreign Currency Commitments or Foreign Currency Loans relating to such Foreign Subsidiary Borrower) and the Administrative Agent otherwise consent, (iii) each partial assignment shall be made as an assignment of a proportionate part of all the assigning Lender's rights and obligations under this Agreement, except that this clause (iii) shall not be construed to prohibit the assignment of a proportionate part of all the assigning Lender's rights and obligations in respect of one Class of Commitments or Loans, (iv) notwithstanding anything to the contrary, assignments by any Revolving Lender of any portion of its Revolving Commitments or any portion of Revolving Loans must include a ratable portion of its Foreign Currency Commitments and ratable portion of its Foreign Currency Loans and visa versa, (v) the parties to each assign- -133- ment shall execute and deliver to the Administrative Agent an Assignment and Acceptance, together with a processing and recordation fee of $3,500, and (vi) the assignee, if it shall not be a Lender, shall deliver to the Administrative Agent an Administrative Questionnaire; and provided, further, that any consent of the Parent Borrower, any Subsidiary Term Borrower or any Foreign Subsidiary Borrower otherwise required under this paragraph shall not be required if an Event of Default under Article VII has occurred and is continuing. Subject to acceptance and recording thereof pursuant to paragraph (d) of this Section, from and after the effective date specified in each Assignment and Acceptance the assignee thereunder shall be a party hereto and, to the extent of the interest assigned by such Assignment and Acceptance, have the rights and obligations of a Lender under this Agreement (provided that any liability of the Parent Borrower, any Subsidiary Term Borrower or any Foreign Subsidiary Borrower to such assignee under Section 2.15, 2.16 or 2.17 shall be limited to the amount, if any, that would have been payable thereunder by the Parent Borrower, any Subsidiary Term Borrower or any Foreign Subsidiary Borrower in the absence of such assignment), and the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Acceptance, be released from its obligations under this Agreement (and, in the case of an Assignment and Acceptance covering all of the assigning Lender's rights and obligations under this Agreement, such Lender shall cease to be a party hereto but shall continue to be entitled to the benefits of Sections 2.15, 2.16, 2.17 and 10.03). Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this paragraph shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with paragraph (e) of this Section. (c) The Administrative Agent, acting for this purpose as an agent of the Parent Borrower, the Subsidiary Term Borrowers and the Foreign Subsidiary Borrowers, shall maintain at one of its offices in The City of New York a copy of each Assignment and Acceptance delivered to it and a register for the recordation of the names and addresses of the Lenders, and the Commitment of, and principal amount of the Loans and LC Disbursements owing to, each Lender pursuant to the terms hereof from time to time (the "Register"). The entries in the Register shall be conclusive, and Holdings, the Parent Borrower, the Subsidiary Term Borrowers, the Foreign Subsidiary Borrowers, the Administrative Agent, the Issuing Bank and the Lenders may treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement, notwithstanding notice to the contrary. The Register shall be available for inspection by the Parent Borrower, the Subsidiary Term Borrowers, the Foreign Subsidiary Borrowers, the Issuing Bank and any Lender, at any reasonable time and from time to time upon reasonable prior notice. (d) Upon its receipt of a duly completed Assignment and Acceptance executed by an assigning Lender and an assignee, the assignee's completed Administrative Questionnaire (unless the assignee shall already be a Lender hereunder), the processing and recordation fee referred to in paragraph (b) of this Section and any written consent to such assign- -134- ment required by paragraph (b) of this Section, the Administrative Agent shall accept such Assignment and Acceptance and record the information contained therein in the Register. No assignment shall be effective for purposes of this Agreement unless it has been recorded in the Register as provided in this paragraph. (e) Any Lender may, without the consent of the Parent Borrower, any Subsidiary Term Borrower or any Foreign Subsidiary Borrower, the Administrative Agent, the Issuing Bank or the Swingline Lender, sell participations to one or more banks or other entities (a "Participant") in all or a portion of such Lender's rights and obligations under this Agreement (including all or a portion of its Commitment and the Loans owing to it); provided that (i) such Lender's obligations under this Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations and (iii) Holdings, the Parent Borrower, the Subsidiary Term Borrowers, the Foreign Subsidiary Borrowers, the Administrative Agent, the Issuing Bank and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement. Any agreement or instrument pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce the Loan Documents and to approve any amendment, modification or waiver of any provision of the Loan Documents; provided that such agreement or instrument may provide that such Lender will not, without the consent of the Participant, agree to any amendment, modification or waiver described in the first proviso to Section 10.02(b) that affects such Participant. Subject to paragraph (f) of this Section, the Parent Borrower, the Subsidiary Term Borrowers and the Foreign Subsidiary Borrowers agree that each Participant shall be entitled to the benefits of Sections 2.15, 2.16 and 2.17 to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to paragraph (b) of this Section. To the extent permitted by law, each Participant also shall be entitled to the benefits of Section 10.08 as though it were a Lender, provided such Participant agrees to be subject to Section 2.18(c) as though it were a Lender. (f) A Participant shall not be entitled to receive any greater payment under Section 2.15 or 2.17 than the applicable Lender would have been entitled to receive with respect to the participation sold to such Participant, unless the sale of the participation to such Participant is made with the prior written consent of the Parent Borrower and, to the extent applicable, each relevant Subsidiary Term Borrower and Foreign Subsidiary Borrower. A Participant that would be a Foreign Lender if it were a Lender shall not be entitled to the benefits of Section 2.17 unless the Parent Borrower and, to the extent applicable, each relevant Foreign Subsidiary Borrower is notified of the participation sold to such Participant and such Participant agrees, for the benefit of the Parent Borrower and, to the extent applicable, each relevant Foreign Subsidiary Borrower, to comply with Section 2.17(e) as though it were a Lender. -135- (g) Any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement to secure obligations of such Lender, including any pledge or assignment to secure obligations to a Federal Reserve Bank, and this Section shall not apply to any such pledge or assignment of a security interest; provided that no such pledge or assignment of a security interest shall release a Lender from any of its obligations hereunder or substitute any such pledgee or assignee for such Lender as a party hereto. SECTION 10.05. Survival. All covenants, agreements, representations and warranties made by the Loan Parties in the Loan Documents and in the certificates or other instruments delivered in connection with or pursuant to this Agreement or any other Loan Document shall be considered to have been relied upon by the other parties hereto and shall survive the execution and delivery of the Loan Documents and the making of any Loans and issuance of any Letters of Credit, regardless of any investigation made by any such other party or on its behalf and notwithstanding that the Administrative Agent, the Issuing Bank or any Lender may have had notice or knowledge of any Default or incorrect representation or warranty at the time any credit is extended hereunder, and shall continue in full force and effect as long as the principal of or any accrued interest on any Loan or any fee or any other amount payable under this Agreement is outstanding and unpaid or any Letter of Credit is outstanding and so long as the Commitments have not expired or terminated. The provisions of Sections 2.15, 2.16, 2.17 and 10.03 and Article VIII shall survive and remain in full force and effect regardless of the consummation of the transactions contemplated hereby, the repayment of the Loans, the expiration or termination of the Letters of Credit and the Commitments or the termination of this Agreement or any provision hereof. SECTION 10.06. Counterparts; Integration; Effectiveness. This Agreement may be executed in counterparts (and by different parties hereto on different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. This Agreement, the other Loan Documents and any separate letter agreements with respect to fees payable to the Administrative Agent constitute the entire contract among the parties relating to the subject matter hereof and supersede any and all previous agreements and understandings, oral or written, relating to the subject matter hereof. Except as provided in Section 4.01, this Agreement shall become effective when it shall have been executed by the Administrative Agent and when the Administrative Agent shall have received counterparts hereof which, when taken together, bear the signatures of each of the other parties hereto, and thereafter shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. Delivery of an executed counterpart of a signature page of this Agreement by telecopy shall be effective as delivery of a manually executed counterpart of this Agreement. -136- SECTION 10.07. Severability. Any provision of this Agreement held to be invalid, illegal or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity, illegality or unenforceability without affecting the validity, legality and enforceability of the remaining provisions hereof; and the invalidity of a particular provision in a particular jurisdiction shall not invalidate such provision in any other jurisdiction. SECTION 10.08. Right of Setoff. If an Event of Default shall have occurred and be continuing, each Lender and each of its Affiliates is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other obligations at any time owing by such Lender or Affiliate to or for the credit or the account of the Parent Borrower, any Subsidiary Term Borrower or any Foreign Subsidiary Borrower against any of and all the obligations of the Parent Borrower, any Subsidiary Term Borrower or any Foreign Subsidiary Borrower now or hereafter existing under this Agreement held by such Lender, irrespective of whether or not such Lender shall have made any demand under this Agreement and although such obligations may be unmatured. The rights of each Lender under this Section are in addition to other rights and remedies (including other rights of setoff) which such Lender may have. SECTION 10.09. Governing Law; Jurisdiction; Consent to Service of Process. (a) This Agreement shall be construed in accordance with and governed by the law of the State of New York. (b) Each of Holdings, the Parent Borrower, each Subsidiary Term Borrower and each Foreign Subsidiary Borrower hereby irrevocably and unconditionally submits, for itself and its property, to the nonexclusive jurisdiction of the Supreme Court of the State of New York sitting in New York County and of the United States District Court of the Southern District of New York, and any appellate court from any thereof, in any action or proceeding arising out of or relating to any Loan Document, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such New York State or, to the extent permitted by law, in such Federal court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Agreement or any other Loan Document shall affect any right that the Administrative Agent, the Issuing Bank or any Lender may otherwise have to bring any action or proceeding relating to this Agreement or any other Loan Document against Holdings, the Parent Borrower, any of the Subsidiary Term Borrowers, any of the Foreign Subsidiary Borrowers or their properties in the courts of any jurisdiction. -137- (c) Each of Holdings, the Parent Borrower, each of the Subsidiary Term Borrowers and each Foreign Subsidiary Borrower hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement or any other Loan Document in any court referred to in paragraph (b) of this Section. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court. (d) Each party to this Agreement irrevocably consents to service of process in the manner provided for notices in Section 10.01. Nothing in this Agreement or any other Loan Document will affect the right of any party to this Agreement to serve process in any other manner permitted by law. SECTION 10.10. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT, ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION. SECTION 10.11. Headings. Article and Section headings and the Table of Contents used herein are for convenience of reference only, are not part of this Agreement and shall not affect the construction of, or be taken into consideration in interpreting, this Agreement. SECTION 10.12. Confidentiality. Each of the Administrative Agent, the Issuing Bank and the Lenders agrees to maintain the confidentiality of the Information (as defined below), except that Information may be disclosed (a) to its and its Lender Affiliates' directors, officers, employees and agents, including accountants, legal counsel and other advisors (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential pursuant to the terms hereof), (b) to -138- the extent requested by any regulatory authority, (c) to the extent required by applicable laws or regulations or by any subpoena or similar legal process, (d) to any other party to this Agreement, (e) in connection with the exercise of any remedies hereunder or any suit, action or proceeding relating to this Agreement or any other Loan Document or the enforcement of rights hereunder or thereunder, (f) subject to an agreement containing provisions substantially the same as those of this Section, to (i) any assignee of or Participant in, or any prospective assignee of or Participant in, any of its rights or obligations under this Agreement or (ii) any actual or prospective counterparty (or its advisors) to any swap or derivative transaction relating to the Parent Borrower, any Subsidiary Term Borrower, any Foreign Subsidiary Borrower and their respective obligations, (g) with the consent of the Parent Borrower or (h) to the extent such Information (i) is publicly available at the time of disclosure or becomes publicly available other than as a result of a breach of this Section or (ii) becomes available to the Administrative Agent, the Issuing Bank or any Lender on a nonconfidential basis from a source other than Holdings, the Parent Borrower or any Subsidiary (including the Receivables Subsidiary and the Saturn Subsidiary). For the purposes of this Section, "Information" means all information received from Holdings, the Parent Borrower or any Subsidiary (including the Receivables Subsidiary and the Saturn Subsidiary) relating to Holdings, the Parent Borrower or any Subsidiary (including the Receivables Subsidiary and the Saturn Subsidiary) or its business, other than any such information that is available to the Administrative Agent, the Issuing Bank or any Lender on a nonconfidential basis prior to disclosure by Holdings, the Parent Borrower or any Subsidiary (including the Receivables Subsidiary and the Saturn Subsidiary); provided that, in the case of information received from Holdings, the Parent Borrower or any Subsidiary (including the Receivables Subsidiary and the Saturn Subsidiary) after the date hereof, such information is clearly identified at the time of delivery as confidential. Any Person required to maintain the confidentiality of Information as provided in this Section shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of such Information as such Person would accord to its own confidential information. SECTION 10.13. Interest Rate Limitation. Notwithstanding anything herein to the contrary, if at any time the interest rate applicable to any Loan, together with all fees, charges and other amounts which are treated as interest on such Loan under applicable law (collectively the "Charges"), shall exceed the maximum lawful rate (the "Maximum Rate") which may be contracted for, charged, taken, received or reserved by the Lender holding such Loan in accordance with applicable law, the rate of interest payable in respect of such Loan hereunder, together with all Charges payable in respect thereof, shall be limited to the Maximum Rate and, to the extent lawful, the interest and Charges that would have been payable in respect of such Loan but were not payable as a result of the operation of this Section shall be cumulated and the interest and Charges payable to such Lender in respect of other Loans or periods shall be increased (but not above the Maximum Rate therefor) until such cumulated amount, together with inter- -139- est thereon at the Federal Funds Effective Rate to the date of repayment, shall have been received by such Lender. SECTION 10.14. Judgment Currency. (a) The obligations hereunder of the Parent Borrower, the Subsidiary Term Borrowers and the Foreign Subsidiary Borrowers and under the other Loan Documents to make payments in Dollars or in the Foreign Currencies, as the case may be, (the "Obligation Currency") shall not be discharged or satisfied by any tender or recovery pursuant to any judgment expressed in or converted into any currency other than the Obligation Currency, except to the extent that such tender or recovery results in the effective receipt by the Administrative Agent, the Collateral Agent or a Lender of the full amount of the Obligation Currency expressed to be payable to the Administrative Agent, Collateral Agent or Lender under this Agreement or the other Loan Documents. If, for the purpose of obtaining or enforcing judgment against the Parent Borrower, any Subsidiary Term Borrower, any Foreign Subsidiary Borrower or any other Loan Party in any court or in any jurisdiction, it becomes necessary to convert into or from any currency other than the Obligation Currency (such other currency being hereinafter referred to as the "Judgment Currency") an amount due in the Obligation Currency, the conversion shall be made, at the Dollar Equivalent of such amount, in each case, as of the date immediately preceding the day on which the judgment is given (such Business Day being hereinafter referred to as the "Judgment Currency Conversion Date"). (b) If there is a change in the rate of exchange prevailing between the Judgment Currency Conversion Date and the date of actual payment of the amount due, the Parent Borrower, each Subsidiary Term Borrower and each Foreign Subsidiary Borrower, as the case may be, covenants and agrees to pay, or cause to be paid, such additional amounts, if any (but in any event not a lesser amount), as may be necessary to ensure that the amount paid in the Judgment Currency, when converted at the rate of exchange prevailing on the date of payment, will produce the amount of the Obligation Currency which could have been purchased with the amount of Judgment Currency stipulated in the judgment or judicial award at the rate of exchange prevailing on the Judgment Currency Conversion Date. (c) For purposes of determining the Dollar Equivalent, such amounts shall include any premium and costs payable in connection with the purchase of the Obligation Currency. SECTION 10.15. Obligations Joint and Several. (a) Each Tranche A Borrower agrees that it shall, jointly with the other Tranche A Borrowers and severally, be liable for all the Obligations in respect of the Tranche A Loans and Tranche A Commitments (the "Tranche A Loan Obligations"). Each Tranche A Borrower further agrees that the Tranche A Loan Obligations of the other Tranche A Borrowers may be extended and renewed, in whole or in part, without -140- notice to or further assent from it, and that it will remain bound upon its agreement hereunder notwithstanding any extension or renewal of any Tranche A Loan Obligation of the other Tranche A Borrowers. (b) Each Tranche A Borrower waives presentment to, demand of payment from and protest to the other Tranche A Borrowers of any of the Tranche A Loan Obligations, and also waives notice of acceptance of its obligations and notice of protest for nonpayment. The Tranche A Loan Obligations of a Tranche A Borrower hereunder shall not be affected by (i) the failure of any Tranche A Lender or the Issuing Bank or the Administrative Agent or the Collateral Agent to assert any claim or demand or to enforce any right or remedy against the other Tranche A Borrowers under the provisions of this Agreement or any of the other Loan Documents or otherwise; (ii) any rescission, waiver, amendment or modification of any of the terms or provisions of this Agreement, any of the other Loan Documents or any other agreement; or (iii) the failure of any Tranche A Lender or the Issuing Bank to exercise any right or remedy against any other Tranche A Borrower. (c) Each Tranche A Borrower further agrees that its agreement hereunder constitutes a promise of payment when due and not of collection, and waives any right to require that any resort be had by any Tranche A Lender or the Issuing Bank to any balance of any deposit account or credit on the books of any Tranche A Lender or the Issuing Bank in favor of any other Tranche A Borrower or any other person. (d) The Tranche A Loan Obligations of each Tranche A Borrower hereunder shall not be subject to any reduction, limitation, impairment or termination for any reason, including compromise, and shall not be subject to any defense or setoff, counterclaim, recoupment or termination whatsoever by reason of the invalidity, illegality or unenforceability of the Tranche A Loan Obligations of the other Tranche A Borrowers or otherwise. Without limiting the generality of the foregoing, the Tranche A Loan Obligations of each Tranche A Borrower hereunder shall not be discharged or impaired or otherwise affected by the failure of the Administrative Agent, the Collateral Agent or any Tranche A Lender or the Issuing Bank to assert any claim or demand or to enforce any remedy under this Agreement or under any other Loan Document or any other agreement, by any waiver or modification in respect of any thereof, by any default, failure or delay, willful or otherwise, in the performance of the Tranche A Loan Obligations of the other Tranche A Borrowers, or by any other act or omission which may or might in any manner or to any extent vary the risk of such Tranche A Borrower or otherwise operate as a discharge of such Tranche A Borrower as a matter of law or equity. (e) Each Tranche A Borrower further agrees that its obligations hereunder shall continue to be effective or be reinstated, as the case may be, if at any time payment, or any part thereof, of principal of or interest on any Tranche A Loan Obligation of the other -141- Tranche A Borrowers is rescinded or must otherwise be restored by the Administrative Agent, the Collateral Agent or any Tranche A Lender or the Issuing Bank upon the bankruptcy or reorganization of any of the other Tranche A Borrowers or otherwise. (f) In furtherance of the foregoing and not in limitation of any other right which the Administrative Agent, the Collateral Agent or any Tranche A Lender or the Issuing Bank may have at law or in equity against any Tranche A Borrower by virtue hereof, upon the failure of a Tranche A Borrower to pay any Tranche A Loan Obligation when and as the same shall become due, whether at maturity, by acceleration, after notice of prepayment or otherwise, each other Tranche A Borrower hereby promises to and will, upon receipt of written demand by the Administrative Agent, forthwith pay, or cause to be paid, in cash the amount of such unpaid Tranche A Loan Obligations, and thereupon each Tranche A Lender shall, in a reasonable manner, assign the amount of the Tranche A Loan Obligations of the other Tranche A Borrowers owed to it and paid by such Tranche A Borrower pursuant to this guarantee to such Tranche A Borrower, such assignment to be pro tanto to the extent to which the Tranche A Loan Obligations in question were discharged by such Tranche A Borrower, or make such disposition thereof as such Tranche A Borrower shall direct (all without recourse to any Tranche A Lender and without any representation or warranty by any Tranche A Lender). IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written. MASCOTECH, INC., By: ------------------------------------------ Name: Title: S-2 Signature Page to the MascoTech Credit Agreement dated as of November 28, 2000 METALYNC COMPANY LLC, By: ------------------------------------------ Name: Title: S-3 Signature Page to the MascoTech Credit Agreement dated as of November 28, 2000 LAMONS METAL GASKET CO., By: ------------------------------------------ Name: Title: S-4 Signature Page to the MascoTech Credit Agreement dated as of November 28, 2000 LAKE ERIE SCREW CORPORATION, By: ------------------------------------------ Name: Title: S-5 Signature Page to the MascoTech Credit Agreement dated as of November 28, 2000 COMPAC CORPORATION, By: ------------------------------------------ Name: Title: S-6 Signature Page to the MascoTech Credit Agreement dated as of November 28, 2000 FULTON PERFORMANCE PRODUCTS, INC., By: ------------------------------------------ Name: Title: S-7 Signature Page to the MascoTech Credit Agreement dated as of November 28, 2000 NORRIS CYLINDER COMPANY, By: ------------------------------------------ Name: Title: S-8 Signature Page to the MascoTech Credit Agreement dated as of November 28, 2000 DRAW-TITE, INC., By: ------------------------------------------ Name: Title: S-9 Signature Page to the MascoTech Credit Agreement dated as of November 28, 2000 THE CHASE MANHATTAN BANK, individually and as Administrative Agent and Collateral Agent, By: ------------------------------------------ Name: Title: S-10 Signature Page to the MascoTech Credit Agreement dated as of November 28, 2000 CREDIT SUISSE FIRST BOSTON, individually and as Syndication Agent, By: ------------------------------------------ Name: Title: By: ------------------------------------------ Name: Title: S-11 Signature Page to the MascoTech Credit Agreement dated as of November 28, 2000 COMERICA BANK, individually and as Documentation Agent, By: ------------------------------------------ Name: Title: S-12 Signature Page to the MascoTech Credit Agreement dated as of November 28, 2000 FIRST UNION NATIONAL BANK, individually and as Documentation Agent, By: ------------------------------------------ Name: Title: S-13 Signature Page to the MascoTech Credit Agreement dated as of November 28, 2000 NATIONAL CITY BANK, individually and as Documentation Agent, By: ------------------------------------------ Name: Title: S-14 Signature Page to the MascoTech Credit Agreement dated as of November 28, 2000 BANK ONE, NA, individually and as Documentation Agent, By: ------------------------------------------- Name: Title: S-15 Signature Page to the MascoTech Credit Agreement dated as of November 28, 2000 BNP PARIBAS, By: ------------------------------------------ Name: Title: By: ------------------------------------------ Name: Title: S-16 Signature Page to the MascoTech Credit Agreement dated as of November 28, 2000 DRESDNER BANK AG NEW YORK AND GRAND CAYMAN BRANCHES, By: ------------------------------------------ Name: Title: By: ------------------------------------------ Name: Title: S-17 Signature Page to the MascoTech Credit Agreement dated as of November 28, 2000 IKB CAPITAL CORPORATION, By: ------------------------------------------ Name: Title: By: ------------------------------------------ Name: Title: S-18 Signature Page to the MascoTech Credit Agreement dated as of November 28, 2000 HELLER FINANCIAL, INC., By: ------------------------------------------- Name: Title: S-19 Signature Page to the MascoTech Credit Agreement dated as of November 28, 2000 KZH CNC LLC, By: ------------------------------------------- Name: Title: S-20 Signature Page to the MascoTech Credit Agreement dated as of November 28, 2000 METROPOLITAN LIFE INSURANCE COMPANY, By: -------------------------------------------- Name: Title: S-21 Signature Page to the MascoTech Credit Agreement dated as of November 28, 2000 MORGAN STANLEY DEAN WITTER PRIME INCOME TRUST, By: ------------------------------------------- Name: Title: S-22 Signature Page to the MascoTech Credit Agreement dated as of November 28, 2000 NATEXIS BANQUES POPULAIRES, By: -------------------------------------------- Name: Title: By: -------------------------------------------- Name: Title: S-23 Signature Page to the MascoTech Credit Agreement dated as of November 28, 2000 THE SUMITOMO TRUST AND BANKING CO, LTD., NEW YORK BRANCH, By: -------------------------------------------- Name: Title: S-24 Signature Page to the MascoTech Credit Agreement dated as of November 28, 2000 WINGED FOOT FUNDING TRUST, By: -------------------------------------------- Name: Title: S-25 Signature Page to the MascoTech Credit Agreement dated as of November 28, 2000 TEXTRON FINANCIAL CORPORATION, By: ------------------------------------------ Name: Title: S-26 Signature Page to the MascoTech Credit Agreement dated as of November 28, 2000 MICHIGAN NATIONAL BANK, By: ------------------------------------------ Name: Title: S-27 Signature Page to the MascoTech Credit Agreement dated as of November 28, 2000 FLEET NATIONAL BANK, By: ------------------------------------------ Name: Title: S-28 Signature Page to the MascoTech Credit Agreement dated as of November 28, 2000 THE BANK OF NOVA SCOTIA, By: ------------------------------------------ Name: Title: S-29 Signature Page to the MascoTech Credit Agreement dated as of November 28, 2000 LIBERTY - STEIN ROE ADVISOR FLOATING RATE ADVANTAGE FUND, BY STEIN ROE & FARNHAM INCORPORATED, As Advisor, By: ----------------------------------------- Name: Title: S-30 Signature Page to the MascoTech Credit Agreement dated as of November 28, 2000 SRF 2000 LLC, By: ------------------------------------------ Name: Title: S-31 Signature Page to the MascoTech Credit Agreement dated as of November 28, 2000 SRF TRADING, INC., By: ------------------------------------------ Name: Title: S-32 Signature Page to the MascoTech Credit Agreement dated as of November 28, 2000 STEIN ROE & FARNHAM INCORPORATION, As Agent for Keyport Life Insurance Company, By: ----------------------------------------- Name: Title: S-33 Signature Page to the MascoTech Credit Agreement dated as of November 28, 2000 STEIN ROE FLOATING RATE LIMITED LIABILITY COMPANY, By: --------------------------------------------- Name: Title: S-34 Signature Page to the MascoTech Credit Agreement dated as of November 28, 2000 STANDARD FEDERAL CORPORATION, By: ------------------------------------------ Name: Title: S-35 Signature Page to the MascoTech Credit Agreement dated as of November 28, 2000 THE TRAVELERS INSURANCE COMPANY, By: ------------------------------------------ Name: Title: S-36 Signature Page to the MascoTech Credit Agreement dated as of November 28, 2000 TRAVELERS CORPORATE LOAN FUND By Travelers Asset Management International Company, By: ---------------------------------------------- Name: Title: S-37 Signature Page to the MascoTech Credit Agreement dated as of November 28, 2000 THE PRUDENTIAL INSURANCE COMPANY OF AMERICA By: ------------------------------------------ Name: Title: EX-10.2 9 0009.txt RECEIVABLES PURCHASE AGREEMENT EXHIBIT 10.2 ================================================================================ RECEIVABLES PURCHASE AGREEMENT among MASCOTECH, INC., THE SELLERS NAMED HEREIN as Sellers and MTSPC, INC. as Purchaser Dated as of November 28, 2000 ================================================================================ TABLE OF CONTENTS Page ARTICLE I Definitions SECTION 1.01. Definitions.............................................1 SECTION 1.02. Other Terms.............................................1 SECTION 1.03. Computation of Time Periods.............................1 ARTICLE II Purchase, Conveyance and Servicing of Receivables SECTION 2.01. Sales...................................................2 SECTION 2.02. Servicing of Receivables................................3 ARTICLE III Consideration and Payment; Reporting SECTION 3.01. Purchase Price..........................................4 SECTION 3.02. Payment of Purchase Price...............................4 SECTION 3.03. Reports.................................................6 SECTION 3.04. Transfer of Records.....................................6 SECTION 3.05. Payments and Computations...............................7 ARTICLE IV Representations and Warranties SECTION 4.01. Sellers' Representations and Warranties SECTION 4.02. Reaffirmation of Representations and Warranties by the Sellers; Notice of Breach.....................10 ARTICLE V Covenants of the Sellers SECTION 5.01. Covenants of the Sellers...............................11 -i- Page ARTICLE VI Repurchase Obligation SECTION 6.01. Mandatory Repurchase...................................17 SECTION 6.02. Dilutions, Etc.........................................18 ARTICLE VII Conditions Precedent SECTION 7.01. Conditions Precedent...................................18 SECTION 7.02. Conditions Precedent to the Addition of a Seller.......19 ARTICLE VIII Term and Termination SECTION 8.01. Term...................................................22 SECTION 8.02. Effect of Termination..................................22 SECTION 8.03. Termination of Sellers and Seller Divisions............23 ARTICLE IX Miscellaneous Provisions SECTION 9.01. Amendments, Etc........................................24 SECTION 9.02. Governing Law; Submission to Jurisdiction..............24 SECTION 9.03. Notices................................................24 SECTION 9.04. Severability of Provisions.............................25 SECTION 9.05. Assignment.............................................25 SECTION 9.06. Further Assurances.....................................26 SECTION 9.07. No Waiver; Cumulative Remedies.........................26 SECTION 9.08. Counterparts...........................................26 SECTION 9.09. Binding Effect; Third-Party Beneficiaries..............26 SECTION 9.10. Merger and Integration.................................26 SECTION 9.11. Headings...............................................27 SECTION 9.12. Exhibits...............................................27 SECTION 9.13. Addition of Sellers....................................27 SECTION 9.14. Confidentiality........................................27 Exhibit A - Form of Subordinated Note Exhibit B - Litigation -ii- Page Exhibit C - Form of Additional Seller Supplement Schedule I - Location of Each Seller's Chief Executive Office -iii- RECEIVABLES PURCHASE AGREEMENT, dated as of November 28, 2000 (as amended, supplemented or otherwise modified and in effect from time to time, this "Agreement"), among MascoTech, Inc., a Delaware corporation ("MascoTech"), the subsidiaries of MascoTech identified as Sellers on Schedule I, as sellers, (each, individually, a "Seller" and collectively, the "Sellers"), and MTSPC, Inc., a Delaware corporation, as purchaser (in such capacity, the "Purchaser"). W I T N E S S E T H : - - - - - - - - - - WHEREAS, the Purchaser desires to purchase from time to time certain accounts receivable existing on the Closing Date and thereafter until the Purchase Termination Date; WHEREAS, the Sellers desire to sell and assign from time to time such certain accounts receivable to the Purchaser upon the terms and conditions hereinafter set forth; NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, it is hereby agreed by and among the Purchaser and the Sellers as follows: ARTICLE I Definitions SECTION 1.01. Definitions. All capitalized terms used herein shall have the meanings specified herein or, if not so specified, the meaning specified in, or incorporated by reference into, Schedule A to the Receivables Transfer Agreement, dated as of the date hereof (as amended, supplemented or otherwise modified and in effect from time to time, the "Receivables Transfer Agreement"), by and among MTSPC, Inc., as Transferor thereunder, MascoTech, Inc., individually, as Collection Agent and as Guarantor thereunder, the several CP Conduit Purchasers, Committed Purchasers and Funding Agents named therein, and The Chase Manhattan Bank, as Administrative Agent thereunder. SECTION 1.02. Other Terms. All accounting terms not specifically defined herein shall be construed in accordance with generally accepted accounting principles. All terms used in Article 9 of the Relevant UCC, and not specifically defined herein, are used herein as defined in such Article 9. SECTION 1.03. Computation of Time Periods. Unless other- wise stated in this Agreement, in the computation of a period of time from a specified date to a later specified date, the word "from" means "from and including" and the words "to" and "until" each means "to but excluding," and the word "within" means "from and excluding a specified date and to and including a later specified date." ARTICLE II Purchase, Conveyance and Servicing of Receivables SECTION 2.01. Sales. (a) Upon the terms and subject to the conditions set forth herein, and without recourse (except such limited recourse as is specifically provided for in Sections 5.01(q), 6.01 and 6.02), each of the Sellers hereby sells, assigns, transfers and conveys to the Purchaser, and the Purchaser hereby purchases from each of the Sellers, all of such Seller's right, title and interest, whether now owned or hereafter acquired and wherever located, in, to and under the Receivables outstanding on the Closing Date and thereafter owned by each of the Sellers, through any Purchase Termination Date, together with all Related Security and Collections with respect thereto (to the extent that such right, title and interest was not already purchased by the Purchaser) and all Proceeds of the foregoing. Such interest in the Receivables, expressed as a dollar amount, shall be equal to the aggregate unpaid balance of the Receivables from time to time. Any sale, assignment, transfer and conveyance hereunder does not constitute an assumption by the Purchaser of any obligations of the Sellers or any other Person to Obligors or to any other Person in connection with the Receivables or under any Related Security or any other agreement or instrument relating to the Receivables. (b) In connection with such sale, each Seller agrees to execute and deliver for filing on or prior to the Closing Date, at its own expense, a financing statement or statements (Form UCC-1) with respect to the Receivables and the other property described in Section 2.01(a) sold by such Seller hereunder meeting the requirements of applicable state law in such manner and in such jurisdictions as are necessary to perfect and protect the interests of the Purchaser created hereby in the Receivables under the Relevant UCC against all creditors of, and purchasers from, such Seller, and to deliver either the originals of such financing statements or a file-stamped copy of such financing statements or other evidence of such filings to the Purchaser on or prior to the Closing Date. (c) Each of the Sellers agrees that from time to time, at its expense, it will promptly execute and deliver all instruments and documents and take all actions as may be necessary or as the Purchaser may reasonably request in order to perfect or protect the interest of the Purchaser in the Receivables purchased hereunder or to enable the Purchaser to exercise or enforce any of its rights hereunder. Without limiting the foregoing, each Seller will, in order to accurately reflect this purchase and sale transaction, execute and file such financing or continuation statements or amendments thereto or assignments thereof (as permitted pursuant -2- hereto) as may be requested by the Purchaser and mark its master data processing records (or related subledger) and other documents with a legend describing the purchase by the Purchaser of the Receivables and the interest transferred by the Purchaser to the Administrative Agent pursuant to the Receivables Transfer Agreement and stating "An interest in these accounts receivable has been granted to The Chase Manhattan Bank, as Administrative Agent, pursuant to a Receivables Transfer Agreement dated as of November 28, 2000." The Sellers shall, upon request of the Purchaser, obtain such additional search reports as the Purchaser shall request. To the fullest extent permitted by applicable law, the Purchaser shall be permitted to sign and file continuation statements and amendments thereto and assignments thereof without the Sellers' signatures. Carbon, photographic or other reproduction of this Agreement or any financing statement shall be sufficient as a financing statement. (d) It is the express intent of the Sellers and the Purchaser that the conveyance of the Receivables by the Sellers to the Purchaser pursuant to this Agreement be construed as a sale of such Receivables by the Sellers to the Purchaser. Further, it is not the intention of the Sellers and the Purchaser that such conveyance be deemed a grant of a security interest in the Receivables by the Sellers to the Purchaser to secure a debt or other obligation of the Sellers. Except under the limited circumstances described in Sections 5.01(q), 6.01 and 6.02, the Sellers shall have no right or obligation hereunder to repurchase or otherwise reacquire any such Receivables. Except as otherwise provided in Sections 5.01(q), 6.01 and 6.02, each sale of Receivables by the Sellers hereunder is made without recourse of any kind. However, in the event that, notwithstanding the intent of the parties, the Receivables are construed to constitute property of the Sellers, then (i) this Agreement shall be deemed to be, and hereby is, a security agreement within the meaning of the Relevant UCC; and (ii) the conveyances by each of the Sellers provided for in this Agreement shall be deemed to be, and each of the Sellers hereby grants to the Purchaser, a security interest in, to and under all of such Seller's right, title and interest in, to and under the Receivables, together with all Related Security and Collections with respect thereto and all Proceeds of the foregoing, to secure the rights of the Purchaser set forth in this Agreement or as may be determined in connection therewith by applicable law. The Sellers and the Purchaser shall, to the extent consistent with this Agreement, take such actions as may be necessary to ensure that, if this Agreement were deemed to create a security interest in the Receivables, such security interest would be deemed to be a perfected security interest in favor of the Purchaser under applicable law and will be maintained as such throughout the term of this Agreement. SECTION 2.02. Servicing of Receivables. The servicing, administering and collection of the Receivables shall be conducted by each of the Sellers, as agents of the Collection Agent, in accordance with the terms and conditions of the Receivables Transfer Agreement. Each Seller hereby agrees to perform, take or cause to be taken all such action as may be necessary or advisable to collect each Receivable from time to time, all in accordance with the terms and conditions of the Receivables Transfer Agreement, the Credit and Collection Policy and applicable laws, -3- rules and regulations and with the care and diligence which each of the Sellers employs in servicing similar receivables for its own account. The Purchaser hereby appoints each of the Sellers as its agent to enforce the Purchaser's rights and interests in, to and under the Receivables, the Related Security and the Collections with respect thereto. To the extent permitted by applicable law, each Seller hereby grants to any Collection Agent appointed under the Receivables Transfer Agreement and at any time following the designation of a Collection Agent other than MascoTech, any Seller or the Purchaser, to the Administrative Agent an irrevocable power of attorney to take in the Seller's name and on behalf of the Seller any and all steps necessary or desirable, in the reasonable determination of the Collection Agent or the Administrative Agent, to collect all amounts due under any and all Receivables, including, without limitation, endorsing the Seller's name on checks and other instruments representing Collections and enforcing such Receivables and the related Contracts. Each of the Sellers shall hold in trust for the Purchaser, in accordance with its interests, all Records which evidence or relate to the Receivables or Related Security, Collections and Proceeds with respect thereto. Notwithstanding anything to the contrary contained herein, from and after the occurrence of a Termination Event or a Collection Agent Default, the Administrative Agent, upon written notice to the Collection Agent on behalf of the CP Conduit Purchasers and the Committed Purchasers, shall have the absolute and unlimited right to terminate the Sellers' servicing activities described in this Section 2.02. In consideration of the foregoing, the Purchaser agrees to pay each Seller a servicing fee of one percent (1.0%) per annum on the aggregate Outstanding Balance of the Receivables sold by such Seller, payable monthly, for its performance of the duties and obligations described in this Section 2.02.; provided that any such monthly payment shall be reduced by any amounts payable in such month by the CP Conduit Purchasers or the Committed Purchasers to MascoTech, in its capacity as Collection Agent pursuant to the Receivables Transfer Agreement. ARTICLE III Consideration and Payment; Reporting SECTION 3.01. Purchase Price. The purchase price for the Receivables and related property conveyed to the Purchaser by the Sellers under this Agreement (other than Receivables and related property contributed to the Purchaser pursuant to the penultimate sentence of Section 3.02(a))on any Business Day shall be a dollar amount equal to the product of (i) the aggregate Outstanding Balance of the Receivables sold on such Business Day and (ii) the then applicable Discount Percentage (the "Purchase Price"). SECTION 3.02. Payment of Purchase Price. (a) The Purchase Price for each Receivable sold hereunder on any Business Day shall be paid or provided for on the Business Day on which such sale occurred (i) by payment in immediately available funds -4- to the extent the Purchaser has such funds available and (ii) to the extent such funds are not available, by increasing the amount due under the Subordinated Note by notation thereon; provided, however, that the aggregate outstanding principal amount of the Subordinated Note on any Business Day (after giving effect to all repayments thereof on or before such Business Day) shall not exceed the lesser of (x) 30% of the Outstanding Balance of the Receivables purchased hereunder existing on such Business Day and (y) an amount that would cause the Purchaser's net worth (as defined in accordance with GAAP) to be less than $25,000,000. To the extent that the Purchaser does not have sufficient cash or availability under the Subordinated Note to pay the total Purchase Price for Receivables sold on any Business Day in full, Metalync Company LLC may make a cash capital contribution to the Purchaser. No sales of Receivables shall be made hereunder on and after the Purchase Termination Date. (b) All advances made by the Sellers to Purchaser pursuant to Section 3.02(a) (each, an "Advance") shall be evidenced by a single subordinated note, duly executed on behalf of Purchaser, in substantially the form of Exhibit A annexed hereto, delivered on the Closing Date and payable to MascoTech, as agent for the Sellers (as amended, supplemented or otherwise modified and in effect from time to time, the "Subordinated Note"). The Collection Agent is hereby authorized by Purchaser to endorse on the schedule attached to the Subordinated Note (or a continuation of such schedule attached thereto and made a part thereof) an appropriate notation evidencing the date and amount of each Advance, as well as the date and amount of each payment with respect thereto; provided, however, that the failure of any Person to make such a notation shall not affect any obligations of Purchaser thereunder. Any such notation shall be conclusive and binding as to the date and amount of such Advance, or payment of principal or interest thereon, absent manifest error. (c) The terms and conditions of the Subordinated Note and all Advances thereunder shall be as follows: (i) Allocation of Advances. Advances shall be allocated among the Sellers pro rata according to the Purchase Price due to each Seller on the date such Advances are made. (ii) Repayment of Advances. All amounts paid by the Purchaser with respect to the Advances shall be allocated first to the repayment of accrued interest until all such interest is paid, and then to the outstanding principal amount of the Advances. Subject to the provisions of this Agreement, the Purchaser may borrow, repay and reborrow Advances on and after the date hereof and prior to the termination of this Agreement, subject to the terms, provisions and limitations set forth herein. (iii) Interest. The Subordinated Note shall bear interest from its date on the outstanding principal balance thereof at an initial rate per annum equal to 11.5%, adjusted on each Interest Payment Date (as defined therein) to an amount equal to the -5- Prime Rate (as defined therein) plus 2%. Interest on each Advance shall be computed based on the number of days elapsed in a year of 360 days. (iv) Sole and Exclusive Remedy; Subordination. The Purchaser shall be obligated to repay Advances to the Sellers only to the extent of funds available to the Purchaser from Collections on the Receivables and, to the extent that such payments are insufficient to pay all amounts owing to the Sellers under the Subordinated Note, the Sellers shall not have any claim against the Purchaser for such amounts and no further or additional recourse shall be available against Purchaser. The Subordinated Note shall be fully subordinated to any rights of the Administrative Agent, on behalf of the CP Conduit Purchasers and the Committed Purchasers pursuant to the Receivables Transfer Agreement and the Asset Purchase Agreement, and shall not evidence any rights in the Receivables or related property. (v) Offsets, etc. The Purchaser may offset any amount due and owing by the Sellers to the Purchaser against any amount due and owing by the Purchaser to the Sellers under the terms of the Subordinated Note. SECTION 3.03. Reports. Each Seller will furnish to the Collection Agent all information with respect to the Receivables sold by such Seller under this Agreement required by the Collection Agent in order to complete the weekly Deposit Reports and monthly Settlement Statements delivered by the Collection Agent pursuant to the Receivables Transfer Agreement. Each delivery of a Deposit Report and Settlement Statement by the Collection Agent shall be deemed to be a representation and warranty by each Seller that all information set forth in those reports with respect to the Receivables sold by such Seller under this Agreement and Collections thereof is true and correct. SECTION 3.04. Transfer of Records. (a) In connection with the Purchase of Receivables hereunder, each of the Sellers hereby sells, transfers, and conveys to the Purchaser all of its right and title to and interest in the Records relating to all of its Receivables sold hereunder, without the need for any further documentation in connection with any Purchase. In connection with such transfer, each of the Sellers hereby grants to the Purchaser, the Collection Agent and the Administrative Agent an irrevocable, non-exclusive license to use without royalty or payment of any kind, all software used by such Seller to account for its Receivables, to the extent necessary to administer its Receivables, whether such software is owned by the Parent or is owned by others and used by the Parent under license agreements with respect thereto, provided that should the consent of any licensor to such grant of license described herein be required, each Seller agrees that upon the request of the Purchaser, the Collection Agent or the Administrative Agent, such Seller will use reasonable efforts to obtain the consent of such third-party licensor. The irrevocable license hereby granted shall terminate on the date when the Net Invest- -6- ment has been reduced to zero, all other Aggregate Unpaids have been paid in full and the Commitments have been terminated. (b) Each Seller shall take such action as requested by the Purchaser, from time to time hereafter, that may be necessary or appropriate to ensure that the Purchaser and its assignees have an enforceable right to use all Records and all software used to account for the Receivables and/or recreate such records. (c) The use of Records by the Purchaser is subject to Section 9.14 of this Agreement. SECTION 3.05. Payments and Computations. All amounts due to be paid or deposited by the Purchaser hereunder shall be paid or deposited in accordance with the terms hereof on the day when due in immediately available funds to the account designated from time to time by the Sellers or as otherwise directed by the Sellers. In the event that any payment owed by any Person hereunder becomes due on a day that is not a Business Day, then such payment shall be made on the next succeeding Business Day. Except as otherwise provided in the Transaction Documents, any amount due hereunder that is not paid when due hereunder shall bear interest at the Base Rate as in effect from time to time until paid in full; provided, however, that such interest rate shall not at any time exceed the maximum rate permitted by applicable law. All computations of interest payable hereunder shall be made on the basis of a year of 360 days for the actual number of days (including the first, but excluding the last) elapsed. ARTICLE IV Representations and Warranties SECTION 4.01. Sellers' Representations and Warranties. Each of the Sellers represents and warrants to the Purchaser as of the Closing Date and on each Business Day on which Receivables are sold hereunder: (a) Corporate Existence and Power. The Seller is a corporation duly organized, validly existing and in good standing under the laws of the State of its incorporation and has all requisite corporate power and all material governmental licenses, authorizations, consents and approvals required to carry on its business in each jurisdiction in which its business is now conducted except where the failure to have such licenses, authorizations, consents and approvals would not have a Material Adverse Effect. The Seller is duly qualified to do business in, and is in good standing in, every other jurisdiction in which the nature of its business requires it to be so qualified, ex- -7- cept where the failure to be so qualified or in good standing would not have a Material Adverse Effect. (b) Corporate and Governmental Authorization; Contravention. The execution, delivery and performance by the Seller of the Transaction Documents to which it is a party are within the Seller's corporate powers, have been duly authorized by all necessary corporate action, require no action by or in respect of, or filing with, any Official Body or official thereof (except for the filing of UCC financing statements as required by this Agreement), and to the best of the Sellers' knowledge, do not contravene, or constitute a default under, any provision of applicable law, rule or regulation or of the Certificate of Incorporation or the By-Laws of the Seller or of any agreement, judgment, injunction, order, writ, decree or other instrument binding upon the Seller or result in the creation or imposition of any Adverse Claim on the assets of the Seller (except those created by this Agreement, the Receivables Transfer Agreement and the Asset Purchase Agreement). (c) Valid Sale; Binding Effect. Each purchase of Receivables and Related Security by the Purchaser hereunder shall constitute a valid sale and assignment by the Seller to the Purchaser, enforceable against creditors of, and purchasers from, the Seller. Each of the Transaction Documents to which the Seller is a party will constitute the legal, valid and binding obligation of the Seller, enforceable in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or other similar laws affecting the rights of creditors and general equitable principles (whether considered in a proceeding in equity or at law). (d) Quality of Title. Immediately preceding the sale of the Receivables and Related Security pursuant to this Agreement, the Seller was the owner of all of the Receivables, free and clear of all liens, encumbrances, security interests, preferences or other security arrangement. On or prior to the date hereof, all financing statements and other documents required to be recorded or filed in order to perfect and protect the interest of the Purchaser in, to and under the Receivables against all creditors of and purchasers from the Seller will have been duly executed and delivered to the Purchaser or its representative for filing in each filing office necessary for such purpose and all filing fees and taxes, if any, payable in connection with such filings shall have been provided for in full. (e) Accuracy of Information. All written information heretofore furnished by the Seller to the Purchaser, the Collection Agent and the Administrative Agent for purposes of or in connection with this Agreement, any other Transaction Document, or any transaction contemplated hereby or thereby is, and all such information hereafter furnished by the Seller to the Purchaser, the Collection Agent, the Administrative Agent, the Funding Agents, the CP Conduit Purchasers and the Committed Purchasers -8- will be, true and accurate in every material respect, on the date such information is stated or certified. (f) Tax Status. The Seller has filed all material tax returns (Federal, state and local) required to be filed and has paid or made adequate provision for the payment of all material taxes, assessments and other similar governmental charges other than taxes contested in good faith and for which adequate reserves have been established in accordance with GAAP and taxes which are not yet due and payable. (g) Litigation. Except as set forth in Exhibit B hereof, there are no actions, suits or proceedings pending, or to the knowledge of the Seller threatened, against or affecting the Seller or any Affiliate of the Seller or their respective properties, in or before any court, arbitrator or other Official Body, which could reasonably be expected to, individually or in the aggregate, have a Material Adverse Effect. (h) Place of Business. The principal place of business and chief executive office of the Seller are located at the address specified on Schedule I, and the offices where the Seller keeps all its Records, are located at the address specified on Schedule I, or such other locations notified to the Purchaser in accordance with this Agreement in jurisdictions where all action required by the terms of this Agreement has been taken and completed. (i) Solvency. The Seller is not insolvent, does not have unreasonably small capital with which to carry on its business, is able to pay its debts generally as they become due and payable, and its liabilities do not exceed its assets. (j) Tradenames, Etc. As of the date hereof: (i) The Seller has only the subsidiaries and divisions listed on Exhibit J to the Receivables Transfer Agreement; and (ii) the Seller has, within the last five years, operated only under the tradenames identified on Exhibit J to the Receivables Transfer Agreement, and, within the last five (5) years, has not changed its name, merged with or into or consolidated with any other corporation or been the subject of any proceeding under Title 11, United States Code (Bankruptcy), except as disclosed in Exhibit J to the Receivables Transfer Agreement. (k) Nature of Receivables. Each Receivable included in the calculation of the Net Receivables Balance in fact satisfies at such time the definition of "Eligible Receivable" and is an "eligible asset" as defined in Rule 3a-7 under the Investment Company Act of 1940, as amended, and is not a Defaulted Receivable. (l) Credit and Collection Policy. Since the Closing Date, there have been no material changes in the Credit and Collection Policy other than as permitted hereunder. -9- (m) Collections and Servicing. Since June 30, 2000, there has been no material adverse change in the ability of the Seller to service and collect the Receivables. (n) Binding Effect of Receivables and Contract. Each Receivable and related Contract constitutes a legal, valid and binding obligation of the Obligor, enforceable against the Obligor, subject to the effect of bankruptcy, insolvency, reorganization or similar laws affecting creditors' rights generally and general equitable principles (whether considered in a proceeding at law or in equity). (o) Not an Investment Company. The Seller is not, nor is it controlled by, an "investment company" within the meaning of the Investment Company Act of 1940, as amended, and it is exempt from all provisions of such Act. (p) ERISA. The Seller and its ERISA Affiliates are in compliance in all material respects with ERISA, and no lien exists in favor of the Pension Benefit Guaranty Corporation on any of the Receivables. (q) Lock-Box Accounts. The names and addresses of all the Lock-Box Banks, together with the account numbers of the Lock-Box Accounts at such Lock-Box Banks, are specified in Exhibit C to the Receivables Transfer Agreement. All Obligors have been instructed to make payment to a Lock-Box Account. (r) Bulk Sales. No transaction contemplated by this Agreement requires compliance with any bulk sales act or similar law. (s) Reasonably Equivalent Value. The Purchase Price constitutes reasonably equivalent value in consideration for the transfer by each Seller to the Purchaser of Receivables from such Seller pursuant to this Agreement and no such transfer has been made for or on account of an antecedent debt owed by such Seller to the Purchaser, and no such transfer is or may be voidable or subject to avoidance under any section of the Bankruptcy Code. SECTION 4.02. Reaffirmation of Representations and Warranties bv the Sellers; Notice of Breach. On the Closing Date and on each Business Day on which Receivables are sold hereunder, the Sellers, by accepting the proceeds of such sale, shall be deemed to have certified that all representations and warranties described in Section 4.01 are true and correct on and as of such day as though made on and as of such day. The representations and warranties set forth in Section 4.01 shall survive (i) the conveyance of the Receivables to the Purchaser, (ii) the termination of the rights and obligations of the Purchaser and the Sellers under this Agreement and (iii) the termination of the rights and obligations of the Transferor, the Sellers and the Funding Agent under the Receivables Transfer Agreement. Upon the coming to the knowledge of any Responsible Officer of -10- the Purchaser or any of the Sellers of a breach of any of the foregoing representations and warranties, the party with knowledge of such breach shall give prompt written notice to the other within three (3) Business Days of such discovery. ARTICLE V Covenants of the Sellers SECTION 5.01. Covenants of the Sellers. Each of the Sellers hereby covenants and agrees with the Purchaser that, for so long as this Agreement is in effect, and until all Receivables which have been sold to the Purchaser pursuant hereto, shall have been paid in full or written-off as uncollectible, and all amounts owed by the Sellers pursuant to this Agreement have been paid in full, unless the Purchaser and the Administrative Agent otherwise consents in writing, as follows: (a) Conduct of Business. The Seller will, and will cause each of its Affiliates to, carry on and conduct its business in substantially the same manner and in substantially the same fields of enterprise as it is presently conducted and do all things necessary to remain duly organized, validly existing and in good standing in its jurisdiction of incorporation and will maintain all requisite authority to conduct its business in each jurisdiction in which its business is conducted except where the failure to be so qualified or in good standing would not have a Material Adverse Effect. (b) Compliance with Laws. The Seller will, and will cause each of its Affiliates to, comply in all material respects with all laws, rules, regulations, orders, writs, judgments, injunctions, decrees or awards to which it may be subject, except to the extent that the failure to comply with such laws, rules, regulations, orders, writs, judgments, injunctions, decrees or awards would not materially adversely affect the ability of the Seller to perform its obligations under this Agreement. (c) Furnishing of Information and Inspection of Records. The Seller will furnish to the Purchaser from time to time such information with respect to itself or the Receivables as the Purchaser may reasonably request, including, without limitation, listings identifying the Obligor and the Outstanding Balance for each Receivable. The Seller will at any time and from time to time during regular business hours, upon reasonable notice (it being agreed that one Business Day's notice shall be reasonable when a Termination Event or Potential Termination Event has taken place and is continuing), and at the Purchaser's expense, permit the Purchaser, its agents or representatives or such other individuals as the Purchaser may reasonably request, (i) to examine and make copies of and abstracts from all Records and (ii) to visit the offices and properties of the Seller for the purpose of examining such Records, and to discuss -11- matters relating to Receivables or the Seller's performance hereunder with any of the officers or employees of the Seller having knowledge of such matters. (d) Keeping of Records and Books of Account. The Seller will maintain a system of accounting established and administered in accordance with generally accepted accounting principles, consistently applied, and will maintain and implement administrative and operating procedures (including, without limitation, an ability to recreate records evidencing Receivables in the event of the destruction of the originals thereof), and keep and maintain, or obtain, as and when required, all documents, books, records and other information reasonably necessary or advisable for the collection of all Receivables (including, without limitation, records adequate to permit the daily identification of each Receivable and all Collections of and adjustments to each existing Receivable). The Seller will give the Purchaser prompt notice of any change in the administrative and operating procedures referred to in the previous sentence to the extent such change could reasonably be expected to have a Material Adverse Effect. (e) Performance and Compliance with Receivables and Contracts. The Seller at its expense will timely and fully perform and comply with all material provisions, covenants and other promises required to be observed by it under the Contracts related to the Receivables. (f) Credit and Collection Policies. The Seller will comply in all material respects with the Credit and Collection Policy in regard to each Receivable and the related Contract. (g) Collections. The Seller shall instruct all Obligors to cause all Collections to be deposited directly to a Lock-Box Account. (h) Collections Received. The Seller shall hold in trust for the Purchaser, and deposit immediately (and in any event within one Business Day) after receipt thereof to a Lock-Box Account all Collections received from time to time by the Seller. The Seller shall prevent the deposit of any funds other than Collections into any of the Lock-Box Accounts and, to the extent that any such funds are nevertheless deposited into any of such Lock-Box Accounts, promptly (and in any event within one Business Day) identify any such funds to the Collection Agent for segregation and remittance to the owner thereof. If such Seller or any of its agents or representatives of Affiliates shall at any time receive any cash, checks or other instruments constituting Collections, such recipient shall segregate such payments and hold such payments in trust for the Purchaser and shall, promptly upon receipt (and in any event within one Business Day following receipt), remit all such Collections, duly endorsed or with duly executed instruments of transfer, to a Lock-Box Account. -12- (i) Sale Treatment. The Seller agrees to treat each conveyance hereunder for all purposes (including, without limitation, tax and financial accounting purposes) as a sale and, to the extent any such reporting is required, shall report the transactions contemplated by this Agreement on all relevant books, records, tax returns, financial statements and other applicable documents as a sale of the Receivables to the Purchaser. (j) No Sales, Liens, Etc. Except as otherwise provided herein, the Seller will not sell, assign (by operation of law or otherwise) or otherwise dispose of, or create or suffer to exist any Adverse Claim upon (except for the filing of any financing statement as required under this Agreement) or with respect to, any Receivable, Related Security or Collections or upon or with respect to any Lock-Box Account to which any Collections of any Receivable are sent, or, in each case, assign any right to receive income in respect thereof. (k) No Extension or Amendment of Receivables. The Seller will not extend, amend or otherwise modify the terms of any Receivable, or amend, modify or waive any term or condition of any Contract related thereto in a manner which adversely affects the amount or collectibility of any Receivable, except as provided in the Receivables Transfer Agreement, without the prior written consent of the Purchaser. (l) No Change in Credit and Collection Policy. Except as provided in the Receivables Transfer Agreement, the Seller will not make any change in the Credit and Collection Policy, which change might impair the Seller's ability to collect the Receivables, considered as a whole, in any respect. (m) No Mergers, Etc. The Sellers will not (i) consolidate or merge with or into any other Person, or (ii) sell, lease or transfer all or substantially all of its assets to any other Person; -provided, that the Seller may merge with another Person if the Seller is the surviving entity and such merger or consolidation does not cause a Termination Event or Potential Termination Event under Section 7.01(h) of the Receivables Transfer Agreement. (n) Change in Payment Instructions to Obligors; De-posits to Lock-Box Accounts. The Sellers will not add or terminate, or make any change to, any Lock-Box Account, except in accordance with the Receivables Transfer Agreement. The Seller will not deposit or otherwise credit, or cause or permit to be so deposited or credited, to any Lock-Box Account, cash or cash proceeds other than Collections of Receivables. (o) Change of Name, Etc. The Sellers shall not change its name, identity or structure or its chief executive office, unless at least ten (10) days prior to the effective -13- date of any such change the Seller delivers to the Purchaser and the Administrative Agent (i) financing statements under the Relevant UCC, executed by the Seller, necessary to reflect such change and to continue the perfection of the Purchaser's interest in the Receivables and (ii) new or revised Lock-Box Account Agreements which reflect such change and enable the Administrative Agent, on behalf of the CP Conduit Purchasers and the Committed Purchasers, to exercise its rights under the Transaction Documents. (p) Separate Existence. The Seller shall: (i) Maintain its deposit account or accounts, separate from those of the Purchaser and use its commercially reasonable efforts to ensure that its funds will not be diverted to the Purchaser and that its funds and assets will not be commingled with those of the Purchaser; (ii) To the extent that it shares any officers or other employees with the Purchaser, fairly allocate between it and the Purchaser the salaries of and the expenses related to providing benefits to such officers and other employees, and the Seller and the Purchaser shall bear their respective fair share of the salary and benefit costs associated with all such common officers and employees; (iii) To the extent that it jointly contracts with the Purchaser to do business with vendors or service providers or to share overhead expenses, fairly allocate between it and the Purchaser the costs incurred in so doing, and it and the Purchaser shall bear their fair shares of such costs. To the extent that it contracts or does business with vendors or service providers where the goods and services provided are partially for the benefit of the Purchaser, the costs incurred in so doing shall be fairly allocated between it and the Purchaser in proportion to the benefit of the goods or services each is provided, and the Seller and the Purchaser shall bear their fair shares of such costs; (iv) Enter into all material transactions with the Purchaser, whether currently existing or hereafter entered into, only on an arm's length basis, it being understood and agreed that the transactions contemplated in the Transaction Documents meet the requirements of this clause (iv); (v) Maintain office space separate from the office space of the Purchaser (but which may be located at the same address as the Purchaser). To the extent that it and the Purchaser have offices in the same location, there shall be a fair and appropriate allocation of overhead costs between them, and each shall bear its fair share of such expenses subject to a written sublease agreement; -14- (vi) Conduct its affairs strictly in accordance with its certificate of incorporation and observe all necessary, appropriate and customary corporate formalities, including, but not limited to, holding all regular and special stockholders' and directors' meetings appropriate to authorize all corporate action, keeping separate and accurate minutes of its meetings, passing all resolutions or consents necessary to authorize actions taken or to be taken, and maintaining accurate and separate books, records and accounts, including, but not limited to, payroll and intercompany transaction accounts; (vii) Not assume or guarantee any of the liabilities of the Purchaser; (viii) Take, or refrain from taking, as the case may be, all other actions that are necessary to be taken or not to be taken in order (x) to ensure that the assumptions and factual recitations set forth in the Specified Bankruptcy Opinion Provisions remain true and correct with respect to it (and, to the extent within its control, to ensure that the assumptions and factual recitations set forth in the Specified Bankruptcy Opinion Provisions remain true and correct with respect to the Purchaser) and (y) to comply with those procedures described in such provisions that are applicable to it; (ix) The books of account, financial reports and corporate records of the Seller will be maintained separately from those of the Parent and each other Affiliate of the Seller; (x) The accounting records and the published financial statements of the Seller will clearly show that, for accounting purposes, the Receivables and Related Security have been sold to the Purchaser; (xi) The Seller's assets will be maintained in a manner that facilitates their identification and segregation from those of the Parent, the other Sellers, the Transferor and other Affiliates of the Parent; (xii) The Seller shall not, directly or indirectly, name the Purchaser or enter into any agreement to name the Purchaser a direct or contingent beneficiary or loss payee or any insurance policy covering the property of the Seller; and (xiii) The Seller will not be, nor will hold itself out to be, responsible for the debts of the Purchaser or the decisions or actions in respect of the daily business and affairs of the Purchaser. The Seller will immediately correct any known misrepresentation with respect to the foregoing, and the Sellers, the Purchaser and their Affiliates will not operate or purport to operate as an inte- -15- grated single economic unit with respect to each other or in their dealing with any other entity. (q) Indemnification. The Seller agrees to indemnify, defend and hold the Purchaser harmless from and against any and all losses, liabilities, damages, judgments, claims, deficiencies, or expenses (including interest, penalties, reasonable attorneys' fees and amounts paid in settlement) to which the Purchaser may become subject insofar as such losses, liabilities, damages, judgments, claims, deficiencies, or expenses arise out of or are based upon a breach by the Seller of its representations, warranties and covenants contained herein, or any information certified in any schedule or certificate delivered by any of the Sellers hereunder or in connection with the Transaction Documents, being untrue in any material respect at any time; provided that in no event shall this Section 5.01(q) be construed to include uncollectibility of any Receivable for credit-related reasons pertaining to the related Obligor. The obligations of the Seller under this Section 5.01(q) shall be considered to have been relied upon by the Purchaser and the Administrative Agent, on behalf of the CP Conduit Purchasers, the Funding Agents and the Committed Purchasers, and shall survive the execution, delivery, performance and termination of this Agreement for a period of three (3) years following the Purchase Termination Date, regardless of any investigation made by the Purchaser or the Administrative Agent or on behalf of either of them. It is expressly understood and agreed by the parties (i) that the foregoing indemnification is not intended to, and shall not constitute a guarantee of the collectibility or payment of the Purchased Receivables and (ii) that nothing in this Section 5.01(q) shall constitute recourse (except as otherwise specifically provided in this Agreement) for (a) uncollectible Receivables or other obligations hereunder or related costs or expenses resulting from such indemnified Person's gross negligence or wilful misconduct, (b) any franchise taxes owed by such indemnified Person or (c) any other taxes imposed against such indemnified Person on account of its ownership of the Purchased Receivables to the extent such taxes are measured by or against the gross or net income or receipts of such Person. (r) ERISA. (i) The Seller will not (A) engage or permit any of its ERISA Affiliates to engage in any prohibited transaction (as defined in Section 4975 of the Code and Section 406 of ERISA) for which an exemption is not available or has not previously been obtained from the U.S. Department of Labor; (B) permit to exist any accumulated funding deficiency (as defined in Section 302(a) of ERISA and Section 412(a) of the Code) or funding deficiency with respect to any Benefit Plan other than a Multiemployer Plan; (c) fail to make any payments to any Multiemployer Plan that the Seller or any ERISA Affiliate of the Seller is required to make under the agreement relating to such Multiemployer Plan or any law pertaining thereto; (D) terminate any Benefit Plan so as to result in any liability; or (E) permit to exist any occurrence of any -16- reportable event described in Title IV of ERISA which represents a material risk of a liability to the Sellers, or any ERISA Affiliate of the Seller under ERISA or the Code, if such prohibited transactions, accumulated funding deficiencies, failure to make payments, terminations and reportable events occurring within any fiscal year of the Seller, in the aggregate, involve a payment of money or an incurrence of liability by the Seller or any ERISA Affiliate of the Seller, in an amount which would reasonably be expected to have a Material Adverse Effect and (ii) the Seller shall promptly give the Purchaser written notice upon becoming aware that the Seller is not in compliance in all material respects with ERISA or that any ERISA lien on any of the Receivables exists and, promptly after the receipt or filing thereof, shall provide the Purchaser with copies of all reports and notices with respect to any reportable event (as defined in Article IV of ERISA) which the Seller or any ERISA Affiliate thereof files under ERTSA with the Internal Revenue Service, the Pension Benefit Guaranty Corporation or the U.S. Department of Labor or which the Seller or any ERISA Affiliate thereof receives from the Internal Revenue Service, the Pension Benefit Guaranty Corporation or the U.S. Department of Labor. (s) Amendments to Credit Agreement. The Seller agrees not to amend the Credit Agreement without the Purchaser's consent. ARTICLE VI Repurchase Obligation SECTION 6.01. Mandatory Repurchase. (a) Breach of Representation or Warranty. If any Receivable which has been sold by any Seller hereunder and which has been reported by such Seller as an Eligible Receivable to the Collection Agent in the reports of such Seller delivered pursuant to Section 3.03 shall have failed to meet the conditions set forth in the definition of Eligible Receivable on the date of such report or if, on any day, any representation or warranty made herein in respect of such Receivable shall no longer be true in any material respect, such Seller shall be deemed to have received on the date of such report or such day, as applicable, a Collection of such Receivable in full and shall on such day pay to the Purchaser an amount equal to the aggregate Outstanding Balance of such Receivable. (b) Reconveyance Under Certain Circumstances. Each Seller agrees that, in the event of a breach of any of the representations and warranties set forth in Sections 4.01(d), (h), (j), (k), (1), (n), (o), and (p), with respect to any Receivable which has been sold hereunder, such Seller agrees to accept the reconveyance of such Receivable upon receipt by such Seller of notice given in writing by the Purchaser and such Seller's failure to cure such -17- breach within fifteen (15) days (or, in the case of Section 4.01(d) or (k), within one (1) Business Day) after receipt of such notice. In the event of a reconveyance under this Section 6.01(b), the Seller shall pay to the Purchaser in immediately available funds on such 15th day (or such Business Day, if applicable) an amount equal to the Outstanding Balance of any such Receivable. SECTION 6.02. Dilutions, Etc. Each Seller agrees that if on any Business Day the Outstanding Balance of a Receivable, an interest in which has been sold by such Seller hereunder, is either (x) reduced as a result of defective, rejected or returned goods or other dilution factor, any billing adjustment or other adjustment, or (y) reduced or canceled as a result of (i) a setoff or dispute in respect of any claim by any Person (whether such claim arises out of the same or a related transaction or an unrelated transaction), or (ii) any action by any Federal or state taxing authority or as a result of the payment by any Obligor of any portion of a Receivable constituting a tax or governmental fee or charge to any Person other than the Purchaser, then such Seller shall be deemed to have received on such day a collection of such Receivable in the amount of such reduction, cancelation or payment made by the Obligor and shall on such day pay to the Purchaser an amount equal to such reduction or cancelation on the last Business Day of the calendar month in which such reduction or cancelation occurred. ARTICLE VII Conditions Precedent SECTION 7.01. Conditions Precedent. The obligations of the Purchaser to purchase the Receivables on the Closing Date and on any Business Day on which Receivables are sold hereunder shall be subject to the satisfaction of the following conditions: (a) All representations and warranties of the Sellers contained in this Agreement shall be true and correct on the Closing Date and on the applicable Business Day of sale, with the same effect as though such representations and warranties had been made on such date; (b) All information concerning the Receivables provided to the Purchaser shall be true and correct in all material respects as of the Closing Date, in the case of any Receivables sold on the Closing Date, or the date such Receivables are created, in the case of any Receivables created after the Closing Date and sold by the Sellers to the Purchaser on a subsequent Business Day; -18- (c) Each of the Sellers shall have substantially performed all other obligations required to be performed by the provisions of this Agreement and the other Transaction Documents to which it is a party; (d) The Sellers shall have either filed or caused to be filed the financing statement(s) required to be filed pursuant to Section 2.01(b); (e) On the Closing Date, all corporate and legal proceedings, and all instruments in connection with the transactions contemplated by this Agreement and the other Transaction Documents shall be satisfactory in form and substance to the Purchaser, and the Purchaser shall have received from the Sellers copies of all documents (including, without limitation, records of corporate proceedings) relevant to the transactions herein contemplated as the Purchaser may reasonably have requested; (f) On the Closing Date, the Sellers shall deliver to the Purchaser and the Administrative Agent a statement of the aggregate Outstanding Balance of the Receivables in existence as of the close of business on the second Business Day prior to the Closing Date; and (g) the Purchase Termination Date shall not have occurred. SECTION 7.02. Conditions Precedent to the Addition of a Seller. The obligation of the Purchaser to purchase Receivables and Related Security hereunder from a Subsidiary of MascoTech requested to be an additional Seller pursuant to Section 9.13 is subject to the conditions precedent that the Purchaser shall have received the following items on or before the date designated for the addition of such Seller (the "Seller Addition Date") and in form and substance satisfactory to the Purchaser: (a) Additional Seller Supplement. An Additional Seller Supplement substantially in the form of Exhibit C attached hereto (with a copy for the Administrative Agent and each Funding Agent) duly executed and delivered by such Seller; (b) Secretary's Certificate. A certificate of the Secretary or an Assistant Secretary of such Seller, dated the related Seller Addition Date, and certifying (i) that attached thereto is a true and complete copy of the by-laws of such Seller, as in effect on the Seller Addition Date and at all times since a date prior to the date of the resolutions described in clause (ii) below, (ii) that attached thereto is a true and complete copy of the resolutions, in form and substance reasonably satisfactory to the Purchaser, of the Board of Directors of such Seller or committees thereof authorizing the execution, delivery and performance of this Agreement and the other Transaction Documents to which it is a party and the transactions contemplated hereby and thereby, and that such resolutions have not been amended, modified, revoked or rescinded and are -19- in full force and effect, (iii) that the certificate of incorporation of such Seller has not been amended since the date of the last amendment thereto shown on the certificate of good standing (or its equivalent) furnished pursuant to subsection (e) below and (iv) as to the incumbency and specimen signature of each officer executing the Additional Seller Supplement and any other Transaction Documents or any other document delivered in connection therewith on behalf of such Seller (on which certificates the Purchaser may conclusively rely until such time as the Purchaser shall receive from such Seller a revised certificate with respect to such Seller meeting the requirements of this subsection (b)); (c) Officer's Certificate. A Certificate of a Responsible Officer of MascoTech, dated the related Seller Addition Date, and certifying such Seller is in the same or a related line of business as the existing Sellers as of the related Seller Addition Date; (d) Corporate Documents. The organizational documents, including all amendments thereto, of such Seller, certified as of a recent date by the Secretary of State or other appropriate authority of the state of incorporation, as the case may be; (e) Good Standing Certificates. Certificates of compliance, of status or of good standing, dated as of a recent date, from the Secretary of State or other appropriate authority of such jurisdiction, with respect to such Seller in each State where the ownership, lease or operation of property or the conduct of business requires it to qualify as a foreign corporation, except where the failure to so qualify would not have a Material Adverse Effect; (f) Consents, Licenses, Approvals, Etc. A certificate dated the related Seller Addition Date of a Responsible Officer of such Seller either (i) attaching copies of all consents (including, without limitation, consents under loan agreements and indentures to which any Seller or its Affiliates are parties), licenses and approvals required in connection with the execution, delivery and performance by such Seller of the Additional Seller Supplement and the validity and enforceability of the Additional Seller Supplement against such Seller, and such consents, licenses and approvals shall be in full force and effect or (ii) stating that no such consents, licenses and approvals are so required; (g) No Litigation. Confirmation that there is no pending or, to its knowledge after due inquiry, threatened action or proceeding affecting such Seller or any of its Subsidiaries before any Governmental Authority that could reasonably be expected to have a Material Adverse Effect; -20- (h) Lockboxes. A Lockbox Account with respect to Receivables to be sold by such Seller shall have been established in the name of the Purchaser, each invoice issued to an Obligor on and after the related Seller Addition Date shall indicate that payments in respect of its Receivable shall be made by such Obligor to a Lockbox Account or by wire transfer or other electronic payment to a Lockbox Account or the Collection Account and the Collection Agent shall have delivered with respect to each Lockbox Account a Lockbox Agreement signed by the Purchaser, the Administrative Agent and the applicable Lockbox Bank; (i) UCC Certificate; UCC Financing Statements. Executed copies of such proper financing statements (or other similar instruments), filed and recorded at such Seller's expense prior to the related Seller Addition Date, naming such Seller as the seller and the Purchaser as the purchaser of the Receivables and the Related Security, in proper form for filing in each jurisdiction in which the Purchaser (or any of its assignees) deems it necessary or desirable to perfect the Purchaser's ownership interest in all Receivables and Related Security under the UCC or any comparable law of such jurisdiction; (j) UCC Searches. Written search reports, listing all effective financing statements (or other similar instruments) that name such Seller as debtor or assignor and that are filed in the jurisdictions in which filings were made pursuant to subsection (i) above and in any other jurisdictions that the Purchaser (or any of its assignees) determines are necessary or appropriate, together with copies of such financing statements (none of which, except for those described in subsection (i) above, shall cover any Receivables or Related Security), and tax and judgment lien searches showing no liens that are not permitted by the Transaction Documents; (k) List of Obligors. A microfiche, typed or printed list or other tangible evidence reasonably acceptable to the Purchaser showing, as of a date acceptable to the Purchaser prior to the related Seller Addition Date, the Obligors whose Receivables are to be transferred to the Purchaser and the balance of the Receivables with respect to each such Obligor as of such date; (l) Back-up Servicing Arrangements. Evidence that such Seller maintains disaster recovery systems or back-up computer or other information management systems that, in the Purchaser's, the Administrative Agent's and each Funding Agent's reasonable judgment, are sufficient to protect such Seller's business against material interruption or loss or destruction of its primary computer and information management systems; (m) Systems. Evidence, reasonably satisfactory to the Purchaser, the Administrative Agent and each Funding Agent, that such additional Seller's systems, pro- -21- cedures and record keeping relating to the Receivables remain in all material respects sufficient and satisfactory in order to permit the purchase and administration of the Receivables in accordance with the terms and intent of this Agreement; (n) Opinions. The Transferor shall have received (i) legal opinions on behalf of such Seller as to general corporate matters (including an opinion as to the perfection and priority of the Transferor's interest in the Receivables) and (ii) a certificate from a Responsible Officer of such Seller stating that the Specified Bankruptcy Opinion Provisions are also true and correct as to such Seller as of the Seller Addition Date, all in form and substance reasonably satisfactory to the Administrative Agent and the Funding Agents; and (o) Other. Such other approvals or documents as the Purchaser (or any of its assignees) may reasonably request from such additional Seller, including, but not limited to, a pro-forma Deposit Report and Settlement Statement incorporating the receivables data of such additional Seller. ARTICLE VIII Term and Termination SECTION 8.01. Term. This Agreement shall commence as of the first day on which all of the conditions precedent as set out in Section 7.01 have been satisfied and shall continue in full force and effect until the earlier of (i) the date designated by the Purchaser or the Sellers as the Purchase Termination Date at any time following ten (10) days' written notice to the other (with a copy thereof to the Administrative Agent), (ii) the date on which the Administrative Agent, on behalf of the CP Conduit Purchasers, the Funding Agents and the Committed Purchasers, declares a Termination Event pursuant to the Receivables Transfer Agreement, (iii) upon the occurrence of an Event of Bankruptcy with respect to either the Purchaser or any of the Sellers or (iv) the date on which either the Purchaser or any of the Sellers becomes unable for any reason to purchase or repurchase, respectively, any Receivable in accordance with the provisions of this Agreement or defaults on its obligations hereunder, which default continues unremedied for more than ten (10) days after written notice to the defaulting party (any such date being a "Purchase Termination Date"); provided, however, that the termination of this Agreement pursuant to this Section 8.01 hereof shall not discharge any Person from any obligations incurred prior to such termination, including, without limitation, any obligations to make any payments with respect to any Receivable sold prior to such termination. SECTION 8.02. Effect of Termination. Following the termination of this Agreement pursuant to Section 8.01, the Sellers shall not sell, and the Purchaser shall not purchase, any Receivables. No -22- termination, rejection or failure to assume the executory obligations of this Agreement in any Event of Bankruptcy with respect to the Sellers or the Purchaser shall be deemed to impair or affect the obligations pertaining to any executed sale or executed obligations, including, without limitation, pre-termination breaches of representations and warranties by the Sellers or the Purchaser. Without limiting the foregoing, prior to termination, the failure of the Sellers to deliver computer records of Receivables or any reports regarding the Receivables shall not render such transfer or obligation executory, nor shall the continued duties of the parties pursuant to this Agreement render an executed sale executory. SECTION 8.03. Termination of Sellers and Seller Divisions. (a) MascoTech hereby covenants and agrees with the Purchaser that MascoTech shall not permit any Seller at any time to cease to be a wholly-owned Subsidiary of MascoTech, except as provided in the following paragraph (b). (b) If MascoTech wishes to permit any Seller to cease to be a wholly-owned Subsidiary of MascoTech or terminate the sales of Receivables hereunder by any Seller or Seller Division, then MascoTech shall submit a request (a "Seller Termination Request") to such effect in writing to the Purchaser, which request shall be accompanied by a certificate prepared by a Responsible Officer of the Collection Agent indicating the Purchased Receivables Percentage applicable to such Seller (or Seller Division) as of the date of submission of such request (the "Seller Termination Request Date"). Subject to the terms and provisions hereof and of the Receivables Transfer Agreement, the relevant Seller (or Seller Division) shall be terminated as a Seller (or Seller Division) hereunder immediately upon the consummation of the transaction in connection with which such Seller ceases to be a wholly-owned Subsidiary of MascoTech or in the case of a Seller Division upon the satisfaction of any applicable conditions in the Receivables Transfer Agreement. From and after the date any such Seller (or Seller Division) is terminated as a Seller (or Seller Division) pursuant to this subsection, the Seller (or Seller Division) shall cease selling, and the Purchaser shall cease buying, Receivables and Related Security from such Seller (or Seller Division) and a Purchase Termination Date shall be deemed to have occurred with respect to such Seller (or Seller Division). (c) A terminated Seller (or Seller Division) shall have no further obligation under any Transaction Document, other than pursuant to Sections 5.01(q), 6.01 and 6.02 of this Agreement, with respect to Receivables previously sold by it to the Purchaser. -23- ARTICLE IX Miscellaneous Provisions SECTION 9.01. Amendments, Etc. This Agreement and the rights and obligations of the parties hereunder may not be amended, supplemented, waived or otherwise modified and no consent to any such amendment, supplement, waiver or modification may be given except in an instrument in writing signed by the Purchaser and the Sellers and consented to in writing by the Administrative Agent (with the consent of the Required Committed Purchasers). Any reconveyance executed in accordance with Section 5.01(q), 6.01 or 6.02 hereof shall not be considered an amendment or modification to this Agreement. SECTION 9.02. Governing Law; Submission to Jurisdiction. (a) This Agreement shall be governed by and construed in accordance with the laws of the State of New York except to the extent that the validity or perfection of the Purchaser's ownership of or security interest in the Receivables, or remedies hereunder in respect thereof, are governed by the laws of a jurisdiction other than the State of New York. (b) The parties hereto hereby submit to the nonexclusive jurisdiction of the United States District Court for the Southern District of New York and of any New York state court sitting in The City of New York for purposes of all legal proceedings arising out of or relating to this agreement or the transactions contemplated hereby. Each party hereto hereby irrevocably waives, to the fullest extent it may effectively do so, any objection which it may now or hereafter have to the laying of the venue of any such proceeding brought in such a court and any claim that any such proceeding brought in such a court has been brought in an inconvenient forum. Nothing in this Section 9.02 shall affect the right of the Purchaser to bring any other action or proceeding against any of the Sellers or its property in the courts of other jurisdictions. SECTION 9.03. Notices. (a) All demands, notices and communications hereunder shall be in writing and shall be deemed to have been duly given if personally delivered at or mailed by registered mail, return receipt requested, or telecopied to: (a) in the case of the Purchaser: MTSPC, Inc. 21001 Van Born Road Taylor, MI 48180 -24- Attention: President Telecopy: (313) 792-6940 (b) in the case of the Sellers to the address set forth on Schedule I; and in each case, with a copy to: THE CHASE MANHATTAN BANK, as Administrative Agent 450 W. 33rd Street, 15th Floor New York, New York 10001 Attention: Lara Graff Telecopy: (212) 946-8098 or, as to each party, at such other address as shall be designated by such party in a written notice to each other party. (b) Notices and communications by facsimile shall be effective upon receipt. SECTION 9.04. Severability of Provisions. If any one or more of the covenants, agreements, provisions or terms of this Agreement shall for any reason whatsoever be held invalid, then such covenants, agreements, provisions, or terms shall be deemed severable from the remaining covenants, agreements, provisions, or terms of this Agreement and shall in no way affect the validity or enforceability of the other provisions of this Agreement. SECTION 9.05. Assignment. This Agreement may not be assigned by the parties hereto, except that the Purchaser may assign its rights hereunder pursuant to the Receivables Transfer Agreement to the Administrative Agent for the benefit of the CP Conduit Purchasers, the Funding Agents and the Committed Purchasers as security for the Purchaser's repayment obligations under the Receivables Transfer Agreement and the Asset Purchase Agreement. The Purchaser hereby notifies the Sellers, and the Sellers hereby acknowledge and agree, that the Purchaser, pursuant to the Receivables Transfer Agreement, has assigned its rights (but not its obligations) hereunder to the Administrative Agent for the benefit of the CP Conduit Purchasers and the Committed Purchasers and that the representations, warranties, covenants and agreements of the Sellers contained in this Agreement and the rights, powers and remedies of the Purchaser under this Agreement are intended to benefit the CP Conduit Purchasers and the Committed Purchasers and will be directly enforceable by the Administrative Agent on their behalf. All rights, powers and remedies of the Purchaser hereunder may be exercised by the Administrative Agent to the extent of its rights hereunder and under the other Transaction Documents. -25- SECTION 9.06. Further Assurances. The Purchaser and the Sellers agree to do and perform, from time to time, any and all acts and to execute any and all further instruments required or reasonably requested by the other party more fully to effect the purposes of this Agreement and the other Transaction Documents, including, without limitation, the execution of any financing statements or continuation statements or equivalent documents relating to the Receivables for filing under the provisions of the Relevant UCC or other laws of any applicable jurisdiction. SECTION 9.07. No Waiver; Cumulative Remedies. No failure to exercise and no delay in exercising, on the part of the Purchaser, the Sellers or the Administrative Agent, any right, remedy, power or privilege hereunder, shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges herein provided are cumulative and not exhaustive of any rights, remedies, powers and privilege provided by law. SECTION 9.08. Counterparts. (a) This Agreement may be executed in two or more counterparts thereof (and by different parties on separate counterparts), each of which shall be an original, but all of which together shall constitute one and the same instrument. (b) Delivery of an executed counterpart of a signature page to this Agreement by facsimile shall be effective as delivery of a manually executed counterpart of this Agreement. SECTION 9.09. Binding Effect; Third-Party Beneficiaries. This Agreement and the other Transaction Documents will inure to the benefit of and be binding upon the parties hereto and their respective successors, transferees and permitted assigns. The CP Conduit Purchasers, the Funding Agents, Committed Purchasers and the Administrative Agent are each intended by the parties hereto to be third-party beneficiaries of this Agreement. SECTION 9.10. Merger and Integration. Except as specifically stated otherwise herein, this Agreement and the other Transaction Documents set forth the entire understanding of the parties relating to the subject matter hereof, and all prior understandings, written or oral, are superseded by this Agreement and the other Transaction Documents. -26- SECTION 9.11. Headings. The headings herein are for purposes of reference only and shall not otherwise affect the meaning or interpretation of any provision hereof. SECTION 9.12. Exhibits. The schedules and exhibits referred to herein shall constitute a part of this Agreement and are incorporated into this Agreement for all purposes. SECTION 9.13. Addition of Sellers. Subject to the terms and conditions hereof, from time to time one or more wholly-owned direct or indirect Subsidiaries of MascoTech may become additional Seller parties hereto. If any such Subsidiary wishes to become an additional Seller, MascoTech shall submit a request to such effect in writing to the Purchaser, the Administrative Agent, the Funding Agents and each Rating Agency. If MascoTech, the Purchaser, the Administrative Agent, each Funding Agent and each Rating Agency shall have agreed to any such request (such consent not to be unreasonably withheld or delayed from the date such request is received and such consent of each Funding Agent being obtained by the Administrative Agent), such wholly-owned Subsidiary shall become an additional Seller party hereto on the related Seller Addition Date upon satisfaction of the conditions set forth in Section 7.02. SECTION 9.14. Confidentiality. (a) Each of MascoTech, the Sellers and the Purchaser shall maintain, and shall cause each officer, employee and agent of itself and its Affiliates to maintain, the confidentiality of this Agreement, the other Transaction Documents and all other confidential proprietary information with respect to the other parties and each of their respective businesses obtained by them in connection with the structuring, negotiation and execution of the transactions contemplated herein and in the other Transaction Documents, except for information that has become publicly available or information disclosed (i) to legal counsel, accountants and other professional advisors to the parties and their Affiliates, (ii) as required by law, regulation or legal process (including in connection with any registration Statement or other filing made with the SEC); or (iii) in connection with any legal or regulatory proceeding to which the parties or any of their Affiliates is subject. Each of the parties hereby consents to the disclosure of any nonpublic information with respect to it received by any CP Conduit Purchaser, any Committed Purchaser, any Funding Agent or the Administrative Agent to (i) any of the CP Conduit Purchasers, Committed Purchasers, Funding Agents or the Administrative Agent, (ii) any nationally recognized rating agency providing a rating or proposing to provide a rating to the CP Conduit Purchasers' Commercial Paper, (iii) any placement agent which proposes to offer and sell the CP Conduit Purchasers' Commercial Paper, (iv) any provider of the CP Conduit Purchasers' program-wide liquidity or credit support facilities, (v) any potential Committed Purchaser or (vi) any Participant or potential Participant. -27- (b) Each of the parties hereto shall maintain, and shall cause each officer, employee and agent of itself and its Affiliates to maintain, the confidentiality of the Transaction Documents and all other confidential proprietary information with respect to the CP Conduit Purchasers, the Committed Purchasers, the Funding Agents and the Administrative Agent and each of their respective businesses obtained by them in connection with the structuring, negotiation and execution of the transactions contemplated herein and in the other Transaction Documents, except for information that has become publicly available or information disclosed (i) to legal counsel, accountants and other professional advisors to the parties and their Affiliates, (ii) as required by law, regulation or legal process (including in connection with any registration Statement or other filing made with the SEC) or (iii) in connection with any legal or regulatory proceeding to which the parties or any of their Affiliates is subject. -28- IN WITNESS WHEREOF, the Purchaser and the Sellers each have caused this Receivables Purchase Agreement to be duly executed by their respective officers as of the day and year first above written. MASCOTECH, INC. By: -------------------------------------------- Name: Title: As Sellers: Beaumont Bolt & Gasket, Inc., Compac Corporation, Cuyam Corporation, Draw-Tite, Inc., Fulton Performance Products, Inc., Hitch'N Post, Inc., Industrial Bolt & Gasket, Inc., Lake Erie Screw Corporation, Lamons Metal Gasket Co., Louisiana Hose & Rubber Co., MascoTech Forming Technologies-Fort Wayne, Inc., MascoTech Sintered Components, Inc., MascoTech Sintered Components of Indiana, Inc., MascoTech Tubular Products, Inc., Metalync Company LLC, Netcong Investments, Inc., Reese Products, Inc., Rieke Corporation, Rieke Leasing Co., Incorporated, Rieke of Indiana, Inc., TriMas Fasteners, Inc., Windfall Products, Inc. By: -------------------------------------------- Name: Title: -29- As Purchaser: MTSPC, INC. By: -------------------------------------------- Name: Title: Acknowledged and agreed as of the date first above written: THE CHASE MANHATTAN BANK, as Administrative Agent for the benefit of the several CP Conduit Purchasers, Funding Agents and the Committed Purchasers By: ------------------------------------------ Name: Title: -30- EXHIBIT A FORM OF SUBORDINATED NOTE __________, 2000 FOR VALUE RECEIVED, the undersigned, MTSPC, INC., a Delaware corporation (the "Maker"), hereby promises to pay to the order of MascoTech, Inc., a Delaware corporation (the "Payee"), as Agent for the Sellers under the Receivables Purchase Agreement referred to below, on __________, ____ or earlier as provided for in the Receivables Purchase Agreement dated as of the date hereof between the Maker, the Payee and the Sellers (as such agreement may from time to time be amended, supplemented or otherwise modified and in effect, the "Receivables Purchase Agreement"), the aggregate unpaid principal amount of all Advances to the Maker from the Sellers pursuant to the terms of the Receivables Purchase Agreement, in lawful money of the United States of America in immediately available funds, and to pay interest from the date thereof on the principal amount hereof from the date of this Note continuing until such principal balance shall be paid in full, in like funds, at an office designated by the Payee. Accrued and unpaid interest shall be payable in arrears on the last Business Day of each calendar month (each day, an "Interest Payment Date"). Interest shall be payable at the initial rate of [11.5]% per annum, adjusted monthly on each Interest Payment Date, for the month commencing on such Interest Payment Date, to the sum of Prime Rate then in effect plus 2%. With respect to any Interest Payment Date, the "Prime Rate" shall be the prime rate as reported in The Wall Street Journal on such Interest Payment Date (or, if The Wall Street Journal is not published on such Interest Payment Date, the Business Day next succeeding such Interest Payment Date on which The Wall Street Journal is published.) If The Wall Street Journal shall no longer be published or if it shall cease to report a prime rate, the "Prime Rate" shall be the rate publicly announced by The Chase Manhattan Bank, New York Branch, on such Interest Payment Date as its base commercial lending rate. If any Interest Payment Date shall not be a Business Day, then such Interest Payment Date shall be deemed to occur on the next following Business Day, but no additional interest shall be payable. A "Business Day" means any day that is not a Saturday, Sunday or other day on which commercial banks in New York, New York or , are required or authorized by law to be closed. The undersigned, for itself and its legal representatives, successors and assigns, and any others who may at any time become liable for payment hereunder, hereby (a) consents to any and all extensions of time, renewals, waivers, or modifications, if any, that may be granted or consented to by the Payee with regard to the time of payment hereunder or any other provisions hereof. A-1 The Maker hereby waives diligence, presentment, demand, protest, notice of dishonor and notice of nonpayment. The non-exercise by the holder hereof of any of its rights, powers or remedies hereunder or thereafter available in law, in equity, by statute or otherwise in any particular instance shall not constitute a waiver thereof in that or any subsequent instance. All borrowings evidenced by this Subordinated Note and all payments and prepayments of the principal hereof and interest hereon and the respective dates thereof shall be endorsed by the holder hereof on the schedule attached hereto and made a part hereof, or on a continuation thereof which shall be attached hereto and made a part hereof, or otherwise recorded by such holder in its internal records; provided, however, that the failure of the holder hereof to make such a notation or any error in such a notation shall not in any manner affect the obligation of the Maker to make payments of principal and interest in accordance with the terms of this Subordinated Note and the Receivables Purchase Agreement. The Maker shall have the right to subject to the limitations set forth in the Receivables Purchase Agreement, reborrow Advances made to it without penalty or premium. This Note may be prepaid in full, or from time to time in part, at any time. All payments received under this Note shall be applied first to accrued interest and the remainder, if any, to the principal amount hereunder. This Subordinated Note is the Subordinated Note referred to in the Receivables Purchase Agreement, which, among other things, contains provisions for the subordination of this Subordinated Note to the rights of certain parties under the Receivables Transfer Agreement, all upon the terms and conditions specified therein and as specified on Schedule II to this Subordinated Note. Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in, or incorporated by reference into, the Receivables Purchase Agreement. This Subordinated Note shall be governed by, and construed in accordance with, the laws of the State of New York. A-2 IN WITNESS WHEREOF, the Maker has caused this Note to be signed in its corporate name by the officer thereunto duly authorized, and to be dated as of the date first above written. MTSPC, INC. By: ------------------------------------------- Name: Title: A-3 SCHEDULE I TO SUBORDINATED NOTE
Advances and Payments Amount of Payments Unpaid Principal Name of Person Date Advance Principal/Interest Balance of Note Making Notation
SCHEDULE II TO SUBORDINATED NOTE SUBORDINATION Section 1. Agreement to Subordinate. (a) The Maker for itself and its successors covenants and agrees, and the Payee, by its acceptance of this Note, likewise covenants and agrees, that the indebtedness represented by this Note and the payment of the principal of and interest on this Note is hereby expressly subordinated, to the extent and in the manner hereinafter set forth, to the prior payment in full of all Senior Indebtedness (as defined in Section l(b) below). This Schedule II shall constitute a continuing offer and inducement to all Persons who become holders of, or continue to hold, Senior Indebtedness. The provisions of this Schedule II are made for the benefit of the holders of Senior Indebtedness, each of whom is an obligee hereunder and is entitled to enforce such holders' rights hereunder, without any act or notice of acceptance hereof or reliance hereon. No amendment, modification or discharge of any provision of this Schedule II shall be effective against any holder of Senior Indebtedness unless expressly consented to in writing by such holder. The provisions of this Schedule II apply notwithstanding anything to the contrary contained in this Note. (b) "Senior Indebtedness" means all indebtedness incurred, assumed or guaranteed, directly or indirectly, by the Maker, either before, on, or after the date hereof without any limitation as to the amount or terms thereof, and whether such indebtedness (including, but not limited to, interest on any such indebtedness) arises or accrues before or after the commencement of any bankruptcy, insolvency or receivership proceedings, including (1) all obligations of the Maker to the Administrative Agent, the CP Conduit Purchasers, the Funding Agents and the Committed Purchasers (as such terms are defined below) incurred pursuant to the Receivables Transfer Agreement dated as of November 28, 2000 (as amended, supplemented or otherwise modified from time to time, the "Receivables Transfer Agreement"), among the Maker, the CP Conduit Purchasers, the Committed Purchasers, the Funding Agents, The Chase Manhattan Bank, as administrative agent (the "Administrative Agent"), and the Payee, individually, as collection agent (in such capacity, the "Collection Agent") and as Guarantor, including all fees, expenses, indemnities and any other amounts payable pursuant to the Receivables Transfer Agreement. Senior Indebtedness shall continue to constitute Senior Indebtedness for all purposes of this Note, and the provisions of this Schedule II shall continue to apply to such Senior Indebtedness, notwithstanding the fact that such Senior Indebtedness or any claim in respect thereof shall be disallowed, avoided or subordinated pursuant to the provisions of the United States Bankruptcy Code or other applicable law. Section 2. Subordination of this Note. In the event of any dissolution, winding-up, liquidation or reorganization of the Maker (whether voluntary or involuntary and whether in bankruptcy, insolvency or receivership proceedings, or upon an assignment for the benefit of creditors or any other marshaling of the assets and liabilities of the Maker or otherwise), the Maker and the Payee, by its acceptance hereof, covenant and agree that: (a) all Senior Indebtedness shall first be paid in full, before any payment or distribution is made upon the principal of or interest on this Note: (b) any payment or distribution of assets of the Maker or from the estate created by the commencement of any such proceeding, whether in cash, property or securities to which the Payee would be entitled except for the provisions of this Schedule II (including any such payments or distributions which may be payable or deliverable by reason of the payment of any other indebtedness of the Maker being subordinated to the payment of this Note), shall be paid or delivered by the Maker or any receiver, trustee in bankruptcy, liquidating trustee, agent or other person making such payment or distribution directly to the holders of Senior Indebtedness or their representative or representatives or to the trustee or trustees under any indenture under which any instruments evidencing any of such Senior Indebtedness may have been issued, as their respective interests may appear, to the extent necessary to pay in full all Senior Indebtedness remaining unpaid, after giving effect to any concurrent payment or distribution to the holders of such Senior Indebtedness, before any payment or distribution is made to the Payee; and (c) in the event that any payment or distribution of cash, property or securities shall be received by the Payee in contravention of subsection (a) or (b) of this Section 2 (including any such payments or distributions which may be payable or deliverable by reason of the payment of any other indebtedness of the Maker being subordinated to payment of this Note) before all Senior Indebtedness is paid in full, such payment or distribution shall be held for the benefit of and shall be paid over to the holders of such Senior Indebtedness or their representative or representatives, or to the trustee or trustees under any indenture under which any instrument evidencing any Senior Indebtedness may have been issued, as their respective interests may appear, to the extent necessary to pay in full all Senior Indebtedness remaining unpaid, after giving effect to any concurrent payment or distribution to the holders of Senior Indebtedness. The Maker shall give prompt written notice to the Payee of any dissolution, winding-up, liquidation or reorganization of the Maker or any assignment for the benefit of creditors. Section 3. Subrogation; Enforcement. Subject to and only after the payment in full of all Senior Indebtedness at the time outstanding, the Payee shall be subrogated to the rights of the holders of Senior Indebtedness (to the extent of payments or distributions previously made to such holders of Senior Indebtedness pursuant to the provisions of Section 2 and -2- equally and ratably with the holders of all indebtedness of the Maker which by its express terms is subordinated to indebtedness of the Maker to substantially the same extent as this Note is subordinated and is entitled to like rights of subrogation) to receive payments or distributions of assets of the Maker applicable to the Senior Indebtedness until amounts owing on this Note shall be paid in full. No payments or distributions to the holders of Senior Indebtedness of any cash, property or securities to which the Payee would be entitled except for the provisions of this Schedule II, and no payment over pursuant to the provisions of this Schedule II to holders of Senior Indebtedness by the Payee, shall as between the Maker, its creditors other than the holders of Senior Indebtedness and the Payee be deemed to be a payment by the Maker to or for the account of the holders of Senior Indebtedness, it being understood that the provisions of this Schedule II are intended solely for the purpose of defining the relative rights of the Payee, on the one hand, and the holders of the Senior Indebtedness, on the other hand, and nothing contained in this Schedule II or elsewhere in this Note is intended to or shall impair the obligation of the Maker, which is absolute and unconditional, to pay to the Payee, subject to the rights of the holders of Senior Indebtedness, the principal of and interest on this Note as and when the same shall become due and payable in accordance with its terms, or is intended to or shall effect the relative rights of the Payee and creditors of the Maker other than the holders of the Senior Indebtedness, nor shall anything herein or therein prevent the Payee from exercising all remedies otherwise permitted by applicable law upon default under this Note, subject to the rights, if any, under this Schedule II, of the holders of Senior Indebtedness in respect of cash, property or securities of the Maker received upon the exercise of any such remedy. The Payee by its acceptance hereof: (i) if and so long as payment with respect to this Note is prohibited under this Schedule II, irrevocably authorizes and empowers (but without imposing any obligation on, or any duty to the Payee from) each holder of Senior Indebtedness at any time outstanding and such holder's representatives, to demand, sue for, collect, receive and receipt for the Payee's payments and distributions in respect of this Note (including, without limitation, all payments and distributions which may be payable or deliverable pursuant to the terms of any indebtedness subordinated to this Note which are required to be paid or delivered to the holders of Senior Indebtedness as provided in this Schedule II and to file and prove all claims therefor and all such other action (including the right to vote, file and prove claims respecting any indebtedness subordinated to this Note), as such holder of Senior Indebtedness or such holder's representatives, may determine to be necessary or appropriate for the enforcement of the provisions of this Schedule II; and (ii) agrees to execute and to deliver to each holder of Senior Indebtedness and such holder's representatives all such further instruments confirming the authorization hereinabove set forth, and all such powers of attorney, proofs of claim, assignments of claim and other instruments, and to take all such other action that may be requested by such holder of Senior Indebtedness or such holder's representatives in order to enable such holder to enforce all claims upon or in respect of the Payee's payments and distributions in respect of this Note and so long as there is Senior Indebtedness outstanding, not to compromise, release, forgive or otherwise discharge the obli- -3- gations of the Maker with respect to this Note. For purposes of this Note, Senior Indebtedness shall be deemed to be outstanding until the Receivables Transfer Agreement is no longer in effect. Section 4. Reliance on Court Orders. Upon any payment or distribution of assets of the Maker referred to in Section 2, the Payee shall be entitled to rely upon a certificate of the receiver, trustee in bankruptcy, liquidating trustee, agent or other person making such payment or distribution, delivered to the Payee, for the purpose of ascertaining the persons entitled to participate in such distribution, the holders of Senior Indebtedness and other indebtedness of the Maker, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Schedule II. The Payee owes no fiduciary duty to the holders of Senior Indebtedness and the Payee undertakes to perform or to observe only such covenants and obligations as are specifically set forth in this Note and no implied covenants and obligations with respect to holders of Senior Indebtedness shall be read into this Note against the Payee. Section 5. Payments Upon Default in Payment of Senior Indebtedness and During Senior Indebtedness Default. The Maker shall not make any payment with respect to this Note if and so long as: (1) any Senior Indebtedness is or becomes due and payable (whether at maturity, for an installment of principal or interest, upon acceleration, for mandatory prepayment, or otherwise) and remains unpaid; or (2) any Senior Indebtedness Default (as defined below) has occurred and has not been cured or waived in conformity with the terms of the instrument, indenture or agreement governing such Senior Indebtedness; or (3) a payment by the Maker with respect to this Note would, immediately after giving effect thereto, result in a Senior Indebtedness Default. A payment with respect to this Note shall include, without limitation, payment of principal of and interest on this Note, purchase of this Note by the Maker and any other payment. "Senior Indebtedness Default" means the failure to make any payment of any Senior Indebtedness when due or the happening of an event of default with respect to any Senior Indebtedness, as defined therein or in the instrument under which the same is outstanding which, by its terms, if occurring prior to the stated maturity of such Senior Indebtedness, permits or with the giving of notice or lapse of time (or both) would permit any holder thereof, any group of such holders or any trustee or representative for such holders thereupon to accelerate the maturity thereof or results in such acceleration, including, without limitation, -4- a "Termination Event" or "Potential Termination Event" as defined in the Receivables Transfer Agreement, whether or not such Senior Indebtedness or instrument has been avoided, disallowed or subordinated. In the event that, notwithstanding the foregoing, any payment or distribution of cash, property or securities shall be received or collected by the Payee in contravention of this Section 5 or if and as long as payment with respect to this Note is prohibited under this Schedule II, and except as otherwise expressly provided in Sections 6 and 7 below, such payment or distribution shall be held for the benefit of and shall be paid over to the holders of Senior Indebtedness or their representative or representatives or to the trustee or trustees under any indenture under which any instrument evidencing Senior Indebtedness may have been issued, as their respective interests may appear, to the extent necessary to pay in full all Senior Indebtedness then due, after giving effect to any concurrent payment to the holders of Senior Indebtedness. Section 6. Payee Entitled to Presume Payments Permitted in Absence of Notice. Unless and until written notice shall be received by the Payee from any holder of Senior Indebtedness notifying the Payee of the existence of one or more of the circumstances which would prohibit the making of any payment with respect to this Note under the provisions of Section 5 and stating that it is a "Notice of Senior Indebtedness Default", the Payee shall be entitled to assume that no such circumstances exist. From and after the receipt by the Payee of such Notice the Payee shall, so long as Senior Indebtedness shall be outstanding (but not thereafter), assume that such circumstances continue to exist unless and until the Payee receives a notice from the holder of such Senior Indebtedness to which such default relates stating that such holder has received evidence satisfactory to it that such circumstances have been cured or waived and stating that it is a "Notice of Cure or Waiver of Senior Indebtedness Default." Section 7. Application by Payee of Moneys Deposited With It. Any funds deposited with or collected by the Payee in respect of this Note shall be subject to the provisions of this Schedule II, except that, if immediately prior to the date on which by the terms of this Note any such funds may become payable for any purpose (including, without limitation, the payment of either the principal of or the interest on this Note), the Payee shall not have received with respect to such finds the Notice of Senior Indebtedness Default provided for in Section 6, then the Payee shall have full power and authority to receive such funds and to apply the same to the purpose for which they were received and shall not be affected with respect to such funds by any Notice of Senior Indebtedness default to the contrary which may be received by the Payee on or after such date. Section 8. Obligation not Affected. Except as expressly provided in this Schedule II, nothing contained in this Schedule II or elsewhere in this Note shall affect the -5- obligation of the Maker to make payments of the principal of or interest on this Note at any time in accordance with the provisions hereof. Section 9. No Waiver. No right of any present or future holder of any Senior Indebtedness of the Maker to enforce subordination as herein provided shall at any time in any way be prejudiced or impaired by any act of or failure to act on the part of the Maker or the Payee or by any act or failure to act, by any such holder, or by any noncompliance by the Maker or the Payee with the terms, provisions and covenants of this Note, regardless of any knowledge thereof which any such holder may have or be otherwise charged with. The holders of Senior Indebtedness may extend, renew, modify or amend the terms of the Senior Indebtedness or any security therefor or guaranty thereof and release, sell or exchange or enforce such security or guaranty or elect any right or remedy, or delay in enforcing or release any right or remedy and otherwise deal freely with the Maker all without notice to the Payee and all without affecting the liabilities and obligations of the Payee, even if any right of reimbursement or subrogation or other right or remedy of the Payee is extinguished, affected or impaired thereby. No provision of any supplemental indenture which affects the superior position of the holders of Senior Indebtedness shall be effective against the holders of Senior Indebtedness who have not consented thereto. Section 10. Effectuation of Subordination by the Payee. The Payee, by his acceptance of this Note, agrees to take such action as may be necessary or appropriate to effectuate the subordination as provided in this Schedule II. Section 11. Notice to Maker. The Payee shall promptly advise the Maker of any notice, presentation or demand, as the case may be, received by the Payee from holders of Senior Indebtedness. Section 12. Payee to Presume Outstanding Senior Indebtedness in Absence of Notice. Unless and until written notice shall be given to the Payee by the Maker and the Funding Agent notifying the Payee that Senior Indebtedness is no longer outstanding, the Payee shall assume that Senior Indebtedness is outstanding. The Maker agrees to give, and to cause the Funding Agent to give, such notice to the Payee promptly after the first date on which no Senior Indebtedness shall be outstanding. -6- EXHIBIT B TO RECEIVABLES PURCHASE AGREEMENT Litigation B-1 EXHIBIT C TO RECEIVABLES PURCHASE AGREEMENT [FORM OF ADDITIONAL SELLER SUPPLEMENT] SUPPLEMENT, dated [ 1, to the Receivables Purchase Agreement, dated as of November 28, 2000 (as amended, supplemented or otherwise modified from time to time in accordance with its terms, the "Receivables Purchase Agreement"), among MascoTech, Inc. ("MascoTech"), the Sellers named on Schedule I thereto or added pursuant to a prior Additional Seller Supplement and MTSPC, Inc., as the Purchaser. W I T N E S S E T H: WHEREAS, the Receivables Purchase Agreement provides that any wholly-owned direct or indirect Subsidiary of MascoTech, although not originally a Seller thereunder, may become a Seller under the Receivables Purchase Agreement upon the satisfaction of each of the conditions precedent set forth in Sections 7.02 and 9.13 of the Receivables Purchase Agreement; WHEREAS, the undersigned was not an original Seller under the Receivables Purchase Agreement but now desires to become a Seller thereunder. NOW, THEREFORE, the undersigned hereby agrees as follows: The undersigned agrees to be bound by all of the provisions of the Receivables Purchase Agreement applicable to a Seller thereunder and agrees that it shall, on the date this Supplement is accepted by MascoTech, the Purchaser, the Administrative Agent and each Funding Agent and each of the conditions precedent set forth in Section 7.02 of the Receivables Purchase Agreement have been satisfied, become a Seller for all purposes of the Receivables Purchase Agreement to the same extent as if originally a party thereto. C-1 IN WITNESS WHEREOF, the undersigned has caused this Supplement to be executed and delivered by a duly authorized officer on the date first above written. [Insert name of Seller] By: -------------------------------------------- Name: Title: [address] Accepted as of the date first above written: MASCOTECH By: ------------------------------------------ Name: Title: Accepted as of the date first above written: MTSPC, INC. By: ------------------------------------------ Name: Title: Acknowledged as of the date first above written: THE CHASE MANHATTAN BANK, as Administrative Agent By: ------------------------------------------ Name: Title: C-2 THE CHASE MANHATTAN BANK, as Funding Agent for PARCO By: ------------------------------------------ Name: Title: [Add other Funding Agents] C-3 SCHEDULE I TO RECEIVABLES PURCHASE AGREEMENT Location of Each Seller's Chief Executive Office EX-10.3 10 0010.txt RECEIVABLES TRANSFER AGREEMENT EXHIBIT 10.3 ================================================================================ RECEIVABLES TRANSFER AGREEMENT by and among MTSPC, INC., as Transferor, MASCOTECH, INC., individually, as Collection Agent and as Guarantor, The Persons Parties hereto as CP Conduit Purchasers, Committed Purchasers and Funding Agents and THE CHASE MANHATTAN BANK, as Administrative Agent Dated as of November 28, 2000 ================================================================================ TABLE OF CONTENTS Page ARTICLE I Definitions SECTION 1.01. Certain Defined Terms.....................................1 SECTION 1.02. Other Terms...............................................2 SECTION 1.03. Computation of Time Periods...............................2 ARTICLE II Purchases and Settlements SECTION 2.01. Facility..................................................2 SECTION 2.02. Transfers; Certificates; Eligible Receivables.............3 SECTION 2.03. Selection of Tranche Periods and Tranche Rates............6 SECTION 2.04. Discount, Fees and Other Costs and Expenses...............9 SECTION 2.05. Non-Liquidation Settlement and Reinvestment Procedures....9 SECTION 2.06. Liquidation Settlement Procedures........................11 SECTION 2.07. Reduction of Commitments.................................13 SECTION 2.08. Fees13 SECTION 2.09. Protection of Ownership Interest of the CP Conduit Purchasers and the Committed Purchasers..............13 SECTION 2.10. Deemed Collections; Application of Payments..............15 SECTION 2.11. Payments and Computations, etc...........................16 SECTION 2.12. Reports..................................................17 SECTION 2.13. Collection Account.......................................17 SECTION 2.14. Right of Setoff..........................................19 SECTION 2.15. Sharing of Payments, etc.................................19 SECTION 2.16. Broken Funding...........................................19 SECTION 2.17. Conversion and Continuation of Outstanding Tranches Funded by the Committed Purchasers ..................20 SECTION 2.18. Illegality...............................................21 SECTION 2.19. Inability to Determine Eurodollar Rate...................22 SECTION 2.20. Indemnities by the Transferor............................23 SECTION 2.21. Indemnity for Reserves and Expenses......................27 SECTION 2.22. Indemnity for Taxes......................................29 SECTION 2.23. Other Costs, Expenses and Related Matters................31 SECTION 2.24. Funding Agents...........................................32 -i- Page SECTION 2.25. Use of Historical Data...................................33 ARTICLE III Representations and Warranties SECTION 3.01. Representations and Warranties of the Transferor.........33 SECTION 3.02. Reaffirmation of Representations and Warranties by the Transferor....................................38 ARTICLE IV Conditions Precedent SECTION 4.01. Conditions to Effectiveness..............................38 ARTICLE V Covenants SECTION 5.01. Affirmative Covenants of the Transferor..................41 SECTION 5.02. Negative Covenants of the Transferor.....................49 ARTICLE VI Administration and Collections SECTION 6.01. Appointment of Collection Agent..........................53 SECTION 6.02. Duties of Collection Agent...............................53 SECTION 6.03. Rights After Designation of New Collection Agent.........56 SECTION 6.04. Representations and Warranties of the Collection Agent...57 SECTION 6.05. Covenants of the Collection Agent........................59 SECTION 6.06. Negative Covenants of the Collection Agent...............60 SECTION 6.07. Collection Agent Default.................................61 SECTION 6.08. Responsibilities of the Transferor and the Sellers.......62 ARTICLE VII Termination Events SECTION 7.01. Termination Events.......................................63 SECTION 7.02. Remedies Upon the Occurrence of a Termination Event......65 -ii- Page SECTION 7.03. Reconveyance Under Certain Circumstances.................66 ARTICLE VIII The Administrative Agent SECTION 8.01. Appointment..............................................67 SECTION 8.02. Delegation of Duties.....................................67 SECTION 8.03. Exculpatory Provisions...................................68 SECTION 8.04. Reliance by Administrative Agent.........................68 SECTION 8.05. Notice of Collection Agent Default.......................69 SECTION 8.06. Non-Reliance on the Administrative Agent and Other Purchasers.....................................69 SECTION 8.07. Indemnification..........................................70 SECTION 8.08. The Administrative Agent in Its Individual Capacity......71 SECTION 8.09. Resignation of Administrative Agent; Successor Administrative Agent.................................71 ARTICLE IX Limited Guaranty SECTION 9.01. Guaranty of Obligations..................................72 SECTION 9.02. Validity of Obligations; Irrevocability..................73 SECTION 9.03. Several Obligations......................................74 SECTION 9.04. Subrogation Rights.......................................74 SECTION 9.05. Rights of Set-Off........................................74 SECTION 9.06. Representations and Warranties...........................75 ARTICLE X Miscellaneous SECTION 10.01. Term of Agreement........................................76 SECTION 10.02. Waivers; Amendments......................................77 SECTION 10.03. Notices..................................................77 SECTION 10.04. Governing Law; Submission to Jurisdiction; Integration...79 SECTION 10.05. Severability; Counterparts...............................79 SECTION 10.06. Successors and Assigns...................................80 SECTION 10.07. Confidentiality..........................................83 SECTION 10.08. No Bankruptcy Petition Against the CP Conduit Purchasers.84 SECTION 10.09. Limited Recourse.........................................84 SECTION 10.10. Characterization of the Transactions Contemplated by the Agreement........................................85 -iii- Page SECTION 10.11. Waiver of Setoff........................................86 SECTION 10.12. Chase Conflict Waiver...................................86 SECTION 10.13. Limitation on the Termination of Sellers................87 SCHEDULE A Definitions SCHEDULE B Schedule of CP Conduit Purchasers, Committed Purchasers and Funding Agents SCHEDULE C Schedule of Special Obligors SCHEDULE D Schedule of Match Funding CP Conduit Purchasers EXHIBIT A Credit and Collection Policies and Practices EXHIBIT B List of Lock-Box Banks and Accounts EXHIBIT C Form of Lockbox Agreement EXHIBIT D-1 Form of Deposit Report EXHIBIT D-2 Form of Settlement Statement EXHIBIT E Form of Transfer Certificate EXHIBIT F List of Actions and Suits EXHIBIT G Location of Records EXHIBIT H List of Subsidiaries, Divisions and Trade Names EXHIBIT I Form of Secretary's Certificate EXHIBIT J Trade Names of the Seller EXHIBIT K Form of Transfer Supplement -iv- RECEIVABLES TRANSFER AGREEMENT (as amended, supplemented or otherwise modified and in effect from time to time, this "Agreement"), dated as of November 28, 2000, by and among MTSPC, INC., a Delaware corporation, as transferor (in such capacity, the "Transferor"), MASCOTECH, INC., a Delaware corporation, individually (the "Parent"), as collection agent (in such capacity, the "Collection Agent") and as guarantor under the Limited Guaranty set forth in Article IX (in such capacity, the "Guarantor"), the several commercial paper conduits identified on Schedule B and their respective permitted successors and assigns (the "CP Conduit Purchasers"; each, individually, a "CP Conduit Purchaser"), the several financial institutions identified on Schedule B as "Committed Purchasers" and their respective permitted successors and assigns (the "Committed Purchasers"; each, individually, a "Committed Purchaser"), the agent bank set forth opposite the name of each CP Conduit Purchaser and Committed Purchaser on Schedule B and its permitted successor and assign (the "Funding Agent" with respect to such CP Conduit Purchaser and Committed Purchaser), and THE CHASE MANHATTAN BANK, a New York state banking corporation ("Chase"), as administrative agent for the benefit of the CP Conduit Purchasers, the Committed Purchasers and the Funding Agents (in such capacity, the "Administrative Agent"). PRELIMINARY STATEMENTS WHEREAS the Transferor may desire to convey, transfer and assign, from time to time, undivided percentage interests in certain accounts receivable, and the CP Conduit Purchasers may desire to, and the Committed Purchasers, if requested by the CP Conduit Purchasers or the Transferor, shall, accept such conveyance, transfer and assignment of such undivided percentage interests, subject to the terms and conditions of this Agreement. NOW, THEREFORE, the parties hereby agree as follows: ARTICLE I Definitions SECTION 1.01. Certain Defined Terms. Capitalized -2- terms used herein shall have the meanings assigned to such terms in, or incorporated by reference into, Schedule A attached hereto, which Schedule A is incorporated by reference herein. SECTION 1.02. Other Terms. All accounting terms not specifically defined herein shall be construed in accordance with GAAP. SECTION 1.03. Computation of Time Periods. Unless otherwise stated in this Agreement, in the computation of a period of time from a specified date to a later specified date, the word "from" means "from and including," the words "to" and "until" each means "to but excluding," and the word "within" means "from and excluding a specified date and to and including a later specified date." ARTICLE II Purchases and Settlements SECTION 2.01. Facility. Upon the terms and subject to the conditions set forth herein and in the other Transaction Documents prior to the Termination Date, (x) the Transferor may, at its option, convey, transfer and assign to each CP Conduit Purchaser (prior to the occurrence of a CP Conduit Purchaser's Termination Event with respect to such CP Conduit Purchaser) or to the Committed Purchaser with respect to such CP Conduit Purchaser and (y) each CP Conduit Purchaser may, at its option (prior to the occurrence of a CP Conduit Purchaser's Termination Event with respect to such CP Conduit Purchaser), and the Committed Purchaser with respect to such CP Conduit Purchaser shall, accept such conveyance, transfer and assignment from the Transferor of, without recourse except as provided herein, undivided percentage ownership interests in the Receivables, together with Related Security, Collections and Proceeds with respect thereto, from time to time. Such purchases by the CP Conduit Purchasers and the Committed Purchasers from the Transferor shall be made in accordance with their respective Pro Rata Shares. By accepting any conveyance, transfer and assignment hereunder, none of the CP Conduit Purchasers, the Committed Purchasers, the Funding Agents or the Administrative Agent assumes or shall have any obligations or liability under any of the Contracts, all of which shall remain the obligations and liabilities of the Sellers. -3- The Committed Purchasers' several obligations to make purchases from the Transferor hereunder shall terminate on the Termination Date. Notwithstanding anything to the contrary contained herein or in the other Transaction Documents, no Committed Purchaser shall be obligated to provide the Transferor with funds in an amount that would exceed such Committed Purchaser's unused Commitment then in effect, and the failure of any Committed Purchaser to make its Pro Rata Share of such purchase available to the Transferor (subject to the terms and conditions set forth herein) shall not relieve any other Committed Purchaser of its obligations hereunder. SECTION 2.02. Transfers; Certificates; Eligible Receivables. (a) Incremental Transfers. Prior to the Termination Date, upon the terms and subject to the conditions set forth herein and in the other Transaction Documents, the Transferor may, at its option from time to time, convey, transfer and assign to each CP Conduit Purchaser (prior to the occurrence of a CP Conduit Purchaser's Termination Event with respect to such CP Conduit Purchaser) or to the Committed Purchaser, with respect to such CP Conduit Purchaser and (y) each CP Conduit Purchaser may, at its option from time to time (prior to the occurrence of a CP Conduit Purchaser's Termination Event with respect to such CP Conduit Purchasers), and the Committed Purchasers with respect to such CP Conduit Purchaser shall, accept such conveyance, transfer and assignment from the Transferor, without recourse except as provided herein, undivided percentage ownership interests in the Receivables, together with Related Security, Collections and Proceeds with respect thereto (each, an "Incremental Transfer") from time to time prior to the Termination Date; provided that after giving effect to the issuance of Commercial Paper by the CP Conduit Purchasers or the obtaining of funds by the Committed Purchasers to fund the Transfer Price of any Incremental Transfer and the payment to the Transferor of such Transfer Price, the Net Investment shall not exceed the Facility Limit; and provided further, that the representations and warranties set forth in Section 3.01 shall be true and correct as of the date of such Incremental Transfer and the payment to the Transferor of the Transfer Price related thereto. The Transferor shall, by notice to the Administrative Agent given by telecopy, offer to convey, transfer and assign to each CP Conduit Purchaser (prior to the occurrence of a CP Conduit Purchaser's Termination Event with respect to such CP -4- Conduit Purchaser) or the Committed Purchasers' undivided percentage ownership interests in the Receivables and Related Security, Collections and Proceeds with respect thereto at least two (2) Business Days prior to the proposed date of any Incremental Transfer. Each such notice shall specify (x) the desired Transfer Price (which shall be at least $1,000,000 per CP Conduit Purchaser or integral multiples of $100,000 in excess thereof) or, to the extent that the then available unused portion of the Facility Limit is less than such amount, such lesser amount equal to such available portion of the Facility Limit; (y) the desired date of such Incremental Transfer which shall be a Business Day; and (z) the desired Tranche Period(s) and allocations of the Net Investment of such Incremental Transfer thereto as required by Section 2.03. Each Incremental Transfer shall be subject to the condition precedent that the Collection Agent shall have delivered to the Administrative Agent, in form and substance satisfactory to the Administrative Agent, a completed Deposit Report dated within five (5) Business Days prior to the desired date of such Incremental Transfer, together with such other additional information as the Administrative Agent may reasonably request. The Administrative Agent will promptly notify the Funding Agent for each CP Conduit Purchaser and the Committed Purchasers, as applicable, of the Administrative Agent's receipt of any request for an Incremental Transfer to be made to such Person. At their option, each CP Conduit Purchaser shall accept or reject any such offer by prompt written notice given to the Transferor, the Administrative Agent and the Funding Agent with respect to such CP Conduit Purchaser by telephone or telecopy. Each notice of proposed Incremental Transfer shall be irrevocable and binding on the Transferor, and the Transferor shall indemnify the CP Conduit Purchasers and the Committed Purchasers against any loss or expense incurred by the CP Conduit Purchasers and the Committed Purchasers, either directly or indirectly, as a result of any failure by the Transferor to complete such Incremental Transfer, including, without limitation, any loss or expense incurred by the CP Conduit Purchasers and the Committed Purchasers by reason of the liquidation or reemployment of funds acquired by the CP Conduit Purchasers or the Committed Purchasers (including, without limitation, funds obtained by issuing Commercial Paper or promissory notes, obtaining deposits as loans from third parties and reemployment of funds) to fund such Incremental Transfer. On the date of the initial Incremental Transfer, the Administrative Agent, on behalf of the CP Conduit Purchasers and the Committed Purchasers, shall deliver written confirma- -5- tion to the Transferor of the Transfer Price, the Tranche Period(s) and the Tranche Rate(s) relating to such Transfer as required by Section 2.03, and the Transferor shall deliver to the Administrative Agent the Transfer Certificate in the form of Exhibit E hereto (the "Transfer Certificate"). The Transfer Price for the initial Incremental Transfer shall be $118,500,000. The Administrative Agent shall indicate the amount of the initial Incremental Transfer together with the date thereof on the grid attached to the Transfer Certificate; provided, however, that the failure by the Administrative Agent to make the foregoing notations shall not in any way affect the Transferor's obligations hereunder. On the date of each subsequent Incremental Transfer, the Administrative Agent shall send written confirmation to the Transferor of the Transfer Price, the Tranche Period(s), the Transfer Date and the Tranche Rate(s) applicable to such Incremental Transfer. The Administrative Agent shall indicate the amount of the Incremental Transfer together with the date thereof as well as any decrease in the Net Investment on the grid attached to the Transfer Certificate. The Transfer Certificate shall evidence the Incremental Transfers. On the day of such Incremental Transfer, the CP Conduit Purchasers or the Committed Purchasers, as applicable, shall deposit to the Transferor's account, in immediately available funds, an amount equal to the Transfer Price for such Incremental Transfer made to the CP Conduit Purchasers or the Committed Purchasers, as applicable. (b) Reinvestment Transfers. On each Business Day occurring after the initial Incremental Transfer hereunder and prior to a CP Conduit Purchaser's Termination Event (in the case of the CP Conduit Purchasers) and the Termination Date (in the case of the Committed Purchasers), the Transferor hereby agrees to convey, transfer and assign to each CP Conduit Purchaser (prior to the occurrence of a CP Conduit Purchaser's Termination Event with respect to such CP Conduit Purchaser) or the Committed Purchasers, and each CP Conduit Purchaser may agree to purchase and each Committed Purchaser shall purchase from the Transferor, undivided percentage ownership interests in each and every Receivable, together with Related Security, Collections and Proceeds with respect thereto, to the extent that Collections are available for such Transfer in accordance with Section 2.05 hereof. The Transferor agrees to maintain, at all times prior to the Termination Date, a Net Receivables Balance in an amount at least sufficient to maintain the Percentage Factor at an amount not greater than the Maximum Percentage Factor. Accordingly, the maximum amount of funding that the Transferor may obtain on the Closing Date or at any time thereafter shall be equal to the maximum Net Investment -6- that would not exceed the Facility Limit and would not cause the Percentage Factor to exceed the Maximum Percentage Factor. (c) All Transfers. Each Transfer shall constitute a purchase of undivided percentage ownership interests in each and every Receivable, together with Related Security, Collections and Proceeds with respect thereto then existing, as well as in each and every Receivable, together with Related Security, Collections and Proceeds with respect thereto, which arises at any time after the date of such Transfer. The CP Conduit Purchasers' (and, following the occurrence of a CP Conduit Purchaser's Termination Event with respect to any CP Conduit Purchasers, the Committed Purchasers') aggregate undivided percentage ownership interest in the Receivables, together with the Related Security, Collections and Proceeds with respect thereto, shall equal the Percentage Factor in effect from time to time. (d) Percentage Factor. The Percentage Factor shall be initially computed as of the opening of business of the Collection Agent on the date of the initial Incremental Transfer hereunder. Thereafter, until the Termination Date, the Percentage Factor shall be automatically recomputed as of the close of business of the Collection Agent on each day (other than a day after the Termination Date). The Percentage Factor shall remain constant from the time as of which any such computation or recomputation is made until the time as of which the next such recomputation, if any, shall be made. At all times on and after the Termination Date until the date on which the Net Investment has been reduced to zero and all accrued Discount, Servicing Fees and all other Aggregate Unpaids have been paid in full, the Percentage Factor shall equal 100%. Following any assignment of any portion of the Transferred Interest to the Committed Purchasers pursuant to the Asset Purchase Agreements, the Funding Agent for each CP Conduit Purchaser and Committed Purchaser shall, at all times and from time to time, calculate such CP Conduit Purchaser's and such Committed Purchaser's pro rata interest in the Percentage Factor and regularly report thereon to the Administrative Agent (with copies thereof to the Transferor). SECTION 2.03. Selection of Tranche Periods and Tranche Rates. (a) Transferred Interest Held by CP Conduit Purchasers Prior to CP Conduit Purchaser's Termination Event. At all times hereafter, but prior to the Termination Date and not with -7- respect to any portion of the Transferred Interest held by any of the Committed Purchasers, the Transferor may, subject to each Match Funding CP Conduit Purchaser's approval and the limitations described below, request Tranche Periods and allocate a portion of the Net Investment to each selected Tranche Period, so that the aggregate amounts allocated to outstanding Tranche Periods at all times shall equal the portion of the Net Investment held by the Match Funding CP Conduit Purchasers. The Transferor shall give the Administrative Agent and the Funding Agent with respect to each Match Funding CP Conduit Purchaser irrevocable notice by telephone of the new requested Tranche Period(s) at least two (2) Business Days prior to the expiration of any then existing Tranche Period; provided, however, that each Match Funding CP Conduit Purchaser may select, in its sole discretion, any such new Tranche Period if (i) the Transferor fails to provide such notice on a timely basis or (ii) the Funding Agent with respect to such Match Funding CP Conduit Purchaser, on behalf of such Match Funding CP Conduit Purchaser, determines, in its sole discretion, that the Tranche Period requested by the Transferor is unavailable or for any reason commercially undesirable. Each Match Funding CP Conduit Purchaser confirms that it is its intention to allocate all or substantially all of the portion of the Net Investment held by it to one or more CP Tranche Periods; provided that each Match Funding CP Conduit Purchaser may determine, from time to time, in its sole discretion, that funding such portion of the Net Investment by means of one or more CP Tranche Periods is not possible or is not desirable for any reason. On any Business Day, a Match Funding CP Conduit Purchaser may elect that the Transferor no longer be permitted to select CP Tranches in accordance with the preceding paragraph in respect of the CP Conduit Funded Amount with respect to such Match Funding CP Conduit Purchaser by giving the Transferor and the Administrative Agent irrevocable written notice thereof, which notice must be received by the Transferor and the Administrative Agent at least one Business Day prior to such Business Day. On any Business Day, a Pooled Funding CP Conduit Purchaser may elect thereafter to allow the Transferor to select CP Tranches in accordance with the preceding paragraph in respect of the CP Conduit Funded Amount with respect to such Pooled Funding CP Conduit Purchaser by giving the Transferor and the Administrative Agent irrevocable written notice thereof, which notice must be received by the Transferor and the Administrative Agent at least two (2) Business Days prior to such Business Day. Any Pooled Funding CP Conduit Purchaser making an election to change the manner in which its funding costs are allocated will be both a Match Funding CP Conduit -8- Purchaser and a Pooled Funding CP Conduit Purchaser during the period that its CP Conduit Funded Amount is funded on both a "pooled" and "match funded" basis and its accrued and unpaid Discount will be calculated accordingly. For all purposes of this Agreement, the "CP Tranche" with respect to any Pooled Funding CP Conduit Purchaser shall be equal to the aggregate amount of its CP Conduit Funded Amount funded on a pooled basis during the related CP Tranche Period. (b) Transferred Interest Held by CP Conduit Purchasers Following the Termination Date. At all times on and after the Termination Date, with respect to any portion of the Transferred Interest which shall not have been transferred to the Committed Purchasers (or any of them), each CP Conduit Purchaser or the Funding Agent with respect to such CP Conduit Purchaser, as applicable, shall select all Tranche Periods and Tranche Rates applicable thereto upon the expiration of Tranche Periods in effect on the Termination Date. (c) Transferred Interest Held by the Committed Purchasers Prior to the Termination Date. At all times with respect to any portion of the Transferred Interest which is owned by or transferred to a Committed Purchaser pursuant to this Agreement or an Asset Purchase Agreement, but prior to the Termination Date, the initial Tranche Period applicable to such portion of the Net Investment allocable thereto shall be a period of not greater than three (3) days, and such Tranche shall be a BR Tranche. Thereafter (but prior to the Termination Date or the occurrence and continuation of a Potential Termination Event), with respect to such portion, and with respect to any other portion of the Transferred Interest held by any Committed Purchaser, the Tranche Period applicable thereto shall be, at the Transferor's sole option, either a BR Tranche or a Eurodollar Tranche. The Transferor shall give the Administrative Agent and the Funding Agents with respect to the applicable Committed Purchasers irrevocable notice by telephone of the new Tranche Period at least three (3) Business Days prior to the expiration of any then existing Tranche Period. Any Tranche Period maintained by the Committed Purchasers which is outstanding on the Termination Date shall end on the Termination Date. (d) After the Termination Date; Transferred Interest Held by Committed Purchasers. At all times on and after the Termination Date, with respect to any portion of the Transferred Interest which shall have been owned by, or transferred to, the Committed Purchaser, the Funding Agents with respect to the applicable Committed Purchasers shall select all Tranche -9- Periods and Tranche Rates applicable thereto upon the expiration of Tranche Periods in effect on the Termination Date. SECTION 2.04. Discount, Fees and Other Costs and Expenses. Notwithstanding the limitation on recourse under Section 2.01 hereof, the Transferor shall pay, as and when due in accordance with this Agreement and the other Transaction Documents, all Discount, Servicing Fees, Fees and other Aggregate Unpaids to the extent not otherwise provided for by the provisions of this Agreement. As provided in Section 2.05 and 2.06, the Transferor shall pay to the Administrative Agent, on behalf of the CP Conduit Purchasers and/or the Committed Purchasers, as applicable, an amount equal to the accrued and unpaid Discount for such Tranche Period together with, in the event any portion of the Transferred Interest is held by the CP Conduit Purchasers, an amount equal to the Discount (without duplication) accrued on the CP Conduit Purchasers's Commercial Paper to the extent such Commercial Paper was issued in order to fund the Transferred Interest in a face amount in excess of the Transfer Price of an Incremental Transfer; provided that (i) in the event of any repayment or prepayment of a BR Tranche or a Eurodollar Tranche, accrued Discount on the principal amount repaid or prepaid shall be payable on the date of such repayment or prepayment and (ii) in the event of any conversion of a BR Tranche or a Eurodollar Tranche, accrued interest on such BR Tranche or Eurodollar Tranche shall be payable on the effective date of such conversion. Discount shall accrue with respect to each Tranche on each day occurring during the Tranche Period related thereto. Nothing in this Agreement or the other Transaction Documents shall limit in any way the obligations of the Transferor to pay the amounts set forth in this Section 2.04. SECTION 2.05. Non-Liquidation Settlement and Reinvestment Procedures. On each day after the date of any Incremental Transfer but prior to the Termination Date, and provided that Section 2.06 shall not be applicable, the Collection Agent shall, out of the Percentage Factor of Collections received on or prior to such day and not previously set aside or paid: (i) set aside and hold in trust for the CP Conduit Purchasers or the Committed Purchasers, as applicable (or deposit into the Collection Account if so required pursuant to Section 2.13 hereof) an amount equal to all Dis- -10- count, Fees and the Servicing Fee accrued through such day and not so previously set aside or paid; (ii) apply the balance of such Percentage Factor of Collections remaining after application of Collections as provided in clause (i) of this Section 2.05 to the Transferor, for the benefit of the CP Conduit Purchasers and/or the Committed Purchasers, as applicable, to the purchase of additional undivided percentage interests in each Receivable pursuant to Section 2.02(b) hereof; and (iii) remit the balance, if any, of such Percentage Factor of Collections remaining after the applications provided in clauses (i) and (ii) to the Transferor. On the Settlement Date, from the amounts set aside as described in clause (i) of the first sentence of this Section 2.05 hereof, the Collection Agent shall deposit to the Collection Account, for the benefit of the CP Conduit Purchasers and/or the Committed Purchasers, as applicable, an amount equal to the accrued and unpaid Discount and Fees for the related Settlement Period and shall deposit to its own account an amount equal to the accrued and unpaid Servicing Fee for such Settlement Period; provided that accrued and unpaid Discount with respect to any CP Tranche funded by a Match Funding CP Conduit Purchaser or any Eurodollar Tranche shall be deposited at the end of the related Tranche Period. The Administrative Agent, upon its receipt of such amounts in the Collection Account, shall distribute such amounts to the Funding Agents for the CP Conduit Purchasers and/or the Committed Purchasers entitled thereto in accordance with the records maintained by the Funding Agents pursuant to Section 2.24; provided further that if the Administrative Agent shall have insufficient funds to pay all of the above amounts in full on any such date, the Administrative Agent shall notify the Transferor and the Transferor shall immediately pay to the Administrative Agent, from funds previously paid to the Transferor, an amount equal to such insufficiency. In addition, the Collection Agent shall remit to the Transferor for its account or apply on behalf of the Transferor as instructed by the Transferor to other accounts specified herein, on each Settlement Date, such portion of Collections not allocated to the CP Conduit Purchasers and the Committed Purchasers or applied towards payment of its Servicing Fee so long as all of the above amounts are paid in full when due. Such Collections remitted to the Transferor shall be available for the ordinary business purposes of the Transferor or otherwise, subject to the provisions of the Transaction Documents. -11- SECTION 2.06. Liquidation Settlement Procedures. If at any time on or prior to the Termination Date, the Percentage Factor is greater than the Maximum Percentage Factor, then the Transferor shall immediately pay to the Administrative Agent, for the benefit of the CP Conduit Purchasers and/or the Committed Purchasers, as applicable, from previously received Collections, an amount that, when applied to reduce the Net Investment, will result in a Percentage Factor less than or equal to the Maximum Percentage Factor. Such amount shall be applied to reduce the Net Investment of Tranche Periods selected by the Funding Agents. On the Termination Date and on each day thereafter, and on each day on which a Potential Termination Event has occurred and is continuing, the Collection Agent, at the direction of the Administrative Agent, shall set aside and hold in trust for the CP Conduit Purchasers and/or the Committed Purchasers, as applicable (or deposit into the Collection Account if so required pursuant to Section 2.12 hereof), the Percentage Factor of all Collections received on such day and shall set aside and hold in trust for the Transferor such portion of Collections not allocated to the CP Conduit Purchasers and/or the Committed Purchasers, as applicable. On the Termination Date or the day on which a Potential Termination Event occurs, the Collection Agent shall deposit to the Collection Account, for the benefit of the CP Conduit Purchasers or the Committed Purchasers, as applicable, any amounts set aside pursuant to Section 2.05 above. On the last day of each Tranche Period to occur on or after the Termination Date or during the continuation of a Potential Termination Event, the Collection Agent, at the direction of the Administrative Agent, shall deposit to the Collection Account, for the benefit of the CP Conduit Purchasers and the Committed Purchasers, as applicable, the amounts so set aside for the CP Conduit Purchasers and the Committed Purchasers pursuant to the second preceding sentence, to be applied to the payment in full of (i) the accrued Discount for such Tranche Period, (ii) the portion of the Net Investment allocated to such Tranche Period, and (iii) all other Aggregate Unpaids not covered in clauses (i) and (ii). On such day, the Collection Agent shall deposit to its account, from the amounts set aside for the CP Conduit Purchasers and the Committed Purchasers pursuant to the preceding sentence which remain after payment in full of the aforementioned amounts, -12- the accrued Servicing Fee for such Tranche Period. If there shall be insufficient funds on deposit for the Collection Agent to distribute funds in payment in full of the aforementioned amounts, the Collection Agent shall distribute funds in the following order of priority: (i) first, in payment of the accrued Discount; (ii) second, if the Transferor, the Parent or any Affiliate of the Transferor or the Parent is not then the Collection Agent, to the Collection Agent's account, in payment of the Servicing Fee payable to the Collection Agent; (iii) third, in reduction of the Net Investment allocated to any Tranche Period ending on such date; (iv) fourth, in payment of all Fees payable by the Transferor hereunder; (v) fifth, in payment of all other Aggregate Unpaids not covered in clauses (i) through (iv) above; and (vi) sixth, if the Transferor, the Seller or any Affiliate of the Transferor or the Seller is the Collection Agent, to its account as Collection Agent, in payment of the Servicing Fee payable to such Person as Collection Agent. The Administrative Agent, upon its receipt of such amounts in the Administrative Agent's account, shall distribute such amounts to the Funding Agents for the CP Conduit Purchasers and/or the Committed Purchasers entitled thereto in accordance with the records maintained by the Funding Agents pursuant to Section 2.24; provided that if the Administrative Agent shall have insufficient funds to pay all of the above amounts in full on any such date, the Administrative Agent shall pay such amounts in the order of priority set forth above and, with respect to any such category above for which the Administrative Agent shall have insufficient funds to pay all amounts owing on such date, ratably (based on the amounts in such categories owing to such Persons) among all such Persons entitled to payment thereof. Following the date on which the Net Investment has been reduced to zero and all accrued Discount, Servicing Fees and all other Aggregate Unpaids have been paid in full, (i) the Percentage Factor shall equal zero, (ii) the Administrative Agent, on behalf of the CP Conduit Purchasers and the Committed Purchasers, shall be considered to have reconveyed to the Transferor all of the CP Conduit Purchasers's and the Committed -13- Purchasers' right, title and interest in, to and under the Receivables and Related Security, Collections and Proceeds with respect thereto, (iii) the Collection Agent shall pay to the Transferor any remaining Collections set aside and held by the Collection Agent pursuant to the third sentence of this Section 2.06 and (iv) the Administrative Agent, on behalf of the CP Conduit Purchasers and the Committed Purchasers, shall execute and deliver to the Transferor, at the Transferor's expense, such documents or instruments as are necessary to terminate the CP Conduit Purchasers' and the Committed Purchasers' respective interests in the Receivables and Related Security, Collections and Proceeds with respect thereto. Any such documents shall be prepared by or on behalf of the Transferor. On the last day of each Tranche Period, the Collection Agent shall remit to the Transferor such portion of Collections set aside for the Transferor pursuant to this Section 2.06. SECTION 2.07. Reduction of Commitments. Upon ten (10) Business Days written notice to the Administrative Agent, the Transferor may reduce the Commitments of the Committed Purchasers in an amount equal to $5,000,000 or a whole multiple of $500,000 in excess thereof; provided that no such termination or reduction shall be permitted if, after giving effect thereto, the Net Investment would exceed 98.04% of the Aggregate Commitment. Upon any such reduction, the Commitment of each Committed Purchaser shall be reduced in an amount equal to such Committed Purchaser's Pro Rata Share of the amount of such reduction, and the Facility Limit shall be recalculated to equal 98.04% of the Aggregate Commitment. Once reduced, the Commitments shall not be subsequently reinstated. The Commitment of each Committed Purchaser shall be automatically reduced to zero on the Commitment Expiry Date. SECTION 2.08. Fees. To the extent not otherwise provided for by the provisions of the Agreement, the Transferor shall pay to the Administrative Agent, for its own account and the account of each CP Conduit Purchaser, Funding Agent and Committed Purchaser, the Fees specified in the Fee Letter. SECTION 2.09. Protection of Ownership Interest of the CP Conduit Purchasers and the Committed Purchasers. (a) The Transferor agrees that it will, and will cause each Seller to, from time to time, at its expense, -14- promptly execute and deliver all instruments and documents and take all actions as may be necessary or as the Administrative Agent may reasonably request in order to perfect or protect the Transferred Interest or to enable the Administrative Agent, the CP Conduit Purchasers or the Committed Purchasers to exercise or enforce any of their respective rights hereunder. Without limiting the foregoing, the Transferor will, and will cause each Seller to, upon the request of the Administrative Agent, the CP Conduit Purchasers or any of the Committed Purchasers, in order to accurately reflect this purchase and sale transaction, (x) execute and file such financing or continuation statements or amendments thereto or assignments thereof (as permitted pursuant to Section 10.06 hereof) as may be requested by the Administrative Agent for the benefit of the CP Conduit Purchasers and the Committed Purchasers and (y) mark its respective master data processing records and other documents with a legend describing the conveyance to the Transferor (in the case of the Sellers) and the Administrative Agent for the benefit of the CP Conduit Purchasers and the Committed Purchasers, of the Transferred Interest. The Transferor shall, and will cause the Sellers to, upon request of the Administrative Agent, obtain such additional search reports as the Administrative Agent, for the benefit of the CP Conduit Purchasers and the Committed Purchasers, shall reasonably request. To the fullest extent permitted by applicable law, the Administrative Agent shall be permitted to sign and file continuation statements and amendments thereto and assignments thereof without the Transferor's or any Seller's signature. Carbon, photostatic or other reproduction of this Agreement or any financing statement shall be sufficient as a financing statement. The Transferor shall not, and shall not permit any Seller to, change its respective name, identity or corporate structure (within the meaning of Section 9-402(7) of the Relevant UCC), or relocate its respective chief executive office or any office where Records are kept unless it shall have: (i) given the Administrative Agent at least thirty (30) days' prior notice thereof and (ii) prepared at Transferor's expense and delivered to the Administrative Agent all financing statements, instruments and other documents necessary to preserve and protect the Transferred Interest or requested by the Administrative Agent in connection with such change or relocation. Any filings under the Relevant UCC or otherwise that are occasioned by such change in name or location shall be made at the expense of Transferor. (b) The Collection Agent shall instruct, and shall cause the other Sellers to instruct, all Obligors to cause all Collections to be deposited directly with a Lock-Box Bank. Any -15- Lock-Box Account maintained by a Lock-Box Bank pursuant to the related Lock-Box Agreement shall be under the exclusive dominion and control of the Administrative Agent which is hereby granted to the Administrative Agent by the Transferor. The Collection Agent shall be permitted to give instructions to the Lock-Box Banks except during the occurrence of a Collection Agent Default or any other Termination Event. The Collection Agent shall not add any bank as a Lock-Box Bank to those listed on Exhibit B attached hereto unless such bank has entered into a Lock-Box Agreement. The Collection Agent shall not terminate any bank as a Lock-Box Bank unless the Administrative Agent shall have received sixty (60) days' prior notice of such termination. If the Transferor, any Seller or the Collection Agent receives any Collections, the Transferor or the Collection Agent, as applicable, shall, or shall cause such Seller to, remit such Collections to a Lock-Box Account within one (1) Business Day. (c) The Transferor hereby pledges, assigns and transfers to the Administrative Agent, for the benefit of the CP Conduit Purchasers and the Committed Purchasers, and hereby creates and grants to the Administrative Agent, for the benefit of the CP Conduit Purchasers and the Committed Purchasers, a security interest in the Lock-Box Accounts and all cash, checks and other negotiable instruments, funds and other evidences of payment held therein. SECTION 2.10. Deemed Collections; Application of Payments. (a) If on any day a Receivable becomes a Diluted Receivable, the Transferor shall be deemed to have received on such day a Collection of such Receivable in the amount of such reduction or cancellation, and the Transferor shall pay to the Collection Agent an amount equal to such reduction or cancellation. Any such amount shall be applied by the Collection Agent as a Collection in accordance with Section 2.05 or 2.06 hereof, as applicable. The Net Investment shall be reduced by the amount of such payment actually received by the Administrative Agent. (b) If on any day any of the representations or warranties in Article III was or becomes untrue with respect to a Receivable or the nature of the Administrative Agent's interest therein (whether on or after the date of any transfer of an interest therein to the CP Conduit Purchasers and the Committed Purchasers, or an assignment therein by the CP Conduit Purchas- -16- ers to the Committed Purchasers under the Asset Purchase Agreements), the Transferor shall be deemed to have received on such day a Collection of such Receivable in full and the Transferor shall, on such day, pay to the Collection Agent an amount equal to the Outstanding Balance of such Receivable and such amount shall be allocated and applied by the Collection Agent as a Collection allocable to the Transferred Interest in accordance with Section 2.05 or 2.06 hereof, as applicable. The Net Investment shall be reduced by the amount of such payment actually received by the Administrative Agent. Simultaneously with any such payment by the Transferor, each of the CP Conduit Purchasers and the Committed Purchasers, as the case may be, shall convey all of its right, title and interest in such Receivable and Related Security to the Transferor, and the Administrative Agent, on behalf of the CP Conduit Purchasers and the Committed Purchasers, shall take all action reasonably requested by the Transferor to effectuate such conveyance. (c) Any payment by an Obligor in respect of any indebtedness owed by it to the Transferor or the Seller shall, except as provided in paragraphs (a) and (b) of this Section 2.10 or as otherwise specified by such Obligor or otherwise required by contract or law and unless otherwise instructed by the CP Conduit Purchasers, be applied as a Collection of any Receivable of such Obligor included in the Transferred Interest (in order of the age of such Receivable, starting with the oldest such Receivable) to the extent of any amounts then due and payable thereunder before being applied to any other receivable or other indebtedness of such Obligor. SECTION 2.11. Payments and Computations, etc. All amounts to be paid or deposited by the Transferor or the Collection Agent hereunder shall be paid or deposited in accordance with the terms hereof no later than 12:00 p.m. (New York time) on the day when due in immediately available funds; if such amounts are payable to any CP Conduit Purchaser (or any Committed Purchaser) they shall be paid or deposited to the Collection Account, until otherwise notified by the Administrative Agent. No later than 3:00 p.m. (New York time) on the date of any Incremental Transfer hereunder, the CP Conduit Purchasers or the Committed Purchasers, as applicable, will make available to the Transferor, in immediately available funds, the amount of such Incremental Transfer on such day by remitting such amount to an account of the Transferor specified in the related notice of Transfer. The Transferor shall, to the extent permitted by law, pay to the Administrative Agent, for the benefit of the CP Conduit Purchasers and/or the Committed -17- Purchasers upon demand, interest on all amounts not paid or deposited by it when due hereunder at a rate equal to 1.5% per annum plus the Base Rate. All computations of interest hereunder shall be made on the basis of a year of 365 or 366 days, as applicable for the actual number of days (including the first but excluding the last day) elapsed. Whenever any payment or deposit to be made hereunder shall be due on a day other than a Business Day, such payment or deposit shall be made on the next succeeding Business Day and such extension of time shall be included in the computation of such payment or deposit. Any computations by the Administrative Agent of amounts payable by the Transferor hereunder shall be binding upon the Transferor absent manifest error. SECTION 2.12. Reports. (a) Deposit Report. The Collection Agent shall deliver to the Administrative Agent and the Transferor, no later than 1:00 p.m., New York City time, on each Weekly Settlement Date (or, after the occurrence of a Termination Event or after the occurrence and during the continuance of a Potential Termination Event, on each Business Day), a written report substantially in the form attached hereto as Exhibit D-1 (the "Deposit Report") setting forth total Collections received and Receivables originated during the immediately preceding calendar week, Eligible Receivables balances at the end of the immediately preceding calendar week, and such other information as the Administrative Agent may reasonably request. If any Sellers or Seller Divisions are shut down during any week, the Deposit Report for such week may be prepared on the basis of the information with respect to the Collections and Receivables of such Sellers and Seller Divisions for their last week of operations preceding the shut down. The Deposit Report may be delivered in an electronic format mutually agreed upon by the Collection Agent and the Administrative Agent, or pending such agreement, by facsimile. (b) Settlement Statement. On each Settlement Date, the Collection Agent shall deliver to the Administrative Agent and the Transferor a monthly report, substantially in the form of Exhibit D-2 (the "Settlement Statement"), showing (i) the aggregate Purchase Price of Receivables acquired or generated by the Sellers in the preceding month, (ii) the aggregate Outstanding Balance of such Receivables that are Eligible Receivables and (iii) such other information as the Administrative Agent may reasonably request. SECTION 2.13. Collection Account. (a) There shall be -18- established on or before the day of the initial Incremental Transfer hereunder and maintained, for the benefit of the Administrative Agent on behalf of the CP Conduit Purchasers and the Committed Purchasers, a segregated account (the "Collection Account"), bearing a designation clearly indicating that the funds deposited therein are held for the benefit of the CP Conduit Purchasers and the Committed Purchasers. On and after the occurrence of a Termination Event or a Potential Termination Event, the Collection Agent, at the direction of the Administrative Agent, shall remit daily to the Collection Account all Collections received with respect to any Receivables as provided in Section 2.06. Funds on deposit in the Collection Account (other than investment earnings) shall be invested by the Administrative Agent in Permitted Investments that will mature so that such funds will be available prior to the last day of each successive Tranche Period or prior to each Settlement Date, as applicable, following such investment. On the last day of each Tranche Period or on each Settlement Date, as applicable, all interest and earnings (net of losses and investment expenses) on funds on deposit in the Collection Account shall be retained in the Collection Account and be available to make any payments required to be made hereunder (including Discount) by the Transferor. On the date on which the Net Investment is zero, all accrued Discount, Servicing Fees, Fees and all other Aggregate Unpaids have been paid in full, any funds remaining on deposit in the Collection Account shall be paid to the Transferor. (b) For so long as any amounts remain due and owing to the CP Conduit Purchasers or the Committed Purchasers hereunder or under the Transaction Documents, the Administrative Agent shall distribute all payments received by it in respect of the Transaction Documents immediately after receipt thereof by (i) transferring to the CP Conduit Purchasers and the Committed Purchasers, on a pro rata basis, based on the amounts thereof owing to each CP Conduit Purchaser and each Committed Purchaser, respectively, all payments of Discount, (ii) transferring to the CP Conduit Purchasers and the Committed Purchasers, on a pro rata basis, based on the CP Conduit Purchaser's Interest and the Committed Purchaser Funded Amount, respectively, on the date of payment, all payments in reduction of the Net Investment and (iii) transferring to the CP Conduit Purchasers and/or the Committed Purchasers, any other amounts owing to the CP Conduit Purchasers and/or the Committed Purchasers under this Agreement. Such transfers shall be made by the Administrative Agent by withdrawing funds on deposit in the Collection Account and remitting such funds to the accounts of the CP Conduit Purchasers and the Committed Purchasers speci- -19- fied by each of them from time to time. The Administrative Agent shall remit any such funds to the Committed Purchasers ratably in accordance with their Pro Rata Shares. SECTION 2.14. Right of Setoff. Each of the CP Conduit Purchasers and the Committed Purchasers is hereby authorized (in addition to any other rights it may have) at any time after the occurrence of the Termination Date, or during the continuation of a Termination Event, to set off, appropriate and apply (without presentment, demand, protest or other notice which are hereby expressly waived) any deposits and any other indebtedness held or owing by such CP Conduit Purchaser or such Committed Purchaser to, or for the account of, the Transferor against the amount of the Aggregate Unpaids owing by the Transferor to such Person (even if contingent or unmatured). SECTION 2.15. Sharing of Payments, etc. If any CP Conduit Purchaser or any Committed Purchaser (for purposes of this Section 2.15 only, a "Recipient") shall obtain any payment (whether voluntary, involuntary, through the exercise of any right of setoff, or otherwise) on account of any interest in the Transferred Interest owned by it in excess of its ratable share of payments on account of any interest in the Transferred Interest obtained by the CP Conduit Purchasers and/or the Committed Purchasers entitled thereto, such Recipient shall forthwith purchase from the CP Conduit Purchasers and/or the Committed Purchasers entitled to a share of such amount participations in the percentage interests owned by such Persons as shall be necessary to cause such Recipient to share the excess payment ratably with each such other Person entitled thereto; provided, however, that if all or any portion of such excess payment is thereafter recovered from such Recipient, such purchase from each such other Person shall be rescinded and each such other Person shall repay to the Recipient the purchase price paid by such Recipient for such participation to the extent of such recovery, together with an amount equal to such other Person's ratable share (according to the proportion of (a) the amount of such other Person's required payment to (b) the total amount so recovered from the Recipient) of any interest or other amount paid or payable by the Recipient in respect of the total amount so recovered. SECTION 2.16. Broken Funding. In the event of (a) the payment of any principal of any Eurodollar Tranche other than on the last day of the Eurodollar Tranche Period applicable -20- thereto (including as a result of the occurrence of the Termination Date or an optional prepayment of a Eurodollar Tranche), (b) the conversion of any Eurodollar Tranche other than on the last day of the related Eurodollar Tranche Period, or (c) any failure to borrow, convert, continue or prepay any Eurodollar Tranche on the date specified in any notice delivered pursuant hereto, then, in any such event, the Transferor shall compensate the Committed Purchasers for the loss, cost and expense actually incurred by such Committed Purchasers attributable to such event. Such loss, cost or expense to any Committed Purchaser shall include an amount determined by such Committed Purchaser to be the excess, if any, of (i) the amount of Discount which would have accrued on the principal amount of such Eurodollar Tranche had such event not occurred, at the Eurodollar Rate that would have been applicable to such Eurodollar Tranche, for the period from the date of such event to the last day of the Eurodollar Tranche Period (or, in the case of a failure to borrow, convert or continue, for the period that would have been the related Eurodollar Tranche Period), over (ii) the amount of interest which would accrue on such principal amount for such period at the interest rate which such Committed Purchaser would bid were it to bid, at the commencement of such period, for dollar deposits of a comparable amount and period from other banks in the interbank Eurodollar market. Within forty-five (45) days after any Committed Purchaser hereunder receives actual knowledge of any of the events specified in this Section 2.16, a certificate of such Committed Purchaser setting forth any amount or amounts that such Committed Purchaser is entitled to receive pursuant to this Section 2.16 and the reason(s) therefor shall be delivered to the Transferor (with a copy to the Administrative Agent) and shall be conclusive absent manifest error. The Transferor shall pay each such Committed Purchaser the amount shown as due on any such certificate within ten (10) days after receipt thereof. SECTION 2.17. Conversion and Continuation of Outstanding Tranches Funded by the Committed Purchasers. Prior to the occurrence of the Termination Date or a Potential Termination Event, (a) each BR Tranche hereunder may, at the option of the Transferor, be converted to a Eurodollar Tranche and (b) each Eurodollar Tranche may, at the option of the Transferor, be continued as a Eurodollar Tranche or converted to a BR Tranche. If the Termination Date has occurred or a Potential Termination Event has been declared by the Administrative Agent and is continuing, then (i) no outstanding Tranche funded by the Committed Purchasers may be converted to, or con- -21- tinued as, a Eurodollar Tranche and (ii) unless repaid, each Eurodollar Tranche shall be converted to a BR Tranche on the last day of the Tranche Period related thereto. For any such conversion or continuation, the Transferor shall give the Administrative Agent irrevocable notice (each, a "Conversion/Continuation Notice") of such request not later than 12:30 p.m. (New York City time) (i) in the case of a conversion of a BR Tranche into a Eurodollar Tranche, or a continuation of a Eurodollar Tranche as a Eurodollar Tranche, three (3) Business Days before the date of such conversion or continuation, as applicable, and (ii) following the Termination Date or the declaration by the Administrative Agent and continuation of a Potential Termination Event, in the case of a conversion of a Eurodollar Tranche into a BR Tranche or a continuation of a BR Tranche as a BR Tranche, on the Business Day of such conversion. If a Conversion/Continuation Notice has not been timely delivered with respect to any BR Tranche or Eurodollar Tranche, such Tranche shall be automatically continued as, or converted to, a BR Tranche. Each Conversion/Continuation Notice shall specify (a) the requested date (which shall be a Business Day) of such conversion or continuation, (b) the aggregate amount and rate option applicable to the Tranche which is to be converted or continued and (c) the amount and rate option(s) of Tranche(s) into which such Tranche is to be converted or continued. SECTION 2.18. Illegality. (a) Notwithstanding any other provision herein, if, after the Closing Date, the adoption of any Law or bank regulatory guideline or any amendment or change in the interpretation of any existing or future Law or bank regulatory guideline by any Official Body charged with the administration, interpretation or application thereof, or the compliance with any directive of any Official Body (in the case of any bank regulatory guideline, whether or not having the force of Law), shall make it unlawful for any Committed Purchaser to acquire or maintain a Eurodollar Tranche as contemplated by this Agreement, (i) such Committed Purchaser shall, within forty-five (45) days after receiving actual knowledge thereof, deliver a certificate to the Transferor (with a copy to the Administrative Agent) setting forth the basis for such illegality, which certificate shall be conclusive absent manifest error, (ii) the commitment of such Committed Purchaser hereunder to make a portion of a Eurodollar Tranche, continue any portion of a Eurodollar Tranche as such and convert a BR Tranche to a Eurodollar Tranche shall forthwith be canceled, and such cancelation shall -22- remain in effect so long as the circumstance described above exists, and (iii) such Committed Purchaser's portion of any Eurodollar Tranche then outstanding shall be converted automatically to a BR Tranche on the last day of the related Eurodollar Tranche Period, or within such earlier period as required by law. If any such conversion of a portion of a Eurodollar Tranche occurs on a day which is not the last day of the related Eurodollar Tranche Period, then pursuant to Section 2.16 the Transferor shall pay to such Committed Purchaser such amounts, if any, as may be required to compensate such Committed Purchaser. If circumstances subsequently change so that it is no longer unlawful for an affected Committed Purchaser to acquire or to maintain a portion of a Eurodollar Tranche as contemplated hereunder, such Committed Purchaser will, as soon as reasonably practicable after such Committed Purchaser knows of such change in circumstances, notify the Transferor and the Administrative Agent, and upon receipt of such notice, the obligations of such Committed Purchaser to acquire or maintain its acquisition of portions of Eurodollar Tranches or to convert its portion of a BR Tranche into portions of Eurodollar Tranches shall be reinstated. (b) Each Committed Purchaser agrees that, upon the occurrence of any event giving rise to the operation of Section 2.18(a) with respect to such Committed Purchaser, it will, if requested by the Transferor and to the extent permitted by law or by the relevant Official Body, endeavor in good faith to change the office at which it books its portions of Eurodollar Tranches hereunder if such change would make it lawful for such Committed Purchasers to continue to acquire or to maintain its acquisition of portions of Eurodollar Tranches hereunder; provided, however, that such change may be made in such manner that such Committed Purchaser, in its sole determination, suffers no unreimbursed cost or expense or any other disadvantage whatsoever. SECTION 2.19. Inability to Determine Eurodollar Rate. If, prior to the first day of any Eurodollar Tranche Period: (1) the Administrative Agent shall have determined (which determination in the absence of manifest error shall be conclusive and binding upon the Transferor) that, by reason of circumstances affecting the interbank Eurodollar market, either (a) dollar deposits in the relevant -23- amounts and for the relevant Tranche Period are not available, or (b) adequate and reasonable means do not exist for ascertaining the Eurodollar Rate for such Eurodollar Tranche Period; or (2) the Administrative Agent shall have received notice from the Required Committed Purchasers that the Eurodollar Rate determined or to be determined for such Eurodollar Tranche Period will not adequately and fairly reflect the cost to such Committed Purchasers (as conclusively certified by such Committed Purchasers) of purchasing or maintaining their affected portions of Eurodollar Tranches during such Eurodollar Tranche Period; then, in either such event, the Administrative Agent shall give telecopy or telephonic notice thereof (confirmed in writing) to the Transferor and the Committed Purchasers as soon as practicable (but, in any event, within ten (10) days after such determination or notice, as applicable) thereafter. Until such notice has been withdrawn by the Administrative Agent, no further Eurodollar Tranches shall be made. The Administrative Agent agrees to withdraw any such notice as soon as reasonably practicable after the Administrative Agent is notified of a change in circumstances which makes such notice inapplicable. SECTION 2.20. Indemnities by the Transferor. Without limiting any other rights which the Administrative Agent, the CP Conduit Purchasers or the Committed Purchasers may have hereunder or under applicable law, the Transferor hereby agrees to indemnify the CP Conduit Purchasers, the Committed Purchasers, the Funding Agents and the Administrative Agent and any successors and permitted assigns and their respective officers, directors, agents and employees (collectively, "Indemnified Parties") from and against any and all damages, losses, claims, liabilities, costs and expenses, including, without limitation, reasonable attorneys' fees (which such attorneys may be employees of the Administrative Agent) and disbursements (all of the foregoing being collectively referred to as "Indemnified Amounts") awarded against or incurred by any of them in any action or proceeding between the Transferor, the Collection Agent in such capacity or the Sellers and any of the Indemnified Parties or between any of the Indemnified Parties and any third party or otherwise arising out of or as a result of this Agreement, the other Transaction Documents, the ownership or maintenance, either directly or indirectly, by the Administrative Agent, the CP Conduit Purchasers or any Committed Purchaser of the Transferred Interest or -24- any of the other transactions contemplated hereby or thereby, excluding, however, (i) Indemnified Amounts to the extent relating to or resulting from (x) gross negligence or willful misconduct on the part of an Indemnified Party or (y) recourse (except as otherwise specifically provided in this Agreement) for uncollectible Receivables or (ii) all taxes (other than Indemnified Taxes). Without limiting the generality of the foregoing, the Transferor shall indemnify each Indemnified Party for Indemnified Amounts (without duplication of amounts for which any Indemnified Party is effectively held harmless under any other provision hereof) relating to or resulting from: (a) any representation or warranty made in writing by the Transferor, the Collection Agent or the Sellers or any officers of the Transferor, the Collection Agent or the Sellers under or in connection with this Agreement, any of the other Transaction Documents, any Deposit Report, any Settlement Report or any other information or report delivered by any of them pursuant hereto or thereto, which shall have been false or incorrect in any material respect when made or deemed made; (b) the failure by the Transferor, the Collection Agent or the Sellers to comply with any applicable law, rule or regulation with respect to any Receivable or the related Contract, or the nonconformity of any Receivable or the related Contract with any such applicable law, rule or regulation; (c) the failure to either (x) vest and maintain vested in the Administrative Agent, for the benefit of the CP Conduit Purchasers and the Committed Purchasers, an undivided first priority, perfected percentage ownership interest, to the extent of the Transferred Interest, in the Receivables and Related Security, Collections and Proceeds with respect thereto, free and clear of any Adverse Claim or (y) to create or maintain a valid and perfected first priority security interest in favor of the Administrative Agent, for the benefit of the CP Conduit Purchasers and the Committed Purchasers, in the Transferor's interest in the Receivables and Related Security, Collections and Proceeds with respect thereto, free and clear of any Adverse Claim (other than any Adverse Claim created by or through the CP Conduit Purchasers or the Committed Purchasers); (d) the failure to file, or any delay in filing, financing statements, continuation statements, or other similar instruments or documents under the Relevant UCC or -25- other applicable laws with respect to any of the Receivables or Related Security, Collections and Proceeds with respect thereto; (e) any dispute, claim, offset or defense (other than discharge in bankruptcy of the obligor) of the Obligor to the payment of any Receivable (including, without limitation, a defense based on such Receivable or the related Contract not being legal, valid and binding obligation of such Obligor enforceable against it in accordance with its terms), or any other claim resulting from the sale of merchandise or services related to such Receivable or the furnishing or failure to furnish such merchandise or services (if such collection activities were performed by the Transferor or any of its Affiliates acting as the Collection Agent); (f) any products liability claim or personal injury or property damage suit or other similar or related claim or action of whatever sort arising out of or in connection with merchandise or services which are the subject of any Receivable; (g) the transfer of an ownership interest in any Receivable other than an Eligible Receivable; (h) the failure by any of the Transferor, the Collection Agent or the Sellers to comply with any term, provision or covenant contained in this Agreement or any of the other Transaction Documents to which it is a party or to perform any duty or obligation in accordance with the provisions hereof or thereof or to perform any of its duties or obligations under the Contracts; (i) the Percentage Factor exceeding the Maximum Percentage Factor at any time on or prior to the Termination Date; (j) the failure of the Sellers to pay when due any taxes, including, without limitation, sales, excise or personal property taxes payable in connection with any of the Receivables with respect to which an Indemnified Party may be held liable as a transferee of such Receivables; (k) any repayment by any Indemnified Party of any amount previously distributed in reduction of Net Investment which such Indemnified Party believes in good faith is required to be made; -26- (l) the commingling by the Transferor, the Sellers or the Collection Agent of Collections of Receivables at any time with other funds; (m) any investigation, litigation or proceeding related to this Agreement, any of the other Transaction Documents, the use of proceeds of Transfers by the Transferor or the Sellers, the ownership of Transferred Interests, or any Receivable, Related Security or Contract; (n) the failure of any Lock-Box Bank to remit any amounts held in the Lock-Box Accounts pursuant to the instructions of the Collection Agent, the Transferor, the Sellers or the Administrative Agent (to the extent such Person is entitled to give such instructions in accordance with the terms hereof and of any applicable Lock-Box Agreement) whether by reason of the exercise of set-off rights or otherwise; (o) any inability to obtain any judgment in or utilize the court or other adjudication system of, any state in which an Obligor may be located as a result of the failure of the Transferor or the Sellers to qualify to do business or file any notice of business activity report or any similar report; (p) any failure of the Transferor to give reasonably equivalent value to the Sellers in consideration of the purchase by the Transferor from the Sellers of any Receivable, or any attempt by any Person to void, rescind or set aside any such transfer under statutory provisions or common law or equitable action, including, without limitation, any provision of the Bankruptcy Code; or (q) any action taken by the Transferor, the Sellers or the Collection Agent in the enforcement or collection of any Receivable; provided, however, that the Transferor shall not be liable for Indemnified Amounts attributable to the fraud, gross negligence, breach of fiduciary duty or willful misconduct of any Collection Agent in the enforcement or collection of any Receivable if such Collection Agent is not the Parent or an Affiliate of the Parent; provided, further, that if any CP Conduit Purchaser enters into agreements for the purchase of interests in receivables from one or more Other Transferors, such CP Conduit Purchaser shall equitably allocate such Indemnified Amounts to the Transferor and each Other Transferor; and pro- -27- vided, further, that if such Indemnified Amounts are attributable solely to the Transferor, the Transferor shall be solely liable for such Indemnified Amounts, and if such Indemnified Amounts are attributable solely to Other Transferors, such Other Transferors shall be solely liable for such Indemnified Amounts. SECTION 2.21. Indemnity for Reserves and Expenses. (a) If after the date hereof, the adoption of any Law or bank regulation or regulatory guideline or any amendment or change in the interpretation of any existing or future Law or bank regulation or regulatory guideline by any Official Body charged with the administration, interpretation or application thereof, or the compliance with any directive of any Official Body (in the case of any bank regulation or regulatory guideline, whether or not having the force of Law), other than Laws, interpretations, guidelines or directives relating to Taxes: (i) shall impose, modify or deem applicable any reserve, special deposit or similar requirement (including, without limitation, any such requirement imposed by the Board of Governors of the Federal Reserve System) against assets of, deposits with or for the account of, or credit extended by, any Indemnified Party or shall impose on any Indemnified Party or on the United States market for certificates of deposit or the London interbank market any other condition affecting this Agreement, the other Transaction Documents, the ownership, maintenance or financing of the Transferred Interest, the Receivables or payments of amounts due hereunder or its obligation to advance funds hereunder or under the other Transaction Documents; or (ii) imposes upon any Indemnified Party any other expense (including, without limitation, reasonable attorneys' fees and expenses, and expenses of litigation or preparation therefor in contesting any of the foregoing) with respect to this Agreement, the other Transaction Documents, the ownership, maintenance or financing of the Transferred Interest, the Receivables or payments of amounts due hereunder or its obligation to advance funds hereunder or otherwise in respect of this Agreement, the other Transaction Documents, the ownership, maintenance or financing of the Transferred Interests or the Receivables; and the result of any of the foregoing is to increase the cost to such Indemnified Party with respect to this Agreement, the -28- other Transaction Documents, the ownership, maintenance or financing of the Transferred Interest, the Receivables, the obligations hereunder, the funding of any Purchases hereunder or under the other Transaction Documents, by an amount deemed by such Indemnified Party to be material, then, within ten (10) Business Days after demand by such Indemnified Party through the Administrative Agent, the Transferor shall pay to the Administrative Agent, for the benefit of such Indemnified Party, such additional amount or amounts (other than with respect to taxes) as will compensate such Indemnified Party for such increased cost or reduction; provided that no such amount shall be payable with respect to any period commencing more than two hundred seventy (270) days prior to the date the Administrative Agent first notifies the Transferor of its intention to demand compensation therefor under this Section 2.21; provided further that if such change in Law, rule or regulation giving rise to such increased costs or reductions is retroactive, then such 270-day period shall be extended to include the period of retroactive effect thereof. In making demand hereunder, the applicable Indemnified Party shall submit to the Transferor a certificate as to such increased costs incurred which shall provide in reasonable detail the basis for such claim. (b) If any Indemnified Party shall have determined that after the date hereof, the adoption of any applicable Law or bank regulation or regulatory guideline regarding capital adequacy, or any change therein, or any change in the interpretation thereof by any Official Body, or any directive regarding capital adequacy (in the case of any bank regulatory guideline, whether or not having the force of law) of any such Official Body, has or would have the effect of reducing the rate of return on capital of such Indemnified Party (or its parent) as a consequence of such Indemnified Party's obligations hereunder or with respect hereto to a level below that which such Indemnified Party (or its parent) could have achieved but for such adoption, change, request or directive (taking into consideration its policies with respect to capital adequacy) by an amount deemed by such Indemnified Party to be material, then from time to time, within ten (10) Business Days after demand by such Indemnified Party through the Administrative Agent, the Transferor shall pay to the Administrative Agent, for the benefit of such Indemnified Party, such additional amount or amounts (other than with respect to taxes) as will compensate such Indemnified Party (or its parent) for such reduction; provided that no such amount shall be payable with respect to any period commencing more than two hundred seventy (270) days prior to the date the Administrative Agent first notifies the Transferor of its intention to demand compensation therefor un- -29- der this Section 2.21(b); provided further that if such change in Law, rule or regulation giving rise to such increased costs or reductions is retroactive, then such 270-day period shall be extended to include the period of retroactive effect thereof. In making demand hereunder, the applicable Indemnified Party shall submit to the Transferor a certificate as to such increased costs incurred which shall provide in reasonable detail the basis for such claim. (c) Anything in this Section 2.21 to the contrary notwithstanding, if any CP Conduit Purchaser enters into agreements for the acquisition of interests in receivables from one or more Other Transferors, such CP Conduit Purchaser shall equitably allocate the liability for any amounts under this Section 2.21 ("Section 2.21 Costs") to the Transferor and each Other Transferor; provided, however, that if such Section 2.21 Costs are attributable to the Transferor and not attributable to any Other Transferor, the Transferor shall be solely liable for such Section 2.21 Costs or if such Section 2.21 Costs are attributable to Other Transferors and not attributable to the Transferor, such Other Transferors shall be solely liable for such Section 2.21 Costs. SECTION 2.22. Indemnity for Taxes. (a) All payments made by the Transferor or the Collection Agent to the Administrative Agent for the benefit of the CP Conduit Purchasers and the Committed Purchasers under this Agreement and any other Transaction Document shall be free and clear of, and without deduction or withholding for or on account of any Indemnified Taxes. If any such Indemnified Taxes are required to be withheld from any amounts payable to the Administrative Agent or any Indemnified Party hereunder, (i) the amounts so payable to the Administrative Agent or such Indemnified Party shall be increased to the extent necessary to yield to the Administrative Agent or such Indemnified Party (after payment of all Indemnified Taxes) all amounts payable hereunder at the rates or in the amounts specified in this Agreement and the other Transaction Documents and (ii) the Transferor or the Collection Agent, as the case may be, shall make such deductions or withholdings and shall pay the amount so deducted or withheld to the applicable Official Body in accordance with the applicable law. The Transferor shall indemnify the Administrative Agent or any Indemnified Party for the full amount of any Indemnified Taxes paid by the Administrative Agent or the Indemnified Party within ten (10) Business Days after the date of written demand therefor by the Administrative Agent or such Indemnified Party if the Administrative Agent or such Indemnified Party, as the -30- case may be, has delivered to the Transferor a certificate signed by an officer of the Administrative Agent or such Indemnified Party, as the case may be, setting forth in reasonable detail the amount so paid and the computations made to determine such amount. Such certificate shall be conclusive absent manifest error. (b) Each Indemnified Party that is not a United States person (within the meaning of Section 7701(a)(30) of the Code) (a "United States Person") shall: (i) at the time such Indemnified Party becomes a party to this Agreement or the Transaction Documents, deliver to the Transferor and the Administrative Agent (A) two duly completed copies of IRS Form 4224, or successor applicable form, as the case may be, and (B) an IRS Form W-8 or W-9, or successor applicable form, as the case may be; (ii) deliver to the Transferor and the Administrative Agent two (2) further copies of any such form or certification on or before the date that any such form or certification expires or becomes obsolete and after the occurrence of any event requiring a change in the most recent form previously delivered by it to the Transferor or the Administrative Agent; and (iii) obtain such extensions of time for filing and complete such forms or certifications as may reasonably be requested by the Transferor or the Administrative Agent; unless, in the case of (ii) and (iii) above, any change in treaty, law regulation, governmental rule, guideline order, or official application or official interpretation thereof has occurred prior to the date on which any such delivery would otherwise be required which renders all such forms inapplicable or which would prevent such Indemnified Party from duly completing and delivering any such form with respect to it, and such Indemnified Party so advises the Transferor and the Administrative Agent. Each such Indemnified Party that is not a United States person (A) shall certify (i) in the case of an IRS Form 4224, or successor applicable form, that it is entitled to receive payments under this Agreement and the other Transaction Documents without deduction or withholding of any United States federal income taxes and (ii) in the case of an IRS Form W-8 or IRS Form W-9, or successor applicable form, that it is entitled to an exemption from United States backup withholding tax and (B) shall agree to provide any other certification and documen- -31- tation as required by the applicable law that is reasonably requested by the Transferor, the Sellers or the Collection Agent. Each Person that is a Purchaser or Participant hereunder, or which otherwise becomes a party to this Agreement and the other Transaction Documents as an Committed Purchaser, shall, prior to the effectiveness of such assignment, participation or addition, as applicable, be required to provide all of the forms and statements required pursuant to this Section 2.22. SECTION 2.23. Other Costs, Expenses and Related Matters. (a) The Transferor agrees, upon receipt of a written invoice, to pay or cause to be paid, and to save the Administrative Agent, the CP Conduit Purchasers, the Committed Purchasers and each Funding Agent harmless against liability for the payment of, all reasonable out-of-pocket expenses (including, without limitation, reasonable attorneys', accountants' and other third parties' fees and expenses, any filing fees and expenses incurred by officers or employees of the Administrative Agent, the CP Conduit Purchasers, the Committed Purchasers and/or the Funding Agents) or intangible, documentary or recording taxes incurred by or on behalf of the Administrative Agent, the CP Conduit Purchasers, the Committed Purchasers and the Funding Agents (i) in connection with the negotiation, execution, delivery and preparation of this Agreement, the other Transaction Documents and any documents or instruments delivered pursuant hereto and thereto and the transactions contemplated hereby or thereby (including, without limitation, the perfection or protection of the Transferred Interest) and (ii) (A) relating to any amendments, waivers or consents under this Agreement, any Asset Purchase Agreement and the other Transaction Documents, (B) arising in connection with the Administrative Agent's, the CP Conduit Purchasers', the Committed Purchasers' or the Funding Agents' enforcement or preservation of rights (including, without limitation, the perfection and protection of the Transferred Interest under this Agreement), or (C) arising in connection with any audit, dispute, disagreement, litigation or preparation for litigation involving this Agreement or any of the other Transaction Documents (all of such amounts, collectively, "Transaction Costs"). All Transaction Costs owed by the Transferor pursuant to this subsection 2.23(a) shall be payable in accordance with Sections 2.05 and 2.06. (b) The Transferor shall pay the Administrative Agent, for the account of the CP Conduit Purchasers and the Committed Purchasers, as applicable, on demand any Early Col- -32- lection Fee due on account of the reduction of a Tranche on any day prior to the last day of its Tranche Period. (c) The Administrative Agent will within forty-five (45) days after receipt of notice of any event occurring after the date hereof which will entitle an Indemnified Party to compensation pursuant to this Article II, notify the Transferor in writing of such event. Any notice by the Administrative Agent claiming compensation under this Article II and setting forth the additional amount or amounts to be paid to it hereunder shall be conclusive in the absence of manifest error, provided that such claim is made in good faith and on a reasonable basis. In determining such amount, the Administrative Agent or any applicable Indemnified Party may use any reasonable averaging and attributing methods. (d) If the Transferor is required to pay any additional amount to any Committed Purchaser pursuant to Sections 2.21 or 2.22, then such Committed Purchaser shall use reasonable efforts (which shall not require such Committed Purchaser to incur an unreimbursed loss or unreimbursed cost or expense or otherwise take any action inconsistent with its internal policies or legal or regulatory restrictions or suffer any disadvantage or burden reasonably deemed by it to be significant) (A) to file any certificate or document reasonably requested in writing by the Transferor or (B) to assign its rights and delegate and transfer its obligations hereunder to another of its offices, branches or affiliates, if such filing or assignment would reduce amounts payable pursuant to Section 2.21 or 2.22, as the case may be, in the future. SECTION 2.24. Funding Agents. (a) The Funding Agent with respect to each CP Conduit Purchaser and Committed Purchaser is hereby authorized to record on each Business Day the CP Funded Amount with respect to such CP Conduit Purchaser and the aggregate amount of Discount and Fees accruing with respect thereto on such Business Day and the Committed Purchaser Funded Amount with respect to such Committed Purchaser and the amount of Discount and Fees accruing with respect thereto on such Business Day. Any such recordations by a Funding Agent, absent manifest error, shall constitute prima facie evidence of the accuracy of the information so recorded. The Funding Agents will report the aggregate amounts due to the CP Conduit Purchasers and the Committed Purchasers for the prior calendar month to the Transferor, the Collection Agent and the Administrative Agent not later than two (2) Business Days prior to the related Settlement Date. Furthermore, the Funding Agent with -33- respect to each CP Conduit Purchaser and Committed Purchaser will maintain records sufficient to identify the percentage interest of such CP Conduit Purchaser and such Committed Purchaser in the Receivables and any amounts owing thereunder. (b) Upon receipt of funds from the Administrative Agent on each Settlement Date pursuant to Sections 2.05 and 2.06, each Funding Agent shall pay such funds to the related CP Conduit Purchaser and/or the related Committed Purchaser owed such funds in accordance with the recordations maintained by it in accordance with Section 2.24(a). If a Funding Agent shall have paid to any CP Conduit Purchaser or Committed Purchaser any funds that (i) must be returned for any reason (including bankruptcy) or (ii) exceeds that which such CP Conduit Purchaser or Committed Purchaser was entitled to receive, such amount shall be promptly repaid to such Funding Agent by such CP Conduit Purchaser or Committed Purchaser. SECTION 2.25. Use of Historical Data. Where necessary to calculate any ratios or other amounts under this Agreement with reference to periods prior to the Closing Date, historical data shall be used. ARTICLE III Representations and Warranties SECTION 3.01. Representations and Warranties of the Transferor. The Transferor hereby represents and warrants to the Administrative Agent, the Funding Agents, the CP Conduit Purchasers and the Committed Purchasers that: (a) Corporate Existence and Power. The Transferor is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware and has all corporate power and all material governmental licenses, authorizations, consents and approvals required to carry on its business in each jurisdiction in which its business is now conducted. The Transferor is duly qualified (or has duly applied for such qualification) to do business in, and is in good standing in, every other jurisdiction in which the nature of its business requires it to be so qualified, except where the failure to be so qualified or in good standing would not have a Material Adverse Effect. -34- (b) Corporate and Governmental Authorization; Contravention. The execution, delivery and performance by the Transferor of this Agreement and the other Transaction Documents to which the Transferor is a party are within the Transferor's corporate powers, have been duly authorized by all necessary corporate action, require no action by or in respect of, or filing with, any Official Body or official thereof, and do not contravene any provision of applicable law, rule or regulation or of the Certificate of Incorporation or Bylaws of the Transferor or constitute a default under any agreement or any judgment, injunction, order, writ, decree or other instrument binding upon the Transferor or result in the creation or imposition of any Adverse Claim on the assets of the Transferor (except as contemplated by Section 2.09 hereof). (c) Binding Effect. Each of this Agreement and the other Transaction Documents to which the Transferor is a party constitutes, and the Transfer Certificate, upon payment of the Transfer Price set forth therein, will constitute the legal, valid and binding obligation of the Transferor, enforceable against it in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or other similar laws affecting the rights of creditors generally and general equitable principles (whether considered in a proceeding at law or in equity). (d) Perfection. Immediately preceding each Transfer hereunder, the Transferor shall be the owner of all of the Receivables, free and clear of all Adverse Claims. On or prior to each Transfer and each recomputation of the Transferred Interest, all financing statements and other documents required to be recorded or filed in order to perfect and protect the Transferred Interest against all creditors of, and purchasers from, the Transferor and the Sellers will have been duly filed in each filing office necessary for such purpose, and all filing fees and taxes, if any, payable in connection with such filings shall have been paid in full. (e) Accuracy of Information. All information heretofore furnished by or on behalf of the Transferor or the Collection Agent on its behalf (including, without limitation, the Deposit Reports, the Settlement Statements, any other reports delivered pursuant to the terms of this Agreement and the Transferor's financial statements) to any CP Conduit Purchaser, any Committed Purchaser, any -35- Funding Agent or the Administrative Agent for purposes of, or in connection with, this Agreement and the other Transaction Documents are, and all such information hereafter furnished by or on behalf of the Transferor to any CP Conduit Purchaser, any Committed Purchaser, any Funding Agent or the Administrative Agent will be, true and accurate in every material respect, on the date such information is stated or certified. (f) Tax Status. The Transferor has filed all material tax returns (Federal, state and local) required to be filed and has paid or made adequate provision for the payment of all material taxes, assessments and other governmental charges other than taxes or filings contested in good faith or taxes which are not yet due and payable, and for which adequate reserves have been established in accordance with GAAP. (g) Action, Suits. There are no actions, suits or proceedings pending or, to the knowledge of the Transferor threatened, against or affecting the Transferor or its properties, in or before any court, arbitrator or other Official Body, which could reasonably be expected to, individually or in the aggregate, have a Material Adverse Effect on the performance by the Transferor of its obligations under the Agreement or the validity and enforceability of this Agreement, the Receivables, the Contracts or any other Transaction Document, except as set forth in Exhibit F concerning Affiliates of the Transferor. (h) Use of Proceeds. No proceeds of any Transfer will be used by the Transferor to acquire any security in any transaction which violates Regulation T, U or X of the Federal Reserve Board. (i) Place of Business. The principal place of business and chief executive office of the Transferor are located at the address of the Transferor indicated in Section 8.03 hereof, and the offices where the Transferor keeps all its Records are located at the address(es) described on Exhibit G or such other locations notified to the Administrative Agent in accordance with Section 2.09 hereof in jurisdictions where all action required by Section 2.09 hereof has been taken and completed. (j) Good Title. Upon each Transfer and each recomputation of the Transferred Interest, the Administrative Agent, on behalf of the CP Conduit Purchasers and the Com- -36- mitted Purchasers, shall acquire (A) a valid and perfected first priority undivided percentage ownership interest to the extent of the Transferred Interest or (B) a first priority perfected security interest in each Receivable that exists on the date of such Transfer and recomputation and in the Related Security, Collections and Proceeds with respect thereto, in either case free and clear of any Adverse Claim. (k) Trade Names, etc. As of the date hereof: (i) the Transferor's chief executive office is located at the address for notices set forth in Section 10.03 hereof; (ii) the Transferor has no subsidiaries or divisions; and (iii) the Transferor has, within the last five (5) years, operated only under the trade names identified in Exhibit H hereto, and, within the last five (5) years, has not changed its name, merged with or into or consolidated with any other corporation or been the subject of any proceeding under Title 11, United States Code (Bankruptcy), except as disclosed in Exhibit H hereto. (l) Nature of Receivables. Each Receivable (x) represented by the Transferor or the Collection Agent to be an Eligible Receivable (including in any Settlement Statement or other report delivered pursuant to Section 2.12 hereof) or (y) included in the calculation of the Net Receivables Balance in fact satisfies at such time the definition of "Eligible Receivable." (m) Coverage Requirement; Amount of Receivables. The Percentage Factor does not exceed the Maximum Percentage Factor. As of November 10, 2000, the aggregate Outstanding Balance of the Receivables in existence was $164,816,000, and the Net Receivables Balance was $148,360,000. (n) Credit and Collection Policy. Since the Closing Date, there have been no material changes in the Credit and Collection Policy, other than as permitted hereunder. Since such date, no material adverse change has occurred in the overall rate of collection of the Receivables. (o) Collections and Servicing. Since June 30, 2000, there has been no material adverse change in the ability of the Collection Agent, the Sellers, the Transferor or any Subsidiary or Affiliate of any of the foregoing to service and collect the Receivables. -37- (p) No Termination Event. No event has occurred and is continuing and no condition exists which constitutes a Termination Event or a Potential Termination Event. (q) Not an Investment Company. The Transferor is not, and is not controlled by, an "investment company" within the meaning of the Investment Company Act of 1940, as amended, or is exempt from all provisions of such Act. (r) ERISA. Each of the Transferor and its ERISA Affiliates is in compliance in all material respects with ERISA, and no lien exists in favor of the Pension Benefit Guaranty Corporation on any of the Receivables. (s) Lock-Box Accounts. The names and addresses of all the Lock-Box Banks, together with the account numbers of the Lock-Box Accounts at such Lock-Box Banks, are specified in Exhibit B hereto (or at such other Lock-Box Banks and/or with such other Lock-Box Accounts as have been notified to the Administrative Agent and the Funding Agents for the CP Conduit Purchasers and the Committed Purchasers and for which Lock-Box Agreements have been executed in accordance with Section 2.09(b) hereof and delivered to the Collection Agent). All Obligors have been instructed to make payment to a Lock-Box Account, and only Collections are deposited into a Lock-Box Account. (t) Bulk Sales. No transaction contemplated hereby or by the Receivables Purchase Agreement requires compliance with any "bulk sales" act or similar law. (u) Transfers Under Receivables Purchase Agreement. Each Receivable which has been transferred to the Transferor by any Seller has been purchased by the Transferor from the Seller pursuant to, and in accordance with, the terms of the Receivables Purchase Agreement. (v) Preference; Voidability. The Transferor shall have given reasonably equivalent value to each Seller in consideration for the transfer to the Transferor of the Receivables and Related Security, Collections and Proceeds with respect thereto from the Seiler, and each such transfer shall not have been made for or on account of an antecedent debt owed by the Seller to the Transferor, and no such transfer is or may be voidable under any Section of the Bankruptcy Reform Act of 1978 (11 U.S.C.ss.ss.101 et seg.), as amended (the "Bankruptcy Code"). -38- (w) Subsidiaries. The Transferor shall not have any subsidiaries. Any document, instrument, certificate or notice delivered to the Administrative Agent or any Funding Agent by the Transferor or any agent of the Transferor hereunder shall be deemed a representation and warranty by the Transferor. SECTION 3.02. Reaffirmation of Representations and Warranties by the Transferor. On each day that a Transfer is made hereunder, the Transferor, by accepting the proceeds of such Transfer, whether delivered to the Transferor pursuant to Section 2.02(a) or Section 2.05 hereof, shall be deemed to have certified that all representations and warranties described in Section 3.01 hereof are true and correct on and as of such day as though made on and as of such day. ARTICLE IV Conditions Precedent SECTION 4.01. Conditions to Effectiveness. This Agreement shall become effective on the first day on which the Administrative Agent shall have received the following documents, instruments and Fees, all of which shall be in a form and substance acceptable to the Administrative Agent: (a) A Certificate of the Secretary or Assistant Secretary of the Transferor in substantially the form of Exhibit I hereto certifying (i) the names and signatures of the officers and employees authorized on its behalf to execute this Agreement and any other documents to be delivered by it hereunder (on which Certificate the Administrative Agent, the CP Conduit Purchasers and the Committed Purchasers may conclusively rely until such time as the Administrative Agent shall receive from the Transferor a revised Certificate meeting the requirements of this clause (a)(i)), (ii) a copy of the Transferor's Certificate of Incorporation, certified by the Secretary of State of the State of Delaware, (iii) a copy of the Transferor's By-Laws, (iv) a copy of resolutions of the Board of Directors of the Transferor approving this transaction and (v) certificates of the Secretary of State of the State of Delaware certifying the Transferor's good standing under the laws of the State of Delaware. -39- (b) A Certificate of the Secretary or Assistant Secretary of each Seller in substantially the form of Exhibit I hereto certifying (i) the names and signatures of the officers and employees authorized on its behalf to execute the Receivables Purchase Agreement and any other documents to be delivered by it (on which Certificate the Administrative Agent, the CP Conduit Purchasers and the Committed Purchasers may conclusively rely until such time as the Administrative Agent shall receive from the Seller a revised Certificate meeting the requirements of this clause (b)(i)), (ii) a copy of the Seller's certificate of incorporation, certified by the Secretary of State of the state of such Seller's incorporation, (iii) a copy of the Seller's By-Laws, (iv) a copy of resolutions of the Board of Directors of the Seller approving this transaction and (v) certificates of the Secretary of State of the state of such Seller's incorporation, certifying the Seller's good standing under the laws of such state. (c) Acknowledgment copies evidencing the filing in the appropriate filing offices of proper financing statements (Form UCC-1), naming the Transferor as the debtor, the Administrative Agent, as secured party, and of such other similar instruments or documents as may be necessary or, in the reasonable opinion of the Administrative Agent, desirable under the Relevant UCC of all appropriate jurisdictions or any comparable law to perfect the Administrative Agent's security interest in all Receivables, Related Security, Proceeds and Collections. (d) Acknowledgment copies evidencing the filing in the appropriate filing offices of proper financing statements (Form UCC-1), naming each Seller as debtor, the Transferor as secured party, and the Administrative Agent, as assignee of the secured party, and of such other similar instruments or documents as may be necessary or, in the reasonable opinion of the Administrative Agent, desirable under the Relevant UCC of all appropriate jurisdictions or any comparable law to perfect the Transferor's ownership or security interest in all Receivables, Related Security and Collections. (e) Acknowledgment copies evidencing the filing in the appropriate filing offices of proper financing statements (Form UCC-3), if any, necessary to terminate or assign to the Administrative Agent all security interests and other rights of any person in Receivables previously granted by the Transferor. -40- (f) Acknowledgment copies evidencing the filing in the appropriate filing offices of proper financing statements (Form UCC-3), if any, necessary to terminate or assign to the Administrative Agent all security interests and other rights of any person in Receivables, Related Security or Proceeds previously granted by the Sellers. (g) Certified copies of request for information or copies (Form UCC-11) (or a similar search report certified by parties acceptable to the Administrative Agent), dated a date reasonably near the Closing Date, listing all effective financing statements which name the Transferor and any Seller (under their respective present names and any previous names) as debtor and which are filed in jurisdictions in which the filings were made pursuant to item (c), (d), (e) or (f) above together with copies of such financing statements (none of which, except for those filed pursuant to item (c) or (d) or those terminated pursuant to item (e) or (f), shall cover any Receivables, Related Security or Contracts). (h) Executed copies of the Lock-Box Agreements relating to each of the Lock-Box Banks and the Lock-Box Accounts; provided that the Lock-Box Agreement with Wachovia Bank will be delivered, and the Transferor hereby covenants and agrees to deliver the Lock-Box Agreement with Wachovia Bank, within fifteen (15) days after the Closing Date. (i) An opinion of Cahill Gordon & Reindel, special counsel to the Transferor and the Sellers, addressed to the Administrative Agent, the CP Conduit Purchasers, the Committed Purchasers, the Funding Agents and the Rating Agencies, regarding substantive consolidation in the event of a bankruptcy of MascoTech or any Seller and true sale between each Seller and the Transferor. (j) Opinions of special counsel to the Seller and the Transferor in the states of Indiana, Louisiana, Michigan, New Jersey, Ohio, Pennsylvania, Texas and Wisconsin, respectively, addressed to the Administrative Agent, the CP Conduit Purchasers, the Committed Purchasers, the Funding Agents and the Rating Agencies, regarding perfection and priority of the interest granted by the Seller to the Transferor and the security interest granted by the Transferor to the Administrative Agent. -41- (k) An opinion of Cahill Gordon & Reindel, special counsel to the Transferor and the Seller, addressed to the Administrative Agent, the CP Conduit Purchasers, the Committed Purchasers, the Funding Agents and the Rating Agencies, regarding the enforceability of the Transaction Documents to which each is a party and other corporate matters. (l) An opinion of David Liner, Esq., General Counsel of MascoTech, Inc., addressed to the Administrative Agent, the CP Conduit Purchasers, the Committed Purchasers, the Funding Agents and the Rating Agencies. (m) An executed copy of this Agreement and each other Transaction Document to be executed by the Transferor and the Sellers. (n) A Settlement Statement for October 2000 and a Deposit Report for the week ending November 11, 2000. (o) The most recent audited and unaudited consolidated financial statements of the Parent and a balance sheet of the Transferor certified by its chief financial officer. (p) All Fees required to be paid on or prior to the Closing Date in accordance with the Fee Letter shall have been paid. (q) Such other documents, instruments, certificates and opinions as the Administrative Agent shall reasonably request. ARTICLE V Covenants SECTION 5.01. Affirmative Covenants of the Transferor. At all times from the date hereof to the later to occur of (i) the Termination Date or (ii) the date on which the Net Investment has been reduced to zero, all accrued Discount, Servicing Fees and all other Aggregate Unpaids shall have been paid in full, in cash, unless the Administrative Agent shall otherwise consent in writing: (a) Financial Reporting. The Transferor will maintain a system of accounting established and administered -42- in accordance with GAAP, and furnish to the Administrative Agent: (i)Annual Reporting. Within ninety-five (95) days after the close of the Transferor's fiscal year, audited financial statements of the Parent and unaudited financial statements of the Transferor, prepared in accordance with GAAP consistently applied, in the case of the Parent on a consolidated basis for the Parent and its Subsidiaries, including balance sheets as of the end of such period, related statements of operations, shareholders' equity and cash flows, accompanied by (in the case of the Parent) an audit report certified by PriceWaterhouseCoopers LLC or other nationally recognized independent certified public accountants (without a "going concern" or like qualification or exception and without any qualification or exception as to the scope of the audit), acceptable to the Administrative Agent, prepared in accordance with generally accepted auditing standards and any management letter prepared by said accountants. (ii)Quarterly Reporting. Within fifty (50) days after the close of the first three (3) quarterly periods of the Transferor's fiscal year, for (x) the Transferor and (y) for the Parent and its Subsidiaries, on a consolidated basis, unaudited balance sheets as at the close of each such period and related statements of operations, shareholders' equity and cash flows in each case for the period from the beginning of such fiscal year to the end of such quarter, in each case certified by its senior financial officer. (iii)Compliance Certificate. Together with the financial statements required hereunder, a compliance certificate signed by the Transferor's chief financial officer stating that (x) the attached financial statements have been prepared in accordance with GAAP and accurately reflect the financial condition of the Transferor or the Parent, as applicable, and (y) to the best of such Person's knowledge, no Termination Event or Potential Termination Event exists, or if any Termination Event or Potential Termination Event exists, stating the nature and status thereof. -43- (iv)Notice of Termination Events or Potential Termination Events. As soon as possible and in any event within two Business Days after the actual knowledge of a Responsible Officer of the Transferor of the occurrence of each Termination Event or each Potential Termination Event, a statement of the chief financial officer of the Transferor setting forth details of such Termination Event or Potential Termination Event and the action which the Transferor has taken or proposes to take with respect thereto. (v)Change in Credit and Collection Policy. Within ten (10) Business Days after the date any material change in or amendment to the Credit and Collection Policy is made, a copy of the Credit and Collection Policy then in effect indicating such change or amendment. (vi)Credit and Collection Policy. Within ninety (90) days after the close of each Seller's and the Transferor's fiscal years, a complete copy of the Credit and Collection Policy then in effect. (vii)ERISA. Promptly after the filing or receiving thereof, copies of all reports and notices with respect to any reportable event (as defined in Article IV of ERISA) which the Transferor, any of the Sellers or any ERISA Affiliate of the Transferor or the Sellers files under ERISA with the Internal Revenue Service, the Pension Benefit Guaranty Corporation or the U.S. Department of Labor or which the Transferor, any of the Sellers or any ERISA Affiliates of the Transferor or the Sellers receives from the Internal Revenue Service, the Pension Benefit Guaranty Corporation or the U.S. Department of Labor. (viii) Other Information. Such other information (including non-financial information) as the Administrative Agent may from time to time reasonably request with respect to the Sellers, the Transferor or any Subsidiary of any of the foregoing; provided that after a CP Conduit Purchaser's Termination Event with respect to any CP Conduit Purchaser such information shall also be provided to the Committed Purchaser with respect to such CP Conduit Purchaser. (b) Conduct of Business. The Transferor will carry on and conduct its business in substantially the same man- -44- ner and in substantially the same fields of enterprise as it is presently conducted and do all things necessary to remain duly incorporated, validly existing and in good standing as a domestic corporation in its jurisdiction of incorporation and maintain all requisite authority to conduct its business in each jurisdiction in which its business is conducted except any jurisdictions where the failure to maintain such authority could not reasonably be expected to have a Material Adverse Effect. (c) Compliance with Laws. The Transferor will, and will cause each Seller and each of the Transferor's and such Seller's Affiliates to, comply with all laws, rules, regulations, orders, writs, judgments, injunctions, decrees or awards to which it or its respective properties may be subject, except to the extent that the failure to so comply with such laws, rules, regulations, writs, judgments, injunctions, decrees or awards would not materially adversely affect the ability of the Transferor to perform its obligations under the Agreement. (d) Furnishing of Information and Inspection of Records. The Transferor will, and will cause each Seller to, furnish to the Administrative Agent from time to time such information with respect to the Receivables as the Administrative Agent may reasonably request, including, without limitation, listings identifying the Obligor and the Outstanding Balance for each Receivable, together with an aging of Receivables. The Transferor will, and will cause each Seller to, at any time and from time to time during regular business hours and upon reasonable notice, permit the Administrative Agent (or the Committed Purchasers after a CP Conduit Purchaser's Termination Event with respect to the CP Conduit Purchasers), or their agents or representatives, (i) to examine and make copies of and abstracts from all Records and (ii) to visit the offices and properties of the Transferor and the Sellers for the purpose of examining such Records, and to discuss matters relating to Receivables or the Transferor's and the Sellers' performance hereunder and under the other Transaction Documents to which such Person is a party with any of the officers or employees of the Transferor and the Sellers having knowledge of such matters. (e) Keeping of Records and Books of Account. The Transferor will, and will cause each Seller to, maintain and implement administrative and operating procedures (including, without limitation, an ability to recreate re- -45- cords evidencing Receivables in the event of the destruction of the originals thereof), and keep and maintain all documents, books, records and other information reasonably necessary or advisable for the collection of all Receivables (including, without limitation, records adequate to permit the daily identification of each new Receivable and all Collections of and adjustments to each existing Receivable). The Transferor will, and will cause each Seller to, give the Administrative Agent, each of the Funding Agents and each of the Committed Purchasers, prompt notice of any change in the administrative and operating procedures of the Transferor or such Seller, as applicable, referred to in the previous sentence to the extent such change may have a Material Adverse Effect. (f) Performance and Compliance with Contracts. The Transferor, at its expense, will instruct the Collection Agent to, and, to the extent applicable, timely and fully perform and comply with all material provisions, covenants and other promises required to be observed by the Transferor under the Contracts related to the Receivables. (g) Credit and Collection Policies. The Transferor will instruct the Collection Agent and the Sellers to comply in all material respects with the Credit and Collection Policy in regard to each Receivable and the related Contract. (h) Collections. The Transferor shall instruct the Collection Agent and the Sellers to instruct all obligors to cause all Collections (other than Collections remitted directly) to be deposited directly to a Lock-Box Account. (i) Collections Received. The Transferor shall, and shall instruct the Collection Agent and the Sellers to, hold in trust, and deposit immediately (but in any event no later than one (1) Business Day following receipt thereof) to a Lock-Box Account all Collections received from time to time by the Transferor, the Collection Agent and the Sellers. (j) Sale Treatment. The Transferor will not (i) account for (including for accounting purposes), or otherwise treat, the transactions contemplated by the Receivables Purchase Agreement in any manner other than as a sale of Receivables by the Sellers to the Transferor, or (ii) account for (other than for tax purposes) or otherwise treat the transactions contemplated hereby in any -46- manner other than as a sale of Receivables by the Transferor to the CP Conduit Purchasers or the Committed Purchasers, as applicable. In addition, the Transferor shall disclose (in a footnote or otherwise) in all of its financial statements (including any such financial statements consolidated with any other Persons' financial statements) the existence and nature of the transaction contemplated hereby and by the Receivables Purchase Agreement and the interest of the Transferor, the CP Conduit Purchasers and the Committed Purchasers in the Receivables and Related Security, Collections and Proceeds with respect thereto. (k) Separate Business. The Transferor shall not engage in any business not permitted by its Certificate of Incorporation as in effect on the Closing Date. (l) Corporate Documents. The Transferor shall only amend, alter, change or repeal its Certificate of Incorporation or the By-laws with the prior written consent of the Administrative Agent which shall not be unreasonably withheld. (m) Net Worth. The Transferor on the Closing Date has a net worth, and thereafter maintains at all times a net worth (as defined in accordance with GAAP), of at least $25,000,000. (n) Separate Corporate Existence. The Transferor shall: (i)Maintain its own deposit account or accounts, separate from those of any Affiliate, with commercial banking institutions and use its commercially reasonable efforts to ensure that the funds of the Transferor will not be diverted to any other Person or for other than corporate uses of the Transferor and that, except as contemplated by Section 6.02(b), such funds will not be commingled with the funds of any Seller or any Subsidiary or Affiliate of the Sellers; (ii)To the extent that it shares the same officers or other employees as any of its stockholders or Affiliates, fairly allocate among such entities the salaries of and the expenses related to providing benefits to such officers and other employees, and each such entity shall bear its fair share of the salary and benefit costs associated with all such common officers and employees; -47- (iii)To the extent that it jointly contracts with any of its stockholders or Affiliates to do business with vendors or service providers or to share overhead expenses, fairly allocate among such entities the costs incurred in so doing, and each such entity shall bear its fair share of such costs. To the extent that the Transferor contracts or does business with vendors or service providers where the goods and services provided are partially for the benefit of any other Person, the costs incurred in so doing shall be fairly allocated to or among such entities for whose benefit the goods or services are provided, and each such entity shall bear its fair share of such costs; (iv)Enter into all material transactions between the Transferor and any of its Affiliates, whether currently existing or hereafter entered into, only on an arm's length basis, it being understood and agreed that the transactions contemplated in the Transaction Documents meet the requirements of this clause (iv); (v)Maintain office space separate from the office space of the Sellers and any Affiliates of the Sellers. To the extent that the Transferor and any of its stockholders or Affiliates have offices in the same location, there shall be a fair and appropriate allocation of overhead costs among them, and each such entity shall bear its fair share of such expenses; (vi)Issue separate financial statements prepared not less frequently than quarterly and prepared in accordance with GAAP; (vii)Conduct its affairs strictly in accordance with its certificate of incorporation and observe all necessary, appropriate and customary corporate formalities, including, but not limited to, holding all regular and special stockholders' and directors' meetings appropriate to authorize all corporate action, keeping separate and accurate minutes of its meetings, passing all resolutions or consents necessary to authorize actions taken or to be taken, and maintaining accurate and separate books, records and accounts, including, but not limited to, payroll and intercompany transaction accounts; -48- (viii) Not assume or guarantee any of the liabilities of the Sellers or any Affiliate thereof; (ix)Take, or refrain from taking, as the case may be, all other actions that are necessary to be taken or not to be taken in order to (x) ensure that the assumptions and factual recitations set forth in the Specified Bankruptcy Opinion Provisions remain true and correct with respect to the Transferor and (y) comply with those procedures described in such provisions which are applicable to the Transferor; (x) Take such actions as are necessary to ensure that not less than one member of Transferor's Board of Directors shall be an individual who is not, and never has been, a direct, indirect or beneficial stockholder, officer, director, employee, affiliate, associate, material supplier or material customer of the Collection Agent or any of its Affiliates (the "Independent Directors"). The certificate of incorporation of the Transferor shall provide that (i) at least one member of the Transferor's Board of Directors shall be an Independent Director, (ii) the Transferor's Board of Directors shall not approve, or take any other action to cause the filing of, a voluntary bankruptcy petition with respect to the Transferor unless a unanimous vote of the Transferor's Board of Directors (which vote shall include the affirmative vote of each Independent Director) shall approve the taking of such action in writing prior to the taking of such action and (iii) the provisions requiring an independent director and the provision described in clauses (i) and (ii) of this paragraph (b) cannot be amended without the prior written consent of each Independent Director; (xi)Take such actions as are necessary to ensure that no Independent Director shall at any time serve as a trustee in bankruptcy for the Transferor or any Affiliate thereof; (xii)Take such actions as are necessary to ensure that the books of account, financial reports and corporate records of the Transferor will be maintained separately from those of the Parent and each other Affiliate of the Transferor; (xiii) Take such actions as are necessary to ensure that any financial statements of Parent or Affiliate thereof which are consolidated to include the -49- Transferor will contain detailed notes clearly stating that (A) all of the Transferor's assets are owned by the Transferor, and (B) the Transferor is a separate corporate entity with its own separate creditors that will be entitled to be satisfied out of the Transferor's assets prior to any value in the Transferor becoming available to the Transferor's equity holders; and the accounting records and the published financial statements of the Sellers will clearly show that, for accounting purposes, the Receivables and Related Security have been sold to the Transferor; (xiv)Take such actions as are necessary to ensure that the Transferor's assets will be maintained in a manner that facilitates their identification and segregation from those of the Parent, the Sellers and other Affiliates of the Parent; (xv)Take such actions as are necessary to ensure that no Affiliates of the Transferor shall, directly or indirectly, name the Transferor or enter into any agreement to name the Transferor a direct or contingent beneficiary or loss payee or any insurance policy covering the property of any such Affiliate; and (xvi)Take such actions as are necessary to ensure that no Affiliate of the Transferor will be, nor will hold itself out to be, responsible for the debts of the Transferor or the decisions or actions in respect of the daily business and affairs of the Transferor. The Transferor will immediately correct any known misrepresentation with respect to the foregoing, and the Transferor and its Affiliates will not operate or purport to operate as an integrated single economic unit with respect to each other or in their dealing with any other entity. (o) Enforcement of Receivables Purchase Acfreement. The Transferor shall use its best efforts to enforce all rights held by it under the Receivables Purchase Agreement and shall not waive any breach of any covenant contained in Section 5.01 thereunder without the written consent of the Administrative Agent. SECTION 5.02. Negative Covenants of the Transferor. During the term of this Agreement, unless the Administrative Agent shall otherwise consent in writing: -50- (a) No Sales, Liens, etc. Except as otherwise provided herein and in the Receivables Purchase Agreement, the Transferor will not sell, assign (by operation of law or otherwise) or otherwise dispose of, or create or suffer to exist any Adverse Claim upon (or the filing of any financing statement) or with respect to (x) any of the Receivables or Related Security, or (y) any Lock-Box Account. (b) No Extension or Amendment of Receivables. Except as otherwise permitted in Section 6.02 hereof, the Transferor will not, and will not permit any Seller to, extend, amend or otherwise modify the terms of any Receivable, or amend, modify or waive any term or condition of any Contract related thereto. (c) No Change in Business or Credit and Collection Policy. The Transferor will not, and will not permit any Seller to, make any change in the character of its business or in the Credit and Collection Policy, which change would have a Material Adverse Effect. (d) No Mergers, etc. The Transferor will not without the prior written consent of the Administrative Agent, and except as otherwise permitted pursuant to the Receivables Purchase Agreement, will not permit any Seller to, (i) consolidate or merge with or into any other Person, or (ii) sell, lease or transfer all or substantially all of its assets to any other Person, provided, that a Seller may merge with or into another Seller or with another Person if (A)(1) such Seller is the corporation surviving such consolidation or merger or (2) the Person into or with whom the Seller is merged or consolidated is an Affiliate and the surviving corporation assumes in writing all duties and liabilities of the Seller under the Transaction Documents, and (B) immediately after and giving effect to such consolidation or merger, no Termination Event or Potential Termination Event shall have occurred and be continuing. (e) Change in Payment Instructions to Obligors; Deposits to Lock-Box Accounts. The Transferor will not, and will not permit any Seller to, add or terminate any bank as a Lock-Box Bank or any account as a Lock-Box Account to or from those listed in Exhibit B hereto or make any change in its instructions to Obligors regarding payments to be made to any Lock-Box Account, unless (i) such instructions are to deposit such payments to another exist- -51- ing Lock-Box Account or (ii) the Administrative Agent shall have received written notice of such addition, termination or change at least thirty (30) days prior thereto and the Administrative Agent shall have received a Lock-Box Agreement executed by each new Lock-Box Bank or an existing Lock-Box Bank with respect to each new Lock-Box Account, as applicable. The Transferor will not deposit or otherwise credit, or cause or permit to be so deposited or credited, to any Lock-Box Account cash or cash proceeds other than Collections of Receivables. However, in the event any Seller deposits or otherwise credits, or causes or permits to be so deposited or credited, to any Lock-Box Account, cash or cash proceeds other than Collections of Receivables, the Transferor shall, or shall cause such Seller to, segregate or cause to be segregated any such cash or cash proceeds from Collections within one (1) Business Day following the deposit or credit to any Lock-Box Account. (f) Change of Name, etc. The Transferor will not, and will not permit a Seller to, change its name, identity or structure or the location of its chief executive office, unless at least ten (10) days prior to the effective date of any such change the Transferor delivers to the Administrative Agent (i) such documents, instruments or agreements, executed by the Transferor as are necessary to reflect such change and to continue the perfection of the Administrative Agent's ownership interests or security interests in the Receivables and Related Security, Collections and Proceeds with respect thereto and (ii) new or revised Lock-Box Agreements executed by the Lock-Box Banks which reflect such change and enable the Administrative Agent to continue to exercise its rights contained in Section 2.08 hereof. (g) Amendment to Receivables Purchase Agreement. The Transferor will not, and will not permit any of the Sellers to, amend, modify, or supplement the Receivables Purchase Agreement, except with the prior written consent of the Administrative Agent; nor shall the Transferor take, or permit any of the Sellers to take, any other action under the Receivables Purchase Agreement that shall have a material adverse affect on the Administrative Agent, any CP Conduit Purchaser or any Committed Purchaser or which is inconsistent with the terms of this Agreement. (h) Other Debt. Except as provided for herein or in the Receivables Purchase Agreement, the Transferor will -52- not create, incur, assume or suffer to exist any indebtedness whether current or funded, or any other liability other than (i) indebtedness of the Transferor representing fees, expenses and indemnities arising hereunder or under the Receivables Purchase Agreement (including the Subordinated Note) for the purchase price of the Receivables under the Receivables Purchase Agreement; (ii) other indebtedness incurred in the ordinary course of its business to the extent permitted by or required under any other Transaction Document and (iii) additional indebtedness in an amount not to exceed $9,850 at any time outstanding. (i) ERISA Matters. The Transferor will not, and will not permit any Seller to, (i) engage or permit any of its ERISA Affiliates to engage in any prohibited transaction (as defined in Section 4975 of the Code and Section 406 of ERISA) for which an exemption is not available or has not previously been obtained from the U.S. Department of Labor; (ii) permit to exist any accumulated funding deficiency (as defined in Section 302(a) of ERISA and Section 412(a) of the Code) or funding deficiency with respect to any Benefit Plan other than a Multiemployer Plan; (iii) fail to make any payments to any Multiemployer Plan that the Transferor or any ERISA Affiliate of the Transferor is required to make under the agreement relating to such Muitiemployer Plan or any law pertaining thereto; (iv) terminate any Benefit Plan so as to result in any liability; or (v) permit to exist any occurrence of any reportable event described in Title IV of ERISA which represents a material risk of a liability to the Transferor or any ERISA Affiliate of the Transferor under ERISA or the Code, if such prohibited transactions, accumulated funding deficiencies, failure to make payments, terminations and reportable events occurring within any fiscal year of the Transferor in the aggregate, involve a payment of money or an incurrence of liability by the Transferor or any ERISA Affiliate of the Transferor in an amount which would be expected to have a Material Adverse Effect. (j) Payment to the Sellers. With respect to any Receivable sold by the Sellers to the Transferor, the Transferor shall, and shall cause the Sellers to, effect such sale under, and pursuant to the terms of, the Receivables Purchase Agreement, including, without limitation, the payment by the Transferor either in cash or by increase in the amount of the Subordinated Note of an amount equal to the purchase price for such Receivable as required by the terms of the Receivables Purchase Agreement. -53- ARTICLE VI Administration and Collections SECTION 6.01. Appointment of Collection Agent. The servicing, administering and collection of the Receivables shall be conducted by such Person (the "Collection Agent") so designated from time to time in accordance with this Section 6.01. Until the Administrative Agent (at the direction of the Funding Agents) gives notice to the Parent of the designation of a new Collection Agent pursuant to this Section 6.01, the Parent is hereby designated as, and hereby agrees to perform the duties and obligations of, the Collection Agent pursuant to the terms hereof. The Collection Agent may not delegate any of its rights, duties or obligations hereunder, or designate a substitute Collection Agent, without the prior written consent of the Administrative Agent; provided that the Parent shall be permitted to delegate its duties and obligations as Collection Agent hereunder to the Sellers or any of the Parent's Affiliates, but such delegation shall not relieve the Parent of its duties and obligations as Collection Agent hereunder. The Administrative Agent may, and upon the direction of the Required Committed Purchasers the Administrative Agent shall, but only after the occurrence of a Collection Agent Default or any other Termination Event, designate as Collection Agent any Person (including itself) to succeed the Parent or any successor Collection Agent, on the condition in each case that any such Person so designated shall agree to perform the duties and obligations of the Collection Agent pursuant to the terms hereof. Following a Collection Agent Default or a Termination Event, the Administrative Agent may notify any Obligor of the designation of a successor Collection Agent. SECTION 6.02. Duties of Collection Agent. (a) The Collection Agent shall take or cause to be taken all such action as may be necessary or advisable to collect each Receivable from time to time, all in accordance with applicable laws, rules and regulations, with reasonable care and diligence, and in accordance with the Credit and Collection Policy. Each of the Transferor, the CP Conduit Purchasers, the Committed Purchasers, the Funding Agents and the Administrative Agent, hereby appoints as its agent the Collection Agent, from time to time designated pursuant to Section 6.01 hereof, to enforce its respective rights and interests in and under the Receivables and Related Security, Collections and Proceeds with -54- respect thereto. To the extent permitted by applicable law, the Transferor hereby grants to any Collection Agent appointed hereunder an irrevocable power of attorney to take in the Transferor's name and on behalf of the Transferor any and all steps necessary or desirable, in the reasonable determination of the Collection Agent, to collect all amounts due under any and all Receivables, including, without limitation, endorsing the Transferor's name on checks and other instruments representing Collections and enforcing such Receivables and the related Contracts. The Collection Agent shall set aside for the account of the Transferor, the CP Conduit Purchasers and the Committed Purchasers their respective allocable shares of the Collections of Receivables in accordance with Sections 2.05 and 2.06 hereof. The Collection Agent shall segregate and deposit to the Collection Account each CP Conduit Purchaser's and each Committed Purchaser's allocable share of Collections of Receivables when required pursuant to Article II hereof. The Transferor shall deliver to the Collection Agent and the Collection Agent shall hold in trust for the Transferor, the CP Conduit Purchasers, the Committed Purchasers, the Funding Agents and the Administrative Agent, in accordance with their respective interests, all Records which evidence or relate to Receivables, Related Security or Collections. Notwithstanding anything to the contrary contained herein, the Administrative Agent shall have the absolute and unlimited right to direct the Collection Agent (whether the Collection Agent is the Parent or any other Person) to commence or settle any legal action to enforce collection of any Receivable or to foreclose upon or repossess any Related Security. The Collection Agent shall not make the Administrative Agent, any of the CP Conduit Purchasers, any of the Funding Agents or any of the Committed Purchasers a party to any litigation without the prior written consent of such Person. (b) The Collection Agent shall, as soon as practicable following receipt thereof, segregate any funds deposited in a Lock-Box Account or otherwise commingled and not attributable to a Receivable within one (1) Business Day of receipt thereof and remit such funds to the appropriate Person. If the Collection Agent is not the Transferor, the Parent, any Seller or an Affiliate of the Transferor or the Sellers, the Collection Agent, by giving three (3) Business Days' prior written notice to the Administrative Agent, may revise the Servicing Fee; provided that such revised Servicing Fee shall be a reasonable fee agreed upon by the Collection Agent and the Administrative Agent reflecting rates and terms prevailing at such time as would be negotiated on an arm's-length basis. The Collection Agent, if other than the Transferor, the Parent, any Seller or -55- an Affiliate of the Transferor or the Sellers, shall as soon as practicable upon demand, deliver to the applicable Seller all Records in its possession which evidence or relate to indebtedness of an Obligor which is not a Receivable. (c) On or before ninety-five (95) days after the end of each fiscal year of the Collection Agent, beginning with the fiscal year ending December 31, 2000, the Collection Agent shall cause a firm of nationally recognized independent public accountants reasonably acceptable to the Administrative Agent (who may also render other services to the Collection Agent, the Transferor, the Sellers or any Affiliates of any of the foregoing), at the expense of the Transferor, to furnish a report to the Administrative Agent and the Transferor to the effect that they have: (i) selected at least one Settlement Statement for each fiscal quarter delivered during the fiscal year then ended and verified that the amounts presented on such Settlement Statement relating to sales, total dilution, net sales, collections, write-offs, concentrations and aging of Receivables agreed with the information provided to the Collection Agent by each Seller; (ii) for four (4) Sellers selected by the Administrative Agent, verified that the amounts presented on each of the Seller's reports to the Collection Agent for the periods selected in (i) above relating to sales, total dilution, net sales, collections, write-offs, concentrations and aging of Receivables agreed with the information contained within such Seller's underlying accounting records for such Settlement Period; (iii) selected at least one Deposit Report for each fiscal quarter delivered during the fiscal year then ended and verified that the amounts presented on such Deposit Report relating to sales, collections, concentrations and aging of Receivables agreed with the information provided to the Collection Agent by each Seller; (iv) for four (4) Sellers selected by the Administrative Agent (which may be the same Sellers selected in (ii) above), verified that the amounts presented on each of the Seller's reports to the Collection Agent for the periods selected in (iii) above relating to sales, collections, concentrations and aging of Receivables agreed with the information contained within such Seller's underlying accounting records for such period; -56- (v) recalculated the Net Receivables Balance as of the end of at least one Settlement Period and one Deposit Report for each fiscal quarter; (vi) selected a sample of fifteen (15) Receivables for each of the four (4) Sellers selected in (ii) above and verified that the Receivables treated by the Collection Agent as Eligible Receivables in fact satisfied the requirements of clauses (iii), (iv) and (viii) of the definition of such term; (vii) selected at least one Settlement Statement for each fiscal quarter and conducted a "negative confirmation" or other alternative procedures of a sample of fifteen (15) Receivables for each of the four (4) Sellers selected in (ii) above (which can be the same Receivables selected in clause (vi) above) and verified that each Seller's records and computer system used in servicing the Receivables contained correct information with regard to outstanding balances; and (viii) selected at least one Settlement Statement for each fiscal quarter and selected a sample of fifteen (15) Receivables for each of the four (4) Sellers selected in (ii) above (which can be the same Receivables selected in clause (vi) above) and verified that such Receivables were included in the proper aging category on such Settlement Statement based on the dates listed on the original invoices for such Receivables; except, in each case for (a) such exceptions as such firm shall believe to be immaterial (which exceptions need not be enumerated) and (b) such other exceptions as shall be set forth in such statement. (d) Notwithstanding anything to the contrary contained in this Article VI, the Collection Agent, if not the Transferor, the Parent, any Seller or any Affiliate of the Transferor or the Sellers, shall have no obligation to collect, enforce or take any other action described in this Article VI with respect to any indebtedness that is not included in the Transferred Interest other than to deliver to the Transferor the collections and documents with respect to any such indebtedness as described in Section 6.02(b) hereof. SECTION 6.03. Rights After Designation of New Collection Agent. At any time following -57- the designation of a Collection Agent other than the Parent, any Seller or the Transferor pursuant to the penultimate sentence of Section 6.01 hereof: (i) The Administrative Agent may, at its option, or shall, at the direction of the Required Committed Purchasers, direct that payment of all amounts payable under any Receivable be made directly to the Administrative Agent or its designee for the benefit of the CP Conduit Purchasers and the Committed Purchasers. (ii) The Transferor shall, at the Administrative Agent's request and at the Transferor's expense, give notice of the CP Conduit Purchasers', the Transferor's and/or the Committed Purchasers' ownership of Receivables to each Obligor and direct that payments be made directly to the Administrative Agent or its designee. (iii) The Transferor shall, at the Administrative Agent's request, (A) assemble all of the Records, and shall make the same available to the Administrative Agent or its designee at a place selected by the Administrative Agent or its designee, and (B) segregate all cash, checks and other instruments received by it from time to time constituting Collections of Receivables in a manner acceptable to the Administrative Agent and shall, promptly upon receipt, remit all such cash, checks and instruments, duly endorsed or with duly executed instruments of transfer, to the Administrative Agent or its designee. (iv) The Transferor hereby authorizes the Administrative Agent to take any and all steps in the Transferor's name and on behalf of the Transferor necessary or desirable, in the determination of the Administrative Agent, to collect all amounts due under any and all Receivables, including, without limitation, endorsing the Transferor's name on checks and other instruments representing Collections and enforcing such Receivables and the related Contracts. SECTION 6.04. Representations and Warranties of the Collection Agent. The Collection Agent represents and warrants (solely as to itself) to the Administrative Agent, each CP Conduit Purchaser, each Committed Purchaser and each Funding Agent as of the date it becomes a Collection Agent hereunder that: -58- (a) Corporate Existence and Power. The Collection Agent is a corporation duly organized, validly existing and in good standing under the laws of its respective jurisdiction of incorporation and has all corporate power and all material governmental licenses, authorizations, consents and approvals required to carry on its business in each jurisdiction in which its business is now conducted, except where the failure to obtain such licenses, authorizations, consents and approvals would not have a Material Adverse Effect. The Collection Agent is duly qualified to do business in, and is in good standing in, every other jurisdiction in which the nature of its business requires it to be so qualified, except where the failure to be so qualified or in good standing would not have a Material Adverse Effect. (b) Corporate and Governmental Authorization, Contravention. The execution, delivery and performance by the Collection Agent of this Agreement (i) are within the Collection Agent's corporate powers, (ii) have been duly authorized by all necessary corporate action on the Collection Agent's part, (iii) require no action by or in respect of, or filing with, any Official Body or official thereof (except for the filing of UCC financing statements as required by this Agreement or as have been taken or filed and, with respect to filings other than UCC financing statements, filings where the failure to file will not have a Material Adverse Effect), (iv) do not contravene, or constitute a default under, any provision of applicable Law or of the organizational documents of the Collection Agent or of any agreement or other material instrument binding upon the Collection Agent, except where such contravention or default would not have a Material Adverse Effect, or (v) result in the creation or imposition of any Adverse Claim on the assets of the Collection Agent or any of its Affiliates (except those created by the Transaction Documents). (c) Binding Effect. This Agreement constitutes the legal, valid and binding obligations of the Collection Agent, enforceable in accordance with its terms, subject to applicable bankruptcy, insolvency, moratorium or other similar laws affecting the rights of creditors generally and general equitable principles (whether considered in a proceeding at law or in equity). (d) Action, Suits. Except as set forth in Exhibit F hereto, there are no actions, suits or proceedings pend- -59- ing, or to the knowledge of the Collection Agent, threatened, against the Collection Agent, or any Affiliate of the Collection Agent, or its respective properties, in or before any court, arbitrator or other body, which may, individually or in the aggregate, have a Material Adverse Effect. SECTION 6.05. Covenants of the Collection Agent. At all times from the date hereof to the date on which the Aggregate Unpaids shall be equal to zero, unless the Administrative Agent shall otherwise consent in writing: (a) Credit and Collection Policy. The Collection Agent will comply in all material respects with the Credit and Collection Policy in regard to each Receivable and the related Contract. (b) Collections Received. The Collection Agent shall hold in trust, and deposit as soon as reasonably practicable (but in any event no later than one Business Day following its receipt thereof) to a Lock-Box Account all Collections received from time to time by the Collection Agent. (c) Notice of Termination Events, Potential Termination Events or Collection Agent Defaults. Immediately, and in any event within one (1) Business Day after the Collection Agent obtains knowledge of the occurrence of each Termination Event, Potential Termination Event or Collection Agent Default, the Collection Agent will furnish to the Administrative Agent and each Funding Agent a statement of a Responsible Officer of the Collection Agent setting forth details of such Termination Event, Potential Termination Event or Collection Agent Default, and the action which the Collection Agent, the Transferor or a Seller proposes to take with respect thereto. (d) Conduct of Business. The Collection Agent will do all things necessary to remain duly incorporated, validly existing and in good standing as a domestic corporation in its jurisdiction of incorporation and maintain all requisite authority to conduct its business in each jurisdiction in which its business is conducted to the extent that the failure to maintain such would have a Material Adverse Effect. -60- (e) Compliance with Laws. The Collection Agent will comply in all respects with all Laws with respect to the Receivables to the extent that any non-compliance would have a Material Adverse Effect. (f) Further Information. The Collection Agent shall furnish or cause to be furnished to the Administrative Agent and, after a Termination Event or a Potential Termination Event, any Funding Agent such other information relating to the Receivables and readily available public information regarding the financial condition of the Collection Agent, as soon as reasonably practicable, and in such form and detail, as the Administrative Agent may reasonably request and, after a Termination Event or a Potential Termination Event, as any Funding Agent may reasonably request. SECTION 6.06. Negative Covenants of the Collection Agent. At all times from the date hereof to the date on which the Aggregate Unpaids shall be equal to zero, unless the Administrative Agent shall otherwise consent in writing: (a) No Sales, Liens, Etc. Except as otherwise provided herein, in the Receivables Purchase Agreement and in the Credit Agreement, the Collection Agent will not sell, assign (by operation of law or otherwise) or otherwise dispose of, or create any Adverse Claim upon (or file any financing statement) or with respect to (x) any of the Receivables, Related Security, Collections or Proceeds with respect thereto, (y) any inventory or goods, the sale of which may give rise to a Collection, or (z) any Lock-Box Account to which any Collections of any Receivable are sent, or assign any right to receive income in respect thereof. (b) Consolidations, Mergers and Sales of Assets. The Collection Agent shall not without the prior written consent of the Administrative Agent, (i) consolidate or merge with or into any other Person or (ii) sell, lease or otherwise transfer all or substantially all of its assets to any other Person; provided that the Collection Agent may consolidate or merge with another Person if (A)(1) the Collection Agent is the corporation surviving such consolidation or merger or (2) the Person into or with whom the Collection Agent is merged or consolidated is an Affiliate and the surviving corporation assumes in writing -61- all duties and liabilities of the Collection Agent hereunder and (B) immediately after and giving effect to such consolidation or merger, no Termination Event or Potential Termination Event shall have occurred and be continuing. (c) Lock-Box Accounts. Except as permitted pursuant to Section 2.09(b) of this Agreement or as otherwise permitted under or required by the Transaction Documents, the Collection Agent shall not make, or cause or permit any other Person to make any transfer of funds on deposit in a Lock-Box Account. (d) Modifications of Receivables or Contracts. The Collection Agent shall not extend, amend, forgive, discharge, compromise, waive, cancel or otherwise modify the terms of any Receivable or amend, modify or waive any term or condition of any Contract related thereto; provided, that the Collection Agent may take such actions as are expressly permitted by the terms of any Transaction Document. SECTION 6.07. Collection Agent Default. The occurrence of any one or more of the following events shall constitute a Collection Agent default (each, a "Collection Agent Default"): (a) (i) the Collection Agent or, to the extent that the Transferor, the Parent, any Seller or any Affiliate of the Transferor or the Sellers is then acting as Collection Agent, the Transferor, the Parent, such Seller or such Affiliate, as applicable, shall fail to observe or perform any material term, covenant or agreement hereunder (other than as referred to in clauses (ii) and (iii) of this Section 6.07(a)), and such failure shall remain unremedied for ten (10) days, after a Responsible Officer of the Collection Agent has knowledge thereof or (ii) the Collection Agent or, to the extent that the Transferor, the Parent, any Seller or any Affiliate of the Transferor or the Sellers is then acting as Collection Agent, the Transferor, the Parent, such Seller or such Affiliate, as applicable, shall fail to make any payment or deposit required to be made by it hereunder when due and such failure remains uncured for one (1) Business Day or the Collection Agent shall fail to observe or perform in any material respect any term, covenant or agreement on the Collection Agent's part to be performed under Section 2.09(b) hereof, or (iii) the Collection Agent fails to deliver any Deposit -62- Report within two (2) Business Days of the date when due or Settlement Statement within one (1) Business Day of the date when due; or (b) any representation, warranty, certification or statement made by the Collection Agent in this Agreement, any other Transaction Document or in any other document delivered pursuant hereto or thereto shall prove to have been incorrect in any material respect when made or deemed made; provided that no such event shall constitute a Collection Agent Default unless such event shall continue unremedied for a period of ten (10) days from the date a Responsible Officer of the Collection Agent obtains knowledge thereof; or (c) the Collection Agent or any of its Subsidiaries shall fail to make any payment of principal or interest in respect of any Indebtedness evidencing an aggregate outstanding principal amount exceeding $15,000,000, when and as the same shall become due and payable after giving effect to any applicable grace period with respect thereto; or any event or condition occurs that results in any such Indebtedness becoming due prior to its scheduled maturity or that enables or permits the holder or holders of any such Indebtedness or any trustee or agent on its or their behalf to cause any such Indebtedness to become due, or to require the prepayment, repurchase, redemption or defeasance thereof, prior to its scheduled maturity; provided that this clause (c) shall not apply to secured Indebtedness that becomes due as a result of the voluntary sale or transfer of the property or assets securing such Indebtedness; or (d) any Event of Bankruptcy shall occur and be continuing for sixty (60) days with respect to the Collection Agent or any of its Subsidiaries; or (e) there shall have occurred any event which, in the commercially reasonable judgment of the Administrative Agent, materially and adversely affects the Collection Agent's ability to collect the Receivables under this Agreement. SECTION 6.08. Responsibilities of the Transferor and the Sellers. Anything herein to the contrary notwithstanding, the Transferor shall, and/or shall cause each Seller to, (i) perform all of such Seller's -63- obligations under the Contracts related to the Receivables to the same extent as if interests in such Receivables had not been sold hereunder and under the Receivables Purchase Agreement and the exercise by the Administrative Agent, the CP Conduit Purchasers and the Committed Purchasers of their rights hereunder and under the Receivables Purchase Agreement shall not relieve the Transferor or the Seller from such obligations and (ii) pay when due any taxes, including without limitation, any sales taxes payable in connection with the Receivables and their creation and satisfaction. Neither the Administrative Agent, any of the CP Conduit Purchasers nor any of the Committed Purchasers shall have any obligation or liability with respect to any Receivable or related Contracts, nor shall it be obligated to perform any of the obligations of the Seller thereunder. ARTICLE VII Termination Events SECTION 7.01. Termination Events. The occurrence of any one or more of the following events shall constitute a Termination Event: (a) the Transferor, any Seller or the Collection Agent shall fail to make any payment or deposit to be made by it hereunder or under any of the Transaction Documents when due hereunder or thereunder and such failure continues for one (1) Business Day; or (b) any representation, warranty, certification or statement made by the Transferor, the Collection Agent or any Seller in this Agreement, any other Transaction Document to which it is a party or in any other document delivered pursuant hereto or thereto shall prove to have been incorrect in any material respect when made or deemed made; provided that no such event shall constitute a Termination Event unless such event shall continue unremedied for a period of ten (10) days from the date a Responsible Officer of the Transferor obtains knowledge thereof; provided further that no grace period shall apply to Sections 3.01(c), 3.01(d), 3.01(j), 3.01(q) and 3.01(r) of this Agreement (and, for the avoidance of doubt, the cure period described in the first proviso of this Section 7.01(b) shall not apply to payments required to be made pursuant to Section 2.10(b)); and provided further that no such event shall constitute a Termination Event if the -64- Transferor shall have timely paid to the Collection Agent the Deemed Collection required to be paid as a result of such event in accordance with Section 2.10(b); or (c) the Transferor, any Seller or the Collection Agent shall default in the performance of any undertaking (other than those covered by clause (a) above) under any Transaction Document and such default shall continue for ten (10) days after a Responsible Officer of such party has knowledge thereof; or (d) the Transferor shall fail to make any payment of principal or interest in respect of any Indebtedness when and as the same shall become due and payable after giving effect to any applicable grace period with respect thereto; or any event or condition occurs that results in any such Indebtedness becoming due prior to its scheduled maturity or that enables or permits the holder or holders of any such Indebtedness or any trustee or agent on its or their behalf to cause any such Indebtedness to become due, or to require the prepayment, repurchase, redemption or defeasance thereof, prior to its scheduled maturity; or (e) any Event of Bankruptcy shall occur with respect to the Transferor, the Collection Agent, any Seller, the Parent or any of its Subsidiaries; or (f) after the filing in the appropriate offices of the financing statements described in Sections 4.01(c), 4.01(d), 4.01(e) and 4.01(f), the Administrative Agent, on behalf of the CP Conduit Purchasers and the Committed Purchasers, shall, for any reason, fail or cease to have a valid and perfected first priority ownership or security interest in the Receivables and Related Security, Collections and Proceeds with respect thereto, free and clear of any Adverse Claims; or (g) a Collection Agent Default shall have occurred; or (h) the Transferor, the Parent or any Seller shall enter into any corporate transaction or merger whereby it is not the surviving entity (other than, in the case of any Seller, a merger or consolidation which does not, in the reasonable opinion of the Administrative Agent, materially adversely affect the collectibility of the Receivables sold by such Seller or the performance of such Seller's obligations under the transaction documents); or -65- (i) there shall have occurred any event or condition which would have material adverse effect on either the collectibility of the Receivables or the ability of the Transferor or any Seller to perform its respective obligations under the Transaction Documents to which it is a party since the Closing Date; or (j) (i) the Percentage Factor exceeds the Maximum Percentage Factor unless the Transferor reduces the Net Investment from previously received Collections or other funds available to the Transferor or increases the balance of the Receivables on the next Business Day following such breach so as to reduce the Percentage Factor to less than or equal to 100%; or (ii) the Net Investment shall exceed the Facility Limit; or (k) the average Dilution Ratio for the three preceding Settlement Periods exceeds 2.5%; or (l) the average Default Ratio for the three preceding Settlement Periods exceeds 3%; or (m) the Parent or any of its Subsidiaries default in the observance or performance of Section 6.13 or 6.14 of the Credit Agreement or an Event of Default (as such term is defined in the Credit Agreement) described in Section 7.01(r) of the Credit Agreement shall have occurred; or (n) a Responsible Officer of the Transferor receives notice or becomes aware that a notice of Lien has been filed against the Transferor or the Collection Agent under Section 412(n) of the Code or Section 302(f) of ERISA for a failure to make a required installment or other payment to a plan to which Section 412(n) of the Code or Section 302(f) of ERISA applies; or (o) the Receivables Purchase Agreement is terminated; or (p) the Parent and the Sellers (in the aggregate) shall fail to maintain 100% ownership of the Transferor. SECTION 7.02. Remedies Upon the Occurrence of a Termination Event. (a) Upon the occurrence of any Termination Event, the Administrative Agent may, or at the direction of the Re- -66- quired Committed Purchasers shall, by notice to the Transferor and the Collection Agent, declare the Termination Date to have occurred; provided, however, that in the case of any event described in Sections 7.01(e), 7.01(f), 7.01(j)(i), 7.01(j)(ii) and 7.01(n) above, the Termination Date shall be deemed to have occurred automatically upon the occurrence of such event. At all times after the declaration or automatic occurrence of the Termination Date pursuant to this Section 7.02(a), the Base Rate plus 2.00% shall be the Tranche Rate applicable to the Net Investment for all existing and future Tranches. If an event or condition shall have occurred which constitutes a Potential Termination Event, the Administrative Agent may, by notice to the Transferor, declare such event or condition a Potential Termination Event. (b) In addition, if any Termination Event occurs hereunder, (i) the Administrative Agent shall promptly notify the Transferor in writing whether it has declared the Termination Date to have occurred and whether it will be exercising the remedies specified in this Section 7.02, (ii) the Administrative Agent, on behalf of the CP Conduit Purchasers and the Committed Purchasers, shall have all of the rights and remedies provided to a secured creditor or a purchaser of accounts under the Relevant UCC by applicable law in respect thereto and (iii) if the Administrative Agent so elects (A) the Facility Limit shall be reduced as of each calendar date thereafter equal to the Net Investment as of such date and (B) the Percentage Factor shall be increased to 100%. SECTION 7.03. Reconveyance Under Certain Circumstances. The Transferor agrees to accept the reconveyance from the Administrative Agent, on behalf of the CP Conduit Purchasers and/or the Committed Purchasers, of the Transferred Interest if any Termination Event occurs hereunder and the Administrative Agent notifies the Transferor of a material breach of any representation or warranty made or deemed made pursuant to Sections 3.01(a), 3.01(b), 3.01(c), 3.01(d), 3.01(g) and 3.01(j) of this Agreement. The reconveyance price shall be paid by the Transferor to the Administrative Agent, for the account of the CP Conduit Purchasers and the Committed Purchasers, as applicable, in immediately available funds on demand in an amount equal to the Aggregate Unpaids. -67- ARTICLE VIII The Administrative Agent SECTION 8.01. Appointment. Each of the CP Conduit Purchasers, the Committed Purchasers and the Funding Agents hereby irrevocably designates and appoints the Administrative Agent as the agent of such Person under this Agreement and irrevocably authorizes the Administrative Agent, in such capacity, to take such action on its behalf under the provisions of this Agreement and to exercise such powers and perform such duties as are expressly delegated to the Administrative Agent by the terms of this Agreement, together with such other powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary elsewhere in this Agreement, (i) the Administrative Agent shall not have any duties or responsibilities except those expressly set forth herein, or any fiduciary relationship with any CP Conduit Purchaser, any Committed Purchaser or any Funding Agent, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or otherwise exist against the Administrative Agent; and (ii) in no event shall the Administrative Agent be liable under or in connection with this Agreement for indirect, special, or consequential losses or damages of any kind, including lost profits, even if advised of the possibility thereof and regardless of the form of action by which such losses or damages may be claimed. In performing its functions and duties hereunder, the Administrative Agent shall act solely as the agent of the CP Conduit Purchasers, the Committed Purchasers and the Funding Agents, and the Administrative Agent does not assume, nor shall be deemed to have assumed, any obligation or relationship of trust or agency with or for any such Person. SECTION 8.02. Delegation of Duties. The Administrative Agent may execute any of its duties under this Agreement by or through agents or attorneys-in-fact and shall be entitled to advice of counsel (who may be counsel for the Transferor or the Collection Agent), independent public accountants and other experts selected by it concerning all matters pertaining to such duties. The Administrative Agent shall not be responsible for the negligence or misconduct of any agents or attorneys-in-fact selected by it with reasonable care. -68- SECTION 8.03. Exculpatory Provisions. Neither the Administrative Agent nor any of its officers, directors, employees, agents, attorneys-in-fact or Affiliates shall be (i) liable for any action lawfully taken or omitted to be taken by it or such Person under or in connection with this Agreement (x) with the consent or at the request of the CP Conduit Purchasers, the Committed Purchasers or the Funding Agents or (y) in the absence of its own gross negligence or willful misconduct or (ii) responsible in any manner to any of the CP Conduit Purchasers, the Committed Purchasers or the Funding Agents for any recitals, statements, representations or warranties made by the Transferor, the Collection Agent, the Sellers or any officer thereof contained in this Agreement or any other Transaction Document or in any certificate, report, statement or other document referred to or provided for in, or received by the Administrative Agent under or in connection with, this Agreement or any other Transaction Document or for the value, validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement, any other Transaction Document, the Receivables (or any Related Security, Collections and Proceeds with respect thereto) or any Transferred Interest or for any failure of any of the Transferor, the Collection Agent, the Sellers or the Obligors to perform its obligations hereunder or thereunder. The Administrative Agent shall not be under any obligation to any CP Conduit Purchaser, any Committed Purchaser or any Funding Agent to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this Agreement or any other Transaction Document or to inspect the properties, books or records of the Transferor, the Collection Agent or any Seller. SECTION 8.04. Reliance by Administrative Agent. The Administrative Agent shall be entitled to rely, and shall be fully protected in relying, upon any writing, resolution, notice, consent, certificate, affidavit, letter, fax, e-mail, statement, order or other document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons and upon advice and statements of legal counsel (including, without limitation, counsel to the Transferor or the Collection Agent), independent accountants and other experts selected by the Administrative Agent and shall not be liable for any action taken or omitted to be taken by it in good faith in accordance with the advice of such counsel, accountants or experts. The Administrative Agent shall be fully justified in failing or refusing to take any action under this Agreement or any other Transaction Docu- -69- ment unless it shall first receive such advice or concurrence of the Funding Agents, on behalf of the CP Conduit Purchasers, as it deems appropriate or it shall first be indemnified to its satisfaction by the Funding Agents against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. The Administrative Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement and the other Transaction Documents in accordance with a request of the Funding Agents, on behalf of the CP Conduit Purchasers (unless, in the case of any action relating to the giving of consent hereunder, the giving of such consent requires the consent of all the CP Conduit Purchasers), and such request and any action taken or failure to act pursuant thereto shall be binding upon all the CP Conduit Purchasers, the Committed Purchasers and the Funding Agents. SECTION 8.05. Notice of Collection Agent Default. The Administrative Agent shall not be deemed to have knowledge or notice of the occurrence of any Collection Agent Default or any Termination Event unless the Administrative Agent has received notice from a CP Conduit Purchaser, a Committed Purchaser, a Funding Agent, the Transferor or the Collection Agent referring to this Agreement, describing such Collection Agent Default or Termination Event and stating that such notice is a "notice of a Collection Agent Default" or "notice of a Termination Event", as the case may be. In the event that the Administrative Agent receives such a notice, the Administrative Agent shall give notice thereof to the Funding Agents, the Transferor and the Collection Agent. The Administrative Agent shall take such action with respect to such event as shall be reasonably directed by the Required Committed Purchasers, provided that unless and until the Administrative Agent shall have received such directions, the Administrative Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such event as it shall deem advisable in the best interests of the CP Conduit Purchasers. SECTION 8.06. Non-Reliance on the Administrative Agent and Other Purchasers. Each of the CP Conduit Purchasers, the Committed Purchasers and the Funding Agents expressly acknowledges that neither the Administrative Agent nor any of its officers, directors, employees, agents, attorneys-in-fact or Affiliates has made any representations or warranties to it and that no act by the Ad- -70- ministrative Agent hereinafter taken, including any review of the affairs of the Transferor, shall be deemed to constitute any representation or warranty by the Administrative Agent to any such Person. Each of the CP Conduit Purchasers, the Committed Purchasers and the Funding Agents represents to the Administrative Agent that it has, independently and without reliance upon the Administrative Agent or any other CP Conduit Purchaser, Committed Purchaser or Funding Agent and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, operations, property, financial and other condition and creditworthiness of the Transferor and the Collection Agent and made its own decision to enter into this Agreement. Each of the CP Conduit Purchasers, the Committed Purchasers and the Funding Agents also represents that it will, independently and without reliance upon the Administrative Agent or any other CP Conduit Purchaser, Committed Purchaser or Funding Agent, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Agreement and the other Transaction Documents, and to make such investigation as it deems necessary to inform itself as to the business, operations, property, financial and other condition and creditworthiness of the Transferor, the Collection Agent and the Sellers. Except for notices, reports and other documents expressly required to be furnished to the Funding Agents by the Administrative Agent hereunder, the Administrative Agent shall have no duty or responsibility to provide any CP Conduit Purchaser, any Committed Purchaser or any Funding Agent with any credit or other information concerning the business, operations, property, condition (financial or otherwise), prospects or creditworthiness of the Transferor, the Collection Agent or the Sellers which may come into the possession of the Administrative Agent or any of its officers, directors, employees, agents, attorneys-in-fact or Affiliates. SECTION 8.07. Indemnification. Each of the Committed Purchasers and the Funding Agents agrees to indemnify the Administrative Agent in its capacity as such (to the extent not reimbursed by the Transferor, the Collection Agent and the Sellers and without limiting the obligation of the Transferor, the Collection Agent and the Sellers to do so), from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind whatsoever which may at any time be imposed on, incurred by or asserted against the Administrative Agent in any way relating to or arising out of this Agreement, -71- any of the other Transaction Documents or any documents contemplated by or referred to herein or therein or the transactions contemplated hereby or thereby or any action taken or omitted by the Administrative Agent under or in connection with any of the foregoing; provided that no Committed Purchaser or Funding Agent shall be liable for the payment of any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting solely from the Administrative Agent's gross negligence or willful misconduct. The agreements in this Section shall survive the payment of all amounts payable hereunder. SECTION 8.08. The Administrative Agent in Its Individual Capacity. The Administrative Agent and its Affiliates may make loans to, accept deposits from and generally engage in any kind of business with the Transferor, the Collection Agent or any of their Affiliates as though the Administrative Agent were not the Administrative Agent hereunder. With respect to any Transferred Interest held by the Administrative Agent, the Administrative Agent shall have the same rights and powers under this Agreement and the other Transaction Documents as any Purchaser and may exercise the same as though it were not the Administrative Agent, and the terms "Committed Purchaser," and "Purchaser" shall include the Administrative Agent in its individual capacity. SECTION 8.09. Resignation of Administrative Agent; Successor Administrative Agent. The Administrative Agent may resign as Administrative Agent at any time by giving 30 days' notice to the Funding Agents, the Transferor and the Collection Agent. The Administrative Agent may be removed at any time by a resolution of the Required Committed Purchasers, removing the Administrative Agent and appointing from among the Funding Agents a successor administrative agent, which successor administrative agent shall be approved by the Transferor and the Collection Agent (which approval shall not be unreasonably withheld), delivered to the Administrative Agent and the Collection Agent. If Chase shall resign as Administrative Agent under this Agreement, then the Required Committed Purchasers, shall promptly appoint a successor administrative agent from among the Funding Agents, which successor administrative agent shall be approved by the Transferor and the Collection Agent (which approval shall not be unreasonably withheld). If no successor administrative agent is appointed prior to the effective date of the resignation of the Administrative Agent, the Administrative Agent may -72- appoint, after consulting with the Funding Agents, the Transferor and the Collection Agent, a successor agent from among the Funding Agents. If no successor administrative agent has accepted appointment as Administrative Agent by the date which is 30 days following a retiring Administrative agent's notice of resignation, the retiring Administrative Agent's resignation shall nevertheless thereupon become effective and the Collection Agent shall assume and perform all of the duties of the Administrative Agent hereunder until such time, if any, as the Required Committed Purchasers appoint a successor agent as provided for above. Effective upon the appointment of a successor administrative agent, such successor administrative agent shall succeed to the rights, powers and duties of the Administrative Agent, and the term "Administrative Agent" shall mean such successor administrative agent effective upon such appointment and approval, and the former Administrative Agent's rights, powers and duties as Administrative Agent shall be terminated, without any other or further act or deed on the part of such former Administrative Agent or any of the parties to this Agreement. After any retiring Administrative Agent's resignation as Administrative Agent, the provisions of this Article VII shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Administrative Agent under this Agreement. ARTICLE IX Limited Guaranty SECTION 9.01. Guaranty of Obligations. The Guarantor unconditionally guarantees the full and prompt payment when due of all of the payment obligations and the timely performance of all of the performance obligations of the Sellers of every kind and nature now or hereafter existing, or due or to become due, under the Transaction Documents (collectively, the "Obligations"); provided that, such Obligations shall not include amounts not collected in respect of any Receivable as a result of the creditworthiness of an Obligor, including, but not limited to, amounts required to be returned to an Obligor as a voidable preference. The Guarantor shall pay all reasonable costs and expenses including, without limitation, all court costs and reasonable attorney's fees and expenses paid or incurred by the Administrative Agent and the other Beneficiaries in connection with (a) the collection of all or any part of the Obligations from the Guarantor and (b) the prosecution or defense of any action by or against the Administrative Agent, the other Beneficiaries or the Transferor in connection with, or relating to, the Obligations, whether involving the Sellers, -73- the Collection Agent, the Guarantor, the Transferor or any other party (including, but not limited to, a trustee in a bankruptcy or a debtor-in-possession). SECTION 9.02. Validity of Obligations; Irrevocability. The Guarantor agrees that subject to the proviso set forth in Section 9.01 above its obligations under this Guaranty shall be unconditional, irrespective of (i) the validity, enforceability, discharge, disaffirmance, settlement or compromise (by any Person, including a trustee in a bankruptcy or a debtor-in-possession) of the Obligations or of the Transaction Documents or any Contract, (ii) the absence of any attempt to collect the Obligations from a Seller or the Collection Agent or any other party, (iii) the waiver or consent by any Person with respect to any provision of any instrument evidencing the Obligations, (iv) any change of the time, manner or place of payment or performance, or any other term of any of the Obligations, (v) any law, regulation or order of any jurisdiction affecting any term of any of the Obligations or rights of any Person with respect thereto, (vi) the failure by any Person to take any steps to perfect and maintain perfected its interest in the Receivables or any security or collateral related to the Obligations or (vii) any other circumstances which might otherwise constitute a legal or equitable discharge or defense of a guarantor or surety. The Guarantor agrees that the Administrative Agent and the Beneficiaries shall be under no obligation to marshal any assets in favor of or against or in payment of any or all of the Obligations. The Guarantor further agrees that, to the extent a payment is made by a Seller or the Collection Agent under the Transaction Documents, which payment or payments or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside and/or required to be repaid to such Seller or the Collection Agent, its estate, trustee, receiver or any other party, under any bankruptcy, insolvency or similar state or federal law, common law or equitable cause, then to the extent of such payment or repayment, the Obligation or part thereof which has been paid, reduced or satisfied by such amount shall be reinstated and continued in full force and effect as of the date such initial payment, reduction or satisfaction occurred. The Guarantor waives all set-offs, defenses and counterclaims and all presentments, demands for performance, notices of dishonor and notice of acceptance of this Guaranty. The Guarantor agrees that its obligations under this Guaranty shall be irrevocable. -74- SECTION 9.03. Several Obligations. The obligations of the Guarantor hereunder are separate and apart from the Sellers or any other Person, and are primary obligations concerning which the Guarantor is the principal obligor. The Guarantor agrees that this Guaranty shall not be discharged except by payment in full of the Obligations and complete performance of the obligations of the Guarantor hereunder. The obligations of the Guarantor hereunder shall not be affected in any way by the release or discharge of a Seller from the performance of any of the Obligations (other than the full and final payment of all of the Obligations), whether occurring by reason of law or any other cause, whether similar or dissimilar to the foregoing. SECTION 9.04. Subrogation Rights. If any amount shall be paid to the Guarantor on account of subrogation rights at any time when all the Obligations shall not have been paid in full, such amount shall be held in trust for the benefit of the Administrative Agent, on behalf of the Beneficiaries, and shall forthwith be paid to the Administrative Agent to be applied to the Obligations. If (a) the Guarantor shall make payment to the Administrative Agent of or perform all or any part of the obligations and (b) all the Obligations shall be paid and performed in full, the Administrative Agent will, at the Guarantor's request, execute and deliver to the Guarantor appropriate documents, without recourse and without representation or warranty, necessary to evidence the transfer by subrogation to the Guarantor of any interest in the Obligations resulting from such payment or performance by the Guarantor. The Guarantor hereby agrees that it shall have no rights of subrogation with respect to amounts due to the Administrative Agent or the Beneficiaries until such time as all obligations of the Sellers to the Transferor, the Administrative Agent and the Beneficiaries have been paid or performed in full and the Receivables Transfer Agreement has been terminated. SECTION 9.05. Rights of Set-Off. The Guarantor hereby authorizes the Administrative Agent, on behalf of the Beneficiaries, at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (whether general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by the Administrative Agent or the Beneficiaries to or for the credit or the account of the Guarantor against any and all of the obligations of the Guarantor now or hereafter existing un- -75- der this Guaranty (even if contingent or unmatured). The Guarantor hereby acknowledges that rights of the Administrative Agent, on behalf of the Beneficiaries, described in this Section 9.05 are in addition to all other rights and remedies (including, without limitation, other rights of set-off) the Administrative Agent and the Beneficiaries may have. SECTION 9.06. Representations and Warranties. The Guarantor hereby represents and warrants to the Administrative Agent, for the benefit of the Beneficiaries, as of the date hereof, as follows: (a) Corporate Existence and Power. The Guarantor is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation and has all corporate power and all material governmental licenses, authorizations, consents and approvals required to carry on its business in each jurisdiction in which its business is now conducted. The Guarantor is duly qualified to do business in, and is in good standing in, every other jurisdiction in which the nature of its business requires it to be so qualified, except where the failure to be so qualified or in good standing would not have a Material Adverse Effect. (b) Corporate and Governmental Authorization; Contravention. The execution, delivery and performance by the Guarantor of this Guaranty and the other Transaction Documents to which the Guarantor is a party are within the Guarantor's corporate powers, have been duly authorized by all necessary corporate action, require no action by or in respect of, or filing with, any Official Body or official thereof, and do not contravene, or constitute a default under, any provision of applicable law, rule or regulation or of the Certificate of Incorporation or By-laws of the Guarantor or of any material agreement, judgment, injunction, order, writ, decree or other instrument binding upon the Guarantor or result in the creation or imposition of any Adverse Claim on the assets of the Guarantor or any of its Subsidiaries. (c) Binding Effect. Each of this Guaranty and the other Transaction Documents to which the Guarantor is a party constitutes the legal, valid and binding obligation of the Guarantor, enforceable in accordance with its terms, subject to applicable bankruptcy, insolvency, moratorium or other similar laws affecting the rights of creditors and general equitable principles (whether considered in a proceeding at law or in equity). -76- (d) Accuracy of Information. All written information heretofore furnished by the Guarantor to the Administrative Agent or the Beneficiaries for purposes of or in connection with this Guaranty, the other Transaction Documents or any transaction contemplated hereby or thereby is, and all such written information hereafter furnished by the Guarantor to the Administrative Agent or the Beneficiaries will be, true and accurate in every material respect on the date such information is stated or certified. (e) Tax Status. The Guarantor has filed all tax returns (Federal, state and local) required to be filed and has paid prior to delinquency or made adequate provision for the payment of all taxes, assessments and other governmental charges (including for such purposes, the setting aside of appropriate reserves for taxes, assessments and other governmental charges being contested in good faith). (f) Action, Suits. There are no actions, suits or proceedings pending, or to the knowledge of the Guarantor threatened, against or affecting the Guarantor or any Affiliate of the Guarantor or their respective properties, in or before any court, arbitrator or other body, which may, individually or in the aggregate, have a Material Adverse Effect. (g) Not an Investment Company The Guarantor is not, nor is it controlled by, an "investment company" within the meaning of the Investment Company Act of 1940, as amended, or is exempt from all provisions of such Act. ARTICLE X Miscellaneous SECTION 10.01. Term of Agreement. This Agreement shall terminate on the date following the Termination Date upon which the Net Investment has been reduced to zero, and all accrued Discount, Servicing Fees and all other Aggregate Unpaids have been paid in full, in each case, in cash; provided, however, that (i) the rights and remedies of the Administrative Agent, the CP Conduit Purchasers and the Committed Purchasers with respect to any representation and warranty made or deemed to be made by the Transferor or the Seller pursuant to this Agreement, (ii) the indemnification and payment provisions of the Asset Purchase Agreements, and (iii) the agreements set forth in Sections 10.08 and 10.09 hereof, shall be continuing and shall survive any termination of this Agreement. -77- SECTION 10.02. Waivers; Amendments. No failure or delay on the part of the Administrative Agent, any CP Conduit Purchaser, any Funding Agent or any Committed Purchaser in exercising any power, right or remedy under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or remedy preclude any other further exercise thereof or the exercise of any other power, right or remedy. The rights and remedies herein provided shall be cumulative and nonexclusive of any rights or remedies provided by law. Any provision of this Agreement may be amended or waived if, but only if, such amendment or waiver is in writing and is signed by the parties hereto and the Required Committed Purchasers and, if such amendment is material, the Rating Agencies, to the extent required by the terms and conditions of the commercial paper program of any CP Conduit Purchaser, have provided Rating Confirmations; provided, however, that no such amendment or waiver shall, without the consent of each affected Committed Purchaser, (A) extend the Commitment Expiry Date or the date of any payment or deposit of Collections by the Transferor or Collection Agent, (B) reduce the rate or extend the time of payment of any interest or fees hereunder, (C) change the amount of an Committed Purchaser's Pro Rata Share or Commitment, (D) consent to or permit the assignment or transfer by the Transferor of any of its rights or obligations under this Agreement, or (E) amend or modify this Section 10.02 or the definition of "Required Committed Purchasers". SECTION 10.03. Notices. Except as provided below, all communications and notices provided for hereunder shall be in writing (including telecopy or electronic facsimile transmission or similar writing) and shall be given to the other party at its address or telecopy number set forth below or at such other address or telecopy number as such party may hereafter specify for the purposes of notice to such party. Each such notice or other communication shall be effective (i) if given by telecopy, when such telecopy is transmitted to the telecopy number specified in this Section 10.03 and confirmation is received, (ii) if given by mail three (3) Business Days following such posting, postage prepaid, U.S. certified or registered, (iii) if given by overnight courier, one (1) Business Day after deposit thereof with a national overnight courier service, or (iv) if given by any other means, when received at the address specified in this Section 10.03. However, anything in this Section 10.03 to the contrary notwithstanding, the Transferor hereby authorizes the Administrative Agent to effect Transfers, -78- Tranche Period and Tranche Rate selections based on telephonic notices made by any Person which the Administrative Agent in good faith believes to be acting on behalf of the Transferor. The Transferor agrees to deliver promptly to the Administrative Agent a written confirmation of each telephonic notice signed by an authorized officer of Transferor. However, the absence of such confirmation shall not affect the validity of such notice. If the written confirmation differs in any material respect from the action taken by the Administrative Agent, the records of the Administrative Agent shall govern absent manifest error. If to the CP Conduit Purchasers, to the address set forth on Schedule B (with a copy to the Administrative Agent). If to the Transferor: 21001 Van Born Road Taylor, MI 48180 Attention: Jim Tompkins Telephone: (313) 792-6403 Telecopy: (313) 792-6940 with a copy to: Jonathan A. Schaffzin Cahill Gordon & Reindel 80 Pine Street New York, NY 10005 Telecopy: (212) 269-5420 If to the Sellers, to the address set forth on Schedule I to the Receivables Purchase Agreement. If to the Administrative Agent: THE CHASE MANHATTAN BANK 450 W. 33rd St., 15th Floor New York, NY 10011 Attention: Lara Graff Telephone: 212-946-3748 Telecopy: 212-946-8098 If to the Committed Purchasers, at their respective addresses set forth on Schedule B. -79- SECTION 10.04. Governing Law; Submission to Jurisdiction; Integration. (a) This Agreement shall be governed by, and construed in accordance with the laws of the State of New York. Each of the parties hereto hereby submits to the nonexclusive jurisdiction of the United States District Court for the Southern District of New York and of any New York state court sitting in The City of New York for purposes of all legal proceedings arising out of or relating to this Agreement or the transactions contemplated hereby. Each of the parties hereto hereby irrevocably waives, to the fullest extent it may effectively do so, any objection which it may now or hereafter have to the laying of the venue of any such proceeding brought in such a court and any claim that any such proceeding brought in such a court has been brought in an inconvenient forum. Nothing in this Section 10.04 shall affect the right of any party hereto to bring any action or proceeding against any party hereto or its respective properties in the courts of other jurisdictions. (b) Each of the parties hereto hereby waives any right to have a jury participate in resolving any dispute, whether sounding in contract, tort or otherwise among any of them arising out of, connected with, relating to or incidental to the relationship between them in connection with this Agreement or the other Transaction Documents. (c) This Agreement contains the final and complete integration of all prior expressions by the parties hereto with respect to the subject matter hereof and shall constitute the entire Agreement among the parties hereto with respect to the subject matter hereof superseding all prior oral or written understandings. SECTION 10.05. Severability; Counterparts. This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which when taken together shall constitute one and the same Agreement. Any provisions of this Agreement which are 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. -80- SECTION 10.06. Successors and Assigns. (a) This Agreement shall be binding on the parties hereto and their respective successors and assigns; provided, however, that neither the Transferor nor the Seller may assign any of its rights or delegate any of its duties hereunder or under any of the other Transaction Documents to which it is a party without the prior written consent of the Administrative Agent. No provision of this Agreement shall in any manner restrict the ability of any CP Conduit Purchaser or any Committed Purchaser to assign, participate, grant security interests in, or otherwise transfer any portion of the Transferred Interest as provided in this Section 10.06. (b) Conduit Assignees. Each CP Conduit Purchaser may, from time to time with prior or concurrent notice to the Transferor, the Funding Agent for such CP Conduit Purchaser and the Administrative Agent, assign all or any portion of the CP Conduit Purchaser's Interest with respect to such CP Conduit Purchaser (and its related Committed Purchasers) and its rights and obligations under this Agreement and any other Transaction Documents to which it is a party to a Conduit Assignee with respect to such CP Conduit Purchaser. Upon such assignment by a CP Conduit Purchaser to a Conduit Assignee, (A) the related administrative or managing agent for such Conduit Assignee will act as the Funding Agent for such Conduit Assignee hereunder, (B) such Conduit Assignee and its liquidity support provider(s) and credit support provider(s) and other related parties shall have the benefit of all the rights and protections provided to such CP Conduit Purchaser and its related Committed Purchasers herein and in the other Transaction Documents (including, without limitation, any limitation on recourse against such Conduit Assignee), (C) such Conduit Assignee shall assume all of such CP Conduit Purchaser's obligations hereunder or under any other Transaction Document (whenever created, whether before or after such assignment) with respect to the assigned portion of the CP Conduit Purchaser's Interest and such CP Conduit Purchaser shall be released from all such obligations, (D) all distributions to such CP Conduit Purchaser hereunder with respect to the assigned portion of the CP Conduit Purchaser's Interest shall be made to such Conduit Assignee, (E) the definition of the term "CP Rate" shall be determined on the basis of the interest rate or discount applicable to commercial paper issued by such Conduit Assignee (rather than such CP Conduit Purchaser), (F) the defined terms and other terms and provisions of this Agreement and the other Transaction Documents shall be interpreted in accordance with the foregoing, and (G) if requested by the Administrative Agent or administrative or manag- -81- ing agent with respect to the Conduit Assignee, the parties will execute and deliver such further agreements and documents (including amendments to this Agreement) and take such other actions as the Administrative Agent or such administrative agent may reasonably request to evidence and give effect to the foregoing. (c) Participations. Any Committed Purchaser may, with the consent of the Administrative Agent and in the ordinary course of its business and its accordance with applicable law, at any time sell to one or more Persons (each, a "Participant") participating interest in its rights and obligations hereunder and under the Transaction Documents; provided, however, that each Participant shall purchase an identical percentage in such selling Committed Purchaser's Commitment, and Pro Rata Share of the Committed Purchaser Funded Amount. Notwithstanding any such sale by an Committed Purchaser of participating interest to a Participant, such Committed Purchaser's rights and obligations under this Agreement shall remain unchanged, such Committed Purchaser shall remain solely responsible for the performance hereof, and each CP Conduit Purchaser and the Administrative Agent shall continue to deal solely and directly with such Committed Purchaser in connection with such Committed Purchaser's rights and obligations under this Agreement and the other Transaction Documents. Each Committed Purchaser agrees that any agreement between such Committed Purchaser and any such Participant in respect of such participating interest shall not restrict such Committed Purchaser's right to agree to any amendment, supplement, waiver or modification to this Agreement. (d) Assignments. (i) Any Committed Purchaser may at any time and from time to time, upon the prior written consent of the related CP Conduit Purchaser and the Administrative Agent, and, if the Purchaser is not an Affiliate of the selling Committed Purchaser, the prior written consent of the Transferor (which consent shall not be unreasonably withheld), assign to one or more accredited investors or other Persons ("Purchaser(s)") all or any part of its rights and obligations under this Agreement and the other Transaction Documents pursuant to a supplement to this Agreement, substantially in the form of Exhibit K hereto (each, a "Transfer Supplement"), executed by the Purchaser, such selling Committed Purchaser, the related CP Conduit Purchaser, the Administrative Agent and, if applicable, the Transferor; and provided, however, that (A) each Purchaser shall purchase an identical percentage in such selling Committed Pur- -82- chaser's Commitment and Pro Rata Share of the Committed Purchaser Funded Amount, (B) any such assignment cannot be for an amount less than the lesser of (1) $5,000,000 and (2) such selling Committed Purchaser's Commitment or Pro Rata Share of the Committed Purchaser Funded Amount (calculated at the time of such assignment) and (C) each Purchaser must be (1) a financial institution incorporated in an OECD country and rated at least A-1/P-1 (or the equivalent short-term ratio) by the Rating Agencies and (2) a "qualified institutional buyer" (as defined in Rule 144A under the Securities Act of 1933, as amended). (ii) Each of the Committed Purchasers agrees that in the event that it shall cease to have short-term debt ratings at least equal other ratings then assigned to the Commercial Paper by the Rating Agencies, or, if such Committed Purchaser does not have short-term debt which is rated by the Rating Agencies, in the event that the parent corporation of such Committed Purchaser has rated short-term debt, such parent corporation ceases to have short-term debt ratings at least equal to the ratings then assigned to the Commercial Paper by the Rating Agencies (each, an "Affected Committed Purchaser"), such Affected Committed Purchaser shall be obliged, at the request of the related CP Conduit Purchaser and the Administrative Agent, to assign all of its rights and obligations hereunder to (x) one or more other Committed Purchasers selected by such CP Conduit Purchaser and the Administrative Agent which are willing to accept such assignment, or (y) another financial institution having short-term debt ratings at least equal to the ratings then assigned to the Commercial Paper by the Rating Agencies nominated by the Administrative Agent and consented to by such CP Conduit Purchaser (which consent shall not be unreasonably withheld) and the Administrative Agent, and willing to participate in this facility through the Commitment Expiry Date in the place of such Affected Committed Purchaser; provided that (i) the Affected Committed Purchaser receives payment in full, pursuant to a Pro Rata Share of the Committed Purchaser Funded Amount and any other amounts due and owing to such Affected Committed Purchaser under this Agreement and the other Transaction Documents and (ii) such nominated financial institution, if not an existing Committed Purchaser, satisfies all the requirements of this Agreement. (iii) Upon (A) execution of a Transfer Supplement, (B) delivery of an executed copy thereof to the related CP Conduit Purchaser and the Administrative Agent, (C) payment, if applicable, by the Purchaser to such selling Committed Purchaser of an amount equal to the purchase price agreed between such sell- -83- ing Committed Purchaser and the Purchaser and (D) receipt by such CP Conduit Purchaser of a Rating Confirmation, such selling Committed Purchaser shall be released from its obligations hereunder to the extent of such assignment and the Purchasers shall, for all purposes, be an Committed Purchaser party to this Agreement and shall have all the rights and obligations of an Committed Purchaser under this Agreement to the same extent as if it were an original party hereto, and no further consent or action by the CP Conduit Purchasers, the Committed Purchasers or the Administrative Agent shall be required. The amount of the assigned portion of the selling Committed Purchaser's Pro Rata Share of the Committed Purchaser Funded Amount allocable to the Purchaser shall be equal to the Transferred Percentage (as defined in the Transfer Supplement) of such selling Committed Purchaser's Pro Rata Share of the Committed Purchaser Funded Amount which is transferred thereunder regardless of the purchase price paid therefor. Such Transfer Supplement shall be deemed to amend this Agreement to the extent, and only to the extent, necessary to reflect the addition of the Purchaser as a Committed Purchaser and the resulting adjustment of the selling Committed Purchaser's Commitment arising from the purchase by the Purchaser of all or a portion of the selling Committed Purchaser's rights, obligations and interest hereunder. SECTION 10.07. Confidentiality. (a) Each of the Transferor, the Collection Agent and the Guarantor shall maintain, and shall cause each officer, employee and agent of itself and its Affiliates to maintain, the confidentiality of the Transaction Documents and all other confidential proprietary information with respect to the CP Conduit Purchasers, the Committed Purchasers, the Funding Agents and the Administrative Agent and each of their respective businesses obtained by them in connection with the structuring, negotiation and execution of the transactions contemplated herein and in the other Transaction Documents, except for information that has become publicly available or information disclosed (i) to legal counsel, accountants and other professional advisors to the Transferor, the Collection Agent, the Guarantor and their respective Affiliates, (ii) as required by law, regulation or legal process (including in connection with any registration Statement or other filing made with the SEC) or (iii) in connection with any legal or regulatory proceeding to which the Transferor, the Collection Agent, the Guarantor or any of their respective Affiliates is subject. Each of the Transferor, the Collection Agent and the Guarantor hereby consents to the disclosure of any nonpublic information with respect to it received by any CP Conduit Purchaser, any Committed Purchaser, any Funding Agent -84- or the Administrative Agent to (i) any of the CP Conduit Purchasers, Committed Purchasers, Funding Agents or the Administrative Agent, (ii) any nationally recognized rating agency providing a rating or proposing to provide a rating to the CP Conduit Purchasers' Commercial Paper, (iii) any placement agent which proposes to offer and sell the CP Conduit Purchasers' Commercial Paper, (iv) any provider of the CP Conduit Purchasers' program-wide liquidity or credit support facilities, (v) any potential Committed Purchaser or (vi) any Participant or potential Participant. (b) Each of the CP Conduit Purchasers, the Committed Purchasers, the Funding Agents and the Administrative Agent shall maintain, and shall cause each officer, employee and agent of itself and its Affiliates to maintain, the confidentiality of the Transaction Documents and all other confidential proprietary information with respect to the Transferor, the Sellers, the Guarantor and their Affiliates and each of their respective businesses obtained by them in connection with the structuring, negotiation and execution of the transactions contemplated herein and in the other Transaction Documents, except for information that has become publicly available or information disclosed (i) to legal counsel, accountants and other professional advisors to the CP Conduit Purchasers, the Committed Purchasers, the Funding Agent, the Administrative Agent and their respective Affiliates, (ii) as required by law, regulation or legal process or (iii) in connection with any legal or regulatory proceeding to which the CP Conduit Purchasers, the Committed Purchasers, the Funding Agent, the Administrative Agent or any of their respective Affiliates is subject. SECTION 10.08. No Bankruptcy Petition Against the CP Conduit Purchasers. Each of the Transferor, the Collection Agent and the Guarantor hereby covenants and agrees that, prior to the date which is one year and one day after the payment in full of all outstanding Commercial Paper or other indebtedness of the CP Conduit Purchasers, it will not institute against, or join any other Person in instituting against, the CP Conduit Purchasers any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings or other similar proceeding under the laws of the United States or any state of the United States. SECTION 10.09. Limited Recourse. Notwithstanding anything to the contrary contained herein, the obligations of the CP Conduit Purchasers under this Agreement are solely the cor- -85- porate obligations of the CP Conduit Purchasers and, in the case of obligations of the CP Conduit Purchasers other than Commercial Paper, shall be payable at such time as funds are actually received by, or are available to, the CP Conduit Purchasers in excess of funds necessary to pay in full all outstanding Commercial Paper and, to the extent funds are not available to pay such obligations, the claims relating thereto shall not constitute a claim against the CP Conduit Purchasers but shall continue to accrue. Each party hereto agrees that the payment of any claim (as defined in Section 101 of Title 11 of the Bankruptcy Code) of any such party shall be subordinated to the payment in full of all Commercial Paper. No recourse under any obligation, covenant or agreement of the CP Conduit Purchasers contained in this Agreement shall be had against any incorporator, stockholder, officer, director, member, manager, employee or agent of the CP Conduit Purchasers, the Administrative Agent, the Manager or any of their Affiliates (solely by virtue of such capacity) by the enforcement of any assessment or by any legal or equitable proceeding, by virtue of any statute or otherwise; it being expressly agreed and understood that this Agreement is solely a corporate obligation of the CP Conduit Purchasers, and that no personal liability whatever shall attach to or be incurred by any incorporator, stockholder, officer, director, member, manager, employee or agent of the CP Conduit Purchasers, the Administrative Agent, the Manager or any of their Affiliates (solely by virtue of such capacity) or any of them under or by reason of any of the obligations, covenants or agreements of the CP Conduit Purchasers contained in this Agreement, or implied therefrom, and that any and all personal liability for breaches by the CP Conduit Purchasers of any of such obligations, covenants or agreements, either at common law or at equity, or by statute, rule or regulation, of every such incorporator, stockholder, officer, director, member, manager, employee or agent is hereby expressly waived as a condition of and in consideration for the execution of this Agreement; provided that the foregoing shall not relieve any such Person from any liability it might otherwise have as a result of fraudulent actions taken or fraudulent omissions made by them. SECTION 10.10. Characterization of the Transactions Contemplated by the Agreement. (a) It is the intention of the parties that the transactions contemplated hereby constitute (other than for tax purposes) the sale of the Transferred Interest, conveying good title thereto free and clear of any Ad- -86- verse Claims to the CP Conduit Purchasers or the Committed Purchasers, as the case maybe, and that the Transferred Interest not be part of the Transferor's estate in the event of an insolvency. If, notwithstanding the foregoing, the transactions contemplated hereby should be deemed a financing, the parties intend that the Transferor shall be deemed to have granted to the Administrative Agent, on behalf of the CP Conduit Purchasers and the Committed Purchasers, and the Transferor hereby grants to the Administrative Agent, on behalf of the CP Conduit Purchasers and the Committed Purchasers, a first priority perfected and continuing security interest in all of the Transferor's right, title and interest in, to and under the Receivables, the Related Security, Collections and Proceeds with respect thereto, the Lock-Box Accounts, and all of the Transferor's rights under the Receivables Purchase Agreement with respect to the Receivables and with respect to any obligations thereunder of the Seller with respect to the Receivables, and that this Agreement shall constitute a security agreement under applicable law. The Transferor hereby assigns to the Administrative Agent, on behalf of the CP Conduit Purchasers and the Committed Purchasers, all of its rights and remedies under the Receivables Purchase Agreement with respect to the Receivables and with respect to any obligations thereunder of the Seller with respect to the Receivables. The Transferor agrees that it shall not give any consent or waiver required or permitted to be given under the Receivables Purchase Agreement without the prior consent of the Administrative Agent, such consent not to be unreasonably withheld. (b) It is the intention of the parties that the transactions contemplated by the Receivables Transfer Agreement will create a debt obligation of the Transferor for United States Federal, state and local income and franchise tax purposes. Unless otherwise required by law, the parties agree to treat the transactions accordingly for all such purposes. SECTION 10.11. Waiver of Setoff. Each of the Administrative Agent, the Transferor and the Collection Agent hereby waives any right of setoff it may have or to which it may be entitled under this Agreement from time to time against any CP Conduit Purchaser or its assets. SECTION 10.12. Chase Conflict Waiver. Chase acts as Administrative Agent and as Funding Agent for PARCO, as issuing and paying agent for PARCO's Commercial Paper, as provider of other backup facilities for PARCO, and may provide other serv- -87- ices or facilities from time to time (the "Chase Roles"). Without limiting the generality of Section 8.08, each of the parties hereto hereby acknowledges and consents to any and all Chase Roles, waives any objections it may have to any actual or potential conflict of interest caused by Chase's acting as the Administrative Agent or as an Committed Purchaser under the Asset Purchase Agreement with respect to PARCO and acting as or maintaining any of the Chase Roles, and agrees that in connection with any Chase Role, Chase may take, or refrain from taking, any action which it in its discretion deems appropriate. SECTION 10.13. Limitation on the Termination of Sellers. Notwithstanding anything to the contrary contained in the Receivables Purchase Agreement, the Transferor shall not consent to any request made pursuant to Section 8.03 thereof, nor shall any Seller or Seller Division which is the subject of such request be terminated under the Receivables Purchase Agreement, in each case unless (i) no Termination Event or Potential Termination Event (other than with respect to the Seller or Seller Division to be so terminated) has occurred and is continuing (both before and after giving effect to such termination) and (ii) the Administrative Agent shall have received prior notice of such termination. IN WITNESS WHEREOF, the parties hereto have executed and delivered this Receivables Transfer Agreement as of the date first written above. MTSPC, INC., as Transferor By: ------------------------------------------------ Name: Title: MASCOTECH, INC., individually, as Collection Agent and as Guarantor By: ------------------------------------------------ Name: Title: PARK AVENUE RECEIVABLES CORPORATION -88- By: ------------------------------------------------ Name: Title: THE CHASE MANHATTAN BANK, as Com mitted Purchaser for Park Avenue Receivables Corporation By: ------------------------------------------------ Name: Title: THE CHASE MANHATTAN BANK, as Funding Agent for Park Avenue Receivables Corporation By: ------------------------------------------------- Name: Title: THE CHASE MANHATTAN BANK, as Administrative Agent By: ------------------------------------------------- Name: Title: SCHEDULE B Schedule of CP Conduit Purchasers, Committed Purchasers and Funding Agents CP CONDUIT PURCHASERS: - --------------------- Park Avenue Receivables Corporation 114 West 47th Street, Suite 1715 New York, NY 10036 CP Conduit Funding Limit: $175,000,000 - ------------------------ COMMITTED PURCHASERS: - -------------------- The Chase Manhattan Bank, as Committed Purchaser for Park Avenue Receivables Corporation 450 West 33rd Street, 15th Floor New York, NY 10011 Commitment: $178,500,000 - ---------- FUNDING AGENTS: - -------------- The Chase Manhattan Bank, as Funding Agent for Park Avenue Receivables Corporation 450 West 33rd Street, 15th Floor New York, NY 10011 SCHEDULE C
Schedule of Special Obligors - ----------------------------------------------------------------------------------------------------------------- Special Obligor Percentage Limit Conditions - ----------------------------------------------------------------------------------------------------------------- New Venture Gear 12.0% So long as short-term or long-term ratings of DaimlerChrysler and General Motors are at least A-1/A by S&P and at least P-1/A2 by Moody's, respectively. - ----------------------------------------------------------------------------------------------------------------- General Motors Corporation 15.0% So long as short-term or long-term ratings are at least A-1/A by S&P and at least P-1/A2 by Moody's, respectively - ----------------------------------------------------------------------------------------------------------------- Ford Motor Company 20.0% So long as short-term or long-term ratings are at least A-1/A by S&P and at least P-I/A2 by Moody's, respectively. - ----------------------------------------------------------------------------------------------------------------- DaimlerChrysler 15.0% So long as short-term or long-term ratings are at least A-1/A by S&P and at least P-1/A2 by Moody's, respectively. - -----------------------------------------------------------------------------------------------------------------
SCHEDULE D Schedule of Match Funding CP Conduit Purchasers NONE EXHIBIT A [CREDIT AND COLLECTION POLICIES AND PRACTICES] EXHIBIT B List of Lock-Box Banks and Accounts 1) Bank Name: Location of Lockbox: Account No.: Lockbox No.: 2) Bank Name: Location of Lockbox: Account No.: Lockbox No.: B-1 EXHIBIT C [FORM OF LOCKBOX AGREEMENT] , 2000 [Name of the bank Address of the bank] Attention: Ladies and Gentlemen: MTSPC, Inc., a Delaware corporation (the "Purchaser"), has agreed to purchase certain receivables (the "Receivables") from the undersigned parties identified as "Sellers" (the "Sellers") pursuant to the Receivables Purchase Agreement dated as of November 28, 2000 (as amended, supplemented or otherwise modified from time to time, the "Receivables Purchase Agreement"), among the Purchaser, MascoTech, Inc., and the Sellers. The Purchaser has in turn transferred the Receivables to Park Avenue Receivables Corporation (the "CP Conduit Purchasers") and to The Chase Manhattan Bank (the "Committed Purchasers") and their respective successors and assigns, pursuant to the Receivables Transfer Agreement dated as of November 28, 2000 (as amended, supplemented or otherwise modified from time to time, the "Receivables Transfer Agreement"), among the Purchaser (in such capacity, the "Transferor"), MascoTech, Inc., individually, as Collection Agent and as Guarantor, the CP Conduit Purchasers, the Committed Purchasers, the financial institutions parties thereto as Funding Agents and The Chase Manhattan Bank, a New York banking corporation, as Administrative Agent (the "Administrative Agent"). Pursuant to the terms of the Receivables Transfer Agreement and except as otherwise provided therein, (i) the Collection Agent has agreed to instruct, and to cause the Sellers to instruct, all obligors under the Receivables to make all payments in respect of such Receivables to lockbox(es) for further credit to a blocked deposit account designated by the Collection Agent or the Sellers to such obligor and (ii) the Transferor has pledged, assigned and transferred to the Administrative Agent, and has created and granted to the Administrative Agent a security interest in, the Lockbox Account (as defined herein) and all cash, checks and other negotiable instruments, funds and other evidences of payment held therein ("Deposited Funds"). Furthermore, the Transferor, the Collection Agent and the Administrative Agent have agreed, pursuant to the Receivables Transfer Agreement, to enter into an agreement with each bank maintaining a Lockbox Account and hereby C-1 request that [name of the bank] (the "Lockbox Bank") act as, and the Lockbox Bank hereby agrees to act as, a lockbox deposit bank for the Transferor with respect to the Lockbox Account. This Letter Agreement defines certain rights and obligations with respect to the appointment of the Lockbox Bank. Except as otherwise specified herein, the Lockbox Bank shall not be deemed to have any knowledge (imputed or otherwise) of: (a) any of the terms or conditions of the Receivables Purchase Agreement or the Receivables Transfer Agreement or any document referred to or contemplated therein or relating to any financing arrangement of the Transferor, or any breach thereof, or (b) any occurrence or existence of a default. The Lockbox Bank shall have no obligation to inform any person of such breach or to take any action in connection with any of the foregoing, except such actions regarding the Lockbox Account as are specified in this Agreement. The Lockbox Bank is not responsible for the enforceability or validity of the security interest in the Receivables, the Lockboxes and the Lockbox Account. Accordingly, the Transferor, the Collection Agent, the Administrative Agent and the Lockbox Bank agree as follows: Reference is made to lockbox account No. (the "Lockbox Account") and corresponding [ lockboxes No.[ ] and [ ]] (the "Lockboxes") maintained with the Lockbox Bank by the Collection Agent. The Collection Agent hereby transfers the Lockbox Account to the Transferor and hereafter the Lockbox Account shall be in the name of the Transferor for The Chase Manhattan Bank as Administrative Agent. All Deposited Funds received by the Lockbox Bank in its capacity as the Lockbox Bank shall be deposited in the Lockbox Account. The Lockbox Bank hereby acknowledges the security interest of the Administrative Agent in the Lockbox Account and all Deposited Funds. All Deposited Funds at any time on deposit in the Lockbox Account shall be held by the Lockbox Bank for application strictly in accordance with the terms of this Letter Agreement. The Lockbox Bank agrees to give the Transferor, the Collection Agent and the Administrative Agent prompt notice if the Lockbox Account shall become subject to any writ, judgment, warrant of attachment, execution or similar process. Until the Administrative Agent shall give the Lockbox Bank written instructions to the contrary, the Transferor shall be entitled to request the transfer of available Deposited Funds from the Lockbox Account in accordance with the Lockbox Bank's customary procedures. Following the Lockbox Bank's receipt of such instructions from the Administrative Agent (i) the Administrative Agent shall have exclusive rights with respect to the transfer of Deposited Funds (subject to the Lock- C-2 box Bank's customary availability schedules) from the Lockbox Account, (ii) the Lockbox Bank shall comply with the Administrative Agent's instructions with respect thereto in accordance with the Lockbox Bank's customary procedures, (iii) the Lockbox Bank shall disregard any instructions of the Transferor or the Collection Agent with respect thereto and (iv) the Lockbox Bank shall furnish the Administrative Agent (with copies to the Transferor) with statements, in the form and manner typical for the Lockbox Bank, of amounts of deposits in, and amounts transferred to the Collection Account from, the Lockbox Account pursuant to any reasonable request of the Administrative Agent but in any event not less frequently than monthly and such other information relating to the Lockbox Account at such times as shall be reasonably requested by the Administrative Agent. The Lockbox Bank acknowledges that, until it receives instructions from the Administrative Agent to the contrary, the Lockbox Bank shall return to the Transferor, upon the Transferor's reasonable request therefor, any remittance advisements and payment invoices deposited into the Lockbox Account. The Administrative Agent shall send to the Transferor and the Collection Agent a copy of any written instructions given to the Lockbox Bank pursuant to the preceding paragraph, but the failure of the Administrative Agent to do so shall not affect the validity of such instructions given to the Lockbox Bank. The parties agree that the Lockbox Bank may debit the Lockbox Account for any items (including without limitation, any automated clearinghouse items and wire transfers) deposited or credited to the Lockbox Account which may be returned or otherwise not collected and for all ordinary and reasonable service charges and fees (the "Expenses") charged by the Lockbox Bank in providing customary services in connection with this Letter Agreement that are not timely paid by the Transferor or the Collection Agent in accordance with the terms hereof; the Lockbox Bank may charge the Lockbox Account as permitted herein at such times as are in accordance with the Lockbox Bank's customary practices for the chargeback of returned items and Expenses. In the event the Lockbox Bank is unable to obtain sufficient funds from such charges to cover returned items, or reversed or returned credits, or any Expenses incurred by the Lockbox Bank in providing the services (referred to as a "Cost" or "Costs"), the Transferor and the Collection Agent, jointly and severally, shall indemnify the Lockbox Bank for all amounts related to the above described Costs incurred by the Lockbox Bank. For purposes of this Letter Agreement, any officer of the Administrative Agent shall be authorized to act, and to C-3 give instructions and notices, on behalf of the Administrative Agent hereunder. All Expenses are the responsibility of the Transferor and the Collection Agent, jointly and severally. In the event that Transferor and the Collection Agent do not pay all Expenses due to the Lockbox Bank within forty-five (45) days after the due date specified in the analysis statement invoice, the Lockbox Bank is authorized to charge the Lockbox Account in the amount of such Expenses. In the event the Lockbox Bank is unable to obtain sufficient funds from such charges to cover such Expenses, the Transferor and the Collection Agent, jointly and severally, shall indemnify the Lockbox Bank for all then-due Expenses on the Lockbox Account that have not been paid. The Lockbox Bank hereby represents and warrants that (a) it is a national banking association duly organized, validly existing and in good standing under the laws of the United States and has full corporate power and authority under such laws to execute, deliver and perform its obligations under this Letter Agreement and (b) the execution, delivery and performance of this Letter Agreement by the Lockbox Bank have been duly and effectively authorized by all necessary corporate action and this Letter Agreement has been duly executed and delivered by the Lockbox Bank and constitutes a valid and binding obligation of the Lockbox Bank enforceable in accordance with its terms. The Lockbox Bank may resign at any time as Lockbox Bank hereunder by delivery to the Administrative Agent and the Transferor of written notice of resignation not less than 60 days prior to the effective date of such resignation. The Transferor may, with the prior written consent of the Administrative Agent, terminate this Letter Agreement upon 60 days' prior written notice to the Lockbox Bank and the Administrative Agent. If there has been a failure by the Lockbox Bank to perform any of its material obligations hereunder and such failure could adversely affect the Administrative Agent's interest in any Receivable or the Administrative Agent's rights, or ability to exercise any remedies, under this Letter Agreement or the Receivables Transfer Agreement, the Administrative Agent may close the Lockbox Account at any time by delivery of notice to the Lockbox Bank and the Transferor at the addresses appearing below. This Letter Agreement shall terminate upon receipt of such notice of closing, or delivery of such notice of resignation, except that the Lockbox Bank shall immediately transfer to any account designated by the Administrative Agent all available Deposited Funds or, subject to the Transferor's reasonable request to retain such items, any remittance advisements or payment invoices, if any, then on deposit in, or otherwise to the credit of, the Lockbox Account and deliver any C-4 available Deposited Funds or such remittance advisements or payment invoices relating to the Receivables received by the Lockbox Bank after such notice directly to any account designated by the Administrative Agent. The Transferor's and the Collection Agent's obligations under this Letter Agreement to indemnify, hold harmless and pay amounts owed shall survive termination of this Letter Agreement. All notices and communications hereunder shall be in writing and shall be deemed to have been received and shall be effective on the day on which delivered (including delivery by telecopy): (i) in the case of the Administrative Agent, to it at: The Chase Manhattan Bank 450 West 33rd Street, 15th Floor New York, NY 10011 Attention: Structured Finance Services Telecopy No.: (212) 946-3240 (ii) in the case of the Lockbox Bank, to it at: (iii) in the case of the Transferor, to it at: MTSPC, Inc. 21001 Van Born Road Taylor, MI 48180 (iv) in the case of the Collection Agent, to it at: MascoTech, Inc. 21001 Van Born Road Taylor, MI 48180 (v) in the case of the Sellers, to them at the address set forth on the signature pages hereto. The Lockbox Bank shall not assign or transfer any of its rights or obligations hereunder (other than to the Administrative Agent) without the prior written consent of the Administrative Agent except the Lockbox Bank may freely assign this Agreement to any company that is directly or indirectly (i) in control of the Lockbox Bank, (ii) under the control of the Lockbox Bank or (iii) under common control with the Lockbox Bank. This Letter Agreement may be amended only by a written instrument executed by the Transferor, the Collection Agent, the Administrative Agent and the Lockbox Bank, acting by their representative officers thereunto duly authorized. Except for its right to charge the Lockbox Account for Costs and Expenses, C-5 the Lockbox Bank hereby unconditionally and irrevocably waives (so long as this Letter Agreement is in effect) any rights of setoff or banker's lien against, or rights to otherwise deduct from, any Deposited Funds held in any Lockbox Account for any indebtedness or other claim owed by the Transferor or the Collection Agent to the Lockbox Bank. The Transferor and Collection Agent jointly and severally agree to indemnify the Lockbox Bank for, and hold the Lockbox Bank harmless from, all claims, demands, losses, liabilities and expenses, including reasonable legal fees and expenses, resulting from or with respect to this Letter Agreement, the Receivables, the Lockbox Account, the Lockboxes and the services provided hereunder, but only with respect to any action taken, or not taken, by the Lockbox Bank in regard thereto in accordance with the terms of this Letter Agreement. The parties hereby unconditionally and irrevocably waive any right to trial by jury in any legal proceeding relating to any dispute arising under this Letter Agreement. Nothing in this Letter Agreement, unless otherwise agreed in writing, or any course of dealing between the Transferor, the Collection Agent, the Administrative Agent or the Lockbox Bank, commits or obligates, the Lockbox Bank to extend any overdraft or other credit to the Transferor, the Collection Agent or the Administrative Agent. THIS LETTER AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF MICHIGAN. TO THE EXTENT APPLICABLE UNDER THE UNIFORM COMMERCIAL CODE OF ANY JURISDICTION, THIS LETTER AGREEMENT GIVES CONTROL OVER THE LOCKBOX ACCOUNT TO THE ADMINISTRATIVE AGENT. This Letter Agreement (i) shall inure to the benefit of, and be binding upon, the Transferor, the Collection Agent, the Administrative Agent, the Lockbox Bank and their respective successors and assigns and (ii) may be executed in two or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument. Delivery of an executed counterpart of a signature page to this Letter Agreement by facsimile transmission shall be effective as delivery of a manually executed counterpart of this Letter Agreement. Notwithstanding any provision of this Letter Agreement, the Lockbox Bank will be liable only for direct damage if the Lockbox Bank fail to exercise ordinary care. The Lockbox Bank shall be deemed to have exercised ordinary care if the Lockbox Bank's action or failure to act is in conformity with general banking usages or is otherwise a commercially reason- C-6 able practice of the banking industry. In no event shall the Lockbox Bank be liable for any special, indirect or consequential damages, even if the Lockbox Bank has been advised of the possibility of such damages. Notwithstanding any provision of this Letter Agreement, the Lockbox Bank shall not be liable for any failure, inability to perform, or delay in performance hereunder, if such failure, inability, or delay is due to acts of God, war, civil commotion, governmental action, fire, explosion, strikes, other industrial disturbances, equipment malfunction, action, non-action or delayed action on the part of the Transferor, the Collection Agent or the Administrative Agent or any other entity or any other causes that are beyond the Lockbox Bank's reasonable control. The terms and conditions of the services, attached as Exhibit A, is made part of this Letter Agreement with respect to matters not explicitly covered in this Letter Agreement. To the extent there is a conflict between the Letter Agreement and the terms and conditions of the services, this Letter Agreement shall take precedence. IN WITNESS WHEREOF, the parties hereto have caused this Letter Agreement to be executed by their duly authorized officers as of the date first above written. Very truly yours, MTSPC, INC., as Transferor, By ----------------------------------------------- Title: MASCOTECH, Inc., as Collection Agent, By ----------------------------------------------- Title: SELLERS: Beaumont Bolt & Gasket, Inc., Compac Corporation, Cuyam Corporation, Draw-Tite, Inc., Fulton Performance Products, Inc., C-7 Hitch'N Post, Inc., Industrial Bolt & Gasket, Inc., Lake Erie Screw Corporation, Lamons Metal Gasket Co., Louisiana Hose & Rubber Co., MascoTech Forming Technologies-Fort Wayne, Inc., MascoTech Sintered Components, Inc., MascoTech Sintered Components of Indiana, Inc., MascoTech Tubular Products, Inc., Metalync Company LLC, Netcong Investments, Inc., Reese Products, Inc., Rieke Corporation, Rieke Leasing Co., Incorporated, Rieke of Indiana, Inc., TriMas Fasteners, Inc., Windfall Products, Inc. By ---------------------------------------------- Title: Address for notices: 21001 Van Born Road Taylor, MI 48180 Agreed to and accepted: [ ,] as Lockbox Bank By ------------------------------------------- Title: THE CHASE MANHATTAN BANK, as Administrative Agent By -------------------------------------------- Title: C-8 EXHIBIT D-1 [FORM OF DEPOSIT REPORT] D-1 EXHIBIT D-2 [FORM OF SETTLEMENT STATEMENT] D-1 EXHIBIT E [FORM OF TRANSFER CERTIFICATE] TRANSFER CERTIFICATE Reference is made to the Receivables Transfer Agreement dated as of November 28, 2000 (the "Agreement") among MTSPC, Inc., as transferor (in such capacity, the "Transferor"), MascoTech, Inc., individually, as collection agent (in such capacity, the "Collection Agent") and as Guarantor, the CP Conduit Purchasers, the Committed Purchasers, the Funding Agents and The Chase Manhattan Bank, as Administrative Agent. Terms defined in the Agreement, or incorporated therein by reference, are used herein as therein defined. The Transferor hereby conveys, transfers and assigns to the Administrative Agent, for the benefit of the CP Conduit Purchasers and the Committed Purchasers, an undivided ownership interest in the Receivables and the Related Security, Collections and Proceeds with respect thereto (each, an "Incremental Transfer"). Each Incremental Transfer by the Transferor to the CP Conduit Purchasers, and each reduction or increase in the Net Investment in respect of each Incremental Transfer evidenced hereby, shall be indicated by the Administrative Agent on the grid attached hereto which is part of this Transfer Certificate. This Transfer Certificate is made without recourse except as otherwise provided in the Agreement. This Transfer Certificate shall be governed by, and construed in accordance with, the laws of the State of New York. IN WITNESS WHEREOF, the undersigned has caused this Transfer Certificate to be duly executed and delivered by its duly authorized officer as of the date first above written. Dated: MTSPC, INC. By -------------------------------------------------- Name: Title: E-1
GRID Date of Amount of Net Investment (Giving Effect Incremental Incremental to Incremental Transfer) Transfer Transfer
E-2 EXHIBIT F List of Actions and Suits [None] F-1 EXHIBIT G Location of Records G-1 EXHIBIT H List of Subsidiaries, Divisions and Trade Names [None] H-1 EXHIBIT I FORM OF SECRETARY'S CERTIFICATE I__________, __________, the undersigned of ("___________"), a ___________ corporation, DO HEREBY CERTIFY that: 1. Attached hereto as Annex A is a true and complete copy of the Certificate of Incorporation of ________________ as in effect on the date hereof. 2. Attached hereto as Annex B is a true and complete copy of the By-laws of _____________________ as in effect on the date hereof. 3. Attached hereto as Annex C is a true and complete copy of the resolutions duly adopted by the Board of Directors of ___________ [adopted by consent] as of ________, ____ 2000, authorizing the execution, delivery and performance of each of the documents mentioned therein, which resolutions have not been revoked, modified, amended or rescinded and are still in full force and effect. 4. Attached hereto as Annex D are copies of good standing certificates of , certified by the Secretaries of State of the States of and ________________ _______________. 5. The below-named persons have been duly qualified as and at all times since [______________, 199_], to and including the date hereof have been officers or representatives of holding the respective offices or positions below set opposite their names and are authorized to execute on behalf of ___________ the below-mentioned Receivables Transfer Agreement and all other Transaction Documents (as defined in such Receivables Transfer Agreement) to which ____________ is a party and the signatures below set opposite their names are their genuine signatures: Name Office Signatures ------ ---------- [OFFICE] ------------------------- [OFFICE] ------------------------- The representations and warranties of ________________ contained in Article III of the Receivables Transfer Agreement, dated as of ___________, 2000 among MTSPC, Inc., MascoTech, Inc., the Sellers, the CP I-1 Conduit Purchasers, the Committed Purchasers, the Funding Agents and The Chase Manhattan Bank, as Administrative Agent, are true and correct as if made on the date hereof. WITNESS my hand and seal of ____________ as of this _____ day of ___________ 2000. _______________________________ Secretary I, the undersigned, _________________ of DO HEREBY CERTIFY that ___________________ is the duly elected and qualified Secretary of and the signature above is his/her genuine signature. WITNESS my hand as of this day of ___________, 2000. ________________________________________ [Officer] I-2 EXHIBIT J Trade Names of the Seller [None] Sellers and Seller Divisions: Beaumont Bolt & Gasket, Inc. Compac Corporation Cuyam Corporation Draw-Tite, Inc. Fulton Performance Products,Inc. Hitch'N Post, Inc. Industrial Bolt & Gasket, Inc. Lake Erie Screw Corporation Lamons Metal Gasket Co. Louisiana Hose & Rubber Co. MascoTech Forming Technologies-Fort Wayne, Inc. MascoTech Sintered Components, Inc. MascoTech Sintered Components of Indiana, Inc. MascoTech Tubular Products,Inc. Metalync Company LLC Netcong Investments, Inc. Reese Products, Inc. Rieke Corporation Rieke Leasing Co., Incorporated Rieke of Indiana, Inc. TriMas Fasteners, Inc. Windfall Products, Inc. J-1 EXHIBIT K Form of Transfer Supplement THIS TRANSFER SUPPLEMENT is entered into as of the ____ day of _________, 200_, by and between ("Seller") and ("Purchaser"). Preliminarv Statements A. This Transfer Supplement is being executed and delivered in accordance with Section 10.06(d) of that certain Receivables Transfer Agreement, dated as of November 28, 2000 (as amended, supplemented or otherwise modified and in effect from time to time, the "Agreement"), by and among MTSPC, Inc., a Delaware corporation, MascoTech, Inc., a Delaware corporation, the CP Conduit Purchasers party thereto, the Committed Purchasers party thereto, the Funding Agents and The Chase Manhattan Bank, a New York banking corporation, as Administrative Agent. Capitalized terms used herein and not otherwise defined herein are used with the meanings set forth in, or incorporated by reference into, the Agreement. B. The Seller is a Committed Purchaser party to the Agreement, and the Purchaser wishes to become a Committed Purchaser thereunder. C. The Seller is selling and assigning to the Purchaser an undivided % (the "Transferred Percentage") interest in all of Seller's rights and obligations under the Agreement, including, without limitation, the Seller's Commitment and (if applicable) the Seller's Pro Rata Share of the Seller's Committed Purchaser Funded Amount as set forth herein. The parties hereto hereby agree as follows: 1. The transfer effected by this Transfer Supplement shall become effective (the "Transfer Effective Date") two Business Days (or such other date selected by the Administrative Agent in its sole discretion) following the date on which a transfer effective notice substantially in the form of Schedule II to this Transfer Supplement ("Transfer Effective Notice") is delivered by the Administrative Agent to [applicable CP Conduit Purchaser], the Seller and the Purchaser. From and after the Transfer Effective Date, the Purchaser shall be a Committed Purchaser party to the Agreement for all purposes thereof as if the Purchaser were an original party thereto and the Purchaser agrees to be bound by all of the terms and provisions contained therein. K-1 2. If the Seller has no Committed Purchaser Funded Amount on the Transfer Effective Date, Seller shall be deemed to have hereby transferred and assigned to the Purchaser, without recourse, representation or warranty (except as provided in paragraph 6 below), and the Purchaser shall be deemed to have hereby irrevocably taken, received and assumed from the Seller, the Transferred Percentage of the Seller's Commitment and all rights and obligations associated therewith under the terms of the Agreement, including, without limitation, the Transferred Percentage of the Seller's future funding obligations under Section 2.02 of the Agreement. 3. If the Seller has a Committed Purchaser Funded Amount, at or before 12:00 noon, local time of the Seller, on the Transfer Effective Date, the Purchaser shall pay to the Seller, in immediately available funds, an amount equal to the sum of (i) the Transferred Percentage of an amount equal to the Seller's Pro Rata Share of the Seller's Committed Purchaser Funded Amount (such amount, being hereinafter referred to as the "Purchaser's Funding Balance"); (ii) all accrued but unpaid (whether or not then due) interest attributable to the Purchaser's Funding Balance; and (iii) accrued but unpaid fees and other costs and expenses payable in respect of the Purchaser's Funding Balance for the period commencing upon each date such unpaid amounts commence accruing, to and including the Transfer Effective Date (the "Purchaser's Acquisition Cost"), whereupon, the Seller shall be deemed to have transferred and assigned to the Purchaser, without recourse, representation or warranty (except as provided in paragraph 6 below), and the Purchaser shall be deemed to have hereby irrevocably taken, received and assumed from the Seller, the Transferred Percentage of the Seller's Commitment and the Seller's Pro Rata Share of the aggregate Committed Purchaser Funded Amount and all related tights and obligations under the Agreement, including, without limitation, the Transferred Percentage of the Seller's future funding obligations under Section 2.02 of the Agreement. 4. Concurrently with the execution and delivery hereof, the Seller will provide to the Purchaser copies of all documents requested by the Purchaser which were delivered to the Seller pursuant to the Agreement. 5. Each of the parties to this Transfer Supplement agrees that at any time and from time to time upon the written request of any other party, it will execute and deliver such further documents and do such further acts and things as such other party may reasonably request in order to effect the purposes of this Transfer Supplement. 6. By executing and delivering this Transfer Supplement, the Seller and the Purchaser confirm to and agree with K-2 each other, the Administrative Agent and the Committed Purchasers as follows: (a) other than the representation and warranty that it has not created any adverse claim upon any interest being transferred hereunder, the Seller makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made by any other Person in or in connection with the Agreement or the Transaction Documents or the execution, legality, validity, enforceability, genuineness, sufficiency or value thereof or any other instrument or document furnished pursuant thereto or the perfection, priority, condition, value or sufficiency of any collateral; (b) the Seller makes no representation or warranty and assumes no responsibility with respect to the financial condition of [applicable CP Conduit Purchaser], the Administrative Agent or any Transaction Party, any surety or any guarantor or the performance or observance by [applicable CP Conduit Purchaser], any Transaction Party or the Administrative Agent of any of their respective obligations under the Agreement or any Transaction Document or any other instrument or document furnished pursuant thereto or in connection therewith; (c) the Purchaser confirms that it has received a copy of the Agreement and the Transaction Documents, together with such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Transfer Supplement; (d) the Purchaser will, independently and without reliance upon the Administrative Agent, [applicable CP Conduit Purchaser] or any other Committed Purchaser, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Agreement or the Transaction Documents; (e) the Purchaser appoints and authorizes the Administrative Agent to take such action as agent on its behalf and to exercise such powers under the Agreement as are delegated to the Administrative Agent by the terms thereof, together with such powers as are reasonably incidental thereto; and (f) the Purchaser agrees that it will perform in accordance with their terms all of the obligations which, by the terms of the Agreement, are required to be performed by it as a Committed Purchaser. 7. Each party hereto represents and warrants to and agrees with the Administrative Agent that it is aware of and will comply with the provisions of the Agreement, including, without limitation, Sections 2.02, 10.06 and 10.08 thereof. 8. Schedule I hereto sets forth the revised Commitment of the Seller and the Commitment of the Purchaser, as well as administrative information with respect to the Purchaser. K-3 9. This Transfer Supplement shall be governed by, and construed in accordance with, the laws of the State of New York. IN WITNESS WHEREOF, the parties hereto have caused this Transfer Supplement to be executed by their respective duly authorized officers of the date hereof. [SELLER] By: ------------------------------------------ Name: Title: [PURCHASER] By: ------------------------------------------ Name: Title: K-4 SCHEDULE I TO TRANSFER SUPPLEMENT LIST OF PURCHASING OFFICES, ADDRESSES FOR NOTICES AND COMMITMENT AMOUNTS Date: , 200 Transferred Percentage: % ---------------------- Pro Rata Share of Committed Purchaser Pro Commitment Commitment Funded Rata Seller [existing] [revised] Amount Share - ------ ---------- --------- ------ ----- Pro Rata Share of Committed Commitment Purchaser Pro Rata Purchaser [initial] Funded Amount Share - --------- --------- ------------- ----- Address for Notices: - ------------------- ____________________________ ____________________________ ____________________________ Attention: Telephone: Telecopy: SCHEDULE II TO TRANSFER SUPPLEMENT TRANSFER EFFECTIVE NOTICE TO: , Seller ------------------------------ ------------------------------ ------------------------------ TO: , Purchaser ------------------------------ ------------------------------ ------------------------------ The undersigned, as Administrative Agent under the Receivables Transfer Agreement, dated as of November 28, 2000 (as amended, supplemented or otherwise modified and in effect from time to time), by and among MTSPC, Inc., a Delaware corporation, MascoTech, Inc., a Delaware corporation, the CP Conduit Purchasers party thereto, the Committed Purchasers party thereto, the Funding Agents and The Chase Manhattan Bank, a New York banking corporation, as Administrative Agent, hereby acknowledges receipt of executed counterparts of a completed Transfer Supplement dated as of _________, 200_ between _________________ as Seller, and as Purchaser. Capitalized terms defined in such Transfer Supplement are used herein as therein defined or incorporated by reference therein. 1. Pursuant to such Transfer Supplement, you are advised that the Transfer Effective Date will be 11 200_. 2. The Administrative Agent each hereby consents to the Transfer Supplement as required by Section 10.06(d) of the Agreement. [3. Pursuant to such Transfer Supplement, the Purchaser is required to pay $________ to the Seller at or before 12:00 noon (local time of the Seller) on the Transfer Effective Date in immediately available funds.] Very truly yours, THE CHASE MANHATTAN BANK, as Administrative Agent By: --------------------------------------------- Authorized Signatory SCHEDULE A ---------- "Administrative Agent" shall mean The Chase Manhattan Bank, as administrative agent on behalf of the CP Conduit Purchasers, the Funding Agents and the Committed Purchasers. "Advance" shall have the meaning specified in Section 3.02(b) of the Receivables Purchase Agreement. "Advance Limit" shall have the meaning specified in Section 3.02(b) of the Receivables Purchase Agreement. "Adverse Claim" shall mean a lien, security interest, charge or encumbrance, or other right or claim in, of or on any Person's assets or properties in favor of any other Person (including any UCC financing statement or any similar instrument filed against such Person's assets or properties) . "Affiliate" shall mean, with respect to any Person, any other Person directly or indirectly controlling, controlled by, or under direct or indirect common control with, such Person. A Person shall be deemed to control another Person if the controlling Person possesses, directly or indirectly, the power to direct or cause the direction of the management or policies of the controlled Person, whether through ownership of voting stock, by contract or otherwise; provided, however, that a Person shall not be deemed an Affiliate of another Person solely by reason of an individual serving as an officer or director of any Person and provided further that any Person other than the Parent and its Subsidiaries which, directly or indirectly, is controlled by Heartland Industrial Partners shall not be deemed an Affiliate of the Parent or any of its Subsidiaries. "Aggregate Commitment" shall mean, at any time, the sum of the Commitments then in effect. "Aggregate Unpaids" shall mean, at any time, an amount equal to the sum of (i) the aggregate accrued and unpaid Discount at such time, (ii) the Net Investment at such time, (iii) all Fees, (iv) all Indemnified Amounts, amounts payable pursuant to Section 2.21 and Indemnified Taxes and (v) all other amounts owed (whether due or accrued) by the Transferor to the CP Conduit Purchasers and the Committed Purchasers at such time. "Applicable Margin" shall mean (a) in the case of any BR Tranche, 1.50% and (b) in the case of any Eurodollar Tranche, 2.50%. "Asset Purchase Agreement" shall mean, with respect to any CP Conduit Purchaser, the asset purchase agreement, liquidity agreement or other agreement among such CP Conduit Purchaser, the Funding Agent with respect to such CP Conduit Purchaser and the -2- Committed Purchaser with respect to such CP Conduit Purchaser as the same may from time to time be amended, supplemented or otherwise modified and in effect. "Bankruptcy Code" shall have the meaning assigned to that term in Section 3.01(v) of the Receivables Transfer Agreement. "Base Rate" or "BR" shall mean, a rate per annum equal to the greater of (i) the prime rate of interest announced by Chase from time to time, changing when and as said prime rate changes (such rate not necessarily being the lowest or best rate charged by Chase) or (ii) the sum of (a) 1.50% and (b) the rate equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day that is a Business Day, the average of the quotations for such day for such transactions received by Chase from three (3) Federal funds brokers of recognized standing selected by it. "Beneficiaries" shall mean the CP Conduit Purchasers, the Committed Purchasers, the Funding Agents and the Administrative Agent, collectively. "Benefit Plan" shall mean any employee benefit plan as defined in Section 3(3) of ERISA in respect of which the Transferor, any Seller or any ERISA Affiliate of the Transferor, or any Seller is, or at any time during the immediately preceding six (6) years was, an "employer" as defined in Section 3(5) of ERISA. "BR Tranche" shall mean a Tranche as to which Discount is calculated at the Base Rate plus the Applicable Margin. "BR Tranche Period" shall mean, with respect to a BR Tranche, either (i) prior to the Termination Date, a period of up to thirty (30) days requested by the Transferor and agreed to by a CP Conduit Purchaser, a Committed Purchaser or the Funding Agent for such CP Conduit Purchaser or such Committed Purchaser, as the case may be, commencing on a Business Day requested by the Transferor and agreed to by the CP Conduit Purchaser, the Committed Purchaser or the Funding Agent for such CP Conduit Purchaser or such Committed Purchaser, as the case may be, or (ii) after the Termination Date, a period of one (1) day. If such BR Tranche Period would end on a day which is not a Business Day, such BR Tranche Period shall end on the next succeeding Business Day. "Business Day" shall mean any day excluding Saturday, Sunday and any day on which banks in The City of New York are authorized or required by law to close, and, when used with respect to the determination of any Eurodollar Rate or any notice with respect -3- thereto, any such day which is also a day for trading by and between banks in the London interbank market in United States dollar deposits. "Capitalized Lease" of a Person shall mean any lease of property by such Person as lessee which would be capitalized on a balance sheet of such Person prepared in accordance with GAAP. "Carrying Cost Reserve Ratio" shall mean, on any day, an amount, expressed as a percentage, equal to (a) the product of (i) 2 times DSO as of such day and (ii) the Base Rate in effect as of such day plus 2%, divided by (b) 365. "Charged-Off Receivables" shall mean, with respect to any Settlement Period, all Receivables (or portions thereof) which, in accordance with the Credit and Collection Policy, have or should have been written off during such Settlement Period as uncollectible, including, without limitation, the Receivables of any Obligor which becomes the subject of any voluntary or involuntary bankruptcy proceeding. "Chase" shall mean The Chase Manhattan Bank, in its individual capacity, and its successors. "Chase Roles" shall have the meaning specified in Section 10.12 of the Receivables Transfer Agreement. "Closing Date" shall mean November 28, 2000. "Code" shall mean the Internal Revenue Code of 1986, as amended, and the rules and regulations promulgated thereunder. "Collection Account" shall mean the account, established by the Administrative Agent, for the benefit of the CP Conduit Purchasers and the Committed Purchasers, pursuant to Section 2.13(a) of the Receivables Transfer Agreement. "Collection Agent" shall mean, at any time, the Person then authorized pursuant to Section 6.01 of the Receivables Transfer Agreement to service, administer and collect Receivables. The initial Collection Agent shall be the Parent. "Collection Agent Default" shall have the meaning specified in Section 6.07 of the Receivables Transfer Agreement. "Collections" shall mean, with respect to any Receivable, all cash collections and other cash proceeds of such Receivable, including, without limitation, all Finance Charges, if any, and cash proceeds of Related Security with respect to such Receivable. -4- "Commercial Paper" shall mean the short-term promissory notes of the CP Conduit Purchasers issued by the CP Conduit Purchasers in the commercial paper market. "Commitment" shall mean, with respect to any Committed Purchaser, the amount specified as such on Schedule B to the Receivables Transfer Agreement for such Committed Purchaser, as the same may be reduced from time to time as provided in Section 2.07 of the Receivables Transfer Agreement. "Commitment Expiry Date" shall mean the earliest to occur of (i) the date on which all amounts due and owing to the CP Conduit Purchasers and the Committed Purchasers under the Receivables Transfer Agreement and the other Transaction Documents have been paid in full, (ii) the date on which the Aggregate Commitment has been reduced to zero pursuant to the Receivables Transfer Agreement, (iii) The Termination Date, and (iv) November 28, 2005. "Committed Purchaser Funded Amount" shall mean, with respect to any Committed Purchaser for any day the excess, if any, of the portion of the Net Investment funded by such Committed Purchaser and the related CP Conduit Purchaser on such day over the CP Conduit Funded Amount of such CP Conduit Purchaser for such day. "Committed Purchasers" shall mean the banks and other financial institutions identified as such on Schedule B to the Receivables Transfer Agreement, as the same may be amended, supplemented or otherwise modified and in effect from time to time. "Concentration Factor" shall mean, on any day with respect to any Designated Obligor, except for a Special Obligor, a percentage equal to the following: (i) with respect to Receivables of any Obligor with short-term or long-term ratings of at least A-1 or A by S&P, respectively, and at least P-1 or A2 by Moody's, respectively, 12.0%; (ii) with respect to Receivables of any Obligor with short-term or long-term ratings of at least A-2 or BBB by S&P, respectively, and at least P-2 or Baa2 by Moody's, respectively, 6.0%; (iii) with respect to Receivables of any Obligor with short-term or long-term ratings of at or below A-3 or BBB- by S&P, respectively, and at or below P-3 or Baa3 by Moody's, respectively, 3.0%; and (iv) with respect to Receivables of any Obligor with no short-term or long-term ratings by S&P and Moody's, 3.0%. -5- The Concentration Factor for Obligors with split ratings shall be determined based upon the lower of the two ratings. "Conduit Assignee" shall mean, with respect to any CP Conduit Purchaser, any commercial paper conduit that issues commercial paper rated at least A-1 by S&P and P1 by Moody's and that accepts an assignment from such CP Conduit Purchaser of such CP Conduit Purchaser's rights and obligations pursuant to Section 10.06(b) of the Receivables Transfer Agreement. "Contract" shall mean a written agreement or invoice, pursuant to or under which an Obligor shall be obligated to pay for merchandise purchased or services rendered and including all items and provisions incorporated or implied by applicable law, including, without limitation, the Relevant UCC. "Conversion/Continuation Notice" shall have the meaning specified in Section 2.17 of the Receivables Transfer Agreement. "CP Conduit Funded Amount" means, with respect to any CP Conduit Purchaser for any day, the aggregate portion of the Net Investment funded by such CP Conduit Purchaser through the issuance of Commercial Paper outstanding on such day. "CP Conduit Funding Limit" means, with respect to any CP Conduit Purchaser, the amount set forth opposite such CP Conduit Purchaser's name on Schedule B to the Receivables Transfer Agreement, as the same may be reduced from time to time as provided in Section 2.07 of the Receivables Transfer Agreement. "CP Conduit Purchasers" shall mean the Persons identified as such on Schedule B to the Receivables Transfer Agreement, as the same may be amended, supplemented or otherwise modified and in effect from time to time. "CP Conduit Purchaser's Insolvency Event" shall mean the occurrence of any one or more of the following: (a) any proceeding shall have been instituted by a CP Conduit Purchaser seeking to adjudicate it as bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking the entry of any order for relief or the appointment of a receiver, trustee or other similar official for it or any substantial part of its property, or (b) any proceeding of the type described in the foregoing clause (a) shall be instituted against a CP Conduit Purchasers and shall have remained undismissed for a period of sixty (60) consecutive days, or an order granting relief requested in any such proceeding shall be entered. -6- "CP Conduit Purchaser's Interest" shall mean, on any day, with respect to any CP Conduit Purchaser, the beneficial interest of such CP Conduit Purchaser in the Receivables and Related Security, which beneficial interest shall equal the product of (i) the Percentage Factor on such day, (ii) the Outstanding Balance of all Receivables and (iii) the percentage equivalent of a fraction, the numerator of which is the CP Conduit Funded Amount of such CP Conduit Purchaser and the denominator of which is the Net Investment. "CP Conduit Purchaser's Termination Event" shall mean, as applicable, a PARCO Termination Event or, in the case of any Conduit Assignee or other Person who becomes a CP Conduit Purchaser after the Closing Date, the "CP Conduit Purchaser's Termination Event" specified in the agreement by which such Person becomes a party to the Receivables Transfer Agreement. "CP Rate" shall mean, (a) with respect to any CP Tranche funded or maintained by any Match Funding CP Conduit Purchaser during any CP Tranche Period, the rate equivalent to (i) the discount rate (or if more than one discount rate, the weighted average of the discount rates) at which Commercial Paper having a term equal to such CP Tranche Period can be sold by any placement agent or commercial paper dealer selected by such Match Funding CP Conduit Purchaser, converted to an annual yield-equivalent rate on the basis of a 360-day year, which rates shall include placement agent and dealer fees and commissions and (ii) the annual interest rate (or if more than one rate, the weighted average of the annual interest rates) payable by such Match Funding CP Conduit Purchaser on interest-bearing Commercial Paper having a term equal to such CP Tranche Period, on the basis of a 360-day year, which rates shall include placement agent and dealer fees and commissions, and (b) with respect to any CP Conduit Funded Amount funded or maintained by any Pooled Funding CP Conduit Purchaser during any CP Tranche Period, the rate equivalent to the weighted average of (i) the weighted average of the discount rates on all of such Pooled Funding CP Conduit Purchaser's Commercial Paper issued at a discount and outstanding during such Tranche Period, converted to an annual yield-equivalent rate on the basis of a 360-day year, which rates shall include placement agent and dealer fees and commissions, and (ii) the weighted average of the annual interest rates payable by such Pooled Funding CP Conduit Purchaser on all interest-bearing Commercial Paper outstanding during such Tranche Period, on the basis of a 360-day year, which rates shall include placement agent and dealer fees and commissions; 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" shall equal the rate or weighted average of the rates applicable to such issuance. "CP Tranche" shall mean a Tranche as to which Discount is calculated at the CP Rate. -7- "CP Tranche Period" shall mean, (a) for any Match Funding CP Conduit Purchaser, with respect to a CP Tranche, a period of days not to exceed two hundred seventy (270) days commencing on a Business Day requested by the Transferor and agreed to by such Match Funding CP Conduit Purchaser pursuant to Section 2.03 of the Receivables Transfer Agreement; provided that if a CP Tranche Period would end on a day which is not a Business Day, such CP Tranche Period shall end on the next succeeding Business Day, and (b) for any Pooled Funding CP Conduit Purchaser, with respect to a CP Tranche, each Settlement Period, provided that on or after the Termination Date, each Pooled Funding CP Conduit Purchaser (or the Funding Agent with respect to such Pooled Funding CP Conduit Purchaser) shall select all Tranche Periods. "Credit Agreement" shall mean that certain Credit Agreement, dated as of November 28, 2000, by and among the Parent, certain subsidiaries of the Parent, The Chase Manhattan Bank, as administrative agent, Chase Securities Inc., as arranger and the various lending institutions party thereto, as amended, supplemented or otherwise modified and in effect from time to time. "Credit and Collection Policy" shall mean the Sellers' credit and collection policy or policies relating to Contracts and Receivables existing on the Closing Date and referred to in Exhibit A attached to the Receivables Transfer Agreement, as amended, supplemented or otherwise modified and in effect from time to time in compliance with Section 5.02(c) of the Receivables Transfer Agreement. "Deemed Collections" shall mean any Collections on any Receivable deemed to have been received pursuant to Section 2.10(a) or (b) of the Receivables Transfer Agreement. "Default Ratio" shall mean, on any day, a fraction, the numerator of which is the sum of (a) the Outstanding Balance of all Receivables which are 91-120 days past their original due date as of the end of the preceding Settlement Period plus (b) the Outstanding Balance of all Receivables which were written off as uncollectible by the Collection Agent in accordance with the Credit and Collection Policy during the preceding Settlement Period prior to 121 days after their original due dates and the denominator of which is the balance of all Receivables which arose during the Settlement Period four Settlement Periods prior to such day. "Defaulted Receivable" shall mean a Receivable: (i) as to which any payment, or part thereof, remains unpaid for more than 121 days from the original due date for such Receivable; (ii) as to which an Event of Bankruptcy has occurred and is continuing with respect to the Obligor thereof; (iii) which has been identified by the Transferor, the Seller or the Collection Agent as uncollectible; or (iv) which, in accordance with the Credit and Collection Policy, should be written off as uncollectible. -8- Delinquent Receivable" shall mean a Receivable as to which any payment, or part thereof, remains unpaid for more than 91 days past its original due date. "Deposit Report" shall have the meaning specified in Section 2.12(a) of the Receivables Transfer Agreement. "Designated Obligor" shall mean, at any time, each Obligor; provided, however, that any Obligor shall cease to be a Designated Obligor upon notice to the Transferor from the Administrative Agent, delivered at any time. "Diluted Receivable" shall mean, any Receivable which is the subject of a reduction or cancellation as a result of any defective, rejected or returned merchandise or services and all credits, rebates, discounts, disputes, warranty claims, repossessed or returned goods, charge backs, allowances, other dilutive factors and any other billing or other adjustment (whether effected through the granting of credits against the applicable Receivables or by the issuance of a check or other payment in respect of (and as payment for) such reduction but excluding adjustments, reductions, or cancellations in respect of the Obligor's bankruptcy or insolvency. "Dilution Period" shall mean, on any day, a number equal to a fraction, the numerator of which is the product of (i) the sum of all Receivables which arose during the Settlement Period immediately preceding such day and (ii) DSO divided by 30 and the denominator of which is the Net Receivables Balance. "Dilution Ratio" shall mean, as of the last day of each Settlement Period, the percentage equivalent of a fraction, the numerator of which is the aggregate amount of Diluted Receivables arising during such Settlement Period and the denominator of which is the aggregate principal amount of all Receivables originated by the Sellers during the Settlement Period immediately preceding the Settlement Period ended on such day. "Dilution Reserve Ratio" shall mean, as of any Settlement Date, and continuing until (but not including) the next Settlement Date, an amount (expressed as a percentage) that is calculated as follows: DRR = [(c*d)+[(e-d)*(e/d)]]*f Where: DRR = Dilution Reserve Ratio; c = 2 . 0 -9- d = the twelve-month rolling average of the Dilution Ratio that occurred during the period of twelve consecutive Settlement Periods ending immediately prior to such earlier Settlement Date; e = the highest Dilution Ratio that occurred during the period of twelve consecutive Settlement Periods ending prior to such earlier Settlement Date; and f = the Dilution Period. "Discount" means, with respect to any Tranche Period: (TR x TNI x AD) --- YD Where: TR = the Tranche Rate applicable to such Tranche Period; TNI = the portion of the Net Investment allocated to such Tranche Period; AD = the actual number of days during such Tranche Period; and YD = either (i) if the Tranche Rate is the CP Rate or the Eurodollar Rate, 360 or (ii) if the Tranche Rate is the Base Rate, 365 or 366, as applicable. provided, however, that no provision of the Receivables Transfer Agreement shall require the payment or permit the collection of Discount in excess of the maximum amount permitted by applicable law; and provided, further, that Discount shall not be considered paid by any distribution if, at any time, such distribution is rescinded or must be returned for any reason. "Discount Percentage" shall mean, on any date, the percentage obtained from the following formula: 100% - (A + B + C + D) all determined by the Transferor as of the related Transfer Date, Where A = Adjusted Loss Reserve Percentage, which as of such Transfer Date will equal the ratio obtained by dividing (a) Charged-Off Receivables (net of recoveries in respect of Charged-Off Receivables) during the six- fiscal -10- month period immediately preceding the Settlement Date most recently preceding such Transfer Payment Date by (b) the aggregate amount of Collections during the six-fiscal month period immediately preceding the Settlement Date most recent to such Transfer Date. B = Adjusted Carrying Cost Reserve Percentage, which as of such Transfer Date will equal the amount obtained by dividing (a) the product of (i) 1.3, (ii) the average of the DSO for the three Settlement Dates most recent to such Transfer Date and (iii) the Base Rate as of the Settlement Date most recent to such Transfer Date by (b) 365. C = The Servicing Fee Percentage divided by 360. D = Processing Expense Reserve Percentage, which will equal 1/10 of 1% and reflects the cost of the Transferor's overhead, including costs of processing the purchase of Receivables and other normal operation costs and a reasonable profit margin. None of the elements of the above-referenced formula, in respect of any purchase of Receivables, will be adjusted following the related Transfer Date. With respect to each calculation set forth above with respect to a Settlement Date, such calculation as calculated on such Settlement Date and included in the applicable Settlement Statement shall remain in effect from and including the related Settlement Date to but excluding the following Settlement Date. For the initial Settlement Period, the Discount Percentage will be 98.5%. "DSO" shall mean, on any Settlement Date, the number of calendar days equal to the product of (a) 91 and (b) the amount obtained by dividing (i) the Net Receivables Balance as of the last day of the immediately preceding Settlement Period by (ii) the aggregate balance of Receivables which arose during the three (3) consecutive Settlement Periods immediately preceding such Settlement Date, which calculation shall remain in effect until the next succeeding Settlement Date for all purposes of this Agreement. "Early Collection Fee" shall mean, for any Tranche Period during which the portion of the Net Investment that was allocated to such Tranche Period is reduced for any reason whatsoever, the excess, if any, of (i) the additional Discount that would have accrued during such Tranche Period if such reductions had not occurred, minus (ii) the income, if any, received by the recipient of such reductions from investing the proceeds of such reductions. -11- "Eligible Obligor" shall mean any Obligor, of which not more than 35% of such Obligor's aggregate Receivables are more than 120 days past their original due date. "Eligible Receivable" shall mean, at any time, any Receivable: (1) which has been originated by any Seller and subsequently sold to the Transferor pursuant to (and in accordance with) the Receivables Purchase Agreement, and to which the Transferor has good title thereto, free and clear of all Adverse Claims other than those imposed in connection with the Transaction Documents; (2) which (together with the Collections and Related Security related thereto) has been the subject of either (A) a valid transfer and assignment from the Transferor to the Administrative Agent, on behalf of the CP Conduit Purchasers and the Committed Purchasers, of all of the Transferor's right, title and interest therein or (B) the grant of a first priority perfected security interest therein (and in the Collections and Related Security related thereto), in each case effective until the termination of the Receivables Transfer Agreement. (3) the Obligor of which is (A) a United States resident or a resident of a U.S. territory, (B) a Designated Obligor at the time of the initial creation of an interest therein hereunder, (C) not an Official Body or an Affiliate of any of the parties to the Receivables Transfer Agreement, (D) not the subject of an Event of Bankruptcy, and (E) an Eligible Obligor; (4) which is not a Delinquent Receivable or a Defaulted Receivable; (5) which (A) arises pursuant to a Contract with respect to which the Seller has performed all obligations required to be performed by it thereunder, including, without limitation, shipment of the merchandise and/or the performance of the services purchased thereunder; and (B) according to the Contract related thereto, has been billed and is required to be paid in full within 120 days of the original billing date therefor; (6) which is an "eligible asset" as defined in Rule 3a-7 under the Investment Company Act of 1940, as amended; (7) which is (A) an "account" within the meaning of Article 9 of the Relevant UCC, (B) chattel paper within the meaning of Section 9-105 of such UCC (provided that, in order for such chattel paper to be eligible, the Collection Agent shall have certified to the Funding Agent in the related Deposit Report that the terms of the contract or contracts giving rise to such chattel paper do -12- not prohibit the assignment thereof) or (C) a "general intangible" (to the extent that such Receivables include interest, finance charges, returned check or late charges or sales or similar taxes) within the meaning of Section 9-106 of such UCC; (8) which is denominated and payable only in United States dollars in the United States; (9) which arises under a Contract that, together with the Receivable related thereto, is in full force and effect and constitutes the legal, valid and binding obligation of the related Obligor, enforceable against such Obligor in accordance with its terms and is not subject to any litigation, dispute, offset, counterclaim or other defense other than unexpired volume or pricing discounts or rebates to which the obligor thereon may be entitled, provided that only such portion of such receivable subject to any such dispute, offset, counterclaim or defense shall be deemed ineligible under this criterion; (10) which, together with the Contract related thereto, does not contravene in any material respect any laws, rules or regulations applicable thereto (including, without limitation, laws, rules and regulations relating to truth in lending, fair credit billing, fair credit reporting, equal credit opportunity, fair debt collection practices and privacy) and with respect to which no part of the Contract related thereto is in violation of any such law, rule or regulation in any material respect; (11) which (A) satisfies all applicable requirements of the Credit and Collection Policy, (B) is assignable without the consent of, or notice to, the Obligor thereunder and (C) complies with such other reasonable criteria and requirements as the Administrative Agent may from time to time specify to the Transferor following five (5) days' notice; (12) which was originated in the ordinary course of the Seller's business; (13) the Obligor of which has been directed to make all payments to a specified account of the Collection Agent with respect to which there shall be a LockBox Account Agreement in effect; (14) the assignment of which under the Receivables Purchase Agreement by the Seller to the Transferor and the assignment of which under the Receivables Transfer Agreement by the Transferor to the CP Conduit Purchasers and the Committed Purchasers does not violate, conflict with or contravene any applicable laws, rules, regulations, orders or writs or any contractual or other re- -13- striction, limitation or encumbrance and does not require the consent of any person; (15) which has not been compromised, adjusted or modified (including by the extension of time for payment or the granting of any discounts, allowances or credits), provided that only such portion of such receivable that has been so compromised, adjusted or modified shall be deemed ineligible pursuant to this criterion; and (16) which, if purchased with proceeds of Commercial Paper, would constitute a "current transaction" within the meaning of Section 3(a)(3) of the Securities Act of 1933, as amended. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended, supplemented or otherwise modified and in effect from time to time, and the rules and regulations promulgated thereunder. "ERISA Affiliate" shall mean, with respect to any Person, (i) any corporation which is a member of the same controlled group of corporations (within the meaning of Section 414(b) of the Code (as in effect from time to time, the "Code")) as such Person; (ii) a trade or business (whether or not incorporated) under common control (within the meaning of Section 414(c) of the Code) with such Person; or (iii) a member of the same affiliated service group (within the meaning of Section 414(m) of the Code) as such Person, any corporation described in clause (i) above or any trade or business described in clause (ii) above. "Eurodollar Rate" shall mean, with respect to any Eurodollar Tranche Period, a rate per annum equal to the sum (rounded upwards, if necessary, to the next higher 1/100 of 1%) of (A) the rate obtained by dividing (i) the applicable LIBOR Rate by (ii) a percentage equal to 100% minus the reserve percentage used for determining the maximum reserve requirement as specified in Regulation D of the Board of Governors of the Federal Reserve System of the United States (or any successors) or in any regulations of any other Official Body having jurisdiction with respect thereto (including, without limitation, any marginal, emergency, supplemental, special or other reserves) that is applicable during such Eurodollar Tranche Period in respect of eurocurrency or eurodollar funding, lending or liabilities (or, if more than one percentage shall be so applicable, the daily average of such percentage for those days in such Eurodollar Tranche Period during which any such percentage shall be applicable) plus (B) the then daily net annual assessment rate (rounded upwards, if necessary, to the nearest 1/100 of 1%) as estimated by the Administrative Agent for determining the current annual assessment payable to the Federal Deposit Insurance Corporation in respect of eurocurrency or eurodollar funding, lending or liabilities. -14- "Eurodollar Tranche" shall mean a Tranche as to which Discount is calculated at the Eurodollar Rate plus the Applicable Margin. "Eurodollar Tranche Period" shall mean, with respect to a Eurodollar Tranche, prior to the Termination Date, a period of up to three (3) months requested by the Transferor and agreed to by a CP Conduit Purchaser, a Committed Purchaser or the Funding Agent for such CP Conduit Purchaser or such Committed Purchaser commencing on a Business Day requested by the Transferor and agreed to by the CP Conduit Purchaser, the Committed Purchaser or the Funding Agent for such CP Conduit Purchaser or such Committed Purchaser; provided, however, that if such Eurodollar Tranche Period would expire on a day which is not a Business Day, such Eurodollar Tranche Period shall expire on the next succeeding Business Day; provided, further, that if such Eurodollar Tranche Period would expire on (a) a day which is not a Business Day but is a day of the month after which no further Business Day occurs in such month, such Eurodollar Tranche Period shall expire on the next preceding Business Day or (b) a Business Day for which there is no numerically corresponding day in the applicable subsequent calendar month, such Eurodollar Tranche Period shall expire on the last Business Day of such month. "Event of Bankruptcy" shall mean, with respect to any Person, (i) that such Person (a) shall generally not pay its debts as such debts become due or (b) shall admit in writing its inability to pay its debts generally or (c) shall make a general assignment for the benefit of creditors; (ii) any proceeding shall be instituted by or against such Person seeking to adjudicate it as bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking the entry of an order for relief or the appointment of a receiver, trustee or other similar official for it or any substantial part of its property or (iii) if such Person is a corporation, such Person or any Subsidiary shall take any corporate action to authorize any of the actions set forth in the preceding clauses (i) or (ii). "Facility Limit" shall mean, at any time, the sum of the CP Conduit Funding Limits then in effect; provided, that the Facility Limit may not at any time exceed 98.04 % of the Aggregate Commitment at any time in effect; provided, further, that from and after the Termination Date, the Facility Limit shall at all times equal the Net Investment. "Federal Funds Rate" shall mean, for any day, an interest rate per annum equal to (a) the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published for such day (or, if such day is not a Business Day, for the immediately preceding Business Day) by the Federal Reserve Bank of New York, or (b) if such rate is not so published for any day which is a Business Day, the average of the quotations at approximately 11:00 A.M. (New -15- York time) on such day on such transactions received by the Administrative Agent from three (3) federal funds brokers of recognized standing selected by the Administrative Agent in its sole discretion. "Fee Letter" shall mean the letter agreement, dated the Closing Date, between the Transferor and the Administrative Agent, for the benefit of the CP Conduit Purchasers, the Funding Agents and the Committed Purchasers with respect to the fees to be paid by the Transferor under the Transaction Documents, as amended, supplemented or otherwise modified and in effect from time to time. "Fees" shall mean the fees payable pursuant to the Fee Letter. "Finance Charges" shall mean, with respect to a Contract, any finance, interest, late or similar charges owing by an Obligor pursuant to such Contract. "Funding Agents" shall mean the Persons identified as such on Schedule B to the Receivables Transfer Agreement, as the same may be amended, supplemented or otherwise modified and in effect from time to time. "GAAP" shall mean generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such accounting profession, which are in effect as of the date of the Receivables Transfer Agreement. "Guarantor" shall mean the Parent in its capacity as Guarantor under the Limited Guaranty set forth in Article IX of the Receivables Transfer Agreement. "Guaranty" shall mean, with respect to any Person, any agreement by which such Person assumes, guarantees, endorses, contingently agrees to purchase or provide funds for the payment of, or otherwise becomes liable upon, the obligation of any other Person, or agrees to maintain the net worth or working capital or other financial condition of any other Person or otherwise assures any other creditor of such other Person against loss, including, without limitation, any comfort letter, operating agreement or take-or-pay contract and shall include, without limitation, the contingent liability of such Person in connection with any application for a letter of credit; provided, however, that the term "Guaranty" shall not mean or include the endorsements by such Person of Instruments for deposit or collection in the ordinary course of business. "Incremental Transfer" shall mean a Transfer which is made pursuant to Section 2.02(a) of the Receivables Transfer Agreement. -16- "Indebtedness" shall mean, with respect to any Person, such Person's (i) obligations for borrowed money, (ii) obligations representing the deferred purchase price of property other than accounts payable arising in the ordinary course of such Person's business on terms customary in the trade, (iii) obligations, whether or not assumed, secured by liens or payable out of the proceeds or production from property now or hereafter owned or acquired by such Person, (iv) obligations which are evidenced by notes, acceptances, or other instruments, (v) Capitalized Lease obligations and (vi) Guaranty obligations. "Indemnified Amounts" shall have the meaning specified in Section 2.20 of the Receivables Transfer Agreement. "Indemnified Taxes" shall mean any present or future income, stamp or other taxes, levies, imposts, duties, charges, fees, deductions or withholdings, now or hereafter imposed, levied, collected, withheld or assessed by any Official Body, excluding (A) all franchise taxes, all taxes, levies, imposts, duties, charges, fees, deductions and withholdings imposed on or measured by the net income, capital or net worth or all taxes, levies, imposts, duties, charges, fees, deductions and withholdings on doing business, in each case, imposed: (i) by the United States or any political subdivision or taxing authority thereof or therein; (ii) by any jurisdiction under the laws of which the Administrative Agent, any CP Conduit Purchaser, any Funding Agent, any Committed Purchaser, any Program Support provider or an Indemnified Party or lending office is organized or in which its lending office is located, managed or controlled or in which its principal office is located or any political subdivision or taxing authority thereof or therein; or (iii) by reason of any connection between the jurisdiction imposing such tax and the Administrative Agent, any CP Conduit Purchaser, any Funding Agent, any Committed Purchaser, any Program Support Provider, such Indemnified Party or such lending office other than a connection arising solely from this Agreement or any other Transaction Document or any transaction hereunder or thereunder, (B) all penalties, interests, additions to taxes and expenses resulting from gross negligence or wilful misconduct on the part of the Administrative Agent, any CP Conduit Purchaser, any Funding Agent, any Committed Purchaser, any Program Support Provider, or an Indemnified Party, as the case may be, and (Q) all taxes, levies, imposts, duties, charges, fees, deductions and withholdings imposed by reason of the failure of any Indemnified Party to comply with its obligations, if any, under Section 2.22(b) of the Receivables Transfer Agreement (including, without limitation, its inability to comply with Section 2.22(b)(i) of the Receivables Transfer Agreement. -17- "Law" shall mean any law (including common law), constitution, statute, treaty, regulation, rule, ordinance, order, injunction, writ, decree or award of any Official Body. "LIBOR Rate" shall mean with respect to each Eurodollar Tranche Period for a Eurodollar Tranche, the rate per annum equal to the rate at which the Administrative Agent is offered U.S. Dollar deposits at or about 10:00 A.M. local market time, two Business Days prior to the beginning of such Eurodollar Tranche Period in the interbank eurodollar market where the eurodollar and foreign currency and exchange operations in respect of its Eurodollar Tranches are then being conducted for delivery on the first day of such Eurodollar Tranche Period for the number of days comprised therein and in an amount comparable to the amount of its Eurodollar Tranche be outstanding during such Eurodollar Tranche Period (and rounded upward to the next whole multiple of 1/16 of 1%). "Lock-Box Account" shall mean an account maintained by the Collection Agent at a Lock-Box Bank for the purpose of receiving Collections from Receivables. "Lock-Box Agreement" shall mean an agreement between the Collection Agent and a Lock-Box Bank in substantially the form of Exhibit C to the Receivables Transfer Agreement. "Lock-Box Bank" shall mean each of the banks set forth in Exhibit B to the Receivables Transfer Agreement, and such banks as may be added thereto or deleted therefrom pursuant to Section 2.09 of the Receivables Transfer Agreement. "Loss and Dilution Reserve Ratio" shall mean, on any day, the greater of (a) the sum of (i) 12% plus (ii) the product of (x) the average Dilution Ratio over the immediately preceding fiscal 12-month period and (y) DSO divided by 30 and (b) the sum of the Loss Reserve Ratio plus the Dilution Reserve Ratio. "Loss Horizon" shall mean, on any day, the amount obtained by dividing (i) the sum of all Receivables which arose during the four Settlement Periods immediately preceding such day plus 0.25 times the sum of all Receivables which arose during the fifth Settlement Period immediately preceding such day by (ii) the Net Receivables Balance as of the end of the preceding Settlement Period. "Loss Reserve Ratio" shall mean, on any day, the product of (a) 2, and (b) the highest three-month average Default Ratio that occurred during the twelve (12) most recent Settlement Periods, (c) the Loss Horizon and (d) the Payment Terms Factor. "Match Funding CP Conduit Purchaser" means each CP Conduit Purchaser that is identified on Schedule D to the Receivables Transfer Agreement as a Match Funding -18- CP Conduit Purchaser and each CP Conduit Purchaser that, after the Closing Date, notifies the Transferor and the Administrative Agent in accordance with Section 2.03(a) in writing that it is funding its CP Conduit Funded Amount with Commercial Paper issued by it, or for its benefit, in specified CP Tranches selected in accordance with Section 2.03(a) and that, in each case, has not subsequently notified the Transferor and the Administrative Agent in writing that the Transferor will no longer be permitted to select CP Tranches in accordance with Section 2.03(a) in respect of the CP Conduit Funded Amount with respect to such CP Conduit Purchaser. "Material Adverse Effect" shall mean any event or condition which would have a material adverse effect on (i) the collectibility of the Receivables, (ii) the condition (financial or otherwise), businesses or properties of the Transferor or any Seller, (iii) the ability of the Transferor or any Seller to perform its respective obligations under the Transaction Documents to which it is a party or (iv) the interests of the Administrative Agent, the CP Conduit Purchasers, the Funding Agents or the Committed Purchasers under the Transaction Documents; provided, however, that for purposes of clause (ii) an event or condition resulting in a material adverse change in the condition (financial or otherwise) of any Seller will not be deemed to have a Material Adverse Effect unless such event or condition, in the Administrative Agent's reasonable discretion, is reasonably likely to have a material adverse effect on the condition (financial or otherwise) of the Parent on a consolidated basis or on the Transferor. "Maximum Percentage Factor" means 100%. "Moody's" shall mean Moody's Investors Service, Inc., and its successors and assigns. "Multiemployer Plan" shall mean a "multiemployer plan" as defined in Section 4001(a)(3) of ERISA which is or was at any time during the current year or the immediately preceding five years contributed to by the Transferor, the Seller or any ERISA Affiliate of the Transferor or the Seller on behalf of its employees. "Net Investment" shall mean the sum of the cash amounts paid to the Transferor by the CP Conduit Purchasers and/or the Committed Purchasers for all Incremental Transfers minus the aggregate amount of Collections received and applied by the Administrative Agent to reduce such Net Investment pursuant to Section 2.05, 2.06 or 2.10 of the Receivables Transfer Agreement; provided that the Net Investment shall be restored and reinstated in the amount of any Collections so received and applied if, at any time, the distribution of such Collections is rescinded or must otherwise be returned for any reason. "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 -19- Designated Obligor exceeds the product of the Concentration Factor for such Designated Obligor multiplied by the Outstanding Balance of all Eligible Receivables of such Designated Obligor. "Obligor" shall mean a Person obligated to make payments for the provision of goods and services pursuant to a Contract. "Official Body" shall mean any government or political subdivision or any agency, authority, bureau, central bank, commission, department or instrumentality of any such government or political subdivision, or any court, tribunal, grand jury or arbitrator, in each case whether foreign or domestic. "Other Transferor" shall mean any Person, other than the Transferor, that has entered into a receivables purchase agreement, receivables transfer agreement, loan agreement or funding agreement with the CP Conduit Purchasers. "Outstanding Balance" shall mean, with respect to any Receivable at any time, the then outstanding principal amount thereof, excluding any accrued and outstanding Finance Charges related thereto. "PARCO" shall mean the Park Avenue Receivables Corporation, a Delaware corporation, and its successors and assigns. "PARCO Termination Event" shall mean that any Program Support Provider with respect to PARCO shall have given notice that an event of default has occurred and is continuing under its agreement with PARCO. "Parent" shall mean MascoTech, Inc., a Delaware corporation. "Payment Terms Factor" shall mean (i) for the period from the Closing Date until the third Settlement Date, 1.08 and (ii) for each three-month period to occur thereafter, a fraction, the numerator of which is the sum of (A) the weighted average payment terms (based upon the principal amount of the Receivables and expressed as a number of days) for the Receivables generated or acquired by the Sellers during such period and (B) 90, and the denominator of which is 120; provided, however, that if the Payment Terms Factor for any period is less than the Payment Terms Factor for the immediately preceding periods, then the actual Payment Terms Factor for such current period shall be recalculated to equal a fraction, the numerator of which is equal to the average of the numerators used to calculate the Payment Terms Factor for such current period and the three immediately preceding periods (without giving effect to this proviso) and the denominator of which is 120; provided, further, the Payment Terms Factor shall never be less than 1.0. -20- "Percentage Factor" shall mean the fraction (expressed as a percentage) computed on any date of determination as follows: NI x [1 + (LDRR + CCRR)] + (SFRR x OBR) ------------ ----------- 1 - LDRR 1-LDRR --------------------------------------- NRB Where: NI = the Net Investment on the date of such computation; LDRR = the Loss and Dilution Reserve Ratio on the date of such computation; CCRR = the Carrying Cost Reserve Ratio on the date of such computation; SFRR = the Servicing Fee Reserve Ratio on the date of such computation; OBR = the Outstanding Balance of all Receivables on the date of such computation; and NRB = the Net Receivables Balance on the date of such computation. The Percentage Factor shall be calculated by the Collection Agent on the day of the initial Incremental Transfer hereunder. Thereafter, until the Termination Date, the Collection Agent shall recompute the Percentage Factor at the time of each Incremental Purchase pursuant to Section 2.02(a) of the Receivables Transfer Agreement and as of the close of business on each Business Day and report such recomputations to the Administrative Agent in the Settlement Statement and as otherwise requested by the Administrative Agent. The Percentage Factor shall remain constant from the time as of which any such computation or recomputations is made until the time as of which the next such recomputations shall be made, notwithstanding any additional Receivables arising, any Incremental Transfer made pursuant to such Section 2.02(a) or any reinvestment Transfer made pursuant to Section 2.02(b) and 2.05 of the Receivables Transfer Agreement during any period between computations of the Percentage Factor. The Percentage Factor shall remain constant at 100% at all times on and after the Termination Date until such time as the Administrative Agent, on behalf of the CP Conduit Purchasers and the Committed Purchasers, shall have received the Aggregate Unpaids, in cash, at which time the Percentage Factor shall be recomputed in accordance with Section 2.06 of the Receivables Transfer Agreement at which point it shall equal zero. "Permitted Investments" shall mean any of the following (a) negotiable instruments or securities represented by instruments in bearer or registered or in book-entry form -21- which evidence (i) obligations fully guaranteed by the United States of America; (ii) time deposits in, or bankers acceptances issued by, any depositary institution or trust company incorporated under the laws of the United States of America or any state thereof and subject to supervision and examination by Federal or state banking or depositary institution authorities; provided, however, that at the time of investment or contractual commitment to invest therein, the certificates of deposit or short-term deposits, if any, or long-term unsecured debt obligations (other than such obligation whose rating is based on collateral or on the credit of a Person other than such institution or trust company) of such depositary institution or trust company shall have a credit rating from Moody's and S&P of at least "P-1" and "A-1", respectively, in the case of the certificates of deposit or short-term deposits, or a rating not lower than one of the two highest investment categories granted by Moody's and by S&P; (iii) certificates of deposit having, at the time of investment or contractual commitment to invest therein, a rating from Moody's and S&P of at least "P-1" and "A-1", respectively; or (iv) investments in money market funds rated in the highest investment category or otherwise approved in writing by the applicable rating agencies; (b) demand deposits and cash escrows in any depositary institution or trust company referred to in (a)(ii) above; (c) commercial paper (having original or remaining maturities of no more than 30 days) having, at the time of investment or contractual commitment to invest therein, a credit rating from Moody's and S&P of at least "P-1" and "A-l", respectively; (d) Eurodollar time deposits having a credit rating from Moody's and S&P of at least "P-1" and "A-l", respectively; and (e) repurchase agreements involving any of the Permitted Investments described in clauses (a)(i), (a)(iii) and (d) of this definition so long as the other party to the repurchase agreement has at the time of investment therein, a rating from Moody's and S&P of at least "P-l" and "A-1", respectively. "Person" shall mean any corporation, limited liability company, natural person, firm, joint venture, partnership, trust, unincorporated organization, enterprise, government or any department or agency of any government. "Pooled Funding CP Conduit Purchaser" means each CP Conduit Purchaser that is not a Match Funding CP Conduit Purchaser. "Potential Termination Event" shall mean an event which but for the lapse of time or the giving of notice, or both, would constitute a Termination Event. "Proceeds" shall mean "proceeds" as defined in Section 9-306(l) of the Relevant UCC. "Program Fee" shall have the meaning specified in the Fee Letter. "Program Support Provider" means, with respect to any CP Conduit Purchaser, the Committed Purchaser with respect to such CP Conduit Purchaser and any other additional Person now or hereafter extending credit, or having a commitment to extend credit to or for -22- the account of, or to make purchases from, such CP Conduit Purchaser or issuing a letter of credit, surety bond or other instrument to support any obligations arising under or in connection with such CP Conduit Purchaser's securitization program. "Pro Rata Share" shall mean, on any date of determination, (a) with respect to any CP Conduit Purchaser, the ratio (expressed as a percentage) of such CP Conduit Purchaser's CP Conduit Funding Limit to the Facility Limit at such time and (b) with respect to any Committed Purchaser, the ratio (expressed as a percentage) of such Committed Purchaser's Commitment to the Aggregate Commitment at such time. "Purchase" shall mean any assignment by a CP Conduit Purchaser to the Committed Purchaser with respect to such CP Conduit Purchaser of the CP Conduit Purchaser's Interest pursuant to the relevant Asset Purchase Agreement. "Purchase Date" shall mean the date specified by a CP Conduit Purchaser in a Sale Notice as being the effective date of the CP Conduit Purchaser's assignment to the Committed Purchaser with respect to such CP Conduit Purchaser of the CP Conduit Purchaser's Interest specified therein. "Purchase Price", as used in any Receivables Purchase Agreement, shall have the meaning set forth in Section 3.01 of the Receivables Purchase Agreement. "Purchase Termination Date" shall have the meaning specified in Section 8.01 of the Receivables Purchase Agreement. "Purchased Receivables Percentage" means, with respect to any Seller (or Seller Division) as to which MascoTech has submitted a Seller Termination Request, the percentage equivalent of a fraction, the numerator of which is an amount equal to the aggregate Outstanding Balance of Receivables sold by such Seller (or Seller Division) as of the applicable Seller Termination Request Date, and the denominator of which is an amount equal to the aggregate Outstanding Balance of all Receivables as of such date. "Rating Agencies" means on any date of determination the rating agencies then rating the Commercial Paper at the request of any CP Conduit Purchaser. "Rating Confirmation" means, with respect to any CP Conduit Purchaser and any subject amendment, modification, waiver or other action to be taken pursuant to the terms of the Transaction Documents, a confirmation by each of the Rating Agencies that such proposed amendment, modification, waiver or action shall not result in a downgrade or withdrawal of such Rating Agency's then current rating of the Commercial Paper. -23- "Receivable" shall mean the indebtedness owed to the Seller by an Obligor under a Contract and rights of payment and other payment obligations, whether constituting an account, chattel paper, instrument, investment property or general intangible, arising in connection with the sale or lease of merchandise or the rendering of services by the Seller, in its ordinary course of business and includes the right to payment of any Finance Charges and other obligations of such Obligor with respect thereto. Notwithstanding the foregoing, once a Receivable has been deemed collected pursuant to Section 2.10 of the Receivables Transfer Agreement, it shall no longer constitute a Receivable under the Receivables Transfer Agreement. "Receivables Purchase Agreement" shall mean the Receivables Purchase Agreement, dated as of November 28, 2000, by and between the Sellers, as sellers, and the Transferor, as purchaser, as such agreement may be amended, supplemented or otherwise modified and in effect from time to time. "Receivables Transfer Agreement" shall mean the Receivables Transfer Agreement, dated as of November 28, 2000, by and between the Transferor, the Parent, individually, as Collection Agent and as Guarantor, the CP Conduit Purchasers, the Committed Purchasers, the Funding Agents and the Administrative Agent, as such agreement may be amended, supplemented or otherwise modified and in effect from time to time. "Recipient" shall have the meaning specified in Section 2.15 of the Receivables Transfer Agreement. "Records" shall mean all Contracts and other documents, books, records and other writings and information (including, without limitation, computer programs, tapes, discs, punch cards, data processing software and related property and rights) maintained with respect to Receivables and the related Obligors. "Related Security" shall mean, with respect to any Receivable, all of the Seller's or Transferor's right, title and interest in, to and under: (a) the merchandise (including returned or repossessed merchandise), if any, the sale of which by the Seller gave rise to such Receivable; (b) all other security interests or liens and property subject thereto from time to time, if any, purporting to secure payment of such Receivable, whether pursuant to the Contract related to such Receivable or otherwise, together with all financing statements signed by an Obligor describing any collateral securing such Receivable; (c) all guarantees, indemnities, warranties, insurance (and proceeds thereof) or other agreements or arrangements of any kind from time to time supporting or securing -24- payment of such Receivable whether pursuant to the Contract related to such Receivable or otherwise; (d) all Records related to such Receivable; (e) in the case of the Administrative Agent for the benefit of the CP Conduit Purchasers and the Committed Purchasers, all rights and remedies of the Transferor under the Receivables Purchase Agreement, together with all financing statements naming any Seller as debtor or seller and the Transferor as secured party or buyer filed in connection therewith; and (f) all Proceeds of any of the foregoing. "Relevant UCC" shall mean, with respect to any state, the Uniform Commercial Code as from time to time in effect in such state. "Required Committed Purchasers" shall mean Committed Purchasers having Pro Rata Shares in the aggregate equal to more than 50% or, if the Commitments have been terminated, having more than 50% of the Net Investment; provided that the Commitment of any Defaulting Committed Purchaser that has not paid all amounts due and owing by it in respect of Purchases it was obliged to make shall not be included in the Commitments for purposes of this definition. "Responsible Officer" shall mean with respect to any Seller or the Transferor, any officer directly or indirectly responsible for the execution of the transactions contemplated by the Transaction Documents. "Sale Notice" shall mean an irrevocable written notice given by an authorized signer or authorized officer of a CP Conduit Purchaser (or on behalf of the CP Conduit Purchaser by the Funding Agent with respect to such CP Conduit Purchaser) to the Committed Purchaser with respect to such CP Conduit Purchaser committing to sell, assign and transfer to such Committed Purchaser, the CP Conduit Purchaser's Interest, which notice shall designate (a) the applicable Purchase Date, (b) the CP Conduit Purchaser's Interest and the Net Investment, (c) the Purchase Price (including a calculation of the Purchase Price) and (d) that no CP Conduit Purchaser's Insolvency Event has occurred. "Seller Addition Date" shall have the meaning specified in Section 7.02 of the Receivables Purchase Agreement. "Seller Division" shall mean any business unit or operating assets acquired by a Seller which is made part of an existing division of a Seller or made a new division (but not a subsidiary) of a Seller. -25- "Seller Termination Request" shall have the meaning specified in Section 8.03(b) of the Receivables Purchase Agreement. "Seller Termination Request Date" shall have the meaning specified in Section 8.03(b) of the Receivables Purchase Agreement. "Sellers" shall have the meaning specified in the recitals to the Receivables Purchase Agreement. "Servicing Fee" shall mean the fees payable by the Transferor to the Collection Agent in an amount equal to the Servicing Fee Percentage multiplied by the amount of the aggregate Outstanding Balance of the Receivables. Such fee shall accrue from the date of the initial purchase of an interest by a CP Conduit Purchaser in the Receivables to the later of the Termination Date or the date on which the Percentage Factor is reduced to zero. On or prior to the Termination Date, and provided that no Potential Termination Event shall have occurred and be continuing, such fee shall be payable only from Collections pursuant to, and subject to the priority of payments set forth in, Section 2.05 of the Receivables Transfer Agreement. After the Termination Date or during the continuation of a Potential Termination Event, such fee shall be payable only from Collections pursuant to, and subject to the priority of payments set forth in, Section 2.06 of the Receivables Transfer Agreement. "Servicing Fee Percentage" shall mean 1.0% per annum. "Servicing Fee Reserve Ratio" shall mean, at any time, an amount equal to the product of (i) the Servicing Fee Percentage and (ii) a fraction having as the numerator, the product of (a) 2 and (b) the DSO, and as the denominator, 360. "Settlement Date" shall mean the fifteenth day immediately succeeding each Settlement Period or, if such day is not a Business Day, the next succeeding Business Day. "Settlement Period" shall mean the period of days from and including the first day of a fiscal month of the Parent to and including the last day of such fiscal month. "Settlement Statement" shall mean a report, in substantially the form attached to the Receivables Transfer Agreement as Exhibit D-2 or in such other form as is mutually agreed to by the Transferor and the Administrative Agent, delivered by the Collection Agent to the Administrative Agent on each Settlement Date pursuant to Section 2.12 of the Receivables Transfer Agreement or prior to an Incremental Transfer pursuant to Section 2.02(a) of the Receivables Transfer Agreement. "Special Obligors" are Obligors designated by the Administrative Agent and the Funding Agents (in their sole discretion upon the Parent's request) and approved by the -26- Rating Agencies which will each be permitted to exceed the Concentration Factor. The names of the Special Obligors and the percentages applicable to each of the Special Obligors will be specified on Schedule C to the Receivables Transfer Agreement, as such Schedule may be amended or modified by the Administrative Agent and approved by the Rating Agencies from time to time to add or delete Obligors or to change the percentages applicable to Special Obligors. The initial Special Obligors and the applicable percentages will be specified on Schedule C as of the Closing Date. At such time as the requirements in Schedule C are not met by any Obligor, the Concentration Factor for such Obligor will be calculated as specified in the definition of Concentration Factor. "Specified Bankruptcy Opinion Provisions" shall mean the factual assumptions (including those contained in the factual certificate referred to therein) and the actions to be taken by the Sellers or the Transferor, in each case as specified in the legal opinion of Cahill, Gordon & Reindel relating to certain bankruptcy matters delivered on the Closing Date. "Standard & Poor's" or "S&P" shall mean Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc., and its successors and assigns. "Subordinated Note" shall have the meaning specified in Section 3.02(b) of the Receivables Purchase Agreement. "Subsidiary" of a Person shall mean any Person more than 50% of the outstanding voting interests of which shall at any time be owned or controlled, directly or indirectly, by such Person or by one or more Subsidiaries of such Person or any similar business organization which is so owned or controlled. "Termination Date" shall mean the earliest of (i) the Business Day designated by the Transferor to the CP Conduit Purchasers as the Termination Date at any time following thirty (30) Business Days' written notice to the CP Conduit Purchasers, (ii) the day upon which a Termination Date is declared or automatically occurs relating to a Termination Event pursuant to Section 7.02(a) of the Receivables Transfer Agreement, (iii) two (2) Business Days prior to the Commitment Expiry Date or (iv) the Purchase Termination Date shall occur with respect to all the Sellers under the Receivables Purchase Agreement. "Termination Event" shall mean an event described in Section 7.01 of the Receivables Transfer Agreement. "Tranche" shall mean a portion of the Net Investment allocated to a Tranche Period pursuant to Section 2.03 of the Receivables Transfer Agreement. "Tranche Period" shall mean a CP Tranche Period, a BR Tranche Period or a Eurodollar Tranche Period, as applicable. -27- "Tranche Rate" shall mean the CP Rate, the Base Rate or the Eurodollar Rate, as applicable, plus, in the case of the Base Rate or the Eurodollar Rate, the Applicable Margin. "Transaction Documents" shall mean, collectively, the Receivables Transfer Agreement, the Receivables Purchase Agreement, the Asset Purchase Agreements, the Fee Letter, the Lock-Box Agreements, the Subordinated Note and all of the other instruments, documents, certificates and other agreements executed and delivered by the Sellers or the Transferor in connection with any of the foregoing, in each case, as the same may be amended, restated, supplemented or otherwise modified from time to time. "Transfer" shall mean a conveyance, transfer and assignment by the Transferor to the CP Conduit Purchasers or the Committed Purchasers of an undivided percentage ownership interest in Receivables and Related Security pursuant to, and in accordance with, the Receivables Transfer Agreement (including, without limitation, as a result of any reinvestment of Collections in Transferred Interests pursuant to Section 2.02(b) and 2.05 of the Receivables Transfer Agreement). "Transfer Certificate" shall have the meaning specified in Section 2.02(a) of the Receivables Transfer Agreement. "Transfer Date" shall mean, with respect to each Transfer, the Business Day on which such Transfer is made. "Transfer Price" shall mean, with respect to any Incremental Transfer, the amount paid to the Transferor by the CP Conduit Purchasers or the Committed Purchasers, as applicable, as described in the applicable Transfer Certificate. The Transfer Price for any Incremental Transfer shall be equal to the aggregate Net Investment (including such Incremental Transfer) minus the aggregate portion of the Net Investment paid in connection with all prior Transfers. "Transferor" shall mean MTSPC, Inc., a Delaware corporation, and its successors and permitted assigns. "Transferred Interest" shall mean, on any date of determination, an undivided percentage ownership interest of the CP Conduit Purchasers or the Committed Purchasers, as applicable, in (i) each and every then outstanding Receivable, (ii) all Related Security with respect to each such Receivable, (iii) all Collections with respect thereto, and (iv) other Proceeds of the foregoing, which undivided ownership interest shall be equal to the Percentage Factor at such time, and only at such time (without regard to prior calculations). The Transferred Interest in each Receivable, together with Related Security, Collections and Proceeds with respect thereto, shall at all times be equal to the Transferred Interest in each other Receivable, together with Related Security, Collections and Proceeds with respect thereto. To -28- the extent that the Transferred Interest shall decrease as a result of a recalculation of the Percentage Factor, the CP Conduit Purchasers or the Committed Purchasers, as applicable, shall be considered to have reconveyed to the Transferor an undivided percentage ownership interest in each Receivable, together with Related Security, Collections and Proceeds with respect thereto, in an amount equal to such decrease such that, in each case, the Transferred Interest in each Receivable shall be equal to the Transferred Interest in each other Receivable. "U.S." or "United States" means the United States of America and its territories. "Weekly Settlement Date" shall mean the third Business Day of each calendar week. EX-10.4 11 0011.txt SUBORDINATED LOAN AGREEMENT EXHIBIT 10.4 SUBORDINATED LOAN AGREEMENT THIS SUBORDINATED LOAN AGREEMENT, dated as of November 28, 2000 (hereinafter referred to as this "Agreement"), is entered into between MascoTech, Inc., a Delaware corporation (the "Company"), and Masco Corporation, a Delaware corporation ("Tailor Shareholder"). WHEREAS, the Company desires to have the right to sell to Tailor Shareholder, and Tailor Shareholder is willing to purchase from the Company at its request, from time to time, up to $100.0 million principal amount of subordinated debt securities upon the terms and conditions hereinafter set forth; NOW, THEREFORE, the parties agree as follows: 1. Authorization of Issues of Securities. (a) The Company has authorized the issuance and delivery of separate series of subordinated debt securities ("Securities"), such Securities to have substantially the same terms and provisions as the form of subordinated note attached hereto as Exhibit A. (b) The Securities shall be issued in one or more series with the interest rate on each such series being a rate per annum that is the higher of: (i) 400 basis points over the average Treasury Rate (as hereinafter defined) for the week preceding the week in which the notice of purchase referred to in Paragraph 2 is given to Tailor Shareholder with respect to such series; or (ii) 150 basis points over the Comparable Debt Issuance Rate (as hereinafter defined) with respect to such series; provided that the interest rate on each series of the Securities will at the time of issuance not exceed 14.5% per annum; provided, further, that the applicable interest rate on each series of the Securities will increase by 1.0% per annum on December 31, 2005 and an additional 1.5% per annum on December 31, 2007. In the event the Comparable Debt Issuance Rate is not timely determined with respect to any series of Securities, the interest rate with respect to such series will be that provided under clause (i) above until such time as the Comparable Debt Issuance Rate is determined with respect to such series, whereupon the applicable interest rate will be retroactively adjusted, if necessary, to be that which would otherwise apply. (c) "Treasury Rate" means the rate for noncallable direct obligations of the United States ("Treasury Notes") having a maturity that ends on June 30, 2009, as published in the Federal Reserve Statistical Release H.15(519) (or any successor publication provided by the Board of Governors of the Federal Reserve System) under the heading "Treasury Constant -2- Maturities." If a rate for Treasury Notes having a maturity that ends on June 30, 2009 has not been so published or reported for the preceding week as provided above by 1:00 P.M., New York City time, on the date of a Notice (as hereinafter defined), then the Treasury Rate shall be calculated by the Company and shall be a yield to maturity (expressed on a bond equivalent, on the basis of a year of 365 or 366 days, as applicable, and applied on a daily basis) of the arithmetic mean of the secondary market bid rates, as of approximately 1:30 P.M., New York City time, on the date of such Notice, of three leading primary United States government securities dealers selected by the Company for the purchase of Treasury Notes with a remaining maturity that ends as nearly close to June 30, 2009 as practicable. (d) The "Comparable Debt Issuance Rate" means, with respect to any series of securities, a per annum rate of interest determined as follows: Each of the Company and Tailor Shareholder shall select an investment banking firm within two Business Days from the date the Notice with respect to such series, and those two investment banking firms shall have one Business Day to select a third investment banking firm. In the absence of a selection within these specified time periods, the Company shall be deemed to have selected Donaldson, Lufkin & Jenrette Securities Corporation and Tailor Shareholder shall be deemed to have selected Merrill, Lynch & Company and these two investment banking firms shall be deemed to have selected Salomon Smith Barney Inc. Any other investment banking firms shall have significant experience and qualifications with respect to the origination and sale of high yield debt instruments of manufacturing and industrial companies. Each of the three investment banking firms shall have until the fifth business day following the date of the Notice to determine, in its good faith opinion, the per annum rate of interest that the Company would be required to pay if it were to issue the relevant series of Securities to third party investors in a transaction negotiated at arm's-length and priced as of the date of the Notice, and each banker shall set forth its conclusion in a letter addressed to each of Tailor Shareholder and the Company and delivered to each of them by 12:00 noon New York City time on the fifth business day from the date of the Notice given to Tailor Shareholder. The arithmetic mean of the interest rates determined by each of the three investment banking firms shall be the Comparable Debt Issuance Rate with respect to the relevant series of Securities. (e) Except with respect to voting rights (as specified in Section 7.1 of the form of subordinated note attached hereto as Exhibit A), each issuance of Securities shall constitute a separate and discrete series of securities and may be redeemed pursuant to Section 5.1 of the form of subordinated note attached hereto as Exhibit A without regard to the redemption of any other Securities. (f) As used herein, the "date of a Notice" shall mean the date upon which the Notice has been effectively given under Paragraph 8 hereof. 2. Obligation to Purchase. (a) Subject to only (i) the accuracy of the representations and warranties made by the Company pursuant to Paragraph 6 hereof, (ii) the absence of -3- a Bankruptcy Event (as defined below) and (iii) except as set forth in the proviso to this sentence, the absence of an Event of Default under the Senior Credit Facilities (collectively, clauses (i), (ii) and (iii) are referred to as the "Conditions"), Tailor Shareholder agrees to purchase, at par, at any time or from time to time on or before October 31, 2003 (the "Commitment Expiry Date"), upon written notice delivered by or on behalf of the Company in the form of Exhibit B hereto (the "Notes"), up to $100.0 million aggregate principal amount of Securities (the "Commitment"); provided that, notwithstanding the failure of the condition referred to in clause (iii), Tailor Shareholder shall be obligated to so purchase Securities to the extent that the Notice includes a certification to the effect that (1) the Company will use the proceeds from the issuance of such series of Securities solely to meet cash obligations in respect of any of the 4-1/2% Convertible Subordinated Debentures Due December 15, 2003 (the "Convertible Debentures") upon maturity, acceleration or exercise of the conversion privilege in respect thereof (whether before or after the occurrence of the Event of Default) or (2) if the date of the Notice is on or prior to the 30th day prior to the Commitment Expiry Date, the Company will use the proceeds from the issuance of such series of securities solely to fund, in whole or in part, the aggregate amount of cash that is (or will be) payable to holders of Convertible Debentures that are outstanding on the date of the Notice. In the event the proviso to the foregoing sentence is applicable, the Condition set forth in clause (iii) shall be deemed satisfied with respect to the purchase specified in the Notice for all purposes of this Agreement. Each Notice shall specify the principal amount of Securities that Tailor Shareholder is required to purchase (which, other than when the proviso to the second preceding sentence applies, for each respective issuance of Securities shall be $5.0 million or any larger multiple of $500,000). The interest rate for such Securities shall be determined in accordance with the provisions of Paragraph 1(b). For purposes of this Agreement a Bankruptcy Event shall be defined as the occurrence of either of the following events: (i) A court having jurisdiction in the premises shall enter a decree or order for relief in respect of the Company in an involuntary case under any applicable bankruptcy, insolvency or other similar law or hereinafter in effect, or appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator or other similar official of the Company or for any substantial part of its property, or ordering the winding-up or liquidation of its affairs, and such decree or order shall remain unstayed and in effect for a period of 90 consecutive days, or, (ii) The Company shall commence a voluntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, shall consent to the entry of an order for relief in an involuntary case under any such law, or shall consent to the appointment of or taking possession by a receiver, liquidator, assignee, trustee, custodian, sequestrator or other similar official of the Company or of any substantial part of its property, or shall make any general assignment for the benefit of creditors. -4- (b) "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 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). (c) The Commitment is not revolving in nature, and any Securities repurchased, redeemed or otherwise acquired by the Company shall not restore the Commitment. The Company may reduce or terminate the unused portion of the Commitment at any time by written notice to Tailor Shareholder. (d) Notwithstanding the foregoing, upon the occurrence of a Change of Control as defined in Section 5.2 of Exhibit A, Tailor Shareholder's Commitment shall terminate. 3. Closing. (a) Any closing of a sale of Securities to Tailor Shareholder hereunder shall occur at the Company's offices (or such other place as may be agreed to by the Company and Tailor Shareholder) on the fifth Business Day (as hereinafter defined) after the Company gives Tailor Shareholder the Notice. The term "Business Day" shall mean any day, except a Saturday, Sunday or other day on which commercial banks in New York City are authorized by law to close. (b) At each closing, subject to the satisfaction of the Conditions, Tailor Shareholder shall deliver to the Company immediately available funds in an amount equal to the aggregate principal amount of Securities being purchased. (c) At each closing, the Company shall deliver to Tailor Shareholder one or more certificates for the Securities being issued, registered in the name of Tailor Shareholder (or such other person as Tailor Shareholder may designate prior to the closing) with any such legend that may be appropriate and in such denominations of $1,000 and any multiple thereof as Tailor Shareholder may specify prior to the closing. The Company's delivery of the certificates representing the Securities being purchased shall automatically be deemed to be a representation by the Company that the Conditions are satisfied at such time. The satisfaction of the Conditions shall be a condition to Tailor Shareholder's obligation to purchase such Securities. 4. Commitment Fee. (a) The Company shall pay Tailor Shareholder a commitment fee for Tailor Shareholder's Commitment hereunder at the rate of 0.125% per annum on the daily average amount by which the Commitment exceeds the principal amount of Securities purchased by Tailor Shareholder hereunder (including Securities previously issued and redeemed). -5- (b) The commitment fee shall continue to accrue from and including the date of the Merger to but excluding the date on which the aggregate principal amount of Securities purchased by Tailor Shareholder hereunder (including Securities previously issued and redeemed) equals the Commitment (as may be reduced or terminated pursuant to Paragraph 2(c)) or the date on which the Commitment is terminated or expires. Such fee shall be computed for the actual number of days elapsed and shall be payable quarterly on the last day of each calendar quarter and upon fulfillment of the Commitment in its entirety or the earlier termination of the Commitment. 5. Representations of Tailor Shareholder. Tailor Shareholder represents and warrants to the Company that: (a) Tailor Shareholder is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware and is authorized by its certificate of incorporation to carry on its business as now conducted. (b) The execution, delivery and performance by Tailor Shareholder of this Agreement and the consummation by Tailor Shareholder of the transactions contemplated hereby are within the corporate powers of Tailor Shareholder and have been duly authorized by all necessary corporate action on the part of Tailor Shareholder. This Agreement constitutes a valid and binding agreement of Tailor Shareholder, except as the same may be limited by general equity principles or laws affecting creditors' rights generally. (c) The execution, delivery and performance of this Agreement do not result in any violation by Tailor Shareholder of any indenture, mortgage or other agreement or instrument by which Tailor Shareholder or any of its Subsidiaries (as hereinafter defined) is bound. (d) No authorization, consent or approval of, or registration or filing with, any governmental or public body or regulatory authority is required on the part of Tailor Shareholder which has not been obtained for the purchase by Tailor Shareholder of the Securities contemplated by this Agreement, and such a purchase will not result in any violation by Tailor Shareholder of any of the terms or provisions of its certificate of incorporation or by-laws. (e) Tailor Shareholder has received such information from the Company as it deems necessary and sufficient in order to make an informed investment decision regarding its commitment to purchase Securities hereunder. Tailor Shareholder is a sophisticated investor, with such knowledge and experience in financial matters that it is capable of evaluating the risks and merits of an investment in the Securities, and is purchasing such Securities for its own account for investment and (subject, to the ex- -6- tent necessary, to the disposition of its property being at all times within its control) not with a view to any distribution or other disposition thereof, and is proceeding on the assumption that it must bear the economic risk of any such investment for an indefinite period since such Securities may not be sold except as set forth below. If Tailor Shareholder decides to dispose of any of the Securities acquired pursuant to this Agreement or any securities issued in exchange or substitution therefor (which it does not presently contemplate), it will not offer, sell or deliver any such securities, directly or indirectly, except in compliance with the Securities Act of 1933. 6. Representations of the Company. The Company represents and warrants to Tailor Shareholder that: (a) As of the date hereof, the Company is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware and is authorized by its certificate of incorporation to carry on its business as now conducted. (b) The execution, delivery and performance by the Company of this Agreement and the consummation by the Company of the transactions contemplated hereby are within the Company's corporate powers and have been duly authorized by all necessary corporate action on the part of the Company. This Agreement constitutes a valid and binding agreement of the Company, except as the same may be limited by general equity principles or laws affecting creditors' rights generally. (c) The Securities issuable from time to time pursuant to this Agreement have been duly authorized by all necessary corporate action on the part of the Company and, if and when such Securities are issued pursuant to this Agreement, such Securities will constitute valid and binding obligations of the Company, except as the same may be limited by general equity principles or laws affecting creditors' rights generally. (d) Assuming the truth and accuracy of Tailor Shareholder's representations and warranties set forth in Paragraph 5(e), no authorization, consent or approval of, or registration or filing with, any governmental or public body or regulatory authority is required on the part of the Company for the issuance of the Securities pursuant to this Agreement prior to the issuance of Securities hereunder, and such issuance will not result in any violation by the Company of any of the terms or provisions of the certificate of incorporation or bylaws of the Company. (e) The execution, delivery and performance by the Company of this Agreement and the issuance of Securities pursuant to this Agreement do not result in any violation by the Company of any of the terms or provisions of any indenture, mortgage or other agreement or instrument by which the Company or any of its Sub- -7- sidiaries is bound. "Subsidiary" means, with respect to any Person, any corporation or other entity of which a majority of the capital stock or other ownership interests having ordinary voting power to elect a majority of the board of directors or other persons performing similar functions are at the time directly or indirectly owned by such Person. 7. Miscellaneous. All notices, requests and other communications to either party hereunder shall be in writing (including telex, telecopy or similar writing) and shall be delivered by hand and receipted for by the party to whom such communication shall have been directed or mailed by certified mail return receipt requested to the following address (or to such other address as the party receiving such communication has theretofore advised the other party in the manner provided for herein): (a) If to Tailor Shareholder, to: 21001 Van Born Road Taylor, MI 48180 Facsimile: (313) 792-4107 Attention: Chairman of the Board and General Counsel with a copy to: Honigman Miller Schwartz and Cohn 2290 First National Building Detroit, MI 48226 Facsimile: (313) 465-7575 Attention: Alan Stuart Schwartz, Esq. except in the case of the Notice required under Paragraph 2, in which case each such notice shall be deemed delivered only upon actual receipt (which may be evidenced by a facsimile confirmation), directed to: Masco Corporation 21001 Van Born Road Taylor, MI 48180 Facsimile: (313) 792-4107 Attention: Robert Rosowski (b) If to the Company, to: -8- MascoTech, Inc. 21001 Van Born Road Taylor, MI 48180 Facsimile: (313) 792-6940 Attention: President with a copy to: Cahill Gordon & Reindel 80 Pine Street New York, NY 10005 Facsimile: (212) 269-5420 Attention: Jonathan A. Schaffzin, Esq. 8. Amendments; No Waivers. This Agreement may not be amended or terminated, nor any condition or term hereof be waived orally, but only by an instrument in writing duly executed by the parties hereto or, in the case of a waiver, by the party otherwise entitled to performance. No failure or delay by either party in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law. 9. Expenses. All costs and expenses incurred in connection with this Agreement shall be paid by the party incurring such cost or expense. 10. Successors and Assigns. The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns; provided that neither party may assign, delegate or otherwise transfer any of its rights or obligations under this Agreement without the consent of the other party hereto, except that (1) Tailor Shareholder may transfer or assign, in whole or from time to time in part, to one or more of its affiliates, its obligation to purchase all or a portion of the Securities, but no such transfer or assignment will relieve Tailor Shareholder of its obligations hereunder in any respect and (2) the Company may assign its rights to give Notice and to require that Tailor Shareholder meet its obligations hereunder as collateral security for the obligations of the Company under the Senior Credit Facilities. Tailor Shareholder hereby agrees to cooperate with the Company and the lenders under the Senior Credit Facilities in order to effect the intent of clause (2) of the immediately preceding sentence. 11. Governing Law. This Agreement shall be construed in accordance with and governed by the laws of the State of New York. -9- 12. Counterparts; Effectiveness. This Agreement may be signed in any number of counterparts, each of which shall be deemed an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Agreement shall become effective when each party hereto shall have received a counterpart hereof signed by the other party hereto. 13. Captions. The captions herein are included for convenience of reference only and shall be ignored in the construction or interpretation hereof. -10- IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written. MASCO CORPORATION By: ________________________________ Name: Title: MASCOTECH, INC. By: __________________________________ Name: Title: Exhibit A FORM OF SUBORDINATED NOTE [insert securities law and any other appropriate legends] No. $ Principal Amount MASCOTECH, INC. % Subordinated Note Due June 30, 2009, Series [ ] MascoTech, Inc., a Delaware corporation (together with its successors and assigns, the "Issuer"), for value received hereby promises to pay to _________ or registered assigns the principal sum of ________ on the Stated Maturity Date (as hereinafter defined) or any earlier redemption date, in such coin or currency of the United States of America as at the time of payment shall be legal tender for the payment of public and private debts, and to pay interest, semiannually in arrears, on June 30 and December 31 (unless such day is not a Business Day (as hereinafter defined), in which event on the next succeeding Business Day) (each an "Interest Payment Date") of each year in which this Note remains outstanding, commencing with ________, 200[ ] [INSERT FIRST INTEREST PAYMENT DATE FALLING THREE OR MORE MONTHS AFTER ISSUANCE], on the unpaid principal sum hereof outstanding in like coin or currency, at the rates per annum set forth below, by check mailed to the address of the holder as such address shall appear in the Register (as hereinafter defined), from the most recent Interest Payment Date to which interest has been paid on this Note, or if no interest has been paid on this Note, from ________200[ ] [INSERT ISSUE DATE], until payment in full of the principal sum hereof has been made. The interest rate shall be a rate per annum that is specified on the face hereof (the "Interest Rate"); provided, further, that the Interest Rate on this Note will increase by 1.0% per annum on December 31, 2005 and an additional 1.5% per annum on December 31, 2007. Further, the Issuer shall pay interest on overdue principal at a rate per annum 1% above the rate borne by this Note at the time the same became overdue (the "Overdue Rate"), and interest on overdue installments of interest, to the extent lawful, at the Overdue Rate. Interest payments on this Note will include interest accrued to but excluding the Interest Payment Dates or the Stated Maturity Date (or any earlier redemption or repayment date), as the case may be, unless previously paid. Interest on this Note will be calculated on the basis of a 360 day year of twelve 30-day months. -2- Notwithstanding anything herein to the contrary, the interest or any amount deemed to be interest payable by the Issuer with respect to this Note shall not exceed the maximum amount permitted by applicable law and, to the extent that any payments in excess of such permitted amount are received by the holder, such excess shall be considered payments in respect of the principal amount of this Note. All sums paid or agreed to be paid to the holder for the use, forbearance or retention of the indebtedness of the Issuer to the holder shall, to the extent permitted by applicable law, be deemed to be amortized, prorated, allocated and spread throughout the full term of such indebtedness until payment in full of the principal so that the interest on account of such indebtedness shall not exceed the maximum amount permitted by applicable law. This Note is one of a duly authorized issue of subordinated notes designated as the _____% Subordinated Notes Due June 30, 2009, Series _____ of the Issuer, limited in aggregate principal amount to $_____ (hereinafter called the "Notes"). This Note is transferable and assignable to one or more purchasers (in any multiple of $100,000 or more), subject to the restrictions on transfer referred to on the face hereof. The Issuer agrees to issue, from time to time, replacement Notes in the form hereof to facilitate such transfers and assignments. In addition, after delivery of an indemnity in form and substance satisfactory to the Issuer, the Issuer also agrees to issue replacement Notes for Notes which have been lost, stolen, mutilated or destroyed. The Issuer shall keep at its principal office a register (the "Register") in which shall be entered the names and addresses of the registered holders of the Notes and particulars of the respective Notes held by them and of all transfers of such Notes. The ownership of the Notes shall be proven by the Register. For the purpose of paying interest and principal on the Notes, the Issuer shall be entitled to rely on the names and addresses in the Register and, notwithstanding anything to the contrary contained in this Note, no Event of Default shall occur under Section 4.1(a) or (b) if payment of interest and principal is made in accordance with the names and addresses and particulars contained in the Register. SECTION 11. Definitions. SECTION 1.1. Certain Terms Defined. The following terms (except as otherwise expressly provided or unless the context otherwise clearly requires) for all purposes of this Note shall have the respective meanings specified below. The terms defined in this Section 1.1 include the plural as well as the singular. "Affiliate" of any Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such Person. For the purposes of this definition, "control" when used with respect to any Person means the possession, directly or indirectly, of the power to direct or cause the direction of the management and poli- -3- cies of such Person, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "Business Day" means any day except a Saturday, Sunday or other day on which commercial banks in the City of New York are authorized by law to close. "Event of Default" means any event or condition specified as such in Section 4 which shall have continued for the period of time, if any, therein designated. "Person" means an individual, a corporation, a partnership, an association, a trust or any other entity or organization, including a government or political subdivision or an agency or instrumentality thereof. "Senior Indebtedness" means (a) all indebtedness of the Issuer for money borrowed (including without limitation obligations of the Issuer in respect of overdrafts, foreign exchange contracts, swaps, hedging contracts, letters of credit, bankers' acceptances, or any loan or advance from a bank whether or not evidenced by promissory notes or other instruments) or incurred in connection with the acquisition of property, whether outstanding on the date of execution of this Note or thereafter created, assumed or incurred, including but not limited to, the Issuer's 4-1/2% Convertible Subordinated Debentures due December 15, 2003 and indebtedness of the Issuer in respect of the Senior Credit Facilities (as defined in the Subordinated Loan Agreement pursuant to which this Note is issued), except (i) other notes issued pursuant to the Subordinated Loan Agreement between the Issuer and Masco Corporation, a Delaware corporation ("Tailor Shareholder"), dated as of , 2000, all of which notes shall rank pari passu with the Notes, (ii) such indebtedness of the Issuer as is by its terms expressly stated to be not superior in right of payment to the Notes or to rank pari passu with the Notes, and (iii) indebtedness of the Issuer to a Subsidiary of the Issuer, (b) any guaranty, endorsement or other contingent obligation of the Issuer in respect of, or to purchase or otherwise acquire, any indebtedness of another for money borrowed or incurred in connection with the acquisition of property, and (c) any deferrals, renewals or extensions of any such Senior Indebtedness, or debentures, notes or other evidences of indebtedness issued in exchange for such Senior Indebtedness. The term "indebtedness of the Issuer for money borrowed" as used in the foregoing sentence shall mean any obligation of the Issuer for borrowed money, whether or not evidenced by notes or other written obligations, and any indebtedness of the Issuer evidenced by bonds, notes or debentures or other similar instruments. The term "indebtedness of the Issuer incurred in connection with the acquisition of property" as used in the first sentence of this definition shall mean any purchase money obligation (whether or not secured by any Lien or other security interest) created or assumed as all or part of the consideration for the acquisition of property whether by purchase, merger, consolidation or otherwise (but not including any account payable or any other obligation created or assumed by the Issuer in the ordinary course of business in connection with the obtaining of materials or services) and any indebtedness arising under a lease of property, equipment or other assets which, pursuant to gener- -4- ally accepted accounting principles then in effect, is classified as a liability on the Issuer's balance sheet. "Stated Maturity Date" means June 30, 2009. "Subsidiary" means, with respect to any Person, any corporation or other entity of which a majority of the capital stock or other ownership interests having ordinary voting power to elect a majority of the board of directors or other persons performing similar functions are at the time directly or indirectly owned by such Person. SECTION 22. Payment of Principal and Interest. SECTION 2.1. Payment of Principal and Interest. No provision of this Note shall alter or impair, as between the Issuer and the holder of this Note the obligations of the Issuer, which are absolute and unconditional, to pay the principal of and interest on this Note at the place, times, and rate, and in the currency, herein prescribed. SECTION 3. Covenants. SECTION 3.1. Offices for Notices and Transfers, etc. So long as any of the Notes remain outstanding, the Issuer will maintain an office or agency where the Notes may be presented for registration of transfer and for exchange and an office or agency where notices and demands to or upon the Issuer in respect of the Notes may be served. The Issuer will give to the holders of the Notes written notice of any change of location of any such office or agency thereof. SECTION 3.2. Provision as to Paying Agent. The Issuer shall act as its own paying agent and will, on or not more than seven days before each due date of the principal of or interest on the Notes, set aside, segregate and hold in trust for the benefit of the holders of the Notes of such series a sum sufficient to pay such principal or interest so becoming due. SECTION 3.3. Subordination of Subsidiary Indebtedness. The Issuer shall obtain an agreement from each of its Subsidiaries to the effect that, so long as any Notes are outstanding, all indebtedness of the Issuer to such Subsidiary for money borrowed or incurred in connection with the acquisition of property shall be subordinated and junior in right of payment to the prior payment in full of all such Notes in the same manner and to the same extent as such Notes are subordinated and junior in right of payment to the prior payment in full of all Senior Indebtedness (as defined herein). SECTION 3.4. When Company May Merge, Etc. The Issuer will not, in any transaction or series of transactions, merge or consolidate with or into, or sell, assign, convey, transfer, lease or otherwise dispose of all or substantially all of its properties and assets (each a -5- "Transfer") as an entirety to, any person or persons, and the Issuer will not permit any of its Subsidiaries to enter into any such transaction or series of transactions if such transaction or series of transactions, in the aggregate, would result in a sale, assignment, conveyance, transfer, lease or other disposition of all or substantially all of the properties and assets of the Issuer and its Subsidiaries, taken as a whole, to any other person or persons other than a Transfer by the Issuer to a wholly owned Subsidiary of the Issuer as contemplated by the Commitment Letter for the Senior Credit Facilities, unless at the time of and after giving effect thereto: (a) either (i) if the transaction or series of transactions is a merger or consolidation, the Issuer shall be the surviving person of such merger or consolidation, or (ii) the person formed by any such consolidation or into which the Issuer or such Subsidiary is merged or to which the properties and assets of the Issuer and/or any Subsidiary, as the case may be, are transferred (any such surviving person or transferee person being a "Surviving Entity") shall be a corporation or limited liability company organized and existing under the laws of the United States of America, any state thereof or the District of Columbia and shall expressly assume all the obligations of the Issuer under this Note, and in each case, this Note shall remain in full force and effect; and (b) immediately before and immediately after giving effect to such transaction or series of transactions on a pro forma basis (including, without limitation, any indebtedness incurred or anticipated to be incurred in connection with or in respect of such transaction or series of transactions), no Default hereunder shall have occurred and be continuing. Upon any consolidation, or merger or any transfer of all or substantially all of the assets of the Issuer in accordance with this Section 3.4 in which the Issuer is not the continuing corporation, the Surviving Entity formed by such consolidation or into which the Issuer is merged to which such conveyance, lease or transfer is made shall succeed to, and be substituted for, and may exercise every right and power of, the Issuer under this Note with the same effect as if such Surviving Entity had been named as such. SECTION 4. Events of Default and Remedies. SECTION 4.1. Events of Default. "Event of Default", whenever used herein with respect to any Note means any one of the following events: (a) default in the payment of interest upon any Note when it becomes due and payable and continuance of such default for a period of 30 days; or -6- (b) default in the payment of all or any part of the principal of any Note as and when the same shall become due and payable either at maturity, upon redemption, by declaration or otherwise; or (c) default in the performance, or breach, of any covenant of the Issuer in any Note (other than a covenant, a default in whose performance or whose breach is elsewhere in this Section or elsewhere in the corresponding provision in any such other Note specifically dealt with), and continuance of such default or breach for a period of 90 days after there has been given, by registered or certified mail, to the Issuer by the holders of at least 25% in principal amount of the outstanding Notes, a written notice specifying such default or breach and requiring it to be remedied and stating that such notice is a "Notice of Default" under the Notes; or (d) the Event of Default referred to in Section 5.2(c); or (e) default under any mortgage, indenture or other instrument or agreement under which there may be issued, or by which there may be secured or evidenced, indebtedness of the Issuer in an aggregate principal amount of $25.0 million or more, which default (i) is caused by a failure to pay such indebtedness on its maturity date within the applicable express grace period (and such failure continues for a period of 30 days or more) or (ii) results in the acceleration of such indebtedness prior to its express final maturity (which acceleration is not rescinded, annulled or otherwise cured within 30 days of receipt by the Issuer of such notice of acceleration); or (f) a court having jurisdiction in the premises shall enter a decree or order for relief in respect of the Issuer in an involuntary case under any applicable bankruptcy, insolvency or other similar law or hereafter in effect, or appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator or other similar official of the Issuer or for any substantial part of its property, or ordering the winding-up or liquidation of its affairs and such decree or order shall remain unstayed and in effect for a period of 90 consecutive days; or (g) the Issuer shall commence a voluntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, shall consent to the entry of an order for relief in an involuntary case under any such law, or shall consent to the appointment of or taking possession by a receiver, liquidator, assignee, trustee, custodian, sequestrator or other similar official of the Issuer or of any substantial part of its property, or shall make any general assignment for the benefit of creditors. If an Event of Default described in clause (a), (b), (c), (d) or (e) occurs and is continuing, then, and in each and every such case, unless the principal of all of the Notes shall have already become due and payable, the holders of not less than 25% in aggregate principal -7- amount of the Notes of this Series then outstanding, by notice in writing to the Issuer, may declare the entire principal of all of the Notes and the interest accrued and unpaid thereon, if any, to be due and payable immediately, and upon any such declaration the same shall become immediately due and payable. If an Event of Default described in clause (f) or (g) occurs, the principal of and accrued interest on the Notes shall become and be immediately due and payable without any declaration or other act on the part of any holder of Notes. The foregoing provisions, however, are subject to the condition that if, at any time after the principal of the Notes shall have been so declared due and payable, and before any judgment or decree for the payment of the moneys due shall have been obtained or entered as hereinafter provided, the Issuer shall pay or shall deposit in trust for the benefit of the holders of the Notes a sum sufficient to pay all matured installments of interest upon all of the Notes and the principal of the Notes (with interest upon such principal and, to the extent that payment of such interest is enforceable under applicable law, on overdue installments of interest to the date of such payment or deposit) and if any and all Events of Default under this Note other than the non-payment of the principal shall have been cured, waived or otherwise remedied as provided herein, then and in every such case the holders of a majority in aggregate principal amount of the Notes then outstanding, by written notice to the Issuer, may waive all defaults with respect to the Notes and rescind and annul such declaration and its consequences, but no such waiver or rescission and annulment shall extend to or shall affect any subsequent default or shall impair any right consequent thereon. SECTION 4.2. Powers and Remedies Cumulative; Delay or Omission Not Waiver of Default. All powers and remedies given by this Section 4 to the holders of Notes shall, to the extent permitted by law, be deemed cumulative and not exclusive of any thereof or of any other powers and remedies available to the holders of the Notes, by judicial proceedings or otherwise, to enforce the performance or observance of the covenants and agreements contained in this Note and no delay or omission of any holder of any of the Notes to exercise any right or power accruing upon any default occurring and continuing as aforesaid shall impair any such right or power, or shall be construed to be a waiver of any such default or an acquiescence therein; and, every power and remedy given by this Note or by law to the holders of Notes may be exercised from time to time, and as often as shall be deemed expedient, by the holders of Notes. SECTION 4.3. Waiver of Past Defaults by Majority of Holders. Subject to Section 4.1, the holders of a majority in aggregate principal amount of the Notes at the time outstanding may on behalf of the holders of all of the Notes waive such default or Event of Default and its consequences except a default in the payment of principal of or interest on any of the Notes. Upon any such waiver the Issuer and the holders of the Notes shall be restored to their former positions and rights hereunder, but no such waiver shall extend to any subsequent or other default or Event of Default or impair any right consequent thereon. Whenever any de- -8- fault or Event of Default shall have been waived as permitted by this Section 4.3, said default or Event of Default shall for all purposes of the Notes be deemed to have been cured and to be not continuing. SECTION 5. Redemption. SECTION 5.1. Optional Redemption. The Notes may be redeemed at the option of the Issuer as a whole, or from time to time in part, at any time prior to maturity, at a price equal to the principal amount of the Notes so redeemed, together in each case with accrued and unpaid interest to the date fixed for redemption, upon mailing notice of such redemption not less than 30 nor more than 60 days prior to the date fixed for redemption to the holders of Notes at their last addresses as the same appear on the Register. Such mailing shall be by first class mail. The notice if mailed in the manner herein provided shall be conclusively presumed to have been duly given, whether or not the holder receives such notice. In any case, failure to give such notice by mail or any defect in the notices to the holder of any Note designated for redemption shall not affect the validity of the proceedings for the redemption of any other Note. If less than all of the Notes are to be redeemed, the Issuer will select (a) by lot or by such other manner as may be prescribed by resolution of the Board of Directors of the Issuer and (b) to the extent Tailor Shareholder, or any Subsidiary thereof, holds Notes, the Issuer shall allow Tailor Shareholder to select, in its sole discretion, the specific Notes then owned by Tailor Shareholder or its Subsidiaries to be redeemed (provided that Tailor Shareholder informs the Issuer no later than the day prior to the date of such redemption of the specific Notes selected for redemption), the Notes or portions thereof (in integral multiples of $1,000) to be redeemed in a minimum amount of $1,000,000 unless less than $1,000,000 of the Notes remain outstanding in which case all of the Notes must be redeemed. Upon presentation of any Note redeemed in part only, the Issuer shall execute and deliver to the holder thereof, at the expense of the Issuer, a new Note or Notes of authorized denominations, in principal amount equal to the unredeemed portion of the Note so presented. SECTION 5.2. Change of Control Put. (a) The holder of this Note shall have the right, at such holder's option, upon the giving of notice of the occurrence of a Change of Control (as hereinafter defined), and subject to the terms and provisions hereof, to tender any Note, in whole or in part, without regard to whether the Note is then otherwise redeemable, for purchase by the Issuer or a third party designated by the Issuer (but such designation will not relieve the Issuer from its obligation pursuant to this Section 5.2 until such obligation is satisfied) for cash in an amount equal to the principal amount of such Note plus accrued and unpaid interest to the date fixed for purchase. Such purchase shall occur no later than the 90th day after the date of the notice provided pursuant to clause (c) below (the "Mandatory Purchase Date"). The holder's right to tender shall continue up to the 85th day after the date of -9- such notice and shall be exercised by any surrender of such Note to the office or agency to be maintained by the Issuer pursuant to Section 3.1, accompanied by written notice that the holder elects to tender such Note and (if so required by the Issuer) by a written instrument or instruments of transfer in form satisfactory to the Issuer duly executed by the holder or such holder's duly authorized legal representative and transfer tax stamps or funds therefor, if required. All Notes surrendered for purchase shall be canceled by the Issuer. (b) The occurrence of any of the following events will constitute a "Change of Control": (1) if Heartland Industrial Partners, L.P. and its Affiliates (collectively "Heartland") cease to directly or indirectly beneficially own 30% or more of the outstanding shares of Issuer Common Stock or 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 Issuer; (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 Issuer; (3) Issuer, directly or indirectly, consolidates or merges with any other entity or sells or leases its properties and assets substantially as an entirety to any other entity, provided that this clause shall not apply to a transaction 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 Issuer; and (4) any event constituting a "change of control" in the Senior Credit Facilities, as the same may be amended, waived, modified or replaced from time to time. (c) The Issuer shall mail to each holder of Notes at such holder's last address appearing on the Register, as promptly as possible but in any event not more than 60 days after learning of a Change of Control specified in clause (b) (1) or (2) above or not more than 60 days after an occurrence specified in clause (b) (3) or (4) (except to the extent the occurrence referred to in clause (b)(4) would otherwise have occurred under clause (b)(1) or (2) above), (such 60th day being the "Notice Trigger Date") a notice stating that the event specified in the notice has occurred and that each holder has the right to tender such holder's Notes for cash pursuant to the terms hereof. Notwithstanding the foregoing, prior to making the offer to purchase Notes, but in any event not later than the Notice Trigger Date, the Issuer covenants to (i) repay in full all Senior Indebtedness under agreements containing change of control puts or -10- defaults (and terminate all commitments thereunder) or offer to repay in full all such Senior Indebtedness (and terminate all commitments) and to repay the Senior 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 Senior Indebtedness to permit the repurchase of the Notes. Issuer will first comply with the covenant in the preceding sentence before it will be required to repurchase Notes pursuant to the provisions described below; provided that the Issuer's failure to comply with the covenant described in the preceding sentence shall constitute an Event of Default. (d) On or before the 85th day after the date of the notice provided pursuant to clause (c) above, the Issuer shall set aside, segregate and hold in trust for the benefit of the holders of the Notes to be redeemed an amount of money sufficient to pay the principal of, and accrued interest on, all the Notes to be redeemed on the Mandatory Purchase Date. (e) After making the offer to purchase as provided above, the Notes to be redeemed shall, on the Mandatory Purchase Date, become due and payable at a price equal to the principal amount thereof plus accrued and unpaid interest and from and after such date (unless the Issuer shall default in the payment of principal and accrued interest thereon) such Notes shall cease to bear interest. Upon surrender of any such Note for purchase in accordance herewith, such Note shall be paid on the Mandatory Purchase Date by the Issuer at a price equal to the principal amount thereof, together with accrued and unpaid interest to the Mandatory Purchase Date. If any Note to be redeemed shall not be so paid on the Mandatory Purchase Date, the principal and accrued interest thereon shall, until paid, bear interest from the Mandatory Purchase Date at the Overdue Rate. (f) Notes may be tendered for purchase in whole or in any integral multiple of $1,000. Any Note which is to be redeemed only in part shall be surrendered at an office or agency of the Issuer designated for that purpose (with, if the Issuer so requires, due endorsement by, or a written instrument to transfer in form satisfactory to the Issuer duly executed by, the holder thereof or such holder's attorney duly authorized in writing), and the Issuer shall execute and deliver to the holder of such Note without service charge, a new Note or Notes, of any authorized denomination in aggregate principal amount equal to and in exchange for the unredeemed portion of the principal amount. SECTION 6. Subordination of Notes. SECTION 6.1. Agreement to Subordinate. The Issuer covenants and agrees, and each holder of Notes by such holder's acceptance thereof likewise covenants and agrees, that all Notes shall be issued subject to the provisions of this Section; and each Person holding any Note, whether upon original issue or upon transfer or assignment thereof, accepts and agrees to be bound by such provisions. The provisions of this Section are made for the benefit of the -11- holders of Senior Indebtedness, and such holders shall, at any time, be entitled to enforce such provisions against the Issuer or any holders of Notes. All Notes shall, to the extent and in the manner hereinafter in this Section set forth, be subordinate and junior in right of payment to the prior payment in full of all Senior Indebtedness. SECTION 6.2. No Payment on Notes if Senior Indebtedness in Default. No payment on account of principal or interest on the Notes shall be made unless full payment of amounts then due for principal, premium, if any, sinking funds and interest on all Senior Indebtedness has been made or duly provided for. No payment on account of principal or interest on the Notes shall be made if, at the time of such payment or immediately after giving effect thereto, (i) there shall exist a default in the payment of principal, premium, if any, sinking funds or interest with respect to any Senior Indebtedness, or (ii) there shall have occurred an event of default (other than a default in the payment of principal, premium, if any, sinking funds or interest) with respect to any Senior Indebtedness, as defined therein or in the instrument under which the same is outstanding, permitting the holders thereof to accelerate the maturity thereof, and such event of default shall not have been cured or waived or shall not have ceased to exist. SECTION 6.3. Priority of Senior Indebtedness. In the event of any insolvency or bankruptcy proceedings, and any receivership, liquidation, reorganization under the Federal Bankruptcy Code or any other similar applicable Federal or state law, or other similar proceedings in connection therewith, relative to the Issuer or to its creditors, as such, or to its property, and in the event of any proceedings for voluntary liquidation, dissolution or other winding up of the Issuer or assignment for the benefit of creditors or any other marshalling of assets of the Issuer, whether or not involving insolvency or bankruptcy, then the holders of Senior Indebtedness shall be entitled to receive payment in full of all principal of and premium, if any, and interest on all Senior Indebtedness (including interest on such Senior Indebtedness after the date of filing of a petition or other action commencing such proceeding) before the holders of the Notes are entitled to receive any payment on account of the principal of or interest on the Notes and any payment or distribution of any kind or character which may be payable or deliverable in any such proceedings in respect of the Notes, except securities which are subordinate and junior in right of payment to the payment of all Senior Indebtedness then outstanding, shall be paid by the person making such payment or distribution directly to the holders of Senior Indebtedness to the extent necessary to make payment in full of all Senior Indebtedness, after giving effect to any concurrent payment or distribution to the holders of Senior Indebtedness. In the event that any payment or distribution of cash, property or securities shall be received by the holders of the Notes in contravention of this Section before all Senior Indebtedness is paid in full, or provision made for the payment thereof, such payment or distribution shall be held in trust for the benefit of and shall be paid over to the -12- holders of such Senior Indebtedness or their representative or representatives, or to the trustee or trustees under any indenture under which any instrument evidencing any of such Senior Indebtedness may have been issued, as their respective interests may appear, to the extent necessary to pay in full all Senior Indebtedness remaining unpaid, after giving effect to any concurrent payment or distribution to the holders of such Senior Indebtedness. In the event that any Note is declared due and payable before its expressed maturity because of the occurrence of an Event of Default (under circumstances when the provisions of the first paragraph of this Section shall not be applicable), the holders of the Senior Indebtedness outstanding at the time the Notes so become due and payable because of such occurrence of such an Event of Default shall be entitled to receive payment in full of all principal of and premium, if any, and interest on all Senior Indebtedness before the holders of the Notes are entitled to receive any payment on account of the principal of or interest on the Notes. SECTION 6.4. Subrogation of Notes. Subject to the payment in full of all Senior Indebtedness, the holders of the Notes shall be subrogated to the rights of the holders of Senior Indebtedness to receive payments or distributions of assets of the Issuer made on the Senior Indebtedness until the principal of and interest on the Notes shall be paid in full; and, for the purposes of such subrogation, no payments or distributions to the holders of Senior Indebtedness of any cash, property or securities to which the holders of the Notes would be entitled except for the provisions of this Section, and no payment over pursuant to the provisions of this Section to the holders of Senior Indebtedness by holders of the Notes, shall, as between the Issuer, its creditors other than the holders of Senior Indebtedness, and the holders of Notes, be deemed to be a payment by the Issuer to or on account of Senior Indebtedness, and no payments or distributions to the holders of the Notes of cash, property or securities payable or distributable to the holders of the Senior Indebtedness to which the holders of the Notes shall become entitled pursuant to the provisions of this Section, shall, as between the Issuer, its creditors other than the holders of Senior Indebtedness, and the holders of the Notes, be deemed to be a payment by the Issuer to the holders of or on account of the Notes. SECTION 6.5. Issuer Obligation to Pay Unconditional. The provisions of this Section are solely for the purpose of defining the relative rights of the holders of Senior Indebtedness on the one hand, and the holders of the Notes on the other hand, and nothing herein shall impair, as between the Issuer and the holders of the Notes, the obligation of the Issuer, which is unconditional and absolute, to pay to the holders thereof the principal thereof and interest thereon in accordance with the terms of the Notes nor shall anything herein prevent the holders of the Notes from exercising all remedies otherwise permitted by applicable law or under the Notes upon default under the Notes, subject to the rights of holders of Senior Indebtedness under the provisions of this Section to receive cash, property or securities otherwise payable or deliverable to the holders of the Notes. -13- SECTION 7. Miscellaneous. SECTION 7.1. Modification of Notes. The Notes may be modified without prior notice to any holder but with the written consent of the holders of a majority in principal amount of the Notes or with the written consent of the holders of a majority in principal amount of all notes issued under the Subordinated Loan Agreement between the Issuer and Tailor Shareholder, as the same may be amended or modified from time to time in accordance with its terms (the "Loan Agreement"). Subject to Section 4.1 and Section 4.3, the holders of a majority in principal amount of the Notes or a majority of principal amount of all notes issued under the Loan Agreement may waive compliance by the Issuer with any provision of the Notes without prior notice to any holder. However, without the consent of each holder affected, an amendment, supplement or waiver may not (1) reduce the amount of Notes whose holders must consent to an amendment, supplement or waiver, (2) reduce the rate or extend the time for payment for interest on any Notes, (3) reduce the principal amount of or extend the fixed maturity of any Notes or alter the redemption or repurchase provisions with respect thereto or (4) make any Notes payable in money or property other than as stated in the Notes. Notwithstanding the foregoing, amendments, supplements and waivers of Section 5 may be obtained with the written consent of a majority in principal amount of the Notes or a majority of principal amount of all notes issued under the Loan Agreement prior to the occurrence of a Change of Control. The Issuer will use its best efforts to qualify an indenture with respect to this Note at or prior to the time, if any, such qualification is required under the Trust Indenture Act of 1939, as amended or similar law then in effect. SECTION 7.2. Miscellaneous. This Note shall be deemed to be a contract under the laws of the State of New York and for all purposes shall be construed in accordance with the laws of said State, except as may otherwise be required by mandatory provisions of law. The parties hereto, including all guarantors or endorsers, hereby waive presentment, demand, notice, protest and all other demands and notices in connection with the delivery, acceptance, performance and enforcement of this Note, except as specifically provided herein, and assent to extensions of the time of payment, or forbearance or other indulgence without notice. The holder of this Note by acceptance of this Note agrees to be bound by the provisions (including the subordination provisions) of this Note which are expressly binding on such holder. In determining whether the holders of the requisite aggregate principal amount of Notes have concurred in any direction, consent or waiver as provided under the Notes, Notes which are owned by the Issuer or any Subsidiary of the Issuer shall be disregarded and deemed not to be outstanding for the purpose of any such determination. The Section headings herein are for convenience only and shall not affect the construction hereof. -14- IN WITNESS WHEREOF, the Issuer has caused this instrument to be duly executed. Dated: MASCOTECH, INC. By: -------------------------------------------- Name: Title: -15- Exhibit B FORM OF NOTICE OF ISSUANCE MASCO CORPORATION 21001 Van Born Road Taylor, MI 48180 Attention: [ ] Ladies and Gentlemen: The undersigned, MascoTech, Inc., a Delaware corporation (the "Company"), refers to the Subordinated Loan Agreement, dated as of [__________], 2000 (the "Subordinated Loan Agreement"), among the Company and Masco Corporation, a Delaware corporation ("Tailor Shareholder"). Capitalized terms used herein and not defined shall have the meanings assigned to them in the Subordinated Loan Agreement. The Company hereby gives you notice pursuant to Paragraph 2 of the Subordinated Loan Agreement that it desires to issue Securities (the "Proposed Issuance") that Tailor Shareholder is required to purchase under the Subordinated Loan Agreement, and in that connection sets forth below the information relating to the Proposed Issuance: Proposed Issuance: The date of the Proposed Issuance is [_______________]. The aggregate principal amount of the Proposed Issuance is [________] Dollars ($[________]). 1. The Company hereby certifies and represents that the following statements are true as of the date hereof, and will be true on the date of the Proposed Issuance: All representations and warranties made by the Company in Paragraph 6 of the Subordinated Loan Agreement are true and correct in all material respects, with the same effect as though made on and as of the date of the Proposed Issuance; 2. A Bankruptcy Event does not exist; 3. [No Event of Default under the Senior Credit Facilities has occurred and is continuing, or would result from the Proposed Issuance or would otherwise exist immediately after giving effect to the Proposed Issuance.] [An Event of Default under the Senior Credit Facilities has occurred and is continuing, or would result from the Proposed Issuance or would otherwise exist immediately after giving effect to the Proposed Issuance and the proceeds from the issuance of the Securities will be used solely [to meet cash obligations in respect of any of the Convertible Debentures upon maturity, acceleration or exercise of the conversion -16- privilege in respect thereof (whether before or after the occurrence of the Event of Default)] [to fund, in whole or in part, the aggregate amount of cash that is (or will be) payable to holders of Convertible Debentures that are outstanding on the date of this Notice].(1) Dated: MASCOTECH, INC. By: ________________________ Name: Title: - ---------- 1 Strike inapplicable language. EX-10.15 12 0012.txt STOCK PURCHSE AGREEMENT EXHIBIT 10.15 STOCK PURCHASE AGREEMENT by and between MASCOTECH, INC., the Seller, and CITICORP VENTURE CAPITAL, LTD., the Purchaser, dated as of August 1, 2000 TABLE OF CONTENTS Page ARTICLE ONE DEFINITIONS SECTION 1.01. Definitions...................................................1 ARTICLE 2 PURCHASE AND SALE SECTION 2.01. Purchase and Sale of the Shares...............................2 SECTION 2.02. Purchase Price................................................2 SECTION 2.03. Closing.......................................................3 SECTION 2.04. Deliveries at the Closing.....................................3 ARTICLE 3 CONDITIONS TO OBLIGATION TO CLOSE SECTION 3.01. Conditions to Obligation of the Purchaser.....................3 SECTION 3.02. Conditions to Obligation of the Seller........................4 SECTION 3.03. Failure to Satisfy Certain Conditions.........................5 ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE SELLER SECTION 4.01. Due Authorization.............................................6 SECTION 4.02. Title.........................................................6 SECTION 4.03. No Consents...................................................7 SECTION 4.04. No Conflict, Breach, Etc......................................7 ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF THE PURCHASER SECTION 5.01. Due Authorization.............................................8 SECTION 5.02. No Consents...................................................8 SECTION 5.03. No Conflict, Breach, Etc......................................8 SECTION 5.04. Purchase Entirely for Own Account.............................9 SECTION 5.05. Restricted Securities.........................................9 SECTION 5.06. Legends.......................................................9 -i- Page SECTION 5.07. Accredited Investor; Knowledge...............................10 SECTION 5.08. Financing....................................................10 ARTICLE 6 COVENANTS AND AGREEMENTS SECTION 6.01. Disclosure; Publicity........................................10 SECTION 6.02. Seller Agreements............................................10 SECTION 6.03. Further Assurances...........................................10 SECTION 6.04. Certain Filings..............................................11 SECTION 6.05. Representations and Covenants................................12 SECTION 6.06. Notice.......................................................12 SECTION 6.07. American Commercial Plastics.................................12 ARTICLE 7 MISCELLANEOUS SECTION 7.01. Termination..................................................12 SECTION 7.02. Amendments; Waivers..........................................13 SECTION 7.03. Successors and Assigns.......................................13 SECTION 7.04. Notices......................................................13 SECTION 7.05. Expenses.....................................................14 SECTION 7.06. Governing Law................................................15 SECTION 7.07. Waiver of Jury Trial.........................................15 SECTION 7.08. Severability; Interpretation.................................15 SECTION 7.09. Headings.....................................................15 SECTION 7.10. Entire Agreement.............................................15 SECTION 7.11. Counterparts.................................................15 SECTION 7.12. Third-party Beneficiaries....................................16 SECTION 7.13. Specific Performance.........................................16 Attachment A -- Form of FIRPTA Certificate Schedule 2.01 -- Shares to be Purchased Schedule 2.02 -- Shares Subject to Right of First Refusal or Consent Schedule 4.02 -- Seller Agreements Schedule 4.03 -- Consents of Seller Schedule 4.04 -- Conflicts of Seller Schedule 5.02 -- Consents of Purchaser -ii- STOCK PURCHASE AGREEMENT STOCK PURCHASE AGREEMENT (this "Agreement"), dated as of August 1, 2000, by and between MASCOTECH, INC., a Delaware corporation (the "Seller"), and CITICORP VENTURE CAPITAL, LTD., a New York corporation (the "Purchaser"). WHEREAS, the Seller or a wholly-owned subsidiary of Seller owns all shares, equity interests, membership interests, interests in equity and notes listed on Schedule 2.01 hereto (collectively, the "Shares") of the Persons (as defined herein) listed on Schedule 2.01 hereto (each, a "Company" and, collectively, the "Companies") and the Purchaser desires to purchase from the Seller or a wholly-owned subsidiary of Seller and the Seller desires to sell, and to cause its wholly-owned subsidiaries to sell, to the Purchaser the Shares, upon the terms and subject to the conditions set forth herein; and WHEREAS, the transfer of certain of the Shares will require the consent and/or waiver of certain Persons with respect to provisions in existing agreements, including those related to right of first refusal and right of first offer provisions, and the Seller has undertaken to obtain such consents and/or waivers. NOW, THEREFORE, in consideration of the mutual agreements and covenants contained herein, the Purchaser and the Seller hereby agree as follows: ARTICLE ONE Definitions SECTION 1.01. Definitions. The following terms as used herein have the following meanings: "Affiliate" means, with respect to any Person, any other Person directly or indirectly controlling, controlled by, or under common control with such Person. For the purposes of this definition, "control" (including, with its correlative meanings, the terms "controlling", "controlled by" and "under common control with"), as applied to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of securities, by contract or otherwise. For purposes of Section 7.03 of this Agreement, to the extent permitted by the Seller Agreements, as applicable, "Affiliates" of the Purchaser shall be deemed to include any employees, officers or directors of the Purchaser or any of the Companies and each of their respective Affiliates and any entity in which the Purchaser or any of its -2- Affiliates, together with any employees, officers or directors of any of the Purchaser, such Affiliates or such entities, owns 40% or more of the outstanding voting securities and of which no other Persons own 40% or more of the outstanding voting securities. "Person" means an individual, corporation, partnership, limited liability company, association, trust or other entity or organization. "Recapitalization Agreement" means the Recapitalization Agreement dated as of August 1, 2000, between MascoTech, Inc., a Delaware corporation, and Riverside Company LLC, a limited liability company organized under the laws of Delaware ( "Merger Subsidiary"). ARTICLE 2 Purchase and Sale SECTION 2.01. Purchase and Sale of the Shares. Upon the terms and subject to the conditions of this Agreement, at the Closing the Seller shall sell, transfer, convey, assign and deliver to the Purchaser and the Purchaser shall purchase from the Seller the Shares listed on Schedule 2.01. SECTION 2.02. Purchase Price. (a) The Purchaser shall pay to the Seller at the Closing $125 million for the Shares (the "Purchase Price"), as adjusted as provided in Section 2.02(b), by wire transfer of immediately available funds to an account of the Seller designated in writing by the Seller prior to the Closing Date. (b) Adjustment to Purchase Price. In the event Persons have either exercised rights of first refusal or failed to consent to the transfer of any Shares and the rights related thereto under the Seller Agreements (as defined herein) of the Companies set forth in Schedule 2.02, the Purchase Price shall be reduced by the value of Shares in respect of which such right of first refusal has been exercised or such Shares have been purchased or in respect of which such consent has not been given (x) in the case of any Shares for which a right of first refusal has been exercised, on a dollar-for-dollar basis equal to the value of consideration received or to be received by the Seller from a Person exercising its right of first refusal for such Shares and (y) in the case of any Shares for which consent has not been given, at such value as is determined by the Purchaser in the notice given pursuant to Section 6.06. -3- SECTION 2.03. Closing. Upon the terms and subject to the conditions set forth in this Agreement, the sale and purchase of the Shares contemplated by this Agreement shall take place at a closing (the "Closing") to be held immediately prior to or simultaneously with the closing of the merger (the "Recapitalization") of Merger Subsidiary with and into Seller under the Recapitalization Agreement at the offices of Cahill Gordon & Reindel, 80 Pine Street, New York, New York 10005, or at such other place or time as the Purchaser and the Seller may mutually agree. The date upon which the Closing occurs is herein referred to as the "Closing Date." SECTION 2.04. Deliveries at the Closing. Subject to Section 3.03, at the Closing, (i) the Seller shall deliver to the Purchaser the certificate referred to in Section 3.01 below and a FIRPTA Certificate in the form of Attachment A hereto, (ii) the Purchaser shall deliver to the Seller the certificate referred to in Section 3.02 below, (iii) the Seller shall deliver to the Purchaser stock certificates representing the Shares which are certificated, registered in its name or the name of its wholly-owned subsidiary, as appropriate, duly endorsed in blank or accompanied by duly executed assignment documents, together with an assignment (to the extent permitted) of all Seller's rights under the Seller Agreements and if Shares are uncertificated, shall deliver documents necessary to effect the transfer of such uncertificated Shares, in each case only with respect to Shares actually purchased by Purchaser, and (iv) the Purchaser shall deliver to the Seller the Purchase Price in accordance with Section 2.02 above. ARTICLE 3 Conditions to Obligation to Close SECTION 3.01. Conditions to Obligation of the Purchaser. Subject to Section 3.03, the obligation of the Purchaser to consummate the transactions to be performed by it in connection with the Closing is subject to satisfaction of the following conditions: (a) the representations and warranties set forth in Article 4 below shall be true and correct in all material respects at and as of the Closing Date; (b) the Seller shall have performed in all material respects all covenants and agreements contained in this Agreement that are required to be performed by Seller on or before the Closing; -4- (c) there shall not be any injunction, judgment, order or decree in effect preventing the consummation of any of the transactions contemplated by this Agreement; (d) the Seller shall have delivered to the Purchaser a certificate to the effect that each of the conditions specified above in Sections 3.01(a), 3.01(b) and 3.01(c) (as it relates to the Seller) is satisfied in all material respects; (e) any applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), relating to the transactions contemplated hereby shall have expired or been terminated and all other governmental approvals filed pursuant to Section 6.04 necessary to be obtained prior to Closing shall have been obtained. The Purchaser may waive the conditions specified in this Section 3.01(a) through 3.01(d) if it executes a writing so stating at or prior to the Closing; provided, however, that Purchaser shall not be deemed to have waived any such conditions to the extent that Section 3.03 is applicable as to any of the Shares. SECTION 3.02. Conditions to Obligation of the Seller. The obligation of the Seller to consummate the transactions to be performed by it in connection with the Closing is subject to satisfaction of the following conditions: (a) the representations and warranties set forth in Article 5 below shall be true and correct in all material respects at and as of the Closing Date; (b) the Purchaser shall have performed in all material respects all covenants and agreements contained in this Agreement that are required to be performed by Purchaser on or before the Closing; (c) there shall not be any injunction, judgment, order or decree in effect preventing the consummation of any of the transactions contemplated by this Agreement; (d) the Purchaser shall have delivered to the Seller a certificate to the effect that each of the conditions specified above in Sections 3.02(a), 3.02(b) and 3.02(c) (as it relates to the Purchaser) is satisfied in all material respects; (e) all conditions to the Recapitalization shall have been satisfied or waived in accordance with the terms of the Recapitalization Agreement, other than -5- conditions to the extent related to the sale and purchase of the Shares as contemplated by this Agreement; (f) Purchaser shall have delivered to Seller the Purchase Price in accordance with Section 2.02; and (g) any applicable waiting period under the HSR Act relating to the transactions contemplated hereby shall have expired or been terminated and all other governmental approvals filed pursuant to Section 6.04 necessary to be obtained prior to Closing shall have been obtained. The Seller may waive the conditions specified in this Section 3.02(a) through 3.02(f) if it executes a writing so stating at or prior to the Closing and has received a written consent to such waiver from Merger Subsidiary. SECTION 3.03. Failure to Satisfy Certain Conditions. Notwithstanding the provisions of Section 3.01 hereof, in the event any of the conditions set forth in Section 3.01 are not satisfied or waived such that the Shares (or any part thereof) set forth on Schedule 2.02 may not be transferred to the Purchaser on the Closing in accordance with this Agreement, the Purchaser shall nonetheless be obligated to pay on the Closing Date the Purchase Price less the value of the Shares which may not be transferred to the Purchaser. The Seller or the Merger Subsidiary, as applicable, shall be obligated to sell and the Purchaser shall be obligated to purchase all Shares not purchased at the Closing within 2 business days after such Shares become transferable to the Purchaser for the price determined as specified in Section 2.02(b) at a place and time mutually acceptable to the Seller and the Purchaser; provided, however, that the Seller's and the Purchaser's obligation shall terminate if any such sale and purchase is not consummated by the first day of the seventh month immediately following the Closing. At the closing of any such sale, each of the Seller and the Purchaser shall deliver the documents required under Section 2.04 and such closing shall be conditioned on fulfillment of the conditions specified in Sections 3.01 and 3.02 with respect to the Shares to be transferred. Notwithstanding the foregoing, if any Person exercises its right of first refusal for any Shares pursuant to a Seller Agreement or refuses to consent to such transfer in accordance with the Seller Agreements, all rights and obligations of the Seller and the Purchaser contained in this Agreement with respect to such Shares shall terminate immediately upon the purchase by such Person of the Shares with respect to which it has exercised its right of first refusal or upon the exercise of such right to refuse consent to the transfer of such Shares and the rights related thereto under the Seller Agreements. Notwithstanding the foregoing, in the case of the Shares comprised of shares of common stock of Tower Automotive, Inc., if such Shares cannot be transferred together with an assignment of the rights under the Seller Agreement related thereto, they shall be deemed transferable under this Section 3.03 if and -6- only to the extent they have been registered for re-sale by the Purchaser under the Securities Act. ARTICLE 4 Representations and Warranties of the Seller The Seller hereby represents and warrants to the Purchaser that: SECTION 4.01. Due Authorization. The Seller is duly organized, validly existing and in good standing under the laws of its jurisdiction of organization and has all requisite power and authority to own its properties and conduct its business as now being conducted. The Seller has all requisite corporate power and authority to execute and deliver this Agreement and to perform its obligations hereunder. This Agreement has been duly and validly authorized, executed and delivered by the Seller and constitutes a valid and binding obligation of the Seller, enforceable against the Seller in accordance with its terms, except that the enforcement hereof may be subject to (i) bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect relating to creditors' rights generally and (ii) general principles of equity and the discretion of the court before which any proceeding therefor may be brought. SECTION 4.02. Title. The Seller or a wholly-owned subsidiary of the Seller is the record and beneficial owner of the Shares as listed on Schedule 2.01 and each such Person has, and at the Closing will have, the absolute right, power and capacity to sell, assign, transfer and deliver the Shares to the Purchaser free and clear of any liens, charges, encumbrances or restrictions (other than restrictions on transfer imposed by the Securities Act and applicable state securities or "Blue Sky" laws and other than restrictions (the "Other Restrictions") existing by virtue of the agreements set forth on Schedule 4.02 hereto (the "Seller Agreements")), and, upon delivery and payment for the Shares in accordance with the terms of this Agreement, the Purchaser will acquire valid and marketable title to the Shares, free and clear of all liens, charges, encumbrances or restrictions (other than those created by the Purchaser, those existing by virtue of the Other Restrictions and restrictions on transfer imposed by the Securities Act and applicable state securities or "Blue Sky" laws). All the Shares (other than the Shares of Companies listed under headings (a), (b), and (c) of Schedule 2.01) were duly authorized and validly issued, are outstanding and fully paid and non-assessable and were issued free and clear of any pre-emptive rights. Other than this Agreement, the agreement referred to in Section 6.07, all agreements pursuant to which the Shares were acquired, and the Recapitalization Agreement, the Seller Agreements constitute the sole and exclusive agreements to which the Seller or any of its wholly-owned subsidiaries which are transferring Shares are party to with respect to the Shares. -7- SECTION 4.03. No Consents. No consent, approval, authorization or order of, or filing or registration with, any court or governmental agency or body or third party is required for the execution of this Agreement by the Seller, the sale by the Seller or its wholly-owned subsidiaries of the Shares to the Purchaser or the consummation by the Seller of the other transactions contemplated hereby, except as are listed on Schedule 4.03 hereto, as may be required under applicable state securities or "Blue Sky" laws and as may be required under the HSR Act or by any other governmental authorities in connection with the purchase of the Shares by the Purchaser. SECTION 4.04. No Conflict, Breach, Etc. The execution, delivery and performance by the Seller of this Agreement and the consummation by the Seller and its wholly-owned subsidiaries transferring the Shares of the transactions contemplated hereby (including, without limitation, the sale of the Shares to the Purchaser) will not conflict with or constitute or result in a breach of or a default under (or an event that with notice or passage of time or both would constitute or result in a breach of or a default under) or violation of or result in any Person having the right to terminate, modify or accelerate any of (i) the terms or provisions of any indenture, mortgage, deed of trust, loan agreement (other than the loan agreements, listed on Schedule 4.04, each of which will be terminated upon the consummation of the Recapitalization), note, lease, license, stockholders agreement, or other agreement, instrument or contract to which the Seller, any wholly-owned subsidiary which is transferring the Shares or, to the knowledge of the Seller, any Company (other than Companies listed under headings (a), (b) and (c) of Schedule 2.01) is a party or by which any such Person is bound or to which any of such Person's properties or assets is subject, (ii) the certificate of incorporation or bylaws of the Seller or any wholly-owned subsidiary which is transferring the Shares or, to the knowledge of the Seller, any Company (other than Companies listed under headings (a), (b) and (c) of Schedule 2.01), or (iii) (assuming compliance with all applicable state securities or "Blue Sky" laws and the HSR Act and assuming the accuracy of the representations and warranties of the Purchaser in Article 5 below) any statute, judgment, decree, order, rule or regulation applicable to the Seller or any wholly-owned subsidiary which is transferring the Shares or, to the knowledge of the Seller, any Company (other than Companies listed under headings (a), (b) and (c) of Schedule 2.01) or any of their respective properties or assets, except, in the case of clause (i), for consents or waivers required under the Seller Agreements which consents or waivers Seller will use reasonable best efforts to obtain prior to the Closing. Neither the Seller nor any of its wholly-owned subsidiaries has any obligation to purchase any additional Shares of Series A Redeemable Preferred Stock of Qualitor, Inc. and none of the shares of Common Stock of, or any of the Warrants for shares of Common Stock, of Qualitor, Inc. owned by the Seller or any of its wholly-owned subsidiaries are subject to an option or right of redemption in favor of Qualitor, Inc. -8- ARTICLE 5 Representations and Warranties of the Purchaser The Purchaser hereby represents and warrants to the Seller that: SECTION 5.01. Due Authorization. The Purchaser is duly organized, validly existing and in good standing under the laws of its jurisdiction of organization and has all requisite corporate power and authority to own its properties and conduct its business as now being conducted. The Purchaser has all requisite power and authority to execute and deliver this Agreement and to perform its obligations hereunder. This Agreement has been duly and validly authorized, executed and delivered by the Purchaser and constitutes a valid and binding obligation of the Purchaser, enforceable against the Purchaser in accordance with its terms, except that the enforcement hereof may be subject to (i) bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect relating to creditors' rights generally and (ii) general principles of equity and the discretion of the court before which any proceeding therefor may be brought. SECTION 5.02. No Consents. No consent, approval, authorization or order of, or filing or registration with, any court or governmental agency or body, or third party is required for the execution of this Agreement by the Purchaser, the purchase of the Shares by the Purchaser or the consummation by the Purchaser of the other transactions contemplated hereby, except as are listed on Schedule 5.02 hereto, as may be required under applicable state securities or "Blue Sky" laws and as may be required under the HSR Act or by other governmental authorities in connection with the purchase of the Shares by the Purchaser. SECTION 5.03. No Conflict, Breach, Etc. The execution, delivery and performance by the Purchaser of this Agreement and the consummation by the Purchaser of the transactions contemplated hereby (including, without limitation, the purchase of the Shares by the Purchaser) will not conflict with or constitute or result in a breach of or a default under (or an event that with notice or passage of time or both would constitute or result in a breach of or a default under) or violation of any of (i) the terms or provisions of any indenture, mortgage, deed of trust, loan agreement, note, lease, license, stockholders agreement or other agreement, instrument or contract to which the Purchaser is a party or by which Purchaser is bound or to which any of Purchaser's properties or assets is subject, (ii) the certificate of incorporation or bylaws of the Purchaser, or (iii) (assuming compliance with all applicable state securities or "Blue Sky" laws and the HSR Act) any statute, judgment, decree, order, rule or regulation applicable to the Purchaser or any of its properties or assets except, in the case of clause (i), for consents or -9- waivers required under the Seller Agreements relating to MSX International, Inc. which consents or waivers Purchaser will use reasonable best efforts to obtain prior to Closing. SECTION 5.04. Purchase Entirely for Own Account. The Shares to be acquired by the Purchaser will be acquired for investment for the Purchaser's own account, not as a nominee or agent, and not with a view to the resale or distribution of any part thereof. The Purchaser has no present intention of selling, granting any participation in or otherwise distributing the Shares. The Purchaser does not presently have any contract, undertaking, agreement or arrangement with any Person to sell, transfer or grant participations to such Person or to any third Person, with respect to any of the Shares. SECTION 5.05. Restricted Securities. The Purchaser understands that the transfer of the Shares by the Seller or a transferring subsidiary has not been registered under the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder (the "Securities Act") or any other applicable securities laws. The sale of the Shares hereunder is being consummated in reliance on an exemption from the registration provisions of the Securities Act which depends upon, among other things, the Purchaser's representations as expressed in Sections 5.04 and 5.07. The Purchaser understands that it must hold the Shares indefinitely unless the sale of the Shares is registered under the Securities Act and qualified by state authorities, or an exemption from such registration and qualification requirements is available and that any such sale is subject to the Seller Agreements, as applicable. The Purchaser acknowledges that the Companies have no obligation to register or qualify the Shares for resale, other than as provided in the Seller Agreements. The Purchaser further acknowledges that there is no assurance that any exemption from registration or qualification will be available for resales of the Shares and that, even if available, it may be conditioned on various requirements including, but not limited to, the time and manner of sale, the holding period for the Shares, agreements then in effect with the Companies and/or other stockholders of the Companies with respect to the Shares and on requirements relating to each of the Companies which are outside of the Purchaser's control, and which the Companies are under no obligation and may not be able to satisfy. SECTION 5.06. Legends. The Purchaser understands that each of the Shares will bear, so long as appropriate, those legends required by the Seller Agreements, the Securities Act and other applicable state securities laws. The Purchaser acknowledges that each of the Companies shall be entitled to make a notation on its records and give instructions to any transfer agent of the Shares in order to implement the restrictions on transfer set forth in the Seller Agreements or required by law. -10- SECTION 5.07. Accredited Investor; Knowledge. The Purchaser is an accredited investor as defined in Rule 501 of Regulation D promulgated under the Securities Act. The Purchaser was not organized solely for the purpose of acquiring the Shares and has such knowledge, sophistication and business experience so as to be capable of evaluating the merits and risks of an investment in the Shares. The Purchaser has sufficient experience in investments and knowledge about the Companies' respective management, businesses, operations and financial affairs and about the Shares so as to be capable of evaluating the merits and risks of its investment in the Shares. The Purchaser represents that it is able to bear the economic risk of its investment in the Shares indefinitely, including a possible total loss of investment. SECTION 5.08. Financing. Purchaser has, or will have prior to the Closing, sufficient cash, available lines of credit or other sources of immediately available funds to enable it to make payment of the Purchase Price as required hereunder and all related fees and expenses. ARTICLE 6 Covenants and Agreements SECTION 6.01. Disclosure; Publicity. Neither party hereto shall, and each party hereto shall cause its representatives and agents not to, make any public announcement, statement or press release with respect to this Agreement or the transactions contemplated hereby or otherwise disclose to any Person (other than its respective officers, directors, employees, agents, investors, financial representatives and attorneys, in each case on a need to know basis) the existence, terms, conditions, content or effect of this Agreement, in each case, without the prior consent of the other party unless disclosure is required by applicable law or governmental regulation, or by order of a court of competent jurisdiction. SECTION 6.02. Seller Agreements. Seller agrees that it shall promptly deliver notices to the extent permitted by the Seller Agreements and take all other action required under the Seller Agreements in order to consummate the sale of the Shares to the Purchaser and to use reasonable best efforts to obtain a waiver or an exercise of the other parties' rights of first refusal under the Seller Agreements on or prior to the Closing Date. SECTION 6.03. Further Assurances. Subject to the terms and conditions of this Agreement, each of the parties -11- hereto agrees to use its reasonable best efforts to take, or cause to be taken, all action, and to do, or cause to be done, all things necessary or desirable under applicable legal requirements, to consummate and make effective the transactions contemplated by this Agreement, including, without limitation, obtaining the consents listed on Schedules 4.02 and 5.02 hereto and the assignments of the Seller Agreements; provided, however, that neither the Seller nor the Purchaser shall be required to compensate any third party to obtain any such consent or approval (other than customary filing fees). If at any time after the Closing any further action is necessary or desirable to carry out the purposes of this Agreement, the parties hereto shall use their reasonable best efforts to take or cause to be taken all such necessary or desirable action and execute, and deliver and file, or cause to be executed, delivered and filed, all necessary or desirable documentation. SECTION 6.04. Certain Filings. Purchaser agrees to use reasonable best efforts to file within 10 Business Days after the date hereof a Notification and Report Form for Certain Mergers and Acquisitions ("HSR Notification Form") with the Federal Trade Commission ("FTC") and the Department of Justice ("DOJ") in connection with the acquisition of the Shares other than those listed on Schedule 2.02 and of MSX International, Inc., as appropriate. Seller and Purchaser shall cooperate with one another in taking any actions or making any filings required by the HSR Act and seeking timely to, and shall use their reasonable best efforts to, obtain early termination or expiration of the applicable waiting period. Seller and Purchaser each agree to use their reasonable best efforts to promptly identify any other governmental filings or actions with respect to any other governmental authority necessary to consummate the transactions contemplated by this Agreement and to make such filings or take such actions within 10 Business Days of such identification and to obtain early termination or expiration of any applicable waiting period or early or expedited approval, as applicable. Seller shall use its commercially reasonable efforts to cause each Company to cooperate with the Purchaser and the Seller in their making, and to take all actions and to make, all filings required by the HSR Act or any other governmental authority necessary to consummate the transactions contemplated by this Agreement and to obtain early termination or expiration of any applicable waiting period or early or expedited approval, as applicable, of any such filings. Notwithstanding the foregoing, with respect to the Shares comprised of MSX International, Inc. and those listed on Schedule 2.02, neither the Purchaser nor the Seller shall have any obligation to make or to cause to be made any filings required under this Section 6.04 until, in the case of MSX International, Inc., in the case of any filing required by the HSR Act, 10 Business Days after the date of the Purchaser's notice given pursuant to Section 6.06 hereof, and in the case of all other filings, as otherwise specified herein and, in the case of the Shares listed on Schedule 2.02, in the case of any filing required by the HSR Act, 10 Business Days after the applicable Person's consent to the transfer of such Shares and the rights related thereto under the Seller Agreements or the applicable Person's failure to purchase Shares with respect to which it has exercised a right of first refusal, as appropriate, and in the case of all other filings, as otherwise specified herein. Not- -12- withstanding the foregoing, within 10 Business Days after a written request (which request will not be prior to the delivery of the notice under Section 6.06) by Seller, Purchaser agrees to make a filing on HSR Notification Form with the FTC and the DOJ with respect to the Shares listed on Schedule 2.02 specified in such written request and Seller agrees to reimburse Purchaser for any filing fees paid by Purchaser with respect to such HSR Notification Form filed upon the request of Seller in the event Purchaser is not able to purchase the Shares which are the subject of such HSR Notification Form filed upon the request of Seller. "Business Day" means a day that is not a Saturday, Sunday or other day on which banks are required or authorized by law to be closed in the City of New York. SECTION 6.05. Representations and Covenants. Prior to Closing, each of the Seller and the Purchaser will not engage in any practice, take any action, fail to take any action or enter into any transaction which would cause any representation or warranty made by it in this Agreement to be untrue in any material respect or result in the breach of any material covenant made by it in this Agreement. SECTION 6.06. Notice. No later than the close of business on the tenth Business Days after the date hereof, the Purchaser shall provide the Seller with a notice containing a good faith bona fide offer indicating the terms and the price at which Purchaser will offer to purchase the Shares listed on Schedule 2.02. SECTION 6.07. American Commercial Plastics. Seller agrees to pay over to Purchaser all payments received by Seller pursuant to Section 3.00 of the Stock Purchase Agreement, dated as of March 23, 1999, among MascoTech, Inc., MascoTech Coatings, Inc. and American Commercial Plastics, Inc. no later than 30 days after receipt thereof. ARTICLE 7 Miscellaneous SECTION 7.01. Termination. Seller may terminate this Agreement and Seller may abandon the transactions contemplated hereby in the event the Recapitalization Agreement is terminated for any reason in accordance with its terms by giving Purchaser written notice of termination which shall be effective immediately. Otherwise this Agreement may be terminated only with the prior written consent of Seller and Purchaser. -13- SECTION 7.02. Amendments; Waivers. The provisions of this Agreement may be modified or amended, and waivers and consents to the performance and observance of the terms hereof may be given, only by written instrument executed and delivered by each of the parties hereto in the event of an amendment and by the party against whom the waiver is to be effective in the event of a waiver. The failure at any time to require performance of any provision hereof shall in no way affect the full right to require such performance at any time thereafter (unless performance thereof has been waived in accordance with the terms hereof for all purposes and at all times by the party to whom the benefit of such performance is to be rendered). The waiver by any party to this Agreement of a breach of any provision hereof shall not be taken or held to be a waiver of any succeeding breach of such provision or any other provision or as a waiver of the provision itself. SECTION 7.03. Successors and Assigns. None of the rights or obligations under this Agreement shall be assignable without the written consent of the other party except that (i) Purchaser may transfer or assign, in whole or from time to time in part, to one or more of its Affiliates, the right to purchase all or a portion of the Shares, but no such transfer or assignment will relieve Purchaser of its obligations hereunder and (ii) Seller may transfer or assign this Agreement together with the Shares (in whole or in part) to an Affiliate or to Masco Corporation, a Delaware corporation, as long as Purchaser's rights hereunder are not adversely affected. This Agreement and all covenants and agreements contained in this Agreement by or on behalf of the parties hereto shall bind, and inure to the benefit of, the respective successors and permitted assigns of the parties hereto. SECTION 7.04. Notices. All notices or other communications required or permitted to be given hereunder shall be in writing and shall be delivered by hand or sent, by registered, certified or express mail, reputable overnight courier service or facsimile and shall be deemed given when so delivered by hand or if mailed, three days after mailing (one business day in the case of express mail or overnight courier service) or if sent by facsimile, upon receipt of written confirmation, as follows: if to Seller, to: MascoTech, Inc. 21001 Van Born Road Taylor, Michigan 48180 Attention: President Fax: (313) 792-6157 with a copy to: -14- MascoTech, Inc. 21001 Van Born Road Taylor, Michigan 48180 Attention: General Counsel Fax: (313) 792-6940 and Davis Polk & Wardwell 450 Lexington Avenue New York, New York 10017 Attention: Leonard Kreynin Fax: (212) 450-4800 and Dykema Gossett PLLC 400 Renaissance Center Detroit, MI 48243 Attention: Fredrick M. Miller Fax: (313) 568-6832 if to Purchaser, to: Citicorp Venture Capital, Ltd. 399 Park Avenue 14th Floor New York, New York 10043 Attention: Michael A. Delaney Fax: (212) 793-2425 with a copy to: Morgan Lewis & Bockius LLP 101 Park Avenue New York, NY 10178-0060 Attention: Robert G. Robison Fax: (212) 309-6273 SECTION 7.05. Expenses. Except as specified in Sections 6.04 and 6.07, each party hereto will bear its own costs, fees and ex- -15- penses incurred in connection with the transactions contemplated hereby, including, without limitation, legal and accounting fees and expenses. SECTION 7.06. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE. SECTION 7.07. Waiver of Jury Trial. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. SECTION 7.08. Severability; Interpretation. If any provision in this Agreement is deemed to be or becomes invalid, illegal, void or unenforceable under any law that is applicable hereto, (i) such provision will be deemed amended to conform to applicable laws so as to be valid and enforceable or, if it cannot be so amended without materially altering the intention of the parties hereto, it will be deleted, with effect from the date of such agreement or such earlier date as the parties hereto may agree and (ii) the validity, legality and enforceability of the remaining provisions of this Agreement shall not be impaired or affected in any way. SECTION 7.09. Headings. Section headings herein are for convenience only and shall not affect the construction hereof. SECTION 7.10. Entire Agreement. This Agreement constitutes the entire agreement among the parties hereto relating to the subject matter hereof and supersedes any and all prior oral or written agreements, representations or warranties, contracts, understandings, correspondence, conversations and memoranda, whether written or oral, between the parties hereto, or between or among any agents, representatives, Affiliates, predecessors in interest or successors in interest, with respect to the subject matter hereof. SECTION 7.11. Counterparts. This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement, and shall become effective when one or more such counterparts have been signed by each of the parties and delivered to the other party. -16- SECTION 7.12. Third-party Beneficiaries. This Agreement is intended for the benefit of the parties hereto and is not intended to confer any benefit upon any other person or entity or infringe upon any rights or remedies. SECTION 7.13. Specific Performance. Each party shall be entitled to enforce all of their rights contained herein specifically (without posting a bond or other security), to recover damages by reason of any breach of any provision of this Agreement and to exercise all other rights granted by law. -17- IN WITNESS WHEREOF, the parties hereto have executed this Stock Purchase Agreement as of the date first above written. MASCOTECH, INC. By: ---------------------------------------- Name: Title: CITICORP VENTURE CAPITAL, LTD. By: ---------------------------------------- Name: Title: ATTACHMENT A CERTIFICATION OF NON-FOREIGN STATUS FOR ENTITIES (As contemplated by Treasury Regulation Section 1.1445-2(b)) Section 1445 of the Internal Revenue Code of 1986, as amended, provides that a buyer of a U.S. real property interest must withhold tax if the seller is a foreign person. To inform the buyer that withholding of tax is not required upon the disposition of a U.S. real property interest (if shares of [target] are found to constitute such an interest) by , the undersigned hereby certifies on behalf of such entity: (name of entity) 1. _________________ is not a foreign corporation, foreign partnership, foreign (name of entity) trust, or foreign estate (as those terms are defined in the Internal Revenue Code and Income Tax Regulations); 2. _________________'s U.S. employer identification number is ___________; and (name of entity) (EIC) 3. _________________'s office address within the United States is (name of entity) ----------------------------------------- (street) ----------------------------------------- (city, state, zip code) ______________ understands that this certification must be disclosed to (name) the Internal Revenue Service by the buyer and that any false statement I have made here could be punished by fine, imprisonment, or both. -2- Under penalties of perjury I declare that I have examined this certification and to the best of my knowledge and belief it is true, correct, and complete and I further declare that I have authority to sign this document on behalf of ___________________________ (name of entity) - ----------------------------------- Name of Entity - ----------------------------------- Signature - ----------------------------------- Title Date: _______________
SCHEDULE 2.01 Company Shares to be Purchased (a) Titan International, Inc. 3,315,852 shares of Common Stock (b) Delco Remy International, Inc. 3,025,391 shares of Common Stock (c) MSX International, Inc. 43,752 shares of Class A Common Stock 180,000 shares of Series A Preferred Stock (d) Advanced Accessories Systems, LLC (formerly 1,500 Member Units known as AAS Holdings, LLC) (e) Tower Automotive, Inc. 400,000 shares of Common Stock (f) Innovative Coating Technologies, Inc. Senior Subordinated Note of American Commercial (formerly known as MascoTech Coatings, Inc.) Plastics, Inc. aggregating $6.4 million (including deferred interest) 27.20 shares of Common Stock (g) Qualitor, Inc. 890,000 shares of Series A Redeemable Preferred Stock 300,000 shares of Common Stock Warrant No. 2 to purchase 107,143 shares of Common Stock Warrant No. 3 to purchase 65,839 shares of Common Stock Warrant No. 4 to purchase 25,643 shares of Common Stock
SCHEDULE 2.02 Company Shares to be Purchased Advanced Accessories Systems, LLC (formerly known as 1,500 Member Units AAS Holdings, LLC) Innovative Coating Technologies, Inc. (formerly known 27.20 shares of Common Stock as MascoTech Coatings, Inc.) Qualitor, Inc. 300,000 shares of Common Stock Warrant No. 2 to purchase 107,143 shares of Common Stock Warrant No. 3 to purchase 65,839 shares of Common Stock Warrant No. 4 to purchase 25,643 shares of Common Stock
SCHEDULE 4.02 SELLER AGREEMENTS Amended and Restated Members' Agreement dated as of September 30, 1999 among Advanced Accessory Systems, LLC (F/K/A AAS Holdings, LLC) and the members thereof Third Amended and Restated Operating Agreement dated as of September 30, 1999 of Advanced Accessory Systems, LLC (F/K/A AAS Holdings, LLC), and the members thereof Shareholders Agreement dated March 23, 1999 by and among MascoTech, Inc., American Commercial Plastics, Inc., and Innovative Coating Technologies, Inc. Letter Agreement dated March 23, 1999 by and among American Commercial Holdings, Inc., American Commercial Plastics, Inc., MascoTech Coating Technologies, Inc. and MascoTech, Inc. regarding Registration Rights Agreement Amended and Restated Securities Purchase and Holders Agreement, dated December 22, 1997, by and among Delco Remy International, Inc., Citicorp Venture Capital, Ltd., MascoTech Automotive Systems Group, Inc., and the other individuals named therein Registration Rights Agreement for Common Stock dated July 29, 1994 by and among DR International, Inc., a Delaware corporation, Citicorp Venture Capital Ltd., World Equity Partners, L.P., MascoTech Automotive Systems Group, Inc., Harold K. Sperlich, James R. Gerrity and the Management Investors named therein Stockholders' Agreement dated as of January 3, 1997 (as amended) by and among MSX International, Inc., MascoTech, Inc., Citicorp Venture Capital, Ltd., and other individuals named therein Registration Rights Agreement dated as of January 3, 1997 by and among MSX International, Inc., MascoTech, Inc., Citicorp Venture Capital, Ltd., and other individuals named therein Stockholders Agreement dated as of April 30, 1999 by and among Qualitor, Inc., Wind Point Partners III, L.P., Wind Point Executive Advisor Partners, L.P., Ralph E. Reins, First Union Capital Partners, Inc., and MascoTech, Inc. Registration Rights Agreement dated as of April 30, 1999 by and among Qualitor Inc., Wind Point Partners III, L.P., Wind Point Executive Advisor Partners, L.P., First Union Capital Partners, Inc.., and MascoTech, Inc. -2- Warrant Purchase Agreement dated as of April 30, 1999, by and between Qualitor, Inc. and MascoTech, Inc. Warrant No. 2 dated as of April 30, 1999 issued by Qualitor, Inc. to MascoTech, Inc. to purchase 107,143 shares of Common Stock Warrant No. 3 dated as of April 30, 1999 issued by Qualitor, Inc. to MascoTech, Inc. to purchase 65,839 shares of Common Stock Warrant No. 4 dated as of April 30, 1999 issued by Qualitor, Inc. to MascoTech, Inc. to purchase 25,643 shares of Common Stock Registration Rights and Voting Agreement dated as of May 31, 1996 between Tower Automotive, Inc., and MascoTech, Inc. Senior Subordinated Note dated March 23, 1999 for $6 million issued by American Commercial Plastics, Inc. to MascoTech, Inc. Guaranty of MascoTech Coatings, Inc. Guaranty of George S. Hofmeister General Security Agreement dated as of March 23, 1999 by and among MascoTech, Inc., American Commercial Plastics, Inc. and MascoTech Coatings, Inc. Mortgage dated March 24, 1999 by MascoTech Coatings, Inc. in favor of MascoTech, Inc. Assignment of Rents, Issues, Profits and Leases by MascoTech Coatings, Inc. in favor of MascoTech, Inc. Subordination Agreement dated March 23, 1999 by MascoTech, Inc., MascoTech Coatings, Inc. and National Bank of Canada SCHEDULE 4.03 CONSENTS OF SELLER Filings under HSR Act The parties agree that to the extent any consent listed in this Schedule relates to any Shares not purchased in accordance with Section 3.03, the failure to obtain such consent shall not constitute a breach of the representations and warranties set forth in Section 4.03 with respect to such Shares (the "Unpurchased Shares") at the Closing of any other Shares which does not include such Unpurchased Shares. Amended and Restated Members' Agreement dated as of September 30, 1999 among Advanced Accessory Systems, LLC (F/K/A AAS Holdings, LLC) and the members thereof Third Amended and Restated Operating Agreement dated as of September 30, 1999 of Advanced Accessory Systems, LLC (F/K/A AAS Holdings, LLC) and the members thereof Shareholders Agreement dated March 23, 1999 by and among MascoTech, Inc., American Commercial Plastics, Inc., and Innovative Coating Technologies, Inc. Stockholders Agreement dated as of January 3, 1997 (as amended) by and among MSX International, Inc., MascoTech, Inc., Citicorp Venture Capital, Ltd., and other individuals named therein Stockholders Agreement dated as of April 30, 1999 by and among Qualitor, Inc., Wind Point Partners III, L.P., Wind Point Executive Advisor Partners, L.P., Ralph E. Reins, First Union Capital Partners, Inc., and MascoTech, Inc. Registration Rights and Voting Agreement dated as of May 31, 1996, between Tower Automotive, Inc. and MascoTech, Inc. Additional filings as are identified in Section 6.04 SCHEDULE 4.04 CONFLICTS OF SELLER Loan Agreements $1,300,000,000 Credit Agreement dated as of January 16, 1998 among MascoTech, Inc., MascoTech Acquisition, Inc., the banks party thereto from time to time, The First National Bank of Chicago, as Administrative Agent, Bank of America NT&SA and NationsBank N.A., as Syndication Agents and Amendment No. 1 thereto dated as of February 10, 1998 SCHEDULE 5.02 CONSENTS OF PURCHASER Stockholders' Agreement dated as of January 3, 1997 (as amended) by and among MSX International, Inc., MascoTech, Inc., Citicorp Venture Capital, Ltd. and other individuals named therein Filings under HSR Act The parties agree that to the extent any consent listed in this Schedule relates to any Shares not purchased in accordance with Section 3.03, the failure to obtain such consent shall not constitute a breach of the representations and warranties set forth in Section 5.02 with respect to any Unpurchased Shares at the closing of any other Shares which does not include such Unpurchased Shares Additional filings as are identified as provided in Section 6.04 EX-10.18 13 0013.txt AMEND. NO.2 TO CORP. SERVICES AGREE. EXHIBIT 10.18 Amendment No. 2 to Corporate Services Agreement This Amendment is made as of November 28, 2000 between Masco Corporation, a Delaware corporation ("Masco"), and MascoTech, Inc., a Delaware corporation ("MascoTech") concerning that certain Corporate Services Agreement dated as of January 1, 1987 and amended as of October 31, 1996 and related letter agreements dated January 22, 1998 and June 17, 1998 (the "Services Agreement"). All capitalized terms used and not otherwise defined in this amendment shall have the meanings ascribed to them in the Services Agreement. WHEREAS, MascoTech has entered into a Recapitalization Agreement, dated as of August 1, 2000, with Riverside Company LLC, a Delaware limited liability company (the "Recapitalization Agreement"); WHEREAS, Masco and other parties have entered into an Exchange and Voting Agreement dated as of August 1, 2000, with MascoTech (the "Exchange and Voting Agreement"); WHEREAS, in connection with the Recapitalization Agreement and the Exchange and Voting Agreement, Masco and MascoTech desire to amend certain provisions of the Services Agreement as set forth herein. IN CONSIDERATION OF the mutual covenants and agreements contained in this Amendment, the parties agree to amend the Services Agreement as follows: 1. Paragraph 1 is hereby amended by inserting the following after the first sentence thereof: Notwithstanding the foregoing, beginning January 1, 2001, Masco shall provide to MascoTech and its subsidiaries only the services listed on Schedule A hereto; provided, however, Masco shall provide the services entitled "Litigation Support" only to the extent consistent with applicable standards of professional responsibility. In addition, Masco acknowledges that due to its long-standing relationship as a corporate services provider to MascoTech that Masco and certain of its employees possess historical information and knowledge related to MascoTech's business operations and agrees, upon reasonable request, to allow MascoTech access to such information and personnel. 2. Paragraph 3 is hereby amended by adding the following at the end of such paragraph: Notwithstanding the foregoing, on and after January 1, 2001, the fee for the services to be provided pursuant to the terms hereof shall -2- equal such fees as are mutually agreed by the parties hereto; provided, such fees shall not exceed $3.0 million in fiscal 2001 and $500,000 in fiscal 2002. 3. Paragraph 5 is hereby amended by deleting it in its entirety and replacing it with the following: The term of this Agreement shall be from the date hereof until December 31, 2002; provided, however, Masco shall not be required to provide any service to MascoTech pursuant to the terms of the Services Agreement after the date set forth beside each such service listed on Schedule A hereto; and provided further, that termination of this Agreement shall not relieve either party of its obligations accruing hereunder through the effective date of termination. 4. The parties hereto further agree that an orderly transition of corporate services is in their mutual best interest and they agree they will each consider in good faith any request by the other to modify Schedule A and any other provisions of the Agreement, as amended hereby, that may be impacted by a modification to Schedule A. 5. Except as expressly amended hereby, the terms and conditions of the Services Agreement are hereby ratified and confirmed and remain in full force and effect. -3- IN WITNESS WHEREOF, the parties have duly executed and delivered this Amendment as of the date first above written. MASCO CORPORATION By: ____________________________ Name: Title: MASCOTECH, INC. By: ____________________________ Name: Title: Schedule A Services Termination Services Date - -------- ------- o General Legal Services 05/31/01 o Specialty Legal Services o Intellectual Property 12/30/01 o Litigation Support 12/31/02 o Employee Issues 12/31/01 o Environmental 12/31/01 o Tax 04/30/01 o IAD 03/31/01 o Benefit Administration 12/31/01 o Retirement Administration 06/30/01 o Property Management 12/31/01 o R&D 06/30/01 o Operational Services 06/30/01 o Consolidation 06/30/01 EX-10.19 14 0014.txt AMENDMENT NO. 2 TO CORP. OPPORT. AGREE. EXHIBIT 10.19 Amendment No. 2 to Corporate Opportunities Agreement This Amendment is made as of November 28, 2000 between Masco Corporation, a Delaware corporation ("Masco"), and MascoTech, Inc., a Delaware corporation ("MascoTech"), concerning that certain Corporate Opportunities Agreement dated as of May 1, 1984, as amended as of October 31, 1996 (the "Opportunities Agreement"). All capitalized terms used and not otherwise defined in this amendment shall have the meanings ascribed to them in the Opportunities Agreement. WHEREAS, MascoTech has entered into a Recapitalization Agreement, dated as of August 1, 2000, with Riverside Company LLC, a Delaware limited liability company (the "Recapitalization Agreement"); WHEREAS, Masco and other parties have entered into an Exchange and Voting Agreement dated as of August 1, 2000, with MascoTech (the "Exchange and Voting Agreement"); WHEREAS, in connection with the Recapitalization Agreement and the Exchange and Voting Agreement, Masco and MascoTech desire to amend certain provisions of the Opportunities Agreement as set forth herein. IN CONSIDERATION OF the mutual covenants and agreements contained in this Amendment, the parties agree to amend the Opportunities Agreement as follows: 1. Subparagraph 4(ii) is hereby amended to read in its entirety as follows: (ii) An "Excluded Transaction" shall mean any Third-Party Transaction with respect to a business which is primarily involved in the home improvement or building products and services businesses. 2. Paragraph 5 is hereby amended to read in its entirety as follows: 5. Duration. The term of this Agreement shall expire on the later of (i) two years after the date hereof, or (ii) six months after corporate services are no longer required to be provided under the Corporate Services Agreement, as amended to the date hereof. 3. Except as expressly amended hereby, the terms and conditions of the Opportunities Agreement are hereby ratified and confirmed and remain in full force and effect. -2- IN WITNESS WHEREOF, the parties have duly executed and delivered this Amendment as of the date first above written. MASCO CORPORATION By: -------------------------------------------- Name: Title: MASCOTECH, INC. By: -------------------------------------------- Name: Title: EX-10.20 15 0015.txt SHAREHOLDERS AGREEMENT EXHIBIT 10.20 ================================================================================ SHAREHOLDERS AGREEMENT By and Among MASCOTECH, INC. MASCO CORPORATION RICHARD MANOOGIAN RICHARD AND JANE MANOOGIAN FOUNDATION THE HEARTLAND ENTITIES LISTED ON THE SIGNATURE PAGES HERETO THE HIP CO-INVESTORS LISTED ON THE SIGNATURE PAGES HERETO ----------------------------------------------- Dated as of November 28, 2000 ----------------------------------------------- ================================================================================ TABLE OF CONTENTS Page ARTICLE I DEFINITIONS; RULES OF CONSTRUCTION SECTION 1.01. Definitions............................................1 SECTION 1.02. Rules of Construction.................................10 ARTICLE II REPRESENTATIONS AND WARRANTIES SECTION 2.01. Authority; Enforceability.............................10 SECTION 2.02. No Breach.............................................11 SECTION 2.03. Consents..............................................11 SECTION 2.04. Share Ownership.......................................11 ARTICLE III SHARE TRANSFERS SECTION 3.01. Restrictions on Transfer..............................12 SECTION 3.02. Exceptions to Restrictions............................12 SECTION 3.03. Improper Transfer.....................................13 SECTION 3.04. Restrictive Legend....................................13 ARTICLE IV RIGHTS OF CERTAIN SHAREHOLDERS SECTION 4.01. Rights of First Offer.................................14 SECTION 4.02. Tag-Along Rights......................................15 SECTION 4.03. Drag-Along Rights.....................................17 SECTION 4.04. Information...........................................18 SECTION 4.05. Preemptive Rights.....................................20 SECTION 4.06. Board of Directors....................................23 SECTION 4.07. Right to Observer.....................................25 SECTION 4.08. Consultation Right....................................25 SECTION 4.09. Approval Rights.......................................26 SECTION 4.10. Transactions with Affiliates..........................26 -i- Page ARTICLE V REGISTRATION RIGHTS SECTION 5.01. Company Registration...................................27 SECTION 5.02. Demand Registration Rights.............................29 SECTION 5.03. Registration Procedures................................32 SECTION 5.04. Registration Expenses..................................37 SECTION 5.05. Indemnification........................................38 SECTION 5.06. 1934 Act Reports.......................................40 SECTION 5.07. Holdback Agreements....................................41 SECTION 5.08. Participation in Registrations.........................42 SECTION 5.09. Remedies...............................................42 SECTION 5.10. Other Registration Rights..............................42 SECTION 5.11. Rule 144...............................................42 ARTICLE VI RIGHTS OF HOLDERS OF CLASS A PREFERRED STOCK SECTION 6.01. Series A Preferred Stock...............................43 SECTION 6.02. Management Fee.........................................43 ARTICLE VII MISCELLANEOUS SECTION 7.01. Notices................................................43 SECTION 7.02. Binding Effect; Benefits; Entire Agreement.............44 SECTION 7.03. Waiver.................................................44 SECTION 7.04. Amendment..............................................44 SECTION 7.05. Assignability..........................................45 SECTION 7.06. Applicable Law.........................................45 SECTION 7.07. Specific Performance...................................45 SECTION 7.08. Severability...........................................45 SECTION 7.09. Additional Securities Subject to Agreement.............45 SECTION 7.10. Name Change............................................46 SECTION 7.11. Section and Other Headings.............................46 SECTION 7.12. Counterparts...........................................46 SECTION 7.13. Termination of Certain Provisions......................46 SECTION 7.14. ERISA Matters..........................................46 SECTION 7.15. Regulatory Cooperation.................................47 -ii- Page SECTION 7.16. Publicity..............................................47 SECTION 7.17. Expenses...............................................47 -iii- SHAREHOLDERS AGREEMENT THIS AGREEMENT (the "Agreement"), dated as of November 28, 2000, by and among MASCOTECH, INC. a Delaware corporation (the "Company"), Richard Manoogian ("IS"), the Richard and Jane Manoogian Foundation ("Foundation Shareholder" and, together with IS, "RM"), MASCO CORPORATION, a Delaware corporation (together with RM, the "Rollover Investors"), the HEARTLAND ENTITIES (as defined herein), LONG POINT CAPITAL FUND, L.P. and LONG POINT CAPITAL PARTNERS L.L.C. (collectively "Long Point"), CRM 1999 ENTERPRISE FUND, LLC ("Cramer" and with Long Point collectively the "Masco Transferees" or individually as a "Masco Transferee") and the entities identified as HIP CO-INVESTORS on the signature pages hereof (the HIP Co-Investors (including, without limitation, the Masco Transferees), the Rollover Investors, Sponsor and each Person executing a Joinder Agreement are collectively referred to herein as the "Shareholders" and individually as a "Shareholder"). WHEREAS, the Company and Riverside Acquisition Corporation (formerly Riverside Company LLC), a Delaware corporation ("Riverside") and an affiliate of Sponsor, have entered into a Recapitalization Agreement, dated as of August 1, 2000, as amended by Amendment No. 1 thereto, dated as of October 23, 2000, and Amendment No. 2 thereto, dated as of November 28, 2000 (the "Recapitalization Agreement"), which provides for, among other things, the merger of Riverside with and into the Company (the "Recapitalization Merger"). WHEREAS, as a result of and in connection with the Recapitalization Merger, each Shareholder will own the number of shares of common stock of the Company, $1.00 par value (the "Common Stock"), set forth on Schedule 2.04 hereto and Company Shareholder will own 361,001 shares of class A preferred stock of the Company, $1.00 par value (the "Class A Preferred Stock"). WHEREAS, the parties hereto desire to enter into this agreement to provide for certain rights and restrictions with respect to the Common Stock. NOW, THEREFORE, in consideration of the mutual covenants and agreements contained herein, the parties mutually agree as follows: ARTICLE I DEFINITIONS; RULES OF CONSTRUCTION SECTION 1.01. Definitions. The following terms, as used herein, have the following meanings: -2- "Adjustments" means adjustments to the number of shares of Common Stock outstanding as a result of a stock split, stock dividend, reclassification, subdivision or reorganization, recapitalization or similar event. "Advice" see Section 5.03(p). "Affiliate" of any specified Person means any other Person directly or indirectly controlling, controlled by or under direct or indirect common control with such specified Person. For the purposes of this definition, "control" when used with respect to any Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "Agreement" see the recitals to this Agreement. "Assignee" see Section 4.01(c). "business day" means each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which banking institutions in the City of New York are authorized or obligated by law or executive order to close. "Capital Stock" means, with respect to any Person, except as otherwise provided in Section 4.05, any and all shares, interests, participations, rights in or other equivalents (however designated) of such Person's capital stock, and any rights (other than debt securities convertible into capital stock), warrants or options exchangeable for or convertible into such capital stock. "Class A Preferred Stock" see the recitals to this Agreement. "Commission" means the Securities and Exchange Commission. "Common Stock" see the recitals to this Agreement. "Company" see the recitals to this Agreement. "Company Option Period" see Section 4.01(b). "Company Shareholder" means Masco Corporation, a Delaware corporation, provided that upon the transfer of all of Masco Corporation's shares of Common Stock to Masco Capital Corporation, a wholly-owned subsidiary of Masco Corporation, Masco Capital Corporation shall also be deemed Company Shareholder for all purposes of this Agreement; provided that Masco Capital Corporation executes a Joinder Agreement. -3- "CSFB" means, collectively, the CSFB Plan Partner and the CSFB Funds, or the CSFB Plan Partner acting on behalf of such other Persons. "CSFB Director" see Section 4.06(a)(ii)(c). "CSFB Funds" means, collectively, Credit Suisse First Boston Equity Partners (Bermuda), L.P., Credit Suisse First Boston U.S. Executive Advisors, L.P., EMA Partners Fund 2000, L.P. and EMA Private Equity Fund 2000, L.P. "CSFB Plan Partner" means Credit Suisse First Boston Equity Partners, L.P. "Demand Holders" means any of Company Shareholder (on behalf of itself and its Direct Permitted Transferees), RM (on behalf of himself, itself and his or its Direct Permitted Transferees), a QI Demand Holder (on behalf of itself and its Direct Permitted Transferees), CSFB (on behalf of itself and its Direct Permitted Transferees and other Transferees to the extent permitted by Section 5.02(g)) or Sponsor (on behalf of itself and its Direct Permitted Transferees). "Demand Registration" see Section 5.02(a). "Direct Permitted Transferee" means: (i) with respect to any Shareholder who is a natural person, (1) the spouse or any lineal descendant (including by adoption and stepchildren) of such Shareholder, (2) any trust of which such Shareholder is the trustee and which is established solely for the benefit of any of the foregoing individuals or (3) any partnership, all of the general partner(s) and limited partner(s) (if any) of which are one or more Persons identified in this clause (i); (ii) with respect to Sponsor, any Affiliate of Sponsor; (iii) with respect to Company Shareholder, any controlled Affiliate of Company Shareholder (including any wholly-owned subsidiary of Company Shareholder); (iv) with respect to any Institutional Shareholder, any Affiliate of such Institutional Shareholder; (v) with respect to Foundation Shareholder, any Affiliate of Foundation Shareholder; (vi) with respect to MetLife, (a) any Affiliates of MetLife or (b) Portfolio Advisors, LLC or any controlled Affiliate of Portfolio Advisors, LLC; and -4- (vii) with respect to any Shareholder, any institutional lender to which such Shareholder pledges or grants a security interest in shares of Common Stock in a bona fide transaction effected in good faith, provided that (x) such pledgee executes a Joinder Agreement and (y) prior to any subsequent foreclosure or sale of such shares or any Transfer resulting from such foreclosure is effected, the provisions of Section 4.01 must be satisfied. "Eligible Offering" see Section 4.05(a). "First Option" see Section 4.01(b). "First Union Capital Partners" means First Union Capital Partners, LLC. "Foundation Shareholder" see the recitals to this Agreement. "GAAP" means United States generally accepted accounting principles consistently applied throughout the specified period. "Heartland Entities" means Heartland Industrial Partners, L.P., Heartland Industrial Partners (FF), L.P., Heartland Industrial Partners (E1), L.P., Heartland Industrial Partners (K1), L.P., Heartland Industrial Partners (C1), L.P. and Direct Permitted Transferees of any of the foregoing. "HIP Co-Investor" means (i) each Shareholder that is a limited partner, or an Affiliate of a limited partner, in Sponsor or in any other fund or investment vehicle established or managed by Sponsor or an Affiliate of Sponsor, (ii) CSFB, (iii) each Masco Transferee and (iv) MetLife; provided that, upon the Transfer by MetLife of all of its shares of Common Stock to Portfolio Advisors, LLC or any controlled Affiliate of Portfolio Advisors, LLC in accordance with Section 3.02(a) of this Agreement, Portfolio Advisors, LLC or such controlled Affiliate of Portfolio Advisors, LLC shall be deemed to be a HIP Co-Investor under this Agreement. "Holder" means any Demand Holder or Incidental Demand Holder. "Incidental Demand Holder" see Section 5.02. "Initial Public Offering" means either (x) an underwritten initial public offering of the Company pursuant to an effective registration statement filed under the 1933 Act (excluding registration statements filed on Form S-8, or any similar successor form or another form used for a purpose similar to the intended use for such forms) or (y) the listing of the Common Stock on a national securities exchange or authorization for quotation on the Nasdaq National Market System. -5- "Institutional Shareholder" means any Shareholder that is not a natural person (other than Company Shareholder, Foundation Shareholder or Sponsor). "Investors" see Section 4.01(a). "Investor's Notice" see Section 4.01(a). "IS" see the recitals to this Agreement. "Joinder Agreement" means a joinder agreement, a form of which is attached hereto as Exhibit A. "Masco Transferees" see the recitals to this Agreement. "Material Event" see Section 4.09(a). "MetLife" means Metropolitan Life Insurance Company. "1933 Act" means the Securities Act of 1933. "1934 Act" means the Securities Exchange Act of 1934, as amended. "Observer" see Section 4.07. "Offered Shares" see Section 4.01(a). "Permitted Transferee" means: (i) with respect to any Shareholder who is a natural person, (1) the spouse or any lineal descendant (including by adoption and stepchildren) of such Shareholder, (2) any trust of which such Shareholder is the trustee and which is established solely for the benefit of any of the foregoing individuals, (3) any charitable foundation selected by such Shareholder, or (4) any partnership, all of the general partner(s) and limited partner(s) (if any) of which are one or more Persons identified in this clause (i), provided that, in the case of clauses (1), (2), (3) or (4), such Person executes a Joinder Agreement; (ii) with respect to Sponsor, (a) any investor in Sponsor or an Affiliate of such investor in Sponsor or an investor in any fund or other investment vehicle established or managed by Sponsor or any of its controlled Affiliates or any other Person which is an Affiliate of Sponsor on the date hereof, (b) any of the Shareholders and any of their respective Affiliates, (c) any controlled Affiliate of Sponsor, and (d) any investor in Sponsor that is an investment fund in connection with a pro rata distribu- -6- tion of shares of Common Stock to all investors in Sponsor at the time of the expiration or termination of the fund, provided that, in the case of clauses (a), (b), (c) or (d), any such investor executes a Joinder Agreement; and provided, further, that, in the case of these clauses (a), (b) or (c) Transfers to such Persons would not cause Sponsor to own, together with its Affiliates, a number of shares equal to less than thirty percent (30%) of the outstanding shares of Common Stock of the Company as of the date of any such Transfer; (iii) with respect to Company Shareholder, any controlled Affiliate of Company Shareholder (including any wholly-owned subsidiary of Company Shareholder), provided that such Affiliate or wholly-owned subsidiary executes a Joinder Agreement; (iv) with respect to any Institutional Shareholder (other than MetLife), (a) any Affiliate of such Institutional Shareholder, (b) any investor of such Institutional Shareholder that is an investment fund in connection with a pro rata distribution of shares of Common Stock to all investors (a "Shareholder Investor" or collectively "Shareholder Investors") in such Institutional Shareholder at the time of the expiration or termination of the fund, or (c) any Person acquiring all or substantially all of the investment portfolio of such Institutional Holder; and provided, further, that, in the case of clause (a), (b) or (c), all such investors execute a Joinder Agreement; (v) with respect to Foundation Shareholder, any Affiliate of Foundation Shareholder, provided such Affiliate executes a Joinder Agreement; (vi) with respect to MetLife, (a) any Affiliate of MetLife, (b) Portfolio Advisors, LLC or any controlled Affiliate of Portfolio Advisors, LLC or (c) any Shareholder Investor of such Institutional Shareholder that is an investment fund in connection with a pro rata distribution to all Shareholder Investors of such Institutional Shareholder at the time of the expiration or termination of the fund; provided, further, that, in the case of clause (a), (b) or (c), such investors execute a Joinder Agreement; and (vii) with respect to any Shareholder, any institutional lender to which such Shareholder pledges or grants a security interest in shares of Common Stock in a bona fide transaction effected in good faith, provided that (x) such pledgee executes a Joinder Agreement and (y) prior to any subsequent foreclosure or sale of such shares or any Transfer resulting from such foreclosure is effected, the provisions of Section 4.01 must be satisfied. -7- "Person" means an individual, a corporation, a partnership, an association, a trust or any other entity or organization, including a government, a political subdivision or an agency or instrumentality thereof. "Piggyback Holder" see Section 5.01(a). "Piggyback Registration" see Section 5.01(a). "Proportionate Percentage" see Section 4.05(a). "Pro Rata Portion" means, with respect to shares of Common Stock held by a Shareholder at any date of determination such number of shares of Common Stock owned by such Shareholder as would result in such Shareholder selling the same percentage of the total number of shares of Common Stock held by such Shareholder in the Transfer subject to the applicable Transfer Notice (the "Subject Sale") as the Sponsor Transferor sells in the Subject Sale (assuming, with respect to the Transfer Notice, that all Shareholders have exercised their Tag-Along Right). "Public Offering" see Section 4.05(a)(i). "Purchaser" see Section 4.02(a). "QI Demand Holder" means any Qualified Investor other than CSFB. "Qualified Investor" means a HIP Co-Investor who (x), together with its Affiliates, at or prior to any date of determination, has made an aggregate cash investment in Common Stock of the Company equal to at least $40.0 million (based upon the original cost of such investment) or (y) owns, together with its Direct Permitted Transferees, at least 10% or more of the outstanding shares of Common Stock of the Company at the date of determination. For purposes of this definition and any other definitions containing thresholds for the dollar amount of cash invested in Common Stock of the Company or the percentage ownership of Common Stock of the Company, the cash investments and the beneficial ownership of the CSFB Funds and the CSFB Plan Partner will be deemed to be aggregated. "Qualifying Public Equity Offering" means either (x) one or more underwritten public offerings of common equity securities of the Company pursuant to an effective registration statement filed under the 1933 Act (excluding registration statements filed on Form S-8, or any similar successor form) resulting in aggregate gross proceeds to the Company of $100,000,000 or more or (y) the listing of the Common Stock on a national securities exchange or authorization for quotation on the Nasdaq National Market System for which there is a public float of least $100,000,000 held by non-Affiliates of the Company. -8- "Recapitalization Agreement" see the recitals to this Agreement. "Recapitalization Merger" see the recitals to this Agreement. "Registrable Securities" shall mean any of (i) the shares of Common Stock owned by any Shareholder at the time of determination and (ii) any other securities issued or issuable with respect to the Common Stock by way of a stock split, stock dividend, reclassification, subdivision or reorganization, recapitalization or similar event. As to any particular Registrable Securities, such securities shall cease to be Registrable Securities when (a) a registration statement with respect to the offering of such securities by the holder thereof shall have been declared effective under the 1933 Act and such securities shall have been disposed of by such holder pursuant to such registration statement, (b) such securities have been sold to the public pursuant to Rule 144 (or any similar provision then in force) promulgated under the 1933 Act, (c) except for purposes of Section 5.02, such securities shall have been otherwise transferred and new certificates for such securities not bearing a legend restricting further transfer shall have been delivered by the Company or its transfer agent and subsequent disposition of such securities shall not require registration or qualification under the 1933 Act or any similar state law then in force or (d) such securities shall have ceased to be outstanding. "Registration" see Section 5.03. "Representatives" means the officers, employees, directors and agents of such Shareholder, including, representatives of its legal, accounting and financial advisors. "Request Notice" see Section 5.02(a). "Requisite Investors" means (i) Company Shareholder for so long as Company Shareholder either (a) has outstanding commitments or loans under the Subordinated Loan Agreement, (b) owns, together with its Permitted Transferees, $10.0 million or more in liquidation preference of Class A Preferred Stock, or (c) owns, together with its Direct Permitted Transferees, at least 1,571,569 shares (as adjusted for Adjustments) of Common Stock, (ii) RM, (iii) CSFB (on behalf of itself and its Direct Permitted Transferees) and (iv) HIP Co-Investors (other than CSFB) (on behalf of the HIP Co-Investors and their Direct Permitted Transferees) owning a majority of the number of shares of Common Stock owned by all HIP Co-Investors (other than CSFB) and their Direct Permitted Transferees as a group at the applicable date of determination. "Riverside" see the recitals to this Agreement. "RM" see the recitals to this Agreement. -9- "Rollover Demand Holders" means Company Shareholder, RM and their respective Direct Permitted Transferees. "Rollover Investors" see the recitals to this Agreement. "Second Option" see Section 4.01(c). "Senior Credit Facilities" means the Credit Agreement, dated as of the date hereof, among The Chase Manhattan Bank, Chase Securities Inc., the Company and certain of its subsidiaries and the other lenders and financial institutions party thereto 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). "Shareholders" see the recitals to this Agreement. "Significant Subsidiary" means any subsidiary of the Company that would be a "significant subsidiary" as such term is defined in Rule 1.02 of Regulation S-X under the 1933 Act. "Sponsor" means collectively the Heartland Entities or Heartland Industrial Partners, L.P. acting on behalf of the other Heartland Entities. "Sponsor Option Period" see Section 4.01(c). "Subordinated Loan Agreement" means the subordinated loan agreement dated the date hereof between Company Shareholder and the Company. "Substantial Change of Control" means the sale, lease or transfer in one or a series of related transactions of at least a majority of the consolidated assets of the Company and its subsidiaries or a majority of the Capital Stock of the Company representing the right to vote for directors to any Person or "group" of Persons (other than Sponsor and its Affiliates) whether direct or indirect or by way of any merger, consolidation or other business combination or purchase of beneficial ownership or otherwise. "Transactions" means (i) the Recapitalization Merger and (ii) all of the other transactions contemplated by the Recapitalization Agreement, including the transactions contemplated by the subscription agreements to be entered into in connection with the Recapitalization Merger. "Transfer" means the direct or indirect offer, sale, donation, assignment (as collateral or otherwise), pledge, hypothecation, encumbrance, transfer or disposition of any security. -10- "Transfer Notice" see Section 4.02(a). "Transferee" means any Person who acquires shares of Common Stock from a Shareholder and who is not a Permitted Transferee. "Triggering Event" means: (i) with respect to a Rollover Demand Holder or CSFB, after the earlier of (1) the fifth anniversary of the date hereof if an Initial Public Offering has not been consummated by the fifth anniversary of the date hereof and (2) 180 days after an Initial Public Offering; (ii) with respect to a QI Demand Holder, 180 days after an Initial Public Offering; and (iii) with respect to Sponsor, at any time. SECTION 1.02. Rules of Construction. For purposes of this Agreement whenever a threshold for the dollar amount of cash invested in Common Stock of the Company or the percentage of ownership of Common Stock is to be determined as to a Shareholder, the cash investments and the beneficial ownership of Direct Permitted Transferees of such Shareholder shall be aggregated with the cash investments and beneficial ownership of such Shareholder and the cash investments and the beneficial ownership of the Heartland Entities will be deemed to be aggregated. ARTICLE II REPRESENTATIONS AND WARRANTIES Each of the parties hereby severally represents and warrants to each of the other parties as follows: SECTION 2.01. Authority; Enforceability. Such party has the legal capacity or corporate power and authority to enter into this Agreement and to carry out its obligations hereunder. Such party (in the case of parties that are not natural persons) is duly organized and validly existing under the laws of its jurisdiction of organization, and the execution of this Agreement and the consummation of the transactions contemplated herein have been duly authorized by all necessary action. No other act or proceeding, corporate or otherwise, on its part is necessary to authorize the execution of this Agreement or the consummation of any of the transactions contemplated hereby. This Agreement has been duly executed by such party and constitutes its legal, valid and binding obligation, enforceable against it in accordance with the terms of this Agreement, -11- subject to applicable bankruptcy, insolvency, reorganization, moratorium and other laws affecting the rights of creditors generally and to the exercise of judicial discretion in accordance with general principles of equity (whether applied by a court of law or of equity). SECTION 2.02. No Breach. Neither the execution of this Agreement nor the performance by such party of its obligations hereunder nor the consummation of the transactions contemplated hereby or by the Transactions does or will: (a) in the case of parties that are not natural persons, conflict with or violate its certificate of incorporation, bylaws or other organizational documents; (b) violate, conflict with or result in the breach or termination of, or otherwise give any other person the right to accelerate, renegotiate or terminate or receive any payment or constitute a default or an event of default (or an event which with notice, lapse of time, or both, would constitute a default or event of default) under the terms of, any contract or agreement to which it is a party or by which it or any of its assets or operations are bound or affected, including, in the case of the Company, the Senior Credit Facilities or Subordinated Loan Agreement; or (c) constitute a violation by such party of any laws, rules or regulations of any governmental, administrative or regulatory authority or any judgments, orders, rulings or awards of any court, arbitrator or other judicial authority or any governmental, administrative or regulatory authority. SECTION 2.03. Consents. No consent, waiver, approval, authorization, exemption, registration, license or declaration is required to be made or obtained by such party, other than those which have been made or obtained, in connection with (i) the execution or enforceability of this Agreement or (ii) the consummation of any of the transactions contemplated hereby or by the Transactions. SECTION 2.04. Share Ownership. (a) The Company represents and warrants that in the case of a Shareholder, such party will own, immediately following the consummation of the transactions contemplated by the Recapitalization Agreement, the number of shares of Capital Stock of the Company set forth opposite such party's name in Schedule 2.04 attached hereto, free and clear of any and all liens, claims and encumbrances, other than those created by this Agreement. (b) The Company represents and warrants that, as of the date hereof after giving effect to the Transactions, the authorized capital stock of the Company consists of (A) 250,000,000 shares of Common Stock, of which 30,177,943 shares of Common Stock are issued and outstanding (without giving effect to the restricted stock awards, whether or not -12- vested, or shares of Common Stock issuable to the former stockholders of K-Tech Mfg., Inc. pursuant to documentation in existence prior to the Transactions), and (B) 25,000,000 shares of preferred stock, of which 361,001 shares of Class A Preferred Stock are issued and outstanding. Without giving effect to any cash elections or any accretion in respect of restricted stock awards after the date of the Transactions and assuming full vesting of restricted stock awards granted as of the date of the Transactions, there are approximately 3,741,325 shares of Common Stock subject to restricted stock awards on the date hereof after giving effect to the Transactions. The maximum number of shares of Common Stock issuable to the former K-Tech Mfg., Inc. stockholders is not presently determinable, but is estimated at up to approximately 550,000 shares of Common Stock. Except (i) as provided for in this Agreement, (ii) for accretion in respect of restricted stock awards after the date hereof, (iii) for Common Stock to be issued to former stockholders of K-Tech Mfg., Inc. arising out of obligations existing prior to the Transactions, as of the date of the Transactions, no subscription, warrant, option, convertible or exchangeable security or other right to purchase or acquire any shares of Capital Stock of the Company is authorized or outstanding and the Company has no obligation to issue any subscription, warrant, option, convertible or exchangeable security or other such right. (c) The Company represents and warrants that the shares of Common Stock issued to each Shareholder in connection with the Recapitalization Merger were duly and validly authorized, and when issued to each Shareholder in connection with the Recapitalization Merger will be duly and validly issued, fully paid and non-assessable and such shares are not subject to preemptive or similar rights except as provided by this Agreement. (d) Each Shareholder hereby consents to and approves of the contribution by the Company in connection with the Transactions of all of its assets to Metalync Company LLC, its wholly-owned subsidiary, as required by the Senior Credit Facilities. ARTICLE III SHARE TRANSFERS SECTION 3.01. Restrictions on Transfer. During the term of this Agreement, each Shareholder agrees that it will not Transfer any Common Stock, except as permitted by or in accordance with this Agreement. SECTION 3.02. Exceptions to Restrictions. Subject to all applicable laws, the restrictions on Transfer set forth in Section 3.01 hereof shall not apply to any of the following: -13- (a) a Transfer by a Shareholder of Common Stock to one of its Permitted Transferees; provided that such Permitted Transferee shall agree to execute a Joinder Agreement in the form annexed hereto as Exhibit A (the "Joinder Agreement"); (b) a Transfer of Common Stock by a Shareholder in accordance with Sections 4.02 and 4.03 of this Agreement; (c) a Transfer by a Shareholder after such Shareholder has complied with Section 4.01; provided that the Transferee shall agree to execute a Joinder Agreement; and (d) a Transfer of Common Stock by a Shareholder pursuant to an effective registration statement under the 1933 Act or a Transfer pursuant to Rule 144 under the 1933 Act. SECTION 3.03. Improper Transfer. Any attempt to Transfer any shares of Common Stock not in accordance with this Agreement shall be null and void and the Company will not give nor permit the Company's transfer agent to give any effect to such attempted Transfer in its stock records. SECTION 3.04. Restrictive Legend. Each certificate representing shares of Common Stock and held by a Shareholder will bear a legend substantially similar to the following (with such additions thereto or changes therein as the Company may be advised by counsel are required by law or necessary to give full effect to this Agreement): "THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO (i) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE UNITED STATES SECURITIES ACT OF 1933 OR (ii) AN APPLICABLE EXEMPTION FROM REGISTRATION THEREUNDER. ANY SALE PURSUANT TO CLAUSE (ii) OF THE PRECEDING SENTENCE MUST BE ACCOMPANIED BY AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY TO THE EFFECT THAT SUCH EXEMPTION FROM REGISTRATION IS AVAILABLE IN CONNECTION WITH SUCH SALE. THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE ALSO SUBJECT TO THE TERMS AND CONDITIONS, INCLUDING WITH RESPECT TO THE DIRECT OR INDIRECT TRANSFER THEREOF, OF A SHAREHOLDERS AGREEMENT DATED AS OF NOVEMBER 28, 2000. THE SHAREHOLDERS AGREEMENT CONTAINS, AMONG OTHER THINGS, SIGNIFICANT RESTRICTIONS ON TRANSFER OF THE SE- -14- CURITIES OF THE COMPANY. A COPY OF THE SHAREHOLDERS AGREEMENT IS AVAILABLE UPON REQUEST FROM THE COMPANY." ARTICLE IV RIGHTS OF CERTAIN SHAREHOLDERS SECTION 4.01. Rights of First Offer. (a) At any time or from time to time prior to a Qualifying Public Equity Offering, in the event that (x) at any time following the first anniversary of the date hereof (provided, however, that, prior to the second anniversary of the date hereof, such Rollover Investor does not in the good faith judgment of the Company jeopardize the "recapitalization" accounting treatment afforded the Company in the Recapitalization Merger), a Rollover Investor desires to Transfer, or (y) at any time following the date hereof, a HIP Co-Investor desires to Transfer, all or part of its Common Stock ("Offered Shares"), other than pursuant to Section 3.02(a), 3.02(d), 4.02 or 4.03 of this Agreement, such Rollover Investor or HIP Co-Investor (individually, an "Investor") shall give prompt written notice (an "Investor's Notice") of its desire to sell the Offered Shares to the Company and Sponsor. The Investor's Notice shall identify (i) the number of Offered Shares and (ii) all other material terms and conditions of the proposed Transfer including the purchase price and the form of the consideration. (b) The Company shall have the right, but not the obligation, to purchase all, but not less than all, the Offered Shares (the "First Option") on the same terms and conditions as set forth in the Investor's Notice, which option shall be exercised by delivering to such Investor irrevocable written notice of its commitment to purchase the Offered Shares within fifteen (15) business days after receipt of the Investor's Notice (the "Company Option Period"). Failure by the Company to give such notice within such fifteen (15) business day period shall be deemed an election by the Company not to purchase the Offered Shares. (c) In the event that the Company decides not to purchase the Offered Shares pursuant to Section 4.01(b), then Sponsor shall have the right, but not the obligation, to purchase all, but not less than all, the Offered Shares (the "Second Option") on the same terms and conditions as set forth in the Investor's Notice, which option shall be exercised by delivering to such Investor irrevocable written notice of its commitment to purchase the Offered Shares within ten (10) business days after the termination of the Company Option Period (the "Sponsor Option Period"); provided that Sponsor may, at its sole option, assign its rights to purchase an Investor's Offered Shares pursuant to this Section 4.01 to another Shareholder or a Permitted Transferee of Sponsor (such person an "Assignee"); provided that if the Assignee is a HIP Co-Investor, each HIP Co-Investor will be able to participate in such assignment on a -15- pro rata basis. Failure by Sponsor or its Assignee to give such notice within such ten (10) business day period shall be deemed an election by Sponsor or its Assignee not to purchase the Offered Shares. (d) Delivery of written notice by the Company, Sponsor or its Assignee accepting the First Option or the Second Option, as the case may be, shall constitute a contract between the Company, Sponsor or its Assignee, on the one hand, and such Investor on the other hand, for the purchase and sale of the Offered Shares on the terms and conditions set forth in the Investor's Notice. The purchase of any shares pursuant to the exercise of the First Option or the Second Option, as the case may be, shall be completed not later than forty-five (45) days following receipt of the Investor's Notice with respect to the Offered Shares, subject to receipt of any required material third-party or governmental approvals, compliance with applicable laws and the absence of any injunction or similar legal order preventing such transaction (collectively, the "Conditions") in which case the purchase of the Offered Shares shall be delayed pending the satisfaction of the Conditions up to an additional thirty (30) days. As a condition to entering into the contract referred to above, the Company, Sponsor and its Assignee will agree to use commercially reasonable efforts to satisfy the Conditions as soon as possible. In the event that neither the First Option nor the Second Option is exercised, the Investor shall have the right for a period of seventy-five (75) days after the termination of the Sponsor Option Period to Transfer (the "Investor Sale") the Offered Shares at a price not less than ninety percent (90%) of the price contained in, and otherwise on terms and conditions no less favorable to such Investor than those set forth in, the Investor's Notice, except that the purchase of the Offered Shares may be delayed up to an additional thirty (30) days pending satisfaction of the Conditions; provided that the Transferee agrees to execute a Joinder Agreement. If the Investor Sale is not consummated pursuant to the terms of the immediately preceding sentence, the Investor will not effect Transfer of any of the Offered Shares without commencing de novo the procedures set forth in this Section 4.01. SECTION 4.02. Tag-Along Rights. (a) If, at any time or from time to time prior to a Qualifying Public Equity Offering, Sponsor or any of its Affiliates (the "Sponsor Transferor") proposes to Transfer any shares of Common Stock to a Person (the "Purchaser"), other than pursuant to Section 3.02(a), 3.02(d), 5.01 or 5.02 or in a circumstance where all of the shares owned by all of the Shareholders are being purchased pursuant to Section 4.03, the Sponsor Transferor shall give written notice (a "Transfer Notice") of such proposed Transfer to the Shareholders at least fifteen (15) days prior to the consummation of such proposed Transfer, setting forth (A) the total number of shares of Common Stock offered to be Transferred to Purchaser, (B) the consideration to be received for such shares of Common Stock by the Sponsor Transferor, (C) the identity of the Purchaser(s), (D) any other material terms and conditions of the proposed Transfer, (E) the expected date of the proposed Transfer and (F) that each such Shareholder shall have the right (the "Tag-Along Right") to elect to sell up to its Pro Rata Portion of such -16- shares of Common Stock to be Transferred to Purchaser. If any portion of the consideration contained in the Transfer Notice includes consideration other than cash, the Sponsor Transferor shall provide the Shareholders with a summary of a valuation study, if any, that the Sponsor Transferor has prepared concerning such consideration, but the Sponsor Transferor shall have no liability to any Shareholder with respect to any such summary or study and no obligation to undertake any such valuation. Notwithstanding the first sentence of this Section 4.02(a), a Shareholder will have a Tag-Along Right in connection with Transfers of shares of Common Stock by the Sponsor Transferor to a Permitted Transferee (other than an Affiliate of the Sponsor Transferor) when the Sponsor Transferor Transfers shares of Common Stock to such Person at a price per share (as adjusted for Adjustments) that is greater than the price per share (as adjusted for Adjustments) paid for such shares by the Sponsor Transferor. (b) Upon delivery of a Transfer Notice, each Shareholder has the option, but not the obligation, to sell up to the Pro Rata Portion of its shares of Common Stock at the same price per share of Common Stock and pursuant to the same terms and conditions with respect to payment for the shares of Common Stock as agreed to by the Sponsor Transferor, by sending written notice to the Sponsor Transferor within ten (10) days of the date of the Transfer Notice, indicating its election to sell up to the Pro Rata Portion of its shares of Common Stock in the same transaction. To the extent that elections pursuant to this Section 4.02(b) are not made with respect to any shares of Common Stock included in a Transfer Notice within such 10-day period, then the Sponsor Transferor shall re-offer to Shareholders who have elected to sell their Pro Rata Portion (the "Tag-Along Shareholders") for one additional three day period, the right to sell such additional number of shares as will result in the Tag-Along Shareholders being able to sell their pro rata share of such remaining shares of Common Stock, based upon all the shares of Common Stock being sold by all the Tag Along Shareholders (not including the remaining shares). For a sixty (60) day period following such ten (10) day period (which period may be extended an additional thirty (30) days in order to satisfy the Conditions), each Tag-Along Shareholder shall be permitted to sell to the Purchaser(s) on the terms and conditions set forth in the Transfer Notice that amount of its shares of Common Stock as to which it has made its election and the Sponsor Transferor shall be permitted to concurrently sell the balance of the shares of Common Stock that are the subject of the Transfer Notice that are not sold by the Tag-Along Shareholders. (c) The provisions of Section 4.02(a) and (b) shall not apply to any Transfer or series of Transfers by Sponsor of shares of Common Stock to one or more Persons other than Permitted Transferees which in the aggregate do not exceed ten percent (10%) of such shares of Common Stock owned by Sponsor immediately following the Transactions. (d) Each Tag-Along Shareholder shall not be required to make representations and -17- warranties in connection with such sale other than customary representations and warranties with respect to (i) such Shareholder's due organization, power and authority, (ii) such Shareholder's ownership of the shares of Common Stock and ability to freely convey such shares of Common Stock without liens or encumbrances, (iii) customary representations regarding non-contravention of such Shareholder's charter, bylaws or other organizational documents or material agreements of such Tag-Along Shareholder and (iv) the enforceable nature of such Tag-Along Shareholder's obligations under the documents for such sale to which it is a party (collectively, the "Shareholder Representations"). No Tag-Along Shareholder shall be liable in respect of any indemnification provided in connection with a Tag-Along Sale (with respect to such Shareholder's Shareholder Representations) in excess of the consideration received by such Tag-Along Shareholder in such Tag-Along Sale and no Tag-Along Shareholder shall be required to participate in any escrow relating to such Tag-Along Sale in excess of such Tag-Along Shareholder's participation in the Tag-Along Sale. (e) In the event that no Shareholder elects to sell shares of Common Stock pursuant to this Section 4.02, Sponsor and/or its Affiliates (as the case may be) shall have the right for a period of seventy-five (75) days (which period may be extended by an additional thirty (30) days to satisfy the Conditions) after the expiration of the 10-day period referred to in Section 4.02(b) to Transfer the Shares subject to the Transfer Notice to the Purchaser at a price not greater than the price contained in, and otherwise on terms and conditions no more favorable to Sponsor and/or such Affiliates than those set forth in, the Transfer Notice; it being agreed that, after the end of the 75-day period referred to in this Section 4.02(e) (including any permitted extension thereof), Sponsor and/or such Affiliates will not effect any transaction in any shares of Common Stock that are the subject of the Transfer Notice without commencing de novo the procedures set forth in this Section 4.02. SECTION 4.03. Drag-Along Rights. If at any time prior to a Qualifying Public Equity Offering, Sponsor and its Affiliates intend to effect a Substantial Change of Control, Sponsor shall have the right to require the other Shareholders (the "Drag-Along Shareholders") to sell the same percentage of Common Stock held by them relative to such Shareholder's ownership of Common Stock as Sponsor and its Affiliates are selling in such transaction in connection with such Substantial Change of Control; to vote such Common Stock, whether by proxy, voting agreement or otherwise in favor of the transactions constituting a Substantial Change of Control; to waive their appraisal or dissenters' rights with respect to such transaction; or otherwise, participate in such Substantial Change of Control and each other Shareholder agrees to take any and all reasonably necessary action in furtherance of the foregoing; provided that (a) the consideration to be received by the other Shareholders shall be for the same type and amount per share of consideration received by Sponsor, and (b) after giving effect to such transaction, Sponsor and its Direct Permitted Transferees shall have sold the same percentage of their holdings of Common Stock of the Company as sold by the Drag-Along Shareholders; provided, however, that CSFB will not be obligated to participate in such transaction if the consideration per share in -18- such transaction is less than $16.90 per share (as adjusted for Adjustments) of the Common Stock of the Company paid by CSFB in connection with the Transactions and provided, further, that if Sponsor and its Affiliates are selling all of their shares of Common Stock in connection with such Substantial Change of Control, the Drag-Along Shareholders will be required to sell all of their shares pursuant to this Section 4.03. In connection with the sale of their shares of Common Stock pursuant to this Section 4.03, the Drag-Along Shareholders shall not be required to make any representations and warranties other than the Shareholder Representations. In addition, no Drag-Along Shareholder shall be liable in respect of any indemnification in connection with a transaction effected pursuant to this Section 4.03 (a "Drag-Along Transaction") (with respect to such Shareholder's Shareholder Representations) in excess of the consideration received by such Drag-Along Shareholder in such Drag-Along Transaction and no such Drag-Along Shareholder shall be required to participate in any escrow relating to such Drag-Along Transaction in excess of such Drag-Along Shareholder's Pro Rata Portion. SECTION 4.04. Information. (a) Prior to the occurrence of an Initial Public Offering, the Company shall deliver to each Shareholder: (1) as soon as available, but in any event within forty-five (45) days after the end of each quarter, copies of: (i) consolidated balance sheets of the Company and its subsidiaries as at the end of such quarter, and (ii) consolidated statements of income, stockholders' equity and cash flows of the Company and its subsidiaries, for such quarter and for the portion of the fiscal year ending with such quarter, in each case prepared in accordance with GAAP applicable to periodic financial statements generally, fairly presenting, in all material respects, the financial position of the Persons being reported on and their results of operations and cash flows, subject to changes resulting from normal year-end adjustments; (2) as soon as available, but in any event within ninety (90) days after the end of each fiscal year of the Company, copies of: (i) consolidated balance sheets of the Company and its subsidiaries as at the end of such year, and (ii) consolidated statements of income, stockholders' equity and cash flows of the Company and its subsidiaries for such year, -19- in each case prepared in accordance with GAAP, fairly presenting, in all material respects, the financial position of the Persons being reported on and their results of operations and cash flows, and accompanied by an opinion thereon of independent certified public accountants of recognized national standing, which opinion shall state that such financial statements present fairly, in all material respects, the financial position of the Persons being reported upon and their results of operations and cash flows and have been prepared in conformity with GAAP; (b) In the case of any Shareholder (other than CSFB) prior to the occurrence of a Qualifying Public Equity Offering, and for so long as such Shareholder owns twenty-five percent (25%) or more of the number of shares of Common Stock (as adjusted for Adjustments) owned by such Shareholder immediately following the Transactions, or in the case of CSFB, for so long as CSFB retains a number of shares of Common Stock equal to at least twenty-five (25%) of the number of shares of Common Stock (as adjusted for Adjustments) owned by CSFB immediately following the Transactions, the Company shall deliver to each such Shareholder and CSFB: (1) the information and reports provided pursuant to Sections 4.04(a)(1) and (2); (2) monthly "flash reports" utilized by the Company in its own management containing summarized, abbreviated data with respect to income statement amounts, balance sheet data and cash flows; and (3) such other information concerning the condition or operations, financial or otherwise, of the Company and its Subsidiaries as a Shareholder may, from time to time, reasonably request. (c) The rights to receive the information set forth in subsections (1) and (2) of paragraph (a) shall be assignable to Transferees of Common Stock. The rights to receive the information set forth in subsections (2) and (3) of paragraph (b) shall be assignable to a Transferee that acquires from CSFB at least 25% of the shares of Common Stock owned by CSFB as of the date hereof (as adjusted for Adjustments). (d) Prior to the occurrence of a Qualifying Public Equity Offering, and for so long as a Shareholder owns twenty-five percent (25%) or more of the number of shares of Common Stock owned by such Shareholder immediately following the Transactions (as adjusted for Adjustments), Representatives of such Shareholder shall be provided with a reasonable opportunity to discuss the business and affairs of the Company with the Company's senior managers, directors, officers and senior employees upon reasonable advance notice during normal business hours; provided that such Company representatives shall be available (A) to such Shareholder for an annual meeting with senior management at which the following -20- year's budget is presented and (B) to Qualified Investors, RM and Company Shareholder for quarterly meetings at which the most recent quarterly results are discussed. (e) Each Shareholder hereby agrees that neither it nor its Representatives will disclose to any third party any information provided to it or its Representatives by the Company hereunder which is not generally available to the public, except with the prior express approval of the Company or as may be required by applicable law; it being understood that nothing in this Section 4.04(e) will restrict the ability of Sponsor or a HIP Co-Investor to disclose certain information to its investors in accordance with the governing documents of their partnership arrangement; provided that such investors agree to be bound by the confidentiality provisions of this Agreement. (f) Notwithstanding the above, access to highly confidential proprietary information and facilities need not be provided by the Company, nor shall the Company be required to provide information to any Shareholder that is a competitor or reasonably likely to become a competitor of the Company or any of its subsidiaries; it being understood that the Shareholders existing as of the date hereof are not competitors. (g) Notwithstanding the foregoing, (x) MetLife in addition to Portfolio Advisors, LLC or any controlled Affiliate of Portfolio Advisors, LLC shall have the rights provided by this Section 4.04 notwithstanding the fact it has transferred all of its shares of Common Stock to Portfolio Advisors, LLC or any controlled Affiliate of Portfolio Advisors, LLC, provided such Person would have such rights as a Shareholder (it being agreed that, solely for purposes of paragraphs (b) and (d) of this Section 4.04, such Person shall be deemed to have held its shares of Common Stock since the consummation of the Transactions) and (y) Company Shareholder shall be entitled to receive the information provided by this Section 4.04 so long as Company Shareholder owns any Class A Preferred Stock or has outstanding commitments or loans under the Subordinated Loan Agreement. SECTION 4.05. Preemptive Rights. (a) Prior to the occurrence of an Initial Public Offering, the Company hereby grants and hereby agrees to cause each Significant Subsidiary of the Company to grant to each HIP Co-Investor and its Direct Permitted Transferees and Sponsor and its Direct Permitted Transferees the right to purchase up to such Shareholder's Proportionate Percentage (as hereinafter defined) of any future Eligible Offering (as hereinafter defined) and in the case such Eligible Offering is in whole or in part to Sponsor or any of its Affiliates, then the Company shall also grant Company Shareholder and RM the right to purchase up to their Proportionate Percentage. For purposes of this Section 4.05, the following terms shall have the meanings set forth below. "Proportionate Percentage" means, with respect to any Shareholder as of any given date with respect to an Eligible Offering, the lower of (i) twenty percent (20%) -21- of such Eligible Offering or (ii) the number (expressed as a percentage) obtained by dividing (A) the number of shares of Common Stock owned by such Shareholder as of such date by (B) the total number of shares of Common Stock outstanding as of such date, in each case, assuming all shares of Capital Stock of the Company convertible into or exercisable for Common Stock have been so converted; provided that CSFB should not be limited by the foregoing clause (i) in the event that the Eligible Offering consists of Capital Stock of the Company for a consideration per share of Capital Stock which is less than the purchase price per share of Common Stock paid by CSFB in connection with the Transactions (as such price is adjusted by the Adjustments). "Eligible Offering" means an offer by the Company or a Significant Subsidiary of the Company to sell to any Person or Persons (including any of the Shareholders) for cash, any Capital Stock of the Company or any Significant Subsidiary, other than an offering by the Company or a Significant Subsidiary of the Company: (i) of Common Stock in an underwritten public offering (a "Public Offering") registered under the 1933 Act or pursuant to a Rule 144A offering under the 1933 Act; (ii) of Common Stock of the Company issued upon the exercise of options, warrants or convertible securities outstanding as of the date hereof; (iii) of Common Stock of the Company or options to purchase shares of Common Stock in connection with or pursuant to any stock option, stock purchase plan or agreement or other benefit plans approved by the Board of Directors of the Company to full-time employees, officers, directors, consultants and/or advisors to the Company or its subsidiaries;(excluding employees of Sponsor) (iv) of Common Stock of the Company issued in connection with restricted stock awards pursuant to and in accordance with the Recapitalization Agreement; (v) of Common Stock of the Company having a value of up to $5.2 million in order to comply with Section 5.15 of the Senior Credit Facilities; (vi) of Capital Stock of the Company issued as consideration to any seller in connection with the acquisition by the Company or any subsidiary of the Company of the assets of any Person in any transaction approved by the Board of Directors of the Company; -22- (vii) of Capital Stock of the Company issued as an inducement in connection with any debt financing of the Company, subject to terms and conditions approved by the Board of Directors of the Company; (viii) of Capital Stock of a Significant Subsidiary of the Company in connection with any sale of control of such Significant Subsidiary to, or any joint venture between such Significant Subsidiary and, a third party that is not a financial sponsor or investor, which sale or joint venture is approved by the Board of the Directors of the Company; (ix) of director qualifying or similar shares of a Significant Subsidiary; (x) of Capital Stock of the Company issued as consideration in connection with the acquisition by the Company or any subsidiary of the Company of Simpson Industries, Inc. or Global Metal Technologies, Inc. (or any parent company thereof); and (xi) of Capital Stock of the Company issued to former stockholders of K-Tech Mfg., Inc. arising out of obligations existing prior to the Transactions. For purposes of this Section 4.05 only, "Capital Stock" means any and all shares of common stock or options, warrants or similar instruments or any other securities convertible or exchangeable therefor (collectively, "Equity Interests") or any equity security linked to or offered or sold in connection with any Equity Interests of such Person or any of its Significant Subsidiaries, as the case may be. (b) The Company shall, before any securities are issued pursuant to an Eligible Offering, give written notice (a "Preemptive Notice") thereof to each Shareholder that is entitled to preemptive rights hereunder. Such notice shall specify the security or securities proposed to be issued, the proposed date of issuance, the consideration that the Company or such Significant Subsidiary, as the case may be, intends to receive therefor and all other material terms and conditions of such proposed issuance. For a period of ten (10) business days following the date of such notice, each such Shareholder shall be entitled, by written notice to the Company, to elect to purchase all or part of such Shareholder's Proportionate Percentage of the securities being sold in the Eligible Offering. To the extent that elections pursuant to this Section 4.05(b) shall not be made with respect to any shares of Common Stock included in a Preemptive Notice within such 10-day period, then the Company shall re-offer to Shareholders who have elected to purchase their Proportionate Percentage (the "Preemptive Shareholders") for one additional three-day period, the right to purchase any part of the shares of Common Stock not purchased by other Shareholders (the "Section 4.05 Remaining Shares") -23- pursuant to this Section 4.05 which is equal to the product obtained by multiplying (i) the number of Section 4.05 Remaining Shares by (ii) a fraction, the numerator of which is the number of shares of Common Stock then owned by any such Preemptive Shareholder and the denominator of which is the aggregate number of shares owned by all Preemptive Shareholders. To the extent that elections pursuant to this Section 4.05(b) shall not be made with respect to any securities included in an Eligible Offering within such ten (10) business day period, then the Company or such Significant Subsidiary, as the case may be, shall not be obligated to issue to such Shareholder such securities for which such Shareholder has elected not to purchase. To the extent that there are securities that have not been purchased pursuant to this Section 4.05, then the Company or such Significant Subsidiary, as the case may be, may issue such securities, but only for consideration not less than, and otherwise on no less favorable terms to the Company or such Significant Subsidiary, as the case may be, than, those set forth in the Company's notice and only within thirty (30) days after the end of such ten (10) business day period. In the event that any such offer is accepted by any such Shareholder or Shareholders, the Company or such Significant Subsidiary, as the case may be, shall sell to such Shareholder or Shareholders, and such Shareholder or Shareholders shall purchase from the Company or such Significant Subsidiary, as the case may be, for the consideration and on the terms set forth in the notice as aforesaid, the securities that such Shareholder or Shareholders shall have elected to purchase within ten (10) business days of such Shareholder's election to purchase such Proportionate Percentage (subject to delay for an additional thirty days for satisfaction of the Conditions). (c) Each of the Shareholders granted rights pursuant to this Section 4.05 acknowledges that it has been given the opportunity to purchase their Proportionate Percentage of Common Stock in connection with the acquisition of Simpson Industries, Inc. and accordingly this Section 4.05 shall not apply to the acquisition of Simpson Industries, Inc. (d) The Company may comply with any applicable securities laws before issuing any shares of Common Stock pursuant to this Section 4.05 and shall not be in violation of the provisions hereof by reason of such compliance; provided it is using commercially reasonable efforts to so comply. SECTION 4.06. Board of Directors. (a) At each annual or special stockholders meeting called for the election of directors, and whenever the Shareholders of the Company act by written consent with respect to the election of directors, each Shareholder agrees to vote or otherwise give such Shareholder's consent in respect of all shares of the Capital Stock of the Company (whether now owned or hereafter acquired) owned by such Shareholder, and take all other appropriate action and the Company shall take all necessary and desirable actions within its control in order to cause: -24- (i) an amendment to the Bylaws of the Company to provide that the authorized number of directors on the Board of Directors of the Company shall be as recommended by the Sponsor in its sole discretion. (ii) the election to the Board of Directors of: (a) such number of directors as shall constitute a majority of the Board of Directors as designated by Heartland Industrial Partners, L.P.; (b) one director designated by the Company Shareholder; provided, however, that except as set forth in the immediately following sentence of this subpart (b) upon Company Shareholder and its Direct Permitted Transferees ceasing to own at least 1,571,569 shares of Common Stock or, upon a Qualifying Public Equity Offering, Company Shareholder shall no longer have the right to designate one director to the Board. Notwithstanding the foregoing, Company Shareholder shall maintain the right to designate one director to the Board of Directors for so long as Company Shareholder or its Affiliates, own (x) $10.0 million or more of liquidation preference of the Class A Preferred Stock or (y) have outstanding loans or unfunded commitments under the Subordinated Loan Agreement; and (c) one director designated by the CSFB Plan Partner (the "CSFB Director") after consultation with Sponsor; provided, however, that upon CSFB and its Direct Permitted Transferees ceasing to own a number of shares of Common Stock which would equal at least a majority of the shares of Common Stock owned by CSFB immediately following the Transactions (as adjusted for Adjustments), CSFB shall no longer have the right to designate one director to the Board of Directors; all of which persons shall hold office subject to their earlier removal in accordance with clause (iii) below, the Bylaws of the Company and applicable corporate law, until their respective successors shall have been elected and shall have qualified; (iii) the removal from the Board of Directors (with or without cause) of any director elected in accordance with subpart (a), (b) or (c) of clause (ii) above upon the written request of the Shareholders that designated such director; and (iv) upon any vacancy in the Board of Directors as a result of any individual designated as provided in clause (ii) above ceasing to be a member of the Board of Directors whether by resignation or otherwise, the election to the Board of Directors as promptly as possible of an individual designated -25- by the Shareholders that designated such individual; provided that the CSFB Plan Partner will consult with Sponsor prior to designating a replacement to serve as the CSFB Director. (b) The ability of a Shareholder to designate a director to the Board of Directors shall not be assignable to any Person. (c) The parties hereto agree to cause the Board of Directors to appoint the CSFB Director to each decision making committee of the Board and to cause such CSFB Director to be nominated to the Board of each subsidiary of the Company to the extent the composition of such boards is substantially identical to the composition of the Board. (d) The Company agrees to provide customary directors' liability insurance. SECTION 4.07 Right to Observer. In the case of a Qualified Investor (other than CSFB), for so long as such Qualified Investor retains a number of shares of Common Stock equal to at least a majority of, or, in the case of the CSFB Plan Partner, for so long as it retains a number of shares of Common Stock equal to at least twenty-five percent (25%) of, the shares of Common Stock owned by such Person immediately following the Transactions (as adjusted for the Adjustments), such Person will have right to send one Representative on its behalf (the "Observer") to attend all meetings of the Board, including all committees thereof, solely in a non-voting observer capacity. The Company will furnish to the Observer copies of all notices, minutes, consents and other materials that it generally makes available to its directors. The Observer may participate in discussions of matters under consideration by the Board of the Company and any matters brought before any committee thereof but will not be entitled to vote on any matter presented to the Board of Directors. Any Qualified Investor and the CSFB Plan Partner will have the right to remove and replace its Observer in its sole discretion and to designate a substitute representative if its Observer is unable or unwilling to attend any of the Board's meetings, including any committees thereof. The right of Qualified Investors (other than CSFB) to appoint an Observer as set forth in this Section 4.07 will terminate upon the occurrence of a Qualifying Public Equity Offering. SECTION 4.08. Consultation Right. (a) The Company hereby agrees to consult (a "Consultation") with the Representatives of the CSFB Plan Partner set forth on Exhibit B hereto with respect (x) to any issues, events or transactions pertaining to the Company which in the good faith judgment of the Board of Directors of the Company are material to the consolidated business, operations and financial condition of the Company and (y) to the preparation of the annual business plan of the Company. In connection with any Consultation, the Company will provide such Representatives with all material information regarding any action under consideration and reasonable notice so that the consultation period shall constitute sufficient time for the CSFB Plan -26- Partner to participate meaningfully in any decision-making process regarding the action to be taken. (b) The provision of Section 4.08(a) shall terminate upon a Qualifying Public Equity Offering. SECTION 4.09. Approval Rights. (a) The Company hereby agrees not to enter into or adopt any Material Event (as defined below) without the prior written approval of the majority of the Representatives of the CSFB Plan Partner set forth on Exhibit B hereto, which approval with respect to clauses (i) and (ii) of the definition of "Material Event" will not be unreasonably withheld. For the purpose of this Section 4.09, "Material Event" means (i) any agreement to acquire a business with a total enterprise value of $250.0 million or more individually or any agreement to acquire a business if there have been one or more agreements during the immediately preceding twelve (12) month period for acquisitions(s) with a total enterprise value of $500.0 million or more (it being hereby agreed by the parties that the acquisition of Global Metal Technologies, Inc. shall be counted toward such $500.0 million threshold and that the acquisition of Simpson Industries, Inc. shall not be counted toward such threshold); (ii) the selection of a chief executive officer of the Company; (iii) any restructuring of debt or other similar transaction pursuant to which debt holders of the Company would hold twenty-five percent (25%) or more of the outstanding Capital Stock of the Company; and (iv) any liquidation, dissolution, winding-up of the affairs of the Company, whether voluntary or involuntary, or the filing of a voluntary petition in bankruptcy or the filing of a plan of reorganization. The Company hereby agrees to promptly give notice to the CSFB Plan Partner if the Company is contemplating any Material Event. The CSFB Plan Partner hereby agrees to notify the Company within ten (10) business days of the receipt of such notice as to whether it approves of the Material Event. Failure of the CSFB Plan Partner to notify the Company in writing within such ten (10) business day period of its approval or disapproval of the Material Event shall be deemed an approval by the CSFB Plan Partner of such Material Event. (b) The provisions of Section 4.09(a) shall terminate upon a Qualifying Public Equity Offering. SECTION 4.10. Transactions with Affiliates. Without the consent of the Requisite Investors, for so long as Sponsor directly or indirectly beneficially owns twenty percent (20%) or more of the outstanding shares of Common Stock of the Company, the Company and its subsidiaries will not enter into, or suffer to exist, any transaction with Sponsor or any of its Affiliates involving payments or other consideration in excess of $1.0 million. The foregoing restrictions will not apply to: (a) the payment of annual monitoring fees to Sponsor in an amount not to exceed (x) $4.0 million plus reimbursement of out-of-pocket expenses incurred by Sponsor in connection with the advisory services provided to the Company for the first -27- year after the date hereof and (y) not to exceed 0.25% of the consolidated assets of the Company in subsequent years; provided that such amount will not be less than $4.0 million plus reimbursement of out-of-pocket expenses incurred by Sponsor in connection with the advisory services provided to the Company; (b) the payment to Sponsor of advisory fees and out-of-pocket expense reimbursement in connection with an acquisition, divestiture or financing by the Company or any of its subsidiaries (but excluding sales and purchases of personal property in the ordinary course of business) provided that such fees shall be in an amount equal to 1% of the aggregate value of such transaction; (c) fees payable to Sponsor in connection with the Transactions and reimbursement of out-of-pocket expenses incurred by Sponsor in connection with the Transactions; (d) transactions involving the sale, purchase or lease of goods or services in the ordinary course of business and on an arm's-length basis between or among the Company or any of its subsidiaries and portfolio companies of Sponsor; (e) transactions between or among the Company or any of its subsidiaries; (f) issuances of Capital Stock to Sponsor and its Affiliates pursuant to, and in compliance with, Section 4.05; and (g) issuances of Common Stock to Sponsor and other Shareholders, as applicable (valued at $16.90 or more per share of Common Stock, unless otherwise determined by the Board of Directors of the Company) for cash, or in exchange for common stock, to provide for the acquisition by the Company or one of its subsidiaries of all of the outstanding Capital Stock of Simpson Industries, Inc. or Global Metal Technologies, Inc. (or any parent company thereof) either initially or within one (1) year after the acquisition thereof by Sponsor or one of its Affiliates (based on the cash equity provided by Sponsor and its Affiliates at the closing of any such acquisition). Notwithstanding the foregoing, the benefits of this Section 4.10 in favor of a class of Requisite Investors (other than Company Shareholder) shall terminate as to it individually when such class (including their respective Direct Permitted Transferees) ceases to own a number of shares of Common Stock that would equal at least a majority of the number of shares of Common Stock (appropriately adjusted for Adjustments) owned by such class immediately following the Transactions. The benefits of this Section 4.10 in favor of Company Shareholder will terminate as to Company Shareholder when Company Shareholder (i) ceases to have outstanding commitments or loans under the Subordinated Loan Agreement, (ii) owns, together with its Direct Permitted Transferees, less than $10.0 million of liquidation preference of Class A Preferred Stock and (iii) ceases to own, together with its Direct Permitted Transferees, at least 1,571,569 shares of Common Stock. ARTICLE V REGISTRATION RIGHTS SECTION 5.01. Company Registration. (a) Right to Piggyback on Registration of Stock. Subject to Section 5.01(c), if at any time or from time to time the Company proposes to register the Common -28- Stock under the 1933 Act in connection with a public offering (other than an Initial Public Offering consisting solely of primary Common Stock or in connection with the registration of shares of Common Stock issued to former shareholders of K-Tech Mfg., Inc. arising out of, or in lieu of, obligations existing prior to the Transactions) of such Common Stock on any form other than Form S-4 or Form S-8 or any similar successor forms or another form used for a purpose similar to the intended use for such forms (a "Piggyback Registration"), whether for its own account or for the account of one or more shareholders of the Company, the Company shall each such time promptly give each Shareholder written notice of such determination (in any event within 10 business days after its receipt of notice of any exercise of demand registration rights); provided, however, that such notice of a Piggyback Registration shall be given at least thirty (30) days prior to the anticipated filing date of such Piggyback Registration. Upon the written request of any Shareholder (the "Piggyback Holder") given within ten (10) business days after the providing of any such notice by the Company, the Company shall use its best efforts to cause to be registered under the 1933 Act all of the Registrable Securities held by such Shareholder that the Shareholder has requested to be registered; provided, however, that if, at any time after giving written notice of its intention to register any securities and prior to the effective date of the registration statement filed in connection with such registration, the Company shall determine for any reason not to register or to delay registration of such securities, the Company may, at its election, give written notice of such determination to each Piggyback Holder and (i) in the case of a determination not to register, shall be relieved of its obligation to register any Registrable Securities in connection with such registration (but not from any obligation of the Company to pay the registration expenses in connection therewith); and (ii) in the case of a determination to delay registering, shall be permitted to delay registering any Registrable Securities for the same period as the delay in registering such other securities. No registration effected under this Section 5.01 shall relieve the Company of its obligation to effect any registration upon demand under Section 5.02. The registration rights contained in Section 5.01 may be assigned to any Transferee or Permitted Transferee. (b) Selection of Underwriters. If any Piggyback Registration involves an underwritten primary offering, the Company shall have sole discretion in the selection of any underwriter or underwriters to manage such Piggyback Registration. (c) Priority on Piggyback Registrations. In the event that the Piggyback Registration includes an underwritten offering, the Company shall so advise the Shareholders as part of the written notice given pursuant to Section 5.01(a) and the registration rights provided in Section 5.01(a) shall be subject to the condition that if the managing underwriter or underwriters of a Piggyback Registration advise the Company in writing (a copy of which shall be provided to the applicable Shareholders) that in its opinion the number of Registrable Securities proposed to be sold in such Piggyback Registration exceeds the number which can be sold, and would materially adversely affect the price at which the Registrable Securities are to be sold, in such offering, the Company (or the Shareholders, as the case may be) will in- -29- clude in such registration only the number of Registrable Securities which, in the opinion of such underwriter or underwriters can be sold in such offering without such material adverse effect. The Registrable Securities so included in such Piggyback Registration shall be apportioned (i) first, either (x) in the case of a primary registration on behalf of the Company, to any shares of Common Stock that the Company proposes to sell, or (y) in the case of a secondary registration on behalf of a Shareholder, pro rata among the Holders on the basis of the number of Registrable Securities requested to be registered pursuant to such Demand Registration, (ii) second, pro rata among the Company Shareholder, RM and the HIP Co-Investors (and their respective Permitted Transferees), but only to the extent of shares of Common Stock of the Company held by them as of the date hereof (as adjusted by the Adjustments), and (iii) third, pro rata among other shares included in such Piggyback Registration, in each case according to the total number of shares of the Common Stock requested for inclusion by said selling stockholders, or in such other proportions as shall mutually be agreed to among such selling stockholders. SECTION 5.02. Demand Registration Rights. (a) Right to Demand. At any time after a Triggering Event, the Demand Holders may (subject in the case of Sponsor to Section 6.01), individually or collectively, make a written request, which request will specify the aggregate number of Registrable Securities to be registered and will also specify the intended methods of disposition thereof (the "Request Notice") to the Company for registration with the Commission under and in accordance with the provisions of the 1933 Act of all or part of the Registrable Securities then owned by Demand Holders (a "Demand Registration"); provided that the Company may, if the Board of Directors so determines in the exercise of its reasonable, good faith judgment that due to a pending or contemplated acquisition or disposition or public offering or other material event involving the Company it would be inadvisable to effect such Demand Registration at such time (but in no event after such registration statement has become effective), the Company may, upon providing the Demand Holders written notice (the "Delay Notice"), defer such Demand Registration for a single period with respect to such Demand Registration not to exceed one hundred thirty five (135) days. Upon receipt by the Company of a request (a "Demand Request") to effect a Demand Registration the Company will within 10 business days after the receipt of such notice, notify each other Demand Holder of such request and such other Demand Holder shall have the option to include its Registrable Securities in such Demand Registration pursuant to this Section 5.02. Subject to Section 5.02(f), the Company will register all other Registrable Securities which the Company has been requested to register by such other Demand Holders (each an "Incidental Demand Holder") pursuant to this Section 5.02 by written request given to the Company by such holders within 10 business days after the giving of such written notice by the Company to such other Demand Holders. The Company shall not be obligated to maintain a registration statement pursuant to a Demand Regis- -30- tration effective for more than (x) ninety (90) days or (y) such shorter period when all of the Registrable Securities covered by such registration statement have been sold pursuant thereto (the "Effectiveness Period"). Notwithstanding the foregoing, the Company shall not be obligated to effect more than one Demand Registration in any 90-day period or such longer period not to exceed 180 days as requested by an underwriter pursuant to Section 5.07. Upon any such request for a Demand Registration, the Company will deliver any notices required by Section 5.01 and 5.02 and thereupon the Company will, subject to Section 5.01(c) and 5.02(f) hereof use its best efforts to effect the prompt registration under the 1933 Act of: (i) the Registrable Securities which the Company has been so requested to register by Demand Holders as contained in the Request Notice, and (ii) all other Registrable Securities which the Company has been requested to register by the Piggyback Holders and Incidental Demand Holders, all to the extent required to permit the disposition of the Registrable Securities so to be registered in accordance with the intended method or methods of disposition of each seller of such Registrable Securities. (b) Number of Demand Registrations. The Company shall not be required to prepare and file a registration statement pursuant to this Section 5.02 if (i) a Rollover Demand Holder and its Direct Permitted Transferees cease to own at the time of making the Request Notice twenty-five percent (25%) or more of the shares of Common Stock of the Company owned as of the date hereof (as adjusted for Adjustments) and (ii) the Request Notice relates to less than twenty-five percent (25%) of the shares of Common Stock held by such Demand Holder. In addition, the Company will not be required to effect more than (i) two registrations pursuant to this Section 5.02 on behalf of Company Shareholder, (ii) one registration on behalf of RM pursuant to this Section 5.02, (iii) two registrations on behalf of CSFB pursuant to this Section 5.02; provided that CSFB will be afforded one additional Demand Registration in the event that CSFB has not been able to dispose of all of the Registrable Securities requested to be registered by CSFB with its initial two Demand Registrations; provided that the Company shall not be obligated to attend or participate in any "road shows" if such third and final Demand Registration is for less than 10% of the shares of Common Stock of the Company owned by CSFB immediately following the Transactions (as adjusted for Adjustments and (iv) one demand on behalf of the QI Demand Holders as a group (other than CSFB) pursuant to this Section 5.02. Sponsor and its Affiliates will be entitled to an unlimited number of Demand Registrations. It being understood that if two or more Demand Holders make a collective Demand Registration, such Demand Registration will count pursuant to this Section 5.02(b) as a Demand Registration for each such Demand Holder. It is hereby acknowledged and agreed by the parties that any Registrable Securities included in a registration statement on behalf of an Incidental Demand Holder will not count as a Demand Registration -31- for such Incidental Demand Holder. In connection with a Demand Registration by more than one Demand Holder or by a Demand Holder and Incidental Demand Holders, such Demand Holders and Incidental Demand Holders shall elect one such Holder to act as representative (the "DH Representative") in connection with such Demand Registration and the Company shall only be obligated to communicate with such DH Representative in connection with such Demand Registration. The Holders shall give the Representative any and all necessary powers of attorneys needed for the DH Representative to act on their behalf. (c) Revocation. Holders of a majority in number of the Registrable Securities to be included in a registration statement pursuant to this Section 5.02 may, at any time prior to the effective date of the registration statement relating to such Demand Registration, acting through their DH Representative revoke such request by providing a written notice thereof to the Company. The Holders of Registrable Securities who revoke such request shall reimburse the Company for all its expenses incurred in the preparation, filing and processing of the Registration Statement. If pursuant to the terms of this Section 5.02(c), the Holders reimburse the Company for its reasonable expenses incurred in the preparation, filing and processing of any registration statement requested and subsequently revoked by such Holders, the attempted registration by such requested and subsequently revoked registration statement shall not be deemed to be a Demand Registration. Notwithstanding the foregoing, the Holders of a majority in number of the Registrable Securities to be included in a registration statement pursuant to this Section 5.02 may, at any time within five days after receipt of any Delay Notice acting through their DH Representative revoke such request by providing written notice thereof to the Company and the attempted Demand Registration shall not be deemed to be a Demand Registration, notwithstanding that such Holders shall not reimburse the Company for any expenses incurred in the preparation, filing and processing of any Registration Statement. (d) Effective Registration. A registration will not count as a Demand Registration: (i) if a Holder determines in its good faith judgment to withdraw the proposed registration of any Registrable Securities requested to be registered by a Demand Holder (x) due to marketing or regulatory reasons subject to such Holder reimbursing the Company for its expenses in accordance with Section 5.02(c) above, or (y) due to a material adverse change in the Company (other than as a result of any action by the Holder); (ii) if such registration is interfered with by any stop order, injunction or other order or requirement of the Commission or other governmental agency or court for any reason (other than as a result of any action by the Holder) and the Company fails to promptly have such stop order, injunction or other order or requirement removed, withdrawn or resolved to the Holder's satisfaction; or (iii) the conditions to closing specified in the underwriting agreement or purchase agreement entered into in connection with the registration relating to any such demand are not satisfied (other than as a result of a default or breach thereunder by the relevant Holder). -32- (e) Selection of Underwriters. If any of the Registrable Securities covered by a Demand Registration are to be sold in an underwritten offering, the relevant Holder, or Holders, will have the right to select the managing underwriter(s) to administer the offering subject to the approval of the Company, which will not be unreasonably withheld. (f) Priority on Demand Registrations. If the managing underwriter or underwriters of a Demand Registration advise the Company in writing that in its or their opinion the number of Registrable Securities proposed to be sold in such Demand Registration exceeds the number which can be sold, or adversely affects the price at which the Registrable Securities are to be sold, in such offering, the Company will include in such registration only the number of Registrable Securities which, in the opinion of such underwriter or underwriters, can be sold in such offering without such material adverse effect. To the extent such Demand Registration includes Registrable Securities of more than one Holder, the Registrable Securities so included in such Demand Registration shall be apportioned (i) first, pro rata among such Holders based upon the number of shares of Common Stock owned by each Holder at the date of determination and (ii) second, pro rata among other shares of Common Stock included in such Demand Registration; provided that if such Demand Registration is effected pursuant to a Demand Request by either Company Shareholder or RM such number of Registrable Securities (as adjusted for Adjustments) of either Company Shareholder or RM that are owned by Company Shareholder and RM immediately following the Transactions will be included first without regard to the pro rata treatment described in clause (i) of this sentence. (g) Assignability of Demand Registration Rights. The rights offered a Shareholder pursuant to Section 5.02 are only assignable to a Direct Permitted Transferee. Notwithstanding the foregoing, CSFB will be able to assign its rights under this Article V to a Transferee that acquires from CSFB at least 25% of the shares of Common Stock owned by CSFB as of the date hereof (as adjusted for Adjustments). Any such assignment permitted hereunder shall be effected hereunder only by giving written notice thereof from both the transferee and the transferee to the Company. SECTION 5.03. Registration Procedures. It shall be a condition precedent to the obligations of the Company and any underwriter or underwriters to take any action pursuant to this Article V that the Shareholders requesting inclusion in any Piggyback Registration or Demand Registration (a "Registration") shall furnish to the Company such information regarding them, the Registrable Securities held by them, the intended method of disposition of such Registrable Securities, and such agreements regarding indemnification, disposition of such securities and other matters referred to in this Article V as the Company shall reasonably request and as shall be required in connection with the action to be taken by the Company. With respect to -33- any Registration which includes Registrable Securities held by a Shareholder, the Company will, subject to Sections 5.01 and 5.02 promptly: (a) Prepare and file with the Commission a registration statement on the appropriate form prescribed by the Commission and use its best efforts to cause such registration statement to become effective as soon as practicable thereafter; provided that the Company shall not be obligated to maintain such registration effective for a period longer than the Effectiveness Period; provided further that before filing a registration statement or prospectus or any amendments or supplements thereto, including documents incorporated by reference after the initial filing of the registration statement, the Company will furnish to the holders of the Registrable Securities covered by such registration statement and the underwriter or underwriters, if any, copies of or drafts of all such documents proposed to be filed, including documents incorporated by reference in the Prospectus and, if required by such holders, the exhibits incorporated by reference, at least three (3) business days prior thereto, which documents will be subject to the reasonable review of such holders and underwriters. Holders will have the opportunity to object to any information pertaining to such holders that is contained therein and the Company will make the corrections reasonably requested by such holders with respect to such information prior to filing any registration statement or amendment thereto or any prospectus or any supplement thereto; provided, however, that the Company will not file any registration statement or amendment thereto or any prospectus or any supplement thereto or any documents required to be incorporated by reference therein to which holders of a majority of the Registrable Securities covered by such registration statement or the underwriters, if any, shall reasonably object; (b) Prepare and file with the Commission such amendments and post-effective amendments to such registration statement and any documents required to be incorporated by reference therein as may be necessary to keep the registration statement effective for a period of not less than the Effectiveness Period (but not prior to the expiration of the time period referred to in Section 4(3) of the 1933 Act and Rule 174 thereunder, if applicable); cause the prospectus to be supplemented by any required prospectus supplement, and as so supplemented to be filed pursuant to Rule 424 under the 1933 Act; and comply with the provisions of the 1933 Act applicable to it with respect to the disposition of all Registrable Securities covered by such registration statement during the applicable period in accordance with the intended methods of disposition by the sellers thereof set forth in such registration statement or supplement to the prospectus; (c) Furnish to such Shareholder, without charge, such number of conformed copies of the registration statement and any post-effective amendment thereto, -34- as such Shareholder may reasonably request, and such number of copies of the prospectus (including each preliminary prospectus) and any amendments or supplements thereto, and any documents incorporated by reference therein as the Shareholder or underwriter or underwriters, if any, may request in order to facilitate the disposition of the securities being sold by the Shareholder (it being understood that the Company consents to the use of the prospectus and any amendment or supplement thereto by the Shareholder covered by the registration statement and the underwriter or underwriters, if any, in connection with the offering and sale of the securities covered by the prospectus or any amendments or supplements thereto); (d) Notify such Shareholder, at any time when a prospectus relating thereto is required to be delivered under the 1933 Act, when the Company becomes aware of the happening of any event as a result of which the prospectus included in such registration statement (as then in effect) contains any untrue statement of material fact or omits to state a material fact necessary to make the statements therein (in the case of the prospectus or any preliminary prospectus, in light of the circumstances under which they were made) not misleading and, as promptly as practicable thereafter, prepare and file with the Commission and furnish a supplement or amendment to such prospectus so that, as thereafter delivered to the investors of such securities, such prospectus will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; (e) In the case of an underwritten offering, enter into such customary agreements (including underwriting agreements in customary form) and make members of senior management of the Company available on a basis reasonably requested by the underwriters to participate in, "road show" and other customary marketing activities (including one-on-one meetings with prospective purchasers of the Registrable Securities) and cause to be delivered to the underwriters reasonable opinions of counsel to the Company in customary form, covering such matters as are customarily covered by opinions for an underwritten public offering as the underwriters may reasonably request and addressed to the underwriters; (f) Make available, for inspection by any seller of Registrable Securities, any underwriter participating in any disposition pursuant to a registration statement, and any attorney, accountant or other agent retained by any such seller or underwriter, all financial and other records, pertinent corporate documents and properties of the Company, and cause the Company's officers, directors, employees and independent accountants to supply all information reasonably requested by any such seller, underwriter, attorney, accountant or agent that are necessary to be reviewed by such person in connection with the preparation of such registration statement; -35- (g) If requested, cause to be delivered, immediately prior to the effectiveness of the registration statement (and, in the case of an underwritten offering, at the time of delivery of any Registrable Securities sold pursuant thereto), letters from the Company's independent certified public accountants addressed to each selling Shareholder (unless such selling Shareholder does not provide to such accountants the appropriate representation letter required by rules governing the accounting profession) and each underwriter, if any, stating that such accountants are independent public accountants within the meaning of the 1933 Act and the applicable rules and regulations adopted by the Commission thereunder, and otherwise in customary form and covering such financial and accounting matters as are customarily covered by letters of the independent certified public accountants delivered in connection with primary or secondary underwritten public offerings, as the case may be; (h) Provide a transfer agent and registrar for all such Registrable Securities not later than the effective date of the registration statement; (i) Use its best efforts to cause all securities included in such registration statement to be listed, by the date of the first sale of securities pursuant to such registration statement, on any national securities exchange, quotation system or other market on which the Common Stock is then listed or proposed to be listed by the Company, if any; (j) Make generally available to its security holders an earnings statement, which need not be audited, satisfying the provisions of Section 11(a) of the 1933 Act as soon as reasonably practicable after the end of the twelve (12)-month period beginning with the first month of the Company's first fiscal quarter commencing after the effective date of the registration statement, which statement shall cover said twelve (12)-month period; (k) After the filing of a registration statement, (i) promptly notify each Shareholder holding Registrable Securities covered by such registration statement of any stop order issued or, to the Company's knowledge, threatened by the Commission and of the receipt by the Company of any notification with respect to the suspension of the qualification of any Registrable Securities for sale under the applicable securities or blue sky laws of any jurisdiction and (ii) take all reasonable actions to obtain the withdrawal of any order suspending the effectiveness of the registration statement or the qualification of any Registrable Securities at the earliest possible moment; (l) Subject to the time limitations specified in paragraph (b) above, if requested by the managing underwriter or underwriters or such Shareholder, promptly incorporate in a prospectus supplement or post-effective amendment such information as the managing underwriter or underwriters or the Shareholder reasonably requests to -36- be included therein, including, without limitation, with respect to the number of shares being sold by the Shareholder to such underwriter or underwriters, the purchase price being paid therefor by such underwriter or underwriters and with respect to any term of the underwritten offering of the securities to be sold in such offering; and make all required filings of such prospectus supplement or post-effective amendment as soon as practicable after being notified of the matters to be incorporated in such prospectus supplement or post-effective amendment; (m) As promptly as practicable after filing with the Commission of any document which is incorporated by reference into a registration statement, deliver a copy of such document to such Shareholder; (n) On or prior to the date on which the registration statement is declared effective, use its best efforts to register or qualify, and cooperate with such Shareholder, the underwriter or underwriters, if any, and their counsel in connection with the registration or qualification of, the securities covered by the registration statement for offer and sale under the securities or blue sky laws of each state and other jurisdiction of the United States as the Shareholder or managing underwriter or underwriters, if any, requests in writing, to use its best efforts to keep each such registration or qualification effective, including through new filings, or amendments or renewals, during the Effectiveness Period do any and all other acts or things necessary or advisable to enable the disposition in all such jurisdictions of the Registrable Securities covered by the applicable registration statement; provided that the Company will not be required to qualify generally to do business in any jurisdiction where it is not then so qualified or to take any action which would subject it to general service of process in any such jurisdiction where it is not then so subject; (o) Cooperate with such Shareholder and the managing underwriter or underwriters, if any, to facilitate the timely preparation and delivery of certificates (not bearing any restrictive legends) representing securities to be sold under the registration statement, and enable such securities to be in such denominations and registered in such names as the managing underwriter or underwriters, if any, may request; and (p) Use its best efforts to cause the securities covered by the registration statement to be registered with or approved by such other governmental agencies, authorities or self-regulatory bodies within the United States as may be necessary to enable the seller or sellers thereof or the underwriter or underwriters, if any, to consummate the disposition of such Registrable Securities. At all times after an Initial Public Offering, the Company shall file all reports required to be filed by it under the 1933 Act and the 1934 Act and the rules and regulations adopted by the Commission thereunder, and take such further action as any Shareholders may -37- reasonably request, all to the extent required to enable such Shareholders to be eligible to sell Registrable Securities pursuant to Rule 144 (or any similar rule then in effect). The Shareholders, upon receipt of any notice from the Company of the happening of any event of the kind described in subsection (d) of this Section 5.03, will forthwith discontinue disposition of the securities until the Shareholders' receipt of the copies of the supplemented or amended prospectus contemplated by subsection (d) of this Section 5.03 or until it is advised in writing (the "Advice") by the Company that the use of the prospectus may be resumed, and has received copies of any additional or supplemental filings which are incorporated by reference in the prospectus, and, if so directed by the Company, each Shareholder will, or will request the managing underwriter or underwriters, if any, to, deliver, to the Company (at the Company's expense) all copies, other than permanent file copies then in such Shareholder's possession, of the prospectus covering such securities current at the time of receipt of such notice. In the event the Company shall give any such notice, the time periods mentioned in subsections (a), (b) and (n) of this Section 5.03 shall be extended by the number of days during the period from and including any date of the giving of such notice to and including the date when each seller of securities covered by such registration statement shall have received the copies of the supplemented or amended prospectus contemplated by subsection (d) of this Section 5.03 hereof or the Advice. SECTION 5.04. Registration Expenses. (a) Subject to Section 5.02(c), in the case of any Registration, the Company shall bear all expenses incident to the Company's performance of or compliance with Sections 5.01, 5.02 and 5.03 of this Agreement, including, without limitation, all Commission and stock exchange or National Association of Securities Dealers, Inc. registration and filing fees and expenses, fees and expenses of compliance with securities or blue sky laws (including, without limitation, reasonable fees and disbursements of counsel in connection with blue sky qualifications of the Registrable Securities), rating agency fees, printing expenses, messenger, telephone and delivery expenses, fees and disbursements of counsel for the Company and all independent certified public accountants and any fees and disbursements of underwriters customarily paid by issuers or sellers of securities (but not including any underwriting discounts or commissions, or transfer taxes, if any, attributable to the sale of Registrable Securities by a Piggyback Holder or Holder or fees and expenses of more than one counsel representing the Shareholders selling Registrable Securities under such Registration). (b) In connection with each registration initiated hereunder (whether a Demand Registration or a Piggyback Registration), the Company shall reimburse the holders covered by such registration or sale for the reasonable fees and disbursements of one law firm chosen by the holders of a majority of the number of shares of Registrable Securities included in such registration. -38- (c) The obligation of the Company to bear the expenses described in Section 5.04(b) and to reimburse the holders for the expenses described in Section 5.04(b) shall apply irrespective of whether a registration, once properly demanded, if applicable, becomes effective, is withdrawn or suspended, or is converted to another form of registration and irrespective of when any of the foregoing shall occur; provided, however, that the expenses for any registration statement withdrawn pursuant to 5.02(c) prior to its effectiveness at the request of a Holder (unless withdrawn following and due to a Delay Notice), any registration statement withdrawn solely at the request of a Holder, or any supplements or amendments to a registration statement or prospectus resulting from a misstatement furnished to the Company by a Holder, shall be borne by such Holder. SECTION 5.05. Indemnification. (a) Indemnification by the Company. The Company agrees to indemnify and hold harmless each Shareholder, its officers, directors, Affiliates and agents and each Person who controls (within the meaning of the 1933 Act or the 1934 Act) the Shareholder, including, without limitation any general partner or manager of any thereof, against all losses, claims, damages, liabilities and expenses (including reasonable counsel fees and disbursements) arising out of or based upon any untrue or alleged untrue statement of a material fact contained in any registration statement, prospectus or preliminary prospectus, or any amendment thereof or supplement thereto, in which such Shareholder participates in an offering of Registrable Securities or in any document incorporated by reference therein or any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein (in the case of the prospectus or any preliminary prospectus, in light of the circumstances under which they were made) not misleading, except insofar as the same are made in reliance on and in conformity with any information with respect to such Shareholder furnished in writing to the Company by such Shareholder expressly for use therein; provided, however, that the foregoing indemnity agreement with respect to any preliminary prospectus shall not inure to the benefit of any Shareholder from whom the Person asserting such loss, claim, damage or liability purchased the securities if it is determined that such loss, claim, damage or liability was caused by such Shareholder's failure to deliver to such Shareholder's immediate purchaser a current copy of the prospectus (if the current copy of the prospectus was required by applicable law to be so delivered) after the Company has furnished such Shareholder with a sufficient number of copies of such prospectus. The Company will also indemnify underwriters (as such term is defined in the 1933 Act), their officers and directors and each Person who controls such underwriters (within the meaning of the 1933 Act) to the same extent as provided above with respect to the indemnification of the Shareholders. -39- (b) Indemnification by the Shareholders. In connection with any registration statement in which a Shareholder is participating, each such Shareholder will furnish to the Company in writing such information and affidavits with respect to such Shareholder as the Company reasonably requests for use in connection with any registration statement or prospectus covering the Registrable Securities of such Shareholder and to the extent permitted by law agrees to indemnify and hold harmless the Company, its directors, officers and agents and each Person who controls (within the meaning of the 1933 Act or the 1934 Act) the Company, against any losses, claims, damages, liabilities and expenses arising out of or based upon any untrue statement of a material fact or any omission to state a material fact required to be stated therein or necessary to make the statements in the registration statement or prospectus or preliminary prospectus (in the case of the prospectus or preliminary prospectus, in light of the circumstances under which they were made) not misleading, to the extent, but only to the extent, that such untrue statement or omission is made in reliance on and in conformity with the information or affidavit with respect to such Shareholder so furnished in writing by such Shareholder expressly for use in the registration statement or prospectus; provided, however, that the obligation to indemnify shall be several, not joint and several, among such Shareholders and the liability of each such Shareholder shall be in proportion to and limited to the net amount received by such Shareholder from the sale of Registrable Securities pursuant to a registration statement in accordance with the terms of this Agreement. The indemnity agreement contained in this Section 5.05 shall not apply to amounts paid in settlement of any such loss, claim, damage, liability, action or proceeding if such settlement is effected without the consent of such seller (which consent shall not be unreasonably withheld or delayed). The Company and the holders of the Registrable Securities hereby acknowledge and agree that, unless otherwise expressly agreed to in writing by such holders, the only information furnished or to be furnished to the Company for use in any registration statement or prospectus relating to the Registrable Securities or in any amendment, supplement or preliminary materials associated therewith are statements specifically relating to (a) transactions or the relationship between such holder and its Affiliates, on the one hand, and the Company, on the other hand, (b) the beneficial ownership of shares of Common Stock by such holder and its Affiliates, (c) the name and address of such holder and (d) any additional information about such holder or the plan of distribution (other than for an underwritten offering) required by law or regulation to be disclosed in any such document. (c) Conduct of Indemnification Proceedings. Any Person entitled to indemnification hereunder will (i) give prompt written notice to the indemnifying party of any claim with respect to which it seeks indemnification and (ii) unless in such indemnified party's reasonable judgment a conflict of interest may exist between such indemnified and indemnifying parties with respect to such claim, permit such indemnifying party to assume the defense of such claim with counsel reasonably satisfactory to the indemnified party. The failure to so notify the indemnifying party shall not relieve the indemnifying party from any liability hereunder with respect to the action, except to the extent that such indemnifying party -40- is materially prejudiced by the failure to give such notice; provided, however, that any such failure shall not relieve the indemnifying party from any other liability which it may have to any other party. No indemnifying party in the defense of any such claim or litigation, shall, except with the consent of such indemnified party, which consent shall not be unreasonably withheld, consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release from all liability in respect of such claim or litigation. An indemnifying party who is not entitled to, or elects not to, assume the defense of a claim will not be obligated to pay the fees and expenses of more than one counsel for all parties indemnified by such indemnifying party with respect to such claim, unless in the reasonable judgment of any indemnified party there may be one or more legal or equitable defenses available to such indemnified party which are in addition to or may conflict with those available to any other of such indemnified parties with respect to such claim, in which event the indemnifying party shall be obligated to pay the reasonable fees and expenses of such additional counsel or counsels; provided, however, that such number of additional counsel must be reasonably acceptable to the indemnifying party. (d) Contribution. If for any reason the indemnification provided for in the preceding paragraphs (a) and (b) of this Section 5.05 is unavailable to an indemnified party as contemplated by the preceding paragraphs (a) and (b) of this Section 5.05, then the indemnifying party shall contribute to the amount paid or payable by the indemnified party as a result of such loss, claim, damage or liability in such proportion as is appropriate to reflect not only the relative benefits received by the indemnified party and the indemnifying party, but also the relative fault of the indemnified party and the indemnifying party, as well as any other relevant equitable considerations. In no event shall the liability of any selling Shareholder be greater in amount than the amount of net proceeds received by such Shareholder upon such sale or the amount for which such indemnifying party would have been obligated to pay by way of indemnification if the indemnification provided in paragraph (b) of this Section 5.05 had been available. SECTION 5.06. 1934 Act Reports. The Company agrees that at all times after it has filed a registration statement pursuant to the requirements of the 1933 Act relating to any class of equity securities of the Company, it will use its best efforts to file in a timely manner all reports required to be filed by it pursuant to the 1934 Act to the extent the Company is required to file such reports. Notwithstanding the foregoing, the Company may deregister any class of its equity securities under Section 12 of the 1934 Act or suspend its duty to file reports with respect to any class of its securities pursuant to Section 15(d) of the 1934 Act if it is then permitted to do so pursuant to the 1934 Act and rules and regulations thereunder. -41- SECTION 5.07. Holdback Agreements. (a) Whenever the Company proposes to register any of its equity securities under the 1933 Act for its own account (other than on Form S-4 or S-8 or any similar successor form or another form used for a purpose similar to the intended use of such forms) or is required to use its best efforts to effect the registration of any Registrable Securities under the 1933 Act pursuant to Section 5.01 or 5.02, each holder of Registrable Securities agrees by acquisition of such Registrable Securities not to effect any sale or distribution, including any sale pursuant to Rule 144 under the 1933 Act, or to request registration under Section 5.02 of any Registrable Securities within 10 days prior to and 90 days (unless advised by the managing underwriter that a longer period, not to exceed 180 days, is required, or such shorter period as the managing underwriter for any underwritten offering may agree) after the effective date of the registration statement relating to such registration, except as part of such registration or unless in the case of a private sale or distribution, the transferee agrees in writing to be subject to this Section 5.07. If requested by such managing underwriter, each holder of Registrable Securities agrees to execute a holdback agreement, in customary form, consistent with the terms of this Section 5.07(a). Notwithstanding the foregoing, no Shareholder will be restricted from selling any Registrable Securities if such Shareholder was not able to sell all of its Registrable Securities pursuant to such registration statement or such Shareholder and its Affiliates beneficially own a number of shares of Common Stock as of such date of determination equal to less than three percent (3%) of the outstanding Common Stock of the Company. (b) The Company agrees not to effect any sale or distribution of any of its equity securities or securities convertible into or exchangeable or exercisable for any of such securities within the 10 days prior to and during the 90 days (unless advised by the managing underwriter that a longer period, not to exceed 180 days, is required, or such shorter period as the managing underwriter for any underwritten offering may agree) beginning on the effective date of any underwritten Demand Registration or any underwritten Piggyback Registration (except as part of such underwritten registration or pursuant to registrations on Form S-8 or S-4 or any successor forms thereto), except that such restriction shall not prohibit (i) grants of employee stock options or other issuances of Capital Stock pursuant to the terms of a Company employee benefit plan, issuances by the Company of Capital Stock pursuant to the exercise of such options or the exercise of any other employee stock options outstanding on the date hereof, (ii) the Company from issuing shares of Capital Stock in private placements pursuant to Section 4(2) of the 1933 Act or in connection with a strategic alliance, or (iii) the Company from publicly announcing its intention to issue, or actually issuing, shares of Capital Stock to shareholders of another entity as consideration for the Company's acquisition of, or merger with, such entity. In addition, upon the request of the managing underwriter, the Company shall use its best efforts to cause each holder of its equity securities or any securities convertible into or exchangeable or exercisable for any of such securities whether outstanding on the date of this Agreement or issued at any time after the date of this Agreement (other -42- than any such securities acquired in a public offering), to agree not to effect any such public sale or distribution of such securities during such period, except as part of any such registration if permitted, and to cause each such holder to enter into a similar agreement to such effect with the Company. SECTION 5.08. Participation in Registrations. No Shareholder may participate in any Registration hereunder which is underwritten unless such Shareholder (a) agrees to sell its securities on the basis provided in any underwriting arrangements approved by the persons entitled hereunder to approve such arrangements, and (b) completes and executes all questionnaires, powers of attorney, underwriting agreements and other documents customarily required under the terms of such underwriting arrangements. SECTION 5.09. Remedies. Each Shareholder shall have the right and remedy to have the provisions of Sections 5.01 and 5.02 specifically enforced by any court having jurisdiction in the event that the Company materially breaches such provisions, and the Company shall reimburse such Shareholder for the reasonable costs of and expenses for counsel for such Shareholder incurred in connection with such proceeding. SECTION 5.10. Other Registration Rights. The Company will not grant any Person any demand or piggyback registration rights with respect to the Capital Stock of the Company other than registration rights that would not be in conflict or inconsistent with the rights of the Shareholders as set forth in this Article V. SECTION 5.11. Rule 144. The Company shall file any reports required to be filed by it under the 1933 Act and the 1934 Act and the rules and regulations adopted by the Commission thereunder, and it will take such further action as any holder may reasonably request to make available adequate current public information with respect to the Company meeting the current public information requirements of Rule 144(c) under the 1933 Act, to the extent required to enable such holder to sell Registrable Securities without registration under the 1933 Act within the limitation of the exemptions provided by (i) Rule 144 under the 1933 Act, as such Rule may be amended from time to time, or (ii) any similar rule or regulation hereafter adopted by the Commission. Notwithstanding the foregoing, nothing in this Section 5.11 shall be deemed to require the Company to register any of its securities pursuant to the 1934 Act. -43- ARTICLE VI RIGHTS OF HOLDERS OF CLASS A pREFERRED STOCK SECTION 6.01. Series A Preferred Stock. For so long as Company Shareholder or one of its Affiliates is the direct or indirect beneficial owner of at least $10.0 million in liquidation preference of Class A Preferred Stock, the Company will not (1) register for sale in any underwritten public offering any shares of Common Stock beneficially owned by Sponsor and its Affiliates or (2) redeem or repurchase any shares of Common Stock beneficially owned by Sponsor and its Affiliates out of the proceeds of any underwritten public offering by the Company, in any such case, without optionally redeeming or repurchasing all of the shares of Class A Preferred Stock owned by Company Shareholder and its Affiliates; provided, however, that if the Company has no such right to optionally redeem or repurchase all of the shares of Class A Preferred Stock, then the Company, at its option, may offer to purchase for cash all of the Class A Preferred Stock held by Company Shareholder and its Affiliates at a price equal to the liquidation preference of the Class A Preferred Stock, together with cumulated and unpaid dividends. The provisions of this Section 6.01 will no longer be operative once the Company has made such offer regardless of whether or not the Company Shareholder sells any shares of Class A Preferred Stock pursuant to such offer unless such offer is not effected because the Company does not purchase the shares of Class A Common Stock which Company Shareholder has requested be purchased. SECTION 6.02. Management Fee. For so long as Company Shareholder or any of its Affiliates is the direct or indirect beneficial owner of any Class A Preferred Stock, Sponsor agrees that any management fee due and owning to Sponsor by the Company will accrue but not be payable if at any time there are cumulated and unpaid dividends in respect of the Class A Preferred Stock. ARTICLE VII MISCELLANEOUS SECTION 7.01. Notices. All notices, requests and other communications to any party, hereunder shall be in writing (including bank wire, telex, facsimile or similar writing) and shall be given to such party at its address or telex or facsimile number set forth on the signature pages hereof or in the relevant Joinder Agreement or such other address or telex or facsimile number as such party may hereafter specify in writing to the Secretary of the Company for the purpose by notice to the party sending such communication. Each such notice, request or other communication shall be effective (i) if given by telex or facsimile, when such message is transmitted to the number -44- specified on the signature pages to this Agreement or any Joinder Agreement, (ii) if given by mail, three (3) business days after such communication is deposited in the mails registered or certified, return receipt requested, with postage prepaid, addressed as aforesaid, or (iii) if given by any other means, when delivered at the address specified on the signature pages to this Agreement or any Joinder Agreement. SECTION 7.02. Binding Effect; Benefits; Entire Agreement. This Agreement shall be binding upon and inure to the benefit of the parties to this Agreement and their respective successors and permitted assigns. Nothing in this Agreement, express or implied, is intended or shall be construed to give any person other than the parties to this Agreement or their respective successors or assigns any legal or equitable right, remedy or claim under or in respect of any agreement or any provision contained herein. This Agreement constitutes the entire agreement and understanding, and supersedes all prior agreements and understandings, both oral and written, between the parties hereto relating to the subject matter hereof. SECTION 7.03. Waiver. Any party hereto may by written notice to the other (a) extend the time for the performance of any of the obligations or other actions of any other party under this Agreement; (b) waive compliance with any of the conditions or covenants of any other party contained in this Agreement; and (c) waive or modify performance of any of the obligations of any other party under this Agreement. Except as provided in the preceding sentence, no action taken pursuant to this Agreement, including, without limitation, any investigation by or on behalf of any party, shall be deemed to constitute a waiver by the party taking such action of compliance with any representations, warranties, covenants or agreements contained herein. The waiver by any party hereto of a breach of any provision of this Agreement shall not operate or be construed as a waiver of any preceding or succeeding breach and no failure by any party to exercise any right or privilege hereunder shall be deemed a waiver of such party's rights or privileges hereunder or shall be deemed a waiver of such party's rights to exercise the same at any subsequent time or times hereunder. SECTION 7.04. Amendment. Other than as a result of the execution and delivery of a Joinder Agreement, this Agreement may not be amended, modified or supplemented in any respect except by a written instrument executed by each Shareholder and the Company; provided that this Agreement may be amended and restated or amended without consent of Shareholders for the addition of new shareholders after the date hereof if such addition does not adversely affect the rights of the Shareholders (it being agreed that the provision of demand registration rights and piggyback registration rights and tag-along rights on an equal basis with HIP Co-Investors will not constitute an adverse affect). -45- SECTION 7.05. Assignability. Neither this Agreement nor any right, remedy, obligation or liability arising hereunder or by reason hereof shall be assignable by either the Company or any Shareholder except as otherwise expressly stated hereunder or with the prior written consent of each other party. A Direct Permitted Transferee who executes a Joinder Agreement in accordance with the provisions hereof may be assigned any rights available hereunder (other than Section 4.06). All of the rights offered a Shareholder under this Agreement who executes a Joinder Agreement are assignable to a Transferee, except for the rights set forth in Sections 4.05, 4.06, 4.07, 4.08, 4.09, 4.10 and 5.02 (other than certain rights granted to CSFB pursuant to Section 5.02). The rights set forth in Sections 4.04 and 5.02 are assignable to a Transferee who executes a Joinder Agreement to the extent provided in Section 4.04 and 5.02(g), respectively. SECTION 7.06. Applicable Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York, regardless of the laws that might otherwise govern under applicable principles of conflicts of law that would require the application of the laws of another jurisdiction, and the parties irrevocably submit to (and waive immunity from) the jurisdiction of the federal and state courts located in the County of New York in the State of New York. SECTION 7.07. Specific Performance. The parties hereto agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the parties shall be entitled to an injunction or injunctions to prevent breaches of the provisions of this Agreement and to enforce specifically the terms and provisions hereof in any state or federal court of New York (this being in addition to any other remedy to which they are entitled at law or in equity), and each party hereto agrees to waive in any action for such enforcement the defense that a remedy at law would be adequate. SECTION 7.08. Severability. If any provision of this Agreement is declared by any court of competent jurisdiction to be illegal, void or unenforceable, all other provisions of the Agreement will not be affected and will remain in full force and effect. SECTION 7.09. Additional Securities Subject to Agreement. Each Shareholder agrees that any other shares of Common Stock of the Company which it hereafter acquires by means of a stock split, stock dividend, distribution, exercise of options or warrants or otherwise (other than pursuant to a public offering) whether by merger, consolidation or otherwise (including shares of a surviving corporation into which the shares of Common Stock of the Company are exchanged in such transaction) will be subject to the provisions of this Agree- -46- ment to the same extent as if held on the date hereof, including for purposes of constituting Registrable Securities hereunder. SECTION 7.10. Name Change. For the benefit of Company Shareholder, the Company agrees to change its corporate name (but not the trade names used by its businesses) to exclude "Masco" or a derivation thereof from its corporate name prior to consummating an Initial Public Offering of its Common Stock. SECTION 7.11. Section and Other Headings. The section and other headings contained in this Agreement are for reference purposes only and shall not affect the meaning or interpretation of this Agreement. SECTION 7.12. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original and all of which together shall be deemed to be one and the same instrument. A facsimile, telecopy or other reproduction of this Agreement may be executed by one or more parties hereto, and an executed copy of this Agreement may be delivered by one or more parties hereto by facsimile or similar instantaneous electronic transmission device pursuant to which the signature of or on behalf of such party can be seen, and such execution and delivery shall be considered valid, binding and effective for all purposes. At the request of any party hereto, all parties hereto agree to execute an original of this Agreement as well as any facsimile, telecopy or other reproduction hereof. SECTION 7.13. Termination of Certain Provisions. The provisions of this Agreement set forth in Sections 3.01, 3.02, 4.01, 4.02, 4.03, 4.04(b) (except as it relates to CSFB and Company Shareholder), 4.04(d) (except as it relates to CSFB and Company Shareholder) and 4.09 will terminate and be of no force and effect upon the occurrence of a Qualifying Public Equity Offering. The provisions of this Agreement set forth in Sections 4.04(a) (except as it relates to CSFB and Company Shareholder) and 4.05 will terminate and be of no force and effect upon the occurrence of an Initial Public Offering. The provisions of this Agreement set forth in Sections 4.04 (insofar as it relates to CSFB and Company Shareholder), 4.06, 4.07, 4.08 and 4.10 will terminate as to a particular Shareholder as set forth in such section. SECTION 7.14. ERISA Matters. The Company agrees to give Sponsor the rights set forth in Sections 4.07 and 4.08 to the extent Sponsor does not have the ability to designate a Person to the Board of Directors of the Company and failure to have the rights set forth in Section 4.07 or 4.08 would cause Sponsor to have an ERISA Problem. For purposes of this Section 7.14, "ERISA Problem" -47- means that the assets of Sponsor and its Affiliates would be considered "Plan Assets" within the meaning of 29 CFR 2510.3-101 due to the fact that Sponsor and its Affiliates do not have the rights specified in Section 4.07 or 4.08. SECTION 7.15. Regulatory Cooperation. If any Shareholder reasonably determines that, by reason of any existing or future federal or state rule, regulation, guideline, order, request or directive (whether or not having the force of law and whether or not failure to comply therewith would be unlawful) (collectively, a "Regulatory Requirement"), it is effectively restricted or prohibited from holding any of the shares of Common Stock (including any shares of Capital Stock or other securities distributable in any merger, reorganization, readjustment or other reclassification of such shares), the Company and the other Shareholders shall take such action as may be reasonably necessary to permit such Shareholder to comply with such Regulatory Requirement; provided, that no such action pursuant to this Section 7.15 shall adversely affect the Company, the rights of the other Shareholders hereunder or the rights, preferences, qualifications and limitations of any Capital Stock of the Company held by the other Shareholders; provided, further that neither the Company nor any Shareholder shall be required to purchase any of such shares of Common Stock as a result of such Regulatory Requirement. Such reasonable action to be taken may include the Company's authorization of one or more new classes of non-voting common stock that is otherwise substantially identical to the Common Stock then owned by such Shareholder and the amendment of the Company's certificate of incorporation or any other documents or instruments executed in connection with the shares held by such Shareholder. Such Shareholder shall give written notice to the Company and the other Shareholders of any such determination and the actions necessary to comply with such Regulatory Requirement, and the Company and such other Shareholders shall take all reasonably necessary steps to comply with such determination as expeditiously as possible. SECTION 7.16. Publicity. None of the parties hereto shall issue any press release or make any public disclosure regarding the transactions contemplated hereby unless such press release or public disclosure shall be approved by those parties mentioned in such press release or public disclosure in advance. Notwithstanding the foregoing, each of the parties hereto may, in documents required to be filed by it with the Commission or other regulatory bodies, make such statements with respect to the transactions contemplated hereby as each may be advised by counsel is legally necessary or advisable, and may make such disclosure as it is advised by its counsel is required by law. SECTION 7.17. Expenses. The Company agrees, if the Transactions are consummated, to reimburse each Qualified Investor for all reasonable out-of-pocket expenses arising in connection with the Transactions promptly (including, without limitation, and, in any event, within 30 days after any invoice or -48- other statement or notice), including all reasonable documented fees and expenses of counsel to such Qualified Investor incurred in connection with this Agreement and the transactions contemplated hereby and all reasonable out-of-pocket expenses incurred by such Qualified Investor for so long as such Person is a Qualified Investor in connection with the monitoring of its equity investment in the Company. [Signature Pages Follow] -49- IN WITNESS WHEREOF, the Company and each Shareholder have executed this Agreement as of the day and year first above written. MASCOTECH, INC. By: /s/ David B. Liner ------------------------------ Name: David B. Liner Title: Vice President Notices: 21001 Van Born Road Taylor, Michigan 48140 Attention: Chairman of the Board and General Counsel Facsimile: (313) 792-4107 With a copy to: Cahill Gordon & Reindel 80 Pine Street New York, New York 10005 Attention: Jonathan A. Schaffzin, Esq. Facsimile: (212) 269-5420 MASCO CORPORATION By: John R. Leekley ------------------------------------- Name: John R. Leekley Title: Senior Vice President Notices: 21001 Van Born Road Taylor, Michigan 48140 Attention: Chairman of the Board and General Counsel Facsimile: (313) 792-4107 With a copy to: Honigman Miller Schwartz and Cohn 2290 First National Building Detroit, Michigan 48226 Attention: Alan Stuart Schwartz, Esq. Facsimile: (313) 465-7575 RICHARD A. MANOOGIAN By: /s/ Richard A. Manoogian ---------------------------------- Notices: Richard A. Manoogian c/o Masco Corporation 21001 Van Born Road Taylor, Michigan 48140 Attention: Richard A. Manoogian Facsimile: (313) 792-6134 with a copy to: Bodman Longley & Dahling LLP 100 Renaissance Center Detroit, Michigan 48243 Attention: David M. Hempstead, Esq. Facsimile: (313) 393-7579 RICHARD AND JANE MANOOGIAN FOUNDATION By: /s/ Richard A. Manoogian ------------------------------------- Name: Richard A. Manoogian Title: President Notices: Richard and Jane Manoogian Foundation c/o Masco Corporation 21001 Van Born Road Taylor, Michigan 48140 Attention: Richard A. Manoogian Facsimile: (313) 792-6134 with a copy to: Eugene A. Gargaro, Jr., Esq. c/o Masco Corp. 21001 Van Born Road Taylor, Michigan 48140 Facsimile: (313) 792-6289 HEARTLAND ENTITY: HEARTLAND INDUSTRIAL PARTNERS, L.P. By: Heartland Industrial Associates L.L.C., its General Partner By: /s/ David A. Stockman --------------------------------------- Name: David A. Stockman Title: Managing Member Notices: Heartland Industrial Partners, L.P. 320 Park Avenue, 33rd Floor New York, New York 10022 Attention: David A. Stockman Facsimile: (212) 981-3535 and 55 Railroad Avenue Greenwich, Connecticut 06830 Attention: David A. Stockman Facsimile: (203) 861-2722 With a copy to: Cahill Gordon & Reindel 80 Pine Street New York, New York 10005 Attention: Jonathan A. Schaffzin, Esq. Facsimile: (212) 269-5420 HEARTLAND ENTITY: HEARTLAND INDUSTRIAL PARTNERS (FF), L.P. By: Heartland Industrial Associates L.L.C., its General Partner By: /s/ David A. Stockman ---------------------------------------- Name: David A. Stockman Title: Managing Member Notices: Heartland Industrial Partners, L.P. 320 Park Avenue, 33rd Floor New York, New York 10022 Attention: David A. Stockman Facsimile: (212) 981-3535 and 55 Railroad Avenue Greenwich, Connecticut 06830 Attention: David A. Stockman Facsimile: (203) 861-2722 With a copy to: Cahill Gordon & Reindel 80 Pine Street New York, New York 10005 Attention: Jonathan A. Schaffzin, Esq. Facsimile: (212) 269-5420 HEARTLAND ENTITY: HEARTLAND INDUSTRIAL PARTNERS (E1), L.P. By: Heartland Industrial Associates L.L.C., its General Partner By: /s/ David A. Stockman ----------------------------------------- Name: David A. Stockman Title: Managing Member: Notices: Heartland Industrial Partners, L.P. 320 Park Avenue, 33rd Floor New York, New York 10022 Attention: David A. Stockman Facsimile: (212) 981-3535 and 55 Railroad Avenue Greenwich, Connecticut 06830 Attention: David A. Stockman Facsimile: (203) 861-2722 With a copy to: Cahill Gordon & Reindel 80 Pine Street New York, New York 10005 Attention: Jonathan A. Schaffzin, Esq. Facsimile: (212) 269-5420 HEARTLAND ENTITY: HEARTLAND INDUSTRIAL PARTNERS (K1), L.P. By: Heartland Industrial Associates L.L.C., its General Partner By: /s/ David A. Stockman ------------------------------------------ Name: David A. Stockman Title: Managing Member Notices: Heartland Industrial Partners, L.P. 320 Park Avenue, 33rd Floor New York, New York 10022 Attention: David A. Stockman Facsimile: (212) 981-3535 and 55 Railroad Avenue Greenwich, Connecticut 06830 Attention: David A. Stockman Facsimile: (203) 861-2722 With a copy to: Cahill Gordon & Reindel 80 Pine Street New York, New York 10005 Attention: Jonathan A. Schaffzin, Esq. Facsimile: (212) 269-5420 HEARTLAND ENTITY: HEARTLAND INDUSTRIAL PARTNERS (C1), L.P. By: Heartland Industrial Associates L.L.C., its General Partner By: /s/ David A. Stockman ---------------------------------------- Name: David A. Stockman Title: Managing Member: Notices: Heartland Industrial Partners, L.P. 320 Park Avenue, 33rd Floor New York, New York 10022 Attention: David A. Stockman Facsimile: (212) 981-3535 and 55 Railroad Avenue Greenwich, Connecticut 06830 Attention: David A. Stockman Facsimile: (203) 861-2722 With a copy to: Cahill Gordon & Reindel 80 Pine Street New York, New York 10005 Attention: Jonathan A. Schaffzin, Esq. Facsimile: (212) 269-5420 LONG POINT CAPITAL FUND, L.P. By: /s/ Ira Starr ---------------------------------- Name: Ira Starr Title: Managing Director Notices: 767 Fifth Avenue New York, New York 10153 Attention: Ira Starr Facsimile: (212) 593-1888 With a copy to: Proskauer Rose LLP 1585 Broadway New York, NY 10036-8299 Attention: Peter Samuels, Esq. Facsimile: (212) 969-2900 LONG POINT CAPITAL PARTNERS, L.L.C. By: /s/ Ira Starr -------------------------------------- Name: Ira Starr Title: Managing Director Notices: 767 Fifth Avenue New York, New York 10153 Attention: Ira Starr Facsimile: (212) 593-1888 With a copy to: Proskauer Rose LLP 1585 Broadway New York, NY 10036-8299 Attention: Peter Samuels, Esq. Facsimile: (212) 969-2900 CRM 1999 ENTERPRISE FUND, LLC By: /s/ Jay Abramson ----------------------------------- Name: Jay Abramson Title: Exec. VP of Managing Member Notices: 520 Madison Avenue 32nd Floor New York, NY 10022 Attention: Edward Azimi Facsimile: (212) 371-3562 HIP CO-INVESTOR: KLEINWORT BENSON HOLDINGS, INC. By: /s/ Iain Leigh ----------------------------------- Name: Iain Leigh Title: Authorized Person By: /s/ John Walker ----------------------------------- Name: John Walker Title: Authorized Person Notices: 75 Wall Street 34th Floor New York, NY 10005 Attention: Alexander P. Coleman Adam Lichtenstein Facsimile: (212) 429-3139 With a copy to Kirkland & Ellis 153 East 53rd Street 39th Floor New York, NY 10022 Attention: Eunu Chun Facsimile: (212) 446-4900 HIP CO-INVESTOR: 75 WALL STREET ASSOCIATES, LLC By: Kleinwort Benson (USA), Inc. Its: Attorney-in-Fact By: /s/ Iain Leigh ------------------------------ Name: Iain Leigh Title: Authorized Person By: /s/ John Walker ------------------------------- Name: John Walker Title: Authorized Person Notices: 75 Wall Street 34th Floor New York, NY 10005 Attention: Alexander P. Coleman Adam Lichtenstein Facsimile: (212) 429-3139 With a copy to Kirkland & Ellis 153 East 53rd Street 39th Floor New York, NY 10022 Attention: Eunu Chun Facsimile: (212) 446-4900 HIP CO-INVESTOR: METROPOLITAN LIFE INSURANCE COMPANY By: /s/ James A. Wiviott ----------------------------------- Name: James A. Wiviott Title: Director Notices: Metropolitan Life Insurance Company Corporate Equities 334 Madison Avenue Convent Station, NJ 07961 Attention: Susan M. Garret Facsimile: (973) 254-3055 With a copy to: Metropolitan Life Insurance Company One Madison Avenue New York, NY 10010 Attention: Todd S. Shenkin, Esq. (Law, Area 6H) Facsimile: (212) 251-1673 and Metropolitan Life Insurance Company 4100 Boy Scout Boulevard Tampa, FL 33607 Attention: Desiree DiSalvo - Securities Accounting Facsimile: (813) 801-2506 HIP CO-INVESTOR: FIRST UNION CAPITAL PARTNERS, LLC By: /s/ A. Wellford Tabor ------------------------------------- Name: A. Wellford Tabor Title: Principal Notices: First Union Capital Partners One First Union Center, 12th Floor 301 South College Street Charlotte, NC 28288-0732 Attention: A. Wellford Tabor Facsimile: (704) 374-6711 With a copy to: Kennedy Covington Lobdell & Hickman, L.L.P. 100 North Tryon Street, Suite 4200 Charlotte, NC 28202-4006 Attention: Kevin P. Stichter Facsimile: (704) 331-7598 HIP CO-INVESTOR: GE CAPITAL EQUITY INVESTMENTS, INC. By: /s/ William R. Kraus ------------------------------------- Name: William R. Kraus Title: SVP Notices: GE Capital Equity Investments, Inc. 120 Long Ridge Road Stamford, CT 06927 Attention: Barbara J. Gould, Esq. Facsimile: (203) 357-3047 Attention: William R. Kraus Facsimile: (203) 357-6426 With a copy to: Winston & Strawn 200 Park Avenue New York, NY 10166 Attention: David B. Hertzog, Esq. Facsimile: (212) 294-4700 HIP CO-INVESTOR: CREDIT SUISSE FIRST BOSTON U.S. EXECUTIVE ADVISORS, L.P. By: /s/ Hartley R. Rogers ------------------------------------ Name: Hartley R. Rogers Title: Attorney-in-Fact Notices: Credit Suisse First Boston U.S. Executive Advisors, L.P. c/o Credit Suisse First Boston Advisory Partners, LLC Eleven Madison Avenue New York, New York 10010 Attention: Hartley R. Rogers Facsimile: (212) 325-2291 With a copy to: Skadden, Arps, Slate, Meagher & Flom LLP Four Times Square New York, New York 10036 Attention: Eileen T. Nugent Facsimile: (212) 735-2000 HIP CO-INVESTOR: CREDIT SUISSE FIRST BOSTON EQUITY PARTNERS (BERMUDA), L.P. By: /s/ Hartley R. Rogers ------------------------------------ Name: Hartley R. Rogers Title: Attorney-in-Fact Notices: Credit Suisse First Boston Equity Partners (Bermuda), L.P. c/o Credit Suisse First Boston Advisory Partners, LLC Eleven Madison Avenue New York, New York 10010 Attention: Hartley R. Rogers Facsimile: (212) 325-2291 With a copy to: Skadden, Arps, Slate, Meagher & Flom LLP Four Times Square New York, New York 10036 Attention: Eileen T. Nugent Facsimile: (212) 735-2000 HIP CO-INVESTOR: CREDIT SUISSE FIRST BOSTON EQUITY PARTNERS, L.P. By: /s/ Hartley R. Rogers ----------------------------------- Name: Hartley R. Rogers Title: Attorney-in-Fact Notices: Credit Suisse First Boston Equity Partners, L.P. c/o Credit Suisse First Boston Advisory Partners, LLC Eleven Madison Avenue New York, New York 10010 Attention: Hartley R. Rogers Facsimile: (212) 325-2291 With a copy to: Skadden, Arps, Slate, Meagher & Flom LLP Four Times Square New York, New York 10036 Attention: Eileen T. Nugent Facsimile: (212) 735-2000 HIP CO-INVESTOR: EMA PARTNERS FUND 2000, L.P. By: /s/ Hartley R. Rogers ------------------------------------- Name: Hartley R. Rogers Title: Attorney-in-Fact Notices: EMA Partners Fund 2000, L.P. c/o Credit Suisse First Boston Advisory Partners, LLC Eleven Madison Avenue New York, New York 10010 Attention: Hartley R. Rogers Facsimile: (212) 325-2291 With a copy to: Skadden, Arps, Slate, Meagher & Flom LLP Four Times Square New York, New York 10036 Attention: Eileen T. Nugent Facsimile: (212) 735-2000 EMA PRIVATE EQUITY FUND 2000, L.P. By: /s/ Hartley R. Rogers --------------------- Name: Hartley R. Rogers Title: Attorney-in-Fact EMA Private Equity Fund 2000, L.P. c/o Credit Suisse First Boston Advisory Partners, LLC Eleven Madison Avenue New York, New York 10010 Attention: Hartley R. Rogers Facsimile: (212) 325-2291 With a copy to: Skadden, Arps, Slate, Meagher & Flom LLP Four Times Square New York, New York 10036 Attention: Eileen T. Nugent Facsimile: (212) 735-2000 MERCHANT CAPITAL, INC. By: /s/ Edward Nadel ------------------------------------ Name: Edward Nadel Title: Vice President Merchant Capital, Inc. Eleven Madison Avenue New York, New York 10010 Attention: Edward Nadel Facsimile: (212) 325-1659 HIP CO-INVESTOR: BANCBOSTON CAPITAL INC. By: /s/ Mark H. DeBlois ---------------------------------- Name: Mark H. DeBlois Title: Managing Director Notices: BancBoston Capital Inc. 175 Federal Street, 10th Floor Boston, MA 02210 Attention: Daniel C. Reese Facsimile: (617) 434-1153 With a copy to: Bingham Dana LLP 150 Federal Street Boston, MA 02110-1726 Attention: Robert M. Wolf Facsimile: (617) 951-8736 PRIVATE EQUITY PORTFOLIO FUND II, LLC By: Fleet Bank, NA, its Manager By: /s/ Glen Holland -------------------------------- Name: Glen Holland Title: Director Notices: BancBoston Capital Inc. 175 Federal Street, 10th Floor Boston, MA 02210 Attention: Daniel C. Reese Facsimile: (617) 434-1153 With a copy to: Bingham Dana LLP 150 Federal Street Boston, MA 02110-1726 Attention: Robert M. Wolf Facsimile: (617) 951-8736 EXHIBIT A JOINDER AGREEMENT WHEREAS, the undersigned is acquiring simultaneously with the execution of this Agreement common stock (the "Common Stock"), par value $1.00 per share of MascoTech, Inc. (the "Company"); and WHEREAS, as a condition to the acquisition of the Common Stock, the undersigned has agreed to join in a certain Stockholders Agreement (the "Stockholders Agreement") dated as of November 28, 2000 among MascoTech, Inc. and the Shareholders (as such term is defined in the Stockholders Agreement); and WHEREAS, the undersigned understands that execution of this Agreement is a condition precedent to the acquisition of the Common Stock; NOW, THEREFORE, as an inducement to both the transferor of the Common Stock and the other Shareholders (as such term is defined in the Stockholders Agreement), to Transfer (as such term is defined in the Stockholders Agreement) and to allow the Transfer of the Common Stock to the undersigned, the undersigned agrees as follows: 1. The undersigned hereby joins in the Stockholders Agreement and agrees to be bound by the terms and provisions of the Stockholders Agreement as provided by the Stockholders Agreement. 2. The undersigned hereby consents that the certificate or certificates to be issued to the undersigned representing the Common Stock shall be legended as follows: "THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO (i) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED, OR (ii) AN APPLICABLE EXEMPTION FROM REGISTRATION THEREUNDER. ANY SALE PURSUANT TO CLAUSE (ii) OF THE PRECEDING SENTENCE MUST BE ACCOMPANIED BY AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY TO THE EFFECT THAT SUCH EXEMPTION FROM REGISTRATION IS AVAILABLE IN CONNECTION WITH SUCH SALE. THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE ALSO SUBJECT TO THE TERMS AND CONDITIONS, INCLUDING WITH RESPECT TO THE DIRECT OR INDIRECT TRANSFER THEREOF, OF A SHAREHOLDERS AGREEMENT DATED AS OF NOVEMBER 28, 2000. THE SHAREHOLDERS AGREEMENT CONTAINS, AMONG OTHER -2- THINGS, SIGNIFICANT RESTRICTIONS ON TRANSFER OF THE SECURITIES OF THE COMPANY. A COPY OF THE SHAREHOLDERS AGREEMENT IS AVAILABLE UPON REQUEST FROM THE COMPANY." IN WITNESS WHEREOF, the undersigned has executed this Agreement this ____ day of _______________, 20__. ________________________________________ Name: Title: Address: EXHIBIT B Representatives of CSFB Hartley R. Rogers Phone: (212) 325-4618 Fax: (212) 325-2291 Jay Finney Phone: (212) 325-4622 Fax: (212) 325-5553 Lee Wright Phone: (212) 325-2762 Fax: (212) 325-5553 SCHEDULE 2.04 Shareholder Common Shares Heartland Entities 12,261,251 Richard Manoogian 621,170* Richard and Jane Manoogian Foundation 661,260 Masco Corporation 2,492,248 Kleinwort Benson Holdings, Inc. 591,716 75 Wall Street Associates LLC 295,858 Metropolitan Life Insurance Company 591,716 First Union Capital Partners LLC 1,479,290 GE Capital Equity Investments Inc. 591,716 Credit Suisse First Boston Equity Partners, L.P. 6,247,530 Credit Suisse First Boston Equity Partners (Bermuda), L.P. 1,746,345 Credit Suisse First Boston U.S. Executive Advisors, L.P. 5,558 EMA Partners Fund 2000, L.P. 533,168 EMA Private Equity Fund 2000, L.P. 343,139 Merchant Capital, Inc. 177,515 BancBoston Capital Inc. 769,231 Private Equity Portfolio Fund II, LLC 118,343 - ---------- * Exclusive of 49,215 shares of restricted stock that will vest on the closing date of the Transactions (assuming no cash elections) and 147,645 shares of unvested restricted stock. -2- Shareholder Common Shares Long Point Capital Fund L.P. 581,025 Long Point Capital Partners LLC 10,692 CRM 1999 Enterprise Fund, LLC 59,172 EX-21 16 0016.txt LIST OF SUBSIDIARIES EXHIBIT 21 Subsidiaries of Mascotech, Inc. Name Jurisdiction of Incorporation or Organization Acme Office Group New York Arrow Specialty Company Delaware Cuyam Corporation Ohio ER Acquisition Corp. Delaware Gruppo Tov Sr.l Italy K.S. Disposition, Inc. Michigan K-Tech Mfg., Inc. Delaware Masco Industries International Sales, Inc. Barbados MascoTechLux S.a.r.l. Luxembourg MascoTech Europe S.a.r.l. Luxembourg MascoTech Europe, Inc. Delaware MascoTech GmbH Germany Gruppo Tov Sr.l. Italy H&B Hyprotec Technology OHG Germany Anton Bauer GmbH Germany Holzer GmbH & Co. OHG Germany Holzer Limited United Kingdom MascoTech 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 MascoTech Forming Technologies - Fort Wayne, Inc. Indiana MascoTech Services, Inc. Delaware MascoTech Sintered Components Limited United Kingdom MascoTech Sintered Components of Indiana, Inc. Delaware MascoTech 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. MascoTech Tubular Products, Inc. Michigan MASG Disposition, Inc. Michigan MASX Energy Services Group, Inc. Delaware MTSPC, Inc. Delaware NI Wheel, Incorporated Ontario Name Jurisdiction of Incorporation or Organization Plastic Form, Inc. Delaware Precision Headed Products, Inc. Delaware 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 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. -2- Name Jurisdiction of Incorporation or Organization 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 -3- EX-23.2 17 0017.txt CONSENT OF INDEPENDENT ACCOUNTANTS EXHIBIT 23.2 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the use in this Registration Statement on Form S-1 of our report dated February 25, 2000 relating to the financial statements of MascoTech, Inc., which appears in such Registration Statement. We also consent to the incorporation by reference in this Registration Statement of our report dated February 25, 2000 relating to the financial statement schedule of MascoTech, Inc. and our report dated February 17, 1998 relating to the financial statements of TriMas Corporation, which appear in MascoTech's 1999 Annual Report on Form 10-K for the year ended December 31, 1999. We also consent to the references to us under the headings "Experts" and "Selected Historical Financial Data" in such Registration Statement. /s/ PricewaterhouseCoopers LLP Detroit, Michigan December 21, 2000 -----END PRIVACY-ENHANCED MESSAGE-----