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EXHIBIT 10.s
CONFORMED
STOCK PURCHASE AGREEMENT
THIS AGREEMENT is made as of this 23rd day of December, 1991 by and
between Masco Corporation, a Delaware corporation ("Masco"), and Masco
Industries, Inc., a Delaware corporation ("Industries").
Masco and Industries each own one share of the two issued and outstanding
shares of Masco Capital Corporation, a Delaware corporation ("Masco Capital"),
which has been jointly managed by Masco and Industries. Its most significant
investment was the Junior Subordinated Discount Debentures of Payless Cashways,
Inc. which were recently sold. Related bank loans and indebtedness to the
shareholders have been fully repaid. Masco Capital has also made a
distribution of its retained earnings.
Due to Masco Capital's reduced scope, Masco and Industries deem it
appropriate to place the management of Masco Capital under the exclusive
control of Masco. Further, Industries desires a return of its original capital
investment and to be relieved of the responsibility to provide additional funds
to satisfy its pro rata portion of Masco Capital's future funding obligations.
Accordingly, Industries has agreed to sell and Masco has agreed to purchase
Industries' 50% interest in Masco Capital. In light of the fact that Masco
Capital's investments generally have no public market, their current value,
which is believed to be in excess of the current book value, is uncertain. The
parties anticipate that the uncertainty will significantly decrease over the
next three years as the investments are liquidated. Therefore, the parties
have structured this purchase and sale to pay Industries a small premium over
its current carrying cost of Masco Capital and to provide that Industries will
be in at least as favorable an after-tax financial position at the time of
settlement of obligations as it would have been in if the Masco Capital
investment portfolio were frozen as of December 20, 1991 and then liquidated
over time and the proceeds of the liquidation distributed prior to December 31,
1994.
NOW, THEREFORE, in consideration of the above premises and the agreements
set forth herein, the parties hereto agree as follows:
1. Conditions Precedent. The respective obligations of Masco and
Industries to consummate the transactions contemplated by this Agreement are
subject to (i) the approval on behalf of Masco by the Oversight Committee of
the Masco Board of Directors and (ii) the approval on behalf of Industries by
the Oversight Committee of the Industries Board of Directors.
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2. Agreement to Purchase and Sell. Subject to the terms and conditions of
this Agreement, Industries agrees to sell, transfer and convey all of its
right, title and interest in and to one share of the capital stock, par value
$1.00 per share, of Masco Capital (the "Masco Capital Share") and Masco agrees
to purchase the Masco Capital Share.
3. Delivery by Industries. At the Closing of the transactions
contemplated hereby (the "Closing"), Industries shall deliver to Masco a
certificate representing the Masco Capital Share registered in the name of
Industries and endorsed to Masco Corporation. The Closing shall be held at the
offices of Masco Capital in Taylor, Michigan on December 30, 1991 at 10:00 a.m.
or at such other time or place as mutually agreed upon by the parties hereto.
4. Payment. The aggregate purchase price shall be equal to the sum of (i)
the Closing Price (as hereinafter defined) and (ii) (A) one-half of the
Incremental Value (as hereinafter defined) less (B) $5,200,000, and less (C)
interest on the Closing Price accrued and compounded annually at a rate
equivalent to Masco's average after-tax cost of bank borrowing from the Closing
to the date of payment of such one-half of the Incremental Value; provided,
however, that if Masco has no bank borrowings at a time during the term hereof,
the interest rate during such time shall be the equivalent of an after-tax cost
of 1% under the Prime Rate of NBD Bank, N.A. The aggregate purchase price
shall be payable as follows:
(a) The Closing Price shall be $49,451,500 (representing 50% of the Net
Book Value indicated on the balance sheet Masco Capital prepared as of December
20, 1991 and heretofore initialled by the parties plus $5,200,000) and shall be
paid upon the delivery of the Masco Capital Share as provided in Section 3.
For purposes of this Agreement, the term Net Book Value shall mean Total
Shareholders' Equity of Masco Capital without reflecting any write up or write
down in the carrying value of the assets or liabilities of Masco Capital as a
result of a change in the fair market value of such assets or liabilities.
(b) Subject to the provisions of Section 10 hereof, the amount determined
under Section 4(ii) shall be paid at the earlier of (i) thirty days after the
date on which the Valuation (as hereinafter defined) is completed but no later
than December 31, 1994 and (ii) thirty days after the date on which the last of
the Investments (as hereinafter defined) shall have been sold, liquidated or
otherwise turned into cash.
(c) Investments shall mean the investments and assets of Masco Capital
existing on December 20, 1991.
(d) Incremental Value shall mean the total of:
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(i) for Investments that are sold, liquidated or otherwise turned
into cash, the aggregate of the gain or loss on each such Investment
determined with reference to the carrying cost of each such Investment;
plus or minus
(ii) for Investments which have not been sold, liquidated or
otherwise turned into cash, and all non-cash proceeds (received or
receivable) relating thereto, including, without limitation, dividends,
interest, additional securities and securities derived from such
Investments by way of reorganization, recapitalization or otherwise (the
"Proceeds"), the aggregate gain or loss determined with reference to the
carrying cost of each such Investment and based on a Valuation of such
Investment (and Proceeds) on September 30, 1994; plus
(iii) the aggregate of Masco Capital's dividend and interest income
from (x) the Investments, (y) the Proceeds thereof and (z) cash realized
on sale, liquidation or otherwise turning into cash of Investments from
December 20, 1991 until September 30, 1994; minus
(iv) all management and other fees relating to the Investments paid
or payable to the investment advisors and managers of the partnerships
which hold the Investments and all legal, accounting, management and
other expenses reasonably incurred by Masco Capital relating to
Investments, in each case from December 20, 1991 until September 30,
1994; minus
(v) all federal, state and local taxes paid or payable on the
aggregate income from the Investments, including without limitation
dividends, interest and the gain and loss of such Investments which have
been sold, liquidated or otherwise turned into cash and an appropriate
reserve (to be determined by Masco in its sole discretion) to cover all
such taxes which may be due after September 30, 1994 based on the
Valuation of all Investments which have not been sold, liquidated or
otherwise turned into cash at such date.
(e) For purposes of this Agreement, Valuation shall mean the value placed
on the Investments (and Proceeds), which have not been sold, liquidated or
otherwise turned into cash on or before September 30, 1994, by the respective
Oversight Committees of the Boards of Directors of Masco and Industries acting
jointly. However, if such directors do not unanimously agree on such value,
the value of the Investments (and Proceeds) shall be determined by the
valuation department or group of Masco's independent public accountants (which,
unless Masco informs Industries otherwise, shall be Coopers & Xxxxxxx), and the
persons performing the valuation (the "Valuation Group") shall take into
account all relevant business and management considerations using customary
valuation techniques. If at such time Masco's independent public
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accountants do not have a valuation department or group, then Masco shall
have the right to select another independent entity to serve as the "Valuation
Group" which, in Masco's reasonable judgment, is experienced and reputable with
respect to such matters. All determinations by the Valuation Group shall be
final and binding.
(f) Masco and Industries acknowledge that the Net Book Value of
$88,503,000 is based on the best information contained in the books and records
of Masco Capital at December 20, 1991. As soon as practicable after the
Closing (but no later than February 1, 1992) Masco Capital shall prepare a
final balance sheet as of December 20, 1991 based on the books and records of
Masco Capital setting forth an exact Net Book Value and deliver such balance
sheet to Masco and Industries. If Industries shall not have delivered a
written objection to Masco within 10 business days of receipt of such balance
sheet, such balance sheet will become final. If the Oversight Committee of the
Industries Board of Directors does deliver a timely written objection with
which Masco does not agree, the balance sheet will be delivered to Coopers &
Xxxxxxx for a final determination of the correct Net Book Value, which shall be
made no later than March 15, 1992. Upon the final determination of the Net
Book Value on such balance sheet, Masco and Industries shall adjust the Closing
Price based thereon by, (A) if such Net Book Value has increased from
$88,503,000, paying one-half of such increase to Industries in cash within 3
business days of such determination and (B) if such Net Book Value has
decreased, by deducting such decrease from the Incremental Value. Masco
Capital shall also prepare a definitive list of Investments and the carrying
cost thereof as of the Closing.
(g) In no event shall the purchase price hereunder be less than the
Closing Price as finally determined pursuant to Section 4(f) hereof.
5. Subsequent Fundings by Masco. (a) If after December 20, 1991 Masco
should provide any additional funds to Masco Capital, Industries shall not
share in any gain or loss resulting from such funds or be paid any amount as
interest, dividends or otherwise relating thereto and any interest expense on
such additional funds shall be disregarded for all purposes hereunder.
(b) Notwithstanding the determination of Incremental Value in accordance
with Section 4 hereof, if during the term hereof Masco Capital supplies funds
to a partnership for an investment in an existing Investment and such
additional investment has an impact on the value of the Investment which is
disproportionate to the Investment (as valued by the Oversight Committees
acting jointly at the time of such additional investment) and not reflected in
the value of any security received by Masco in respect of such additional
investment, the Valuation of such Investment (and Proceeds) at September 30,
1994 (or, in the case of an Investment previously sold, liquidated, or
otherwise turned into cash, the amount of gain or loss realized and Proceeds
thereof) shall be
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equitably adjusted by action of the Committees or, if such
Committees cannot reach unanimous agreement, by the Valuation Group provided in
Section 4(e).
6. Termination of Fee Agreement. The Fee Agreement dated as of December
16, 1988 among Masco, Industries and Masco Capital is hereby terminated as of
December 20, 1991 and no liability of any kind will arise to either party from
prior performance or neglect of its terms other than payment of fees up to and
including such date.
7. Payless Preferred Supplier Agreement. It is Masco's current
intention, so long as Masco is a party to the Supply Agreement dated as of
August 4, 1988 by and between Masco and Payless Cashways, Inc., that Masco
shall continue to designate Industries and its subsidiaries "affiliated
companies" under Article I thereof; provided, however, that Masco is under no
obligation to keep the Supply Agreement in effect, and provided further that
Masco may in its sole discretion terminate such designation at any time upon
reasonable notice.
8. Management of Masco Capital. From the date hereof, Masco shall have
the sole right to manage Masco Capital, make investment decisions and take all
other acts which it may deem necessary or appropriate and Masco shall have no
liability to Industries with respect to such management, investment decisions
or any other matter involving Masco Capital based on action or inaction of
Masco or recklessness, misfeasance, gross negligence or negligence of Masco or
of any of its officers, directors, employees, shareholders or agents in the
handling of Masco Capital's affairs; provided, however, that if Masco is
requested or required by one of the partnerships managing an Investment to make
a decision which may affect the value of such Investment, Masco will notify
Industries before it makes such decision.
9. Funding Commitments. Masco and Masco Capital hereby release
Industries from any and all current or future funding commitments of Masco
Capital which Industries may have or have had with respect to the Investments
or the partnerships holding the Investments or otherwise and Masco agrees to
hold Industries harmless from any loss occasioned by an attempt by any entity
to enforce any such funding commitment.
10. Termination and Distribution. (a) Notwithstanding anything in this
Agreement to the contrary, if the Oversight Committees of the Boards of
Directors of Masco and Industries jointly determine that it is inappropriate to
pay all or part of the Incremental Value based on the Valuation as of September
30, 1994, or if they otherwise jointly determine to defer such Valuation or
payment, then such Committees may in their sole discretion set such payment to
occur in whole or in part after a Valuation on September 30, 1995 or September
30, 1996 and pay only such portion of the Incremental Value prior to December
31, 1994 as
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such Committees shall jointly determine. In such case all references to
September 30, 1994 in Section 4 or Section 5 hereof will be deemed to refer to
such later valuation date.
(b) Notwithstanding anything in this Agreement to the contrary, the
Oversight Committees of the Boards of Directors of Masco and Industries, acting
jointly, may determine following the liquidation of one or more Investments
that it is appropriate for Masco to make a cash payment to Industries prior to
December 31, 1994 (or December 31, 1995 or 1996 as the case may be) as an
advance against amounts that such Committees believe may subsequently be due to
Industries hereunder. Such advances may be made on such terms (including a
requirement that Industries agree to repay such advance if, after sale,
liquidation or otherwise turning into cash of all Investments, the advance was
not warranted) as such Committees may establish.
11. Liquidation of Masco Capital. Nothing in this Agreement shall
preclude Masco from reorganizing, merging, combining or liquidating and winding
up Masco Capital; provided, however, in the event of such a transaction or
series of transactions Masco shall keep separate accounts to enable it to
satisfy its obligations hereunder.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date and year first above written.
MASCO CORPORATION
By /s/ Xxxxxxx X. Xxxxxxxxx
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MASCO INDUSTRIES, INC.
By /s/ Xxxxxxx Xxxxxxx
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Masco Capital Corporation accepts and agrees to the provisions of this
Agreement relating to it.
MASCO CAPITAL CORPORATION
By /s/ Xxxx X. Xxxxxxx
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