UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported) DECEMBER 23, 2004
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MASCO CORPORATION
(Exact name of Registrant as Specified in Charter)
DELAWARE 1-5794 38-1794485
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(State or Other Jurisdiction (Commission File Number) (IRS Employer
of Incorporation) Identification No.)
21001 VAN BORN ROAD, TAYLOR, MICHIGAN 48180
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(Address of Principal Executive Offices) (Zip Code)
(313) 274-7400
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Registrant's telephone number, including area code
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions:
[ ] Written communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17
CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
ITEM 1.01: ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT
ITEM 2.03: CREATION OF A DIRECT FINANCIAL OBLIGATION OR AN OBLIGATION UNDER AN
OFF-BALANCE SHEET ARRANGEMENT OF A REGISTRANT
On December 23, 2004, Masco Corporation ("Masco") closed its offer to
exchange up to $1,874,978,000 aggregate principal amount at maturity of its
newly issued Zero Coupon Convertible Senior Notes, Series B due 2031 (the "New
Notes") for an equal amount of its currently outstanding Zero Coupon Convertible
Senior Notes due 2031 (the "Old Notes"). In connection with the exchange offer,
Masco and J.P. Morgan Trust Company entered into the Second Supplemental
Indenture (the "Second Supplemental Indenture"), dated as of December 23, 2004,
which supplemented the Indenture, dated as of February 12, 2001, between Masco
and J.P. Morgan Trust Company, National Association (as successor-in-interest to
Bank One Trust Company, National Association) as trustee (as so supplemented,
the "Indenture") and which governs the New Notes. The following description of
the Supplemental Indenture and the New Notes is qualified in its entirety by the
Supplemental Indenture, which is filed herewith as Exhibit 10.1.
An affiliate of J.P. Morgan Trust Company is a depository of funds of,
makes loans to and performs other services for Masco from time to time in the
normal course of business. Masco's Chairman of the Board and Chief Executive
Officer, Richard A. Manoogian, serves as a director of JP Morgan Chase & Co., an
affiliate of J.P. Morgan Trust Company.
The material terms and conditions of the Supplemental Indenture and the
New Notes governed thereby are as follows:
PRINCIPAL AMOUNT AT MATURITY.
The aggregate principal amount at maturity of the New Notes is $1,872,488,000.
MATURITY.
The New Notes will mature on July 20, 2031.
YIELD TO MATURITY.
The New Notes will accrete at a value of 3.125% per year (computed on a
semi-annual bond equivalent basis) from an initial principal amount of $438.65
to $1,000 principal amount at maturity.
OPTIONAL CONVERSION TO SEMI-ANNUAL CASH PAY NOTES UPON A TAX EVENT.
If certain tax-related events were to occur and Masco were to so elect, the New
Notes will cease to accrete, and cash interest will accrue at a rate of 3.125%
per annum on the restated principal amount and be payable semi-annually in
arrears.
CONTINGENT INTEREST.
Masco will pay contingent interest to the holders of New Notes during any
six-month period from January 20 to July 19 and from July 20 to January 19,
commencing January 20, 2007, if the average market price of a New Note for the
five trading days ending on the second trading day
immediately preceding the beginning of the relevant six-month period equals 120%
or more of the accreted value of such note on the day immediately preceding the
beginning of the relevant six-month period. The amount of contingent interest
payable per New Note in respect of any six-month period will equal the greater
of (1) cash dividends paid by Masco per share on its common stock during that
six-month period multiplied by the number of shares of common stock equal to the
sum of (A) the number of shares of common stock with a value equal to the
principal return on such date and (B) the net share amount and (2) 0.125% of
such average market price of a new note for the five-trading-day period referred
to above.
CONVERSION RIGHTS.
Holders of the New Notes may convert the New Notes into shares of Masco common
stock prior to the close of business on July 20, 2031 if any of the following
conversion conditions are satisfied:
(1) the average per share sale price of Masco common stock for the 20
trading days immediately prior to the conversion date is at least a
specified percentage, beginning at 119% and declining 1/3% each year
thereafter until it reaches 110-1/3% for the year beginning July 20,
2030, of the accreted value of a New Note, divided by the conversion
rate;
(2) the credit rating assigned to the New Notes by either Moody's
Investors Service, Inc. or Standard & Poor's Ratings Group is
reduced to below investment grade, as defined in the Indenture;
(3) Masco calls the New Notes for redemption;
(4) Masco makes specified distributions to its shareholders; or
(5) Masco becomes a party to a consolidation, merger or binding share
exchange pursuant to which its common stock would be converted into
cash, securities or other property.
SETTLEMENT UPON CONVERSION.
Subject to certain exceptions, at the time the New Notes are tendered for
conversion, the aggregate value (the "conversion value") of the cash and shares
of Masco common stock, if any, to be received by the tendering holders will be
determined by multiplying the applicable conversion rate by the applicable stock
price. Upon conversion of New Notes, Masco will deliver the conversion value for
each $1,000 principal amount at maturity of New Notes as follows: (1) cash in an
amount (the "principal return") equal to the lesser of (A) the accreted value of
each New Note to be converted and (B) the conversion value, and (2) if the
conversion value is greater than the applicable accreted value of each New Note,
a number of shares of Masco common stock (the "net shares") equal to the sum of
the daily share amounts (as defined in the Indenture); provided that, Masco may,
at its option, deliver cash or a combination of cash and shares of Masco common
stock with a value equal to the net shares.
The initial conversion rate will be 12.7243 shares of Masco common stock per New
Note with a principal amount at maturity of $1,000 and is subject to adjustment.
MAKE WHOLE AMOUNT AND CHANGE OF CONTROL.
If certain transactions that constitute a change of control occur on or prior to
January 20, 2007, under certain circumstances, Masco will increase the
conversion rate by a number of additional shares for any conversion of New Notes
in connection with such transactions. The amount of additional shares will be
determined based on the conversion date and the closing sale price of Masco
common stock on the conversion date (or, if the New Notes are converted after
the effective date of the change of control transaction, the closing sale price
of Masco common stock immediately prior to the effectiveness of the
transaction). A description of how the additional shares will be determined and
a table showing the additional shares that would apply at various stock prices
and conversion dates based on assumed interest and conversion rates are set
forth in the Indenture. No additional shares will be added to the conversion
rate if the stock price is less than $25.51 per share or if the stock price
exceeds $50.00 per share, subject to adjustment.
If such transaction constitutes a public acquirer change of control (as defined
in the Indenture), in lieu of increasing the conversion rate, Masco may elect to
adjust its conversion obligation such that upon conversion of the New Notes,
Masco will deliver cash and acquirer common stock.
CONVERSION RATE ADJUSTMENTS.
Under certain circumstances, the conversion rate will be adjusted for (1)
distributions on Masco common stock payable in Masco common stock or other
capital stock of Masco, (2) subdivisions, combinations or certain
reclassifications of Masco common stock, (3) distributions to all holders of
Masco common stock of certain rights to purchase Masco common stock for a period
expiring within 60 days at less than the stock price of Masco common stock
prevailing at that time, (4) Masco self-tenders, (5) prior to January 20, 2007,
cash dividends on Masco common stock and (6) certain distributions to such
holders of Masco's assets, debt securities or certain rights to purchase Masco's
securities.
OPTIONAL REDEMPTION.
Prior to January 25, 2007, Masco may redeem all but not part of the New Notes,
at their accreted value, only if the closing price for Masco common stock on the
New York Stock Exchange exceeds the conversion price of the New Notes by 130%
for a specified period of time. Masco may, at any time on or after January 25,
2007, redeem for cash all or a portion of the New Notes at their accreted value.
REPURCHASE BY MASCO AT THE OPTION OF THE HOLDER.
Holders may require Masco to purchase their New Notes for cash on any one of the
following dates at the following prices:(1) On January 20, 2005 at a price of
$439.67 per new note; (2) On January 20, 2007 at a price of $467.80 per new
note; (3) On July 20, 2011 at a price of $537.85 per new note, plus accrued and
unpaid contingent interest, if any; (4) On July 20, 2016 at a price of $628.06
per new note, plus accrued and unpaid contingent interest, if any; (5) On July
20, 2021 at a price of $733.39 per new note, plus accrued and unpaid contingent
interest, if any; and (6) On July 20, 2026 at a price of $856.38 per new note
plus accrued and unpaid interest, if any.
RANKING.
The New Notes are Masco's general obligations and will not be secured by any
collateral. The right to payment under the New Notes will be junior to the
rights of Masco's secured creditors to the extent of their security in Masco's
assets, equal with the rights of creditors under Masco's other unsecured
unsubordinated debt, including the Old Notes and Masco's revolving credit
facility; and senior to the rights of creditors under debt expressly
subordinated to the New Notes.
EVENTS OF DEFAULT.
The Indenture contains customary events of default.
ITEM 9.01: FINANCIAL STATEMENTS AND EXHIBITS
(c) Exhibits
10.1 Second Supplemental Indenture between Masco and J.P. Morgan Trust
Company, National Association, as trustee, dated as of December 23,
2004 (including form of Zero Coupon Convertible Senior Note, Series
B due 2031).
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MASCO CORPORATION
By: /s/ Timothy Wadhams
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Name: Timothy Wadhams
Title: Senior Vice President and
Chief Financial Officer
December 23, 2004
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
10.1 Second Supplemental Indenture between Masco and J.P. Morgan
Trust Company, National Association, as trustee, dated as of
December 23, 2004 (including form of Zero Coupon Senior
Convertible Note, Series B due 2031).