SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
FORM 10-K
 ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000 COMMISSION FILE NUMBER 1-5794
MASCO CORPORATION
 (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

                DELAWARE                                      38-1794485
        (State of Incorporation)                 (I.R.S. Employer Identification No.)

 21001 VAN BORN ROAD, TAYLOR, MICHIGAN                          48180
(Address of Principal Executive Offices)                      (Zip Code)	

Registrant's Telephone Number, Including Area Code: 313-274-7400
Securities Registered Pursuant to Section 12(b) of the Act:

                                                  NAME OF EACH EXCHANGE
          TITLE OF EACH CLASS                      ON WHICH REGISTERED
          -------------------                     ---------------------
Common Stock, $1.00 par Value                 New York Stock Exchange, Inc.
Series A Participating Cumulative
  Preferred Stock Purchase Rights             New York Stock Exchange, Inc.	

Securities Registered Pursuant to Section 12(g) of the Act:
None
Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X]
The aggregate market value of the Registrant's Common Stock held by non-affiliates of the Registrant on March 15, 2001 (based on the closing sale price of $23.50 of the Registrant's Common Stock, as reported by the New York Stock Exchange on such date) was approximately $10,489,374,000.
Number of shares outstanding of the Registrant's Common Stock at March 15, 2001:
459,140,000 shares of Common Stock, par value $1.00 per share
Portions of the Registrant's definitive Proxy Statement to be filed for its 2001 Annual Meeting of Stockholders are incorporated by reference into Part III of this Report.

MASCO CORPORATION
2000 ANNUAL REPORT ON FORM 10-K
TABLE OF CONTENTS

ITEM                                                                    PAGE
----                                                                    ----
                                   PART I
 1.     Business....................................................      2
 2.     Properties..................................................      6
 3.     Legal Proceedings...........................................      7
 4.     Submission of Matters to a Vote of Security Holders.........      7
        Supplementary Item. Executive Officers of Registrant........      8

                                  PART II
 5.     Market for Registrant's Common Equity and Related
          Stockholder Matters.......................................      8
 6.     Selected Financial Data.....................................      9
 7.     Management's Discussion and Analysis of Financial Condition
          and Results of Operations.................................      9
 8.     Financial Statements and Supplementary Data.................     21
 9.     Changes in and Disagreements with Accountants on Accounting
          and Financial Disclosure..................................     44

                                  PART III
10.     Directors and Executive Officers of the Registrant..........     44
11.     Executive Compensation......................................     44
12.     Security Ownership of Certain Beneficial Owners and
          Management................................................     44
13.     Certain Relationships and Related Transactions..............     44

                                  PART IV
14.     Exhibits, Financial Statement Schedules, and Reports on Form
          8-K.......................................................     45
        Signatures..................................................     48

                        FINANCIAL STATEMENT SCHEDULE
        Valuation and Qualifying Accounts...........................    F-1	

1
 
PART I
ITEM 1. BUSINESS.
Masco Corporation manufactures, sells and installs home improvement and building products, with emphasis on brand name products and services holding leadership positions in their markets. The Company is among the largest manufacturers in North America of brand name consumer products designed for the home improvement and home building industries. The Company's operations consist of five business segments, which are based on similarities in products and services. The following table sets forth, for the three years ended December 31, 2000, the contribution of the Company's segments to net sales and operating profit. Additional financial information concerning the Company's operations by segments as of and for the three years ended December 31, 2000 is set forth in the Note to the Company's Consolidated Financial Statements captioned "Segment Information," included in Item 8 of this Report.

                                                               (IN THOUSANDS)
                                                     NET SALES(1)
                                         ------------------------------------
                                            2000         1999         1998
                                         ----------   ----------   ----------
Cabinets and Related Products..........  $2,551,000   $2,220,000   $1,908,000
Plumbing Products......................   1,839,000    1,803,000    1,667,000
Decorative Architectural Products......   1,395,000    1,165,000      919,000
Insulation Installation and Other
  Services.............................     855,000      532,000      250,000
Other Specialty Products...............     603,000      587,000      536,000
                                         ----------   ----------   ----------
          Total........................  $7,243,000   $6,307,000   $5,280,000
                                         ==========   ==========   ==========	

                                                OPERATING PROFIT(1)(2)
                                         ------------------------------------
                                            2000         1999         1998
                                         ----------   ----------   ----------
Cabinets and Related Products..........  $  323,000   $  320,000   $  295,000
Plumbing Products......................     284,000      378,000      369,000
Decorative Architectural Products......     250,000      122,000      167,000
Insulation Installation and Other
  Services.............................     123,000       79,000       30,000
Other Specialty Products...............      86,000      104,000       91,000
                                         ----------   ----------   ----------
          Total........................  $1,066,000   $1,003,000   $  952,000
                                         ==========   ==========   ==========	

(1) Amounts for 1998 have been restated to include the operations of merged companies accounted for in pooling-of-interests transactions.
(2) Amounts are before general corporate expense and include goodwill amortization.
More than 80% of the Company's sales are generated by operations in North America (primarily in the United States). International operations (primarily in Europe) comprise the balance. European operations are located principally in Denmark, Germany and England.
Mergers and acquisitions have been a key factor in the Company's growth. During 2000 and early 2001, the Company acquired several businesses with aggregate annual sales of approximately $1.3 billion. The most significant transactions during 2000 were the acquisitions of Tvilum-Scanbirk A/S, a Danish manufacturer of ready-to-assemble cabinetry, shelving, storage units and workstations, and Masterchem Industries, Inc., a manufacturer and supplier of paint primer and related products. In early 2001, the Company acquired BSI Holdings, Inc., a provider of installed insulation and other products in the United States and Canada. More information about these transactions is set forth in the following discussion and under "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in Item 7 of this Report. Except as the context otherwise indicates, the terms "Masco" and the "Company" refer to Masco Corporation and its consolidated subsidiaries.
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RECENT DEVELOPMENTS
In November 2000, the Company reduced its common equity ownership in Metaldyne Corporation (formerly MascoTech, Inc.) to approximately 7%. The Company received cash and preferred stock for its divested shares of Metaldyne, and Metaldyne holds an option to issue up to $100 million in subordinated debt securities to the Company. In December 2000, the Company adopted a plan to dispose of several businesses that the Company believes are not core to its long-term growth strategies. See Management's Discussion and Analysis of Financial Condition and Results of Operations included in Item 7 of this Report.
CABINETS AND RELATED PRODUCTS
The Company manufactures economy, stock and semi-custom, assembled and ready-to-assemble kitchen and bath cabinetry in the United States in a broad range of styles and price points. The Company's cabinets are sold in North America under a number of trademarks, including MERILLAT(R), KRAFTMAID(R), QUALITY CABINETS(R), STARMARK(R) and MILL'S PRIDE(R), with sales to distributors, home centers and dealers and direct to builders for both the home improvement and new construction markets. The Company also manufactures bathroom storage products under the brand name ZENITH PRODUCTS(R). In Europe, the Company manufactures assembled and ready-to-assemble kitchen, bath, home office and storage cabinetry, shelving, storage units, workstations and other products under such brand names as TVILUM(TM), SCANBIRK(TM), SYSTEMA(TM), FAARUP(TM), VESTERGAARD(TM), THE MOORES GROUP(TM), ALMA KUCHEN(TM), ALVIC(TM), XEY(TM) and GRUMAL(TM), with sales in Europe through distribution channels that parallel domestic distribution.
The cabinet manufacturing industry in the United States and Europe is very competitive, with several large competitors and hundreds of smaller companies. Management believes that the Company is the largest manufacturer of kitchen and bath cabinetry in North America. Significant competitors are Aristokraft, Shrock, American Woodmark and Omega.
PLUMBING PRODUCTS
In North America, the Company manufactures and markets a wide variety of faucet and showering devices under several brand names. The most widely known of these are the DELTA(R) and PEERLESS(R) single and double handle faucets, used in kitchen, lavatory and other sinks and in bath and shower installations. DELTA(R) faucets are sold by manufacturers' representatives and Company sales personnel to major retail accounts and to distributors who sell the faucets to plumbers, building contractors, remodelers, smaller retailers and others. PEERLESS(R) faucets, designed for the "do-it-yourself" market, are sold primarily through manufacturers' representatives directly to retail outlets such as mass merchandisers, home centers and hardware stores and are also sold under private label. Showerheads, handheld showers and valves are sold under ALSONS(R), MIXET(R) and PLUMB SHOP(R) brand names. The Company manufactures faucets and various other plumbing products for the European markets under the brand names DAMIXA(R), GUMMERS(R), NEWTEAM(TM) and MARIANI(TM) and sells them through multiple distribution channels.
The percentage of operating profit to net sales on faucets is somewhat higher than that on most other products offered by the Company. The Company believes that the quality, styling and reliability of and available finishes for its faucets, manufacturing efficiencies and capabilities, its marketing and merchandising activities, and the development of a broad line of products, have accounted for the continued strength of its faucet sales. Management believes that Masco's faucet operations hold a leadership position in the North American market, with Moen, Price Pfister, Kohler and American Standard as major brand competitors. Competition from import products is also a significant factor in the Company's markets. There are several major competitors among the European manufacturers of faucets and accessories, primarily in Germany and Italy, and hundreds of smaller companies throughout Europe and Asia.
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Other plumbing products sold by the Company include AQUA GLASS(R) acrylic and gelcoat bath and shower units and whirlpools, and MIROLIN(R) bath units, which are sold primarily to wholesale plumbing distributors for use in the home improvement and new home construction markets. Bath and shower enclosure units, shower trays and laundry tubs are sold under the brand names AMERICAN SHOWER & BATH(TM), PLASKOLITE(TM) and TRAYCO(TM). These products are sold to home centers, hardware stores and mass merchandisers for the "do-it-yourself" market. The Company's spas and hot tubs are sold under the brand name HOT SPRING SPA(R) and other trademarks directly to retailers for sale to residential customers.
Also included in plumbing products are brass and copper plumbing system components and other plumbing specialties, which are sold to plumbing, heating and hardware wholesalers and to home centers, hardware stores, building supply outlets and other mass merchandisers. These products are marketed in North America for the wholesale trade under the BRASSCRAFT(R) trademark and for the "do-it-yourself" market under the PLUMB SHOP(R), HOME PLUMBER(R) and MASTER PLUMBER(R) trademarks and are also sold under private label. Other plumbing products for the international market include HUPPE(R) luxury bath and shower enclosures sold by the Company through wholesale channels primarily in Germany. HERITAGE(TM) ceramic and acrylic bath fixtures and faucets are sold in the United Kingdom directly to selected retailers. GLASS(TM) acrylic baths, whirlpools and steam shower enclosures are sold in Italy and other European countries.
DECORATIVE ARCHITECTURAL PRODUCTS
The Company manufactures architectural coatings, including paints, specialty paint products, stains, varnishes and waterproofings. BEHR(R) products and MASTERCHEM(R) specialty paint products, including KILZ(R) brand primers, are sold in the United States and Canada primarily to the "do-it-yourself" market through home centers. Competitors in the architectural coatings market include large multinational companies such as Sherwin-Williams, ICI Paints and PPG Industries, Inc. as well as numerous smaller regional and national companies.
The Company manufactures decorative bath and shower accessories under the brand names BALDWIN(R), FRANKLIN BRASS(R) and MELARD(TM). Also in the Decorative Architectural Products category are premium BALDWIN(R) quality brass trim and mortise lock sets, knobs and trim and other builders' hardware, which are manufactured and sold for the home improvement and new home construction markets. LIBERTY HARDWARE(R) cabinet and builders' hardware is produced and sold to original equipment manufacturers as well as to the home center and wholesale markets. WEISER(R) lock sets and related hardware are sold through contractor supply outlets, hardware distributors and home centers. Key competitors to Baldwin and Weiser in the North American lock set market are Kwikset and Schlage. Imported products are also a significant factor in this market.
AVOCET(R) builders' hardware products, including locks and door and window hardware, are distributed to home centers and other retailers, builders and original equipment door and window manufacturers, primarily in the United Kingdom.
The Company features on many of its decorative brass faucets and other products a durable coating that offers tarnish protection and scratch resistance, under the trademarks BRILLIANCE(R) and THE LIFETIME FINISH FROM BALDWIN(R). This innovative finish is currently available on many of the Company's kitchen and bath products and door hardware.
INSULATION INSTALLATION AND OTHER SERVICES
Through local offices of Gale Industries, Inc. and Cary Corporation in various parts of the United States, the Company supplies and installs insulation and other products primarily for the residential home building industry. In early 2001, the Company significantly increased its installation operations with the acquisition of BSI Holdings, Inc., a leading provider and installer of insulation and other products. Davenport Insulation Group, acquired in late 2000, is one of the leading installers of insulation in the eastern United States. The Company also performs restoration services for
4
residential, commercial and institutional facilities damaged principally by natural disasters through local offices of INRECON.
OTHER SPECIALTY PRODUCTS
The Company offers a complete line of manual and electric staple gun tackers, staples and other fastening tools under the brand name ARROW(R), sold through various distribution channels including wholesalers, home centers and other retailers. SAFLOK(R) electronic lock sets and WINFIELD(R) mechanical lock sets are sold primarily to the hospitality market. The Company manufactures grilles, registers and diffusers for heating and cooling systems under the trademark AMERICAN METAL PRODUCTS(TM) and decorative registers under REGISTERS UNIQUE(TM), which are sold through wholesale distribution and home centers.
Commercial ventilating products are manufactured and distributed by the Company in Europe under the GEBHARDT(TM) brand name. The Company also manufactures residential hydronic radiators and heat convectors under the brand names VASCO(R), BRUGMAN(TM) and SUPERIA(TM) and distributes to the European market from operations in Belgium and Holland. JUNG(TM) water pumps are manufactured and distributed by the Company primarily in Germany.
ADDITIONAL INFORMATION
- Direct sales of the Company's product lines to home center retailers have increased substantially in recent years, and in 2000 sales to The Home Depot were $1,866 million (approximately 26 percent of total sales). Although builders, dealers and other retailers represent other channels of distribution for the Company's products, the Company believes that the loss of The Home Depot as a customer would have a material adverse impact on the Company.
- The major markets for the Company's products are highly competitive. Competition in all of the Company's product lines is based primarily on performance, quality, style, delivery, customer service and price, with the relative importance of such factors varying among products.
- The Company's international operations are subject to political, monetary, economic and other risks attendant generally to international businesses. These risks generally vary from country to country.
- Financial information concerning the Company's export sales and foreign and domestic operations, including the net sales, operating profit and assets which are attributable to the Company's segments and to the Company's North American and International operations, as of and for the three years ended December 31, 2000, is set forth in Item 8 of this Report in the Note to the Company's Consolidated Financial Statements captioned "Segment Information."
- Although the Decorative Architectural Products Segment experiences stronger sales during the second and third calendar quarters as compared with other quarters, corresponding to peak building and remodeling seasons, no material portion of the Company's business is seasonal.
- The Company maintains a higher investment in inventories for certain of its businesses than the average manufacturing company, a result of its strategies of providing superior customer service, establishing efficient production scheduling and benefiting from larger, more cost-effective purchasing, but otherwise has no special working capital requirements.
- The Company does not consider backlog orders to be material.
- No material portion of the Company's business is subject to renegotiation of profits or termination of contracts at the election of the U.S. government.
5
- Compliance with federal, state and local regulations relating to the discharge of materials into the environment, or otherwise relating to the protection of the environment, is not expected to result in material capital expenditures by the Company or to have a material adverse effect on the Company's earnings or competitive position.
- In general, raw materials required by the Company are obtainable from various sources and in the quantities desired, although from time to time certain operations may encounter shortages or unusual price changes.
PATENTS AND TRADEMARKS
The Company holds United States and foreign patents covering its vapor deposition finish and various design features and valve constructions used in certain of its faucets, and holds numerous other patents and patent applications, licenses, trademarks and trade names. As a manufacturer of brand name consumer products, the Company views its trademarks and other proprietary rights as important, but does not believe that there is any reasonable likelihood of a loss of such rights that would have a material adverse effect on the Company's present business as a whole.
EMPLOYEES
At December 31, 2000, the Company employed approximately 48,600 people. Satisfactory relations have generally prevailed between the Company and its employees.
ITEM 2. PROPERTIES.
In general, each of the Company's business units arranges for the manufacturing, distribution and other facilities that will meet its operating needs. The Company has approximately 70 manufacturing facilities and approximately 60 warehousing and distribution facilities throughout North America, including several in Canada and Mexico. The majority of the Company's manufacturing facilities range in size from approximately 10,000 square feet to over 1,000,000 square feet. The Company owns most of its manufacturing facilities and none of the Company-owned properties is subject to significant encumbrances. A substantial number of its warehousing and distribution facilities are leased.
In addition, the Company operates branch locations throughout North America that supply and install insulation and other products. Other branch locations provide restoration services to buildings damaged principally by natural disasters. The majority of the service locations are leased.
Operations outside of North America consist of approximately 50 manufacturing and 40 distribution facilities, most of which are located in Denmark, Germany, England and Spain. The manufacturing facilities are generally owned by the Company and the distribution facilities are primarily leased.
The Company's corporate headquarters are located in Taylor, Michigan and are owned by the Company. The Company owns an additional building near its corporate headquarters that is used by its corporate research and development department.
The Company's buildings, machinery and equipment have been generally well maintained, are in good operating condition, and are adequate for current production and distribution requirements.
6
 
ITEM 3. LEGAL PROCEEDINGS.
In May 1998, a civil suit was filed in the Grays Harbor County, Washington Superior Court against Behr Process Corporation, a subsidiary of the Company. The case involves four exterior wood coating products, which represent a relatively small part of Behr's total sales. The plaintiffs allege, among other things, that after applying these products, the wood surfaces suffered excessive mildewing in the very humid climate of western Washington. The trial court certified the case as a class action, including all purchasers of the products who reside in nineteen counties in western Washington. Behr denies the allegations. Although Behr believes that the subject products have been purchased by thousands of consumers in western Washington, consumer complaints in the past have been relatively small compared to the total volume of products sold. In May 2000, the court entered a default against Behr as a discovery sanction. Thereafter, the jury returned a verdict awarding damages to the named plaintiffs. The damages awarded for the eight homeowner claims (excluding one award to the owners of a vacation resort) ranged individually from $14,500 to $38,000. The awards were calculated using a formula based on the product used, the nature and square footage of wood surface and certain other allowances. Under the verdict, the same formula will be used for calculating awards on claims that may be submitted by the subject purchasers of these products. In July 2000, the court awarded additional damages of $10,000 per claim to the eight homeowner claims, under the Washington Consumer Protection Act. This increased the total damages awarded on the homeowner claims to approximately $263,000. The court denied the plaintiffs' request for an award of additional damages on claims that may be submitted by other class members. In addition, the court granted the plaintiffs' motion for attorneys' fees.
Behr is appealing the judgment. At this time, the Company is not in a position to estimate reliably the number of class members, the number of claims that may be filed or the awards that class members may seek. Although Behr is not able to estimate the amount of any potential liability, Behr believes that there have been numerous rulings by the trial court that constitute reversible error and that there are valid defenses to the lawsuit. The Company has made no provision for any potential loss in the Company's consolidated financial statements.
Behr has also been served with sixteen complaints filed by consumers in state courts in Alabama, California, New York, Oregon, and Washington; and in a provincial court in British Columbia, Canada. The complaints allege that some of Behr's exterior wood coating products fail to perform as warranted, resulting in damage to the plaintiffs' wood surfaces. Some of the complaints seek nationwide class action certification; others seek class action certification for one state or region. Discovery in the lawsuits has only recently begun. Proceedings in the eleven California actions will be coordinated in the San Joaquin, California Superior Court.
In addition, Behr and the Company have recently been notified that complaints containing similar allegations have been filed in state court in Juneau, Alaska and in a provincial court in Ontario, Canada. These complaints have not yet been served.
Behr and the Company are defending the lawsuits and believe that there are substantial grounds for denial of class action certification and that there are substantial defenses to the claims.
Two of Behr's liability insurers are participating in Behr's defense of the class actions subject to a reservation of rights. One insurer has filed a declaratory judgment action in the Orange County, California Superior Court seeking a declaration that the claims asserted in the class action complaints are not covered by Behr's insurance policies. The other insurer was named as a defendant in the suit and has filed cross-claims against Behr seeking a similar declaration.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
7
 
SUPPLEMENTARY ITEM. EXECUTIVE OFFICERS OF REGISTRANT (PURSUANT TO INSTRUCTION 3 TO ITEM 401(b) OF REGULATION S-K).

                                                                                                OFFICER
                    NAME                                       POSITION                   AGE    SINCE
                    ----                                       --------                   ---   -------
Richard A. Manoogian.........................  Chairman of the Board and Chief            64     1962
                                                 Executive Officer
Raymond F. Kennedy...........................  President and Chief Operating Officer      58     1989
Dr. Lillian Bauder...........................  Vice President -- Corporate Affairs        61     1996
David A. Doran...............................  Vice President -- Taxes                    59     1984
Daniel R. Foley..............................  Vice President -- Human Resources          59     1996
Eugene A. Gargaro, Jr. ......................  Vice President and Secretary               58     1993
John R. Leekley..............................  Senior Vice President and General          57     1979
                                                 Counsel
Richard G. Mosteller.........................  Senior Vice President -- Finance           68     1962
Robert B. Rosowski...........................  Vice President -- Controller and           60     1973
                                                 Treasurer	

Executive officers, who are elected by the Board of Directors, serve for a term of one year or less. Each elected executive officer has been employed in a managerial capacity with the Company for over five years except for Mr. Foley and Dr. Bauder. Mr. Foley was employed by Metaldyne Corporation (formerly MascoTech, Inc.) as its Vice President -- Human Resources from 1994 to 1996. From 1984 to 1996, Dr. Bauder served as President and Chief Executive Officer of Cranbrook Educational Community.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The New York Stock Exchange is the principal market on which the Company's Common Stock is traded. The following table indicates the high and low sales prices of the Company's Common Stock as reported by the New York Stock Exchange and the cash dividends declared per share for the periods indicated:

                                              MARKET PRICE
                                            -----------------         DIVIDENDS
QUARTER                                     HIGH         LOW          DECLARED
-------                                     ----         ----         ---------
2000
  Fourth..................................   $27          $14 1/2       $.13
  Third...................................    22 1/4       17 9/16       .13
  Second..................................    25 3/8       16 13/16      .12
  First...................................    25 3/8       17 1/16       .12
                                                                        ----
     Total................................                              $.50
                                                                        ====
1999
  Fourth..................................   $31 3/4     $ 22 1/2       $.12
  Third...................................    33 11/16     28 3/16       .12
  Second..................................    32 3/8       25 1/4        .11
  First...................................    32 7/16      25 5/16       .11
                                                                        ----
     Total................................                              $.46
                                                                        ====	

On March 15, 2001, there were approximately 6,700 holders of record of the Company's Common Stock.
The Company expects that its practice of paying quarterly dividends on its Common Stock will continue, although the payment of future dividends will continue to depend upon the Company's earnings, capital requirements, financial condition and other factors.
8
 
ITEM 6. SELECTED FINANCIAL DATA.
The following table sets forth summary consolidated financial information for the Company's continuing operations, for the years and dates indicated. Such information has been restated for 1999 poolings of interests, except for dividends.

                                                                        (IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
                                2000           1999              1998              1997              1996
                             ----------   ---------------   ---------------   ---------------   ---------------
Net sales..................  $7,243,000     $6,307,000        $5,280,000        $4,508,000        $3,854,000
Income from continuing
  operations...............  $  591,700     $  569,600        $  565,100        $  444,100        $  355,100
Per share of common
  stock:(1)
  Income from continuing
     operations:
     Basic.................       $1.34          $1.31             $1.30             $1.05              $.85
     Diluted...............       $1.31          $1.28             $1.26             $1.02              $.83
  Dividends declared.......       $ .50          $ .46             $ .43 1/2         $ .41              $.39
  Dividends paid...........       $ .49          $ .45             $ .43             $ .40 1/2          $.38 1/2
At December 31:
  Total assets.............  $7,744,000     $6,634,920        $5,618,850        $4,696,600        $4,030,340
  Long-term debt...........  $3,018,240     $2,431,270        $1,638,290        $1,553,950        $1,279,740
  Shareholders' equity.....  $3,426,060     $3,136,500        $2,774,040        $2,224,820        $2,064,040	

(1) After giving effect to the 100 percent stock distribution in July 1998.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
The financial and business analysis below provides information which the Company believes is relevant to an assessment and understanding of the Company's consolidated financial position and results of operations. This financial and business analysis should be read in conjunction with the consolidated financial statements and related notes.
The following discussion and certain other sections of this Report contain statements reflecting the Company's views about its future performance and constitute "forward-looking statements" under the Private Securities Litigation Reform Act of 1995. These views may involve risks and uncertainties that are difficult to predict and may cause the Company's actual results to differ materially from the results discussed in such forward-looking statements. Readers should consider that various factors, including changes in general economic conditions, nature of competition, relationships with key customers, industry consolidation, influence of e-commerce and other factors discussed in the "Overview" and "Outlook for the Company" sections below may affect the Company's projected performance. The Company undertakes no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise.
OVERVIEW
The Company is engaged principally in the manufacture and sale of home improvement and building products. These products are sold to the home improvement and home construction markets through mass merchandisers, hardware stores, home centers, distributors and other outlets for consumers and contractors. The Company also supplies and installs insulation and other building products directly to builders and consumers and performs restoration services.
Factors that affect the Company's results of operations include the levels of home improvement and residential construction activity principally in the U.S. and Europe (including repair and remodeling and new construction), cost management, fluctuations in European currencies (primarily the euro and British pound), the increasing importance of home centers as distributors of home
9
improvement and building products and the Company's ability to maintain its leadership positions in its markets in the face of increasing global competition. Historically, the Company has been able to largely offset cyclical declines in housing markets through new product introductions and acquisitions as well as market share gains.
CORPORATE DEVELOPMENT
Mergers and acquisitions have historically contributed significantly to Masco's long-term growth, after the initial impact on earnings of transaction-related costs and expenses such as interest and added depreciation and amortization. The important earnings benefit to Masco arises from subsequent growth of such companies, since incremental sales are not impacted by these expenses.
During 2000, the Company acquired Masterchem Industries, Inc., a U.S. manufacturer and supplier of paint primer and related products, Tvilum-Scanbirk A/S, a Danish manufacturer of ready-to-assemble products including cabinetry, shelving, storage units and workstations, and several smaller companies.
In January 2001, the Company completed the acquisition of BSI Holdings, Inc. BSI Holdings is headquartered in Carmel, California and is a provider of installed insulation and other products within the United States and Canada.
The aggregate net purchase price of these purchase acquisitions, excluding assumed debt of $367 million, was $994 million and included approximately 19 million shares of Company common stock valued at $356 million (including approximately four million shares issued in 2000 valued at approximately $90 million). The excess of the aggregate acquisition costs for these purchase acquisitions over the fair value of net assets acquired, totaling approximately $1,040 million, represents acquired goodwill, to be amortized over periods not exceeding 40 years.
The results of operations for these purchase acquisitions are included in the consolidated financial statements from the dates of acquisition. Had these companies been acquired effective January 1, 1999, pro forma unaudited consolidated net sales and net income would have approximated $8,111 million and $625 million for 2000 and $7,484 million and $615 million for 1999, respectively, and pro forma unaudited consolidated diluted earnings per share would have increased by $.02 and $.04 for 2000 and 1999, respectively.
Certain purchase agreements of recent acquisitions provide for the payment of additional consideration, contingent upon certain conditions being met. Such additional consideration totaled $34 million for the year ended December 31, 2000 and has been recorded as additional purchase price.
PLANNED DISPOSITION OF BUSINESSES
In December 2000, the Company adopted a plan to dispose of several businesses which the Company believes are not core to its long-term growth strategies. Management has estimated the expected proceeds on these planned dispositions based on various analyses, including valuations by certain specialists. For certain of these businesses, the expected proceeds are less than the related carrying value. Accordingly, a non-cash, pre-tax charge of $90.0 million has been recorded with a write-down of goodwill and long-lived assets. For those businesses where the expected proceeds are greater than the related carrying value, any gain will be recognized upon the completion of the transactions. The Company anticipates the planned dispositions to be substantially completed by the end of 2001.
The sales and results of operations of these businesses will be included in continuing operations until disposed. These businesses have combined annual sales of approximately $600 million and an aggregate operating profit margin less than the Company average.
10
SECURITIES OF FURNISHINGS INTERNATIONAL INC.
In late November 1995, the Company's Board of Directors approved a formal plan to dispose of the Company's home furnishings products segment. During August 1996, the Company completed the sale of its home furnishings products segment to Furnishings International Inc. Proceeds to the Company from the sale totaled $1,050 million, consisting of cash of $708 million, junior debt securities and equity securities including 13% cumulative preferred stock, common stock and convertible preferred stock.
The junior debt securities mature in 2008 and are stated at face value; the Company is recording the 12% pay-in-kind interest income from these securities. Interest from these junior debt securities becomes payable in cash beginning in late 2004. The Company records dividend income from the 13% cumulative preferred stock when such dividends are declared. The convertible preferred stock represents transferable rights for up to a 25 percent common ownership, although the Company is restricted from maintaining an ownership in excess of 20 percent of Furnishings International's common equity. As such, the Company will not acquire additional common equity, except for purposes of resale.
FINANCIAL CONDITION
Over the years, the Company has largely funded its growth through cash provided by a combination of operations and long-term bank and other borrowings, and by the issuance of common stock for certain mergers and acquisitions.
Bank credit lines are maintained to ensure availability of short-term funds. In November 2000, the Company entered into two new Revolving Credit Agreements with a group of banks. Such agreements include a $1.25 billion 364-Day Revolving Credit Agreement, which expires in 2001 and includes the option to extend payment for one year at the Company's discretion, and a $1.25 billion 5-Year Revolving Credit Agreement. Interest is payable on borrowings under these agreements based on various floating rate options as selected by the Company (approximately 7 percent at December 31, 2000). Proceeds from the facilities were used to pay the outstanding balances on the Company's $750 million Amended and Restated Credit Agreement, due to expire in November 2001 and the Company's $1 billion Amended and Restated Credit Agreement, due to expire in March 2001; both of these agreements were terminated in November 2000.
Certain debt agreements contain limitations on additional borrowings and a requirement for maintaining a certain level of net worth. At December 31, 2000, the Company was in compliance with these borrowing limitations, and the Company's net worth exceeded that requirement by $776 million.
During 2000, the Company increased its quarterly dividend eight percent to $.13 per share. This marks the 42nd consecutive year in which dividends have been increased. Although the Company is aware of the greater interest in yield by many investors and has maintained an increased dividend payout in recent years, the Company continues to believe that its shareholders' long-term interests are best served by investing a significant portion of its earnings in the future growth of the Company.
Maintaining high levels of liquidity and cash flow are among the Company's financial strategies. The Company's total debt as a percent of total capitalization increased to 49 percent at December 31, 2000 from 44 percent at December 31, 1999 due principally to borrowings for purchase acquisitions. The relatively high cash flow should help the Company reduce its total debt to total capitalization ratio. The Company's working capital ratio was 2.1 to 1 at December 31, 2000 compared with 2.5 to 1 at December 31, 1999; this decrease was due principally to short-term acquisition-related debt and the anticipated retirement of the 9% debentures due October 2001.
11
CASH FLOWS
Significant sources and uses of cash in the past three years are summarized as follows:
CASH SOURCES (USES)

                                                              (IN THOUSANDS)
                                             2000        1999        1998
                                           ---------   ---------   ---------
Net cash from operating activities.......  $ 733,840   $ 490,610   $ 537,670
Increase in debt, net....................    702,010     578,990     315,740
Issuance of Company common stock.........    156,040      --          --
Purchase of Company common stock for:
  Retirement.............................   (219,640)    (99,600)    (43,330)
  Long-term stock incentive award plan...    (39,810)     (6,840)    (46,800)
Cash dividends paid......................   (218,680)   (164,990)   (145,290)
Acquisitions of companies, net of cash
  acquired...............................   (588,780)   (794,950)   (322,880)
Capital expenditures.....................   (388,030)   (350,850)   (243,380)
(Investments in) proceeds from non-
  operating assets, net..................   (198,020)     11,390     (80,040)
Cash proceeds from sale of:
  MascoTech shares.......................     57,140      --          --
  Subsidiary and equity investment.......     --          --         137,640
Re: Shareholders of pooled companies:
  Capital contributions from.............     --          11,490       1,520
  Distributions to.......................     --          --         (45,950)
Other, net...............................    (57,420)      2,380      37,600
                                           ---------   ---------   ---------
          Cash increase (decrease).......  $ (61,350)  $(322,370)  $ 102,500
                                           =========   =========   =========	

CASH FLOWS FROM OPERATING ACTIVITIES
Cash from operating activities was $733.8 million in 2000 as compared with $490.6 million in 1999 and $537.7 million in 1998. Cash from operating activities for 1999 was negatively affected by unusual expense, principally related to transactions accounted for as poolings of interests. As compared with the average manufacturing company, the Company maintains a higher investment in inventories, which relates to the Company's business strategies of providing better customer service, establishing efficient production scheduling and benefiting from larger, more cost-effective purchasing.
CASH FLOWS FROM FINANCING ACTIVITIES
Financing activities for 2000 provided cash of $379.9 million. Cash from financing activities for 2000 included $702.0 million from a net increase in debt (largely bank debt to finance purchase acquisitions) and $156.0 million from the sale of shares of Company common stock to key employees. During the third quarter of 2000, approximately 300 of the Company's key employees purchased from the Company 8.4 million shares of Company common stock for cash totaling $156.0 million under a recently adopted Executive Stock Purchase Program ("Program"). The stock was purchased at $18.50 per share, the market price of the common stock at the time of purchase.
Participants in the Program financed their purchases with five-year full recourse personal loans, at a market interest rate, from a bank syndicate. Each participant is fully responsible at all times for repaying their bank loans when they become due and is personally responsible for 100 percent of any loss in the market value of the purchased stock. The Company has guaranteed repayment of the loans only in the event of a default by the participant. As a further inducement for continued
12
employment beyond the end of this five-year Program, each participant received, as part of the Program, a restricted stock grant vesting over a ten-year period. All of these key employees, in order to participate in this Program, were also required to sign a one-year post-employment non-competition agreement for the Company businesses that employ them.
Cash used for financing activities in 2000 included $219.6 million for the acquisition of Company common stock in open-market transactions, $39.8 million for the acquisition of Company common stock for the Company's long-term incentive award plan, and $218.7 million for cash dividends paid. At December 31, 2000, the Company had remaining authorization to repurchase up to an additional 27.4 million shares of its common stock in open-market transactions or otherwise.
Financing activities for 1999 provided cash of $319.1 million. Cash from financing activities for 1999 included $579.0 million from a net increase in debt (primarily bank debt to finance purchase acquisitions) and $11.5 million of capital contributions from shareholders of pooled companies. Cash used for financing activities included $165 million for cash dividends paid, $99.6 million for the acquisition of Company common stock in open-market transactions and $6.8 million for the acquisition of Company common stock for the Company's long-term stock incentive award plan.
Financing activities for 1998 provided cash of $35.9 million. Cash from financing activities for 1998 included $315.7 million from a net increase in debt. Cash used for financing activities for 1998 included $145.3 million for cash dividends paid, $43.3 million for the acquisition of Company common stock in open-market transactions, $46.8 million for the acquisition of Company common stock for the Company's long-term stock incentive award plan and $44.4 million of net distributions to shareholders of pooled companies.
Capital contributions from and distributions to shareholders of pooled companies as described above occurred prior to August 31, 1999, the date of the pooling mergers.
During March 2001, the Company issued $800 million of 6 3/4% notes due 2006; proceeds from this issuance were used to retire outstanding variable-rate bank debt. After giving effect to this debt issuance, the Company has on file with the Securities and Exchange Commission an unallocated shelf registration pursuant to which the Company is able to issue up to a combined $700 million of debt and equity securities.
CASH FLOWS FOR INVESTING ACTIVITIES
Cash used for investing activities was $1,175.1 million in 2000, $1,132.0 million in 1999 and $471.1 million in 1998.
Cash used for investing activities in 2000 included $588.8 million for 2000 purchase acquisitions. Such purchase acquisitions are set forth in the Note to the Company's consolidated financial statements captioned "Acquisitions." Investing activities for 1999 and 1998 included cash for purchase acquisitions of $795.0 million and $322.9 million, respectively.
Capital expenditures totaled $388.0 million in 2000 as compared with $350.9 million in 1999 and $243.4 million in 1998. These amounts primarily pertain to expenditures for additional facilities related to anticipated increased demand for certain existing products as well as for new products. The Company also continues to invest in automating its manufacturing operations and increasing its productivity, in order to be a more efficient producer and to improve customer service. The Company expects capital expenditures for 2001, excluding those of 2001 acquisitions, to approximate $300 million. Depreciation and amortization expense for 2000 totaled $238.3 million, compared with $181.8 million for 1999 and $156.7 million for 1998; for 2001, depreciation and amortization expense, excluding 2001 acquisitions, is expected to approximate $270 million.
During November 2000, the Company participated in a transaction in which an affiliate of Heartland Industrial Partners L.P. acquired a majority interest in MascoTech, Inc. In exchange for a portion of its ownership in MascoTech, the Company received proceeds aggregating $90 million,
13
including cash and preferred stock of $57 million and $33 million, respectively. The Company recognized a $27.9 million pre-tax gain from its participation in this transaction.
Costs of environmental responsibilities and compliance with existing environmental laws and regulations have not had, nor in the opinion of the Company are they expected to have, a material adverse effect on the Company's capital expenditures, financial position or results of operations.
The Company believes that its present cash balance and cash flows from operations are sufficient to fund its near-term working capital and other investment needs. The Company believes that its longer-term working capital and other general corporate requirements will be satisfied through cash flows from operations and, to the extent necessary, from bank borrowings, from future financial market activities and from proceeds from asset sales.
CONSOLIDATED RESULTS OF OPERATIONS
Sales and Operations
Net sales for 2000 were $7,243 million, representing an increase of 15 percent over 1999. Excluding results from purchase acquisitions and divestitures, net sales for 2000 increased 4 percent over 1999. Net sales in 2000 were negatively affected by a softening in sales of home improvement products in North America and Europe, customer inventory reduction programs and a stronger U.S. dollar. Net sales for 1999 increased 19 percent to $6,307 million from $5,280 million in 1998; after adjusting for purchase acquisitions and divestitures, net sales increased 12 percent in 1999 over 1998.
As a result of the Financial Accounting Standards Board Emerging Issues Task Force ("EITF") Issue Number 00-10, "Accounting for Shipping and Handling Fees and Costs," the Company changed its policy for the classification of shipping and handling costs. The change resulted in a reclassification of shipping and handling costs from selling, general and administrative expenses to cost of sales of $143 million, $161 million and $135 million for the nine months ended September 30, 2000 and for the twelve months ended December 31, 1999 and 1998, respectively. This reclassification did not result in a change in net income or earnings per share.
Cost of sales as a percentage of sales for 2000 was 67.6 percent as compared with 65.9 percent for 1999 and 66.0 percent for 1998. The increase in cost of sales as a percentage of sales in 2000 includes the under-absorption of costs related to slower than anticipated internal sales growth and new product launches, higher energy costs and a less favorable product mix.
Including amortization of acquired goodwill ($66.2 million, $45.4 million and $29.0 million in 2000, 1999 and 1998, respectively), selling, general and administrative expenses as a percent of sales were 17.8 percent in 2000 compared with 19.6 percent in 1999 and 17.6 percent in 1998. Excluding amortization of acquired goodwill, selling, general and administrative expenses as a percent of sales were 16.9 percent in 2000 compared with 18.9 percent in 1999 and 17.1 percent in 1998. Selling, general and administrative expenses in 1999 include the influence of unusual expense principally related to transactions accounted for as poolings of interests. Excluding such unusual expense, selling, general and administrative expenses as a percentage of sales increased modestly in 2000 as compared with 1999.
Operating profit margin, before general corporate expense, was 14.7 percent in 2000 as compared with 15.9 percent in 1999 and 18.0 percent in 1998 (general corporate expense includes those expenses not specifically attributable to the Company's business segments). Operating profit margin, before general corporate expense, in 2000 was negatively influenced by a $90 million charge for the planned disposition of businesses. Operating profit margin, before general corporate expense, in 1999 was negatively influenced by unusual pre-tax expense aggregating $156.7 million primarily related to transactions accounted for as poolings of interests. Excluding such charge and unusual expense from 2000 and 1999, respectively, operating profit margin, before general corporate expense, was 16.0 percent in 2000 and 18.4 percent in 1999. The Company's operating
14
profit margin decreased in 2000 due principally to the items discussed above and in the "Business Segment and Geographic Area Results" section below.
Operating profit margin, after general corporate expense, was 13.3 percent in 2000, 14.5 percent in 1999 and 16.4 percent in 1998. General corporate expense was $99 million in 2000, as compared with $92 million in 1999 and $86 million in 1998. General corporate expense as a percentage of sales decreased to 1.4 percent in 2000 from 1.5 percent in 1999 and 1.6 percent in 1998.
Other Income (Expense), Net
Included in other income (expense), net are equity earnings from MascoTech of $17.3 million in 2000, and $15.4 million in each of 1999 and 1998.
Included in other, net under other income (expense), net is interest income in 2000, 1999 and 1998 of $52.4 million, $46.6 million and $41.5 million, respectively, from the 12% pay-in-kind junior debt securities of Furnishings International Inc.
Included in other items, net under other income (expense), net, in 2000 were approximately $41 million of income and gains, net regarding certain non-operating assets, realized foreign currency exchange gains of $22 million and income from early retirement of debentures of $19 million. Also included in other items in 2000 were $55 million of non-cash charges for the write-down of certain investments (including $35 million related to an investment in Emco Limited) and $22 million for losses on dispositions of property and equipment and other items.
Included in other items, net under other income (expense), net in 1999 were approximately $30 million of income and gains, net regarding certain non-operating assets and $7.6 million of dividend income from the Company's investment in Furnishings International's 13% cumulative preferred stock. Also included in other items in 1999 were approximately $4 million of expenses related to the early retirement of debt.
Included in other items, net under other income (expense), net in 1998 were gains aggregating approximately $59 million from sales of the Company's Thermador subsidiary ($30 million) and the Company's investment in TriMas Corporation ($29 million). Also included in other items in 1998 were $7 million of dividend income from the Company's investment in Furnishings International's 13% cumulative preferred stock and an approximate $12 million charge related to the early retirement of long-term debt.
Net Income and Earnings Per Share
Net income for 2000 was $591.7 million as compared with $569.6 million for 1999 and $565.1 million for 1998. Diluted earnings per share for 2000 were $1.31 compared with $1.28 for 1999 and $1.26 for 1998. Net income for 2000 was negatively affected by aggregate after-tax charges of $94 million for the planned disposition of businesses and the write-down of certain investments; net income for 2000 benefited from the $27.9 million pre-tax gain from the sale of a portion of its ownership in MascoTech, Inc. Net income and earnings per share for 1999 were negatively affected by unusual expense, principally related to transactions accounted for as poolings of interests.
The Company's effective tax rate decreased to 33.8 percent in 2000 from 37.0 percent in 1999 and 37.6 percent in 1998; the decrease in 2000 was due principally to the increased utilization of a portion of the Company's capital loss carryforward benefit, continued lower taxes on foreign earnings and a lower tax rate on the gain from the sale of MascoTech shares. The Company estimates that its effective tax rate should approximate 35.0 percent for 2001.
15
OUTLOOK FOR THE COMPANY
The Company experienced a weakening of economic and business conditions in its markets in 2000. Continued softening in sales of home improvement products in North America and Europe, a stronger U.S. dollar, higher energy costs, new product launches, less favorable product mix, customer inventory reduction programs and higher interest rates on the Company's variable-rate bank debt negatively impacted the Company's sales and earnings for the year ended December 31, 2000.
The Company believes that certain of the negative economic trends and business factors mentioned above will continue for the near-term.
16
 
BUSINESS SEGMENT AND GEOGRAPHIC AREA RESULTS
The following table sets forth the Company's net sales and operating profit information by business segment and geographic area.

                                                                          PERCENT          PERCENT
                                                                          INCREASE         INCREASE
                                                                         (DECREASE)     (DECREASE)(A)
                                                                        ------------    --------------
                                                     ($ IN MILLIONS)    2000    1999    2000     1999
                                          --------------------------    VS.     VS.      VS.      VS.
                                           2000      1999      1998     1999    1998    1999     1998
                                          ------    ------    ------    ----    ----    -----    -----
NET SALES:
    Cabinets and Related Products.......  $2,551    $2,220    $1,908     15%     16%       3%      14%
    Plumbing Products...................   1,839     1,803     1,667      2%      8%      (1%)      4%
    Decorative Architectural Products...   1,395     1,165       919     20%     27%      13%      17%
    Insulation Installation and Other
      Services..........................     855       532       250     61%    113%      23%      43%
    Other Specialty Products............     603       587       536      3%     10%      (7%)    -0-%
                                          ------    ------    ------
         Total..........................  $7,243    $6,307    $5,280     15%     19%       4%      12%
                                          ======    ======    ======
    North America.......................  $5,947    $5,238    $4,441     14%     18%       7%      14%
    International, principally Europe...   1,296     1,069       839     21%     27%     (11%)      1%
                                          ------    ------    ------
         Total..........................  $7,243    $6,307    $5,280     15%     19%       4%      12%
                                          ======    ======    ======
OPERATING PROFIT: (B)(C)(D)
    Cabinets and Related Products.......  $  323    $  320    $  295      1%      8%
    Plumbing Products...................     284       378       369    (25%)     2%
    Decorative Architectural Products...     250       122       167    105%    (27%)
    Insulation Installation and Other
      Services..........................     123        79        30     56%    163%
    Other Specialty Products............      86       104        91    (17%)    14%
                                          ------    ------    ------
         Total..........................  $1,066    $1,003    $  952      6%      5%
                                          ======    ======    ======
    North America.......................  $  923    $  867    $  829      6%      5%
    International, principally Europe...     143       136       123      5%     11%
                                          ------    ------    ------
         Total..........................  $1,066    $1,003    $  952      6%      5%
                                          ======    ======    ======

OPERATING PROFIT MARGIN: (B)(C)(D)
    Cabinets and Related Products.......    12.7%     14.4%     15.5%
    Plumbing Products...................    15.4%     21.0%     22.1%
    Decorative Architectural Products...    17.9%     10.5%     18.2%
    Insulation Installation and Other
      Services..........................    14.4%     14.8%     12.0%
    Other Specialty Products............    14.3%     17.7%     17.0%

    North America.......................    15.5%     16.6%     18.7%
    International, principally Europe...    11.0%     12.7%     14.7%
         Total..........................    14.7%     15.9%     18.0%	

(A) Percentage change in sales excluding purchase acquisitions and divestitures.
(B) Before general corporate expense, but including goodwill amortization.
(C) Included in operating profit for 2000 is a non-cash charge for the planned disposition of businesses for the following segments: Cabinets and Related Products -- $20 million; Plumbing Products -- $40 million; Decorative Architectural Products -- $20 million; and Other Specialty Products -- $10 million.
(D) Included in operating profit for 1999 is $156.7 million of unusual expense primarily related to transactions accounted for as poolings of interests.
17
Changes in net sales in the following segment and geographic area discussion exclude the influence of purchase acquisitions and divestitures.
BUSINESS SEGMENT RESULTS
CABINETS AND RELATED PRODUCTS
Net sales of Cabinets and Related Products increased 3 percent in 2000 compared with 1999 and increased 14 percent in 1999 compared with 1998 due largely to higher unit sales volume of U.S. operations included in this segment. The increase in sales in 2000 was negatively affected by a softening of incoming orders in North America and Europe. This segment was also negatively affected by a stronger U.S. dollar in 2000, 1999 and 1998, which affected the translation of European operations included in this segment.
Operating profit margin in 2000 was negatively affected by the under-absorption of costs associated with a new product launch, a $20 million charge for the planned disposition of businesses and higher energy costs. Operating profit margin in 1999 compared with 1998 was negatively influenced by unusual expense related to a transaction accounted for as a pooling of interests; excluding such unusual expense, 1999 operating profit margin for this segment approximated the 1998 level.
PLUMBING PRODUCTS
Net sales of Plumbing Products decreased 1 percent in 2000 compared with 1999 due largely to lower unit sales volume related to a softening of incoming orders in North America and Europe, a stronger U.S. dollar and customer inventory reduction programs. Net sales of Plumbing Products increased 4 percent in 1999 compared with 1998 due largely to higher unit sales volumes of whirlpools, spas and faucets and new product introductions.
Operating results of this segment included the influence of a stronger U.S. dollar in 2000, 1999 and 1998, which negatively affected the translation of European operations included in this segment. Operating profit margin was 15.4 percent in 2000 as compared with 21.0 percent and 22.1 percent, respectively, in 1999 and 1998. Operating profit margin in 2000 was negatively affected by a $40 million charge for the planned disposition of businesses. The decline in operating profit margin in 2000 also includes the influence of lower than anticipated sales volume, product mix, including an increased percentage of lower margin faucet units, competitive pricing pressures, and higher energy costs.
The percentage of operating profit on the Company's faucet sales is somewhat higher than that on most other products offered by the Company. The Company believes that the quality, styling and reliability of and available finishes for its faucets, manufacturing efficiencies and capabilities, its marketing and merchandising activities, and the development of a broad line of products have accounted for the continued strength of its faucet sales.
DECORATIVE ARCHITECTURAL PRODUCTS
Net sales of Decorative Architectural Products increased 13 percent in 2000 compared with 1999 and increased 17 percent in 1999 compared with 1998 due largely to higher unit sales volume of paints and stains. Operating profit margin in 2000 includes the negative affect of a $20 million charge for the planned disposition of businesses. Operating profit margin in 1999 includes the negative influence of the previously mentioned unusual expense related to a transaction accounted for as a pooling of interests. Excluding such charge and unusual expense in 2000 and 1999, respectively, operating profit margin declined modestly in 2000 as compared with 1999; such decline was due primarily to plant start-up costs and higher energy costs. Excluding unusual expense, 1999 operating profit margin for this segment approximated the 1998 level.
18
INSULATION INSTALLATION AND OTHER SERVICES
Net sales of Insulation Installation and Other Services increased 23 percent in 2000 due largely to broader geographic U.S. market penetration. Net sales of this segment increased 43 percent in 1999 compared with 1998 due largely to broader geographic U.S. market penetration, increased sales volume in existing markets and selling price increases.
OTHER SPECIALTY PRODUCTS
Net sales of Other Specialty Products decreased 7 percent in 2000 compared with 1999 and were flat in 1999 compared with 1998; a stronger U.S. dollar in both 2000 and 1999 had a negative effect on the translation of the relatively high concentration of European operations included in this segment. Operating profit margin in 2000 was negatively affected by a $10 million charge for the planned disposition of businesses and by the lower margins of existing European operations included in this segment.
GEOGRAPHIC AREA RESULTS
NORTH AMERICA
North American net sales in 2000 increased 7 percent over 1999 due to higher unit sales volume of paints, stains and cabinets and higher installation sales of fiberglass insulation. Operating profit margin in 2000 was negatively affected by a $70 million charge for the planned disposition of businesses. Operating profit margin in 1999 was negatively affected by $156.7 million of unusual expense principally related to transactions accounted for as poolings of interests. Excluding such charge and unusual expense from 2000 and 1999, respectively, operating profit margin declined in 2000 to 16.7 percent as compared with 19.5 percent in 1999. Such decline was due principally to the under-absorption of costs related to slower than anticipated internal sales growth and new product launches, plant start-up costs, higher energy costs, and a less favorable product mix.
North American net sales for 1999 increased 14 percent over 1998 due largely to higher unit sales volume of cabinets, paints and stains and whirlpools and spas, higher installation sales of fiberglass insulation, and to a lesser extent, new product introductions and selling price increases. Excluding unusual 1999 expense, operating profit margin for 1999 was 19.5 percent as compared with 18.7 percent for 1998.
Results of the Company's North American operations for 1999 and 1998 benefited from demographic and economic conditions principally in the United States, including higher consumer confidence and income, modest economic growth and relatively low unemployment. These conditions favorably influenced the housing and home improvement markets in the United States, including housing starts, existing home sales and repair and remodeling activities.
INTERNATIONAL, PRINCIPALLY EUROPE
Net sales of the Company's International operations decreased 11 percent in 2000 compared with 1999 and increased 1 percent in 1999 compared with 1998. Operating profit margin in 2000 was negatively affected by a $20 million charge for the planned disposition of businesses; excluding such charge, operating profit margin in 2000 was 12.6 percent as compared with 12.7 percent in 1999 and 14.7 percent in 1998. Operating results of existing European operations have been adversely influenced in recent years, in part due to softness in the Company's European markets, competitive pricing pressures on certain products and the effect of a higher percentage of lower margin sales to total sales. In addition, a stronger U.S. dollar had a negative effect on the translation of European results in 2000 compared with 1999 as well as 1999 compared with 1998, lowering European net sales in 2000 and 1999 by approximately 12 percent and 3 percent, respectively.
19
OTHER MATTERS
COMMITMENTS AND CONTINGENCIES
LITIGATION
The Company is subject to lawsuits and claims pending or asserted with respect to matters generally arising in the ordinary course of business. The "Commitments and Contingencies" note in the Consolidated Financial Statements discusses certain specific claims pending against the Company and its subsidiary, Behr Process Corporation, with respect to several of Behr's exterior wood coating products.
OTHER COMMITMENTS
Metaldyne Corporation (formerly MascoTech, Inc.) holds an option expiring in October 2003 to require the Company to purchase up to $100 million aggregate amount of subordinated debt securities of Metaldyne.
RECENTLY ISSUED STATEMENTS OF FINANCIAL ACCOUNTING STANDARDS
In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging Activities." SFAS No. 133 requires that all derivative instruments be recorded on the balance sheet at fair value. Changes in the fair value of derivatives are to be recorded each period in current earnings or other comprehensive income, depending on whether a derivative is designated as part of a hedge transaction and, if it is, the type of hedge transaction. In June 1999, the FASB issued SFAS No. 137, "Accounting for Derivative Instruments and Hedging Activities -- Deferral of the Effective Date of FASB Statement No. 133." Adoption of SFAS No. 137 deferred the effective adoption date of SFAS No. 133 to January 1, 2001. The adoption of SFAS No. 133 will not have a material effect on the Company's financial statements.
QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
The Company has considered the provisions of Financial Reporting Release No. 48, "Disclosure of Accounting Policies for Derivative Financial Instruments and Derivative Commodity Instruments, and Disclosure of Quantitative and Qualitative Information about Market Risk Inherent in Derivative Financial Instruments, Other Financial Instruments and Derivative Commodity Instruments." The Company had no holdings of derivative financial or commodity-based instruments at December 31, 2000. A review of the Company's other financial instruments and risk exposures at that date revealed that the Company had exposure to interest rate and foreign currency exchange rate risks. The Company also had market price risk pertaining to its long-term investments. At December 31, 2000, the Company performed sensitivity analyses to assess these risks and concluded that the effects of hypothetical changes of 200 basis points in average interest rates, a ten percent change in foreign currency exchange rates or a ten percent decline in the market value of the Company's long-term investments would not be expected to materially affect the Company's financial position, results of operations or cash flows.
20
 
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of Masco Corporation:
In our opinion, the consolidated financial statements listed in the accompanying index appearing under Item 14(a)(1) present fairly, in all material respects, the financial position of Masco Corporation and its subsidiaries at December 31, 2000 and 1999, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2000 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule listed in the accompanying index appearing under Item 14(a)(2)(i) presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. These financial statements and financial statement schedule are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
PRICEWATERHOUSECOOPERS LLP
Detroit, Michigan
February 14, 2001
21
 
MASCO CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AT DECEMBER 31, 2000 AND 1999
ASSETS

                                                                 2000              1999
                                                            --------------    --------------
Current Assets:
  Cash and cash investments...............................  $  169,430,000    $  230,780,000
  Receivables.............................................   1,099,150,000     1,002,630,000
  Inventories.............................................     912,960,000       769,870,000
  Prepaid expenses and other..............................     126,620,000       106,500,000
                                                            --------------    --------------
          Total current assets............................   2,308,160,000     2,109,780,000
Equity investment in MascoTech, Inc.......................              --        69,930,000
Equity investments in other affiliates....................      87,460,000       133,550,000
Securities of Furnishings International Inc. .............     533,670,000       481,270,000
Property and equipment....................................   1,906,840,000     1,624,360,000
Acquired goodwill, net....................................   2,190,770,000     1,742,930,000
Other assets..............................................     717,100,000       473,100,000
                                                            --------------    --------------
          Total Assets....................................  $7,744,000,000    $6,634,920,000
                                                            ==============    ==============
                            LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
  Notes payable...........................................  $  210,950,000    $   62,300,000
  Accounts payable........................................     250,460,000       243,810,000
  Accrued liabilities.....................................     616,640,000       540,320,000
                                                            --------------    --------------
          Total current liabilities.......................   1,078,050,000       846,430,000
Long-term debt............................................   3,018,240,000     2,431,270,000
Deferred income taxes and other...........................     221,650,000       220,720,000
Commitments and contingencies.............................              --                --
                                                            --------------    --------------
          Total Liabilities...............................   4,317,940,000     3,498,420,000
                                                            --------------    --------------
Shareholders' Equity:
  Common shares authorized: 900,000,000; issued:
     2000-444,750,000; 1999-443,510,000...................     444,750,000       443,510,000
  Preferred shares authorized: 1,000,000..................              --                --
  Paid-in capital.........................................     631,120,000       601,990,000
  Retained earnings.......................................   2,519,940,000     2,151,520,000
  Other comprehensive income (loss).......................    (169,750,000)      (60,520,000)
                                                            --------------    --------------
          Total Shareholders' Equity......................   3,426,060,000     3,136,500,000
                                                            --------------    --------------
          Total Liabilities and Shareholders' Equity......  $7,744,000,000    $6,634,920,000
                                                            ==============    ==============	

See notes to consolidated financial statements.
22
 
MASCO CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998

                                                 2000             1999             1998
                                            --------------   --------------   --------------
Net sales.................................  $7,243,000,000   $6,307,000,000   $5,280,000,000
Cost of sales.............................   4,898,160,000    4,156,280,000    3,483,150,000
                                            --------------   --------------   --------------
          Gross profit....................   2,344,840,000    2,150,720,000    1,796,850,000
Selling, general and administrative
  expenses................................   1,221,940,000    1,193,890,000      901,450,000
Charge for planned disposition of
  businesses..............................      90,000,000         --               --
Amortization of acquired goodwill.........      66,200,000       45,430,000       29,000,000
                                            --------------   --------------   --------------
          Operating profit................     966,700,000      911,400,000      866,400,000
                                            --------------   --------------   --------------
Other income (expense), net:
  Re: MascoTech, Inc.:
     Equity earnings......................      17,250,000       15,430,000       15,360,000
     Gain from sale of shares.............      27,910,000         --               --
  Equity earnings, other affiliates.......       2,220,000        8,500,000       13,840,000
  Other, net..............................      70,700,000       89,190,000      124,300,000
  Interest expense........................    (191,380,000)    (120,420,000)    (114,400,000)
                                            --------------   --------------   --------------
                                               (73,300,000)      (7,300,000)      39,100,000
                                            --------------   --------------   --------------
          Income before income taxes......     893,400,000      904,100,000      905,500,000
Income taxes..............................     301,700,000      334,500,000      340,400,000
                                            --------------   --------------   --------------
          Net income......................  $  591,700,000   $  569,600,000   $  565,100,000
                                            ==============   ==============   ==============

Earnings per share:
          Basic...........................           $1.34            $1.31            $1.30
                                            ==============   ==============   ==============
          Diluted.........................           $1.31            $1.28            $1.26
                                            ==============   ==============   ==============	

See notes to consolidated financial statements.
23
 
MASCO CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998

                                                         2000              1999             1998
                                                    ---------------   ---------------   -------------
Cash Flows From (For):
  Operating Activities:
    Net income....................................  $   591,700,000   $   569,600,000   $ 565,100,000
    Depreciation and amortization.................      238,330,000       181,820,000     156,670,000
    Unremitted equity earnings of affiliates......       (9,640,000)      (18,720,000)    (24,070,000)
    Interest accrual on pay-in-kind notes
      receivable..................................      (52,400,000)      (46,630,000)    (41,500,000)
    Deferred income taxes.........................       15,260,000         5,240,000      61,660,000
    Non-cash charge for:
      Planned disposition of businesses...........       90,000,000         --               --
      Non-current asset write-downs...............       54,600,000         --               --
    Gain from sale of:
      MascoTech shares............................      (27,910,000)        --               --
      Subsidiary and equity investment............        --                --            (59,300,000)
    Increase in receivables.......................      (12,090,000)     (116,830,000)    (98,930,000)
    Increase in inventories.......................      (89,810,000)      (68,280,000)    (55,870,000)
    Increase in accounts payable and accrued
      liabilities, net............................       13,160,000        14,300,000      20,340,000
    Other, net....................................      (77,360,000)      (29,890,000)     13,570,000
                                                    ---------------   ---------------   -------------
         Net cash from operating activities.......      733,840,000       490,610,000     537,670,000
                                                    ---------------   ---------------   -------------
  Financing Activities:
    Issuance of notes and debentures..............        --              300,000,000     350,000,000
    Increase in other debt........................    2,811,960,000       915,830,000     436,430,000
    Payment of other debt.........................   (2,000,360,000)     (436,840,000)   (362,070,000)
    Retirement of notes...........................     (109,590,000)     (200,000,000)   (108,620,000)
    Purchase of Company common stock for:
      Retirement..................................     (219,640,000)      (99,600,000)    (43,330,000)
      Long-term stock incentive award plan........      (39,810,000)       (6,840,000)    (46,800,000)
    Issuance of Company common stock..............      156,040,000         --               --
    Cash dividends paid...........................     (218,680,000)     (164,990,000)   (145,290,000)
    Capital contributions from shareholders of
      pooled companies............................        --               11,490,000       1,520,000
    Distributions to shareholders of pooled
      companies...................................        --                --            (45,950,000)
                                                    ---------------   ---------------   -------------
         Net cash from financing activities.......      379,920,000       319,050,000      35,890,000
                                                    ---------------   ---------------   -------------
  Investing Activities:
    Acquisition of companies, net of cash
      acquired....................................     (588,780,000)     (794,950,000)   (322,880,000)
    Capital expenditures..........................     (388,030,000)     (350,850,000)   (243,380,000)
    Cash proceeds from sale of:
      MascoTech shares............................       57,140,000         --               --
      Subsidiary and equity investment............        --                --            137,640,000
    (Investments in) proceeds from non-operating
      assets, net.................................     (198,020,000)       11,390,000     (80,040,000)
    Other, net....................................      (57,420,000)        2,380,000      37,600,000
                                                    ---------------   ---------------   -------------
         Net cash for investing activities........   (1,175,110,000)   (1,132,030,000)   (471,060,000)
                                                    ---------------   ---------------   -------------
Cash and Cash Investments:
    Increase (decrease) for the year..............      (61,350,000)     (322,370,000)    102,500,000
    At January 1..................................      230,780,000       553,150,000     450,650,000
                                                    ---------------   ---------------   -------------
    At December 31................................  $   169,430,000   $   230,780,000   $ 553,150,000
                                                    ===============   ===============   =============	

See notes to consolidated financial statements.
24
 
MASCO CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998

                                                            COMMON                                            OTHER
                                                            SHARES          PAID-IN         RETAINED      COMPREHENSIVE
                                           TOTAL        ($1 PAR VALUE)      CAPITAL         EARNINGS      INCOME (LOSS)
                                       --------------   --------------   -------------   --------------   -------------
Balance, January 1, 1998.............  $2,224,820,000    $217,540,000    $ 640,500,000   $1,392,260,000   $ (25,480,000)
  Net income.........................     565,100,000                                       565,100,000
  Cumulative translation
    adjustments......................       8,910,000                                                         8,910,000
                                       --------------
Total comprehensive income...........     574,010,000
Shares issued........................     206,590,000       5,670,000      200,920,000
100 percent stock distribution.......        --           221,960,000     (221,960,000)
Shares repurchased...................     (43,330,000)     (1,890,000)     (41,440,000)
Cash dividends declared..............    (148,610,000)                                     (148,610,000)
Re: Shareholders of pooled companies:
  Capital contributions from.........       1,520,000                        1,520,000
  Distribution to....................     (45,950,000)                                      (45,950,000)
  Compensatory stock options.........       4,990,000                        4,990,000
                                       --------------    ------------    -------------   --------------   -------------
Balance, December 31, 1998...........  2,774,040,000..    443,280,000      584,530,000    1,762,800,000     (16,570,000)
  Net income.........................     569,600,000                                       569,600,000
  Cumulative translation
    adjustments......................     (43,950,000)                                                      (43,950,000)
                                       --------------
Total comprehensive income...........     525,650,000
Shares issued........................      85,550,000       3,960,000       81,590,000
Shares repurchased...................     (99,600,000)     (3,730,000)     (95,870,000)
Cash dividends declared..............    (180,880,000)                                     (180,880,000)
Re: Shareholders of pooled companies:
  Capital contributions from.........      11,490,000                       11,490,000
  Compensatory stock options.........      20,250,000                       20,250,000
                                       --------------    ------------    -------------   --------------   -------------
Balance, December 31, 1999...........   3,136,500,000     443,510,000      601,990,000    2,151,520,000     (60,520,000)
  Net income.........................     591,700,000                                       591,700,000
  Cumulative translation
    adjustments......................     (68,540,000)                                                      (68,540,000)
  Unrealized loss on non-operating
    assets, net of income tax
    of $23,900,000...................     (40,690,000)                                                      (40,690,000)
                                       --------------
Total comprehensive income...........     482,470,000
Shares issued........................     261,710,000      13,800,000      247,910,000
Shares repurchased...................    (219,640,000)    (12,560,000)    (207,080,000)
Cash dividends declared..............    (223,280,000)                                     (223,280,000)
Re: Shareholders of pooled companies:
  Compensatory stock options.........     (11,700,000)                     (11,700,000)
                                       --------------    ------------    -------------   --------------   -------------
Balance, December 31, 2000...........  $3,426,060,000    $444,750,000    $ 631,120,000   $2,519,940,000   $(169,750,000)
                                       ==============    ============    =============   ==============   =============	

See notes to consolidated financial statements.
25
MASCO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ACCOUNTING POLICIES
Principles of Consolidation. The consolidated financial statements include the accounts of Masco Corporation and all majority-owned subsidiaries. All significant intercompany transactions have been eliminated. 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.
Use of Estimates in the Preparation of Financial Statements. The preparation of financial statements in conformity with generally accepted accounting principles requires the Company to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of any contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from such estimates and assumptions.
Revenue Recognition. The Company recognizes revenue as title to products is transferred to customers or services are rendered, net of applicable provisions for discounts, returns and allowances.
Foreign Currency. The financial statements of the Company's foreign subsidiaries are measured using the local currency as the functional currency. Assets and liabilities of these subsidiaries are translated at exchange rates as of the balance sheet date. Revenues and expenses are translated at average rates of exchange in effect during the year. The resulting cumulative translation adjustments have been recorded in other comprehensive income. Realized foreign currency transaction gains and losses are included in the statement of income.
Cash and Cash Investments. The Company considers all highly liquid investments with an initial maturity of three months or less to be cash and cash investments.
Receivables. The Company does significant business with a number of individual customers, including certain home centers. The Company monitors its exposure for credit losses and maintains related allowances for doubtful accounts. At December 31, 2000 and 1999, accounts and notes receivable are presented net of allowances of $35.9 million and $26.1 million, respectively.
Property and Equipment. Property and equipment, including significant betterments to existing facilities, are recorded at cost. Upon retirement or disposal, the cost and accumulated depreciation are removed from the accounts and any gain or loss is included in the statement of income. Maintenance and repair costs are charged to expense as incurred.
Depreciation and Amortization. Depreciation is computed principally using the straight-line method over the estimated useful lives of the assets. Annual depreciation rates are as follows: buildings and land improvements, 2 to 10 percent, and machinery and equipment, 5 to 33 percent. Depreciation was $145.5 million, $114.6 million and $107.5 million in 2000, 1999 and 1998, respectively.
Acquired goodwill is being amortized using the straight-line method over periods not exceeding 40 years; at December 31, 2000 and 1999 such accumulated amortization totaled $202.7 million and $153.9 million, respectively. When events and circumstances occur that may indicate impairment, management evaluates the recoverability of acquired goodwill by comparing the carrying value of the asset to the associated current and projected annual sales, operating profit and undiscounted annual cash flows; management also considers business prospects, market trends and other economic factors in performing this evaluation. Based on this evaluation, there was no unrecorded permanent impairment related to acquired goodwill at December 31, 2000 and 1999. Purchase costs of patents are being amortized using the straight-line method over the legal lives of the patents, not
26
MASCO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
ACCOUNTING POLICIES -- (CONCLUDED)
to exceed 17 years. Amortization of intangible assets totaled $92.8 million, $67.2 million and $49.2 million in 2000, 1999 and 1998, respectively.
Fair Value of Financial Instruments. The carrying value of financial instruments reported in the balance sheet for current assets, current liabilities and long-term variable-rate debt approximates fair value. The fair value of financial instruments that are carried as long-term investments (other than those accounted for by the equity method) was based principally on quoted market prices for those or similar investments or by discounting future cash flows using a discount rate that reflects the risk of the underlying investments. The fair value of the Company's long-term fixed-rate debt instruments was based principally on quoted market prices for the same or similar issues or the current rates available to the Company for debt with similar terms and remaining maturities. The aggregate market value of the Company's long-term investments and long-term debt at December 31, 2000 was approximately $1,009 million and $2,933 million, as compared with the Company's aggregate carrying value of $981 million and $3,018 million, respectively, and at December 31, 1999 the aggregate market value was approximately $772 million and $2,370 million, as compared with the Company's aggregate carrying value of $706 million and $2,431 million, respectively.
Reclassifications. Certain prior year amounts have been reclassified to conform to 2000 presentation in the consolidated financial statements.
ACQUISITIONS
During 2000, the Company acquired Masterchem Industries, Inc., a U.S. manufacturer and supplier of paint primer and related products, Tvilum-Scanbirk A/S, a Danish manufacturer of ready-to-assemble products including cabinetry, shelving, storage units and workstations, and several smaller companies.
In January 2001, the Company completed the acquisition of BSI Holdings, Inc. BSI Holdings is headquartered in Carmel, California and is a provider of installed insulation and other products within the United States and Canada.
The aggregate net purchase price of these purchase acquisitions, excluding assumed debt of $367 million, was $994 million and included approximately 19 million shares of Company common stock valued at $356 million (including approximately four million shares issued in 2000 valued at approximately $90 million). The excess of the aggregate acquisition costs for these purchase acquisitions over the fair value of net assets acquired, totaling approximately $1,040 million, represents acquired goodwill, to be amortized over periods not exceeding 40 years.
The results of operations for these purchase acquisitions are included in the consolidated financial statements from the dates of acquisition. Had these companies been acquired effective January 1, 1999, pro forma unaudited consolidated net sales and net income would have approximated $8,111 million and $625 million for 2000 and $7,484 million and $615 million for 1999, respectively, and pro forma unaudited consolidated diluted earnings per share would have increased by $.02 and $.04 for 2000 and 1999, respectively.
Certain purchase agreements of recent acquisitions provide for the payment of additional consideration, contingent upon certain conditions being met. Such additional consideration totaled $34 million for the year ended December 31, 2000 and has been recorded as additional purchase price.
27
MASCO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
PLANNED DISPOSITION OF BUSINESSES
In December 2000, the Company adopted a plan to dispose of several businesses which the Company believes are not core to its long-term growth strategies. Management has estimated the expected proceeds on these planned dispositions based on various analyses, including valuations by certain specialists. For certain of these businesses, the expected proceeds are less than the related carrying value. Accordingly, a non-cash, pre-tax charge of $90.0 million has been recorded with a write-down of goodwill and long-lived assets. For those businesses where the expected proceeds are greater than the related carrying value, any gain will be recognized upon the completion of the transactions. The Company anticipates the planned dispositions to be substantially completed by the end of 2001.
The sales and results of operations of these businesses will be included in continuing operations until disposed. These businesses have combined annual sales of approximately $600 million and an aggregate operating profit margin less than the Company average.
INVENTORIES

                                                              (IN THOUSANDS)
                                                              AT DECEMBER 31
                                                            -------------------
                                                              2000       1999
                                                            --------   --------
Raw material..............................................  $348,420   $307,060
Finished goods............................................   377,270    290,440
Work in process...........................................   187,270    172,370
                                                            --------   --------
                                                            $912,960   $769,870
                                                            ========   ========	

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. Cost in inventory includes purchased parts, materials, direct labor and applied manufacturing overhead.
EQUITY INVESTMENTS IN AFFILIATES
Equity investments in affiliates consist primarily of the following common equity interests:

                                                                AT DECEMBER 31
                                                              ------------------
                                                              2000   1999   1998
                                                              ----   ----   ----
MascoTech, Inc..............................................   --    17.5%   17%
Emco Limited................................................   43%     42%   42%
Hans Grohe, a German company................................   27%     27%   27%	

During November 2000, the Company participated in a transaction in which an affiliate of Heartland Industrial Partners L.P. acquired a majority interest in MascoTech, Inc. In exchange for a portion of its ownership in MascoTech, the Company received proceeds aggregating $90 million, including cash and preferred stock of $57 million and $33 million, respectively. The Company recognized a $27.9 million pre-tax gain from its participation in this transaction. In addition, MascoTech's option to issue subordinated debt securities to the Company was reduced from $200 million to $100 million, and the option term was extended to October 2003. Subsequent to the transaction, MascoTech, Inc. was renamed Metaldyne Corporation. The Company is accounting for its investment in Metaldyne under the cost method and reclassified the investment to other non- current assets. The Company's common equity ownership in Metaldyne was 6 percent at December 31, 2000.
28
MASCO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
EQUITY INVESTMENTS IN AFFILIATES -- (CONCLUDED)
Excluding Hans Grohe, for which there is no quoted market value, the aggregate market value of the Company's investment in Emco Limited at December 31, 2000 (which may differ from the amounts that could then have been realized upon disposition), based upon quoted market prices at that date, was $14 million, as compared with the Company's related aggregate carrying value of $58 million. The Company's carrying value in common stock of Emco Limited exceeded its equity in the underlying net book value by approximately $23 million at December 31, 2000. This excess is currently being amortized over a period of 20 years.
SECURITIES OF FURNISHINGS INTERNATIONAL INC.
During August 1996, the Company completed the sale of its home furnishings products segment to Furnishings International Inc. Proceeds to the Company from the sale totaled $1,050 million, consisting of cash of $708 million, junior debt securities and equity securities. Securities of Furnishings International Inc. are summarized as follows:

                                                                       (IN THOUSANDS)
                                                                  AT DECEMBER 31
                                                              -----------------------
                                                                2000           1999
                                                              --------       --------
Junior debt securities (12% pay-in-kind).............         $476,300       $423,900
Preferred stock (13% cumulative).....................
Common stock (15% ownership).........................    )      57,370         57,370
Convertible preferred stock..........................
                                                              --------       --------
                                                              $533,670       $481,270
                                                              ========       ========	

The junior debt securities mature in 2008 and are stated at face value. Interest from these junior debt securities becomes payable in cash beginning in late 2004. The convertible preferred stock represents transferable rights for up to a 25 percent common ownership, although the Company is restricted from maintaining an ownership in excess of 20 percent of Furnishings International's common equity. As such, the Company will not acquire additional common equity, except for purposes of resale.
PROPERTY AND EQUIPMENT

                                                                (IN THOUSANDS)
                                                                AT DECEMBER 31
                                                           ------------------------
                                                              2000          1999
                                                           ----------    ----------
Land and improvements................................      $  119,060    $  101,000
Buildings............................................         755,390       643,190
Machinery and equipment..............................       1,958,840     1,694,910
                                                           ----------    ----------
                                                            2,833,290     2,439,100
Less, accumulated depreciation.......................         926,450       814,740
                                                           ----------    ----------
                                                           $1,906,840    $1,624,360
                                                           ==========    ==========	

29
 
MASCO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
ACCRUED LIABILITIES

                                                             (IN THOUSANDS)
                                                             AT DECEMBER 31
                                                         -----------------------
                                                            2000         1999
                                                         ----------   ----------
Advertising and sales promotion........................  $  136,030   $  110,450
Salaries, wages and commissions........................     113,630       90,210
Employee retirement plans..............................      70,330       72,690
Insurance..............................................      64,200       49,860
Dividends payable......................................      57,820       53,220
Interest...............................................      42,070       39,570
Property, payroll and other taxes......................      34,170       24,260
Income taxes...........................................       3,820       33,130
Other..................................................      94,570       66,930
                                                         ----------   ----------
                                                         $  616,640   $  540,320
                                                         ==========   ==========	

LONG-TERM DEBT

                                                             (IN THOUSANDS)
                                                             AT DECEMBER 31
                                                         -----------------------
                                                            2000         1999
                                                         ----------   ----------
Notes and Debentures:
  9%,     due Oct. 1, 2001.............................  $   77,030   $   77,030
  6.125%, due Sept. 15, 2003...........................     200,000      200,000
  5.75%,  due Oct. 15, 2008............................     100,000      100,000
  7.125%, due Aug. 15, 2013............................     200,000      200,000
  6.625%, due Apr. 15, 2018............................     121,310      250,000
  7.75%,  due Aug. 1, 2029.............................     300,000      300,000
Notes payable to banks:
  Domestic.............................................   1,563,000      750,000
  European.............................................     444,510      470,060
Other..................................................     223,340      146,480
                                                         ----------   ----------
                                                          3,229,190    2,493,570
Less, current portion..................................     210,950       62,300
                                                         ----------   ----------
                                                         $3,018,240   $2,431,270
                                                         ==========   ==========	

All of the notes and debentures above, other than bank notes, are nonredeemable.
The notes payable to domestic banks at December 31, 2000 relate to two Revolving Credit Agreements with a group of banks, which the Company entered into in November 2000. Such agreements include a $1.25 billion 364-Day Revolving Credit Agreement, which expires in 2001 and includes the option to extend payment for one year at the Company's discretion, and a $1.25 billion 5-Year Revolving Credit Agreement. Interest is payable on borrowings under these agreements based on various floating rate options as selected by the Company (approximately 7 percent at December 31, 2000). Proceeds from the facilities were used to pay the outstanding balances on the Company's $750 million Amended and Restated Credit Agreement, due to expire in November 2001 and the Company's $1 billion Amended and Restated Credit Agreement, due to expire in March 2001; both of these agreements were terminated in November 2000.
The notes payable to European banks relate to borrowings of local currency for European acquisitions and expansion. At December 31, 2000, approximately $190 million of European bank
30
MASCO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
LONG-TERM DEBT -- (CONCLUDED)
debt related to a term loan facility expiring in 2002. The balance of $254 million represents borrowings under lines of credit primarily expiring in 2003. Interest is payable on European borrowings based on various floating rates as selected by the Company (approximately 5.3 percent at December 31, 2000).
Certain debt agreements contain limitations on additional borrowings and a requirement for maintaining a certain level of net worth. At December 31, 2000, the Company was in compliance with these borrowing limitations, and the Company's net worth exceeded that requirement by approximately $776 million.
At December 31, 2000, the maturities of long-term debt during each of the next five years were approximately as follows: 2001 -- $210.9 million; 2002 -- $795.2 million; 2003 -- $393.9 million; 2004 -- $17.0 million; and 2005 -- $1,013.3 million.
Interest paid was approximately $203 million, $126 million and $114 million in 2000, 1999 and 1998, respectively.
Unaudited Subsequent Event: During March 2001, the Company issued $800 million of 6 3/4% notes due 2006; proceeds from this issuance were used to retire outstanding variable-rate bank debt. After giving effect to this debt issuance, the Company has on file with the Securities and Exchange Commission an unallocated shelf registration pursuant to which the Company is able to issue up to a combined $700 million of debt and equity securities.
SHAREHOLDERS' EQUITY
During the third quarter of 2000, approximately 300 of the Company's key employees purchased from the Company 8.4 million shares of Company common stock for cash totaling $156.0 million under a recently adopted Executive Stock Purchase Program ("Program"). The stock was purchased at $18.50 per share, the approximate market price of the common stock at the time of purchase.
Participants in the Program financed their purchases with five-year full recourse personal loans, at a market interest rate, from a bank syndicate. Each participant is fully responsible at all times for repaying their bank loans when they become due and is personally responsible for 100 percent of any loss in the market value of the purchased stock. The Company has guaranteed repayment of the loans only in the event of a default by the participant. As a further inducement for continued employment beyond the end of this five-year Program, each participant received, as part of the Program, a restricted stock grant vesting over a ten-year period. All of these key employees, in order to participate in this Program, were also required to sign a one-year post-employment non- competition agreement with the Company businesses that employ them.
During April 2000, the Company's Board of Directors authorized the repurchase of up to 40 million shares of its common stock in open-market transactions or otherwise. Pursuant to this authorization, approximately 12.6 million common shares were repurchased in 2000 at a cost aggregating approximately $220 million. At December 31, 2000, the Company had remaining authorization to repurchase up to an additional 27.4 million shares of its common stock in open-market transactions or otherwise.
Included in the consolidated statements of shareholders' equity for 1999 and 1998 are distributions to and contributions from shareholders of pooled companies. Such distributions and contributions occurred prior to August 31, 1999, the date of the pooling mergers.
31
MASCO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
SHAREHOLDERS' EQUITY -- (CONCLUDED)
On the basis of amounts paid (declared) and after giving effect to the 1998 stock split, cash dividends per share were $.49 ($.50) in 2000, $.45 ($.46) in 1999 and $.43 ($.43 1/2) in 1998.
In July 1998, the Company effected a two-for-one stock split in the form of a 100 percent stock distribution to shareholders, which, after giving effect to 1999 poolings of interests, resulted in the issuance of approximately 222 million shares of common stock and reduced paid-in-capital by approximately $222 million.
In 1995, the Company's Board of Directors announced the approval of a Shareholder Rights Plan. The Rights were designed to enhance the Board's ability to protect the Company's shareholders against, among other things, unsolicited attempts to acquire control of the Company that do not offer an adequate price to all shareholders or are otherwise not in the best interests of the shareholders. The Rights were issued to shareholders of record in December 1995 and will expire in December 2005.
STOCK OPTIONS AND AWARDS
The Company's 1991 Long Term Stock Incentive Plan (the "Plan") provides for the issuance of stock-based incentives in various forms. At December 31, 2000, outstanding stock-based incentives were primarily in the form of restricted long-term stock awards, stock appreciation rights, phantom stock awards and stock options. Additionally, the Company's 1997 Non-Employee Directors Stock Plan (the "1997 Plan") provides for the payment of compensation to non-employee Directors in part in Company common stock.
RESTRICTED LONG-TERM STOCK AWARDS
The Company granted long-term stock awards, net of cancellations, for 2,662,000, 402,000 and 1,149,000 shares of Company common stock during 2000, 1999 and 1998, respectively, to key employees and non-employee Directors of the Company. These long-term stock awards do not cause net share dilution inasmuch as the Company reacquires an equal number of shares on the open market. The weighted average grant date fair value per share of long-term stock awards granted during 2000, 1999 and 1998 was $20, $29 and $26, respectively. Compensation expense for the annual vesting of long-term stock awards was $22 million, $20 million and $17 million in 2000, 1999 and 1998, respectively. The unamortized costs of unvested stock awards, aggregating approximately $140 million at December 31, 2000, are included in other non-current assets and are being amortized over the typical 10-year vesting periods.
STOCK APPRECIATION RIGHTS AND PHANTOM STOCK AWARDS
In connection with transactions accounted for as poolings of interests in 1999, the Company converted existing stock appreciation rights ("SARs") into Company SARs with annual cash compensation linked to the value of approximately 330,000 shares of Company common stock. In connection with other acquisitions in 1999, the Company issued phantom stock awards linked to the value of 664,000 shares of Company common stock. Compensation expense related to SARs and phantom stock awards for 2000, 1999 and 1998 was $5.7 million, $66.6 million and $8.3 million, respectively.
STOCK OPTIONS
Fixed stock options are granted to key employees and non-employee Directors of the Company and generally have a maximum term of 10 years. The exercise price equals the market price of
32
MASCO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
STOCK OPTIONS AND AWARDS -- (CONTINUED)
Company common stock on the date of grant. These options generally become exercisable in installments beginning in the third year and extending through the eighth year after grant.
During 2000, the Company granted stock options for 9,696,000 shares of Company common stock and restoration stock options for 102,000 shares with grant date exercise prices ranging from $19 to $24 (the market prices on the grant dates). During 1999 and 1998, the Company granted restoration stock options for 1,956,000 and 692,000 shares of Company common stock with grant date exercise prices ranging from $25 to $33 and $25 to $31, respectively. The Company also granted stock options for 320,000 shares of Company common stock in 2000 and 64,000 in each of 1999 and 1998 to non-employee Directors of the Company with exercise prices of $21, $30 and $29, respectively (the market prices on the grant dates).
A summary of the status of the Company's fixed stock options for the three years ended December 31, 2000 is presented below.

                                                          (SHARES IN THOUSANDS)
                                                        2000     1999     1998
                                                       ------   ------   ------
Option shares outstanding, January 1.................  12,636   14,396   16,200
  Weighted average exercise price....................     $20      $18      $17
Option shares granted, including restoration
  options............................................  10,118    2,020      756
  Weighted average exercise price....................     $18      $29      $28
Option shares exercised..............................     536    3,780    2,486
  Weighted average exercise price                         $11      $17      $13
Option shares canceled...............................      25     --         74
  Weighted average exercise price....................     $20     --        $10
Option shares outstanding, December 31...............  22,193   12,636   14,396
  Weighted average exercise price....................     $19      $20      $18
  Weighted average remaining option term (in
     years)..........................................     7.8      5.9      6.6
Option shares exercisable, December 31...............   7,137    4,952    3,781
  Weighted average exercise price....................     $19      $21      $17	

The following table summarizes information for option shares outstanding and exercisable at December 31, 2000 (shares in thousands).

         OPTION SHARES OUTSTANDING               {OPTION SHARES EXERCISABLE
-------------------------------------------      --------------------------
                       WEIGHTED
                        AVERAGE    WEIGHTED                        WEIGHTED
                       REMAINING   AVERAGE                         AVERAGE
RANGE OF   NUMBER OF    OPTION     EXERCISE      NUMBER OF         EXERCISE
 PRICES     SHARES       TERM       PRICE         SHARES            PRICE
--------   ---------   ---------   --------      ---------         --------
 $ 8-15      2,723      12 Years     $10           2,487             $ 9
  16-19      2,913       6 Years      16             849              16
  20-27     14,283       8 Years      20           1,617              21
  28-33      2,274       5 Years      30           2,184              29
 ------     ------     ---------     ---           -----             ---
 $ 8-33     22,193       8 Years     $19           7,137             $19
 ======     ======     =========     ===           =====             ===	

At December 31, 2000, a total of 19,952,000 shares and 702,000 shares of Company common stock was available under the Plan and the 1997 Plan, respectively, for the granting of stock options or long-term stock awards.
The Company has elected to continue to apply the provisions of Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," and, accordingly, the Company's
33
MASCO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
STOCK OPTIONS AND AWARDS -- (CONCLUDED)
stock options do not constitute compensation expense in the determination of net income in the statement of income. Had stock option compensation expense been determined pursuant to the methodology of Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting for Stock-Based Compensation," the pro forma effect would have been a reduction in the Company's diluted earnings per share of approximately $.03, $.04 and $.01 in 2000, 1999 and 1998, respectively.
For SFAS No. 123 calculation purposes, the weighted average grant date fair values of option shares, including restoration options granted in 2000, 1999, and 1998, were $7.16, $7.28 and $6.00, respectively. The fair values of these options were estimated at the grant dates using a Black-Scholes option pricing model with the following assumptions for 2000, 1999 and 1998, respectively:
risk-free interest rate -- 6.7%, 5.0% and 4.9%; dividend yield -- 1.9%, 1.6% and 2.1%; volatility factor -- 28%, 34% and 28%; and expected option life -- 7 years, 3 years and 3 years.
EMPLOYEE RETIREMENT PLANS
The Company sponsors defined-benefit and defined-contribution pension plans for most of its employees. In addition, substantially all salaried employees participate in non-contributory profit-sharing plans, to which payments are determined annually by the Compensation Committee of the Board of Directors. Aggregate charges to income under the Company's pension, retirement and profit-sharing plans were $53.7 million in 2000, $57.3 million in 1999 and $35.8 million in 1998.
Net periodic pension cost for the Company's qualified defined benefit pension plans includes the following components, in thousands:

                                                   2000        1999        1998
                                                 --------    --------    --------
Service cost.................................    $  8,850    $  9,630    $  8,530
Interest cost................................      13,390      12,470      11,260
Expected return on plan assets...............     (11,350)    (10,610)    (11,870)
Amortization of transition asset.............        (640)       (620)       (620)
Amortization of prior-service cost...........         440         380         320
Amortization of net loss.....................       1,250       2,250       1,530
                                                 --------    --------    --------
Net periodic pension cost....................    $ 11,940    $ 13,500    $  9,150
                                                 ========    ========    ========	

34
 
MASCO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
EMPLOYEE RETIREMENT PLANS -- (CONTINUED)
The following table provides a reconciliation of changes in the projected benefit obligation, fair value of plan assets and funded status of the Company's qualified defined benefit pension plans at December 31, in thousands:

                                                              2000        1999
                                                            --------    --------
Changes in projected benefit obligation:
  Projected benefit obligation at January 1.............    $162,940    $175,980
  Service cost..........................................       8,370       9,220
  Interest cost.........................................      15,960      12,470
  Plan amendments.......................................       1,070         980
  Actuarial (gain)/loss.................................      (2,020)    (28,600)
  Business combinations/divestitures....................       1,270       --
  Benefit payments......................................      (6,350)     (7,110)
                                                            --------    --------
     Projected benefit obligation at December 31........    $181,240    $162,940
                                                            ========    ========
Changes in fair value of plan assets:
  Fair value of plan assets at January 1................    $107,300    $112,860
  Actual return on plan assets..........................       7,210      (8,700)
  Business combinations/divestitures....................         920       --
  Company contributions.................................      23,710      10,650
  Benefit payments......................................      (6,350)     (7,110)
  Expenses/other........................................        (480)       (400)
                                                            --------    --------
     Fair value of plan assets at December 31...........    $132,310    $107,300
                                                            ========    ========
     (Includes approximately 629,000 shares of Company
     common stock valued at $16 million at December 31,
     2000)
Funded status of qualified defined benefit pension
  plans:
  Plan assets (less than) projected benefit obligation
     at December 31.....................................    $(48,930)   $(55,640)
  Unamortized transition asset, net.....................      (1,210)     (1,560)
  Unamortized prior-service cost........................       5,500       4,880
  Unamortized net loss..................................      42,130      41,250
                                                            --------    --------
     Net liability recognized...........................    $ (2,510)   $(11,070)
                                                            ========    ========	

The major assumptions used in accounting for the Company's pension plans are as follows:

                                                        2000       1999       1998
                                                        ----       ----       -----
Discount rate for obligations.......................    7.75%      7.75%       6.75%
Expected return on plan assets......................    9.0%       9.0%       11.0%
Rate of compensation increase.......................    4.5%       5.0%        5.0%	

In addition to the Company's qualified defined benefit pension and retirement plans, the Company has non-qualified unfunded supplemental pension plans covering certain employees, which provide for benefits in addition to those provided by the qualified pension plans. The actuarial present value of accumulated benefit obligations and projected benefit obligations related to these non-qualified pension plans totaled $47.9 million and $55.5 million, and $41.4 million and $48.9 million at December 31, 2000 and 1999, respectively. Net periodic pension cost for these plans was $8.2 million, $7.9 million and $7.1 million in 2000, 1999 and 1998, respectively.
35
MASCO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
EMPLOYEE RETIREMENT PLANS -- (CONCLUDED)
The Company sponsors certain post-retirement benefit plans that provide medical, dental and life insurance coverage for eligible retirees and dependents in the United States based on age and length of service. At December 31, 2000, the aggregate present value of the unfunded accumulated postretirement benefit obligation approximated $2.9 million.
SEGMENT INFORMATION
The Company's operations in the segments detailed below consist of the manufacture and sale of, and for one segment the installation of certain of, the following home improvement and building products:
Cabinets and Related Products -- principally includes assembled and ready-to-assemble kitchen and bath cabinets; home office workstations; entertainment centers; storage products; bookcases; and kitchen utility products.
Plumbing Products -- principally includes faucets; plumbing fittings and valves; bathtubs and shower enclosures; whirlpools; and spas.
Decorative Architectural Products -- principally includes paints and stains; mechanical and electronic lock sets; and door, window and other hardware.
Insulation Installation and Other Services -- principally includes the sale and installation of insulation and other products, and the restoration of facilities damaged by natural disasters.
Other Specialty Products -- principally includes staple gun tackers, staples and other fastening tools; hydronic radiators and heat convectors; venting and ventilation systems; modular office workstations; and grilles, registers and diffusers for heating and cooling systems.
The above products are sold to the home improvement and home construction markets through mass merchandisers, hardware stores, home centers, distributors, and other outlets for consumers and contractors.
The Company's operations are principally located in North America and Europe. The Company's country of domicile is the United States.
Corporate assets consist primarily of real property, cash and cash investments and other investments.
The Company's segments are based on similarities in products and services and represent the aggregation of operating units for which financial information is regularly evaluated by the corporate operating executives in determining resource allocation and assessing performance and is periodically reviewed by the Board of Directors. Accounting policies for the segments are the same as those for the Company. The Company primarily evaluates performance based on operating profit and, other than general corporate expense, allocates specific corporate overhead to each segment.
36
 
MASCO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
SEGMENT INFORMATION -- (CONCLUDED)
The following table presents information about the Company by segment and geographic area:

                                                      NET SALES (1)(2)(3)(4)
                                               ------------------------------------
                                                  2000         1999         1998
                                               ----------   ----------   ----------
The Company's operations by segment were:
   Cabinets and Related Products.............  $2,551,000   $2,220,000   $1,908,000
   Plumbing Products.........................   1,839,000    1,803,000    1,667,000
   Decorative Architectural Products.........   1,395,000    1,165,000      919,000
   Insulation Installation and Other
     Services................................     855,000      532,000      250,000
   Other Specialty Products..................     603,000      587,000      536,000
                                               ----------   ----------   ----------
       Total                                   $7,243,000   $6,307,000   $5,280,000
                                               ==========   ==========   ==========
The Company's operations by geographic area
 were:
   North America.............................  $5,947,000   $5,238,000   $4,441,000
   International, principally Europe.........   1,296,000    1,069,000      839,000
                                               ----------   ----------   ----------
       Total, as above.......................  $7,243,000   $6,307,000   $5,280,000
                                               ==========   ==========   ==========
General corporate expense, net.....................................................
Operating profit, after general corporate expense..................................
Other income (expense), net........................................................
Income before income taxes (6).....................................................
Equity investments in affiliates...................................................
Securities of Furnishings International Inc. ......................................
Corporate assets...................................................................
       Total assets................................................................

                                                      OPERATING PROFIT (8)
                                               ----------------------------------
                                                  2000         1999        1998
                                               ----------   ----------   --------
The Company's operations by segment were:
   Cabinets and Related Products.............  $  323,000   $  320,000   $295,000
   Plumbing Products.........................     284,000      378,000    369,000
   Decorative Architectural Products.........     250,000      122,000    167,000
   Insulation Installation and Other
     Services................................     123,000       79,000     30,000
   Other Specialty Products..................      86,000      104,000     91,000
                                               ----------   ----------   --------
       Total                                   $1,066,000   $1,003,000   $952,000
                                               ==========   ==========   ========
The Company's operations by geographic area
 were:
   North America.............................  $  923,000   $  867,000   $829,000
   International, principally Europe.........     143,000      136,000    123,000
                                               ----------   ----------   --------
       Total, as above.......................   1,066,000    1,003,000    952,000
General corporate expense, net...............    (99,000)     (92,000)   (86,000)
                                               ----------   ----------   --------
Operating profit, after general corporate exp     967,000      911,000    866,000
Other income (expense), net..................    (73,000)      (7,000)     39,000
                                               ----------   ----------   --------
Income before income taxes (6)...............    $894,000     $904,000   $905,000
                                               ==========   ==========   ========
Equity investments in affiliates.............
Securities of Furnishings International Inc.
Corporate assets.............................
       Total assets..........................

                                                                     (IN THOUSANDS)
                                                    ASSETS AT DECEMBER 31 (5)
                                               ------------------------------------
                                                  2000         1999         1998
                                               ----------   ----------   ----------
The Company's operations by segment were:
   Cabinets and Related Products.............  $1,942,000   $1,517,000   $1,334,000
   Plumbing Products.........................   1,270,000    1,217,000    1,118,000
   Decorative Architectural Products.........   1,200,000      823,000      586,000
   Insulation Installation and Other
     Services................................     872,000      629,000      224,000
   Other Specialty Products..................     938,000      997,000      586,000
                                               ----------   ----------   ----------
       Total                                   $6,222,000   $5,183,000   $3,848,000
                                               ==========   ==========   ==========
The Company's operations by geographic area
 were:
   North America.............................  $4,424,000   $3,746,000   $2,672,000
   International, principally Europe.........   1,798,000    1,437,000    1,176,000
                                               ----------   ----------   ----------
       Total, as above.......................   6,222,000    5,183,000    3,848,000
General corporate expense, net...............
Operating profit, after general corporate exp
Other income (expense), net..................
Income before income taxes (6)...............
Equity investments in affiliates.............      87,000      203,000      225,000
Securities of Furnishings International Inc.      534,000      481,000      435,000
Corporate assets.............................     901,000      768,000    1,111,000
                                               ----------   ----------   ----------
       Total assets..........................  $7,744,000   $6,635,000   $5,619,000
                                               ==========   ==========   ==========	

                                                                  PROPERTY ADDITIONS (7)
                                                              -------------------------------
                                                                2000        1999       1998
                                                              ---------   --------   --------
The Company's operations by segment were:
 Cabinets and Related Products..............................  $ 218,000   $162,000   $ 85,000
 Plumbing Products..........................................     79,000     87,000     65,000
 Decorative Architectural Products..........................    103,000     61,000     36,000
 Insulation Installation and Other Services.................     46,000     45,000     17,000
 Other Specialty Products...................................     30,000     56,000     69,000
                                                              ---------   --------   --------
                                                                476,000    411,000    272,000
 Unallocated amounts principally related to corporate
   assets...................................................     17,000     27,000     25,000
 Assets of purchase acquisitions............................   (105,000)   (87,000)   (54,000)
                                                              ---------   --------   --------
       Total................................................  $ 388,000   $351,000   $243,000
                                                              =========   ========   ========

                                                                     DEPRECIATION AND
                                                                       AMORTIZATION
                                                              ------------------------------
                                                                2000       1999       1998
                                                              --------   --------   --------
The Company's operations by segment were:
 Cabinets and Related Products..............................  $ 67,000   $ 49,000   $ 49,000
 Plumbing Products..........................................    50,000     45,000     39,000
 Decorative Architectural Products..........................    30,000     20,000     21,000
 Insulation Installation and Other Services.................    34,000     18,000     10,000
 Other Specialty Products...................................    31,000     26,000     19,000
                                                              --------   --------   --------
                                                               212,000    158,000    138,000
 Unallocated amounts principally related to corporate
   assets...................................................    26,000     24,000     19,000
 Assets of purchase acquisitions............................     --         --         --
                                                              --------   --------   --------
       Total................................................  $238,000   $182,000   $157,000
                                                              ========   ========   ========	

(1) Included in net sales in 2000, 1999 and 1998 are export sales from the U.S. of $162 million, $127 million and $112 million, respectively.
(2) Intra-company sales between segments represented less than one percent of consolidated net sales in 2000, 1999 and 1998.
(3) Includes net sales to one customer in 2000, 1999 and 1998 of $1,866 million, $1,539 million and $1,236 million, respectively.
(4) Net sales from the Company's operations in the U.S. were $5,740 million, $5,024 million and $4,275 million in 2000, 1999 and 1998, respectively.
(5) Long-lived assets of the Company's operations in the U.S. and Europe were $2,626 million and $1,246 million, $2,135 million and $997 million, and $1,392 million and $813 million at December 31, 2000, 1999 and 1998, respectively.
(6) Income before income taxes and net income pertaining to non-U.S. operations were $108 million and $67 million, $120 million and $69 million, and $118 million and $59 million for 2000, 1999 and 1998, respectively.
(7) Property additions by segment include assets of purchase acquisitions.
(8) Included in operating profit for 2000 is a non-cash charge for the planned disposition of businesses for the following segments: Cabinets and Related Products -- $20 million, Plumbing Products -- $40 million, Decorative Architectural Products -- $20 million, and Other Specialty Products -- $10 million.
37
 
MASCO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
OTHER INCOME (EXPENSE), NET

                                                                   (IN THOUSANDS)
                                                2000         1999         1998
                                              ---------    ---------    ---------
Re: MascoTech, Inc.:
  Equity earnings.........................    $  17,250    $  15,430    $  15,360
                                              ---------    ---------    ---------
  Gain from sale of shares................       27,910       --           --
                                              ---------    ---------    ---------
Equity earnings, other affiliates.........        2,220        8,500       13,840
                                              ---------    ---------    ---------
Other, net:
  Income from cash and cash investments...        4,920        9,330       21,540
  Other interest income...................       60,450       52,530       46,340
  Other items, net........................        5,330       27,330       56,420
                                              ---------    ---------    ---------
                                                 70,700       89,190      124,300
                                              ---------    ---------    ---------
Interest expense..........................     (191,380)    (120,420)    (114,400)
                                              ---------    ---------    ---------
                                              $ (73,300)   $  (7,300)   $  39,100
                                              =========    =========    =========	

Other interest income for 2000, 1999 and 1998 includes $52.4 million, $46.6 million and $41.5 million, respectively, from the 12% pay-in-kind junior debt securities of Furnishings International Inc.
Other items in 2000 include approximately $41 million of income and gains, net regarding certain non-operating assets, realized foreign currency exchange gains of $22 million and income from early retirement of debentures of $19 million. Also included in other items in 2000 were $55 million of non-cash charges for the write-down of certain investments (including $35 million related to an investment in Emco Limited) and $22 million for losses on dispositions of property and equipment and other items.
Other items in 1999 include approximately $30 million of income and gains, net regarding certain non-operating assets and $7.6 million of dividend income from the Company's investment in Furnishings International's 13% cumulative preferred stock. Also included in other items in 1999 were approximately $4 million of expenses related to the early retirement of debt.
Other items in 1998 include gains aggregating approximately $59 million from sales of the Company's Thermador subsidiary ($30 million) and the Company's investment in TriMas Corporation ($29 million). Also included in other items in 1998 were $7 million of dividend income from the Company's investment in Furnishings International's 13% cumulative preferred stock and an approximate $12 million charge related to the early retirement of long-term debt.
38
 
MASCO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
INCOME TAXES

                                                                (IN THOUSANDS)
                                                  2000       1999       1998
                                                --------   --------   --------
Income before income taxes:
  U.S.........................................  $785,670   $783,910   $787,090
  Foreign.....................................   107,730    120,190    118,410
                                                --------   --------   --------
                                                $893,400   $904,100   $905,500
                                                ========   ========   ========
Provision for income taxes:
  Currently payable:
     U.S. Federal.............................  $217,040   $256,420   $203,200
     State and local..........................    28,100     27,800     28,290
     Foreign..................................    41,300     45,040     47,250
  Deferred:
     U.S. Federal.............................    16,160     (1,270)    49,250
     Foreign..................................      (900)     6,510     12,410
                                                --------   --------   --------
                                                $301,700   $334,500   $340,400
                                                ========   ========   ========
Deferred tax assets at December 31:
  Intangibles.................................  $  7,910   $ 11,540
  Inventories.................................    11,490      5,530
  Accrued liabilities.........................    55,810     59,170
  Capital loss carryforward...................    71,070    100,570
  Other, principally equity and other
     investments..............................    81,100     60,550
                                                --------   --------
                                                 227,380    237,360
  Valuation allowance.........................   (88,700)  (127,320)
                                                --------   --------
                                                 138,680    110,040
                                                ========   ========
Deferred tax liabilities at December 31:
  Property and equipment......................   239,650    206,110
  Other.......................................    24,070     37,610
                                                --------   --------
                                                 263,720    243,720
                                                --------   --------
Net deferred tax liability at December 31.....  $125,040   $133,680
                                                ========   ========	

At December 31, 2000 and 1999, net deferred tax liability consists of net short-term deferred tax assets of $31.1 million and $25.0 million, respectively, and net long-term deferred tax liabilities of $156.1 million and $158.7 million, respectively.
A valuation allowance of approximately $88.7 million and $127.3 million was recorded at December 31, 2000 and 1999, respectively, primarily due to the uncertainty of whether a significant portion of the Company's capital loss carryforward may ultimately be realized (expiring at December 31, 2001). Such capital loss benefit pertains to a $71.1 million and $100.6 million after-tax capital loss carryforward at December 31, 2000 and 1999, respectively, on the 1996 disposition of the Company's home furnishings products segment and a $17.6 million and $26.7 million benefit of a capital nature on the Company's equity and other investments at December 31, 2000 and 1999, respectively.
39
 
MASCO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
INCOME TAXES -- (CONCLUDED)
 The following is a reconciliation of the U.S. Federal statutory rate:

                                                               2000    1999    1998
                                                               ----    ----    ----
U.S. Federal statutory rate................................     35%     35%     35%
State and local taxes, net of federal tax benefit..........      2       2       2
Higher taxes on foreign earnings...........................      1       1       2
Amortization in excess of tax..............................      1       1       1
Change in valuation allowance..............................     (3)     (2)     (2)
Other, net.................................................     (2)     --      --
                                                                --      --      --
  Effective tax rate.......................................     34%     37%     38%
                                                                ==      ==      ==	

Income taxes paid were approximately $314 million, $326 million and $216 million in 2000, 1999 and 1998, respectively.
Earnings of non-U.S. subsidiaries generally become subject to U.S. tax upon the remittance of dividends and under certain other circumstances. Undistributed earnings of non-U.S. subsidiaries were $381.4 million at December 31, 2000. If remitted, such earnings generally would not result in any significant additional foreign tax or U.S. tax because of available foreign tax credits.
EARNINGS PER SHARE
The following are reconciliations of the numerators and denominators used in the computations of basic and diluted earnings per share, in thousands:

                                                  2000       1999       1998
                                                --------   --------   --------
Numerator:
  Basic (Net income)..........................  $591,700   $569,600   $565,100
  Add convertible debenture interest, net.....     --         --           700
                                                --------   --------   --------
  Diluted (Net income)........................  $591,700   $569,600   $565,800
                                                ========   ========   ========
Denominator:
  Basic shares (based on weighted average)....   441,600    435,600    435,500
  Add:
     Contingent shares........................     8,700      7,300      7,200
     Stock option dilution....................     1,500      3,300      3,800
     Convertible debentures...................     --         --         1,000
                                                --------   --------   --------
  Diluted shares..............................   451,800    446,200    447,500
                                                ========   ========   ========	

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In December 1999, the Securities and Exchange Commission issued Staff Accounting Bulletin Number 101, "Revenue Recognition in Financial Statements" ("SAB 101"). The guidelines in SAB 101 were adopted in the fourth quarter of 2000 and did not have a material effect on the Company's financial statements.
As a result of the Financial Accounting Standards Board Emerging Issues Task Force ("EITF") Issue Number 00-10, "Accounting for Shipping and Handling Fees and Costs," the Company changed its policy for the classification of shipping and handling costs. The change resulted in the reclassification of shipping and handling costs from selling, general and administrative expenses to cost of sales of $143 million, $161 million and $135 million for the nine months ended September 30,
40
MASCO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS -- (CONCLUDED)
2000, and for the twelve months ended December 31, 1999 and 1998, respectively. This reclassification did not result in a change in net income or earnings per share.
In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging Activities." SFAS No. 133 requires that all derivative instruments be recorded on the balance sheet at fair value. Changes in the fair value of derivatives are to be recorded each period in current earnings or other comprehensive income, depending on whether a derivative is designated as part of a hedge transaction and, if it is, the type of hedge transaction. In June 1999, the FASB issued SFAS No. 137, "Accounting for Derivative Instruments and Hedging Activities -- Deferral of the Effective Date of FASB Statement No. 133." Adoption of SFAS No. 137 deferred the effective adoption date of SFAS No. 133 to January 1, 2001. The adoption of SFAS No. 133 will not have a material effect on the Company's financial statements.
COMMITMENTS AND CONTINGENCIES
The Company is subject to lawsuits and claims pending or asserted with respect to matters arising in the ordinary course of business.
In May 1998, a civil suit was filed in the Grays Harbor County, Washington Superior Court against Behr Process Corporation, a subsidiary of the Company. The case involves four exterior wood coating products, which represent a relatively small part of Behr's total sales. The plaintiffs allege, among other things, that after applying these products, the wood surfaces suffered excessive mildewing in the very humid climate of western Washington. The trial court certified the case as a class action, including all purchasers of the products who reside in nineteen counties in western Washington. Behr denies the allegations. Although Behr believes that the subject products have been purchased by thousands of consumers in western Washington, consumer complaints in the past have been relatively small compared to the total volume of products sold. In May 2000, the court entered a default against Behr as a discovery sanction. Thereafter, the jury returned a verdict awarding damages to the named plaintiffs. The damages awarded for the eight homeowner claims (excluding one award to the owners of a vacation resort) ranged individually from $14,500 to $38,000. The awards were calculated using a formula based on the product used, the nature and square footage of wood surface and certain other allowances. Under the verdict, the same formula will be used for calculating awards on claims that may be submitted by the subject purchasers of these products. In July 2000, the court awarded additional damages of $10,000 per claim to the eight homeowner claims, under the Washington Consumer Protection Act. This increased the total damages awarded on the homeowner claims to approximately $263,000. The court denied the plaintiffs' request for an award of additional damages on claims that may be submitted by other class members. In addition, the court granted the plaintiffs' motion for attorneys' fees.
Behr is appealing the judgment. At this time, the Company is not in a position to estimate reliably the number of class members, the number of claims that may be filed or the awards that class members may seek. Although Behr is not able to estimate the amount of any potential liability, Behr believes that there have been numerous rulings by the trial court that constitute reversible error and that there are valid defenses to the lawsuit. The Company has made no provision for any potential loss in the Company's consolidated financial statements.
Behr has also been served with sixteen complaints filed by consumers in the state courts in Alabama, California, New York, Oregon, and Washington; and in a provincial court in British Columbia, Canada. The complaints allege that some of Behr's exterior wood coating products fail to
41
MASCO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
COMMITMENTS AND CONTINGENCIES -- (CONCLUDED)
perform as warranted, resulting in damage to the plaintiffs' wood surfaces. Some of the complaints seek nationwide class action certification; others seek class action certification for one state or region. Discovery in the lawsuits has only recently begun. Proceedings in the eleven California actions will be coordinated in the San Joaquin, California Superior Court.
In addition, Behr and the Company have recently been notified that complaints containing similar allegations have been filed in state court in Juneau, Alaska and in a provincial court in Ontario, Canada. These complaints have not yet been served.
Behr and the Company are defending the lawsuits and believe that there are substantial grounds for denial of class action certification and that there are substantial defenses to the claims.
Two of Behr's liability insurers are participating in Behr's defense of the class actions subject to a reservation of rights. One insurer has filed a declaratory judgment action in the Orange County, California Superior Court seeking a declaration that the claims asserted in the class action complaints are not covered by Behr's insurance policies. The other insurer was named as a defendant in the suit and has filed cross-claims against Behr seeking a similar declaration.
42
 
MASCO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONCLUDED)
INTERIM FINANCIAL INFORMATION (UNAUDITED)

                                                       (IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
                                                                   QUARTERS ENDED
                                   TOTAL       -------------------------------------------------------
                                    YEAR       DECEMBER 31    SEPTEMBER 30     JUNE 30       MARCH 31
                                 ----------    -----------    ------------    ----------    ----------
2000:
Net Sales....................    $7,243,000    $1,733,000      $1,893,000     $1,871,000    $1,746,000
Gross Profit.................    $2,344,840    $  515,970      $  627,300     $  626,800    $  574,770
Net income...................    $  591,700    $   44,900      $  187,400     $  185,400    $  174,000
Earnings per share:
  Basic......................         $1.34          $.10            $.42           $.42          $.40
  Diluted....................         $1.31          $.10            $.41           $.41          $.39

1999:
Net sales....................    $6,307,000    $1,645,000      $1,704,000     $1,567,000    $1,391,000
Gross profit.................    $2,150,720    $  546,010      $  581,920     $  543,030    $  479,760
Net income...................    $  569,600    $  178,700      $   64,900     $  174,100    $  151,900
Earnings per share:
  Basic......................         $1.31          $.41            $.15           $.40          $.35
  Diluted....................         $1.28          $.40            $.15           $.39          $.34

Diluted earnings per share,
  excluding amortization of
  acquired goodwill:
  2000.......................         $1.43          $.13            $.44           $.44          $.42
  1999.......................         $1.37          $.43            $.17           $.41          $.36	

Gross profit has been restated for a change in accounting policy resulting from EITF 00-10, "Accounting for Shipping and Handling Fees and Costs." Such restatement reduced gross profit by $45 million, $48 million and $50 million in the first, second and third quarters of 2000, respectively, and by $37 million, $38 million, $40 million and $46 million in the first, second, third and fourth quarters of 1999, respectively. This restatement did not result in a change in net income or earnings per share.
43
 
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Information regarding executive officers required by this Item is set forth as a Supplementary Item at the end of Part I hereof (pursuant to Instruction 3 to Item 401(b) of Regulation S-K). Other information required by this Item will be contained in the Company's definitive Proxy Statement for its 2001 Annual Meeting of Stockholders, to be filed on or before April 30, 2001, and such information is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION.
Information required by this Item will be contained in the Company's definitive Proxy Statement for its 2001 Annual Meeting of Stockholders, to be filed on or before April 30, 2001, and such information is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Information required by this Item will be contained in the Company's definitive Proxy Statement for its 2001 Annual Meeting of Stockholders, to be filed on or before April 30, 2001, and such information is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Information required by this Item will be contained in the Company's definitive Proxy Statement for its 2001 Annual Meeting of Stockholders, to be filed on or before April 30, 2001, and such information is incorporated herein by reference.
44
 
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) LISTING OF DOCUMENTS.
(1)Financial Statements. The Company's Consolidated Financial Statements included in Item 8 hereof, as required at December 31, 2000 and 1999, and for the years ended December 31, 2000, 1999 and 1998, consist of the following:
Consolidated Balance Sheets Consolidated Statements of Income Consolidated Statements of Cash Flows Consolidated Statements of Shareholders' Equity Notes to Consolidated Financial Statements
(2) Financial Statement Schedules.

(i)        Financial Statement Schedule of the Company appended hereto,
           as required for the years ended December 31, 2000, 1999 and
           1998, consists of the following:
                II. Valuation and Qualifying Accounts	

(3) Exhibits.

3.i         Restated Certificate of Incorporation of Masco Corporation
            and amendments thereto(4).
3.ii        Bylaws of Masco Corporation, as amended(6).
4.a.i       Indenture dated as of December 1, 1982 between Masco
            Corporation and Morgan Guaranty Trust Company of New York,
            as Trustee(2), and Directors' resolutions establishing Masco
            Corporation's: (i) 9% Notes Due October 1, 2001(1); (ii)
            6 1/8% Notes Due September 15, 2003(6); (iii) 7 1/8%
            Debentures Due August 15, 2013(6); (iv) 6.625% Debentures
            Due April 15, 2018(6); (v) 5.75% Notes Due 2008(6); and (vi)
            7 3/4% Debentures Due August 1, 2029(8).
4.a.ii      Agreement of Appointment and Acceptance of Successor Trustee
            dated as of July 25, 1994 among Masco Corporation, Morgan
            Guaranty Trust Company of New York and The First National
            Bank of Chicago(8).
4.a.iii     Supplemental Indenture dated as of July 26, 1994 between
            Masco Corporation and The First National Bank of Chicago(8).
4.a.iv      Indenture dated as of February 12, 2001 between Masco
            Corporation and Bank One Trust Company, National
            Association, as Trustee, and Directors' Resolutions
            establishing Masco Corporation's 6 3/4% Notes Due 2006
            (filed herewith).
4.b         Rights Agreement dated as of December 6, 1995, between Masco
            Corporation and The Bank of New York, as Rights Agent, and
            Amendment No. 1 dated September 23, 1998 (filed herewith).
4.c         $1.25 billion 364-day Revolving Credit Agreement dated as of
            November 6, 2000 among Masco Corporation and Masco Europe
            S.A.R.L., as borrowers, the banks party thereto, Commerzbank
            AG, New York and Grand Cayman Branches, and Citibank, N.A.,
            as Syndication Agents, BNP Paribas, as Documentation Agent,
            and Bank One, NA, as Administrative Agent.(10)	

45

4.d         $1.25 billion 5-Year Revolving Credit Agreement dated as of
            November 6, 2000 among Masco Corporation and Masco Europe
            S.A.R.L., as borrowers, the banks party thereto, Commerzbank
            AG, New York and Grand Cayman Branches, and Citibank, N.A.,
            as Syndication Agents, BNP Paribas, as Documentation Agent,
            and Bank One, NA, as Administrative Agent.(10)
4.e         DM 350,000,000 Multicurrency Revolving Credit Facility dated
            September 14, 1998 among Masco GmbH, as Borrower, Masco
            Corporation, as Guarantor, Commerzbank Aktiengesellschaft,
            as Arranger, and Commerzbank International S.A., as
            Agent(6).
4.f         DM 400,000,000 Term Loan Facility dated July 9, 1997 among
            Masco GmbH, as Borrower, Masco Corporation, as Guarantor,
            Commerzbank Aktiengesellschaft, as Arranger, and Commerzbank
            International S.A., as Agent for the banks party thereto;
            and Amendment dated as of June 12, 1998 to Credit
            Agreement(6).
4.g         Shareholders Agreement by and among MascoTech, Inc. (now
            known as Metaldyne Corporation), Masco Corporation, Richard
            Manoogian, certain of their respective affiliates and other
            co-investors as party thereto, dated as of November 28, 2000
            (filed herewith).
NOTE:       Other instruments, notes or extracts from agreements
            defining the rights of holders of long-term debt of Masco
            Corporation or its subsidiaries have not been filed since
            (i) in each case the total amount of long-term debt
            permitted thereunder does not exceed 10 percent of Masco
            Corporation's consolidated assets, and (ii) such
            instruments, notes and extracts will be furnished by Masco
            Corporation to the Securities and Exchange Commission upon
            request.
10.a        Subordinated Loan Agreement dated as of November 28, 2000
            between MascoTech, Inc. (now known as Metaldyne Corporation)
            and Masco Corporation (filed herewith).
NOTE:       Exhibits 10.b through 10.g constitute the management
            contracts and executive compensatory plans or arrangements
            in which certain of the Directors and executive officers of
            the Company participate.
10.b        Masco Corporation 1991 Long Term Stock Incentive Plan as
            Amended and Restated September 13, 2000. (filed herewith)
10.c        Masco Corporation Supplemental Executive Retirement and
            Disability Plan dated October 2, 2000 (filed herewith).
10.d        Masco Corporation 1997 Annual Incentive Compensation
            Plan(3).
10.e        Masco Corporation 1997 Non-Employee Directors Stock Plan.
            (as amended and restated December 6, 2000)(filed herewith).
10.f        Description of the Masco Corporation Program for Estate,
            Financial Planning and Tax Assistance.(3)
10.g        Masco Corporation Executive Stock Purchase Program.(9)
10.h        12% Senior Note Due 2008 by Furnishings International Inc.
            to Masco Corporation and Registration Rights Agreement dated
            as of August 5, 1996 between Furnishings International Inc.
            and Masco Corporation(2).
10.i        Registration Rights Agreement among Masco Corporation and
            the Investors listed therein dated as of August 31, 1999(7).
12          Computation of Ratio of Earnings to Fixed Charges (filed
            herewith).
21          List of Subsidiaries (filed herewith).	

46

23          Consent of PricewaterhouseCoopers LLP relating to Masco
            Corporation's Consolidated Financial Statements and
            Financial Statement Schedules (filed herewith).	

(1) Incorporated by reference to the Exhibits filed with Masco Corporation's Current Report on Form 8-K dated November 13, 1996.
(2) Incorporated by reference to the Exhibits filed with Masco Corporation's Annual Report on Form 10-K for the year ended December 31, 1996.
(3) Incorporated by reference to the Exhibits filed with Masco Corporation's Annual Report on Form 10-K for the year ended December 31, 1997.
(4) Incorporated by reference to the Exhibits filed with Masco Corporation's Quarterly Report on Form 10-Q for the quarter ended June 30, 1998.
(5) Incorporated by reference to the Exhibits filed with Masco Corporation's Quarterly Report on Form 10-Q for the quarter ended September 30, 1998.
(6) Incorporated by reference to the Exhibits filed with Masco Corporation's Annual Report on Form 10-K for the year ended December 31, 1998.
(7) Incorporated by reference to the Exhibits filed with Masco Corporation's Quarterly Report on Form 10-Q for the quarter ended September 30, 1999.
(8) Incorporated by reference to the Exhibits filed with Masco Corporation's Annual Report on Form 10-K for the year ended December 31, 1999.
(9) Incorporated by reference to the Exhibits filed with Masco Corporation's Quarterly Report on Form 10-Q for the quarter ended June 30, 2000.
(10) Incorporated by reference to the Exhibits filed with Masco Corporation's Quarterly Report on Form 10-Q for the quarter ended September 30, 2000.
THE COMPANY WILL FURNISH ITS STOCKHOLDERS A COPY OF ANY OF THE ABOVE EXHIBITS NOT INCLUDED HEREIN UPON THE WRITTEN REQUEST OF SUCH STOCKHOLDER AND THE PAYMENT TO THE COMPANY OF THE REASONABLE EXPENSES INCURRED BY THE COMPANY IN FURNISHING SUCH COPY OR COPIES.
(b) REPORTS ON FORM 8-K.
A Current Report on Form 8-K was filed on November 9, 2000 which included a press release announcing Masco Corporation's results for the quarter ended September 30, 2000.
47
 
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.
MASCO CORPORATION

                                          BY    /s/ RICHARD G. MOSTELLER
                                            ------------------------------------
                                                    RICHARD G. MOSTELLER
                                              Senior Vice President -- Finance

March 29, 2001	

Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the date indicated.

PRINCIPAL EXECUTIVE OFFICER:

          /s/ RICHARD A. MANOOGIAN                 Chairman of the Board and Chief
---------------------------------------------        Executive Officer
            RICHARD A. MANOOGIAN

PRINCIPAL FINANCIAL OFFICER:

          /s/ RICHARD G. MOSTELLER                 Senior Vice President -- Finance
---------------------------------------------
            RICHARD G. MOSTELLER

PRINCIPAL ACCOUNTING OFFICER:

           /s/ ROBERT B. ROSOWSKI                  Vice President -- Controller and
---------------------------------------------        Treasurer
             ROBERT B. ROSOWSKI

            /s/ THOMAS G. DENOMME                  Director
---------------------------------------------
              THOMAS G. DENOMME

          /s/ JOSEPH L. HUDSON, JR.                Director
---------------------------------------------
            JOSEPH L. HUDSON, JR.

             /s/ VERNE G. ISTOCK                   Director
---------------------------------------------
               VERNE G. ISTOCK

           /s/ Raymond F. Kennedy                  President and Chief Operating
---------------------------------------------        Officer and Director
             RAYMOND F. KENNEDY

              /s/ Wayne B. Lyon                    Director
---------------------------------------------
                WAYNE B. LYON

             /s/ John A. Morgan                    Director
---------------------------------------------
               JOHN A. MORGAN

              /s/ ARMAN SIMONE                     Director
---------------------------------------------
                ARMAN SIMONE

             /s/ PETER W. STROH                    Director
---------------------------------------------
               PETER W. STROH

          /s/ Mary Ann Van Lokeren                 Director
---------------------------------------------
          MARY ANN KREY VAN LOKEREN	

March 29, 2001
48
 
MASCO CORPORATION
SCHEDULE II. VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998

         COLUMN A            COLUMN B             COLUMN C             COLUMN D      COLUMN E
--------------------------  -----------   ------------------------   ------------   -----------
                                                 ADDITIONS
                                          ------------------------
                            BALANCE AT    CHARGED TO     CHARGED                    BALANCE AT
                             BEGINNING     COSTS AND     TO OTHER                     END OF
       DESCRIPTION           OF PERIOD     EXPENSES      ACCOUNTS     DEDUCTIONS      PERIOD
--------------------------  -----------   -----------   ----------   ------------   -----------
                                                           (A)           (B)
Allowance for doubtful
  accounts, deducted from
  accounts receivable in
  the balance sheet:
     2000.................  $26,125,600   $10,793,600   $1,727,400   $ (2,729,700)  $35,916,900
                            ===========   ===========   ==========   ============   ===========
     1999.................  $22,235,500   $12,514,200   $4,326,300   $(12,950,400)  $26,125,600
                            ===========   ===========   ==========   ============   ===========
     1998.................  $20,634,400   $ 4,248,600   $1,224,200   $ (3,871,700)  $22,235,500
                            ===========   ===========   ==========   ============   ===========	

NOTES:
(A) Allowance of companies acquired and companies disposed of, net.
(B) Deductions, representing uncollectible accounts written off, less recoveries of accounts written off in prior years.
F-1
 
EXHIBIT INDEX

  EXHIBIT
    NO.                             DESCRIPTION
  -------                           -----------
 3.i
            Restated Certificate of Incorporation of Masco Corporation
            and amendments thereto(4).
 3.ii
            Bylaws of Masco Corporation, as amended(6).
 4.a.i
            Indenture dated as of December 1, 1982 between Masco
            Corporation and Morgan Guaranty Trust Company of New York,
            as Trustee(2), and Directors' resolutions establishing Masco
            Corporation's: (i) 9% Notes Due October 1, 2001(1); (ii)
            6 1/8% Notes Due September 15, 2003(6); (iii) 7 1/8%
            Debentures Due August 15, 2013(6); (iv) 6.625% Debentures
            Due April 15, 2018(6); (v) 5.75% Notes Due 2008(6); and (vi)
            7 3/4% Debentures Due August 1, 2029(8).
 4.a.ii
            Agreement of Appointment and Acceptance of Successor Trustee
            dated as of July 25, 1994 among Masco Corporation, Morgan
            Guaranty Trust Company of New York and The First National
            Bank of Chicago(8).
 4.a.iii
            Supplemental Indenture dated as of July 26, 1994 between
            Masco Corporation and The First National Bank of Chicago(8).
 4.a.iv
            Indenture dated as of February 12, 2001 between Masco
            Corporation and Bank One Trust Company, National
            Association, as Trustee, and Directors' Resolutions
            establishing Masco Corporation's 6 3/4% Notes Due 2006
            (filed herewith).
 4.b
            Rights Agreement dated as of December 6, 1995, between Masco
            Corporation and The Bank of New York, as Rights Agent, and
            Amendment No. 1 dated September 23, 1998 (filed herewith).
 4.c
            $1.25 billion 364-day Revolving Credit Agreement dated as of
            November 6, 2000 among Masco Corporation and Masco Europe
            S.A.R.L., as borrowers, the banks party thereto, Commerzbank
            AG, New York and Grand Cayman Branches, and Citibank, N.A.,
            as Syndication Agents, BNP Paribas, as Documentation Agent,
            and Bank One, NA, as Administrative Agent.(10)
 4.d
            $1.25 billion 5-Year Revolving Credit Agreement dated as of
            November 6, 2000 among Masco Corporation and Masco Europe
            S.A.R.L., as borrowers, the banks party thereto, Commerzbank
            AG, New York and Grand Cayman Branches, and Citibank, N.A.,
            as Syndication Agents, BNP Paribas, as Documentation Agent,
            and Bank One, NA, as Administrative Agent.(10)
 4.e
            DM 350,000,000 Multicurrency Revolving Credit Facility dated
            September 14, 1998 among Masco GmbH, as Borrower, Masco
            Corporation, as Guarantor, Commerzbank Aktiengesellschaft,
            as Arranger, and Commerzbank International S.A., as
            Agent(6).
 4.f
            DM 400,000,000 Term Loan Facility dated July 9, 1997 among
            Masco GmbH, as Borrower, Masco Corporation, as Guarantor,
            Commerzbank Aktiengesellschaft, as Arranger, and Commerzbank
            International S.A., as Agent for the banks party thereto;
            and Amendment dated as of June 12, 1998 to Credit
            Agreement(6).
 4.g
            Shareholders Agreement by and among MascoTech, Inc. (now
            known as Metaldyne Corporation), Masco Corporation, Richard
            Manoogian, certain of their respective affiliates and other
            co-investors as party thereto, dated as of November 28, 2000
            (filed herewith).
NOTE:
            Other instruments, notes or extracts from agreements
            defining the rights of holders of long-term debt of Masco
            Corporation or its subsidiaries have not been filed since
            (i) in each case the total amount of long-term debt
            permitted thereunder does not exceed 10 percent of Masco
            Corporation's consolidated assets, and (ii) such
            instruments, notes and extracts will be furnished by Masco
            Corporation to the Securities and Exchange Commission upon
            request.	

  EXHIBIT
    NO.                             DESCRIPTION
  -------                           -----------
10.a
            Subordinated Loan Agreement dated as of November 28, 2000
            between MascoTech, Inc. (now known as Metaldyne Corporation)
            and Masco Corporation (filed herewith).
NOTE:
            Exhibits 10.b through 10.g constitute the management
            contracts and executive compensatory plans or arrangements
            in which certain of the Directors and executive officers of
            the Company participate.
10.b
            Masco Corporation 1991 Long Term Stock Incentive Plan as
            Amended and Restated September 13, 2000. (filed herewith)
10.c
            Masco Corporation Supplemental Executive Retirement and
            Disability Plan dated October 2, 2000 (filed herewith).
10.d
            Masco Corporation 1997 Annual Incentive Compensation
            Plan(3).
10.e
            Masco Corporation 1997 Non-Employee Directors Stock Plan.
            (as amended and restated December 6, 2000)(filed herewith).
10.f
            Description of the Masco Corporation Program for Estate,
            Financial Planning and Tax Assistance.(3)
10.g
            Masco Corporation Executive Stock Purchase Program.(9)
10.h
            12% Senior Note Due 2008 by Furnishings International Inc.
            to Masco Corporation and Registration Rights Agreement dated
            as of August 5, 1996 between Furnishings International Inc.
            and Masco Corporation(2).
10.i
            Registration Rights Agreement among Masco Corporation and
            the Investors listed therein dated as of August 31, 1999(7).
12
            Computation of Ratio of Earnings to Fixed Charges (filed
            herewith).
21
            List of Subsidiaries (filed herewith).
23
            Consent of PricewaterhouseCoopers LLP relating to Masco
            Corporation's Consolidated Financial Statements and
            Financial Statement Schedules (filed herewith).	

(1) Incorporated by reference to the Exhibits filed with Masco Corporation's Current Report on Form 8-K dated November 13, 1996.
(2) Incorporated by reference to the Exhibits filed with Masco Corporation's Annual Report on Form 10-K for the year ended December 31, 1996.
(3) Incorporated by reference to the Exhibits filed with Masco Corporation's Annual Report on Form 10-K for the year ended December 31, 1997.
(4) Incorporated by reference to the Exhibits filed with Masco Corporation's Quarterly Report on Form 10-Q for the quarter ended June 30, 1998.
(5) Incorporated by reference to the Exhibits filed with Masco Corporation's Quarterly Report on Form 10-Q for the quarter ended September 30, 1998.
(6) Incorporated by reference to the Exhibits filed with Masco Corporation's Annual Report on Form 10-K for the year ended December 31, 1998.
(7) Incorporated by reference to the Exhibits filed with Masco Corporation's Quarterly Report on Form 10-Q for the quarter ended September 30, 1999.
(8) Incorporated by reference to the Exhibits filed with Masco Corporation's Annual Report on Form 10-K for the year ended December 31, 1999.
(9) Incorporated by reference to the Exhibits filed with Masco Corporation's Quarterly Report on Form 10-Q for the quarter ended June 30, 2000.
(10) Incorporated by reference to the Exhibits filed with Masco Corporation's Quarterly Report on Form 10-Q for the quarter ended September 30, 2000.
THE COMPANY WILL FURNISH ITS STOCKHOLDERS A COPY OF ANY OF THE ABOVE EXHIBITS NOT INCLUDED HEREIN UPON THE WRITTEN REQUEST OF SUCH STOCKHOLDER AND THE PAYMENT TO THE COMPANY OF THE REASONABLE EXPENSES INCURRED BY THE COMPANY IN FURNISHING SUCH COPY OR COPIES.
(b) REPORTS ON FORM 8-K.
A Current Report on Form 8-K was filed on November 9, 2000 which included a press release announcing Masco Corporation's results for the quarter ended
September 30, 2000.
 
EXHIBIT 4.a.iv

MASCO CORPORATION,
ISSUER
AND
BANK ONE TRUST COMPANY, NATIONAL ASSOCIATION
TRUSTEE

Indenture
Dated as of February 12, 2001

Reconciliation and tie(1) between Trust Indenture Act of 1939, as amended, and
Indenture, dated as of February 12, 2001 between Masco Corporation, Issuer and Bank One Trust Company, NA, Trustee

TRUST INDENTURE                                                                        INDENTURE
ACT SECTION                                                                             SECTION
ss.310(a)(1) .......................................................................... 6.09
(a)(2) ................................................................................ 6.09
(a)(3) ................................................................................ Not Applicable
(a)(4) ................................................................................ Not Applicable
(b) ................................................................................... 6.08
    ................................................................................... 6.10
ss.311(a) ............................................................................. 6.13
(b) ................................................................................... 6.13
(b)(2) ................................................................................ 7.03(a)(ii)

ss.312(a) ............................................................................. 7.01
    ................................................................................... 7.02(a)
(b) ................................................................................... 7.02(b)
(c) ................................................................................... 7.02(c)
ss.313(a) ............................................................................. 7.03(a)
(b) ................................................................................... 7.03(b)
(c) ................................................................................... 7.03(a), 7.03(b)
(d) ................................................................................... 7.03(c)
ss.314(a) ............................................................................. 7.04
(b) ................................................................................... Not Applicable
(c)(1) ................................................................................ 1.02
(c)(2) ................................................................................ 1.02
(c)(3) ................................................................................ Not Applicable
(d) ................................................................................... Not Applicable
(e) ................................................................................... 1.02
ss.315 (a) ............................................................................ 6.01(a)(i)	

(1) NOTE: This reconciliation and tie shall not, for any purpose, be deemed to be a part of the Indenture.
2
TABLE OF CONTENTS

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                                                                                                      ----
                                                            ARTICLE 1
                                                DEFINITIONS AND OTHER PROVISIONS

SECTION 1.01.          Definitions .................................................................   1
SECTION 1.02.          Compliance Certificates and Opinions ........................................  .9
SECTION 1.03.          Form of Documents Delivered to Trustee ......................................  10
SECTION 1.04.          Acts of Holders .............................................................  11
SECTION 1.05.          Notices, Etc., to Trustee and Company .......................................  12
SECTION 1.06.          Notice to Holders; Waiver ...................................................  12
SECTION 1.07.          Conflict with Trust Indenture Act ...........................................  13
SECTION 1.08.          Effect of Headings and Table of Contents ....................................  13
SECTION 1.09.          Successors and Assigns ......................................................  13
SECTION 1.10.          Separability Clause .........................................................  13
SECTION 1.11.          Benefits of Indenture .......................................................  13
SECTION 1.12.          Governing Law ...............................................................  13
SECTION 1.13.          Legal Holidays ..............................................................  14
SECTION 1.14.          Counterparts ................................................................  14

                                                            ARTICLE 2
                                                         SECURITY FORMS

SECTION 2.01.          Forms Generally .............................................................  14
SECTION 2.02.          Securities in Permanent Global Form .........................................  15

                                                            ARTICLE 3
                                                         THE SECURITIES

SECTION 3.01.          Amount Unlimited; Issuable in Series ........................................  16
SECTION 3.02.          Denominations ...............................................................  19
SECTION 3.03.          Execution, Authentication, Delivery and Dating ..............................  19
SECTION 3.04.          Temporary Securities ........................................................  23
SECTION 3.05.          Registration, Registration of Transfer and Exchange .........................  23
SECTION 3.06.          Mutilated, Destroyed, Lost and Stolen Securities.............................  27
SECTION 3.07.          Payment of Interest; Interest Rights Preserved ..............................  27
SECTION 3.08.          Persons Deemed Owners .......................................................  29
SECTION 3.09.          Cancellation ................................................................  29
SECTION 3.10.          Computation of Interest .....................................................  30	

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                                                                                                    ----
                                                               ARTICLE 4
                                                       SATISFACTION AND DISCHARGE

SECTION 4.01.          Satisfaction and Discharge of Indenture ...................................... 30
SECTION 4.02.          Defeasance of Securities of Any Series ....................................... 31
SECTION 4.03.          Application of Trust Funds; Indemnification .................................. 34
SECTION 4.04.          Reinstatement ................................................................ 34

                                                               ARTICLE 5
                                                                REMEDIES

SECTION 5.01.          Events of Default ............................................................ 35
SECTION 5.02.          Acceleration of Maturity; Rescission and Annulment ........................... 36
SECTION 5.03.          Collection of Indebtedness and Suits for Enforcement by Trustee .............. 38
SECTION 5.04.          Trustee May File Proofs of Claim ............................................. 38
SECTION 5.05.          Trustee May Enforce Claims Without Possession of Securities .................. 39
SECTION 5.06.          Application of Money Collected ............................................... 40
SECTION 5.07.          Limitation on Suits .......................................................... 40
SECTION 5.08.          Unconditional Right of Holders to Receive Principal,
                       Premium and Interest ......................................................... 41
SECTION 5.09.          Restoration of Rights and Remedies ........................................... 41
SECTION 5.10.          Rights and Remedies Cumulative ............................................... 41
SECTION 5.11.          Delay or Omission Not Waiver ................................................. 42
SECTION 5.12.          Control by Holders ........................................................... 42
SECTION 5.13.          Waiver of Past Defaults ...................................................... 42
SECTION 5.14.          Undertaking for Costs ........................................................ 43
SECTION 5.15.          Waiver of Usury, Stay or Extension Law ....................................... 43

                                                               ARTICLE 6
                                                              THE TRUSTEE

SECTION 6.01.          Certain Duties and Responsibilities .......................................... 44
SECTION 6.02.          Notice of Defaults ........................................................... 45
SECTION 6.03.          Certain Rights of Trustee .................................................... 45
SECTION 6.04.          Not Responsible for Recitals or Issuance of Securities ....................... 47
SECTION 6.05.          May Hold Securities .......................................................... 47
SECTION 6.06.          Money Held in Trust .......................................................... 47
SECTION 6.07.          Compensation and Reimbursement ............................................... 47
SECTION 6.08.          Disqualification; Conflicting Interest ....................................... 48
SECTION 6.09.          Corporate Trustee Required; Eligibility ...................................... 48
SECTION 6.10.          Resignation and Removal; Appointment of Successor ............................ 49	

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                                                                                                      PAGE
                                                                                                      ----
SECTION 6.11.          Acceptance of Appointment by Successor ....................................... 50
SECTION 6.12.          Merger, Conversion, Consolidation or Succession to Business .................. 52
SECTION 6.13.          Preferential Collection of Claims ............................................ 52
SECTION 6.14.          Appointment of Authenticating Agent .......................................... 52

                                                       ARTICLE 7
                                HOLDERS' LIST AND REPORTS BY TRUSTEE AND COMPANY

SECTION 7.01.          Company to Furnish Trustee Names and Addresses of Holders .................... 55
SECTION 7.02.          Preservation of Information; Communications to Holders ....................... 55
SECTION 7.03.          Reports by Trustee ........................................................... 56
SECTION 7.04.          Reports by Company ........................................................... 58

                                                       ARTICLE 8
                                  CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE

SECTION 8.01.          Company May Consolidate, Etc., Only on Certain Terms ......................... 59
SECTION 8.02.          Successor Corporation to be Substituted for Company .......................... 60
SECTION 8.03.          Securities to be Secured in Certain Events ................................... 60
SECTION 8.04.          Evidence to be Furnished to the Trustee ...................................... 61

                                                       ARTICLE 9
                                               SUPPLEMENTAL INDENTURES

SECTION 9.01.          Supplemental Indentures without Consent of Holders ........................... 61
SECTION 9.02.          Supplemental Indentures with Consent of Holders .............................. 62
SECTION 9.03.          Execution of Supplemental Indentures ......................................... 63
SECTION 9.04.          Effect of Supplemental Indentures ............................................ 64
SECTION 9.05.          Conformity with Trust Indenture Act .......................................... 64
SECTION 9.06.          Reference in Securities to Supplemental Indentures ........................... 64

                                                       ARTICLE 10
                                                       COVENANTS

SECTION 10.01.         Payment of Principal, Premium and Interest ................................... 64
SECTION 10.02.         Maintenance of Office or Agency .............................................. 65
SECTION 10.03.         Money for Securities Payments to be Held in Trust ............................ 65
SECTION 10.04.         Limitations on Liens ......................................................... 67
SECTION 10.05.         Limitation on Sale and Leaseback ............................................. 69
SECTION 10.06.         Defeasance of Certain Obligations ............................................ 69
SECTION 10.07.         Certificate of Officers of the Company ....................................... 71	

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                                                                                                     PAGE
                                                                                                     ----

                                                          ARTICLE 11
                                                REDEMPTION OF SECURITIES

SECTION 11.01.          Applicability of Article ...................................................  72
SECTION 11.02.          Election to Redeem; Notice to Trustee ......................................  72
SECTION 11.03.          Selection by Trustee of Securities to be Redeemed ..........................  72
SECTION 11.04.          Notice of Redemption .......................................................  73
SECTION 11.05.          Deposit of Redemption Price ................................................  74
SECTION 11.06.          Securities Payable on Redemption Date ......................................  74
SECTION 11.07.          Securities Redeemed in Part ................................................  74

                                                        ARTICLE 12
                                                     SINKING FUNDS

SECTION 12.01.          Applicability of Article ...................................................  75
SECTION 12.02.          Satisfaction of Sinking Fund Payments with Securities ......................  75
SECTION 12.03.          Redemption of Securities for Sinking Fund ..................................  76

EXHIBIT A - FORM OF SECURITIES ..................................................................... A-1	

iv
INDENTURE, dated as of February 12, 2001, between MASCO CORPORATION, a corporation duly organized and existing under the laws of the State of Delaware (herein called the "COMPANY"), and BANK ONE TRUST COMPANY, NATIONAL ASSOCIATION, a national banking association, as Trustee (herein called the "TRUSTEE").
RECITALS OF THE COMPANY
The Company has duly authorized the execution and delivery of this Indenture to provide for the issuance from time to time of its unsecured debentures, notes or other evidences of indebtedness (herein called the "SECURITIES"), to be issued in one or more series as in this Indenture provided.
All things necessary to make this Indenture a valid agreement of the Company, in accordance with its terms, have been done.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the Securities by the Holders thereof, it is mutually covenanted and agreed, for the equal and proportionate benefit of all Holders of the Securities or of series thereof, as follows:
ARTICLE 1
DEFINITIONS AND OTHER PROVISIONS
SECTION 1.01. Definitions For all purposes of this Indenture, except as otherwise expressly provided or unless the context otherwise requires:
(a) the terms defined in this Article have the meanings assigned to them in this Article and include the plural as well as the singular;
(b) all other terms used herein which are defined in the Trust Indenture Act, either directly or by reference therein, have the meanings assigned to them therein;
(c) all accounting terms not otherwise defined herein have the meanings assigned to them in accordance with generally accepted accounting principles, and except as otherwise herein expressly provided, the term "GENERALLY ACCEPTED ACCOUNTING PRINCIPLES" with respect to any computation required or permitted hereunder shall mean such accounting principles as are generally accepted at the date of such computation; and
(d) the words "HEREIN," "HEREOF" and "HEREUNDER" and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision.
Certain terms, used principally in Article 6, are defined in that Article.
"ACT," when used with respect to any Holder, has the meaning specified in Section 1.04.
"AFFILIATE" of any specified Person means any other Person directly or indirectly controlling or 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 specified 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.
"ATTRIBUTABLE DEBT" means in respect of a sale and leaseback arrangement, at the time of determination, the lesser of (x) the fair value of the property subject to such arrangement (as determined by the Board of Directors) or (y) the present value (discounted at the rate per annum equal to the interest borne by fixed-rate Securities or the Yield to Maturity at the time of issuance of any Original Issue Discount Securities determined on a weighted average basis compounded semi-annually) of the total obligations of the lessee for rental payments during the remaining term of the lease included in such arrangement (including any period for which such lease has been extended or may, at the option of the lessor, be extended) after excluding all amounts required to be paid on account of maintenance and repairs, insurance, taxes, assessments, water and utility rates and similar charges. In the case of any such lease which may be terminated by the lessee upon the payment of a penalty, such net amount shall also include the amount of such penalty, but no rent shall be considered as required to be paid under such lease subsequent to the first date upon which it may be so terminated. Notwithstanding the foregoing, there shall not be deemed to be any Attributable Debt in respect of a sale and leaseback arrangement if (i) such arrangement involves property of a type to which Section 10.04 does not apply, (ii) the Company or a Consolidated Subsidiary would be entitled pursuant to the provisions of Section 10.04(a) to issue, assume or guarantee Debt (as defined in said Section 10.04(a)), secured by a mortgage upon the property involved in such arrangement without equally and ratably securing the Securities, or (iii) the greater of the proceeds of such arrangement or the fair market value of the property so leased has been applied or credited in accordance with clause (b) of Section 10.05.
"AUTHENTICATING AGENT" means any Person authorized by the Trustee to act on behalf of the Trustee to authenticate Securities.
2
"BOARD OF DIRECTORS" means either the board of directors of the Company or any duly authorized committee of that board.
"BOARD RESOLUTION" means a copy of a resolution certified by the Secretary or an Assistant Secretary of the Company to have been duly adopted by the Board of Directors and to be in full force and effect on the date of such certification, and delivered to the Trustee.
"BUSINESS DAY," when used with respect to any Place of Payment, means each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which banking institutions in that Place of Payment are authorized or obligated by law to close.
"COMMISSION" means the Securities and Exchange Commission, as from time to time constituted, created under the Securities Exchange Act of 1934, or, if at any time after the execution of this instrument such Commission is not existing and performing the duties now assigned to it under the Trust Indenture Act, then the body performing such duties at such time.
"COMPANY" means the Person named as the "Company" in the first paragraph of this instrument until a successor corporation shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "Company" shall mean such successor corporation.
"COMPANY REQUEST" or "COMPANY ORDER" means a written request or order signed in the name of the Company by its Chairman of the Board, its President or a Vice President, and by its Treasurer, an Assistant Treasurer, its Secretary or an Assistant Secretary, and delivered to the Trustee.
"CONSOLIDATED NET TANGIBLE ASSETS" means the aggregate amount of assets (less applicable reserves) of the Company and its Consolidated Subsidiaries after deducting therefrom (a) all current liabilities (excluding any such liabilities deemed to be Funded Debt), (b) all goodwill, trade names, trademarks, patents, unamortized debt discount and expense and other like intangibles, and (c) all investments in any Subsidiary other than a Consolidated Subsidiary, in all cases computed in accordance with generally accepted accounting principles and which under generally accepted accounting principles would appear on a consolidated balance sheet of the Company and its Consolidated Subsidiaries. For purposes of the foregoing, the term "investment in any Subsidiary other than a Consolidated Subsidiary" shall mean all evidences of indebtedness, capital stock, other securities, obligations or indebtedness of any Subsidiary other than a Consolidated Subsidiary owned or held by or owed to the Company or any Consolidated Subsidiary, except an evidence of indebtedness, an account receivable or an obligation or indebtedness on open account resulting directly from the sale of goods or merchandise or services for fair value in the ordinary course
3
of business by the Company or the Consolidated Subsidiary to a Subsidiary other than a Consolidated Subsidiary.
"CONSOLIDATED SUBSIDIARY" means each Subsidiary other than any Subsidiary the accounts of which (i) are not required by generally accepted accounting principles to be consolidated with those of the Company for financial reporting purposes, (ii) were not consolidated with those of the Company in the Company's then most recent annual report to stockholders and (iii) are not intended by the Company to be consolidated with those of the Company in its next annual report to stockholders; provided, however, that the term "Consolidated Subsidiary" shall not include (a) any Subsidiary which is principally engaged in
(i) owning, leasing, dealing in or developing real property, or (ii) purchasing or financing accounts receivable, making loans, extending credit or other activities of a character conducted by a finance company or (b) any Subsidiary, substantially all of the business, properties or assets of which were acquired after [date of Indenture] (by way of merger, consolidation, purchase or otherwise), unless the Board of Directors thereafter designates such Subsidiary a Consolidated Subsidiary.
"CORPORATE TRUST OFFICE" means the office of the Trustee in Chicago, Illinois at which at any particular time corporate trust business shall be principally administered. At the date of execution of this Indenture the address of the Corporate Trust Office is Bank One Plaza, Suite IL1-0126, Chicago, IL 60670-0126.
"CORPORATION" includes corporations, associations, companies and business trusts.
"DEFAULTED INTEREST" has the meaning specified in Section 3.07.
"DEPOSITARY" means, with respect to the Securities of any series issuable or issued in whole or in part in the form of one or more permanent global Securities, the Person designated as Depositary by the Company pursuant to Section 3.01, which must be a clearing agency registered under the Securities Exchange Act of 1934, as amended, and if at any time there is more than one such Person, "Depositary" as used with respect to the Securities of any such series shall mean the Depositary with respect to the Securities of that series.
"EVENT OF DEFAULT" has the meaning specified in Section 5.01.
"FUNDED DEBT" means all indebtedness having a maturity of more than 12 months from the date of the determination thereof or having a maturity of less than 12 months but by its terms being renewable or extendible at the option of the borrower beyond 12 months from the date of such determination (a) for money borrowed or (b) incurred in connection with the acquisition of any real or personal property, stock, debt or other assets (to the extent that any of the foregoing acquisition indebtedness is
4
represented by any notes, bonds, debentures or similar evidences of indebtedness), and for the payment of which the Company or any Consolidated Subsidiary is directly or contingently liable, or which is secured by any property of the Company or any Consolidated Subsidiary.
"HOLDER" means a Person in whose name a Security is registered in the Security Register.
"INDENTURE" means this instrument as originally executed or as it may from time to time be supplemented or amended by one or more indentures supplemental hereto entered into pursuant to the applicable provisions hereof and shall include the terms of particular series of Securities established as contemplated by Section 3.01.
"INTEREST," when used with respect to an Original Issue Discount Security which by its terms bears interest only upon Maturity, means interest payable after Maturity.
"INTEREST PAYMENT DATE," when used with respect to any Security, means the Stated Maturity of an installment of interest on such Security.
"MATURITY," when used with respect to any Security, means the date on which the principal of such Security or an instalment of principal becomes due and payable as therein or herein provided, whether at the Stated Maturity or by declaration of acceleration, call for redemption or otherwise.
"OFFICERS' CERTIFICATE" means a certificate signed by the Chairman of the Board, the President or a Vice President, and by the Treasurer, an Assistant Treasurer, the Secretary or an Assistant Secretary, of the Company, and delivered to the Trustee.
"OPINION OF COUNSEL" means a written opinion of counsel, who may be counsel for the Company, and who shall be acceptable to the Trustee.
"ORIGINAL ISSUE DISCOUNT SECURITY" means any Security which provides for an amount less than the principal amount thereof to be due and payable upon a declaration of acceleration of the Maturity thereof pursuant to Section 5.02.
"OUTSTANDING," used with respect to Securities, means, as of the date of determination, all Securities theretofore authenticated and delivered under this Indenture, except:
(i) Securities theretofore canceled by the Trustee or delivered to the Trustee for cancellation;
5
(ii) Securities for whose payment or redemption (a) money in the necessary amount has been theretofore deposited with the Trustee or any Paying Agent (other than the Company) in trust or set aside and segregated in trust by the Company (if the Company shall act as its own Paying Agent) for the Holders of such Securities or (b) U.S. Government Obligations as contemplated by Section 4.02 in the necessary amount have been theretofore deposited with the Trustee (or another trustee satisfying the requirements of Section 6.09) in trust for the Holders of such Securities in accordance with Section 4.03; provided that, if such Securities are to be redeemed, notice of such redemption has been duly given pursuant to this Indenture or provision therefor satisfactory to the Trustee has been made;
(iii) Securities as to which defeasance has been effected pursuant to
Section 4.02 and not reinstated pursuant to Section 4.04; and
(iv) Securities which have been paid pursuant to Section 3.06 or in exchange for or in lieu of which other Securities have been authenticated and delivered pursuant to this Indenture, other than any such Securities in respect of which there shall have been presented to the Trustee proof satisfactory to it that such Securities are held by a bona fide purchaser in whose hands such Securities are valid obligations of the Company;
provided, however, that in determining whether the Holders of the requisite principal amount of the Outstanding Securities have given any request, demand, authorization, direction, notice, consent, waiver or other action hereunder as of any date (A) the principal amount of an Original Issue Discount Security which shall be deemed to be Outstanding shall be the amount of the principal thereof which would be due and payable as of such date upon acceleration of the Maturity thereof to such date pursuant to Section 5.02, (B) if, as of such date, the principal amount payable at the Stated Maturity of a Security is not determinable, the principal amount of such Security which shall be deemed to be Outstanding shall be the amount as specified or determined as contemplated by
Section 3.01, (C) the principal amount of a Security denominated in one or more foreign currencies or currency units which shall be deemed to be Outstanding shall be the U.S. dollar equivalent, determined as of such date in the manner provided as contemplated by Section 3.01, of the principal amount of such Security (or, in the case of a Security described in clause (A) or (B) of this paragraph, of the amount determined as provided in such clause), and (D) Securities owned by the Company or any other obligor upon the Securities or any Subsidiary of the Company or of such other obligor shall be disregarded and deemed not to be Outstanding, except that, in determining whether the Trustee shall be protected in relying upon any such request, demand, authorization, direction, notice, consent, waiver or other action, only Securities which a Responsible Officer of the Trustee knows to be so owned shall be so disregarded. Securities so owned which have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Trustee the pledgee's right so to act with respect to such Securities
6
and that the pledgee is not the Company or any other obligor upon the Securities or any Affiliate of the Company or of such other obligor.
"PARTNERSHIP" means any joint venture, partnership or participation by which the Company with one or more Persons forms a business arrangement to own or acquire tangible personal property for the purpose of financing such property and allocating rights to profits and liabilities for losses, and establishing obligations, among the Company and such Persons relating to such financing.
"PAYING AGENT" means any Person authorized by the Company to pay the principal of (and premium, if any) or interest on any Securities on behalf of the Company.
"PERIODIC OFFERING" means an offering of Securities of a series from time to time, the specific terms of which Securities, including, without limitation, the rate or rates of interest, if any, thereon, the stated maturity or maturities thereof and the redemption provisions, if any, with respect thereto, are to be determined by the Company or its agents upon the issuance of such Securities.
"PERSON" means any individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization or government or any agency or political subdivision thereof.
"PLACE OF PAYMENT," when used with respect to the Securities of any series, means the place or places where the principal of (and premium, if any) and interest on the Securities of that series are payable as specified as contemplated by Section 3.01.
"PREDECESSOR SECURITY" of any particular Security means every previous Security evidencing all or a portion of the same debt as that evidenced by such particular Security; and, for the purposes of this definition, any Security authenticated and delivered under Section 3.06 in exchange for or in lieu of a mutilated, destroyed, lost or stolen Security shall be deemed to evidence the same debt as the mutilated, destroyed, lost or stolen Security.
"PRINCIPAL PROPERTY" means any manufacturing plant, research or engineering facility owned or leased by the Company or any Consolidated Subsidiary which is located within the United States of America or Puerto Rico, except any such plant or facility which, in the opinion of the Board of Directors, is not of material importance to the total business conducted by the Company and its Consolidated Subsidiaries as an entirety.
"REDEMPTION DATE," when used with respect to any Security to be redeemed, means the date fixed for such redemption by or pursuant to this Indenture.
7
"REDEMPTION PRICE," when used with respect to any Security to be redeemed, means the price at which it is to be redeemed pursuant to this Indenture.
"REGULAR RECORD DATE" for the interest payable on any Interest Payment Date on the Securities of any series means the date specified for that purpose as contemplated by Section 3.01.
"RESPONSIBLE OFFICER," when used with respect to the Trustee, means any officer within the Corporate Trustee Administration Department, including any vice president, any assistant secretary, any trust officer or assistant trust officer, or any other officer of the Trustee customarily performing functions similar to those performed by any of the above designated officers and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of his knowledge of and familiarity with the particular subject.
"SECURITIES" has the meaning stated in the first recital of this Indenture and more particularly means any Securities authenticated and delivered under this Indenture.
"SECURITY REGISTER" and "SECURITY REGISTRAR" have the respective meanings specified in Section 3.05.
"SPECIAL RECORD DATE" for the payment of any Defaulted Interest means a date fixed by the Trustee pursuant to Section 3.07.
"STATED MATURITY," when used with respect to any Security or any instalment of principal thereof or interest thereon, means the date specified in such Security as the fixed date on which the principal of such Security or such installment of principal or interest is due and payable.
"SUBSIDIARY" means any corporation of which at least a majority of the outstanding stock having by the terms thereof ordinary voting power to elect a majority of the board of directors of such corporation (excluding in the computation of such percentage stock of any class or classes of such corporation which has or might have voting power by reason of the happening of any contingency) is at the time owned by the Company, or by one or more Subsidiaries, or by the Company and one or more Subsidiaries.
"TRUSTEE" means the Person named as the "TRUSTEE" in the first paragraph of this instrument until a successor Trustee shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "Trustee" shall mean or include each Person who is then a Trustee hereunder; provided, however, that if at any time there is more than one such Person, "Trustee" as used with respect to the Securities of any series shall mean only the Trustee with respect to Securities of that series.
8
"TRUST INDENTURE ACT" means the Trust Indenture Act of 1939, as amended, as in force on the date on which this instrument was executed provided, however, that in the event the Trust Indenture Act of 1939 is amended after such date, "Trust Indenture Act" means, to the extent required by such amendment, the Trust Indenture Act of 1939 as so amended.
"U.S. GOVERNMENT OBLIGATIONS" means securities which are (i) direct obligations of the United States of America for the payment of which its full faith and credit is pledged or (ii) obligations of a Person controlled or supervised by and acting as an agency or instrumentality of the United States of America the payment of which is unconditionally guaranteed as a full faith and credit obligation by the United States of America, which, in either case are not callable or redeemable at the option of the issuer thereof, and shall also include a depositary receipt issued by a bank or trust company as custodian with respect to any such U.S. Government Obligations or a specific payment of interest on or principal of any such U.S. Government Obligation held by such custodian for the account of the holder of a depository receipt, provided that (except as required by law) such custodian is not authorized to make any deduction from the amount payable to the holder of such depository receipt for any amount received by the custodian with respect to the U.S. Government Obligation or the specific payment of interest on or principal of the U.S. Government Obligation.
"VICE PRESIDENT," when used with respect to the Company or the Trustee, means any vice president, whether or not designated by a number or a word or words added before or after the title "vice president."
"YIELD TO MATURITY" means the yield to maturity on a series of Securities, calculated at the time of issuance of such series of Securities, or if applicable, at the most recent redetermination of interest on such series and calculated in accordance with accepted financial practice.
SECTION 1.02. Compliance Certificates and Opinions
Unless otherwise provided herein, upon any application or request by the Company to the Trustee to take any action under any provision of this Indenture, the Company shall furnish to the Trustee an Officers' Certificate stating that all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with and an Opinion of Counsel stating that in the opinion of such counsel all such conditions precedent, if any, have been complied with and, unless otherwise provided herein, no additional certificate or opinion need be furnished.
Every certificate or opinion, other than the Officers' Certificate called for by Section 10.07, with respect to compliance with a condition or covenant provided for in this Indenture shall include
9
(a) a statement that each individual signing such certificate or opinion has read such covenant or condition and the definitions herein relating thereto;
(b) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based;
(c) a statement that, in the opinion of each such individual, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with; and
(d) a statement as to whether, in the opinion of each such individual, such condition or covenant has been complied with.
SECTION 1.03. Form of Documents Delivered to Trustee
In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion with respect to some matters and one or more other such Persons as to other matters, and any such Person may certify or give an opinion as to such matters in one or several documents.
Any certificate or opinion of an officer of the Company may be based, insofar as it relates to legal matters, upon a certificate or opinion of, or representations by, counsel, unless such officer knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to the matters upon which his certificate or opinion is based are erroneous. Any such certificate or Opinion of Counsel may be based, insofar as it relates to factual matters, upon a certificate or opinion of, or representations by, an officer or officers of the Company stating that the information with respect to such factual matters is in the possession of the Company, unless such counsel knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to such matters are erroneous.
Where any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements, opinions or other instruments under this Indenture, they may, but need not, be consolidated and form one instrument.
SECTION 1.04. Acts of Holders
(a) Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by Holders may be embodied in and evidenced by one or more instruments of substantially similar tenor
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signed by such Holders in person or by an agent duly appointed in writing; and, except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments are delivered to the Trustee and, where it is hereby expressly required, to the Company. If any Securities are denominated in coin or currency other than that of the United States, then for the purposes of determining whether the Holders of the requisite principal amount of Securities have taken any action with respect to the Securities of more than one series as herein described, the principal amount of such Securities shall be deemed to be that amount of United States dollars that could be obtained for such principal amount on the basis of the spot rate of exchange into United States dollars for the currency in which such Securities are denominated (as evidenced to the Trustee by an Officers' Certificate) as of the date the taking of such action by the Holders of such requisite principal amount is evidenced to the Trustee as provided in the immediately preceding sentence. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the "ACT" of the Holders signing such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Indenture and (subject to Section 6.01) conclusive in favor of the Trustee and the Company, if made in the manner provided in this Section.
(b) The fact and date of the execution by any Person of any such instrument or writing may be proved by the affidavit of a witness of such execution or by a certificate of a notary public or other officer authorized by law to take acknowledgments of deeds, certifying that the individual signing such instrument or writing acknowledged to him the execution thereof. Where such execution is by a signer acting in a capacity other than his individual capacity, such certificate or affidavit shall also constitute sufficient proof of his authority. The fact and date of the execution of any such instrument or writing, or the authority of the Person executing the same, may also be proved in any other manner which the Trustee deems sufficient.
(c) The ownership of Securities shall be proved by the Security Register.
(d) Any request, demand, authorization, direction, notice, consent, waiver or other Act of the Holder of any Security shall bind every future Holder of the same Security and the Holder of every Security issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof in respect of anything done, omitted or suffered to be done by the Trustee or the Company in reliance thereon, whether or not notation of such action is made upon such Security.
SECTION 1.05. Notices, Etc., to Trustee and Company
Any request, demand, authorization, direction, notice, consent, waiver or Act of Holders or other document provided or permitted by this Indenture to be made upon, given or furnished to, or filed with,
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(a) the Trustee by any Holder or by the Company shall be sufficient for every purpose hereunder if made, given, furnished or filed in writing to or with the Trustee at its Corporate Trust Office, Attention: Corporate Trust Administration, or at any other address previously furnished in writing to the Company and the Holders by the Trustee; or
(b) the Company by the Trustee or by any Holder shall be sufficient for every purpose hereunder (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, to the Company addressed to it at 21001 Van Born Road, Taylor, Michigan 48180 or at any other address previously furnished in writing to the Trustee by the Company.
SECTION 1.06. Notice to Holders; Waiver
Where this Indenture provides for notice to Holders of any event, such notice shall be sufficiently given (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, to each Holder affected by such event, at his address as it appears in the Security Register, not later than the latest date, and not earlier than the earliest date, prescribed for the giving of such notice. In any case where notice to Holders is given by mail, neither the failure to mail such notice, nor any defect in any notice so mailed, to any particular Holder shall affect the sufficiency of such notice with respect to other Holders. Where this Indenture provides for notice in any manner, such notice may be waived in writing by the Person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Holders shall be filed with the Trustee, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver.
In case by reason of the suspension of regular mail service or by reason of any other cause it shall be impracticable to give such notice by mail, then such notification as shall be made with the approval of the Trustee shall constitute a sufficient notification for every purpose hereunder.
SECTION 1.07. Conflict with Trust Indenture Act
If any provision hereof limits, qualifies or conflicts with another provision hereof which is required to be included in this Indenture by any of the provisions of the Trust Indenture Act, such required provision shall control.
SECTION 1.08. Effect of Headings and Table of Contents
The Article and Section headings herein and the Table of Contents are for convenience only and shall not affect the construction hereof.
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SECTION 1.09. Successors and Assigns
All covenants and agreements in this Indenture by the Company shall bind its successors and assigns, whether so expressed or not.
SECTION 1.10. Separability Clause
In case any provision in this Indenture or in the Securities 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 1.11. Benefits of Indenture
Nothing in this Indenture or in the Securities, express or implied, shall give to any Person, other than the Parties hereto, any Authenticating Agent, any Paying Agent, any Securities Registrar and their successors hereunder and the Holders, any benefit or any legal or equitable right, remedy or claim under this Indenture.
SECTION 1.12. Governing Law
This Indenture and the Securities shall be governed by and construed in accordance with the laws of the State of New York without regard to any conflicts of laws principles therein.
SECTION 1.13. Legal Holidays
In any case where any Interest Payment Date, Redemption Date or Stated Maturity of any Security shall not be a Business Day at any Place of Payment, then, unless otherwise specified in such Security, payment of interest or principal (and premium, if any) need not be made at such Place of Payment on such date, but may be made on the next succeeding Business Day at such Place of Payment with the same force and effect as if made on the Interest Payment Date or Redemption Date, or at the Stated Maturity, provided that no interest shall accrue for the period from and after such Interest Payment Date, Redemption Date or Stated Maturity, as the case may be.
SECTION 1.14. Counterparts
This instrument may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument.
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ARTICLE 2
SECURITY FORMS
SECTION 2.01. Forms Generally
The Securities of each series shall be in substantially the form set forth in Exhibit A, or in such other form as shall be established by or pursuant to a Board Resolution or in one or more indentures supplemental hereto, in each case with such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Indenture, and may have such letters, numbers or other marks of identification and such legends or endorsements placed thereon as may be required to comply with any law or any rules or regulations pursuant thereto, or with the rules of any securities exchange or to conform to general usage, all as may consistently herewith be determined by the officers executing such Securities, as evidenced by their execution of the Securities. If the form of Securities of any series is established by action taken pursuant to a Board Resolution, a copy of an appropriate record of such action shall be certified by the Secretary or an Assistant Secretary of the Company and delivered to the Trustee at or prior to the delivery of the Company Order contemplated by Section 3.03 for the authentication and delivery of such Securities.
The definitive Securities shall be printed, lithographed or engraved on steel engraved borders or may be produced in any other manner, all as determined by the officers executing such Securities, as evidenced by their execution of such Securities.
SECTION 2.02. Securities in Permanent Global Form
If the Company shall establish pursuant to Section 3.01 that the Securities of a series are to be issued in whole or in part in permanent global form, then notwithstanding Section 3.01(g) and the provisions of Section 3.02, any such Security shall represent such of the Outstanding Securities of such series as shall be specified therein and may provide that it shall represent the aggregate amount of Outstanding Securities from time to time endorsed thereon and that the aggregate amount of Outstanding Securities represented thereby may from time to time be reduced or increased to reflect exchanges. Any endorsement of a Security in permanent global form to reflect the amount, or any increase or decrease in the amount, of Outstanding Securities represented thereby shall be made by the Trustee or the Security Registrar in such manner and upon instructions given by such Person or Persons as shall be specified in such Security in permanent global form or in the Company Order to be delivered to the Trustee pursuant to Section 3.03 or Section 3.04. Subject to the provisions of
Section 3.03 and, if applicable, Section 3.04, the Trustee or the Security Registrar shall deliver and redeliver any Security in permanent global form in the manner and upon instructions given by the Person or Persons specified in such Security or in the applicable Company Order. If a Company Order pursuant to Section
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3.03 or 3.04 has been, or simultaneously is, delivered, any instructions by the Company with respect to endorsement or delivery or redelivery of a global Security shall be in writing but need not comply with Section 1.02 and need not be accompanied by an Officers' Certificate or an Opinion of Counsel, provided that the form of permanent global Security to be endorsed, delivered or redelivered has previously been covered by an Opinion of Counsel.
The provisions of the last sentence of Section 3.03 shall only apply to any Security represented by a Security in permanent global form if such Security was never issued and sold by the Company and the Company delivers to the Trustee or the Security Registrar the Security in permanent global form together with written instructions (which need not comply with Section 1.02 and need not be accompanied by an Officers' Certificate or an Opinion of Counsel) with regard to the reduction in the principal amount of Securities represented thereby, together with the written statement contemplated by the last sentence of Section 3.03.
Unless otherwise specified as contemplated by Section 3.01 for the Securities evidenced thereby, every Security in permanent global form authenticated and delivered hereunder shall bear a legend in substantially the following form:
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITARY TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF THE DEPOSITARY OR ITS NOMINEE AND ANY PAYMENT IS MADE TO THE DEPOSITARY OR ITS NOMINEE, ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF HAS AN INTEREST HEREIN.
ARTICLE 3
THE SECURITIES
SECTION 3.01. Amount Unlimited; Issuable in Series
The aggregate principal amount of Securities which may be authenticated and delivered under this Indenture is unlimited. All Securities issued under this Indenture shall constitute unsecured and unsubordinated obligations of the Company and shall rank pari passu with all of the Company's other unsecured and unsubordinated obligations.
The Securities may be issued in one or more series. There shall be established in or pursuant to a Board Resolution and, subject to Section 3.03, set forth,
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or determined in the manner provided, in an Officers' Certificate, or established in one or more indentures supplemental hereto, prior to the issuance of Securities of any series
(a) the title of the Securities of the series (which shall distinguish the Securities of the series from all other Securities);
(b) any limit upon the aggregate principal amount of the Securities of the series which may be authenticated and delivered under this Indenture (except for Securities authenticated and delivered upon registration of transfer of, or in exchange for, or in lieu of, other Securities of the series pursuant to
Section 3.04, 3.05, 3.06, 9.06 or 11.07 and except for any Securities which, pursuant to Section 3.03 of the Indenture, shall have not been issued and sold by the Company and are therefore deemed never to have been authenticated and delivered hereunder);
(c) the date or dates on which the principal of the Securities of the series is payable;
(d) the Person to whom any interest on any Security of the series shall be payable if other than as set forth in Section 3.07; the rate or rates at which any Securities of the series shall bear interest or the manner of calculation of such rate or rates, if any, the date or dates from which any such interest shall accrue, the Interest Payment Dates on which any such interest shall be payable and the Regular Record Date for the interest payable on any Interest Payment Date;
(e) the place or places where the principal of and any premium or interest on Securities of the series shall be payable;
(f) the period or periods within which, the price or prices at which and the terms and conditions upon which Securities of the series may be redeemed, in whole or in part, at the option of the Company and, if other than by a Board Resolution, the manner in which any election by the Company to redeem the Securities shall be evidenced;
(g) the obligation, if any, of the Company to redeem or purchase Securities of the series pursuant to any sinking fund or analogous provisions or at the option of a Holder thereof and the period or periods within which, the price or prices at which and the terms and conditions upon which Securities of the series shall be redeemed or purchased in whole or in part, pursuant to such obligation;
(h) if other than denominations of $1,000 and any multiple thereof, the denominations in which Securities of the series shall be issuable;
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(i) if other than the principal amount thereof, the portion of the principal amount of Securities of the series which shall be payable upon declaration of acceleration of the Maturity thereof pursuant to Section 5.02;
(j) if applicable, that the Securities of the series, in whole or any specified part, shall be defeasible pursuant to Section 4.02 or Section 10.06 (and in the case of defeasance pursuant to Section 10.06, the negative or restrictive covenants that shall be subject to such defeasance) or both Sections and if other than by a Board Resolution, the manner in which any election by the Company to defease those securities shall be evidenced;
(k) whether the Securities of the series are to be issuable in whole or in part in permanent global form, without coupons, and, if so, (i) the form of any legend or legends which shall be borne by any such permanent global Security in addition to or in lieu of that set forth in Section 2.02, (ii) any circumstances in addition to or in lieu of those set forth in Clause 3.05(a) in which such permanent global Security may be exchanged in whole or in part for Securities registered, and in which any transfer of such permanent global Security in whole or in part may be registered, in the name of Persons other than the Depositary for such permanent global Security or a nominee thereof and
(iii) the Depositary with respect to any such permanent global Security or Securities;
(l) the currency or currencies, including composite currencies, in which payment of the principal of, and any premium and interest on, the Securities of the series shall be payable if other than the currency of the United States of America;
(m) if the principal of, or any premium or interest on, any Securities of the series is to be payable, at the election of the Company or the Holder thereof, in one or more currencies or currency units other than that or those in which such Securities are stated to be payable, the currency, currencies or currency units in which the principal of or any premium or interest on such Securities as to which such election is made shall be payable, the periods within which and the terms and conditions upon which such election is to be made and the amount so payable (or the manner in which such amount shall be determined);
(n) if the amount of payments of principal of, or any premium or interest on, the Securities of the series may be determined with reference to an index or pursuant to a formula, the manner in which such amounts shall be determined;
(o) if the principal amount payable at the Stated Maturity of any Securities of the series will not be determinable as of any one or more dates prior to the Stated Maturity, the amount which shall be deemed to be the principal amount of such Securities as of any such date for any purpose thereunder or hereunder, including the principal amount thereof which shall be due and payable upon any Maturity other than the Stated Maturity or which shall be deemed to be Outstanding as of any date prior to
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the Stated Maturity (or, in any such case, the manner in which such amount deemed to be the principal amount shall be determined);
(p) any addition to or change in the Events of Default which applies to any Securities of the series and any change in the right of the Trustee or the requisite Holders of such Securities to declare the principal amount thereof due and payable pursuant to Section 5.01;
(q) whether and under what circumstances the Company will pay additional amounts on the Securities of the series held by a person who is not a U.S. person in respect of any tax, assessment or governmental charge withheld or deducted and, if so, whether the Company will have the option to redeem such Securities rather than pay such additional amounts;
(r) any trustees, depositaries, authenticating or paying agents, transfer agents or registrars or any other agents with respect to the Securities of such series;
(s) if the Securities of any series may be converted into or exchanged for stock or other securities or other property of the Company or other entities, the terms upon which such series may be converted or exchanged, any specific terms relating to the adjustment thereof and the period during which such Securities may be so converted or exchanged;
(t) any addition to or change in the covenants set forth in Article 10 which applies to any Securities of the series; and
(u) any other terms of the series (which terms shall not be inconsistent with the provisions of this Indenture, except as permitted by
Section 9.01(e)).
All Securities of any one series shall be substantially identical except as to denomination and except as may otherwise be provided in or pursuant to the Board Resolution referred to above and (subject to Section 3.03) set forth in the Officers' Certificate that established the form of the Securities of such series or in any such indenture supplemental hereto.
All Securities of any one series need not be issued at the same time and may be issued from time to time, consistent with the terms of this Indenture, if so provided in or pursuant to such Board Resolution, such Officers' Certificate or in any such indenture supplemental hereto.
If any of the terms of the series are established by action taken pursuant to a Board Resolution, a copy of an appropriate record of such action shall be certified by the Secretary or an Assistant Secretary of the Company and delivered to the Trustee at or prior to the delivery of the Officers' Certificate setting forth the terms of the series.
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SECTION 3.02. Denominations
The Securities of each series shall be issuable in registered form without coupons and, except for any Security issuable in permanent global form, in such denominations as shall be specified in accordance with Section 3.01. In the absence of such provisions with respect to the Securities of any series, the Securities of such series, other than a Security issuable in permanent global form, shall be issuable in denominations of $1,000 and any multiple thereof.
SECTION 3.03. Execution, Authentication, Delivery and Dating
The Securities shall be executed on behalf of the Company by its Chairman of the Board, its President, one of its Vice Presidents or its Treasurer, attested by its Secretary or one of its Assistant Secretaries. The signature of any of these officers on the Securities may be manual or facsimile.
Securities bearing the manual or facsimile signatures of individuals who were at any time the proper officers of the Company shall bind the Company, notwithstanding that such individuals or any of them have ceased to hold such offices prior to the authentication and delivery of such Securities or did not hold such offices at the date of such Securities.
At any time and from time to time after the execution and delivery of this Indenture, the Company may deliver Securities of any series executed by the Company to the Trustee for authentication, together with the applicable documents referred to below in this Section, and the Trustee shall thereupon authenticate and deliver such Securities to or upon the order of the Company (contained in the Company Order referred to below in this Section) or pursuant to such procedures acceptable to the Trustee and to such recipients as may be specified from time to time by a Company Order. The maturity date, original issue date, interest rate and any other terms of the Securities of such series shall be determined by or pursuant to such Company Order and procedures. If provided for in such procedures, such Company Order may authorize authentication and delivery pursuant to oral instructions from the Company or its duly authorized agent, which instructions shall be promptly confirmed in writing. In authenticating such Securities, and accepting the additional responsibilities under this Indenture in relation to such Securities, the Trustee shall be entitled to receive (in the case of subparagraphs 3.03(ii), 3.03(iii) and 3.03(iv) below, only at or before the time of the first request of the Company to the Trustee to authenticate Securities of such series) and (subject to
Section 6.01) shall be fully protected in relying upon, unless and until such documents have been superseded or revoked:
(i) a Company Order requesting such authentication and setting forth delivery instructions if the Securities are not to be delivered to the Company, provided that, with respect to Securities of a series subject to a Periodic Offering, (a) such Company Order may be delivered by the Company to the
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Trustee prior to the delivery to the Trustee of such Securities for authentication and delivery, (b) the Trustee shall authenticate and deliver Securities of such series for original issue from time to time, in an aggregate principal amount not exceeding the aggregate principal amount, if any, established for such series, pursuant to a Company Order or pursuant to procedures acceptable to the Trustee as may be specified from time to time by a Company Order, (c) the maturity date or dates, original issue date or dates, interest rate or rates and any other terms of Securities of such series shall be determined by a Company Order or pursuant to such procedures and (d) if provided for in such procedures, such Company Order may authorize authentication and delivery pursuant to oral or electronic instructions from the Company or its duly authorized agent or agents, which oral instructions shall be promptly confirmed in writing;
(ii) any Board Resolution, Officers' Certificate and/or executed supplemental indenture referred to in Sections 2.01 and 3.01 by or pursuant to which the forms and terms of the Securities were established;
(iii) an Officers' Certificate setting forth the form or forms and (to the extent established) the terms of the Securities, stating that the form or forms and any such terms of the Securities have been established pursuant to Sections 2.01 and 3.01 and comply with this Indenture, and covering such other matters as the Trustee may reasonably request; and
(iv) At the option of the Company, either an Opinion of Counsel, or a letter addressed to the Trustee permitting to it rely on an Opinion of Counsel, substantially to the effect that:
(A) the forms of the Securities have been duly authorized and established in conformity with the provisions of this Indenture;
(B) if all of the terms of the Securities of such series have been established, the terms of the Securities have been duly authorized by the Company and established in conformity with the provisions of this Indenture, and, in the case of all other offerings, certain terms of the Securities have been established pursuant to a Board Resolution, an Officers' Certificate or a supplemental indenture in accordance with this Indenture, and when such other terms as are to be established pursuant to procedures set forth in a Company Order shall have been established, all such terms will have been duly authorized by the Company and will have been established in conformity with the provisions of this Indenture;
(C) when the Securities have been executed by the Company and authenticated by the Trustee in accordance with the provisions of
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this Indenture and delivered to and duly paid for by the purchasers thereof, they will have been duly issued under this Indenture and will be valid and legally binding obligations of the Company, enforceable in accordance with their respective terms, and will be entitled to the benefits of this Indenture; and
(D) the execution and delivery by the Company of, and the performance by the Company of its obligations under, the Securities will not contravene any provision of applicable law or the certificate of incorporation or by-laws of the Company or, to the best of such counsel's knowledge, any agreement or other instrument binding upon the Company or any of its subsidiaries that is material to the Company and its subsidiaries, considered as one enterprise, or, to the best of such counsel's knowledge, any judgment, order or decree of any governmental body, agency or court having jurisdiction over the Company or any subsidiary, and no consent, approval or authorization of any governmental body or agency is required for the performance by the Company of its obligations under the Securities, except such as are specified and have been obtained and such as may be required by the securities or blue sky laws of the various states in connection with the offer and sale of the Securities.
In rendering such opinions, such counsel may qualify any opinions as to enforceability by stating that such enforceability may be limited by bankruptcy, insolvency, reorganization, liquidation, moratorium and other similar laws affecting the rights and remedies of creditors and is subject to general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law). Such counsel may rely upon opinions of other counsel (copies of which shall be delivered to the Trustee), who shall be counsel reasonably satisfactory to the Trustee, in which case the opinion shall state that such counsel believes he and the Trustee are entitled so to rely. Such counsel may also state that, insofar as such opinion involves factual matters, he has relied, to the extent he deems proper, upon certificates of officers of the Company and its subsidiaries and certificates of public officials.
The Trustee shall have the right to decline to authenticate and deliver any Securities under this Section if the Trustee, being advised by counsel, determines that such action may not lawfully be taken by the Company or if the Trustee in good faith by its board of directors or board of trustees, executive committee, or a trust committee of directors or trustees or Responsible Officers shall determine that such action would expose the Trustee to personal liability to existing Holders or would affect the Trustee's own rights, duties or immunities under the Securities, this Indenture or otherwise.
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Each Security shall be dated the date of its authentication. Unless otherwise specified as contemplated by Section 3.01 for any Security, interest on the each Security will accrue from the date of its authentication.
No Security shall be entitled to any benefit under this Indenture or be valid or obligatory for any purpose unless there appears on such Security a certificate of authentication substantially in the form provided for herein executed by the Trustee by manual signature, and such certificate upon any Security shall be conclusive evidence, and the only evidence, that such Security has been duly authenticated and delivered hereunder and is entitled to the benefits of this Indenture.
Notwithstanding the foregoing and subject, in the case of a Security in permanent global form, to Section 2.02, if any Security shall have been authenticated and delivered hereunder but never issued and sold by the Company, and the Company shall deliver such Security to the Trustee for cancellation as provided in Section 3.09 together with a written statement (which need not comply with Section 1.02 and need not be accompanied by an Opinion of Counsel) directing such cancellation and stating that such Security has never been issued and sold by the Company, for all purposes of this Indenture such Security shall be deemed never to have been authenticated and delivered hereunder and shall never be entitled to the benefits of this Indenture.
SECTION 3.04. Temporary Securities
Pending the preparation of definitive Securities of any series, the Company may execute, and upon Company Order the Trustee shall authenticate and deliver, temporary Securities which are printed, lithographed, typewritten, mimeographed or otherwise produced, in any authorized denomination, substantially of the tenor of the definitive Securities in lieu of which they are issued and with such appropriate insertions, omissions, substitutions and other variations as the officers executing such Securities may determine, as evidenced by their execution of such Securities.
If temporary Securities of any series are issued, the Company will cause definitive Securities of that series to be prepared without unreasonable delay. After the preparation of definitive Securities of such series, the temporary Securities of such series shall be exchangeable for definitive Securities of such series upon surrender of the temporary Securities of such series at the office or agency of the Company in a Place of Payment for that series, without charge to the Holder. Upon surrender for cancellation of any one or more temporary Securities of any series the Company shall execute and the Trustee shall authenticate and deliver in exchange therefor a like principal amount of definitive Securities of the same series and of like tenor of authorized denominations. Until so exchanged the temporary Securities of any series shall in all respects be entitled to the same benefits under this Indenture as definitive Securities of such series.
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SECTION 3.05. Registration, Registration of Transfer and Exchange
The Company shall cause to be kept at the Corporate Trust Office of the Trustee a register (the register maintained in such office and in any other office or agency of the Company in a Place of Payment being herein sometimes collectively referred to as the "SECURITY REGISTER") in which, subject to such reasonable regulations as it may prescribe, the Company shall provide for the registration of Securities and transfers of Securities. The Trustee is hereby appointed "SECURITY REGISTRAR" for the purpose of registering Securities and transfers of Securities as herein provided.
Upon surrender for registration of transfer of any Security of any series at the office or agency in a Place of Payment for that series, the Company shall execute, and the Trustee shall authenticate and deliver, in the name of the designated transferee or transferees one or more new Securities of the same series of any authorized denominations and of a like aggregate principal amount and of like tenor.
At the option of the Holder, Securities of any series may be exchanged for other Securities of the same series, of any authorized denominations and of a like aggregate principal amount and of like tenor, upon surrender of the Securities to be exchanged at such office or agency. Whenever any Securities are so surrendered for exchange, the Company shall execute, and the Trustee shall authenticate and deliver, the Securities which the Holder making the exchange is entitled to receive.
All Securities issued upon any registration of transfer or exchange of Securities shall be the valid obligations of the Company, evidencing the same debt, and entitled to the same benefits under this Indenture, as the Securities surrendered upon such registration of transfer or exchange.
Every Security presented or surrendered for registration of transfer or for exchange shall (if so required by the Company or the Trustee) be duly endorsed, or be accompanied by a written instrument of transfer in form satisfactory to the Company and the Security Registrar duly executed, by the Holder thereof or his attorney duly authorized in writing.
No service charge shall be made for any registration of transfer or exchange of Securities, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any registration of transfer or exchange of Securities, other than exchanges pursuant to Section 3.04, 9.06 or 11.07 not involving any transfer.
The Company shall not be required (i) to issue, register the transfer of or exchange Securities of any series during a period beginning at the opening of business 15 days before the day of the mailing of a notice of redemption of Securities of that series selected for redemption under Section 11.03 and ending at the close of business on the day of such mailing, or (ii) to register the transfer of or exchange any Security
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so selected for redemption in whole or in part, except the unredeemed portion of any Security being redeemed in part.
The provisions of Clauses (a) - (g) below shall apply only to permanent global Securities:
(a) Each permanent global Security authenticated under this Indenture shall be registered in the name of the Depositary designated for such permanent global Security or a nominee thereof and delivered to such Depositary or a nominee thereof or custodian therefor, and each such permanent global Security shall constitute a single Security for all purposes of this Indenture.
(b) Notwithstanding any other provisions in this Indenture, no permanent global Security may be exchanged in whole or in part for Securities registered, and no transfer of a permanent global Security in whole or in part may be registered, in the name of any Person other than the Depositary for such permanent global Security or a nominee thereof unless (i) the Depositary notifies the Company pursuant to Clause 3.05(c) of this Section that it is unwilling or unable to continue as Depositary for such permanent global Security or if at any time the Depositary ceases to be a clearing agency registered under the Securities Exchange Act of 1934, as amended, (ii) if the Company in its sole discretion determines pursuant to Clause 3.05(d) of this Section that such permanent global Security shall be so exchangeable or transferrable and executes and delivers to the Security Registrar a Company Order providing that such permanent global Security shall be so exchangeable or transferrable, (iii) any event shall have occurred and be continuing which, after notice or lapse of time, or both, would become an Event of Default with respect to the Securities of the series of which such permanent global Security is a part or (iv) there shall exist such circumstances, if any, in addition or in lieu of the foregoing as have been specified for this purpose as contemplated by Section 3.01.
(c) Subject to Clause 3.05(a) above, any exchange of a permanent global Security for other Securities may be made in whole or in part, and all Securities issued in exchange for a permanent global Security or any portion thereof shall be registered in such names as the Depositary for such permanent global Security shall direct. The Trustee shall deliver such Securities to or as directed by the Persons in whose names such Securities are so registered.
(d) If at any time the Depositary for any Securities of a series represented by one or more global Securities notifies the Company that it is unwilling or unable to continue as Depositary for such Securities or if at any time the Depositary ceases to be a clearing agency registered under the Securities Exchange Act of 1934, as amended, the Company shall appoint a successor Depositary with respect to such Securities. If a successor Depositary for such Securities is not appointed by the Company within 90 days after the Company receives such notice or becomes aware of such ineligibility (and in any event before the Depositary surrenders such global Security for exchange),
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the Company's election that such Securities be represented by one or more global Securities shall no longer be effective and the Company shall execute, and the Trustee, upon receipt of an Officers' Certificate for the authentication and delivery of definitive Securities of such series, will authenticate and deliver, Securities of such series in definitive registered form without coupons, in any authorized denominations, in an aggregate principal amount equal to the principal amount of the global Security or Securities representing such Securities in exchange for such global Security or Securities.
(e) The Company may at any time and in its sole discretion determine that the Securities of any series issued in the form of one or more global Securities shall no longer be represented by a global Security or Securities. In such event the Company will execute, and the Trustee, upon receipt of an Officers' Certificate for the authentication and delivery of definitive Securities of such series, will authenticate and deliver Securities of such series in definitive registered form, in any authorized denominations, in an aggregate principal amount equal to the principal amount of the global Security or Securities representing such Securities, in exchange for such global Security or Securities.
(f) Subject to Clause 3.05(a) above, with respect to Securities represented by a global Security, the Depositary for such global Security may surrender such global Security in exchange in whole or in part for Securities of the same series in definitive registered form on such terms as are acceptable to the Company and such Depositary. Thereupon, the Company shall execute, and the Trustee shall authenticate and deliver, without service charge,
(i) to the Person specified by such Depositary a new Security or Securities of the same series, of any authorized denomination as requested by such Person, in an aggregate principal amount equal to and in exchange for such Person's beneficial interest in the global Security; and
(ii) to such Depositary a new global Security in a denomination equal to the difference, if any, between the principal amount of the surrendered global Security and the aggregate principal amount of Securities authenticated and delivered pursuant to clause 3.05(f)(i) above.
Upon the exchange of a global Security for Securities in definitive registered form, in authorized denominations, such global Security shall be canceled by the Trustee.
(g) Every Security authenticated and delivered upon registration of transfer of, or in exchange for or in lieu of, a permanent global Security or any portion thereof, whether pursuant to this Section, Section 3.04, 3.06, 9.06 or 11.07 or otherwise, shall be authenticated and delivered in the form of, and shall be, a permanent global
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Security, unless such Security is registered in the name of a Person other than the Depositary for such permanent global Security or a nominee thereof.
SECTION 3.06. Mutilated, Destroyed, Lost and Stolen Securities
If any mutilated Security is surrendered to the Trustee, the Company shall execute and the Trustee shall authenticate and deliver in exchange therefor a new Security of the same series and of like tenor and principal amount and bearing a number not contemporaneously outstanding.
If there shall be delivered to the Company and the Trustee (i) evidence to their satisfaction of the destruction, loss or theft of any Security and (ii) such security or indemnity as may be required by them to save each of them and any agent of either of them harmless, then, in the absence of notice to the Company or the Trustee that such Security has been acquired by a bona fide purchaser, the Company shall execute and the Trustee shall authenticate and deliver, in lieu of any such destroyed, lost or stolen Security, a new Security of the same series and of like tenor and principal amount and bearing a number not contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen Security has become or is about to become due and payable, the Company in its discretion may, instead of issuing a new Security, pay such Security.
Upon the issuance of any new Security under this Section, the Company may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Trustee) connected therewith.
Every new Security of any series issued pursuant to this Section in lieu of any destroyed, lost or stolen Security shall constitute an original additional contractual obligation of the Company, whether or not the destroyed, lost or stolen Security shall be at any time enforceable by anyone, and shall be entitled to all the benefits of this Indenture equally and proportionately with any and all other Securities of that series duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities.
SECTION 3.07. Payment of Interest; Interest Rights Preserved
Unless otherwise provided as contemplated by Section 3.01 with respect to any Security, interest on such Security which is payable, and is punctually paid or duly provided for, on any Interest Payment Date shall be paid to the Person in whose name that Security (or one or more Predecessor Securities) is registered at the close of
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business on the Regular Record Date for such interest; provided that if that Security or its Predecessor Security was originally issued on a date after a Regular Record Date and before the following Interest Payment Date, the first payment of interest on such Security will be made on the Interest Payment Date following the next succeeding Regular Record Date. Unless otherwise specified as contemplated by Section 3.01 for any Security, interest payable at Maturity (other than on a date which is an Interest Payment Date) will be paid to the same Person to whom the principal amount of this Security is payable.
Any interest on any Security of any series which is payable, but is not punctually paid or duly provided for, on any Interest Payment Date (herein called "DEFAULTED INTEREST") shall forthwith cease to be payable to the Holder on the relevant Regular Record Date by virtue of having been such Holder, and such Defaulted Interest may be paid by the Company, at its election in each case, as provided in clause (a) or (b) below:
(a) The Company may elect to make payment of any Defaulted Interest to the Persons in whose names the Securities of such series (or their respective Predecessor Securities) are registered at the close of business on a Special Record Date for the payment of such Defaulted Interest, which shall be fixed in the following manner. The Company shall notify the Trustee in writing of the amount of Defaulted Interest proposed to be paid on each Security of such series and the date of the proposed payment, and at the same time the Company shall deposit with the Trustee an amount of money equal to the aggregate amount proposed to be paid in respect of such Defaulted Interest or shall make arrangements satisfactory to the Trustee for such deposit prior to the date of the proposed payment, such money when deposited to be held in trust for the benefit of the Persons entitled to such Defaulted Interest as in this Clause provided. Thereupon the Trustee shall fix a Special Record Date for the payment of such Defaulted Interest which shall be not more than 15 days and not less than 10 days prior to the date of the proposed payment and not less than 10 days after the receipt by the Trustee of the notice of the proposed payment. The Trustee shall promptly notify the Company of such Special Record Date and, in the name and at the expense of the Company, shall cause notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor to be mailed, first-class postage prepaid, to each Holder of Securities of such series at his address as it appears in the Security Register, not less than 10 days prior to such Special Record Date. Notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor having been so mailed, such Defaulted Interest shall be paid to the Persons in whose names the Securities of such series (or their respective Predecessor Securities) are registered at the close of business on such Special Record Date and shall no longer be payable pursuant to the following clause 3.07(b).
(b) The Company may make payment of any Defaulted Interest on the Securities of any series in any other lawful manner not inconsistent with the
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requirements of any securities exchange on which such Securities may be listed, and upon such notice as may be required by such exchange, if, after notice given by the Company to the Trustee of the proposed payment pursuant to this Clause, such manner of payment shall be deemed practicable by the Trustee.
Subject to the foregoing provisions of this Section, each Security delivered under this Indenture upon registration of transfer of or in exchange for or in lieu of any other Security shall carry the rights to interest accrued and unpaid, and to accrue, which were carried by such other Security.
SECTION 3.08. Persons Deemed Owners
Prior to due presentment of a Security for registration of transfer, the Company, the Trustee and any agent of the Company or the Trustee may treat the Person in whose name such Security is registered as the owner of such Security for the purpose of receiving payment of principal of (and premium, if any) and (subject to Section 3.07) interest on such Security and for all other purposes whatsoever, whether or not such Security is overdue, and neither the Company, the Trustee nor any agent of the Company or the Trustee shall be affected by notice to the contrary.
SECTION 3.09. Cancellation
All Securities surrendered for payment, redemption, registration of transfer or exchange or for credit against any sinking fund payment shall, if surrendered to any Person other than the Trustee, be delivered to the Trustee and shall be promptly canceled by it. The Company may at any time deliver to the Trustee for cancellation any Securities previously authenticated and delivered hereunder which the Company may have acquired in any manner whatsoever and may deliver to the Trustee (or to any other Person for delivery to the Trustee) for cancellation any Securities previously authenticated hereunder which the Company has not issued and sold, and all Securities so delivered shall be promptly canceled by the Trustee. No Securities shall be authenticated in lieu of or in exchange for any Securities canceled as provided in this Section, except as expressly permitted by this Indenture. All canceled Securities held by the Trustee shall be disposed of as directed by a Company Order.
SECTION 3.10. Computation of Interest
Except as otherwise specified as contemplated by Section 3.01 for any Security, interest on the Securities of each series shall be computed on the basis of a 360-day year consisting of 12 30-day months.
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ARTICLE 4
SATISFACTION AND DISCHARGE
SECTION 4.01. Satisfaction and Discharge of Indenture
This Indenture shall upon Company Request cease to be of further effect (except as to any surviving rights of registration of transfer or exchange of Securities herein expressly provided for), and the Trustee, at the expense of the Company, shall execute proper instruments acknowledging satisfaction and discharge of this Indenture, when
(a) either
(i) all Securities theretofore authenticated and delivered (other than (x) Securities which have been destroyed, lost or stolen and which have been replaced or paid as provided in Section 3.06 and
(y) Securities for whose payment money has theretofore been deposited in trust or segregated and held in trust by the Company and thereafter repaid to the Company or discharged from such trust, as provided in
Section 10.03) have been delivered to the Trustee for cancellation; or
(ii) all such Securities not theretofore delivered to the Trustee for cancellation
(A) have become due and payable, or
(B) will become due and payable at their Stated Maturity within one year, or
(C) are to be called for redemption within one year under arrangements satisfactory to the Trustee for the giving of notice of redemption by the Trustee in the name, and at the expense, of the Company,
and the Company, in the case of (A), (B) or (C) above has deposited or caused to be deposited with the Trustee as trust funds in trust for the purpose an amount sufficient to pay and discharge the entire indebtedness on such Securities not theretofore delivered to the Trustee for cancellation, for principal, and any premium or interest, to the date of such deposit (in the case of Securities which have become due and payable) or to the Stated Maturity or Redemption Date, as the case may be;
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(b) the Company has paid or caused to be paid all other sums payable hereunder by the Company; and
(c) the Company has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent herein provided for relating to the satisfaction and discharge of this Indenture have been complied with.
Notwithstanding the satisfaction and discharge of this Indenture, the obligations of the Company to the Trustee under Sections 4.03(b) and 6.07, the obligations of the Trustee to any Authenticating Agent under Section 6.14 and, if money shall have been deposited with the Trustee pursuant to subclause 4.01(a)(ii), the obligations of the Trustee under Section 4.03 and the last paragraph of Section 10.03 shall survive.
SECTION 4.02. Defeasance of Securities of Any Series
Unless otherwise specified pursuant to Section 3.01 with respect to any Security, then notwithstanding Section 4.01, the Company shall be deemed to have paid and discharged the entire indebtedness on all the Outstanding Securities of any series on the 91st day after the date of the deposit referred to in subparagraph 4.02(d) hereof, and the provisions of this Indenture, as it relates to such Outstanding Securities, shall no longer be in effect (and the Trustee, at the expense of the Company, shall at Company Request, execute proper instruments acknowledging the same) (hereinafter called "DEFEASANCE"), except as to:
(a) the rights of Holders of Securities to receive, from the trust funds described in subparagraph 4.02(d) hereof, (i) payment of the principal of and any premium or interest on the Outstanding Securities of that series on the Stated Maturity of such principal or installment of principal or interest and
(ii) the benefit of any mandatory sinking fund payments or analogous payments applicable to Securities of such series on the day on which such payments are due and payable in accordance with the terms of the Indenture and such Securities;
(b) the Company's obligations with respect to such Securities under Sections 3.05, 3.06, 4.03, 10.02 and 10.03; and
(c) the rights, powers, trusts, duties and immunities of the Trustee hereunder;
provided that the following conditions have been satisfied:
(d) with reference to this provision, the Company has irrevocably deposited or caused to be irrevocably deposited with the Trustee as trust funds for the purpose of making the following payments, specifically pledged as security for, and dedicated solely to, the benefit of the Holders of the Securities of that series, (i) money in an
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amount, or (ii) U.S. Government Obligations which through the payment of interest and principal in respect thereof in accordance with their terms will provide not later than one day before the due date of any payment referred to in clause (A) or (B) of this subparagraph 4.02(d) money in an amount, or (iii) a combination thereof, sufficient, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, to pay and discharge, and which shall be applied by the Trustee for such purposes, (A) the principal of and any premium or interest on the Outstanding Securities of that series on the Stated Maturity of such principal or installment of principal or interest on the Redemption Date, as the case may be, and (B) any mandatory sinking fund payments or analogous payments applicable to Securities of such series on the day on which such payments are due and payable, each in accordance with the terms of this Indenture and of such Securities;
(e) such Defeasance shall not cause the Trustee with respect to the Securities of that series to have a conflicting interest as defined in Section 6.08 and for purposes of the Trust Indenture Act with respect to the Securities of any series;
(f) such Defeasance will not result in a breach or violation of, or constitute a default under, this Indenture or any other agreement or instrument to which the Company is a party or by which it is bound;
(g) such Defeasance would not cause any Outstanding Security of such series then listed on any nationally recognized securities exchange to be then delisted as a result thereof;
(h) no Event of Default or event which with notice or lapse of time would become an Event of Default with respect to Securities of the series shall have occurred and be continuing on the date of such deposit or during the period ending on the 91st day after such date;
(i) the Company has delivered to the Trustee an Opinion of Counsel based on the fact that (x) the Company has received from, or there has been published by, the Internal Revenue Service a ruling or (y) since the date hereof, there has been a change in the applicable Federal income tax law, in either case to the effect that, and such opinion shall confirm that, the Holders of the Securities of such series will not recognize income, gain or loss for Federal income tax purposes as a result of such deposit, defeasance and discharge and will be subject to Federal income tax on the same amount and in the same manner and at the same times, as would have been the case if such deposit, defeasance and discharge had not occurred;
(j) the Company has delivered to the Trustee an Opinion of Counsel stating that (i) such deposit, defeasance and discharge would not cause any outstanding Security of such series then listed on any nationally recognized securities exchange to be delisted as a result thereof; and (ii) and that such Defeasance would not result in
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the trust arising from such deposit constituting an investment company within the meaning of the Investment Company Act of 1940, as amended from time to time;
(k) the Company has delivered to the Trustee an Opinion of Counsel to the effect that after the 91st day following the deposit, the trust funds will not be subject to the effect of any applicable bankruptcy, insolvency, reorganization or similar laws affecting creditors' rights generally, except that if a court were to rule under any such law in any case or proceeding that the trust funds remained property of the Company, no opinion is given as to the effect of such laws on the trust funds except the following: (A) assuming such trust funds remained in the Trustee's possession prior to such court ruling to the extent not paid to Holders of Securities, the Trustee will hold, for the benefit of such Holders, a valid and perfected security interest in such trust funds that is not avoidable in bankruptcy or otherwise, and (B) such Holders will be entitled to receive adequate protection of their interests in such trust funds if such trust funds are used; and
(l) the Company has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent provided for relating to the Defeasance contemplated by this provision have been complied with.
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SECTION 4.03. Application of Trust Funds; Indemnification
(a) Subject to the provisions of the last paragraph of Section 10.03, all money deposited with the Trustee pursuant to Section 4.01, all money and U.S. Government Obligations deposited with the Trustee pursuant to Section 4.02 or Section 10.06 and all money received by the Trustee in respect of U.S. Government Obligations deposited with the Trustee pursuant to Section 4.02 or
Section 10.06 shall be held in trust and applied by it, in accordance with the provisions of the Securities and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as its own Paying Agent) as the Trustee may determine, to the Persons entitled thereto of the principal (and premium, if any) and interest for whose payment such money has been deposited with or received by the Trustee or to make mandatory sinking fund payments or analogous payments as contemplated by Section 4.02 or Section 10.06, as the case may be.
(b) The Company shall pay and shall indemnify the Trustee against any tax, fee or other charge imposed on or assessed against U.S. Government Obligations deposited pursuant to Section 4.02 or Section 10.06 or the interest and principal received in respect of such obligations other than any payable by or on behalf of Holders.
(c) The Trustee shall deliver or pay to the Company from time to time upon Company Request any money or U.S. Government Obligations held by it as provided in Section 4.02 or 10.06 which, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, are then in excess of the amount which then would have been required to be deposited for the purpose for which such money or U.S. Government Obligations were deposited or received.
SECTION 4.04. Reinstatement
If the Trustee or the Paying Agent is unable to apply any money in accordance with Section 4.02 or 10.06 with respect to any Securities by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application or upon the occurrence of an Event of Default, then the obligations under this Indenture and such Securities from which the Company has been discharged or released pursuant to
Section 4.02 or 10.06 shall be revived and reinstated as though no deposit had occurred pursuant to this Article with respect to such Securities, until such time as the Trustee or Paying Agent is permitted to apply all money held in trust pursuant to Section 4.03 with respect to such Securities in accordance with this Article; provided, however, that if the Company makes any payment of principal of or any premium or interest on any such Security following such reinstatement of its obligations, the Company shall be subrogated to the rights (if any) of the Holders of such Securities to receive such payment from the money so held in trust.
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ARTICLE 5
REMEDIES
SECTION 5.01. Events of Default
"EVENT OF DEFAULT," wherever used herein with respect to Securities of any series, means any one of the following events (whatever the reason for such Event of Default and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body):
(a) default in the payment of any interest upon any Security of that series when it becomes due and payable, and continuance of such default for a period of 30 days; or
(b) default in the payment of the principal of (or premium, if any, on) any Security of that series at its Maturity; or
(c) default in the deposit of any sinking fund payment, when and as due by the terms of a Security of that series; or
(d) default in the performance, or breach, of any covenant or warranty of the Company in this Indenture (other than a covenant or warranty a default in whose performance or whose breach is elsewhere in this Section specifically dealt with or which has expressly been included in this Indenture solely for the benefit of a series of Securities other than that series), 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 Company by the Trustee or to the Company and the Trustee by the Holders of at least 25% in principal amount of the Outstanding Securities of each series affected thereby a written notice specifying such default or breach and requiring it to be remedied and stating that such notice is a "NOTICE OF DEFAULT" hereunder; or
(e) the entry by a court having jurisdiction in the premises of (A) a decree or order for relief in respect of the Company in an involuntary case or proceeding under any applicable Federal or State bankruptcy, insolvency, reorganization or other similar law or (B) a decree or order adjudging the Company a bankrupt or insolvent, or approving as properly filed a petition seeking reorganization, arrangement, adjustment or composition of or in respect of the Company under any applicable Federal or State law, or appointing a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of the Company or any substantial part of its property, or ordering the winding up or liquidation of its affairs, and the continuance of any such decree or order for relief or any such other decree or order unstayed and in effect for a period of 60 consecutive days; or
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(f) the commencement by the Company of a voluntary case or proceeding under any applicable Federal or State bankruptcy, insolvency, reorganization or other similar law or of any other case or proceeding to be adjudicated a bankrupt or insolvent, or the consent by it to the entry of a decree or order for relief in respect of the Company in an involuntary case or proceeding under any applicable Federal or State bankruptcy, insolvency, reorganization or other similar law or to the commencement of any bankruptcy or insolvency case or proceeding against it, or the filing by it of a petition or answer or consent seeking reorganization or relief under any applicable Federal or State law, or the consent by it to the filing of such petition or the appointment of or taking possession by a custodian, receiver, liquidator, assignee, trustee, sequestrator or similar official of the Company or of any substantial part of its property, or the making by it of any assignment for the benefit of creditors, or the admission by it in writing of its inability to pay its debts generally as they become due, or the taking of corporate action by the Company in furtherance of any such action; or
(g) any events of default provided with respect to Securities of that series.
SECTION 5.02. Acceleration of Maturity; Rescission and Annulment
If an Event of Default described in clause 5.01(a), 5.01(b), 5.01(c), 5.01(d) or 5.01(g) with respect to Securities of any series at the time Outstanding occurs and is continuing, then in every such case the Trustee or the Holders of not less than 25% in principal amount of the Outstanding Securities of such series (each such series voting as a separate class in the case of an Event of Default under clause 5.01(a), 5.01(b), 5.01(c) or 5.01(g), and all such series voting as one class in the case of such an Event of Default under clause 5.01(d)) may declare the principal amount (or, if any Securities are Original Issue Discount Securities, such portion of the principal amount as may be specified in the terms of such Securities) of all of the Securities of such series to be due and payable immediately, by a notice in writing to the Company (and to the Trustee if given by Holders), and upon any such declaration such principal amount (or specified amount) shall become immediately due and payable. If any Event of Default described in clause 5.01(d) with respect to all series of Securities then Outstanding, or any Event of Default described in clause 5.01(e) or 5.01(f) occurs and is continuing, then in every such case the Trustee or the Holders of not less than 25% in aggregate principal amount of all the Outstanding Securities (voting as one class) may declare the principal amount (or, if any Securities are Original Issue Discount Securities, such portion of the principal amount as may be specified in the terms of such Securities) of all the Securities then Outstanding to be due and payable immediately, by a notice in writing to the Company (and to the Trustee if given by Holders), and upon any such declaration such principal amount (or specified amount) shall become immediately due and payable.
At any time after such a declaration of acceleration with respect to Securities of any series has been made and before a judgment or decree for payment of the money
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due has been obtained by the Trustee as hereinafter in this Article provided, the Holders of a majority in principal amount of the Outstanding Securities of that series, by written notice to the Company and the Trustee, may rescind and annul such declaration and its consequences if
(a) the Company has paid or deposited with the Trustee a sum sufficient to pay
(i) the overdue interest on all Securities of the series,
(ii) the principal of (and premium, if any, on) any Securities of that series which have become due otherwise than by such declaration of acceleration and interest thereon at the interest rate or rates prescribed in such Securities,
(iii) to the extent that payment of such interest is lawful, interest upon overdue interest at the rate or rates prescribed for overdue interest in such Securities, and
(iv) all sums paid or advanced by the Trustee hereunder and the reasonable compensation, expenses, disbursements and advances of the Trustees, its agents and counsel and all other amounts due under
Section 6.07;
and
(b) all Events of Default with respect to Securities of that series other than the non-payment of the principal of Securities of that series which have become due solely by such declaration of acceleration, have been cured or waived as provided in Section 5.13.
No such rescission shall affect any subsequent default or impair any right consequent thereon.
SECTION 5.03. Collection of Indebtedness and Suits for Enforcement by Trustee
The Company covenants that if
(a) default is made in the payment of any interest on any Security when such interest becomes due and payable and such default continues for a period of 30 days, or
(b) default is made in the payment of the principal of (or premium, if any, on) any Security at the Maturity thereof
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the Company will, upon demand of the Trustee, pay to it, for the benefit of the Holders of such Securities, the whole amount then due and payable on such Securities, for principal (and premium, if any) and interest and, to the extent that payment of such interest shall be legally enforceable, interest on any overdue principal (and premium, if any) and on any overdue interest, at the rate or rates prescribed therefor in such Securities and, in addition thereto, such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, other than those incurred due to the Trustee's bad faith or negligence.
If the Company fails to pay such amounts forthwith upon such demand, the Trustee, in its own name and as trustee of an express trust may institute a judicial proceeding for the collection of the sums so due and unpaid, may prosecute such proceeding to judgment or final decree and may enforce the same against the Company or any other obligor upon such Securities and collect the moneys adjudged or decreed to be payable in the manner provided by law out of the property of the Company or any other obligor upon such Securities, wherever situated.
If an Event of Default with respect to Securities of any series occurs and is continuing, the Trustee may in its discretion proceed to protect and enforce its rights and the rights of the Holders of Securities of such series by such appropriate judicial proceedings as the Trustee shall deem most effectual to protect and enforce any such rights whether for the specific enforcement of any covenant or agreement in this Indenture or in aid of the exercise of any power granted herein or therein, or to enforce any other proper remedy.
SECTION 5.04. Trustee May File Proofs of Claim
In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding relative to the Company or any other obligor upon the Securities or the property of the Company or of such other obligor or their creditors, the Trustee (irrespective of whether the principal of the Securities shall then be due and payable as therein expressed or by declaration or otherwise and irrespective of whether the Trustee shall have made any demand on the Company for the payment of overdue principal or interest) shall be entitled and empowered, by intervention in such proceeding or otherwise,
(a) to file and prove a claim for the whole amount of principal (and premium, if any) and interest owing and unpaid in respect of the Securities and to file such other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel) and of the Holders allowed in such judicial proceeding, and
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(b) to collect and receive any moneys or other property payable or deliverable on any such claims and to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 6.07.
Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Securities or the rights of any Holders hereof or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding.
SECTION 5.05. Trustee May Enforce Claims Without Possession of Securities
All rights of action and claims under this Indenture or the Securities may be prosecuted and enforced by the Trustee without the possession of any of the Securities or the production thereof in any proceeding relating thereto, and any such proceeding instituted by the Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment shall, after provision for the payment of the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, be for the ratable benefit of the Holders of the Securities in respect of which such judgment has been recovered.
SECTION 5.06. Application of Money Collected
Any money collected by the Trustee pursuant to this Article shall be applied in the following order, at the date or dates fixed by the Trustee and, in case of the distribution of such money on account of principal (or premium, if any) or interest, upon presentation of the Securities and the notation thereon of the payment if only partially paid and upon surrender thereof if fully paid:
FIRST: To the payment of all amounts due the Trustee under this Indenture; and
SECOND: To the payment of the amounts then due and unpaid for principal of (and premium, if any) and interest on the Securities in respect of which or for the benefit of which such money has been collected ratably without preference or priority of any kind according to the amounts due and payable on such Securities for principal (and premium, if any) and interest, respectively.
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SECTION 5.07. Limitation on Suits
No Holder of any Security of any series shall have any right to institute any proceeding, judicial or otherwise, with respect to this Indenture, or for the appointment of a receiver or trustee, or for any other remedy hereunder, unless
(a) such Holder has previously given written notice to the Trustee of a continuing Event of Default with respect to the Securities of that series;
(b) the Holders of not less than 25% in principal amount of the Outstanding Securities of that series shall have made written request to the Trustee to institute proceedings in respect of such Event of Default in its own name as Trustee hereunder;
(c) such Holder or Holders have offered to the Trustee reasonable indemnity against the costs, expenses and liabilities to be incurred in compliance with such request;
(d) the Trustee for 60 days after its receipt of such notice, request and offer of indemnity has failed to institute any such proceeding; and
(e) no direction inconsistent with such written request has been given to the Trustee during such 60-day period by the Holders of a majority in principal amount of all Outstanding Securities of that series;
it being understood and intended that no one or more of such Holders shall have any right in any manner whatever by virtue of, or by availing of, any provision of this Indenture to affect, disturb or prejudice the rights of any other of such Holders, or to obtain or to seek to obtain priority or preference over any other of such Holders or to enforce any right under this Indenture, except in the manner herein provided and for the equal and ratable benefit of all of such Holders.
SECTION 5.08. Unconditional Right of Holders to Receive Principal, Premium and Interest
Notwithstanding any other provision in this Indenture, the Holder of any Security shall have the right, which is absolute and unconditional, to receive payment of the principal of (and premium, if any) and (subject to
Section 3.07) interest on such Security on the Stated Maturity or Maturities expressed in such Security (or, in the case of redemption, on the Redemption Date) and to institute suit for the enforcement of any such payment, and such rights shall not be impaired without the consent of such Holder.
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SECTION 5.09. Restoration of Rights and Remedies
If the Trustee or any Holder has instituted any proceeding to enforce any right or remedy under this Indenture and such proceeding has been discontinued or abandoned for any reason, or has been determined adversely to the Trustee or to such Holder, then and in every such case, subject to any determination in such proceeding, the Company, the Trustee and the Holders shall be restored severally and respectively to their former positions hereunder and thereafter all rights and remedies of the Trustee and the Holders shall continue as though no such proceeding had been instituted.
SECTION 5.10. Rights and Remedies Cumulative
Except as otherwise provided with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities in the last paragraph of
Section 3.06, no right or remedy herein conferred upon or reserved to the Trustee or to the Holders is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy.
SECTION 5.11. Delay or Omission Not Waiver
No delay or omission of the Trustee or of any Holder of any Securities to exercise any right or remedy accruing upon any Event of Default which shall have occurred and shall be continuing shall impair any such right or remedy or constitute a waiver of any such Event of Default or an acquiescence therein. Every right and remedy given by this Article or by law to the Trustee or to the Holders may be exercised from time to time, and as often as may be deemed expedient, by the Trustee or by the Holders, as the case may be.
SECTION 5.12. Control by Holders
The Holders of a majority in principal amount of the Outstanding Securities of any series shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred on the Trustee, with respect to the Securities of such series, provided that
(a) such direction shall not be in conflict with any rule of law or with this Indenture,
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(b) the Trustee may take any other action deemed proper by the Trustee which is not inconsistent with such direction, and
(c) the Trustee shall have the right to decline any direction with respect to which a Responsible Officer reasonably determines such direction will cause the Trustee to incur any liability for which it shall not have been adequately indemnified pursuant to Section 5.07.
SECTION 5.13. Waiver of Past Defaults
The Holders of (i) not less than a majority in principal amount of the Outstanding Securities of any series (each such series voting as a separate class) may on behalf of the Holders of all Securities of such series waive any past default or Event of Default described in clause 5.01(d) which relates to less than all series of Outstanding Securities or described in clause 5.01(g) with respect to such series and its consequences, or (ii) not less than a majority in principal amount of the Outstanding Securities affected thereby (voting as one class) may on behalf of the Holders of all the Outstanding Securities affected thereby waive any past default or Event of Default described in said clause 5.01(d) which relates to all such Outstanding Securities and its consequences, except in any such case a default
(a) in the payment of the principal of, or any premium or interest on, any Security of such series, or
(b) in respect of a covenant or provision hereof which under Article 9 cannot be modified or amended without the consent of the Holder of each Outstanding Security of such series affected.
Upon any such waiver, such default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured, for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other default or impair any right consequent thereon.
SECTION 5.14. Undertaking for Costs
All parties to this Indenture agree, and each Holder of any Security by his acceptance thereof shall be deemed to have agreed, that any court may in its discretion require, in any suit for the enforcement of any right or remedy under this Indenture, or in any suit against the Trustee for any action taken, suffered or omitted by it as Trustee, the filing by any party litigant in such suit of an undertaking to pay the costs of such suit, and that such court may in its discretion assess reasonable costs, including reasonable attorneys' fees, against any party litigant in such suit, having due regard to the merits and good faith of the claims or defenses made by such party litigant; but the provisions of this Section shall not apply to any suit instituted by the Company, to any suit instituted by the Trustee, to any suit instituted by any Holder, or group of Holders,
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holding in the aggregate more than 25% in principal amount of the Outstanding Securities of any series or to any suit instituted by any Holder for the enforcement of the payment of the principal of (or premium, if any) or interest on any Security on or after the Stated Maturity or Maturities expressed in such Security (or, in the case of redemption, on or after the Redemption Date).
SECTION 5.15. Waiver of Usury, Stay or Extension Law
The Company covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension of law wherever enacted, now or at any time hereafter in force, which may affect the covenants or the performance of this Indenture; and the Company (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted.
ARTICLE 6
THE TRUSTEE
SECTION 6.01. Certain Duties and Responsibilities
(a) Except during the continuance of an Event of Default,
(i) the Trustee undertakes to perform such duties and only such duties as specifically set forth in this Indenture, and no implied covenants or obligations shall be read into this Indenture against the Trustee; and
(ii) in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture; but in the case of any such certificates or opinions which by any provision hereof are specifically required to be furnished to the Trustee, the Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Indenture.
(b) In case an Event of Default has occurred and is continuing, the Trustee shall exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in their exercise, as a prudent man would exercise or use under the circumstances in the conduct of his own affairs.
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(c) No provision of this Indenture shall be construed to relieve the Trustee from liability for its own negligent action, its own negligent failure to act, or its own wilful misconduct, except that
(i) this Subsection shall not be construed to limit the effect of Subsection 6.01(a);
(ii) the Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer, unless it shall be proved that the Trustee was negligent in ascertaining the pertinent facts;
(iii) the Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the Holders of a majority in principal amount of the Outstanding Securities of any series, determined as provided in
Section 5.12, relating to the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee, under this Indenture with respect to the Securities of such series; and
(iv) no provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it.
(d) Whether or not therein expressly so provided, every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of this Section.
SECTION 6.02. Notice of Defaults
Within 90 days after receipt by the Trustee of written notice of the occurrence of any default hereunder with respect to the Securities of any series the Trustee shall transmit in the manner and to the extent provided in Section 7.03(d), notice of such default hereunder known to the Trustee, unless such default shall have been cured or waived; provided, however, that, except in the case of a default in the payment of the principal of (or premium, if any) or interest on any Security of such series or in the payment of any sinking fund installment with respect to Securities of such series, the Trustee shall be protected in withholding such notice if and so long as the board of directors, the executive committee or a trust committee of directors or Responsible Officers of the Trustee in good faith determine that the withholding of such notice is in the interest of the Holders of Securities of such series; and provided, further, that in the case of any default of the character specified in
Section 5.01(d) with respect to
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Securities of such series, no such notice to Holders shall be given until at least 30 days after the occurrence thereof. For the purpose of this Section, the term "DEFAULT," means any event which is, or after notice or lapse of time or both would become, an Event of Default with respect to Securities of such series.
SECTION 6.03. Certain Rights of Trustee
Subject to the provisions of Section 6.01:
(a) the Trustee may rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties;
(b) any request or direction of the Company mentioned herein shall be sufficiently evidenced by a Company Request or Company Order and any resolution of the Board of Directors may be sufficiently evidenced by a Board Resolution;
(c) whenever in the administration of this Indenture the Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Trustee (unless other evidence be herein specifically prescribed) may, in the absence of bad faith on its part, rely upon an Officers' Certificate;
(d) the Trustee may consult with counsel and the written advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon;
(e) the Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders pursuant to this Indenture, unless such Holders shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction;
(f) the Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document, but the Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled to examine the books, records and premises of the Company, personally or by agent or attorney;
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(g) the Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys and the Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder;
(h) the Trustee shall not be liable for any action taken, suffered or omitted by it in good faith and believed by it to be authorized or within the discretion or rights or powers conferred upon it by this Indenture; and
(i) The Trustee's immunities and protections from liability and its rights to compensation and indemnification in connection with the performance of its duties under this Indenture shall extend to the Trustee's officers, directors, agents and employees. Such immunities and protections and right to indemnification, together with the Trustee's right to compensation, shall survive the Trustee's resignation or removal and final payment of the Securities.
SECTION 6.04. Not Responsible for Recitals or Issuance of Securities
The recitals contained herein and in the Securities, except the Trustee's certificates of authentication, shall be taken as the statements of the Company, and the Trustee or any Authenticating Agent assumes no responsibility for their correctness. The Trustee makes no representations as to the validity or sufficiency of this Indenture or of the Securities. The Trustee or any Authenticating Agent shall not be accountable for the use or application by the Company of Securities or the proceeds thereof.
SECTION 6.05. May Hold Securities
The Trustee, any Authenticating Agent, any Paying Agent, any Security Registrar or any other agent of the Company, in its individual or any other capacity, may become the owner or pledgee of Securities and, subject to Sections 6.08 and 6.13, may otherwise deal with the Company with the same rights it would have if it were not Trustee, Authenticating Agent, Paying Agent, Security Registrar or such other agent.
SECTION 6.06. Money Held in Trust
Money held by the Trustee in trust hereunder need not be segregated from other funds except to the extent required by law. The Trustee shall be under no liability for interest on any money received by it hereunder except as otherwise agreed with the Company.
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SECTION 6.07. Compensation and Reimbursement
The Company agrees
(a) to pay to the Trustee from time to time reasonable compensation for all services rendered by it hereunder (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust);
(b) to reimburse the Trustee upon its request for all reasonable expenses, disbursements and advances incurred or made by the Trustee in accordance with any provision of this Indenture (including the reasonable compensation and the expenses and disbursements of its agents and counsel), except any such expenses, disbursements or advances as may be attributable to its negligence or bad faith;
(c) to indemnify the Trustee for, and to hold it harmless against, any loss, liability or expense incurred without negligence or bad faith on its part, arising out of or in connection with the acceptance or administration of the trust or trusts hereunder, including the costs and expenses of defending itself against any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder; and
(d) The Trustee shall have, and is hereby granted, a first priority lien on all monies, securities and collateral (other than monies held in trust by the Trustee for the purpose of paying the principal, premium, if any, and interest on any specific Securities) held by or on behalf of the Trustee pursuant to this Indenture for payment or reimbursement to the Trustee of its fees, expenses and any other monies payable to it hereunder.
SECTION 6.08. Disqualification; Conflicting Interest
(a) If the Trustee has or shall acquire any conflicting interest within the meaning of the Trust Indenture Act with respect to the Securities of any series, it shall, within 90 days after ascertaining that it has such conflicting interest, either eliminate such conflicting interest or resign with respect to the Securities of that series in the manner and with the effect hereinafter specified in this Article.
(b) In the event that the Trustee shall fail to comply with the provisions of Subsection 6.08(a) with respect to the Securities of any series, the Trustee shall, within 10 days after the expiration of such 90-day period, transmit by mail to all Holders of Securities of that series, as their names and addresses appear in the Security Register, notice of such failure.
SECTION 6.09. Corporate Trustee Required; Eligibility
There shall at all times be a Trustee hereunder which shall be a corporation organized and doing business under the laws of the United States of America, any State thereof or the District of Columbia, authorized under such laws to exercise corporate trust powers, having a combined capital and surplus of at least $50,000,000 subject to supervision or examination by Federal or State authority and having its
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Corporate Trust Office in any State in the United States of America or in the District of Columbia. If such corporation publishes or files reports of condition at least annually, pursuant to law or to the requirements of said supervising or examining authority, then for the purposes of this Section the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published or filed. If at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section, it shall resign immediately in the manner and with the effect hereinafter specified in this Article.
SECTION 6.10. Resignation and Removal; Appointment of Successor
(a) No resignation or removal of the Trustee and no appointment of a successor Trustee pursuant to this Article shall become effective until the acceptance of appointment by the successor Trustee in accordance with the applicable requirements of Section 6.11.
(b) The Trustee may resign at any time with respect to the Securities of one or more series by giving written notice thereof to the Company. If the instrument of acceptance by a successor Trustee required by Section 6.11 shall not have been delivered to the Trustee within 30 days after the giving of such notice of resignation, the resigning Trustee may petition any court of competent jurisdiction for the appointment of a successor Trustee with respect to the Securities of such series.
(c) The Trustee may be removed at any time with respect to the Securities of any series by Act of the Holders of a majority in principal amount of the Outstanding Securities of such series, delivered to the Trustee and to the Company.
(d) If at any time:
(i) the Trustee shall fail to comply with Section 6.08(a) after written request therefor by the Company or by any Holder who has been a bona fide Holder of a Security for at least six months, or
(ii) the Trustee shall cease to be eligible under Section 6.09 and shall fail to resign after written request therefor by the Company or by any such Holder, or
(iii) the Trustee shall become incapable of acting or shall be adjudged a bankrupt or insolvent or a receiver of the Trustee or of its property shall be appointed or any public officer shall take charge or control of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation,
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then, in any such case, (A) the Company, by a Board Resolution, may remove the Trustee with respect to the applicable series of Securities, or (B) subject to Section 5.14, any Holder who has been a bona fide Holder of a Security of any series for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Trustee with respect to such series of Securities and the appointment of a successor Trustee or Trustees.
(e) If the Trustee shall resign, be removed or become incapable of acting, or if a vacancy shall occur in the office of Trustee for any cause, with respect to the Securities of one or more series, the Company, by a Board Resolution, shall promptly appoint a successor Trustee or Trustees with respect to the Securities of that or those series (it being understood that any such successor Trustee may be appointed with respect to the Securities of one or more or all of such series and that at any time there shall be only one Trustee with respect to the Securities of any particular series) and shall comply with the applicable requirements of Section 6.11. If, within one year after such resignation, removal or incapability, or the occurrence of such vacancy, a successor Trustee with respect to the Securities of any series shall be appointed by Act of the Holders of a majority in principal amount of the Outstanding Securities of such series delivered to the Company and the retiring Trustee, the successor Trustee so appointed shall, forthwith upon its acceptance of such appointment in accordance with the applicable requirements of Section 6.11, become the successor Trustee with respect to the Securities of such series and to that extent supersede the successor Trustee appointed by the Company. If no successor Trustee with respect to the Securities of any series shall have been so appointed by the Company or the Holders and accepted appointment in the manner required by Section 6.11, any Holder who has been a bona fide holder of a Security of such series for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the appointment of a successor Trustee with respect to the Securities of such series.
(f) The Company shall give notice of each resignation and each removal of the Trustee with respect to the Securities of any series and each appointment of a successor Trustee with respect to the Securities of any series by mailing written notice of such event by first-class mail, postage prepaid, to all Holders of Securities of such series as their names and addresses appear in the Security Register. Each notice shall include the name of the successor Trustee with respect to the Securities of such series and the address of its Corporate Trust Office.
SECTION 6.11. Acceptance of Appointment by Successor
(a) In case of the appointment hereunder of a successor Trustee with respect to all Securities, every such successor Trustee so appointed shall execute, acknowledge and deliver to the Company and to the retiring Trustee an instrument accepting such appointment, and thereupon the resignation or removal of the retiring Trustee shall become effective and such successor Trustee, without any further act,
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deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee but, on the request of the Company or the successor Trustee, such retiring Trustee shall, upon payment of its charges, execute and deliver an instrument transferring to such successor Trustee all the rights, powers and trusts of the retiring Trustee and shall duly assign, transfer and deliver to such successor Trustee all property and money held by such retiring Trustee hereunder.
(b) In case of the appointment hereunder of a successor Trustee with respect to the Securities of one or more (but not all) series, the Company, the retiring Trustee and each successor Trustee with respect to the Securities of one or more series shall execute and deliver an indenture supplemental hereto wherein each successor Trustee shall accept such appointment and which (1) shall contain such provisions as shall be necessary or desirable to transfer and confirm to, and to vest in, each successor Trustee all the rights, powers, trusts and duties of the retiring Trustee with respect to the Securities of that or those series to which the appointment of such successor Trustee relates, (2) if the retiring Trustee is not retiring with respect to all Securities, shall contain such provisions as shall be deemed necessary or desirable to confirm that all the rights, powers, trusts and duties of the retiring Trustee with respect to the Securities of that or those series as to which the retiring Trustee is not retiring shall continue to be vested in the retiring Trustee, and
(3) shall add to or change any of the provisions of this Indenture as shall be necessary to provide for or facilitate the administration of the trusts hereunder by more than one Trustee, it being understood that nothing herein or in such supplemental indenture shall constitute such Trustees co-trustees of the same trust and that each such Trustee shall be trustee of a trust or trusts hereunder separate and apart from any trust or trusts hereunder administered by any other such Trustee; and upon the execution and delivery of such supplemental indenture the resignation or removal of the retiring Trustee shall become effective to the extent provided therein and each such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee with respect to the Securities of that or those series to which the appointment of such successor Trustee relates; but, on request of the Company or any successor Trustee, such retiring Trustee shall duly assign, transfer and deliver to such successor Trustee all property and money held by such retiring Trustee hereunder with respect to the Securities of that or those series to which the appointment of such successor Trustee relates.
(c) Upon request of any such successor Trustee, the Company shall execute any and all instruments for more fully and certainly vesting in and confirming to such successor Trustee all such rights, powers and trusts referred to in paragraph 6.11(a) or 6.11(b), as the case may be.
(d) No such successor Trustee shall accept its appointment unless at the time of such acceptance such successor Trustee shall be qualified and eligible under this Article.
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SECTION 6.12. Merger, Conversion, Consolidation or Succession to Business
Any corporation into which the Trustee may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Trustee shall be a party, or any corporation succeeding to all or substantially all the corporate trust business of the Trustee, shall be the successor of the Trustee hereunder, provided such corporation shall be otherwise qualified and eligible under this Article, without the execution or filing of any paper or any further act on the part of any of the parties hereto. In case any Securities shall have been authenticated, but not delivered, by the Trustee then in office, any successor by merger, conversion or consolidation to such authenticating Trustee may adopt such authentication and deliver the Securities so authenticated with the same effect as if such successor Trustee had itself authenticated such Securities.
SECTION 6.13. Preferential Collection of Claims
If and when the Trustee shall be or become a creditor of the Company (or any other obligor upon the Securities), the Trustee shall be subject to the provisions of the Trust Indenture Act regarding the collection of claims against the Company (or any other obligor).
SECTION 6.14. Appointment of Authenticating Agent
At any time the Trustee may appoint an Authenticating Agent or Agents with respect to one or more series of Securities which shall be authorized to act on behalf of the Trustee to authenticate Securities of such series issued upon original issue, exchange, registration of transfer or partial redemption thereof or pursuant to Section 3.06, and Securities so authenticated shall be entitled to the benefits of this Indenture and shall be valid and obligatory for all purposes as if authenticated by the Trustee hereunder. Wherever reference is made in this Indenture to the authentication and delivery of Securities by the Trustee or the Trustee's certificate of authentication, such reference shall be deemed to include authentication and delivery on behalf of the Trustee by an Authenticating Agent and a certificate of authentication executed on behalf of the Trustee by an Authenticating Agent. Each Authenticating Agent shall be acceptable to the Company and shall at all times be a corporation organized and doing business under the laws of the United States of America, any State thereof or the District of Columbia, authorized under such laws to act as Authenticating Agent, having a combined capital and surplus of not less than $50,000,000 and subject to supervision or examination by Federal or State authority. If such Authenticating Agent publishes reports of condition at least annually, pursuant to law or to the requirements of said supervising or examining authority, then for the purposes of this
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Section, the combined capital and surplus of such Authenticating Agent shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time an Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section, such Authenticating Agent shall resign immediately in the manner and with the effect specified in this Section.
Any corporation into which an Authenticating Agent may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which such Authenticating Agent shall be a party, or any corporation succeeding to the corporate agency or corporate trust business of an Authenticating Agent, shall continue to be an Authenticating Agent, provided such corporation shall be otherwise eligible under this Section, without the execution or filing of any paper or any further act on the part of the Trustee or such Authenticating Agent.
An Authenticating Agent may resign at any time by giving written notice thereof to the Trustee and to the Company. The Trustee may at any time terminate the agency of an Authenticating Agent by giving written notice thereof to such Authenticating Agent and to the Company. Upon receiving such a notice of resignation or upon such a termination, or in case at any time such Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section, the Trustee may appoint a successor Authenticating Agent which shall be acceptable to the Company and shall mail written notice of such appointment by first-class mail, postage prepaid, to all Holders of Securities of the series with respect to which such Authenticating Agent will serve, as their names and addresses appear in the Security Register. Any successor Authenticating Agent upon acceptance of its appointment hereunder shall become vested with all the rights, powers and duties of its predecessor hereunder, with like effect as if originally named as an Authenticating Agent. No successor Authenticating Agent shall be appointed unless eligible under the provisions of this Section.
The Company agrees to pay to each Authenticating Agent from time to time reasonable compensation for its services under this Section.
If an appointment with respect to one or more series is made pursuant to this Section, the Securities of such series may have endorsed thereon, in addition to the Trustee's certificate of authentication, an alternate certificate of authentication in the following form:
This is one of the Securities of the series designated therein referred to in the within-mentioned Indenture.
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Bank One Trust Company, National Association, as Trustee,
By

as Authenticating Agent

By
 Authorized Officer

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ARTICLE 7
HOLDERS' LIST AND REPORTS BY TRUSTEE AND COMPANY
SECTION 7.01. Company to Furnish Trustee Names and Addresses of Holders
The Company will furnish or cause to be furnished to the Trustee
(a) semi-annually a list, in such form as the Trustee may reasonably require, of the names and addresses of the Holders as of the date of such list, and
(b) at such other times as the Trustee may request in writing, within 30 days after the receipt by the Company of any such request, a list of similar form and content as of a date not more than 15 days prior to the time such list is furnished, excluding from any such list names and addresses received by the Trustee in its capacity as Security Registrar.
SECTION 7.02. Preservation of Information; Communications to Holders
(a) The Trustee shall preserve, in as current a form as is reasonably practicable, the names and addresses of Holders contained in the most recent list furnished to the Trustee as provided in Section 7.01 and the names and addresses of Holders received by the Trustee in its capacity as Security Registrar. The Trustee may destroy any list furnished to it as provided in
Section 7.01 upon receipt of a new list so furnished.
(b) If three or more Holders of Securities of any series (herein referred to as "APPLICANTS") apply in writing to the Trustee, and furnish to the Trustee reasonable proof that each such applicant has owned a Security of such series for a period of at least six months preceding the date of such application, and such application states that the applicants desire to communicate with other Holders of such series or with Holders of all other series of Securities with respect to their rights under this Indenture or under such Securities and is accompanied by a copy of the form of proxy or other communication which such applicants propose to transmit, then the Trustee shall, within five business days after the receipt of such application, at its election, either
(i) afford such applicants access to the information preserved at the time by the Trustee in accordance with Section 7.02(a), or
(ii) inform such applicants as to the approximate number of Holders of such series of Securities or Holders of all other series of Securities whose names and addresses appear in the information preserved at the time by the Trustee in accordance with Section 7.02(a), and as to the
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approximate cost of mailing to the Holders of such series of Securities or the Holders of all series of Securities the form of proxy or other communication, if any, specified in such application.
If the Trustee shall elect not to afford such applicants access to such information, the Trustee shall, upon the written request of such applicants, mail to each Holder of such series of Securities or of all series of Securities or of all series of Securities whose name and address appear in the information preserved at the time by the Trustee in accordance with Section 7.02(a) a copy of the form of proxy or other communication which is specified in such request, with reasonable promptness after a tender to the Trustee of the material to be mailed and of payment, or provision for the payment, of the reasonable expenses of mailing, unless within five days after such tender the Trustee shall mail to such applicants and file with the Commission, together with a copy of the material to be mailed, a written statement to the effect that, in the opinion of the Trustee, such mailing would be contrary to the best interest of the relevant Holders or would be in violation of applicable law. Such written statement shall specify the basis of such opinion. If the Commission, after opportunity for a hearing upon the objections specified in the written statement so filed, shall enter an order refusing to sustain any of such objections or if, after the entry of an order sustaining one or more of such objections, the Commission shall find, after notice and opportunity for hearing, that all the objections so sustained have been met and shall enter an order so declaring, the Trustee shall mail copies of such material to all such Holders with reasonable promptness after the entry of such order and the renewal of such tender; otherwise the Trustee shall be relieved of any obligation or duty to such applicants respecting their application.
(c) Every Holder of Securities, by receiving and holding the same, agrees with the Company and the Trustee that neither the Company nor the Trustee nor any agent of either of them shall be held accountable by reason of the disclosure of any such information as to the names and addresses of the Holders in accordance with Section 7.02(b), regardless of the source from which such information was derived, and that the Trustee shall not be held accountable by reason of mailing any material pursuant to a request made under Section 7.02(b).
SECTION 7.03. Reports by Trustee
(a) If required under Section 313(a) of the Trust Indenture Act, within 60 days after May 15 of each year commencing with the year 2001, so long as any of the Securities are outstanding, the Trustee shall transmit by mail to all Holders, as provided in subsection 7.03(c), a brief report dated as of such May 15 with respect to any of the following events which may have occurred within the previous 12 months (but if no such event has occurred within such period no report need by transmitted):
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(i) any change to its eligibility under Section 6.09 or the creation of or any material change to its qualifications under Section 6.08;
(ii) the character and amount of any advances (and if the Trustee elects so to state, the circumstances surrounding the making thereof) made by the Trustee (as such) which remain unpaid on the date of such report, and for the reimbursement of which it claims or may claim a lien or charge, prior to that of the Securities, on any property or funds held or collected by it as Trustee, except that the Trustee shall not be required (but may elect) to report such advances if such advances so remaining unpaid aggregate not more than one-half of one percent of the principal amount of the Securities Outstanding of such series on the date of such report;
(iii) any change to the amount, interest rate and maturity date of all other indebtedness owing by the Company (or by any other obligor on the Securities) to the Trustee in its individual capacity, on the date of such report, with a brief description of any property held as collateral security therefor, except an indebtedness based upon a creditor relationship arising in any manner described in Section 6.13;
(iv) any change to the property and funds, if any, physically in the possession of the Trustee as such on the date of such report;
(v) any additional issue of Securities which the Trustee has not previously reported; and
(vi) any action taken by the Trustee in the performance of its duties hereunder which it has not previously reported and which in its opinion materially affects the Securities, except action in respect of a default, notice of which has been or is to be withheld by the Trustee in accordance with Section 6.02.
(b) The Trustee shall transmit by mail to all Holders, as provided in subsection 7.03(c), a brief report with respect to the character and amount of any advances (and if the Trustee elects so to state, the circumstances surrounding the making thereof) made by the Trustee (as such) since the date of the last report transmitted pursuant to Subsection 7.03(a) (or if no such report has yet been so transmitted, since the date of execution of this instrument) for the reimbursement of which it claims or may claim a lien or charge, prior to that of the Securities, on property or funds held or collected by it as Trustee and which it has not previously reported pursuant to this Subsection, except that the Trustee shall not be required (but may elect) to report such advances if such advances remaining unpaid at any time aggregate 10% or less of the principal amount of the Securities Outstanding of such series at such time, such report to be transmitted within 90 days after such time.
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(c) Reports pursuant to this Section shall be transmitted by mail:
(i) to all Holders of Securities, as the names and addresses of such Holders appear in the Security Register as of a date not more than fifteen days prior to the mailing thereof;
(ii) to such holders of Securities of any series as have, within two years preceding such transmission, filed their names and addresses with the Trustee for such series for that purpose; and
(iii) except in the case of reports pursuant to subsection 7.03(b), to all Holders of Securities whose names and addresses have been received by the Trustee pursuant to Section 7.01.
(d) A copy of each such report shall, at the time of such transmission to Holders, be filed by the Trustee with each stock exchange upon which any Securities are listed, with the Commission and with the Company. The Company will notify the Trustee when any Securities are listed on any stock exchange.
SECTION 7.04. Reports by Company
The Company shall:
(a) file with the Trustee, within 15 days after the Company is required to file the same with the Commission, copies of the annual reports and of the information, documents and other reports (or copies of such portions of any of the foregoing as the Commission may from time to time by rules and regulations prescribe) which the Company may be required to file with the Commission pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934; or, if the Company is not required to file information, documents or reports pursuant to either of said Sections, then it shall file with the Trustee and the Commission, in accordance with rules and regulations prescribed from time to time by the Commission, such of the supplementary and periodic information, documents and reports which may be required pursuant to Section 13 of the Securities Exchange Act of 1934 in respect of a security listed and registered on a national securities exchange as may be prescribed from time to time in such rules and regulations;
(b) file with the Trustee and the Commission, in accordance with rules and regulations prescribed from time to time by the Commission, such additional information, documents and reports with respect to compliance by the Company with the conditions and covenants of this Indenture as may be required from time to time by such rules and regulations; and
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(c) transmit by mail to all Holders, as their names and addresses appear in the Security Register, within 30 days after the filing thereof with the Trustee, to such Holders of Securities as have, within the two years preceding such transmission, filed their names and addresses with the Trustee for that purpose and Holders of securities whose names and addresses have been furnished to or received by the Trustee pursuant to Section 7.02(a) such summaries of any information, documents and reports required to be filed by the Company pursuant to paragraphs 7.04(a) and 7.04(b) as may be required by rules and regulations prescribed from time to time by the Commission.
ARTICLE 8
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
SECTION 8.01. Company May Consolidate, Etc., Only on Certain Terms
Subject to the provisions of Section 8.03, nothing contained in this Indenture or in any of the Securities shall prevent any consolidation or merger of the Company with or into any other corporation or corporations, or successive consolidations or mergers in which the Company or its successor or successors shall be a party or parties or shall prevent any sale or conveyance of all or substantially all of the property of the Company to any other corporation authorized to acquire and operate the same; provided, that in any such case, (i) either the Company shall be the continuing corporation, or the successor corporation (if other than the Company) shall be a corporation organized and existing under the laws of the United States of America or a State thereof and such corporation shall expressly assume the due and punctual payment of the principal of, and premium, if any, and interest on all the Securities, according 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, and (ii) the Company or such successor corporation, as the case may be, shall not, immediately after such merger or consolidation, or such sale or conveyance, be in default in the performance of any such covenant or condition and shall not immediately thereafter have outstanding any secured Debt (as defined in Section 10.04) not expressly permitted by the provisions of Section 10.04 unless the provisions of Section 8.03 shall previously have been complied with.
SECTION 8.02. Successor Corporation to be Substituted for Company
In case of any such consolidation, merger, sale or conveyance (other than a conveyance by way of lease) and upon any such assumption by the successor corporation, such successor corporation shall succeed to and be substituted for the
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Company, with the same effect as if it had been named herein as the party of the first part, and the Company thereupon shall be relieved of any further liability or obligation hereunder or upon the Securities and may thereupon or at any time thereafter be dissolved, wound up or liquidated. Such successor corporation thereupon may cause to be signed, and may issue either in its own name or in the name of Masco Corporation, any or all of the Securities issuable hereunder which theretofore shall not have been signed by the Company and delivered to the Trustee or the Authenticating Agent; and upon the order of such successor corporation (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 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 the case of any such consolidation, merger, sale or conveyance, such change in phraseology and form (but not in substance) may be made in the Securities thereafter to be issued as may be appropriate.
SECTION 8.03. Securities to be Secured in Certain Events
If, upon any such consolidation or merger of the Company with or into any other corporation, or upon any sale or conveyance of the property of the Company as an entirety or substantially as an entirety to any other corporation, any Principal Property or any shares of stock or indebtedness of any Consolidated Subsidiary owning any Principal Property owned immediately prior thereto would thereupon become subject to any mortgage (as defined in Section 10.04), unless the Company could create such mortgage pursuant to Section 10.04 without equally and ratably securing the Securities, the Company, prior to or simultaneously with such consolidation, merger, sale or conveyance, will secure the Securities outstanding hereunder, equally and ratably with any other obligation of the Company or any such Subsidiary then entitled thereto, prior to the Debt (as defined in Section 10.04) secured by such mortgage.
SECTION 8.04. Evidence to be Furnished to the Trustee
The Trustee, subject to the provisions of Sections 6.01 and 6.03, may receive and rely upon an Officers' Certificate and an Opinion of Counsel as conclusive evidence that any consolidation, merger, sale or conveyance, and any such assumption complies with the provisions of this Article 8.
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ARTICLE 9
SUPPLEMENTAL INDENTURES
SECTION 9.01. Supplemental Indentures without Consent of Holders
Without the consent of any Holders, the Company, when authorized by a Board Resolution, and the Trustee, at any time and from time to time, may enter into one or more indentures supplemental hereto, in form satisfactory to the Trustee, for any of the following purposes:
(a) to evidence the succession of another corporation to the Company and the assumption by any such successor of the covenants of the Company herein and in the Securities; or
(b) to add to the covenants of the Company for the benefit of the Holders of all or any series of Securities (and if such covenants are to be for the benefit of less than all series of Securities, stating that such covenants are expressly being included solely for the benefit of such series) or to surrender any right or power herein conferred upon the Company; or
(c) to add any additional Events of Default for the benefit of the Holders of all or any series of Securities (and if such additional Events of Default are to be for the benefit of less than all series of Securities, stating that such additional Events of Default are expressly being included solely for the benefit of the relevant series) or to surrender any right or power herein conferred upon the Company; or
(d) to add to or change any of the provisions of this Indenture to such extent as shall be necessary to permit or facilitate the issuance of Securities in bearer form, registrable or not registrable as to principal, and with or without interest coupons, or permit or facilitate the issuance of Securities in uncertificated form; or
(e) to add to, change or eliminate any of the provisions of this Indenture in respect of one or more series of Securities, provided that any such addition, change or elimination (A) shall neither (i) apply to Securities of any series created prior to the execution of such supplemental indenture and entitled to the benefit of such provision nor (ii) modify the rights of the Holder of such Securities with respect to such provision or (B) shall become effective only when there is no such Security Outstanding; or
(f) to secure the Securities pursuant to the requirements of Sections 8.03 or otherwise; or
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(g) to establish the form or terms of Securities of any series as permitted by Sections 2.01 and 3.01; or
(h) to evidence and provide for the acceptance of appointment hereunder by a successor Trustee with respect to the Securities of one or more series and to add to or change any of the provisions of this Indenture as shall be necessary to provide for and facilitate the administration of the trusts hereunder by more than one Trustee, pursuant to the requirements of Section 6.11(b); or
(i) to cure any ambiguity, to correct or supplement any provision herein which may be inconsistent with any other provision herein, or to make any other provisions with respect to matters or questions arising under this Indenture; provided such action shall not adversely affect the interests of the Holders of Securities of any series in any material respect.
SECTION 9.02. Supplemental Indentures with Consent of Holders
With the consent of the Holders of not less than a majority in principal amount of the Outstanding Securities of each series affected by such supplemental indenture voting as one class, by Act of said Holders delivered to the Company and the Trustee, the Company, when authorized by a Board Resolution, and the Trustee may enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Indenture or of modifying in any manner the rights of the Holders of Securities of such series under the Indenture; provided, however, that no such supplemental indenture shall, without the consent of the Holder of each Outstanding Security affected thereby,
(a) change the Stated Maturity of the principal of, or any installment of principal of or interest on, any Security, or reduce the principal amount thereof or the rate of interest thereon or any premium payable upon the redemption thereof, or reduce the amount of the principal of an Original Issue Discount Security that would be due and payable upon a declaration of acceleration of the Maturity thereof pursuant to Section 5.02, or change any Place of Payment where, or the coin or currency in which, any Security or any premium or the interest thereon is payable, or impair the right to institute suit for the enforcement of any such payment on or after the Stated Maturity thereof (or, in the case of redemption, on or after the Redemption Date), or
(b) reduce the percentage in principal amount of the Outstanding Securities of any series, the consent of whose Holders is required for any such supplemental indenture, or the consent of whose Holders is required for any waiver (of compliance with certain provisions of this Indenture or certain defaults hereunder and their consequences) provided for in this Indenture, or
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(c) modify any of the provisions of this Section or Section 5.13, except to increase any such percentage or to provide that certain other provisions of this Indenture cannot be modified or waived without the consent of the Holder of each Outstanding Security affected thereby; provided, however, that this clause shall not be deemed to require the consent of any Holder with respect to changes in the references to "the Trustee" and concomitant changes in this Section, or the deletion of this proviso, in accordance with the requirements of Sections 6.11(b) and 9.01(h).
A supplemental indenture which changes or eliminates any covenant or other provision of this Indenture which has expressly been included solely for the benefit of one or more particular series of Securities, or which modifies the rights of the Holders of Securities of such series with respect to such covenant or other provision, shall be deemed not to affect the rights under this Indenture of the Holders of Securities of any other series.
It shall not be necessary for any Act of Holders under this Section to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such Act shall approve the substance thereof.
SECTION 9.03. Execution of Supplemental Indentures
In executing, or accepting the additional trusts created by, any supplemental indenture permitted by this Article or the modifications thereby of the trusts created by this Indenture, the Trustee shall be entitled to receive, and (subject to Section 6.01) shall be fully protected in relying upon, an Opinion of Counsel stating that the execution of such supplemental indenture is authorized or permitted by this Indenture. The Trustee may, but shall not be obligated to, enter into any such supplemental indenture which affects the Trustee's own rights, duties or immunities under this Indenture or otherwise.
SECTION 9.04. Effect of Supplemental Indentures
Upon the execution of any supplemental indenture under this Article, this Indenture shall be modified in accordance therewith, and such supplemental indenture shall form a part of this Indenture for all purposes; and every Holder of Securities theretofore or thereafter authenticated and delivered hereunder shall be bound thereby.
SECTION 9.05. Conformity with Trust Indenture Act
Every supplemental indenture executed pursuant to this Article shall conform to the requirements of the Trust Indenture Act as then in effect.
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SECTION 9.06. Reference in Securities to Supplemental Indentures
Securities of any series authenticated and delivered after the execution of any supplemental indenture pursuant to this Article may, and shall if required by the Trustee, bear a notation in form approved by the Trustee as to any matter provided for in such supplemental indenture. If the Company shall so determine, new Securities of any series so modified as to conform, in the opinion of the Trustee and the Company, to any such supplemental indenture may be prepared and executed by the Company and authenticated and delivered by the Trustee in exchange for Outstanding Securities of such series.
ARTICLE 10
COVENANTS
SECTION 10.01. Payment of Principal, Premium and Interest
The Company covenants and agrees for the benefit of each series of Securities that it will duly and punctually pay or cause to be paid the principal of (and premium, if any) and any interest on each of the Securities of that series in accordance with the terms of the Securities and this Indenture.
SECTION 10.02. Maintenance of Office or Agency
The Company will maintain in each Place of Payment for any series of Securities an office or agency where Securities of that series may be presented or surrendered for payment, where Securities of that series may be surrendered for registration of transfer or exchange and where notices and demands to or upon the Company in respect of the Securities of that series and this Indenture may be served. The Company will give prompt written notice to the Trustee and the Holders of the location, and any change in the location, of such office or agency. If at any time the Company shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations and surrenders of Securities of that series and notices and demands may be made or served at the Corporate Trust Office of the Trustee, and the Company hereby appoints the Trustee as its agent to receive all such presentations, surrenders, notices and demands.
The Company may also from time to time designate one or more other offices or agencies where the Securities of one or more series may be presented or surrendered for any or all such purposes and may from time to time rescind such designation; provided, however, that no such designation or rescission shall in any manner relieve the Company of its obligation to maintain an office or agency in each Place of Payment for Securities of any series for such purposes. The Company will give prompt written notice to the Trustee and the Holders of any
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such designation or rescission and of any change in the location of any such other office or agency.
SECTION 10.03. Money for Securities Payments to be Held in Trust
(a) If the Company shall appoint a paying agent other than the Trustee with respect to the Securities of any series, it will cause such paying agent to execute and deliver to the Trustee an instrument in which such agent shall agree with the Trustee, subject to the provisions of this Section 10.03:
(i) that it will hold all sums held by it as such agent for the payment of the principal of and premium, if any, or interest, if any, on the Securities of such series (whether such sums have been paid to it by the Company or by any other obligor on the Securities of such series) in trust for the benefit of the holders of the Securities of such series;
(ii) that it will give the Trustee notice of any failure by the Company (or by any other obligor on the Securities of such series) to make any payment of the principal of and premium, if any, or interest, if any, on the Securities of such series when the same shall be due and payable; and
(iii) at any time during the continuance of any such default, upon the written request of the Trustee, forthwith pay to the Trustee all sums so held in trust by such Paying Agent.
(b) If the Company shall at any time act as its own Paying Agent it will, on or before each due date of the principal of (and premium, if any) or interest, if any, on the Securities of any series, set aside, segregate and hold in trust for the benefit of the Persons entitled thereto a sum sufficient to pay such principal (and premium, if any) or interest so becoming due and will notify the Trustee of any failure to take such action and of any failure by the Company (or by any other obligor under the Securities of such series) to make any payment of the principal of and premium, if any, or interest, if any, on the Securities of such series when the same shall become due and payable.
The Company may at any time, for the purpose of obtaining the satisfaction and discharge of this Indenture or for any other purpose, pay, or by Company Order direct any Paying Agent to pay, to the Trustee all sums held in trust by the Company or such Paying Agent, such sums to be held by the Trustee upon the same trusts as those upon which such sums were held by the Company or such Paying Agent; and, upon such payment by any Paying Agent to the Trustee, such Paying Agent shall be released from all further liability with respect to such money.
Any money deposited with the Trustee (except pursuant to Section 4.02 or 10.06) or any Paying Agent, or then held by the Company, in trust for the payment of
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the principal of (and premium, if any) or interest on any Security of any series and remaining unclaimed for two years after such principal (and premium, if any) or interest has become due and payable shall be paid to the Company on Company Request, or (if then held by the Company) shall be discharged from such trust; and the Holder of such Security shall thereafter, as an unsecured general creditor, look only to the Company for payment thereof, and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of the Company as trustee thereof, shall thereupon cease; provided, however, that the Trustee or such Paying Agent, before being required to make any such repayment, may at the expense of the Company cause to be published once, in a newspaper published in the English language, customarily published on each Business Day and of general circulation in the Borough of Manhattan, The City of New York, notice that such money remains unclaimed and that, after a date specified therein, which shall not be less than 30 days from the date of such publication, any unclaimed balance of such money then remaining will be repaid to the Company.
SECTION 10.04. Limitations on Liens
(a) The Company will not, nor will it permit any Consolidated Subsidiary to, issue, assume or guarantee any debt for money borrowed or any Funded Debt (hereinafter in this Article 10 referred to as "DEBT"), secured by a mortgage, security interest, pledge, lien or other encumbrance (mortgages, security interests, pledges, liens and other encumbrances being hereinafter called a "MORTGAGE" or "MORTGAGES") upon any Principal Property or upon any shares of stock or indebtedness of any Consolidated Subsidiary which owns or leases a Principal Property (whether such Principal Property, shares of stock or indebtedness are now owned or hereafter acquired) without in any such case effectively providing concurrently with the issuance, assumption or guaranty of any such Debt that the Securities (together with, if the Company shall so determine, any other indebtedness of or guaranteed by the Company or such Consolidated Subsidiary ranking equally with the Securities and then existing or thereafter created) shall be secured equally and ratably with such Debt; provided, however, that the foregoing restrictions shall not apply to Debt secured by
(i) mortgages on property, shares of stock or indebtedness of any corporation existing at the time such corporation becomes a Consolidated Subsidiary;
(ii) mortgages on property existing at the time of acquisition of such property by the Company or a Consolidated Subsidiary, or mortgages to secure the payment of all or any part of the purchase price of such property upon the acquisition of such property by the Company or a Consolidated Subsidiary or to secure any Debt incurred by the Company or Consolidated Subsidiary prior to, at the time of, or within 120 days after the
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later of the acquisition, the completion of construction (including any improvements on an existing property) or the commencement of commercial operation of such property, which Debt is incurred for the purpose of financing all or any part of the purchase price thereof or construction or improvements thereon; provided, however, that in the case of any such acquisition, construction or improvement, the mortgage shall not apply to any property theretofore owned by the Company or a Consolidated Subsidiary, other than any property on which the property so constructed or the improvement is located or to which the property so constructed or the improvement is appurtenant;
(iii) mortgages securing Debt of a Consolidated Subsidiary owing to the Company or to another Consolidated Subsidiary;
(iv) mortgages on property of a corporation existing at the time such corporation is merged or consolidated with the Company or a Consolidated Subsidiary or at the time of a sale, lease or other disposition of the properties of a corporation or firm as an entirety or substantially as an entirety to the Company or a Consolidated Subsidiary; provided, however, that no such mortgage shall extend to any other Principal Property of the Company or any Consolidated Subsidiary or to any shares of capital stock or any indebtedness of any Consolidated Subsidiary which owns or leases a Principal Property;
(v) mortgages on property of the Company or a Consolidated Subsidiary in favor of the United States of America or any State thereof, or any department, agency or instrumentality or political subdivision of the United States of America or any State thereof, or in favor of any other country, or any political subdivision thereof, to secure partial, progress, advance or other payments pursuant to any contract or statute (including Debt of the pollution control or industrial revenue bond type) or to secure any indebtedness incurred for the purpose of financing all or any part of the purchase price or the cost of construction of the property subject to such mortgages; or
(vi) any extension, renewal or replacement (or successive extensions, renewals or replacements) in whole or in part of mortgages existing at the date of this Indenture, or any mortgage referred to in the foregoing clauses (i) through (v), inclusive, provided, however, that the principal amount of Debt secured thereby shall not exceed the principal amount of Debt so secured at the time of such extension, renewal or replacement, and that such extension, renewal or replacement shall be limited to all or a part of the property which secured the mortgage so extended, renewed or replaced (plus improvements on such property).
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(b) Notwithstanding the foregoing provisions of this Section 10.04, the Company may, and may permit any Consolidated Subsidiary to, issue, assume or guarantee Debt secured by a mortgage not excepted by clauses (i) through (vi) of paragraph (a) above without equally and ratably securing the Securities, provided, however, that the aggregate principal amount of all such Debt then outstanding, plus the aggregate principal amount of the Debt then being issued, assumed, or guaranteed, and the aggregate amount of the Attributable Debt in respect of sale and lease-back arrangements, shall not exceed 5% of Consolidated Net Tangible Assets, determined as of a date not more than 90 days prior thereto.
SECTION 10.05. Limitation on Sale and Leaseback
The Company will not, nor will it permit any Consolidated Subsidiary to, enter into any arrangement with any person providing for the leasing by the Company or any Consolidated Subsidiary of any Principal Property (whether such Principal Property is now owned or hereafter acquired) (except for leases for a term of not more than three years and except for leases between the Company and a Consolidated Subsidiary or between Consolidated Subsidiaries), which property has been or is to be sold or transferred by the Company or such Consolidated Subsidiary to such person, unless (a) the Company or such Subsidiary would be entitled, pursuant to the provisions of Section 10.04, to issue, assume or guarantee Debt secured by a mortgage upon such property at least equal in amount to the Attributable Debt in respect of such arrangement without equally and ratably securing the Securities or (b) the Company or a Consolidated Subsidiary, within 120 days of the effective date of any such arrangement, applies an amount equal to the greater of the net proceeds of the sale of the Principal Property leased pursuant to such arrangement or the fair market value of the Principal Property so leased at the time of entering into such arrangement (as determined by the Board of Directors of the Company) to the retirement (other than any mandatory retirement or by way of payment at maturity) of Funded Debt of the Company or any Consolidated Subsidiary (other than Funded Debt owned by the Company or any Consolidated Subsidiary and other than Funded Debt subordinated in the payment of principal or interest to the Securities and except that no Security shall be retired if such retirement of Securities pursuant to this provision would be prohibited by the resolutions or supplemental indentures referred to in Section 3.01), provided, however, that in lieu of applying all or any part of such net proceeds or fair market value to such retirement, the Company may at its option (i) deliver to the Trustee Securities theretofore purchased or otherwise acquired by the Company, or (ii) receive credit for Securities theretofore redeemed pursuant to the resolutions or supplemental indentures referred to in Section 3.01 hereof, which Securities have not theretofore been made the basis for the reduction of a sinking fund payment pursuant to Article 12 or applied in lieu of retiring Funded Debt pursuant hereto. If the Company shall so deliver Securities to the Trustee (or receive credit for Securities so delivered), the amount of cash which the Company shall be required
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to apply to the retirement of Funded Debt pursuant to this Section 10.05 shall be reduced by an amount equal to the aggregate principal amount of such Securities.
SECTION 10.06. Defeasance of Certain Obligations
The Company may omit to comply, on or after the date the conditions set forth in subsections (a) to (f) of this Section 10.06 are satisfied, with any term, provision or condition set forth in any negative or restrictive covenant of the Company applicable to the Securities of such series (hereafter called "COVENANT DEFEASANCE") that is specified pursuant to Section 3.01(j), if
(a) With reference to this Section 10.06, the Company has irrevocably deposited or caused to be irrevocably deposited with the Trustee as trust funds for the purpose of making the following payments, specifically pledged as security for, and dedicated solely to, the benefit of the Holders of the Securities of that series, (i) money in an amount, or (ii) U.S. Government Obligations which through the payment of interest and principal in respect thereof in accordance with their terms will provide not later than one day before the due date of any payment referred to in clause (A) or (B) of this subparagraph 10.06(a) money in an amount, or (iii) a combination thereof, sufficient, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, to pay and discharge, and which shall be applied by the Trustee for such purposes, (A) the principal of and any premium or interest on the Outstanding Securities of that series on the Stated Maturity of such principal or installment of principal or interest or the Redemption Date, as the case may be, and (B) any mandatory sinking fund payments or analogous payments applicable to Securities of such series on the day on which such payments are due and payable, each in accordance with the terms of this Indenture and of such Securities;
(b) Such Covenant Defeasance shall not cause the Trustee with respect to the Securities of that series to have a conflicting interest as defined in
Section 6.08 and for purposes of the Trust Indenture Act with respect to the Securities of any series;
(c) Such Covenant Defeasance will not result in a breach or violation of, or constitute a default under, this Indenture or any other agreement or instrument to which the Company is a party or by which it is bound;
(d) Such Defeasance would not cause any Outstanding Security of such series then listed on any nationally recognized securities exchange to be then delisted as a result thereof;
(e) No Event of Default or event which with notice or lapse of time would become an Event of Default with respect to Securities of that series shall
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have occurred and be continuing on the date of such deposit or during the period ending on the 91st day after such date;
(f) The Company has delivered to the Trustee an Opinion of Counsel stating that (i) Holders of the Securities of such series will not recognize income, gain or loss for Federal income tax purposes as a result of such deposit and Covenant Defeasance and will be subject to Federal income tax on the same amount and in the same manner and at the same times, as would have been the case if such deposit and Covenant Defeasance had not occurred; (ii) such Covenant Defeasance would not cause any outstanding Security of such series then listed on any nationally recognized securities exchange to be delisted as a result thereof; and (iii) such deposit would not result in the trust arising from such deposit constituting an investment company within the meaning of the Investment Company Act of 1940, as amended from time to time;
(g) The Company has delivered to the Trustee an Opinion of Counsel to the effect that after the 91st day following the deposit, the trust funds will not be subject to the effect of any applicable bankruptcy, insolvency, reorganization or similar laws affecting creditors' rights generally, except that if a court were to rule under any such law in any case or proceeding that the trust funds remained property of the Company, no opinion is given as to the effect of such laws on the trust funds except the following: (A) assuming such trust funds remained in the Trustee's possession prior to such court ruling to the extent not paid to Holders of Securities, the Trustee will hold, for the benefit of such Holders, a valid and perfected security interest in such trust funds that is not avoidable in bankruptcy or otherwise, and (B) such Holders will be entitled to receive adequate protection of their interests in such trust funds if such trust funds are used; and
(h) The Company has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent herein provided for relating to the defeasance contemplated by this Section have been complied with.
SECTION 10.07. Certificate of Officers of the Company
On or before April 1 of each year beginning with the year 2001, so long as Securities of any series are Outstanding hereunder, the Company will file with the Trustee an Officers' Certificate, one of the signers of which shall be the principal financial officer, the principal accounting officer or the principal executive officer of the Company, stating whether or not to the best knowledge of the signer thereof the Company is in default in the performance and observance of any of the terms, provisions and conditions of this Indenture, and, if the Company shall be in default, specifying all such defaults and the nature and status thereof of which they may have knowledge. For purposes of this paragraph, any such default shall be determined
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without regard to any period of grace or requirement of notice provided in this Indenture.
ARTICLE 11
REDEMPTION OF SECURITIES
SECTION 11.01. Applicability of Article
Any Securities that are redeemable before their Stated Maturity shall be redeemable in accordance with their terms and (except as otherwise specified as contemplated by Section 3.01 for any Securities) in accordance with this Article.
SECTION 11.02. Election to Redeem; Notice to Trustee
The election of the Company to redeem any Securities shall be evidenced by a Board Resolution. In case of any redemption at the election of the Company of less than all the Securities of any series, the Company shall, at least 60 days prior to the Redemption Date fixed by the Company (unless a shorter notice shall be satisfactory to the Trustee), notify the Trustee of such Redemption Date, of the tenor, if applicable, of the Securities to be redeemed, and of the principal amount of Securities to be redeemed. In the case of any redemption of Securities prior to the expiration of any restriction on such redemption provided in the terms of such Securities or elsewhere in this Indenture, the Company shall furnish the Trustee with an Officers' Certificate evidencing compliance with such restriction.
SECTION 11.03. Selection by Trustee of Securities to be Redeemed
If less than all the Securities of any series are to be redeemed (unless all of the Securities of a specified tenor are to be redeemed), the particular Securities to be redeemed shall be selected not more than 60 days prior to the Redemption Date by the Trustee, from the Outstanding Securities of such series not previously called for redemption, by such method as the Trustee shall deem fair and appropriate and which may provide for the selection for redemption of portions (equal to the minimum authorized denomination for Securities of that series or any multiple thereof) of the principal amount of Securities of such series of a denomination larger than the minimum authorized denomination for Securities of that series. If less than all of the Securities of such series and of a specified tenor are to be redeemed, the particular Securities to be redeemed shall be selected not more than 45 days prior to the Redemption Date by the Trustee, from the Outstanding Securities of such series and specified tenor not previously called for redemption in accordance with the preceding sentence.
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The Trustee shall promptly notify the Company in writing of the Securities selected for redemption and, in the case of any Securities selected for partial redemption, the principal amount thereof to be redeemed.
For all purposes of this Indenture, unless the context otherwise requires, all provisions relating to the redemption of Securities shall relate, in the case of any Securities redeemed or to be redeemed only in part, to the portion of the principal amount of such Securities which has been or is to be redeemed.
SECTION 11.04. Notice of Redemption
Notice of redemption shall be given by first-class mail, postage prepaid, mailed not less than 30 nor more than 60 days prior to the Redemption Date to each Holder of Securities to be redeemed, at this address appearing in the Security Register.
All notices of redemption shall state:
(a) the Redemption Date,
(b) the Redemption Price,
(c) if less than all the Outstanding Securities of any series are to be redeemed, the identification (and, in the case of partial redemption, the principal amounts) of the particular Securities to be redeemed,
(d) that on the Redemption Date the Redemption Price will become due and payable upon each such Security to be redeemed and, if applicable, that interest thereon will cease to accrue on and after said date,
(e) the place or places where such Securities are to be surrendered for payment of the Redemption Price, and
(f) that the redemption is for a sinking fund, if such is the case.
Notice of redemption of Securities to be redeemed at the election of the Company shall be given by the Company or, at the Company's request, by the Trustee in the name and at the expense of the Company and shall be irrevocable. The notice of redemption 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 notice to the Holder of any Security shall not affect the validity of the proceeding for the redemption of any other Security.
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SECTION 11.05. Deposit of Redemption Price
Prior to 10:00 a.m., New York City time, on any Redemption Date, the Company shall deposit with the Trustee or with a Paying Agent (or, if the Company is acting as its own Paying Agent, segregate and hold in trust as provided in Section 10.03) an amount of money sufficient to pay the Redemption Price of, and accrued interest on, all the Securities which are to be redeemed on that date.
SECTION 11.06. Securities Payable on Redemption Date
Notice of redemption having been given as aforesaid, the Securities so to be redeemed shall, on the Redemption Date, become due and payable at the Redemption Price therein specified, and from and after such date (unless the Company shall default in the payment of the Redemption Price and accrued interest), such Securities shall cease to bear interest. Upon surrender of any such Security for redemption in accordance with said notice, such Security shall be paid by the Company at the Redemption Price, together with accrued interest to the Redemption Date; provided, however, that installments of interest whose Stated Maturity is on or prior to the Redemption Date shall be payable to the Holders of such Securities, or one or more Predecessor Securities, registered as such at the close of business on the relevant Record Dates according to their terms and the provisions of Section 3.07.
If any Security called for redemption shall not be so paid upon surrender thereof for redemption, the principal (and premium, if any) shall, until paid, bear interest from the Redemption Date at the rate prescribed therefor in the Security.
SECTION 11.07. Securities Redeemed in Part
Any Security which is to be redeemed only in part shall be surrendered at a Place of Payment therefor (with, if the Company or the Trustee so requires, due endorsement by, or a written instrument of transfer in form satisfactory to the Company and the Trustee duly executed by, the Holder thereof or his attorney duly authorized in writing), and the Company shall execute, and the Trustee shall authenticate and deliver to the Holder of such Security without service charge, a new Security or Securities of the same series and of like tenor, of any authorized denomination as requested by such Holder, in aggregate principal amount equal to and in exchange for the unredeemed portion of the principal of the Security so surrendered. If a Security in permanent global form is so surrendered, the Company shall execute, and the Trustee shall authenticate and deliver to the Depositary for such Security in permanent global form, without service charge to the Holder, a new Security in permanent global form in a denomination equal to and in exchange for the unredeemed portion of the principal of the Security in permanent global form so surrendered.
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ARTICLE 12
SINKING FUNDS
SECTION 12.01. Applicability of Article
The provisions of this Article shall be applicable to any sinking fund for the retirement of Securities of a series except as otherwise specified as contemplated by Section 3.01 for Securities of such series.
The minimum amount of any sinking fund payment provided for by the terms of Securities of any series is herein referred to as a "MANDATORY SINKING FUND PAYMENT," and any payment in excess of such minimum amount provided for by the terms of Securities of any series is herein referred to as an "OPTIONAL SINKING FUND PAYMENT." If provided for by the terms of Securities of any series, the cash amount of any sinking fund payment may be subject to reduction as provided in Section 12.02. Each sinking fund payment shall be applied to the redemption of Securities of any series as provided for by the terms of Securities of such series.
SECTION 12.02. Satisfaction of Sinking Fund Payments with Securities
The Company (a) may deliver Outstanding Securities of a series (other than any previously called for redemption) and (b) may apply as a credit Securities of a series which have been redeemed either at the election of the Company pursuant to the terms of such Securities or through the application of permitted optional sinking fund payments pursuant to the terms of such Securities, in each case in satisfaction of all or any part of any sinking fund payment with respect to the Securities of such series required to be made pursuant to the terms of such Securities as provided for by the terms of such Series; provided that the Securities to be so credited have not been previously so credited. The Securities to be so credited shall be received and credited for such purpose by the Trustee at the Redemption Price, as specified in the Securities to be so redeemed, for redemption through operation of the sinking fund and the amount of such sinking fund payment shall be reduced accordingly.
SECTION 12.03. Redemption of Securities for Sinking Fund
Not less than 60 days prior to each sinking fund payment date for any series of Securities, the Company will deliver to the Trustee an Officers' Certificate specifying the amount of the next ensuing sinking fund payment for that series pursuant to the terms of such Securities, the portion thereof, if any, which is to be satisfied by payment of cash and the portion thereof, if any, which is to be satisfied by delivering and crediting Securities of that series pursuant to Section 12.02 stating that such Securities have not been previously used as a credit against any sinking fund payment and will also deliver to the Trustee any Securities to be so delivered. Not less than 30 days before each such sinking fund payment date the
72
Trustee shall select the Securities to be redeemed upon such sinking fund payment date in the manner specified in Section 11.03 and cause notice of the redemption thereof to be given in the name of and at the expense of the Company in the manner provided in Section 11.04. Such notice having been duly given, the redemption of such Securities shall be made upon the terms and in the manner stated in Sections 11.05, 11.06 and 11.07.
* * *
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IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed and attested, all as of the day and year first above written.
MASCO CORPORATION

                                       By /s/ Richard G. Mosteller
                                         ------------------------------------
                                       Title: Richard G. Mosteller
                                             --------------------------------
                                              Senior Vice President - Finance

Attest: /s/ John R. Leekley
       ----------------------------
       John R. Leekley
       Senior Vice President -
       General Counsel	

BANK ONE TRUST COMPANY, NATIONAL
ASSOCIATION, as Trustee

By /s/ Benita A. Pointer
  ------------------------------------
Title: Account Executive
      --------------------------------	

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EXHIBIT A
FORM OF FACE OF SECURITY
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, 55 WATER STREET, NEW YORK, NEW YORK (THE "U.S. DEPOSITARY"), TO MASCO CORPORATION OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE U.S. DEPOSITARY (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE U.S. DEPOSITARY), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
[UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITARY TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF THE DEPOSITARY OR ITS NOMINEE AND ANY PAYMENT IS MADE TO THE DEPOSITARY OR ITS NOMINEE, ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF HAS AN INTEREST HEREIN.]
[If the Security is an original issue discount security for tax purposes and is not "publicly offered" within the meaning of Treasury Regulation 1.1275-1(h), insert--For purposes of Sections 1271-1275 of the United States Internal Revenue Code of 1986, as amended, the issue price of this Security is ....., the amount of original issue discount is ....., the issue date is ........, 20.. and the yield to maturity is .....]
MASCO CORPORATION
[Title of Security]
No. .... $ ...........
CUSIP No. _________
Masco Corporation, a corporation duly organized and existing under the laws of Delaware (herein called the "COMPANY," which term includes any successor corporation under the Indenture hereinafter referred to), for value

received, hereby promises to pay to .............................., or
registered assigns, the principal sum of ................................
Dollars on ........................... [If the Security is to bear interest
prior to Maturity, insert--, and to pay interest thereon from ....... or from	

the most recent Interest Payment Date to which interest has been paid or duly provided for, semi-annually on ....... and ....... in each year, commencing ....., at the rate of ..% per annum, until the principal hereof is paid or made available for payment [If applicable, insert--, and (to the extent that the payment of such interest shall be legally enforceable) at the rate of ..% per annum on any overdue principal and premium and on any overdue installment of interest]. The interest so payable, and punctually paid or duly provided for, on any Interest Payment Date will, as provided in such Indenture, be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest, which shall be the .... or .... (whether or not a Business Day), as the case may be, next preceding such Interest Payment Date. Any such interest not so punctually paid or duly provided for will forthwith cease to be payable to the Holder on such Regular Record Date and may either be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on a Special Record Date for the payment of such Defaulted Interest to be fixed by the Trustee, notice whereof shall be given to Holders of Securities of this series not less than 10 days prior to such Special Record Date, or be paid at any time in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Securities of this series may be listed, and upon such notice as may be required by such exchange, all as more fully provided in said Indenture. [Interest on the Securities shall be computed on the basis of a 360-day year consisting of 12 30-day months.]
[If the Security is not to bear interest prior to Maturity, insert--The principal of this Security shall not bear interest except in the case of a default in payment of principal upon acceleration, upon redemption or at Stated Maturity and in such case the overdue principal of this Security shall bear interest at the rate of ..% per annum (to the extent that the payment of such interest shall be legally enforceable), which shall accrue from the date of such default in payment to the date payment of such principal has been made or duly provided for. Interest on any overdue principal that is not so paid on demand shall bear interest at the rate of ...% per annum (to the extent that the payment of such interest shall be legally enforceable), which shall accrue from the date of such demand for payment to the date payment of such interest has been made or duly provided for, and such interest shall also be payable on demand.]
Payment of the principal of (and premium, if any) and [if applicable insert,--any such] interest on this Security will be made at the office or agency of the Company maintained for that purpose in the Borough of Manhattan, The City of New York, in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts [if applicable,
A-2
insert--; provided, however, that at the option of the Company payment of interest may be made by check mailed to the address of the Person entitled thereto as such address shall appear in the Security Register].
Reference is hereby made to the further provisions of this Security set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed by the Trustee referred to on the reverse hereof by manual signature, this Security shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose.
A-3
IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed under its corporate seal.
Dated:
MASCO CORPORATION
By

Attest:

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FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Securities of the series designated therein referred to in the within-mentioned Indenture.
Date of Authentication:
Bank One Trust Company, National Association,
as Trustee
By
 Authorized Officer

A-5
FORM OF REVERSE OF SECURITY
This Security is one of a duly authorized issue of securities of the Company (herein called the "SECURITIES"), issued and to be issued in one or more series under an Indenture, dated as of ____________ (herein called the "INDENTURE"), between the Company and Bank One Trust Company, National Association, as Trustee (herein called the "TRUSTEE," which term includes any successor trustee under the Indenture), to which Indenture and all indentures supplemental thereto reference is hereby made for a statement of the respective rights, limitations of rights, duties and immunities thereunder of the Company, the Trustee and the Holders of the Securities and of the terms upon which the Securities are, and are to be, authenticated and delivered. This Security is one of the series designated on the face hereof [, limited in aggregate principal amount to $......].
[If applicable, insert--The Securities of this series are subject to redemption upon not less than 30 days' notice by mail, [if applicable, insert--(1) on ........... in any year commencing with the year ......... and ending with the year .............. through operation of the sinking fund for this series at a Redemption Price equal to 100% of the principal amount, and
(2)] at any time [ on or after .........., 20....], as a whole or in part, at the election of the Company, at the following Redemption Prices (expressed as

percentages of the principal amount): If redeemed [on or before .......... ..,
....%, and if redeemed] during the 12-month period beginning ............... of
the years indicated,

                  Redemption                                        Redemption	

Year Price Year Price
and thereafter at a Redemption Price equal to ....% of the principal amount, together in the case of any such redemption [if applicable, insert--(whether through operation of the sinking fund or otherwise)] with accrued interest to the Redemption Date, but interest installments whose Stated Maturity is on or prior to such Redemption Date will be payable to the Holders of such Securities, or one or more Predecessor Securities, of record at the close of business on the relevant Record Dates referred to on the face hereof, all as provided in the Indenture.]
[If applicable, insert--The Securities of this series are subject to redemption upon not less than 30 days' notice by mail, (1) on .......... in any year commencing with the year ...... and ending with the year ...... through operation of the sinking fund for this series at the Redemption Prices for redemption through operation of the sinking fund (expressed as percentages of the principal amount) set forth in the table below, and (2) at any time [on or after ..........], as a whole or in part, at the election of the Company, at the Redemption Prices for redemption otherwise than through operation of the sinking fund (expressed as percentages of
A-6
principal amount) set forth in the table below: If redeemed during the 12 month

period beginning ............ of the years indicated,

                   Redemption Price
                   For Redemption                 Redemption Price For
                   Through                        Redemption Otherwise
                   Operation                      Than Through
                   of the                         Operation
Year               Sinking Fund                   of the Sinking Fund	

and thereafter at a Redemption Price equal to ....% of the principal amount, together in the case of any such redemption (whether through operation of the sinking fund or otherwise) with accrued interest to the Redemption Date, but interest installments whose Stated Maturity is on or prior to such Redemption Date will be payable to the Holders of such Securities, or one or more Predecessor Securities, of record at the close of business on the relevant Record Dates referred to on the face hereof, all as provided in the Indenture.]
[Notwithstanding the foregoing, the Company may not, prior to .......... redeem any Securities of this series as contemplated by [clause (2) of] the preceding paragraph as a part of, or in anticipation of, any refunding operation by the application, directly or indirectly, of moneys borrowed having an interest cost to the Company (calculated in accordance with generally accepted financial practice) of less than ....% per annum.]
[The sinking fund for this series provides for the redemption on ...... in each year beginning with the year .......... and ending with the year ......... of [not less than] $......... [("MANDATORY SINKING FUND") and not more than $............] aggregate principal amount of Securities of this series.
[Securities of this series acquired or redeemed by the Company otherwise than through [mandatory] sinking fund payments may be credited against subsequent
[mandatory] sinking fund payments otherwise required to be made--in the inverse order in which they become due.]
[In the event of redemption of this Security in part only, a new Security or Securities of this series for the unredeemed portion hereof will be issued in the name of the Holder hereof upon the cancellation hereof.]
[The Indenture contains provisions for defeasance at any time of (a) the entire indebtedness of this Security and (b) certain restrictive covenants, in each case upon compliance by the Company with certain conditions set forth therein, which provisions apply to this Security.]
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[If the Security is not an Original Issue Discount Security,--If an Event of Default with respect to Securities of this series shall occur and be continuing, the principal of the Securities of this series may be declared due and payable in the manner and with the effect provided in the Indenture.]
[If the Security is an Original Issue Discount Security,--If an Event of Default with respect to Securities of this series shall occur and be continuing, an amount of principal of the Securities of this series may be declared due and payable in the manner and with the effect provided in the Indenture. Such amount shall be equal to--insert formula for determining the amount. Upon payment (i) of the amount of principal so declared due and payable and (ii) of interest on any overdue principal and overdue interest (in each case to the extent that the payment of such interest shall be legally enforceable), all of the Company's obligations in respect of the payment of the principal of and interest, if any, on the Securities of this series shall terminate.]
The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Company and the rights of the Holders of the Securities of each series to be affected under the Indenture at any time by the Company and the Trustee with the consent of the Holders of a majority in principal amount of the Securities at the time Outstanding of each series to be affected. The Indenture also contains provisions permitting the Holders of specified percentages in principal amount of the Securities of each series at the time Outstanding, on behalf of the Holders of all Securities of such series, to waive compliance by the Company with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such consent or waiver by the Holder of this Security shall be conclusive and binding upon such Holder and upon all future Holders of this Security and of any Security issued upon the registration of transfer hereof or in exchange herefor or in lieu hereof, whether or not notation of such consent or waiver is made upon this Security.
As provided in and subject to the provisions of the Indenture, the Holder of this Security shall not have the right to institute any proceeding with respect to the Indenture or for the appointment of a receiver or trustee or for any other remedy thereunder, unless such Holder shall have previously given the Trustee written notice of a continuing Event of Default with respect to the Securities of this series, the Holders of not less than 25% in principal amount of the Securities of this series at the time Outstanding shall have made written request to the Trustee to institute proceedings in respect of such Event of Default as Trustee and offered the Trustee reasonable indemnity, and the Trustee shall not have received from the Holders of a majority in principal amount of Securities of this series at the time Outstanding a direction inconsistent with such request, and shall have failed to institute any such proceeding, for 60 days after receipt of such notice, request and offer of indemnity. The foregoing shall not apply to any suit instituted by the Holder of this Security for
A-8
the enforcement of any payment of principal hereof or any premium or interest hereon on or after the respective due dates expressed herein.
No reference herein to the Indenture and no provision of this Security or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of (and premium, if any) and interest on this Security herein provided, and at the times, place and rate, and in the coin or currency, herein prescribed.
As provided in the Indenture and subject to certain limitations therein set forth, the transfer of this Security is registrable in the Security Register, upon surrender of this Security for registration of transfer at the office or agency of the Company in any place where the principal of (and premium, if any) and interest on this Security are payable, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Company and the Security Registrar duly executed by, the Holder hereof or his attorney duly authorized in writing, and thereupon one or more new Securities of this series, of authorized denominations and for the same aggregate principal amount, will be issued to the designated transferee or transferees.
The Securities of this series are issuable only in registered form without coupons in denominations of $.... and any multiple thereof. As provided in the Indenture and subject to certain limitations therein set forth, Securities of this series are exchangeable for a like aggregate principal amount of Securities of this series of a different authorized denomination, as requested by the Holder surrendering the same.
No service charge shall be made for any such registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith.
Prior to due presentment of this Security for registration of transfer, the Company, the Trustee and any agent of the Company or the Trustee may treat the Person in whose name this Security is registered as the owner hereof for all purposes, whether or not this Security be overdue, and neither the Company, the Trustee nor any such agent shall be affected by notice to the contrary.
All terms used in this Security which are defined in the Indenture shall have the meanings assigned to them in the Indenture.
A-9
 
CROSS-REFERENCE TARGET LIST
NOTE: DUE TO THE NUMBER OF TARGETS SOME TARGET
NAMES MAY NOT APPEAR IN THE TARGET PULL-DOWN LIST. (This list is for the use of the wordprocessor only, is not a part of this document and may be discarded.)

ARTICLE/SECTION     TARGET NAME   ARTICLE/SECTION   TARGET NAME    ARTICLE/SECTION   TARGET NAME   ARTICLE/SECTION  TARGET NAME
===============     ===========   ===============   ===========    ===============   ===========   ===============  ===========
?.......................... 309
1..........................art1
1.01....................... 101
1.02................ compliance
1.03....................... 103
1.04....................... 104
1.05....................... 105
1.06....................... 106
1.07....................... 107
1.08....................... 108
1.09....................... 109
1.10....................... 110
1.11....................... 111
1.12....................... 112
1.13....................... 113
1.14....................... 114
2 .........................art2
2.01....................... 201
2.02.......securities permanent
3..........................art3
3.01...........amount unlimited
3.02..............denominations
3.03..................execution
3.09...............cancellation
3.04............temp securities
6 ..................the.trustee
6.11(b)......accept.appt.succ.b
6.13............pref.coll.claim
7.02........preserv.information
7.02(a)....preserv.infomation.a
7.02(b)...preserv.information.b
7.02(c)...preserv.information.c
8............consol.mrgr.convey
9...............supp.indentures
10....................covenants
10.06......defease certain.obs.
10.07.....................1007
12...............sinking.funds	

RESOLUTIONS OF THE PRICING COMMITTEE OF
THE BOARD OF DIRECTORS
OF MASCO CORPORATION
 MARCH 8, 2001
In lieu of a meeting, the undersigned, being all of the members of the Pricing Committee of the Board of Directors of Masco Corporation, a Delaware corporation, (the "Company") adopt the resolutions attached on Exhibit A hereto.

Dated:  March 8, 2001

                                          /s/Richard A. Manoogian
                                          ------------------------------
                                          Richard A. Manoogian

                                          /s/Wayne B. Lyon
                                          ------------------------------
                                          Wayne B. Lyon

                                          /s/John A. Morgan
                                          ------------------------------
                                          John A. Morgan	

EXHIBIT A
RESOLUTIONS OF THE PRICING COMMITTEE
OF THE BOARD OF DIRECTORS OF
MASCO CORPORATION
 MARCH 8, 2001
WHEREAS, Masco Corporation, a Delaware corporation (the "Company") the Company has filed Registration Statements (Nos. 33-56043 and 333-40122) on Form S-3 with the Securities and Exchange Commission, which are in effect;
WHEREAS, the Company desires to create a series of securities under the Indenture dated as of February 12, 2001 (as amended to the date hereof, the "Indenture"), with Bank One Trust Company, National Association, (the "Trustee"), providing for the issuance from time to time of unsecured debentures, notes or other evidences of indebtedness of this Company ("Securities") in one or more series under such Indenture; and
WHEREAS, capitalized terms used in these resolutions and not otherwise defined are used with the same meaning ascribed to such terms in the Indenture;
THEREFORE RESOLVED, that there is established a series of Securities under the Indenture, the terms of which shall be as follows:
1. The Securities of such series shall be designated as the "6-3/4% Notes Due March 15, 2006."
2. The aggregate principal amount of Securities of such series which may be authenticated and delivered under the Indenture is limited to Eight Hundred Million Dollars ($800,000,000), except for Securities of such series authenticated and delivered upon registration of, transfer of, or in exchange for, or in lieu of, other Securities of such series pursuant to Sections 3.04, 3.05, 3.06, 9.06 or 11.07 of the Indenture.
3. The date on which the principal of the Securities of such series shall be payable is March 15, 2006.
4. The Securities of such series shall bear interest from March 14, 2001 at the rate of 6-3/4% per annum, payable semi-annually on March 15 and September 15 of each year commencing on September 15, 2001 until the principal thereof is paid or made available for payment. The March 1 or September 1 (whether or not a business day), as the case may be, next preceding each such interest payment date shall be the "record date" for the determination of holders to whom interest is payable.
5. The Securities shall be issued initially in the form of global securities registered in the name of Cede & Co., as nominee of The Depository Trust Company ("DTC"), and will be held by the Trustee as custodian for DTC. The Securities shall be subject to the procedures of DTC and will not be issued in definitive registered form.
6. The principal of and interest on the Securities of such series shall be payable at the office or agency of this Company maintained for such purpose in Chicago, Illinois or at any other office or agency designated by the Company, for such purpose pursuant to the Indenture.
7. The Securities of such series shall be subject to redemption in whole or in part prior to maturity, at the Company's option, at a redemption price established in accordance with current market practice, substantially as follows: the redemption price shall be equal to the greater of (i) 100% of the principal amount of the Securities plus accrued interest to the redemption date, or (ii) the sum of the present values of the remaining principal amount and scheduled payments of interest on the Notes to be redeemed (other than accrued interest to the redemption date), discounted to the redemption date on a semi-annual basis at the appropriate treasury rate plus 25 basis points plus accrued interest to the redemption date.
8. The Securities of such series shall be issuable in denominations of One Thousand Dollars ($1,000) and any integral multiples thereof.
9. The Securities shall be issuable at a price such that this Company shall receive $793,592,000 after an underwriting discount of $4,800,000.
10. The Securities shall be subject to defeasance and discharge and to defeasance of certain obligations as set forth in the Indenture.
FURTHER RESOLVED, that the Securities of such series are declared to be issued under the Indenture and subject to the provisions hereof;
FURTHER RESOLVED, that the Chairman of the Board, the President or any Vice President of the Company is authorized to execute, on the Company's behalf and in its name, and the Secretary or any Assistant Secretary of the Company is authorized to attest to such execution and under the Company's seal (which may be in the form of a facsimile of the Company's seal), $800,000,000 aggregate principal amount of the Securities of such series (and in addition Securities to replace lost, stolen, mutilated or destroyed Securities and Securities required for exchange, substitution or transfer, all as provided in the Indenture) in fully registered form in substantially the form of the note filed as an exhibit to the Company's Registration Statement on Form S-3 (No. 333-40122), but with such changes and insertions therein as are appropriate to conform the Securities to the terms set forth herein or otherwise as the respective officers executing the Securities shall approve and as are not inconsistent with these resolutions, such
-2-
approval to be conclusively evidenced by such officer's execution and delivery of such Securities, and to deliver such Securities to the Trustee for authentication, and the Trustee is authorized and directed thereupon to authenticate and deliver the same to or upon the written order of this Company as provided in the Indenture;
FURTHER RESOLVED, that the signatures of the Company officers so authorized to execute the Securities of such series may be the manual or facsimile signatures of the present or any future authorized officers and may be imprinted or otherwise reproduced thereon, and the Company for such purpose adopts each facsimile signature as binding upon it notwithstanding the fact that at the time the respective Securities shall be authenticated and delivered or disposed of, the individual so signing shall have ceased to hold such office;
FURTHER RESOLVED, that Merrill Lynch, Pierce, Fenner & Smith Incorporated, Salomon Smith Barney Inc., Banc One Capital Markets, Inc., McDonald Investments, Inc. and Wachovia Securities, Inc. are appointed underwriters for the issuance and sale of the Securities of such series, and the Chairman of the Board, the President or any Vice President of the Company is authorized, in the Company's name and on its behalf, to execute and deliver an Underwriting Agreement, substantially in the form heretofore approved by the Company's Board of Directors, with such underwriters, with such changes and insertions therein as are appropriate to conform such Underwriting Agreement to the terms set forth herein or otherwise as the officer executing such Underwriting Agreement shall approve and as are not inconsistent with these resolutions, such approval to be conclusively evidenced by such officer's execution and delivery of the Underwriting Agreement;
FURTHER RESOLVED, that Bank One Trust Company, National Association, the Trustee under the Indenture, is appointed trustee for Securities of such series, and as Agent of this Company for the purpose of effecting the registration, transfer and exchange of the Securities of such series as provided in the Indenture, and the corporate trust office of Bank One Trust Company, National Association in Chicago, Illinois is designated pursuant to the Indenture as the office or agency of the Company where such Securities may be presented for registration, transfer and exchange and where notices and demands to or upon this Company in respect of the Securities and the Indenture may be served;
FURTHER RESOLVED, that Bank One Trust Company, National Association is appointed Paying Agent of this Company for the payment of interest on and principal of the Securities of such series, and the corporate trust office of Bank One Trust Company, National Association, is designated, pursuant to the Indenture, as the office or agency of the Company where Securities may be presented for payment; and
FURTHER RESOLVED, that each of the Company's officers is authorized and directed, on behalf of the Company and in its name, to do or cause to be done everything such officer deems advisable to effect the sale and delivery of the Securities of such series pursuant to the Underwriting Agreement and otherwise to carry out the Company's
-3-
obligations under the Underwriting Agreement, and to do or cause to be done everything and to execute and deliver all documents as such officer deems advisable in connection with the execution and delivery of the Underwriting Agreement and the execution, authentication and delivery of such Securities (including, without limiting the generality of the foregoing, delivery to the Trustee of the Securities for authentication and of requests or orders for the authentication and delivery of Securities).
-4-
 
EXHIBIT 4.b
RIGHTS AGREEMENT
dated as of
December 6, 1995
between
Masco Corporation
and
The Bank of New York,
as Rights Agent
TABLE OF CONTENTS [1]

                                                                      Page
                                                                      ----
Section  1.    Definitions ..........................................   1

Section  2.    Appointment of Rights Agent ..........................   5

Section  3.    Issue of Right Certificates ..........................   5

Section  4.    Form of Right Certificates ...........................   6

Section  5.    Countersignature and Registration ....................   7

Section  6.    Transfer and Exchange of Right
                  Certificates; Mutilated, Destroyed,
                  Lost or Stolen Right Certificates .................   8

Section  7.    Exercise of Rights; Purchase Price;
                  Expiration Date of Rights .........................   9

Section  8.    Cancellation and Destruction of Right
                  Certificates ......................................  11

Section  9.    Reservation and Availability of
                  Capital Stock .....................................  11

Section 10.    Preferred Stock Record Date ..........................  12

Section 11.    Adjustment of Purchase Price,
                  Number and Kind of Shares or Number
                  of Rights .........................................  13

Section 12.    Certificate of Adjusted Purchase
                  Price or Number of Shares .........................  22

Section 13.    Consolidation, Merger or Sale or
                  Transfer of Assets or Earning Power ...............  23

Section 14.    Fractional Rights and Fractional
                  Shares ............................................  25

Section 15.    Rights of Action .....................................  27

Section 16.    Agreement of Right Holders ...........................  27	

[1] The Table of Contents is not a part of this Agreement.

                                                                      Page
                                                                      ----
Section 17.    Right Certificate Holder Not Deemed
                  a Stockholder ....................................   28

Section 18.    Concerning the Rights Agent .........................   28

Section 19.    Merger or Consolidation or Change of
                  Name of Rights Agent .............................   29

Section 20.    Duties of Rights Agent ..............................   30

Section 21.    Change of Rights Agent ..............................   32

Section 22.    Issuance of New Right Certificates ..................   33

Section 23.    Redemption ..........................................   33

Section 24.    Exchange ............................................   34

Section 25.    Notice of Proposed Actions ..........................   35

Section 26.    Notices .............................................   36

Section 27.    Supplements and Amendments ..........................   37

Section 28.    Successors ..........................................   37

Section 29.    Determinations and Actions
                  by the Board of Directors, etc. ..................   38

Section 30.    Benefits of this Agreement ..........................   38

Section 31.    Severability ........................................   38

Section 32.    Governing Law .......................................   39

Section 33.    Counterparts ........................................   39

Section 34.    Descriptive Headings ................................   39	

ii

Exhibit A  -   Form of Certificate of Designation
                  of Preferred Stock

Exhibit B  -   Form of Right Certificate

Exhibit C  -   Summary Description of the
                  Stockholder Rights Plan	

iii
RIGHTS AGREEMENT
AGREEMENT dated as of December 6, 1995, between Masco Corporation, a Delaware corporation (the "Company"), and The Bank of New York, as Rights Agent (the "Rights Agent"),
W I T N E S S E T H
WHEREAS, on December 6, 1995 the Board of Directors of the Company authorized and declared a dividend of one preferred stock purchase right (a "Right") for each share of Common Stock (as hereinafter defined) outstanding at the close of business on December 18, 1995 (the "Record Date") and has authorized the issuance, upon the terms and subject to the conditions hereinafter set forth, of one Right in respect of each share of Common Stock issued after the Record Date, each Right representing the right to purchase, upon the terms and subject to the conditions hereinafter set forth, one one-thousandth of a share of Preferred Stock (as hereinafter defined);
NOW, THEREFORE, the parties hereto agree as follows:
Section 1. Definitions. The following terms, as used herein, have the following meanings:
"Acquiring Person" means any Person who, together with all Affiliates and Associates of such Person, shall be the Beneficial Owner of 15% or more of the shares of Common Stock then outstanding, but shall not include the Company, any of its Subsidiaries, any employee benefit plan of the Company or any of its Subsidiaries or any Person organized, appointed or established by the Company or any of its Subsidiaries for or pursuant to the terms of any such plan.
"Affiliate" and "Associate" have the respective meanings ascribed to such terms in Rule 12b-2 under the Exchange Act as in effect on the date hereof.
A Person shall be deemed the "Beneficial Owner" of, and shall be deemed to "beneficially own", any securities:
(a) which such Person or any of its Affiliates or Associates, directly or indirectly, beneficially owns (as determined pursuant to Rule 13d-3 under the Exchange Act as in effect on the date hereof);
(b) which such Person or any of its Affiliates or Associates, directly or indirectly, has
1
(i) the right to acquire (whether such right is exercisable immediately or only upon the occurrence of certain events or the passage of time or both) pursuant to any agreement, arrangement or understanding (whether or not in writing) or otherwise (other than pursuant to the Rights); provided that a Person shall not be deemed the "Beneficial Owner" of or to "beneficially own" securities tendered pursuant to a tender or exchange offer made by or on behalf of such Person or any of its Affiliates or Associates until such tendered securities are accepted for payment or exchange; or
(ii) the right to vote (whether such right is exercisable immediately or only upon the occurrence of certain events or the passage of time or both) pursuant to any agreement, arrangement or understanding (whether or not in writing) or otherwise; provided that a Person shall not be deemed the "Beneficial Owner" of or to "beneficially own" any security under this clause (ii) as a result of an agreement, arrangement or understanding to vote such security if such agreement, arrangement or understanding (A) arises solely from a revocable proxy or consent given in response to a public proxy or consent solicitation made pursuant to the applicable rules and regulations under the Exchange Act and (B) is not also then reportable by such Person on Schedule 13D under the Exchange Act (or any comparable or successor report); or
(c) which are beneficially owned, directly or indirectly, by any other Person (or any Affiliate or Associate thereof) with which such Person or any of its Affiliates or Associates has any agreement, arrangement or understanding (whether or not in writing) for the purpose of acquiring, holding, voting (except pursuant to a revocable proxy as described in subparagraph (b)(ii) immediately above) or disposing of any such securities.
"Business Day" means any day other than a Saturday, Sunday or a day on which banking institutions in the State of New York are authorized or obligated by law or executive order to close.
"Close of business" on any given date means 5:00 P.M., New York City time, on such date; provided that if such date is not a Business Day "close of business" means 5:00 P.M., New York City time, on the next succeeding Business Day.
"Common Stock" means the Common Stock, par value $1.00 per share, of the Company, except that, when used with reference to any Person other than the Company, "Common Stock" means the capital stock of such Person with the greatest voting power, or the equity securities or other equity interest having power to control or direct the management, of such Person.
"Continuing Director" means any member of the Board of Directors of the Company, while such Person is a member of the Board, who is not an Acquiring Person or an Affiliate or Associate of an Acquiring Person or a representative or nominee of an Acquiring
2
Person or of any such Affiliate or Associate and either (a) was a member of the Board immediately prior to the time any Person becomes an Acquiring Person or (b) subsequently becomes a member of the Board, if such Person's nomination for election or election to the Board is recommended or approved by a majority of the Continuing Directors.
"Distribution Date" means the earlier of (a) the close of business on the tenth day (or such later day as may be designated by action of a majority of the Continuing Directors) after the Stock Acquisition Date and
(b) the close of business on the tenth Business Day (or such later day as may be designated by action of a majority of the Continuing Directors) after the date of the commencement of a tender or exchange offer by any Person if, upon consummation thereof, such Person would be an Acquiring Person.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Expiration Date" means the earlier of (a) the Final Expiration Date and (b) the time at which all Rights are redeemed as provided in Section 23 or exchanged as provided in Section 24.
"Final Expiration Date" means the close of business on December 6, 2005.
"Person" means an individual, corporation, partnership, association, trust or any other entity or organization.
"Preferred Stock" means the Series A Participating Cumulative Preferred Stock, par value 1.00 per share, of the Company, having the terms set forth in the form of certificate of designation attached hereto as Exhibit A.
"Purchase Price" means the price (subject to adjustment as provided herein) at which a holder of a Right may purchase one one-thousandth of a share of Preferred Stock (subject to adjustment as provided herein) upon exercise of a Right, which price shall initially be $100.00.
"Section 11(a)(ii) Event" means any event described in the first clause of Section 11(a)(ii).
"Section 13 Event" means any event described in clauses (x), (y) or
(z) of Section 13(a).
"Securities Act" means the Securities Act of 1933, as amended.
"Stock Acquisition Date" means the date of the first public announcement (including the filing of a report on Schedule 13D under the Exchange Act (or any comparable or successor report)) by the Company or an Acquiring Person indicating that an Acquiring Person has become such.
3
"Subsidiary" of any Person means any other Person of which securities or other ownership interests having ordinary voting power, in the absence of contingencies, 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 first Person.
"Trading Day" means a day on which the principal national securities exchange on which the shares of Common Stock are listed or admitted to trading is open for the transaction of business or, if the shares of Common Stock are not listed or admitted to trading on any national securities exchange, a Business Day.
"Triggering Event" means any Section 11(a)(ii) Event or any Section 13 Event.
Section 2. Appointment of Rights Agent. The Company hereby appoints the Rights Agent to act as agent for the Company and the holders of the Rights in accordance with the terms and conditions hereof, and the Rights Agent hereby accepts such appointment. The Company may from time to time appoint such Co-Rights Agents as it may deem necessary or desirable upon ten (10) days' prior written notice to the Rights Agent. The Rights Agent shall have no duty to supervise, and shall in no event be liable for, the acts or omissions of any such Co-Rights Agent. If the Company appoints one or more Co-Rights Agents, the respective duties of the Rights Agent and any Co-Rights Agents shall be as the Company shall determine.
Section 3. Issue of Right Certificates. (a) Prior to the Distribution Date, (i) the Rights will be evidenced by the certificates for the Common Stock and not by separate Right Certificates (as hereinafter defined) and the registered holders of the Common Stock shall be deemed to be the registered holders of the associated Rights, and (ii) the Rights will be transferable only in connection with the transfer of the underlying shares of Common Stock. As soon as practicable after the Record Date, the Company will send a summary of the Rights substantially in the form of Exhibit C hereto, by first-class, postage prepaid mail, to each record holder of the Common Stock as of the close of business on the Record Date at the address of such holder shown on the records of the Company.
(b) As soon as practicable after the Company has notified the Rights Agent of the occurrence of the Distribution Date, the Rights Agent will send, by first-class, insured, postage prepaid mail, to each record holder of the Common Stock as of the close of business on the Distribution Date, at the address of such holder shown on the records of the Company, one or more Right Certificates evidencing one Right (subject to adjustment as provided herein) for each share of Common Stock so held. If an adjustment in the number of Rights per share of Common Stock has been made pursuant to Section 11(p), the Company shall, at the time of distribution of the Right Certificates, make the necessary and appropriate rounding adjustments (in accordance with Section 14(a)) so that Right Certificates representing only whole numbers of Rights are distributed and cash is paid in lieu of any fractional Rights. From and after the Distribution Date, the Rights will be evidenced solely by such Right Certificates.
4
(c) Rights shall be issued in respect of all shares of Common Stock outstanding as of the Record Date or issued (on original issuance or out of treasury) after the Record Date but prior to the earlier of the Distribution Date and the Expiration Date. In addition, in connection with the issuance or sale of shares of Common Stock following the Distribution Date and prior to the Expiration Date, the Company (i) shall, with respect to shares of Common Stock so issued or sold (x) pursuant to the exercise of stock options or under any employee plan or arrangement or (y) upon the exercise, conversion or exchange of other securities issued by the Company prior to the Distribution Date and (ii) may, in any other case, if deemed necessary or appropriate by the Board of Directors of the Company, issue Right Certificates representing the appropriate number of Rights in connection with such issuance or sale; provided that no such Right Certificate shall be issued if, and to the extent that, (i) the Company shall be advised by counsel that such issuance would create a significant risk of material adverse tax consequences to the Company or the Person to whom such Right Certificate would be issued or (ii) appropriate adjustment shall otherwise have been made in lieu of the issuance thereof.
(d) Certificates for the Common Stock issued after the Record Date but prior to the earlier of the Distribution Date and the Expiration Date shall have impressed on, printed on, written on or otherwise affixed to them the following legend:
This certificate also evidences certain Rights as set forth in a Rights Agreement between Masco Corporation and The Bank of New York, dated as of December 6, 1995 (the "Rights Agreement"), the terms of which are hereby incorporated herein by reference and a copy of which is on file at the principal executive offices of the Company. The Company will mail to the holder of this certificate a copy of the Rights Agreement without charge promptly after receipt of a written request therefor. Under certain circumstances, as set forth in the Rights Agreement, such Rights may be evidenced by separate certificates and no longer be evidenced by this certificate, may be redeemed or exchanged or may expire. As set forth in the Rights Agreement, Rights issued to, or held by, any Person who is, was or becomes an Acquiring Person or an Affiliate or Associate thereof (as such terms are defined in the Rights Agreement), whether currently held by or on behalf of such Person or by any subsequent holder, may be null and void.
Section 4. Form of Right Certificates. (a) The certificates evidencing the Rights (and the forms of assignment, election to purchase and certificates to be printed on the reverse thereof) (the "Right Certificates") shall be substantially in the form of Exhibit B hereto and may have such marks of identification or designation and such legends, summaries or endorsements printed thereon as the Company may deem appropriate and as are not inconsistent with the provisions of this Agreement, or as may be required to comply with any applicable law, rule or regulation or with any rule or regulation of any stock exchange on which the Rights may from time to time be listed, or to conform to usage. The Right Certificates shall be in a machine printable format and in a form reasonably satisfactory to the Rights Agent. The Right Certificates, whenever distributed, shall be dated as of the Record Date and shall show the date of countersignature.
5
(b) Any Right Certificate representing Rights beneficially owned by any Person referred to in clauses (i), (ii) or (iii) of the first sentence of
Section 7(d) shall (to the extent feasible) contain the following legend:
The Rights represented by this Right Certificate are or were beneficially owned by a Person who was or became an Acquiring Person or an Affiliate or Associate of an Acquiring Person (as such terms are defined in the Rights Agreement). This Right Certificate and the Rights represented hereby may be or may become null and void in the circumstances specified in Section 7(d) of such Agreement.
Section 5. Countersignature and Registration. (a) The Right Certificates shall be executed on behalf of the Company by its Chairman of the Board, its President or any Vice President, either manually or by facsimile signature, and shall have affixed thereto the Company's seal or a facsimile thereof which shall be attested by the Secretary or an Assistant Secretary of the Company, either manually or by facsimile signature. The Right Certificates shall be manually countersigned by an authorized signatory of the Rights Agent and shall not be valid for any purpose unless so countersigned. In case any officer of the Company whose manual or facsimile signature is affixed to the Right Certificates shall cease to be such officer of the Company before countersignature by the Rights Agent and issuance and delivery by the Company, such Right Certificates may, nevertheless, be countersigned by the Rights Agent and issued and delivered with the same force and effect as though the Person who signed such Right Certificates had not ceased to be such officer of the Company. Any Right Certificate may be signed on behalf of the Company by any Person who, at the actual date of the execution of such Right Certificate, shall be a proper officer of the Company to sign such Right Certificate, although at the date of the execution of this Rights Agreement any such Person was not such an officer.
(b) Following the Distribution Date, the Rights Agent will keep or cause to be kept, at its principal office or offices designated as the place for surrender of Right Certificates upon exercise, transfer or exchange, books for registration and transfer of the Right Certificates. Such books shall show with respect to each Right Certificate the name and address of the registered holder thereof, the number of Rights indicated on the certificate and the certificate number.
Section 6. Transfer and Exchange of Right Certificates; Mutilated, Destroyed, Lost or Stolen Right Certificates. (a) At any time after the Distribution Date and prior to the Expiration Date, any Right Certificate or Certificates may, upon the terms and subject to the conditions set forth below in this Section 6(a), be transferred or exchanged for another Right Certificate or Certificates evidencing a like number of Rights as the Right Certificate or Certificates surrendered. Any registered holder desiring to transfer or exchange any Right Certificate or Certificates shall surrender such Right Certificate or Certificates (with, in the case of a transfer, the form of assignment and certificate on the reverse side thereof duly executed) to the Rights Agent at the principal office or offices of the Rights Agent designated for such purpose. Neither the Rights Agent nor the Company shall be obligated to take any action whatsoever with respect to the transfer of any such surrendered Right Certificate or Certificates until the registered holder of the Rights has
6
complied with the requirements of Section 7(e). Upon satisfaction of the foregoing requirements, the Rights Agent shall, subject to Sections 4(b), 7(d), 14 and 24, countersign and deliver to the Person entitled thereto a Right Certificate or Certificates as so requested. The Company may require payment by the holders of Rights of a sum sufficient to cover any transfer tax or other governmental charge that may be imposed in connection with any transfer or exchange of any Right Certificate or Certificates.
(b) Upon receipt by the Company and the Rights Agent of evidence reasonably satisfactory to them of the loss, theft, destruction or mutilation of a Right Certificate, and, in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to them, and, at the Company's request, reimbursement to the Company and the Rights Agent of all reasonable expenses incidental thereto, and upon surrender to the Rights Agent and cancellation of the Right Certificate if mutilated, the Company will issue and deliver a new Right Certificate of like tenor to the Rights Agent for countersignature and delivery to the registered owner in lieu of the Right Certificate so lost, stolen, destroyed or mutilated.
Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights. (a) The registered holder of any Right Certificate may exercise the Rights evidenced thereby (except as otherwise provided herein, including Sections 7(d) and (e), 9(c), 11(a) and 24) in whole or in part at any time after the Distribution Date and prior to the Expiration Date upon surrender of the Right Certificate, with the form of election to purchase and the certificate on the reverse side thereof duly executed, to the Rights Agent at the principal office or offices of the Rights Agent designated for such purpose, together with payment (in lawful money of the United States of America by certified check or bank draft payable to the order of the Company) of the aggregate Purchase Price with respect to the Rights then to be exercised and an amount equal to any applicable transfer tax or other governmental charge.
(b) Upon satisfaction of the requirements of Section 7(a) and subject to Section 20(k), the Rights Agent shall thereupon promptly (i)(A) requisition from any transfer agent of the Preferred Stock (or make available, if the Rights Agent is the transfer agent therefor) certificates for the total number of one one-thousandths of a share of Preferred Stock to be purchased (and the Company hereby irrevocably authorizes its transfer agent to comply with all such requests) or (B) if the Company shall have elected to deposit the shares of Preferred Stock issuable upon exercise of the Rights with a depositary agent, requisition from the depositary agent depositary receipts representing such number of one one-thousandths of a share of Preferred Stock as are to be purchased (in which case certificates for the shares of Preferred Stock represented by such receipts shall be deposited by the transfer agent with the depositary agent) and the Company will direct the depositary agent to comply with such request, (ii) requisition from the Company the amount of cash, if any, to be paid in lieu of issuance of fractional shares in accordance with Section 14 and (iii) after receipt of such certificates or depositary receipts and cash, if any, cause the same to be delivered to or upon the order of the registered holder of such Right Certificate (with such certificates or receipts registered in such name or names as may be designated by such holder). If the Company is obligated to deliver Common Stock, other securities or assets pursuant to this Agreement, the Company will make all arrangements necessary so that such other securities and assets are available for delivery by the Rights Agent, if and when appropriate.
7
(c) In case the registered holder of any Right Certificate shall exercise less than all the Rights evidenced thereby, a new Right Certificate evidencing the number of Rights remaining unexercised shall be issued by the Rights Agent and delivered to, or upon the order of, the registered holder of such Right Certificate, registered in such name or names as may be designated by such holder, subject to the provisions of Section 14.
(d) Notwithstanding anything in this Agreement to the contrary, from and after the first occurrence of a Section 11(a)(ii) Event, any Rights beneficially owned by (i) an Acquiring Person or an Associate or Affiliate of an Acquiring Person, (ii) a transferee of an Acquiring Person (or of any such Associate or Affiliate) who becomes a transferee after the Acquiring Person becomes such or (iii) a transferee of an Acquiring Person (or of any such Associate or Affiliate) who becomes a transferee prior to or concurrently with the Acquiring Person becoming such and receives such Rights pursuant to either (A) a transfer (whether or not for consideration) from the Acquiring Person (or any such Associate or Affiliate) to holders of equity interests in such Acquiring Person (or in any such Associate or Affiliate) or to any Person with whom the Acquiring Person (or any such Associate or Affiliate) has any continuing agreement, arrangement or understanding regarding the transferred Rights or (B) a transfer which the Continuing Directors have determined is part of a plan, arrangement or understanding which has as a primary purpose or effect the avoidance of this Section 7(d) shall become null and void without any further action, and no holder of such Rights shall have any rights whatsoever with respect to such Rights, whether under any provision of this Agreement or otherwise. The Company shall use all reasonable efforts to insure that the provisions of this Section 7(d) and Section 4(b) are complied with, but shall have no liability to any holder of Right Certificates or other Person as a result of its failure to make any determinations with respect to an Acquiring Person or its Affiliates and Associates or any transferee of any of them hereunder.
(e) Notwithstanding anything in this Agreement to the contrary, neither the Rights Agent nor the Company shall be obligated to undertake any action with respect to a registered holder of Rights upon the occurrence of any purported transfer pursuant to Section 6 or exercise pursuant to this Section 7 unless such registered holder (i) shall have completed and signed the certificate contained in the form of assignment or election to purchase, as the case may be, set forth on the reverse side of the Right Certificate surrendered for such transfer or exercise, as the case may be, (ii) shall not have indicated an affirmative response to clause 1 or 2 thereof and (iii) shall have provided such additional evidence of the identity of the Beneficial Owner (or former Beneficial Owner) or Affiliates or Associates thereof as the Company shall reasonably request.
Section 8. Cancellation and Destruction of Right Certificates. All Right Certificates surrendered for exercise, transfer or exchange shall, if surrendered to the Company or to any of its agents, be delivered to the Rights Agent for cancellation or in canceled form, or, if surrendered to the Rights Agent, shall be canceled by it, and no Right Certificates shall be issued in lieu thereof except as expressly permitted by this Agreement. The Company shall deliver to the Rights Agent for cancellation, and the Rights Agent shall cancel, any other Right Certificate purchased or acquired by the Company otherwise than upon the
8
exercise thereof. The Rights Agent shall deliver all canceled Right Certificates to the Company, or shall, at the written request of the Company, destroy such canceled Right Certificates, and in such case shall deliver a certificate of destruction thereof to the Company.
Section 9. Reservation and Availability of Capital Stock. (a) The Company covenants and agrees that it will cause to be reserved and kept available a number of shares of Preferred Stock which are authorized but not outstanding or otherwise reserved for issuance sufficient to permit the exercise in full of all outstanding Rights as provided in this Agreement.
(b) So long as the Preferred Stock issuable upon the exercise of Rights may be listed on any national securities exchange, the Company shall use its best efforts to cause, from and after such time as the Rights become exercisable, all securities reserved for such issuance to be listed on any such exchange upon official notice of issuance upon such exercise.
(c) The Company shall use its best efforts (i) to file, as soon as practicable following the earliest date after the occurrence of a Section
11(a)(ii) Event as of which the consideration to be delivered by the Company upon exercise of the Rights has been determined in accordance with Section
11(a)(iii), or as soon as is required by law following the Distribution Date, as the case may be, a registration statement under the Securities Act with respect to the securities issuable upon exercise of the Rights, (ii) to cause such registration statement to become effective as soon as practicable after such filing and (iii) to cause such registration statement to remain effective (with a prospectus at all times meeting the requirements of the Securities Act) until the earlier of (A) the date as of which the Rights are no longer exercisable for such securities and (B) the Expiration Date. The Company will also take such action as may be appropriate under, or to ensure compliance with, the securities or blue sky laws of the various states in connection with the exercisability of the Rights. The Company may temporarily suspend, for a period of time not to exceed 90 days after the date set forth in clause (i) of the first sentence of this Section 9(c), the exercisability of the Rights in order to prepare and file such registration statement and permit it to become effective. Upon any such suspension, the Company shall issue a public announcement stating that the exercisability of the Rights has been temporarily suspended, as well as a public announcement at such time as the suspension is no longer in effect. Notwithstanding any such provision of this Agreement to the contrary, the Rights shall not be exercisable for securities in any jurisdiction if the requisite qualification in such jurisdiction shall not have been obtained, such exercise therefor shall not be permitted under applicable law or a registration statement in respect of such securities shall not have been declared effective.
(d) The Company covenants and agrees that it will take all such action as may be necessary to insure that all one one-thousandths of a share of Preferred Stock issuable upon exercise of Rights shall, at the time of delivery of the certificates for such securities (subject to payment of the Purchase Price), be duly and validly authorized and issued and fully paid and nonassessable.
9
(e) The Company further covenants and agrees that it will pay when due and payable any and all federal and state transfer taxes and other governmental charges which may be payable in respect of the issuance or delivery of the Right Certificates and of any certificates for Preferred Stock upon the exercise of Rights. The Company shall not, however, be required to pay any transfer tax or other governmental charge which may be payable in respect of any transfer involved in the issuance or delivery of any Right Certificates or of any certificates for Preferred Stock to a Person other than the registered holder of the applicable Right Certificate, and prior to any such transfer, issuance or delivery any such tax or other governmental charge shall have been paid by the holder of such Right Certificate or it shall have been established to the Company's satisfaction that no such tax or other governmental charge is due.
Section 10. Preferred Stock Record Date. Each Person (other than the Company) in whose name any certificate for Preferred Stock is issued upon the exercise of Rights shall for all purposes be deemed to have become the holder of record of such Preferred Stock represented thereby on, and such certificate shall be dated, the date upon which the Right Certificate evidencing such Rights was duly surrendered and payment of the Purchase Price (and any transfer taxes or other governmental charges) was made; provided that if the date of such surrender and payment is a date upon which the transfer books of the Company relating to the Preferred Stock are closed, such Person shall be deemed to have become the record holder of such shares on, and such certificate shall be dated, the next succeeding Business Day on which the applicable transfer books of the Company are open. Prior to the exercise of the Rights evidenced thereby, the holder of a Right Certificate shall not be entitled to any rights of a stockholder of the Company with respect to shares for which the Rights shall be exercisable, including the right to vote, to receive dividends or other distributions or to exercise any preemptive rights, and shall not be entitled to receive any notice of any proceedings of the Company except as provided herein.
Section 11. Adjustment of Purchase Price, Number and Kind of Shares or Number of Rights. (a)(i) If the Company shall at any time after the date of this Agreement (A) pay a dividend on the Preferred Stock payable in shares of Preferred Stock, (B) subdivide the outstanding Preferred Stock into a greater number of shares, (C) combine the outstanding Preferred Stock into a smaller number of shares or (D) issue any shares of its capital stock in a reclassification of the Preferred Stock (including any such reclassification in connection with a consolidation or merger involving the Company), the Purchase Price in effect immediately prior to the record date for such dividend or of the effective date of such subdivision, combination or reclassification, and the number and kind of shares of Preferred Stock or other capital stock issuable on such date shall be proportionately adjusted so that each holder of a Right shall (except as otherwise provided herein, including Section 7(d)) thereafter be entitled to receive, upon exercise thereof at the Purchase Price in effect immediately prior to such date, the aggregate number and kind of shares of Preferred Stock or other capital stock, as the case may be, which, if such Right had been exercised immediately prior to such date and at a time when the applicable transfer books of the Company were open, such holder would have been entitled to receive upon such exercise and by virtue of such dividend, subdivision, combination or reclassification. If an event occurs which requires an adjustment under both this Section 11(a)(i) and Section 11(a)(ii), the adjustment provided
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for in this Section 11(a)(i) shall be in addition to, and shall be made prior to, any adjustment required pursuant to Section 11(a)(ii).
(ii) If any Person, alone or together with its Affiliates and Associates, shall, at any time after the date of this Agreement, become an Acquiring Person, then proper provision shall promptly be made so that each holder of a Right shall (except as otherwise provided herein, including Section
7(d)) thereafter be entitled to receive, upon exercise thereof at the Purchase Price in effect immediately prior to the first occurrence of a Section 11(a)(ii) Event, in lieu of Preferred Stock, such number of duly authorized, validly issued, fully paid and nonassessable shares of Common Stock of the Company (such shares being referred to herein as the "Adjustment Shares") as shall be equal to the result obtained by dividing
(x) the product obtained by multiplying the Purchase Price in effect immediately prior to the first occurrence of a Section 11(a)(ii) Event by the number of one one-thousandths of a share of Preferred Stock for which a Right was exercisable immediately prior to such first occurrence (such product being thereafter referred to as the "Purchase Price" for each Right and for all purposes of this Agreement) by
(y) 50% of the current market price (determined pursuant to Section
11(d)(i)) per share of Common Stock on the date of such first occurrence;
provided that if the transaction that would otherwise give rise to the foregoing adjustment is also subject to the provisions of Section 13, then only the provisions of Section 13 shall apply and no adjustment shall be made pursuant to this Section 11(a)(ii).
(iii) If the number of shares of Common Stock which are authorized by the Company's certificate of incorporation but not outstanding or reserved for issuance other than upon exercise of the Rights is not sufficient to permit the exercise in full of the Rights in accordance with Section 11(a)(ii), the Company shall, with respect to each Right, make adequate provision to substitute for the Adjustment Shares, upon payment of the Purchase Price then in effect, (A) (to the extent available) Common Stock and then, (B) (to the extent available) other equity securities of the Company which a majority of the Continuing Directors has determined to be essentially equivalent to shares of Common Stock in respect to dividend, liquidation and voting rights (such securities being referred to herein as "common stock equivalents") and then, if necessary, (C) other equity or debt securities of the Company, cash or other assets, a reduction in the Purchase Price or any combination of the foregoing, having an aggregate value (as determined by the Continuing Directors based upon the advice of a nationally recognized investment banking firm selected by the Continuing Directors) equal to the value of the Adjustment Shares; provided that (x) the Company may, and
(y) if the Company shall not have made adequate provision as required above to deliver value within 30 days following the later of the first occurrence of a
Section 11(a)(ii) Event and the first date that the right to redeem the Rights pursuant to Section 23 shall expire, then the Company shall be obligated to, deliver, upon the surrender for exercise of a Right and without requiring payment of the Purchase Price, (1) (to the extent available) Common Stock and then (2) (to the extent available) common stock equivalents and then, if necessary, (3) other equity or debt securities of
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the Company, cash or other assets or any combination of the foregoing, having an aggregate value (as determined by the Continuing Directors based upon the advice of a nationally recognized investment banking firm selected by the Continuing Directors) equal to the excess of the value of the Adjustment Shares over the Purchase Price. If the Continuing Directors of the Company shall determine in good faith that it is likely that sufficient additional shares of Common Stock could be authorized for issuance upon exercise in full of the Rights, the 30 day period set forth above (such period, as it may be extended, being referred to herein as the "Substitution Period") may be extended to the extent necessary, but not more than 90 days following the first occurrence of a Section 11(a)(ii) Event, in order that the Company may seek stockholder approval for the authorization of such additional shares. To the extent that the Company determines that some action is to be taken pursuant to the first and/or second sentence of this Section 11(a)(iii), the Company (X) shall provide, subject to
Section 7(d), that such action shall apply uniformly to all outstanding Rights and (Y) may suspend the exercisability of the Rights until the expiration of the Substitution Period in order to seek any authorization of additional shares and/or to decide the appropriate form and value of any consideration to be delivered as referred to in such first and/or second sentence. If any such suspension occurs, the Company shall issue a public announcement stating that the exercisability of the Rights has been temporarily suspended, as well as a public announcement at such time as the suspension is no longer in effect. For purposes of this Section 11(a)(iii), the value of the Common Stock shall be the current market price per share of Common Stock (as determined pursuant to
Section 11(d)) on the later of the date of the first occurrence of a Section
11(a)(ii) Event and the first date that the right to redeem the Rights pursuant to Section 23 shall expire; any common stock equivalent shall be deemed to have the same value as the Common Stock on such date; and the value of other securities or assets shall be determined pursuant to Section 11(d)(iii).
(b) In case the Company shall fix a record date for the issuance of rights, options or warrants to all holders of Preferred Stock entitling them to subscribe for or purchase (for a period expiring within 45 calendar days after such record date) Preferred Stock (or securities having the same rights, privileges and preferences as the shares of Preferred Stock ("equivalent preferred stock")) or securities convertible into or exercisable for Preferred Stock (or equivalent preferred stock) at a price per share of Preferred Stock (or equivalent preferred stock) (in each case, taking account of any conversion or exercise price) less than the current market price (as determined pursuant to
Section 11(d)) per share of Preferred Stock on such record date, the Purchase Price to be in effect after such record date shall be determined by multiplying the Purchase Price in effect immediately prior to such date by a fraction, the numerator of which shall be the number of shares of Preferred Stock outstanding on such record date, plus the number of shares of Preferred Stock which the aggregate price (taking account of any conversion or exercise price) of the total number of shares of Preferred Stock (and/or equivalent preferred stock) so to be offered would purchase at such current market price and the denominator of which shall be the number of shares of Preferred Stock outstanding on such record date plus the number of additional shares of Preferred Stock (and/or equivalent preferred stock) so to be offered. In case such subscription price may be paid by delivery of consideration part or all of which shall be in a form other than cash, the value of such consideration shall be as determined in good faith by the Board of Directors of the Company, whose
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determination shall be described in a statement filed with the Rights Agent and shall be conclusive for all purposes. Shares of Preferred Stock owned by or held for the account of the Company shall not be deemed outstanding for the purpose of any such computation. Such adjustment shall be made successively whenever such a record date is fixed, and if such rights, options or warrants are not so issued, the Purchase Price shall be adjusted to be the Purchase Price which would then be in effect if such record date had not been fixed.
(c) In case the Company shall fix a record date for the making of a distribution to all holders of Preferred Stock (including any such distribution made in connection with a consolidation or merger involving the Company) of evidences of indebtedness, equity securities other than Preferred Stock, assets (other than a regular periodic cash dividend out of the earnings or retained earnings of the Company) or rights, options or warrants (excluding those referred to in Section 11(b)), the Purchase Price to be in effect after such record date shall be determined by multiplying the Purchase Price in effect immediately prior to such record date by a fraction, the numerator of which shall be the current market price (as determined pursuant to Section 11(d)) per share of Preferred Stock on such record date, less the value (as determined pursuant to Section 11(d)(iii)) of such evidences of indebtedness, equity securities, assets, rights, options or warrants so to be distributed with respect to one share of Preferred Stock and the denominator of which shall be such current market price per share of Preferred Stock. Such adjustment shall be made successively whenever such a record date is fixed, and if such distribution is not so made, the Purchase Price shall be adjusted to be the Purchase Price which would then be in effect if such record date had not been fixed.
(d)(i) For the purpose of any computation hereunder other than computations made pursuant to Section 11(a)(iii) or 14, the "current market price" per share of Common Stock on any date shall be deemed to be the average of the daily closing prices per share of such Common Stock for the 30 consecutive Trading Days immediately prior to such date; for purposes of computations made pursuant to Section 11(a)(iii), the "current market price" per share of Common Stock on any date shall be deemed to be the average of the daily closing prices per share of such Common Stock for the 10 consecutive Trading Days immediately following such date; and for purposes of computations made pursuant to Section 14, the "current market price" per share of Common Stock for any Trading Day shall be deemed to be the closing price per share of Common Stock for such Trading Day; provided that if the current market price per share of the Common Stock is determined during a period following the announcement by the issuer of such Common Stock of (A) a dividend or distribution on such Common Stock payable in shares of such Common Stock or securities exercisable for or convertible into shares of such Common Stock (other than the Rights), or (B) any subdivision, combination or reclassification of such Common Stock, and prior to the expiration of the requisite 30 Trading Day or 10 Trading Day period, as set forth above, after the ex-dividend date for such dividend or distribution, or the record date for such subdivision, combination or reclassification, then, and in each such case, the "current market price" shall be properly adjusted to take into account ex-dividend trading. The closing price for each day shall be the last sale price, regular way, or, in case no such sale takes place on such day, the average of the closing bid and asked prices, regular way, in either case as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the New York Stock Exchange or,
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if the shares of Common Stock are not listed or admitted to trading on the New York Stock Exchange, on the principal national securities exchange on which the shares of Common Stock are listed or admitted to trading or, if the shares of Common Stock are not listed or admitted to trading on any national securities exchange, the last quoted price or, if not so quoted, the average of the high bid and low asked prices in the over-the-counter market, as reported by the National Association of Securities Dealers, Inc. Automated Quotation System ("NASDAQ") or such other system then in use or, if on any such date the shares of Common Stock are not quoted by any such organization, the average of the closing bid and asked prices as furnished by a professional market maker making a market in the Common Stock selected by the Board of Directors of the Company, or, if at the time of such selection there is an Acquiring Person, by a majority of the Continuing Directors. If on any such date no market maker is making a market in the Common Stock, the fair value of such shares on such date as determined in good faith by the Board of Directors of the Company (or, if at the time of such determination there is an Acquiring Person, by a majority of the Continuing Directors) shall be used. If the Common Stock is not publicly held or not so listed or traded, the "current market price" per share means the fair value per share as determined in good faith by the Board of Directors of the Company, or, if at the time of such determination there is an Acquiring Person, by a majority of the Continuing Directors, or if there are no Continuing Directors, by a nationally recognized investment banking firm selected by the Board of Directors, which determination shall be described in a statement filed with the Rights Agent and shall be conclusive for all purposes.
(ii) For the purpose of any computation hereunder, the "current market price" per share of Preferred Stock shall be determined in the same manner as set forth above for the Common Stock in Section 11(d)(i) (other than the last sentence thereof). If the current market price per share of Preferred Stock cannot be determined in such manner, the "current market price" per share of Preferred Stock shall be conclusively deemed to be an amount equal to 1000 (as such number may be appropriately adjusted for such events as stock splits, stock dividends and recapitalizations with respect to the Common Stock occurring after the date of this Agreement) multiplied by the current market price per share of Common Stock (as determined pursuant to Section 11(d)(i) (other than the last sentence thereof)). If neither the Common Stock nor the Preferred Stock is publicly held or so listed or traded, the "current market price" per share of the Preferred Stock shall be determined in the same manner as set forth in the last sentence of Section 11(d)(i). For all purposes of this Agreement, the "current market price" of one one-thousandth of a share of Preferred Stock shall be equal to the "current market price" of one share of Preferred Stock divided by 1000.
(iii) For the purpose of any computation hereunder, the value of any securities or assets other than Common Stock or Preferred Stock shall be the fair value as determined in good faith by the Board of Directors of the Company, or, if at the time of such determination there is an Acquiring Person, by a majority of the Continuing Directors then in office, or, if there are no Continuing Directors, by a nationally recognized investment banking firm selected by the Board of Directors, which determination shall be described in a statement filed with the Rights Agent and shall be conclusive for all purposes.
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(e) Anything herein to the contrary notwithstanding, no adjustment in the Purchase Price shall be required unless such adjustment would require an increase or decrease of at least 1% in the Purchase Price; provided that any adjustments which by reason of this Section 11(e) are not required to be made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this Section 11 shall be made to the nearest cent or to the nearest ten-thousandth of a share of Common Stock or other share or ten-millionth of a share of Preferred Stock, as the case may be.
(f) If at any time, as a result of an adjustment made pursuant to Section 11(a)(ii) or Section 13(a), the holder of any Right shall be entitled to receive upon exercise of such Right any shares of capital stock other than Preferred Stock, thereafter the number of such other shares so receivable upon exercise of any Right and the Purchase Price thereof shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to the Preferred Stock contained in Section 11(a), (b),
(c), (e), (g), (h), (i), (j), (k) and (m), and the provisions of Sections 7, 9, 10, 13 and 14 with respect to the Preferred Stock shall apply on like terms to any such other shares.
(g) All Rights originally issued by the Company subsequent to any adjustment made hereunder shall evidence the right to purchase, at the Purchase Price then in effect, the then applicable number of one one-thousandths of a share of Preferred Stock and other capital stock of the Company issuable from time to time hereunder upon exercise of the Rights, all subject to further adjustment as provided herein.
(h) Unless the Company shall have exercised its election as provided in
Section 11(i), upon each adjustment of the Purchase Price as a result of the calculations made in Section 11(b) and (c), each Right outstanding immediately prior to the making of such adjustment shall thereafter evidence the right to purchase, at the adjusted Purchase Price, that number of one one-thousandths of a share of Preferred Stock (calculated to the nearest ten-millionth) obtained by
(i) multiplying (x) the number of one one-thousandths of a share for which a Right was exercisable immediately prior to this adjustment by (y) the Purchase Price in effect immediately prior to such adjustment of the Purchase Price and
(ii) dividing the product so obtained by the Purchase Price in effect immediately after such adjustment of the Purchase Price.
(i) The Company may elect on or after the date of any adjustment of the Purchase Price to adjust the number of Rights, in lieu of any adjustment in the number of one one-thousandths of a share of Preferred Stock issuable upon the exercise of a Right. Each of the Rights outstanding after such adjustment of the number of Rights shall be exercisable for the number of one one-thousandths of a share of Preferred Stock for which such Right was exercisable immediately prior to such adjustment. Each Right held of record prior to such adjustment of the number of Rights shall become that number of Rights (calculated to the nearest ten-thousandth) obtained by dividing the Purchase Price in effect immediately prior to adjustment of the Purchase Price by the Purchase Price in effect immediately after adjustment of the Purchase Price. The Company shall make a public announcement of its election to adjust the number of Rights, indicating the record date for the adjustment, and, if known at the
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time, the amount of the adjustment to be made. This record date may be the date on which the Purchase Price is adjusted or any day thereafter, but, if the Right Certificates have been issued, shall be at least 10 days later than the date of the public announcement. If Right Certificates have been issued, upon each adjustment of the number of Rights pursuant to this Section 11(i), the Company shall, as promptly as practicable, cause to be distributed to holders of record of Right Certificates on such record date Right Certificates evidencing, subject to Section 14, the additional Rights to which such holders shall be entitled as a result of such adjustment, or, at the option of the Company, shall cause to be distributed to such holders of record in substitution and replacement for the Right Certificates held by such holders prior to the date of adjustment, and upon surrender thereof, if required by the Company, new Right Certificates evidencing all the Rights to which such holders shall be entitled after such adjustment. Right Certificates so to be distributed shall be issued, executed and countersigned in the manner provided for herein (and may bear, at the option of the Company, the adjusted Purchase Price) and shall be registered in the names of the holders of record of Right Certificates on the record date specified in the public announcement.
(j) Irrespective of any adjustment or change in the Purchase Price or the number of one one-thousandths of a share of Preferred Stock issuable upon the exercise of the Rights, the Right Certificates theretofore and thereafter issued may continue to express the Purchase Price per one one-thousandth of a share and the number of shares which were expressed in the initial Right Certificates issued hereunder.
(k) Before taking any action that would cause an adjustment reducing the Purchase Price below the par value, if any, of the number of one one-thousandths of a share of Preferred Stock issuable upon exercise of the Rights, the Company shall take any corporate action which may, in the opinion of its counsel, be necessary in order that the Company may validly and legally issue fully paid and nonassessable such number of one one-thousandths of a share of Preferred Stock at such adjusted Purchase Price.
(l) In any case in which this Section 11 shall require that an adjustment in the Purchase Price be made effective as of a record date for a specified event, the Company may elect to defer until the occurrence of such event the issuance to the holder of any Right exercised after such record date the number of one one-thousandths of a share of Preferred Stock or other capital stock of the Company, if any, issuable upon such exercise over and above the number of one one-thousandths of a share of Preferred Stock or other capital stock of the Company, if any, issuable upon such exercise on the basis of the Purchase Price in effect prior to such adjustment; provided that the Company shall deliver to such holder a due bill or other appropriate instrument evidencing such holder's right to receive such additional shares upon the occurrence of the event requiring such adjustment.
(m) Anything in this Section 11 to the contrary notwithstanding, the Company shall be entitled to make such reductions in the Purchase Price, in addition to those adjustments expressly required by this Section 11, as and to the extent that it, in its sole discretion, shall determine to be advisable in order that any consolidation or subdivision of the Preferred Stock, issuance wholly for cash of any Preferred Stock at less than the current market price, issuance wholly for
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cash of Preferred Stock or securities which by their terms are convertible into or exercisable for Preferred Stock, stock dividends or issuance of rights, options or warrants referred to in this Section 11, hereafter made by the Company to the holders of its Preferred Stock, shall not be taxable to such stockholders.
(n) The Company covenants and agrees that it will not at any time after the Distribution Date (i) consolidate, merge or otherwise combine with or (ii) sell or otherwise transfer (and/or permit any of its Subsidiaries to sell or otherwise transfer), in one transaction or a series of related transactions, assets or earning power aggregating more than 50% of the assets or earning power of the Company and its Subsidiaries, taken as a whole, to any other Person or Persons if (x) at the time of or immediately after such consolidation, merger, combination or sale there are any rights, warrants or other instruments or securities outstanding or any agreements or arrangements in effect which would substantially diminish or otherwise eliminate the benefits intended to be afforded by the Rights or (y) prior to, simultaneously with or immediately after such consolidation, merger, combination or sale, the stockholders of a Person who constitutes, or would constitute, the "Principal Party" for the purposes of
Section 13 shall have received a distribution of Rights previously owned by such Person or any of its Affiliates and Associates.
(o) The Company covenants and agrees that after the Distribution Date, it will not, except as permitted by Sections 23, 24 and 27, take (or permit any Subsidiary to take) any action if at the time such action is taken it is reasonably foreseeable that such action will substantially diminish or otherwise eliminate the benefits intended to be afforded by the Rights.
(p) Notwithstanding anything in this Agreement to the contrary, if at any time after the date hereof and prior to the Distribution Date the Company shall
(i) pay a dividend on the outstanding shares of Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock into a larger number of shares or (iii) combine the outstanding Common Stock into a smaller number of shares, the number of Rights associated with each share of Common Stock then outstanding, or issued or delivered thereafter as contemplated by
Section 3(c), shall be proportionately adjusted so that the number of Rights thereafter associated with each share of Common Stock following any such event shall equal the result obtained by multiplying the number of Rights associated with each share of Common Stock immediately prior to such event by a fraction the numerator of which shall be the total number of shares of Common Stock outstanding immediately prior to the occurrence of the event and the denominator of which shall be the total number of shares of Common Stock outstanding immediately following the occurrence of such event.
Section 12. Certificate of Adjusted Purchase Price or Number of Shares. Whenever an adjustment is made as provided in Sections 11 and 13, the Company shall (a) promptly prepare a certificate setting forth such adjustment and a brief statement of the facts accounting for such adjustment, (b) promptly file with the Rights Agent and with each transfer agent for the Preferred Stock and the Common Stock a copy of such certificate and (c) mail a brief summary thereof to each holder of a Right Certificate (or, if prior to the Distribution Date, to each holder of a
17
certificate representing shares of Common Stock) in the manner set forth in
Section 26. The Rights Agent shall be fully protected in relying on any such certificate and on any adjustment therein contained.
Section 13. Consolidation, Merger or Sale or Transfer of Assets or Earning Power. (a) If, following the Stock Acquisition Date, directly or indirectly,
(x) the Company shall consolidate with, merge into, or otherwise combine with, any other Person, and the Company shall not be the continuing or surviving corporation of such consolidation, merger or combination,
(y) any Person shall merge into, or otherwise combine with, the Company, and the Company shall be the continuing or surviving corporation of such merger or combination and, in connection with such merger or combination, all or part of the outstanding shares of Common Stock shall be changed into or exchanged for other stock or securities of the Company or any other Person, cash or any other property, or
(z) the Company and/or one or more of its Subsidiaries shall sell or otherwise transfer, in one transaction or a series of related transactions, assets or earning power aggregating more than 50% of the assets or earning power of the Company and its Subsidiaries, taken as a whole, to any other Person or Persons,
then, and in each such case, proper provision shall promptly be made so that
(1) each holder of a Right shall thereafter be entitled to receive, upon exercise thereof at the Purchase Price in effect immediately prior to the first occurrence of any Triggering Event, such number of duly authorized, validly issued, fully paid and nonassessable shares of freely tradeable Common Stock of the Principal Party (as hereinafter defined), not subject to any rights of call or first refusal, liens, encumbrances or other claims, as shall be equal to the result obtained by dividing
(A) the product obtained by multiplying the Purchase Price in effect immediately prior to the first occurrence of any Triggering Event by the number of one one-thousandths of a share of Preferred Stock for which a Right was exercisable immediately prior to such first occurrence (such product being thereafter referred to as the "Purchase Price" for each Right and for all purposes of this Agreement) by
(B) 50% of the current market price (determined pursuant to Section
11(d)(i)) per share of the Common Stock of such Principal Party on the date of consummation of such consolidation, merger, combination, sale or transfer;
(2) the Principal Party shall thereafter be liable for, and shall assume, by virtue of such consolidation, merger, combination, sale or transfer, all the obligations and duties of the Company pursuant to this Agreement;
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(3) the term "Company" shall thereafter be deemed to refer to such Principal Party, it being specifically intended that the provisions of Section 11 shall apply only to such Principal Party following the first occurrence of a
Section 13 Event; and
(4) such Principal Party shall take such steps (including the authorization and reservation of a sufficient number of shares of its Common Stock to permit exercise of all outstanding Rights in accordance with this Section 13(a)) in connection with the consummation of any such transaction as may be necessary to assure that the provisions hereof shall thereafter be applicable, as nearly as reasonably may be, in relation to the shares of its Common Stock thereafter deliverable upon the exercise of the Rights.
(b) "Principal Party" means
(i) in the case of any transaction described in Section 13(a)(x) or
(y), the Person that is the issuer of any securities into which shares of Common Stock of the Company are converted in such merger, consolidation or combination, and if no securities are so issued, the Person that survives or results from such merger, consolidation or combination; and
(ii) in the case of any transaction described in Section 13(a)(z), the Person that is the party receiving the greatest portion of the assets or earning power transferred pursuant to such transaction or transactions;
provided that in any such case, (A) if the Common Stock of such Person is not at such time and has not been continuously over the preceding 12-month period registered under Section 12 of the Exchange Act, and such Person is a direct or indirect Subsidiary of another Person the Common Stock of which is and has been so registered, "Principal Party" shall refer to such other Person; and (B) in case such Person is a Subsidiary, directly or indirectly, of more than one Person, the Common Stocks of two or more of which are and have been so registered, "Principal Party" shall refer to whichever of such Persons is the issuer of the Common Stock having the greatest aggregate market value.
(c) The Company shall not consummate any such consolidation, merger, combination, sale or transfer unless the Principal Party shall have a sufficient number of authorized shares of its Common Stock which are not outstanding or otherwise reserved for issuance to permit the exercise in full of the Rights in accordance with this Section 13 and unless prior thereto the Company and such Principal Party shall have executed and delivered to the Rights Agent a supplemental agreement providing for the terms set forth in Section 13(a) and
(b) and providing that, as soon as practicable after the date of any consolidation, merger, combination, sale or transfer mentioned in Section 13(a), the Principal Party will
(i) prepare and file a registration statement under the Securities Act with respect to the securities issuable upon exercise of the Rights, and will use its best efforts to cause such registration statement (A) to become effective as soon as practicable after such filing and (B) to remain effective (with a prospectus at all times meeting the requirements of the Securities Act) until the Expiration Date and
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(ii) deliver to holders of the Rights historical financial statements for the Principal Party and each of its Affiliates which comply in all respects with the requirements for registration on Form 10 under the Exchange Act.
The provisions of this Section 13 shall similarly apply to successive mergers, consolidations, combinations, sales or other transfers. If any Section 13 Event shall occur at any time after the occurrence of a Section 11(a)(ii) Event, the Rights which have not theretofore been exercised shall thereafter become exercisable in the manner described in Section 13(a).
Section 14. Fractional Rights and Fractional Shares. (a) The Company shall not be required to issue fractions of Rights, except prior to the Distribution Date as provided in Section 11(p), or to distribute Right Certificates which evidence fractional Rights. In lieu of any such fractional Rights, the Company shall pay to the registered holders of the Right Certificates with regard to which such fractional Rights would otherwise be issuable an amount in cash equal to the same fraction of the current market price of a whole Right. For purposes of this Section 14(a), the current market price of a whole Right shall be the closing price of a Right for the Trading Day immediately prior to the date on which such fractional Rights would otherwise have been issuable. The closing price of a Right for any day shall be the last sale price, regular way, or, in case no such sale takes place on such day, the average of the closing bid and asked prices, regular way, in either case as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the New York Stock Exchange or, if the Rights are not listed or admitted to trading on the New York Stock Exchange, on the principal national securities exchange on which the Rights are listed or admitted to trading or, if the Rights are not listed or admitted to trading on any national securities exchange, the last quoted price, or, if not so quoted, the average of the high bid and low asked prices in the over-the-counter market, as reported by NASDAQ or such other system then in use or, if on any such date the Rights are not quoted by any such organization, the average of the closing bid and asked prices as furnished by a professional market maker making a market in the Rights selected by the Board of Directors of the Company, or, if at the time of such selection there is an Acquiring Person, by a majority of the Continuing Directors. If on any such date no such market maker is making a market in the Rights, the current market price of the Rights on such date shall be as determined in good faith by the Board of Directors of the Company, or, if at the time of such determination there is an Acquiring Person, by a majority of the Continuing Directors.
(b) The Company shall not be required to issue fractions of shares of Preferred Stock (other than fractions which are multiples of one one-thousandth of a share of Preferred Stock) upon exercise of the Rights or to distribute certificates which evidence fractional shares of Preferred Stock (other than fractions which are multiples of one one-thousandth of a share of Preferred Stock). In lieu of any such fractional shares of Preferred Stock, the Company shall pay to the registered holders of Right Certificates at the time such Rights are exercised as herein provided an amount in cash equal to the same fraction of the current market price of one one-thousandth of a share of Preferred Stock. For purposes of this Section 14(b), the current market price of one one-thousandth of a share of Preferred Stock shall be one one-thousandth of the closing price of a share of Preferred Stock (as determined pursuant to
Section 11(d)) for the
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Trading Day immediately prior to the date of such exercise.
(c) Following the occurrence of any Triggering Event or upon any exchange pursuant to Section 24, the Company shall not be required to issue fractions of shares of Common Stock upon exercise of the Rights or to distribute certificates which evidence fractional shares of Common Stock. In lieu of fractional shares of Common Stock, the Company shall pay to the registered holders of Right Certificates at the time such Rights are exercised or exchanged as herein provided an amount in cash equal to the same fraction of the current market price of a share of Common Stock. For purposes of this Section 14(c), the current market price of a share of Common Stock shall be the closing price of a share of Common Stock (as determined pursuant to Section 11(d)(i)) for the Trading Day immediately prior to the date of such exercise or exchange.
(d) The holder of a Right by the acceptance of the Right expressly waives his right to receive any fractional Rights or any fractional shares upon exercise of a Right except as permitted by this Section 14.
Section 15. Rights of Action. All rights of action in respect of this Agreement are vested in the respective registered holders of the Right Certificates (and, prior to the Distribution Date, the registered holders of certificates representing Common Stock); and any registered holder of any Right Certificate (or, prior to the Distribution Date, of any certificate representing Common Stock), without the consent of the Rights Agent or of the holder of any other Right Certificate (or, prior to the Distribution Date, of any certificate representing Common Stock), may, in his own behalf and for his own benefit, enforce, and may institute and maintain any suit, action or proceeding against the Company to enforce, or otherwise act in respect of, his right to exercise the Rights evidenced by such Right Certificate in the manner provided in such Right Certificate and in this Agreement. Without limiting the foregoing or any remedies available to the holders of Rights, it is specifically acknowledged that the holders of Rights would not have an adequate remedy at law for any breach of this Agreement and will be entitled to specific performance of the obligations under, and injunctive relief against actual or threatened violations of the obligations of, any Person subject to this Agreement.
Section 16. Agreement of Right Holders. Every holder of a Right by accepting the same consents and agrees with the Company and the Rights Agent and with every other holder of a Right that:
(a) prior to the Distribution Date, the Rights will be transferable only in connection with the transfer of Common Stock;
(b) after the Distribution Date, the Right Certificates are transferable only on the registry books of the Rights Agent if surrendered at the principal office or offices of the Rights Agent designated for such purposes, duly endorsed or accompanied by a proper instrument of transfer and with the appropriate forms and certificates fully executed;
(c) subject to Sections 6 and 7, the Company and the Rights Agent may deem and treat the Person in whose name a Right Certificate (or, prior to the Distribution Date, a certificate representing shares of Common Stock) is registered as the absolute owner thereof and of the Rights evidenced thereby (notwithstanding any notations of ownership or writing on
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the Right Certificate or the certificate representing shares of Common Stock made by anyone other than the Company or the Rights Agent) for all purposes whatsoever, and neither the Company nor the Rights Agent, subject to the last sentence of Section 7(d), shall be affected by any notice to the contrary; and
(d) notwithstanding anything in this Agreement to the contrary, neither the Company nor the Rights Agent shall have any liability to any holder of a Right or other Person as a result of its inability to perform any of its obligations under this Agreement by reason of any preliminary or permanent injunction or other order, decree or ruling issued by a court of competent jurisdiction or by a governmental, regulatory or administrative agency or commission, or any statute, rule, regulation or executive order promulgated or enacted by any governmental authority prohibiting or otherwise restraining performance of such obligation; provided that the Company must use its best efforts to have any such order, decree or ruling lifted or otherwise overturned as soon as possible.
Section 17. Right Certificate Holder Not Deemed a Stockholder. No holder, as such, of any Right Certificate shall be entitled to vote, receive dividends or be deemed for any purpose the holder of the shares of capital stock which may at any time be issuable on the exercise of the Rights represented thereby, nor shall anything contained herein or in any Right Certificate be construed to confer upon the holder of any Right Certificate, as such, any of the rights of a stockholder of the Company or any right to vote for the election of directors or upon any matter submitted to stockholders at any meeting thereof, or to give or withhold consent to any corporate action, or to receive notice of meetings or other actions affecting stockholders (except as provided in Section 25), or to receive dividends or subscription rights, or otherwise, until the Right or Rights evidenced by such Right Certificate shall have been exercised in accordance with the provisions hereof.
Section 18. Concerning the Rights Agent. (a) The Company agrees to pay to the Rights Agent such compensation as shall be agreed to in writing between the Company and the Rights Agent for all services rendered by it hereunder and, from time to time, on demand of the Rights Agent, its reasonable expenses and counsel fees, expenses and disbursements and other disbursements incurred in the execution or administration of this Agreement and the exercise and performance of its duties hereunder. The Company also agrees to indemnify the Rights Agent for, and to hold it harmless against, any loss, liability, or expense, incurred without gross negligence, bad faith or willful misconduct on the part of the Rights Agent, for anything done or omitted by the Rights Agent in connection with the administration of this Agreement or the exercise or performance of its duties hereunder, including the costs and expenses of defending against any claim of liability. The provisions of this Section 18(a) shall survive the expiration of the Rights and the termination of this Agreement.
(b) The Rights Agent shall be protected and shall incur no liability for or in respect of any action taken, suffered or omitted by it in connection with the administration of this Agreement or the exercise or performance of its duties hereunder in reliance upon any Right Certificate or certificate for Common Stock or for other securities of the Company, instrument of assignment or transfer, power of attorney, endorsement, affidavit, letter, notice, opinion, instruction, direction, consent, certificate, statement, or other paper or document believed by it to be genuine and to be signed and executed by the proper Person or Persons.
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Section 19. Merger or Consolidation or Change of Name of Rights Agent. (a) Any corporation into which the Rights Agent or any successor Rights Agent may be merged or with which it may be consolidated, or any corporation resulting from any merger or consolidation to which the Rights Agent or any successor Rights Agent shall be a party, or any corporation succeeding to the corporate trust or stock transfer business of the Rights Agent or any successor Rights Agent, shall be the successor to the Rights Agent under this Agreement without the execution or filing of any paper or any further act on the part of any of the parties hereto; provided that such corporation would be eligible for appointment as a successor Rights Agent under the provisions of Section 21. In case at the time such successor Rights Agent shall succeed to the agency created by this Agreement, any of the Right Certificates shall have been countersigned but not delivered, any such successor Rights Agent may adopt the countersignature of a predecessor Rights Agent and deliver such Right Certificates so countersigned; and in case at that time any of the Right Certificates shall not have been countersigned, any successor Rights Agent may countersign such Right Certificates either in the name of the predecessor Rights Agent or in the name of the successor Rights Agent; and in all such cases such Right Certificates shall have the full force provided in the Right Certificates and in this Agreement.
(b) In case at any time the name of the Rights Agent shall be changed and at such time any of the Right Certificates shall have been countersigned but not delivered, the Rights Agent may adopt the countersignature under its prior name and deliver Right Certificates so countersigned; and in case at that time any of the Right Certificates shall not have been countersigned, the Rights Agent may countersign such Right Certificates either in its prior name or in its changed name; and in all such cases such Right Certificates shall have the full force provided in the Right Certificates and in this Agreement.
Section 20. Duties of Rights Agent. The Rights Agent undertakes the duties and obligations imposed by this Agreement upon the following terms and conditions, by all of which the Company and the holders of Right Certificates, by their acceptance thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel (who may be legal counsel for the Company), and the opinion of such counsel shall be full and complete authorization and protection to the Rights Agent as to any action taken or omitted by it in good faith and in accordance with such opinion.
(b) Whenever in the performance of its duties under this Agreement the Rights Agent shall deem it necessary or desirable that any fact or matter (including, without limitation, the identity of any "Acquiring Person" and the determination of "current market price") be proved or established by the Company prior to taking, suffering or omitting to take any action hereunder, such fact or matter (unless other evidence in respect thereof be herein specifically prescribed) may be deemed to be conclusively proved and established by a certificate signed by the Chairman of the Board, the President or any Vice President and by the Treasurer or any Assistant Treasurer or the Secretary or any Assistant Secretary of the Company and delivered to the Rights Agent; and such certificate shall be full authorization to the Rights Agent for any action taken, suffered or
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omitted in good faith by it under the provisions of this Agreement in reliance upon such certificate.
(c) The Rights Agent shall be liable hereunder only for its own gross negligence, bad faith or willful misconduct.
(d) The Rights Agent shall not be liable for or by reason of any of the statements of fact or recitals contained in this Agreement or in the Right Certificates (except its countersignature thereof) or be required to verify the same, but all such statements and recitals are and shall be deemed to have been made by the Company only.
(e) The Rights Agent shall not be under any responsibility in respect of the validity of this Agreement or the execution and delivery hereof (except the due execution hereof by the Rights Agent) or in respect of the validity or execution of any Right Certificate (except its countersignature thereof); nor shall it be responsible for any breach by the Company of any covenant or condition contained in this Agreement or in any Right Certificate; nor shall it be responsible for any change in the exercisability of the Rights (including the Rights becoming void pursuant to Section 7(d)) or any adjustment in the terms of the Rights (including the manner, method or amount thereof) provided for in Sections 3, 11, 13, 23 or 24, or the ascertaining of the existence of facts that would require any such adjustment (except with respect to the exercise of Rights evidenced by Right Certificates after actual notice of any such adjustment); nor shall it by any act hereunder be deemed to make any representation or warranty as to the authorization or reservation of any shares of Common Stock or Preferred Stock to be issued pursuant to this Agreement or any Right Certificate or as to whether any shares of Common Stock or Preferred Stock will, when issued, be duly authorized, validly issued, fully paid and nonassessable.
(f) The Company agrees that it will perform, execute, acknowledge and deliver or cause to be performed, executed, acknowledged and delivered all such further and other acts, instruments and assurances as may reasonably be required by the Rights Agent for the carrying out or performing by the Rights Agent of the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed to accept instructions with respect to the performance of its duties hereunder from the Chairman of the Board, the President or any Vice President or the Secretary or any Assistant Secretary or the Treasurer or any Assistant Treasurer of the Company, and to apply to such officers for advice or instructions in connection with its duties, and it shall not be liable for any action taken, suffered or omitted to be taken by it in good faith in accordance with instructions of any such officer.
(h) The Rights Agent and any stockholder, director, officer or employee of the Rights Agent may buy, sell or deal in any of the Rights or other securities of the Company or become pecuniarily interested in any transaction in which the Company may be interested, or contract with or lend money to the Company or otherwise act as fully and freely as though it were not the Rights Agent under this Agreement. Nothing herein shall preclude the Rights Agent from acting in any other capacity for the Company or for any other Person.
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(i) The Rights Agent may execute and exercise any of the rights or powers hereby vested in it or perform any duty hereunder either itself or by or through its attorneys or agents, and the Rights Agent shall not be answerable or accountable for any act, default, neglect or misconduct of any such attorneys or agents or for any loss to the Company or to any holders of Rights resulting from any such act, default, neglect or misconduct, provided that reasonable care was exercised in the selection thereof.
(j) No provision of this Agreement shall require the Rights Agent to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder or in the exercise of its rights if there shall be reasonable grounds for believing that repayment of such funds or adequate indemnification against such risk or liability is not reasonably assured to it.
(k) If, with respect to any Right Certificate surrendered to the Rights Agent for exercise or transfer, the certificate attached to the form of assignment or form of election to purchase, as the cases may be, has either not been completed or indicates an affirmative response to clause 1 or 2 thereof, the Rights Agent shall not take any further action with respect to such requested exercise or transfer without first consulting with the Company.
Section 21. Change of Rights Agent. The Rights Agent or any successor Rights Agent may resign and be discharged from its duties under this Agreement upon 30 days' notice in writing mailed to the Company and to each transfer agent of the Common Stock and Preferred Stock by registered or certified mail, and, subsequent to the Distribution Date, to the holders of the Right Certificates by first-class mail. The Company may remove the Rights Agent or any successor Rights Agent upon 30 days' notice in writing, mailed to the Rights Agent or successor Rights Agent, as the case may be, and to each transfer agent of the Common Stock and Preferred Stock by registered or certified mail, and, subsequent to the Distribution Date, to the holders of the Right Certificates by first-class mail. If the Rights Agent shall resign or be removed or shall otherwise become incapable of acting, the Company shall appoint a successor to the Rights Agent. If the Company shall fail to make such appointment within a period of 30 days after giving notice of such removal or after it has been notified in writing of such resignation or incapacity by the resigning or incapacitated Rights Agent or by the holder of a Right Certificate (who shall, with such notice, submit his Right Certificate for inspection by the Company), then the registered holder of any Right Certificate may apply to any court of competent jurisdiction for the appointment of a new Rights Agent. Any successor Rights Agent, whether appointed by the Company or by such a court, shall be (a) a corporation organized and doing business under the laws of the United States or of any state of the United States, in good standing, having a principal office in the State of New York, which is authorized under such laws to exercise stock transfer or corporate trust powers and is subject to supervision or examination by federal or state authority and which has at the time of its appointment as Rights Agent a combined capital and surplus of at least $50,000,000 or (b) an Affiliate of a corporation described in clause (a) of this sentence. After appointment, the successor Rights Agent shall be vested with the same powers, rights, duties and responsibilities as if it had been originally named as Rights Agent without further act or deed; but the predecessor Rights Agent shall deliver and transfer to the
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successor Rights Agent any property at the time held by it hereunder, and execute and deliver any further assurance, conveyance, act or deed necessary for the purpose. Not later than the effective date of any such appointment, the Company shall file notice thereof in writing with the predecessor Rights Agent and each transfer agent of the Common Stock and the Preferred Stock, and, subsequent to the Distribution Date, mail a notice thereof in writing to the registered holders of the Right Certificates. Failure to give any notice provided for in this Section 21, or any defect therein, shall not affect the legality or validity of the resignation or removal of the Rights Agent or the appointment of the successor Rights Agent, as the case may be.
Section 22. Issuance of New Right Certificates. Notwithstanding any of the provisions of this Agreement or of the Rights to the contrary, the Company may, at its option, issue new Right Certificates evidencing Rights in such form as may be approved by its Board of Directors to reflect any adjustment or change in the Purchase Price and the number or kind or class of shares of stock issuable upon exercise of the Rights made in accordance with the provisions of this Agreement.
Section 23. Redemption. (a) The Board of Directors of the Company may, at its option, at any time prior to the earlier of (i) the close of business on the tenth day after the Stock Acquisition Date (or such later date as a majority of the Continuing Directors may designate prior to such time as the Rights are no longer redeemable) and (ii) the Final Expiration Date, redeem all but not less than all the then outstanding Rights at a redemption price of $.01 per Right, as such amount may be appropriately adjusted to reflect any stock split, stock dividend or similar transaction occurring after the date hereof (such redemption price being hereinafter referred to as the "Redemption Price"); provided that after any Person has become an Acquiring Person, any redemption of the Rights shall be effective only if there are Continuing Directors then in office, and such redemption shall have been approved by a majority of such Continuing Directors. Notwithstanding anything in this Agreement to the contrary, the Rights shall not be exercisable after the first occurrence of a Section
11(a)(ii) Event until such time as the Company's right of redemption hereunder has expired.
(b) Immediately upon the action of the Board of Directors of the Company electing to redeem the Rights and without any further action and without any notice, the right to exercise the Rights will terminate and thereafter the only right of the holders of Rights shall be to receive the Redemption Price for each Right so held. The Company shall promptly thereafter give notice of such redemption to the Rights Agent and the holders of the Rights in the manner set forth in Section 26; provided that the failure to give, or any defect in, such notice shall not affect the validity of such redemption. Any notice which is mailed in the manner herein provided shall be deemed given, whether or not the holder receives the notice. Each such notice of redemption will state the method by which the payment of the Redemption Price will be made. Neither the Company nor any of its Affiliates or Associates may redeem, acquire or purchase for value any Rights at any time in any manner other than that specifically set forth in Section 23 or 24, and other than in connection with the purchase, acquisition or redemption of shares of Common Stock prior to the Distribution Date.
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Section 24. Exchange. (a) At any time after any Person becomes an Acquiring Person, a majority of the Continuing Directors may, at their option, exchange all or part of the then outstanding and exercisable Rights (which shall not include Rights that have become void pursuant to Section 7(d)) for shares of Common Stock at an exchange ratio of one share of Common Stock per Right, appropriately adjusted to reflect any stock split, stock dividend or similar transaction occurring after the date hereof (such exchange ratio being hereinafter referred to as the "Exchange Ratio"). Notwithstanding the foregoing, the Board of Directors shall not be empowered to effect such exchange at any time after any Person (other than the Company, any of its Subsidiaries, any employee benefit plan of the Company or any of its Subsidiaries or any Person organized, appointed or established by the Company or any of its Subsidiaries for or pursuant to the terms of any such plan), together with all Affiliates and Associates of such Person, becomes the Beneficial Owner of 50% or more of the shares of Common Stock then outstanding.
(b) Immediately upon the action of the Continuing Directors electing to exchange any Rights pursuant to Section 24(a) and without any further action and without any notice, the right to exercise such Rights will terminate and thereafter the only right of a holder of such Rights shall be to receive that number of shares of Common Stock equal to the number of such Rights held by such holder multiplied by the Exchange Ratio. The Company shall promptly thereafter give notice of such exchange to the Rights Agent and the holders of the Rights to be exchanged in the manner set forth in Section 26; provided that the failure to give, or any defect in, such notice shall not affect the validity of such exchange. Any notice which is mailed in the manner herein provided shall be deemed given, whether or not the holder receives the notice. Each such notice of exchange will state the method by which the exchange of the shares of Common Stock for Rights will be effected and, in the event of any partial exchange, the number of Rights which will be exchanged. Any partial exchange shall be effected pro rata based on the number of Rights (other than Rights which have become void pursuant to Section 7(d)) held by each holder of Rights.
(c) In any exchange pursuant to this Section 24, the Company, at its option, may substitute common stock equivalents (as defined in Section
11(a)(iii)) for shares of Common Stock exchangeable for Rights, at the initial rate of one common stock equivalent for each share of Common Stock, as appropriately adjusted to reflect adjustments in dividend, liquidation and voting rights of common stock equivalents pursuant to the terms thereof, so that each common stock equivalent delivered in lieu of each share of Common Stock shall have essentially the same dividend, liquidation and voting rights as one share of Common Stock.
Section 25. Notice of Proposed Actions. (a) In case the Company shall propose, at any time after the Distribution Date, (i) to pay any dividend payable in stock of any class to the holders of Preferred Stock or to make any other distribution to the holders of Preferred Stock (other than a regular quarterly cash dividend out of earnings or retained earnings of the Company), or
(ii) to offer to the holders of its Preferred Stock rights or warrants to subscribe for or to purchase any additional shares of Preferred Stock or shares of stock of any class or any other securities, rights or options, or (iii) to effect any reclassification of its Preferred Stock (other than a reclassification involving only the subdivision or
27
combination of outstanding shares of Preferred Stock) or (iv) to effect any consolidation or merger with any other Person, or to effect and/or to permit one or more of its Subsidiaries to effect any sale or other transfer, in one transaction or a series of related transactions, of assets or earning power aggregating more than 50% of the assets or earning power of the Company and its Subsidiaries, taken as a whole, to any other Person or Persons, or (v) to effect the liquidation, dissolution or winding up of the Company, then, in each such case, the Company shall give to each holder of a Right, to the extent feasible and in accordance with Section 26, a notice of such proposed action, which shall specify the record date for the purposes of any such dividend, distribution or offering of rights or warrants, or the date on which any such reclassification, consolidation, merger, sale, transfer, liquidation, dissolution or winding up is to take place and the date of participation therein by the holders of Preferred Stock, if any such date is to be fixed, and such notice shall be so given in the case of any action covered by clause (i) or (ii) above at least 20 days prior to the record date for determining holders of the Preferred Stock entitled to participate in such dividend, distribution or offering, and in the case of any such other action, at least 20 days prior to the date of the taking of such proposed action or the date of participation therein by the holders of Preferred Stock, whichever shall be the earlier. The failure to give notice required by this Section or any defect therein shall not affect the legality or validity of the action taken by the Company or the vote upon any such action.
(b) Notwithstanding anything in this Agreement to the contrary, prior to the Distribution Date a public filing by the Company with the Securities and Exchange Commission shall constitute sufficient notice to the holders of securities of the Company, including the Rights, for purposes of this Agreement and no other notice need be given to such holders.
(c) If a Triggering Event shall occur, then, in any such case, (1) the Company shall as soon as practicable thereafter give to each holder of a Right, in accordance with Section 26, a notice of the occurrence of such event, which shall specify the event and the consequences of the event to holders of Rights under Section 11(a)(ii) or 13, as the case may be, and (2) all references in
Section 25(a) to Preferred Stock shall be deemed thereafter to refer to Common Stock or other capital stock, as the case may be.
Section 26. Notices. Notices or demands authorized by this Agreement to be given or made by the Rights Agent or by the holder of any Right to or on the Company shall be sufficiently given or made if sent by first-class mail (postage prepaid) to the address of the Company indicated on the signature page hereof or such other address as the Company shall specify in writing to the Rights Agent. Subject to the provisions of Section 21, any notice or demand authorized by this Agreement to be given or made by the Company or by the holder of any Right to or on the Rights Agent shall be sufficiently given or made if sent by first-class mail (postage prepaid) to the address of the Rights Agent indicated on the signature page hereof or such other address as the Rights Agent shall specify in writing to the Company. Notices or demands authorized by this Agreement to be given or made by the Company or the Rights Agent to the holder of any Right Certificate (or, prior to the Distribution Date, to the holder of any certificate representing shares of Common Stock) shall be sufficiently given or made if sent by first-class mail (postage prepaid) to the address of such holder shown on the registry books of the Company.
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Section 27. Supplements and Amendments. Prior to the Distribution Date, the Company and the Rights Agent shall, if the Company so directs, supplement or amend any provision of this Agreement without the approval of any holders of certificates representing shares of Common Stock. From and after the Distribution Date, the Company and the Rights Agent shall, if the Company so directs, supplement or amend this Agreement without the approval of any holders of Right Certificates in order (a) to cure any ambiguity, (b) to correct or supplement any provision contained herein which may be defective or inconsistent with any other provisions herein or (c) to change or supplement the provisions hereof in any manner which the Company may deem necessary or desirable and which shall not adversely affect the interests of the holders of Rights (other than an Acquiring Person or an Affiliate or Associate of an Acquiring Person). Notwithstanding the foregoing, after any Person has become an Acquiring Person, any supplement or amendment shall be effective only if there are Continuing Directors then in office, and such supplement or amendment shall have been approved by a majority of such Continuing Directors. Upon the delivery of a certificate from an appropriate officer of the Company which states that the proposed supplement or amendment is in compliance with the terms of this Section, the Rights Agent shall execute such supplement or amendment. Prior to the Distribution Date, the interests of the holders of Rights shall be deemed coincident with the interests of the holders of Common Stock.
Section 28. Successors. All the covenants and provisions of this Agreement by or for the benefit of the Company or the Rights Agent shall bind and inure to the benefit of their respective successors and assigns hereunder.
Section 29. Determinations and Actions by the Board of Directors, etc. For all purposes of this Agreement, any calculation of the number of shares of Common Stock outstanding at any particular time, including for purposes of determining the particular percentage of such outstanding shares of Common Stock of which any Person is the Beneficial Owner, shall be made in accordance with the last sentence of Rule 13d-3(d)(1)(i) under the Exchange Act as in effect on the date of this Agreement. The Board of Directors of the Company (or, after any Person has become an Acquiring Person, a majority of the Continuing Directors) shall have the exclusive power and authority to administer this Agreement and to exercise all rights and powers specifically granted to the Board or to the Company, or as may be necessary or advisable in the administration of this Agreement, including the right and power to (i) interpret the provisions of this Agreement and (ii) make all determinations deemed necessary or advisable for the administration of this Agreement (including a determination to redeem or exchange or not to redeem or exchange the Rights or to amend the Agreement). All such actions, calculations, interpretations and determinations (including, for purposes of clause (y) below, all omissions with respect to the foregoing) which are done or made by the Board (or, after any Person has become an Acquiring Person, by the Continuing Directors) in good faith shall (x) be final, conclusive and binding on the Company, the Rights Agent, the holders of the Rights and all other parties, and (y) not subject the Board of Directors of the Company or the Continuing Directors to any liability to the holders of the Rights.
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Section 30. Benefits of this Agreement. Nothing in this Agreement shall be construed to give to any Person other than the Company, the Rights Agent and the registered holders of the Right Certificates (and, prior to the Distribution Date, the certificates representing the shares of Common Stock) any legal or equitable right, remedy or claim under this Agreement; but this Agreement shall be for the sole and exclusive benefit of the Company, the Rights Agent and the registered holders of the Right Certificates (and, prior to the Distribution Date, the certificates representing the shares of Common Stock).
Section 31. 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 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; provided that, notwithstanding anything in this Agreement to the contrary, if any such term, provision, covenant or restriction is held by such court or authority to be invalid, void or unenforceable and the Board of Directors of the Company (or, after any Person has become an Acquiring Person, a majority of the Continuing Directors) determines in its good faith judgment that severing the invalid language from this Agreement would adversely affect the purpose or effect of this Agreement, the right of redemption set forth in Section 23 hereof shall be reinstated and shall not expire until the close of business on the tenth day following the date of such determination by the Board of Directors or Continuing Directors, as the case may be.
Section 32. Governing Law. This Agreement, each Right and each Right Certificate issued hereunder shall be deemed to be a contract made under the laws of the State of Delaware and for all purposes shall be governed by and construed in accordance with the laws of such State applicable to contracts to be made and performed entirely within such State, except that the rights and obligations of the Rights Agent shall be governed by the law of the State of New York.
Section 33. Counterparts. This Agreement may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute one and the same instrument.
Section 34. Descriptive Headings. The captions herein are included for convenience of reference only, do not constitute a part of this Agreement and shall be ignored in the construction and interpretation hereof.
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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: /s/Eugene A. Gargaro, Jr.
    Name: Eugene A. Gargaro, Jr.
    Title: Vice President	

21001 Van Born Road Taylor, Michigan 48180 Attention:
THE BANK OF NEW YORK

By:  /s/John I. Sivertsen
     Name: John I. Sivertsen
     Title: Vice President	

101 Barclay Street New York, New York 10286 Attention: Stock Transfer Administration
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Exhibit A
FORM OF
CERTIFICATE OF DESIGNATION
OF
SERIES A PARTICIPATING CUMULATIVE
PREFERRED STOCK
OF
MASCO CORPORATION
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
We, Richard G. Mosteller, Senior Vice President - Finance, and Eugene A. Gargaro, Jr., Vice President and Secretary, of Masco Corporation, a corporation organized and existing under the General Corporation Law of the State of Delaware ("Delaware Law"), in accordance with the provisions thereof, DO HEREBY CERTIFY:
That pursuant to the authority conferred upon the Board of Directors by the Certificate of Incorporation of the Corporation, the Board of Directors on December 6, 1995, adopted the following resolution creating a series of Preferred Stock in the amount and having the designation, voting powers, preferences and relative, participating, optional and other special rights and qualifications, limitations and restrictions thereof as follows:
Section 1. Designation and Number of Shares. The shares of such series shall be designated as "Series A Participating Cumulative Preferred Stock" (the "Series A Preferred Stock"), and the number of shares constituting such series shall be 175,106. Such number of shares of the Series A Preferred Stock may be increased or decreased by resolution of the Board of Directors; provided that no decrease shall reduce the number of shares of Series A Preferred Stock to a number less than the number of shares then outstanding plus the number of shares issuable upon exercise or conversion of outstanding rights, options or other securities issued by the Corporation.
Section 2. Dividends and Distributions.
(A) The holders of shares of Series A Preferred Stock shall be entitled to receive, when, as and if declared by the Board of Directors out of funds legally available for the purpose, quarterly dividends payable on February 15, May 15, August 15 and November 15 of each year (each such date being referred to herein as a "Quarterly Dividend Payment Date"),
A-1
commencing on the first Quarterly Dividend Payment Date after the first issuance of any share or fraction of a share of Series A Preferred Stock, in an amount per share (rounded to the nearest cent) equal to the greater of (a) $1.00 and
(b) subject to the provision for adjustment hereinafter set forth, 1,000 times the aggregate per share amount of all cash dividends or other distributions and 1,000 times the aggregate per share amount of all non-cash dividends or other distributions (other than (i) a dividend payable in shares of Common Stock, par value $1.00 per share, of the Corporation (the "Common Stock") or (ii) a subdivision of the outstanding shares of Common Stock (by reclassification or otherwise)), declared on the Common Stock since the immediately preceding Quarterly Dividend Payment Date, or, with respect to the first Quarterly Dividend Payment Date, since the first issuance of any share or fraction of a share of Series A Preferred Stock. If the Corporation shall at any time after December 6, 1995 (the "Rights Declaration Date") pay any dividend on Common Stock payable in shares of Common Stock or effect a subdivision or combination of the outstanding shares of Common Stock (by reclassification or otherwise) into a greater or lesser number of shares of Common Stock, then in each such case the amount to which holders of shares of Series A Preferred Stock were entitled immediately prior to such event under clause (b) of the preceding sentence shall be adjusted by multiplying such amount by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.
(B) The Corporation shall declare a dividend or distribution on the Series A Preferred Stock as provided in paragraph (A) above immediately after it declares a dividend or distribution on the Common Stock (other than as described in clauses (i) and (ii) of the first sentence of paragraph (A)); provided that if no dividend or distribution shall have been declared on the Common Stock during the period between any Quarterly Dividend Payment Date and the next subsequent Quarterly Dividend Payment Date (or, with respect to the first Quarterly Dividend Payment Date, the period between the first issuance of any share or fraction of a share of Series A Preferred Stock and such first Quarterly Dividend Payment Date), a dividend of $1.00 per share on the Series A Preferred Stock shall nevertheless be payable on such subsequent Quarterly Dividend Payment Date.
(C) Dividends shall begin to accrue and be cumulative on outstanding shares of Series A Preferred Stock from the Quarterly Dividend Payment Date next preceding the date of issue of such shares of Series A Preferred Stock, unless the date of issue of such shares is on or before the record date for the first Quarterly Dividend Payment Date, in which case dividends on such shares shall begin to accrue and be cumulative from the date of issue of such shares, or unless the date of issue is a date after the record date for the determination of holders of shares of Series A Preferred Stock entitled to receive a quarterly dividend and on or before such Quarterly Dividend Payment Date, in which case dividends shall begin to accrue and be cumulative from such Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not bear interest. Dividends paid on shares of Series A Preferred Stock in an amount less than the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a share-by-share basis among all such shares at the time outstanding. The Board of Directors may fix a record date for the determination of holders of shares of Series A Preferred Stock entitled to receive payment of a dividend or distribution declared thereon, which
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record date shall not be more than 60 days prior to the date fixed for the payment thereof.
Section 3. Voting Rights. In addition to any other voting rights required by law, the holders of shares of Series A Preferred Stock shall have the following voting rights:
(A) Subject to the provision for adjustment hereinafter set forth, each share of Series A Preferred Stock shall entitle the holder thereof to 1,000 votes on all matters submitted to a vote of stockholders of the Corporation. If the Corporation shall at any time after the Rights Declaration Date pay any dividend on Common Stock payable in shares of Common Stock or effect a subdivision or combination of the outstanding shares of Common Stock (by reclassification or otherwise) into a greater or lesser number of shares of Common Stock, then in each such case the number of votes per share to which holders of shares of Series A Preferred Stock were entitled immediately prior to such event shall be adjusted by multiplying such number by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.
(B) Except as otherwise provided herein or by law, the holders of shares of Series A Preferred Stock and the holders of shares of Common Stock shall vote together as a single class on all matters submitted to a vote of stockholders of the Corporation.
(C) (i) If at any time dividends on any Series A Preferred Stock shall be in arrears in an amount equal to six quarterly dividends thereon, the occurrence of such contingency shall mark the beginning of a period (herein called a "default period") which shall extend until such time when all accrued and unpaid dividends for all previous quarterly dividend periods and for the current quarterly dividend period on all shares of Series A Preferred Stock then outstanding shall have been declared and paid or set apart for payment. During each default period, all holders of Preferred Stock and any other series of Preferred Stock then entitled as a class to elect directors, voting together as a single class, irrespective of series, shall have the right to elect two Directors.
(ii) During any default period, such voting right of the holders of Series A Preferred Stock may be exercised initially at a special meeting called pursuant to subparagraph (iii) of this Section 3(C) or at any annual meeting of stockholders, and thereafter at annual meetings of stockholders, provided that neither such voting right nor the right of the holders of any other series of Preferred Stock, if any, to increase, in certain cases, the authorized number of Directors shall be exercised unless the holders of 10% in number of shares of Preferred Stock outstanding shall be present in person or by proxy. The absence of a quorum of holders of Common Stock shall not affect the exercise by holders of Preferred Stock of such voting right. At any meeting at which holders of Preferred Stock shall exercise such voting right initially during an existing default period, they shall have the right, voting as a class, to elect Directors to fill such vacancies, if any, in the Board of Directors as may then exist up to two Directors or, if such right is exercised at an annual meeting, to elect two Directors. If the number which may be so elected at any special meeting does not amount to the required number, the holders of the Preferred Stock shall have the right to make such increase in the number of
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Directors as shall be necessary to permit the election by them of the required number. After the holders of the Preferred Stock shall have exercised their right to elect Directors in any default period and during the continuance of such period, the number of Directors shall not be increased or decreased except by vote of the holders of Preferred Stock as herein provided or pursuant to the rights of any equity securities ranking senior to or pari passu with the Series A Preferred Stock.
(iii) Unless the holders of Preferred Stock shall, during an existing default period, have previously exercised their right to elect Directors, the Board of Directors may order, or any stockholder or stockholders owning in the aggregate not less than 10% of the total number of shares of Preferred Stock outstanding, irrespective of series, may request, the calling of special meeting of holders of Preferred Stock, which meeting shall thereupon be called by the President, a Vice President or the Secretary of the Corporation. Notice of such meeting and of any annual meeting at which holders of Preferred Stock are entitled to vote pursuant to this paragraph (C)(iii) shall be given to each holder of record of Preferred Stock by mailing a copy of such notice to him at his last address as the same appears on the books of the Corporation. Such meeting shall be called for a time not earlier than 20 days and not later than 60 days after such order or request or in default of the calling of such meeting within 60 days after such order or request, such meeting may be called on similar notice by any stockholder or stockholders owning in the aggregate not less than 10% of the total number of shares of Preferred Stock outstanding, irrespective of series. Notwithstanding the provisions of this paragraph
(C)(iii), no such special meeting shall be called during the period within 60 days immediately preceding the date fixed for the next annual meeting of stockholders.
(iv) In any default period, the holders of Common Stock, and other classes of stock of the Corporation if applicable, shall continue to be entitled to elect the whole number of Directors until the holders of Preferred Stock shall have exercised their right to elect two Directors voting as a class, after the exercise of which right (x) the Directors so elected by the holders of Preferred Stock shall continue in office until their successors shall have been elected by such holders or until the expiration of the default period, and (y) any vacancy in the Board of Directors may (except as provided in paragraph (C)(ii) of this
Section 3) be filled by vote of a majority of the remaining Directors theretofore elected by the holders of the class of stock which elected the Director whose office shall have become vacant. References in this paragraph (C) to Directors elected by the holders of a particular class of stock shall include Directors elected by such Directors to fill vacancies as provided in clause (y) of the foregoing sentence.
(v) Immediately upon the expiration of a default period, (x) the right of the holders of Preferred Stock as a class to elect Directors shall cease, (y) the term of any Directors elected by the holders of Preferred Stock as a class shall terminate, and (z) the number of Directors shall be such number as may be provided for in the certificate of incorporation or bylaws irrespective of any increase made pursuant to the provisions of paragraph (C)(ii) of this Section 3 (such number being subject, however, to change thereafter in any manner provided by law or in the certificate of incorporation or bylaws). Any vacancies in the Board of Directors effected by the provisions of clauses (y) and (z) in the preceding sentence may be filled by a majority of the remaining Directors.
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(D) The Certificate of Incorporation of the Corporation shall not be amended in any manner (whether by merger or otherwise) so as to adversely affect the powers, preferences or special rights of the Series A Preferred Stock without the affirmative vote of the holders of a majority of the outstanding shares of Series A Preferred Stock, voting separately as a class.
(E) Except as otherwise provided herein, holders of Series A Preferred Stock shall have no special voting rights, and their consent shall not be required for taking any corporate action.
Section 4. Certain Restrictions.
(A) Whenever quarterly dividends or other dividends or distributions payable on the Series A Preferred Stock as provided in Section 2 are in arrears, thereafter and until all accrued and unpaid dividends and distributions, whether or not declared, on outstanding shares of Series A Preferred Stock shall have been paid in full, the Corporation shall not:
(i) declare or pay dividends on, or make any other distributions on, any shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Preferred Stock;
(ii) declare or pay dividends on, or make any other distributions on, any shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series A Preferred Stock, except dividends paid ratably on the Series A Preferred Stock and all such other parity stock on which dividends are payable or in arrears in proportion to the total amounts to which the holders of all such shares are then entitled;
(iii) redeem, purchase or otherwise acquire for value any shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Preferred Stock; provided that the Corporation may at any time redeem, purchase or otherwise acquire shares of any such junior stock in exchange for shares of stock of the Corporation ranking junior (as to dividends and upon dissolution, liquidation or winding up) to the Series A Preferred Stock; or
(iv) redeem, purchase or otherwise acquire for value any shares of Series A Preferred Stock, or any shares of stock ranking on a parity
(either as to dividends or upon liquidation, dissolution or winding up) with the Series A Preferred Stock, except in accordance with a purchase offer made in writing or by publication (as determined by the Board of Directors) to all holders of Series A Preferred Stock and all such other parity stock upon such terms as the Board of Directors, after consideration of the respective annual dividend rates and other relative rights and preferences of the respective series and classes, shall determine in good faith will result in fair and equitable treatment among the respective series or classes.
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(B) The Corporation shall not permit any subsidiary of the Corporation to purchase or otherwise acquire for value any shares of stock of the Corporation unless the Corporation could, under paragraph (A) of this Section 4, purchase or otherwise acquire such shares at such time and in such manner.
Section 5. Reacquired Shares. Any shares of Series A Preferred Stock redeemed, purchased or otherwise acquired by the Corporation in any manner whatsoever shall be retired and canceled promptly after the acquisition thereof. All such shares shall upon their cancellation become authorized but unissued shares of Preferred Stock without designation as to series and may be reissued as part of a new series of Preferred Stock to be created by resolution or resolutions of the Board of Directors as permitted by the Certificate of Incorporation or as otherwise permitted under Delaware Law.
Section 6. Liquidation, Dissolution or Winding Up. Upon any liquidation, dissolution or winding up of the Corporation, no distribution shall be made (1) to the holders of shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Preferred Stock unless, prior thereto, the holders of shares of Series A Preferred Stock shall have received $1.00 per share, plus an amount equal to accrued and unpaid dividends and distributions thereon, whether or not declared, to the date of such payment; provided that the holders of shares of Series A Preferred Stock shall be entitled to receive an aggregate amount per share, subject to the provision for adjustment hereinafter set forth, equal to 1,000 times the aggregate amount to be distributed per share to holders of Common Stock, or (2) to the holders of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series A Preferred Stock, except distributions made ratably on the Series A Preferred Stock and all such other parity stock in proportion to the total amounts to which the holders of all such shares are entitled upon such liquidation, dissolution or winding up. If the Corporation shall at any time after the Rights Declaration Date pay any dividend on Common Stock payable in shares of Common Stock or effect a subdivision or combination of the outstanding shares of Common Stock (by reclassification or otherwise) into a greater or lesser number of shares of Common Stock, then in each such case the aggregate amount to which holders of shares of Series A Preferred Stock were entitled immediately prior to such event under the proviso in clause (1) of the preceding sentence shall be adjusted by multiplying such amount by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.
Section 7. Consolidation, Merger, etc. If the Corporation shall enter into any consolidation, merger, combination or other transaction in which the shares of Common Stock are exchanged for or changed into other stock or securities, cash or any other property, then in any such case the shares of Series A Preferred Stock shall at the same time be similarly exchanged for or changed into an amount per share, subject to the provision for adjustment hereinafter set forth, equal to 1,000 times the aggregate amount of stock, securities, cash or any other property, as the case may be, into which or for which each share of Common Stock is changed or exchanged. If the Corporation shall at any time after the
A-6
Rights Declaration Date pay any dividend on Common Stock payable in shares of Common Stock or effect a subdivision or combination of the outstanding shares of Common Stock (by reclassification or otherwise) into a greater or lesser number of shares of Common Stock, then in each such case the amount set forth in the preceding sentence with respect to the exchange or change of shares of Series A Preferred Stock shall be adjusted by multiplying such amount by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.
Section 8. No Redemption. The Series A Preferred Stock shall not be redeemable.
Section 9. Rank. The Series A Preferred Stock shall rank junior (as to dividends and upon liquidation, dissolution and winding up) to all other series of the Corporation's preferred stock except any series that specifically provides that such series shall rank junior to the Series A Preferred Stock.
Section 10. Fractional Shares. Series A Preferred Stock may be issued in fractions of a share which shall entitle the holder, in proportion to such holder's fractional shares, to exercise voting rights, receive dividends, participate in distributions and to have the benefit of all other rights of holders of Series A Preferred Stock.
IN WITNESS WHEREOF, we have executed and subscribed this Certificate this __ day of December, 1995.

                                     /s/ Richard G. Mosteller
                                     Senior Vice President - Finance

Attest:

/s/ Eugene A. Gargaro, Jr.
Vice President and Secretary	

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Exhibit B
[Form of Right Certificate]
No. R- ____________Rights
NOT EXERCISABLE AFTER THE EARLIER OF DECEMBER 6, 2005 AND THE DATE ON WHICH THE RIGHTS EVIDENCED HEREBY ARE REDEEMED OR EXCHANGED BY THE COMPANY AS SET FORTH IN THE RIGHTS AGREEMENT. AS SET FORTH IN THE RIGHTS AGREEMENT, RIGHTS ISSUED TO, OR HELD BY, ANY PERSON WHO IS, WAS OR BECOMES AN ACQUIRING PERSON OR AN AFFILIATE OR ASSOCIATE THEREOF (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT), WHETHER CURRENTLY HELD BY OR ON BEHALF OF SUCH PERSON OR BY ANY SUBSEQUENT HOLDER, MAY BE NULL AND VOID. [THE RIGHTS REPRESENTED BY THIS RIGHT CERTIFICATE ARE OR WERE BENEFICIALLY OWNED BY A PERSON WHO WAS OR BECAME AN ACQUIRING PERSON OR AN AFFILIATE OR AN ASSOCIATE OF AN ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT). THIS RIGHT CERTIFICATE AND THE RIGHTS REPRESENTED HEREBY MAY BE OR MAY BECOME NULL AND VOID IN THE CIRCUMSTANCES SPECIFIED IN SECTION 7(d) OF THE RIGHTS AGREEMENT.][2]
RIGHT CERTIFICATE
MASCO CORPORATION
This Right Certificate certifies that ______________________, or registered assigns, is the registered holder of the number of Rights set forth above, each of which entitles the holder (upon the terms and subject to the conditions set forth in the Rights Agreement dated as of December 6, 1995 (the "Rights Agreement") between Masco Corporation, a Delaware corporation (the "Company"), and The Bank of New York (the "Rights Agent")) to purchase from the Company, at any time after the Distribution Date and prior to the Expiration Date, ___ one-thousandth[s] of a fully paid, nonassessable share of Series A Participating Cumulative Preferred Stock (the
[2] If applicable, insert this portion of the legend and delete the preceding sentence.
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"Preferred Stock") of the Company at a purchase price of $100.00 per one one-thousandth of a share (the "Purchase Price"), payable in lawful money of the United States of America, upon surrender of this Right Certificate, with the form of election to purchase and related certificate duly executed, and payment of the Purchase Price at an office of the Rights Agent designated for such purpose.
Terms used herein and not otherwise defined herein have the meanings assigned to them in the Rights Agreement.
The number of Rights evidenced by this Right Certificate (and the number and kind of shares issuable upon exercise of each Right) and the Purchase Price set forth above are as of December 18, 1995, and may have been or in the future be adjusted as a result of the occurrence of certain events, as more fully provided in the Rights Agreement.
Upon the occurrence of a Section 11(a)(ii) Event, if the Rights evidenced by this Right Certificate are beneficially owned by (a) an Acquiring Person or an Associate or Affiliate of an Acquiring Person, (b) a transferee of an Acquiring Person (or any such Associate or Affiliate) who becomes a transferee after the Acquiring Person becomes such, or (c) under certain circumstances specified in the Rights Agreement, a transferee of an Acquiring Person (or any such Associate or Affiliate) who becomes a transferee prior to or concurrently with the Acquiring Person becoming such, such Rights shall become null and void, and no holder hereof shall have any right with respect to such Rights from and after the occurrence of such Section 11(a)(ii) Event.
This Right Certificate is subject to all of the terms, provisions and conditions of the Rights Agreement, which terms, provisions and conditions are hereby incorporated herein by reference and made a part hereof and to which Rights Agreement reference is hereby made for a full description of the rights, limitations of rights, obligations, duties and immunities hereunder of the Rights Agent, the Company and the holders of the Right Certificates, which limitations of rights include the temporary suspension of the exercisability of such Rights under the specific circumstances set forth in the Rights Agreement.
Upon surrender at the principal office or offices of the Rights Agent designated for such purpose and subject to the terms and conditions set forth in the Rights Agreement, any Rights Certificate or Certificates may be transferred or exchanged for another Rights Certificate or
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Certificates evidencing a like number of Rights as the Rights Certificate or Certificates surrendered.
Subject to the provisions of the Rights Agreement, the Board of Directors of the Company may, at its option,
(a) at any time prior to the earlier of (i) the close of business on the tenth day after the Stock Acquisition Date (or such later date as a majority of the Continuing Directors may designate prior to such time as the Rights are no longer redeemable) and (ii) the Final Expiration Date, redeem all but not less than all the then outstanding Rights at a redemption price of $.01 per Right; or
(b) at any time after any Person becomes an Acquiring Person (but before such Person becomes the Beneficial Owner of 50% or more of the shares of Common Stock then outstanding), exchange all or part of the then outstanding Rights (other than Rights held by the Acquiring Person and certain related Persons) for shares of Common Stock at an exchange ratio of one share of Common Stock per Right. If the Rights shall be exchanged in part, the holder of this Right Certificate shall be entitled to receive upon surrender hereof another Right Certificate or Certificates for the number of whole Rights not exchanged.
No fractional shares of Preferred Stock are required to be issued upon the exercise of any Right or Rights evidenced hereby (other than fractions which are multiples of one one-thousandth of a share of Preferred Stock, which may, at the election of the Company, be evidenced by depositary receipts), but in lieu thereof a cash payment will be made, as provided in the Rights Agreement. If this Right Certificate shall be exercised in part, the holder shall be entitled to receive upon surrender hereof another Right Certificate or Certificates for the number of whole Rights not exercised.
No holder of this Right Certificate shall be entitled to vote, receive dividends or be deemed for any purpose the holder of the shares of capital stock which may at any time be issuable on the exercise hereof, nor shall anything contained in the Rights Agreement or herein be construed to confer upon the holder hereof, as such, any of the rights of a stockholder of the Company or any right to vote for the election of directors or upon any matter submitted to stockholders at any meeting thereof, or to give or withhold consent to any corporate action, or to receive notice of meetings or other actions affecting stockholders (except as provided in the Rights Agreement), or to receive
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dividends or subscription rights, or otherwise, until the Right or Rights evidenced by this Right Certificate shall have been exercised as provided in the Rights Agreement.
This Right Certificate shall not be valid or obligatory for any purpose until it shall have been countersigned by an authorized signatory of the Rights Agent.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed under its corporate seal by its authorized officers.
Dated as of ________________, 19__
MASCO CORPORATION
By______________________
Title:
[SEAL]
Attest:

Secretary
Countersigned:
THE BANK OF NEW YORK,
as Rights Agent
By____________________
Authorized Signature
Date of Countersignature:

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Form of Reverse Side of Right Certificate
FORM OF ASSIGNMENT
(To be executed if the registered holder desires to transfer the Right Certificate.)
FOR VALUE RECEIVED _______________________________________
hereby sells, assigns and transfers unto _________________

(Please print name and address of transferee)

this Right Certificate, together with all right, title and interest therein, and does hereby irrevocably constitute and appoint ______________________ Attorney, to transfer the within Right Certificate on the books of the within-named Company, with full power of substitution.
Dated: _____________________, 19__

Signature
Signature Guaranteed:
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Certificate
The undersigned hereby certifies by checking the appropriate boxes that:
(1) the Rights evidenced by this Right Certificate ___are ___are not being assigned by or on behalf of a Person who is or was an Acquiring Person or an Affiliate or Associate of any such Acquiring Person (as such terms are defined in the Rights Agreement);
(2) after due inquiry and to the best knowledge of the undersigned, it ___did ___did not acquire the Rights evidenced by this Right Certificate from any Person who is, was or became an Acquiring Person or an Affiliate or Associate of an Acquiring Person.
Dated: __________, 19 __ ________________________ Signature

The signatures to the foregoing Assignment and Certificate must correspond to the name as written upon the face of this Right Certificate in every particular, without alteration or enlargement or any change whatsoever.

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FORM OF ELECTION TO PURCHASE
(To be executed if the registered holder desires to exercise Rights represented by the Right Certificate.)
To: Masco Corporation
The undersigned hereby irrevocably elects to exercise ____________ Rights represented by this Right Certificate to purchase shares of Preferred Stock issuable upon the exercise of the Rights (or such other securities of the Company or of any other person which may be issuable upon the exercise of the Rights) and requests that certificates for such securities be issued in the name of and delivered to:
Please insert social security
or other identifying number

(Please print name and address)

If such number of Rights shall not be all the Rights evidenced by this Right Certificate, a new Right Certificate for the balance of such Rights shall be registered in the name of and delivered to:
Please insert social security
or other identifying number

(Please print name and address)

Dated: ________________, 19__

Signature
Signature Guaranteed:
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Certificate
The undersigned hereby certifies by checking the appropriate boxes that:
(1) the Rights evidenced by this Right Certificate ___are ___are not being exercised by or on behalf of a Person who is or was an Acquiring Person or an Affiliate or Associate of any such Acquiring Person (as such terms are defined in the Rights Agreement);
(2) after due inquiry and to the best knowledge of the undersigned, it ___did ___did not acquire the Rights evidenced by this Right Certificate from any Person who is, was or became an Acquiring Person or an Affiliate or Associate of an Acquiring Person.

Dated: __________, 19 __     ________________________
                                    Signature

                                   ----------	

The signature to the foregoing Election to Purchase and Certificate must correspond to the name as written upon the face of this Right Certificate in every particular, without alteration or enlargement or any change whatsoever.

B-8
 
Exhibit C
MASCO CORPORATION
STOCKHOLDER RIGHTS PLAN
Summary of Terms

Form of Security:                  The Board of Directors has declared
                                   a dividend of one preferred stock
                                   purchase right for each outstanding
                                   share of the Company's Common
                                   Stock, payable to holders of record
                                   as of the close of business on
                                   December 18, 1995 (each a "Right"
                                   and collectively, the "Rights")

Transfer:                          Prior to the Distribution Date[3],
                                   the Rights will be evidenced by the
                                   certificates for and will be

------------------	

[3] "Distribution Date" means the earlier of:
(1) the 10th day after public announcement that any person or group has become the beneficial owner of 15% or more of the Company's Common Stock and
(2) the 10th business day after the date of the commencement of a tender or exchange offer by any person which would, if consummated, result in such person becoming the beneficial owner of 15% or more of the Company's Common Stock,
in each case, subject to extension by a majority of the Continuing Directors.
"Continuing Director" means any member of the Board of Directors who was a member of the Board prior to the time an Acquiring Person (as defined below) becomes such or any person who is subsequently elected to the Board if such person is recommended or approved by a majority of the Continuing Directors.
Continuing Directors do not include an
Acquiring Person, an affiliate or associate
of any Acquiring Person or any representative
or nominee of the foregoing.
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                                   transferred with the Common Stock, and the
                                   registered holders of the Common Stock will
                                   be deemed to be the registered holders of the
                                   Rights.

                                   After the Distribution Date, the Rights Agent
                                   will mail separate certificates evidencing
                                   the Rights to each record holder of the
                                   Common Stock as of the close of business on
                                   the Distribution Date, and thereafter the
                                   Rights will be transferable separately from
                                   the Common Stock.

Exercise:                          Prior to the Distribution Date, the
                                   Rights will not be exercisable.

                                   After the Distribution Date, each Right will
                                   be exercisable to purchase, for $100.00 (the
                                   "Purchase Price"), one one-thousandth of a
                                   share of Series A Participating Cumulative
                                   Preferred Stock, par value 1.00 per share, of
                                   the Company.

Flip-In:                           If any person or group (an
                                   "Acquiring Person") becomes the
                                   beneficial owner of 15% or more of
                                   the Company's Common Stock, then
                                   each Right (other than Rights
                                   beneficially owned by the Acquiring
                                   Person and certain affiliated
                                   persons) will entitle the holder to
                                   purchase, for the Purchase Price, a
                                   number of shares of the Company's
                                   Common Stock having a market value
                                   of twice the Purchase Price.

Flip-Over:                         If, after any person has become an
                                   Acquiring Person, (1) the Company
                                   is involved in a merger or other
                                   business combination in which the
                                   Company is not the surviving
                                   corporation or its Common Stock is
                                   exchanged for other securities or
                                   assets or (2) the Company and/or
                                   one or more of its subsidiaries
                                   sell or otherwise transfer assets
                                   or earning power aggregating more
                                   than 50% of the assets or earning
                                   power of the Company and its
                                   subsidiaries, taken as a whole,
                                   then each Right will	

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                                   entitle the holder to purchase, for the
                                   Purchase Price, a number of shares of common
                                   stock of the other party to such business
                                   combination or sale (or in certain
                                   circumstances, an affiliate) having a market
                                   value of twice the Purchase Price.

Exchange:                          At any time after any person has
                                   become an Acquiring Person (but
                                   before any person becomes the
                                   beneficial owner of 50% or more of
                                   the Company's Common Stock), a
                                   majority of the Continuing
                                   Directors may exchange all or part
                                   of the Rights (other than the
                                   Rights beneficially owned by the
                                   Acquiring Person and certain
                                   affiliated persons) for shares of
                                   Common Stock at an exchange ratio
                                   of one share of Common Stock per
                                   Right.

Redemption:                        The Board of Directors may redeem
                                   all of the Rights at a price of
                                   $.01 per Right at any time prior to
                                   the close of business on the 10th
                                   day after public announcement that
                                   any person has become an Acquiring
                                   Person (subject to extension by a
                                   majority of the Continuing
                                   Directors).

                                   After any person has become an Acquiring
                                   Person, the Rights may be redeemed only with
                                   the approval of a majority of the Continuing
                                   Directors.

Expiration:                        The Rights will expire on December
                                   6, 2005, unless earlier exchanged
                                   or redeemed.	

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Amendments:                        Prior to the Distribution Date, the
                                   Rights Agreement may be amended in
                                   any respect.

                                   After the Distribution Date, the Rights
                                   Agreement may be amended in any respect that
                                   does not adversely affect the Rights holders
                                   (other than any Acquiring Person and certain
                                   affiliated persons).

                                   After any person has become an Acquiring
                                   Person, the Rights Agreement may be amended
                                   only with the approval of a majority of the
                                   Continuing Directors.

Voting Rights:                     Rights holders have no rights as a
                                   stockholder of the Company,
                                   including the right to vote and to
                                   receive dividends.

Antidilution                       The Rights Agreement includes
Provisions:                        antidilution provisions designed to
                                   prevent efforts to diminish the
                                   efficacy of the Rights.

Taxes:                             While the dividend of the Rights
                                   will not be taxable to stockholders
                                   or to the Company, stockholders or
                                   the Company may, depending upon the
                                   circumstances, recognize taxable
                                   income in the event that the Rights
                                   become exercisable as set forth
                                   above.

                                 ---------------	

A copy of the Rights Agreement has been filed with the Securities and Exchange Commission as an Exhibit to a Registration Statement on Form 8-A. A copy of the Rights Agreement is available free of charge from the Company. This summary description of the Rights does not purport to be complete and is qualified in its entirety by reference to the Rights Agreement.
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Exhibit 4.b Amendment No. 1
AMENDMENT NO. 1 TO RIGHTS AGREEMENT
AMENDMENT NO. 1 dated as of September 23, 1998 to the Rights Agreement dated as of December 6, 1995 (the "RIGHTS AGREEMENT") between Masco Corporation, a Delaware corporation (the "COMPANY"), and The Bank of New York, as Rights Agent (the "RIGHTS AGENT").
W I T N E S S E T H
WHEREAS, the parties hereto desire to amend the Rights Agreement in certain respects;
NOW, THEREFORE, the parties hereto agree as follows:
SECTION 1. Defined Terms; References. (a) Unless otherwise specifically defined herein, each term used herein which is defined in the Rights Agreement has the meaning assigned to such term in the Rights Agreement. Each reference to "hereof", "hereunder", "herein" and "hereby" and each other similar reference and each reference to "this Agreement" and each other similar reference contained in the Rights Agreement shall, after this Agreement becomes effective, refer to the Rights Agreement as amended hereby.
(b) Section 1 of the Rights Agreement is hereby amended by deleting the definition of "Continuing Directors" contained therein.
(c) Section 1 of the Rights Agreement is hereby amended by restating in its entirety the following definition to read in full as follows:
"ACQUIRING PERSON" means any Person who, together with all Affiliates and Associates of such Person, shall be the Beneficial Owner of 15% or more of the shares of Common Stock then outstanding, but shall not include the Company, any of its Subsidiaries, any employee benefit plan of the Company or any of its Subsidiaries or any Person organized, appointed or established by the Company or any of its Subsidiaries for or pursuant to the terms of any such plan; provided, however, that
(a) if the majority of Directors determines (whether prior to or after the date that in the absence of such determination would be a Distribution Date) in good faith that a Person who otherwise would be an "Acquiring Person" became such inadvertently, and if such Person as promptly as practicable divests itself of Beneficial Ownership of a sufficient number of shares of Common Stock so that such Person is no longer an "Acquiring Person," then such Person shall not be deemed to be or to have become an "Acquiring Person" for any purposes of this Agreement; and
(b) no Person shall become an "Acquiring Person" solely as a result of an acquisition of shares of Common Stock by the Company which, by reducing the number of shares of Common Stock outstanding, increases the proportionate number of shares of Common Stock beneficially owned by such Person (together with any Affiliate and Associate of such Person) to 15% or more of the shares of Common Stock then outstanding;
provided, however, that if a Person shall become the Beneficial Owner of 15% or more of the shares of Common Stock then outstanding by reason of such share acquisition by the Company and shall thereafter (together with any Affiliate and Associate) become the Beneficial Owner of any additional shares of Common Stock (other than pursuant to a stock dividend, stock split, recapitalization or similar transaction that does not affect the percentage of outstanding Common Stock beneficially owned by such Person) which causes the proportionate number of shares of Common Stock beneficially owned by such Person to increase to 15% or more of the shares of Common Stock then outstanding, then such Person shall be deemed to be an "Acquiring Person".
(d) Section 1 of the Rights Agreement is hereby amended by deleting from the definition of "Distribution Date" both instances of the word "Continuing".
SECTION 2. Exercise of Rights; Expiration Date of Rights. Section 7(d) of the Rights Agreement is hereby amended by inserting the words "a majority of" after the words "a transfer which" and deleting the word "Continuing" from clause (iii)(B) in the first sentence thereof.
SECTION 3. Adjustment of Purchase Price, Number and Kind of Shares or Number of Rights. Section 11 of the Rights Agreement is hereby amended by:
(a) replacing the words "a majority of the Continuing Directors has determined to be" in the first sentence of subsection (a)(iii) thereof with the word "are";
(b) replacing each instance of the words "(as determined by the Continuing Directors based upon the advice of a nationally recognized investment banking firm selected by the Continuing Directors)" in subsection (a)(iii) thereof with the words "(based upon the advice of a nationally recognized investment banking firm)";
(c) deleting the second sentence of subsection (a)(iii) thereof;
(d) replacing the words "first and/or second sentence of this Section
11(a)(iii):" in the third sentence of subsection (a)(iii) thereof with the words "preceding sentence";
(e) replacing the words "Substitution Period in order to seek any authorization of additional shares and/or" in the third sentence of subsection
(a)(iii) thereof with the words "30-day period set forth above in order";
(f) replacing the words "such first and/or second" in the third sentence of subsection (a)(iii) thereof with the words "the preceding";
(g) deleting the words ", or, if at the time of such selection there is an Acquiring Person, by a majority of the Continuing Directors" from the second sentence of subsection (d)(i) thereof;
(h) replacing the words "majority of the Continuing Directors" in the third sentence of subsection (d)(i) thereof with the words "nationally recognized investment banking firm";
(i) deleting the words "by a majority of the Continuing Directors, or, if there are no Continuing Directors," from the fourth sentence of subsection
(d)(i) thereof;
(j) deleting the words "selected by the Board of Directors" from the fourth sentence of subsection (d)(i) thereof;
(k) deleting the words "by a majority of the Continuing Directors then in office, or, if there are no Continuing Directors," from subsection (d)(iii) thereof; and
(l) deleting the words "selected by the Board of Directors" from subsection (d)(iii) thereof.
SECTION 4. Fractional Rights and Fractional Shares. Section 14(a) of the Rights Agreement is hereby amended by:
(a) deleting the words ", or, if at the time of such selection there is an Acquiring Person, by a majority of the Continuing Directors" from the penultimate sentence thereof; and
(b) replacing the words "majority of the Continuing Directors" in the last sentence thereof with the words "nationally recognized investment banking firm.
SECTION 5. Redemption. Section 23(a) of the Rights Agreement is hereby amended by:
(a) deleting the word "Continuing" in the first sentence thereof; and
(b) deleting the proviso from the first sentence thereof and the semicolon immediately preceding such proviso.
SECTION 6. Exchange. (a) Section 24(a) of the Rights Agreement is hereby amended by deleting the word "Continuing" in the first sentence thereof.
(b) Section 24(b) of the Rights Agreement is hereby amended by replacing the word "Continuing" in the first sentence thereof with the words "majority of the".
SECTION 7. Supplements and Amendments. Section 27 of the Rights Agreement is hereby amended in its entirety to read in full as follows:
Prior to the Distribution Date, the Company may, and the Rights Agent shall, if the Company so directs, supplement or amend any provision of this Agreement in any respect without the approval of any holders of certificates representing shares of Common Stock. At any time when the Rights are no longer redeemable, the Company may, and the Rights Agent shall if the Company so directs, supplement or amend this Agreement without the approval of any holders of Right Certificates in order to cure any ambiguity or correct or supplement any provision contained herein which may be defective or inconsistent with any other provisions herein; provided that no such supplement or amendment may (a) adversely affect the interests of the holders of Rights as such (other than an Acquiring Person or an Affiliate or Associate of an Acquiring Person), (b) cause
this Agreement again to become amendable other than in accordance with this sentence, or (c) cause the Rights again to become redeemable. Upon the delivery of a certificate from an appropriate officer of the Company which states that the proposed supplement or amendment is in compliance with the terms of this Section, the Rights Agent shall execute such supplement or amendment. Prior to the Distribution Date, the interest of the holders of Rights shall be deemed coincident with the interests of the holders of Common Stock.
SECTION 8. Determination and Actions by the Board of Directors, Etc.
Section 29 of the Rights Agreement is hereby amended by:
(a) deleting the first parenthetical clause from the second sentence thereof; and
(b) deleting the second parenthetical clause and the words "or the Continuing Directors" from the last sentence thereof.
SECTION 9. Severability. Section 31 of the Rights Agreement is hereby amended by deleting the proviso contained therein and the semicolon that immediately precedes such proviso.
SECTION 10. Form of Right Certificate. Exhibit B to the Rights Agreement is hereby amended by deleting the work "Continuing" in subparagraph
(a) of the seventh paragraph thereof.
SECTION 11. Summary of Terms. Exhibit C to the Rights Agreement is hereby amended by:
(a) deleting the words "Continuing" from the first sentence of the footnote thereto;
(b) deleting the second and third sentences of the footnote thereto;
(c) deleting the word "Continuing" under the heading "Exchange";
(d) deleting both instances of the word "Continuing" under the heading "Redemption".
(e) restating the language under the heading "Amendments" in its entirety to read in full as follows:
Prior to the Distribution Date, the Rights Agreement may be amended in any respect.
After the Distribution Date, the Rights Agreement may be amended by the Board of Directors in any respect that does not (i) adversely affect the Rights holders (other than any Acquiring Person and certain affiliated persons), (ii) cause the Rights Agreement again to become amendable other than in accordance with this paragraph or (iii) cause the Rights again to become redeemable.
SECTION 12. Governing Law. This Amendment shall be governed by and construed in accordance with the laws of the State of Delaware without regard to any applicable conflicts of law rules, except that the rights and obligations of the Rights Agent shall be governed by the laws of the State of New York.
SECTION 13. 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.
SECTION 14. Effectiveness. This Amendment shall become effective by each of the parties hereto of a counterpart hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed as of the date first above written.
MASCO CORPORATION

By:  /s/Richard A. Manoogian
     -----------------------------------
        Name: Richard A. Manoogian
        Title:   Chairman	

THE BANK OF NEW YORK

By:  /s/John Sivertsen
     -----------------------------------
        Name:  John Sivertsen
        Title:    Vice President	

Exhibit 4.g
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

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                                    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..............................................................................       10
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..................................................................       13
SECTION 4.02.         Tag-Along Rights.......................................................................       15
SECTION 4.03.         Drag-Along Rights......................................................................       17
SECTION 4.04.         Information............................................................................       17
SECTION 4.05.         Preemptive Rights......................................................................       20
SECTION 4.06.         Board of Directors.....................................................................       23
SECTION 4.07.         Right to Observer......................................................................       24
SECTION 4.08.         Consultation Right.....................................................................       25
SECTION 4.09.         Approval Rights........................................................................       25
SECTION 4.10.         Transactions with Affiliates...........................................................       26	

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                                    ARTICLE V

                               REGISTRATION RIGHTS

SECTION 5.01.         Company Registration...................................................................       27
SECTION 5.02.         Demand Registration Rights.............................................................       28
SECTION 5.03.         Registration Procedures................................................................       31
SECTION 5.04.         Registration Expenses..................................................................       36
SECTION 5.05.         Indemnification........................................................................       37
SECTION 5.06.         1934 Act Reports.......................................................................       39
SECTION 5.07.         Holdback Agreements....................................................................       39
SECTION 5.08.         Participation in Registrations.........................................................       40
SECTION 5.09.         Remedies...............................................................................       41
SECTION 5.10.         Other Registration Rights..............................................................       41
SECTION 5.11.         Rule 144...............................................................................       41

                                   ARTICLE VI

                  RIGHTS OF HOLDERS OF CLASS A PREFERRED STOCK

SECTION 6.01.         Series A Preferred Stock...............................................................       41
SECTION 6.02.         Management Fee.........................................................................       42

                                   ARTICLE VII

                                  MISCELLANEOUS

SECTION 7.01.         Notices................................................................................       42
SECTION 7.02.         Binding Effect; Benefits; Entire Agreement.............................................       42
SECTION 7.03.         Waiver.................................................................................       42
SECTION 7.04.         Amendment..............................................................................       43
SECTION 7.05.         Assignability..........................................................................       43
SECTION 7.06.         Applicable Law.........................................................................       43
SECTION 7.07.         Specific Performance...................................................................       43
SECTION 7.08.         Severability...........................................................................       44
SECTION 7.09.         Additional Securities Subject to Agreement.............................................       44
SECTION 7.10.         Name Change............................................................................       44
SECTION 7.11.         Section and Other Headings.............................................................       44
SECTION 7.12.         Counterparts...........................................................................       44
SECTION 7.13.         Termination of Certain Provisions......................................................       44
SECTION 7.14.         ERISA Matters..........................................................................       45
SECTION 7.15.         Regulatory Cooperation.................................................................       45
SECTION 7.16.         Publicity..............................................................................       45
SECTION 7.17.         Expenses...............................................................................       45	

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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:
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"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.
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"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
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(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.
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"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 distribution of shares of Common Stock to all investors in Sponsor at the time of the
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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.
"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.
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"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.
"RECAPITALIZATION AGREEMENT" see the recitals to this Agreement.
"RECAPITALIZATION MERGER" see the recitals to this Agreement.
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"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.
"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).
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"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.
"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.
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"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, 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:
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(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 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,
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(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:
(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.
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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 SECURITIES 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
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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 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
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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 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
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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 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
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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 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
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(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,
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
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(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 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
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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%) 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,
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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;
(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.
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(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") 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.
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(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:
(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;
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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 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.
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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 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.
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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 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.
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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 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
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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 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. 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
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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 Registration 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
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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 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
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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).
(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.
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With respect to 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, as such Shareholder may reasonably request, and such number of copies of the
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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;
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(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 be included therein, including, without limitation, with respect to the number of shares
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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 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).
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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.
(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
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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.
(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,
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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 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
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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.
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
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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 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.
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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.
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
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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 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
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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).
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.
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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 Agreement 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.
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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" 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
-46-
arising in connection with the Transactions promptly (including, without limitation, and, in any event, within 30 days after any invoice or 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]
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 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(a)

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	

(a) 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	

EXHIBIT 10.a
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 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
-2-
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 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
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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.
(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,
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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).
(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
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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 extent 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
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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 Subsidiaries 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.
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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:

             MascoTech, Inc.
             21001 Van Born Road
             Taylor, MI  48180
             Facsimile:   (313) 792-6940
             Attention:   President	

                     -8-	

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.
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.
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13. Captions. The captions herein are included for convenience of reference only and shall be ignored in the construction or interpretation hereof.
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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:  /s/John R. Leekley
   -------------------------------------
        Name:  John R. Leekley
        Title:    Senior Vice President-
                  General Counsel	

MASCOTECH, INC.

By:  /s/David B. Liner
   -------------------------------------
       Name:  David B. Liner
       Title:    Vice President	

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.
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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
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policies 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
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generally 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 "Transfer") as an entirety to, any person or persons, and the Issuer will not permit any of its
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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
(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
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(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 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
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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 default 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.
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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 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
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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 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
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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 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.
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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 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
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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.
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
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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.
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IN WITNESS WHEREOF, the Issuer has caused this instrument to be duly executed.
Dated:
MASCOTECH, INC.
By:

Name:

Title:
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 privilege in respect thereof (whether before or after the occurrence of the Event of
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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.
 
Exhibit 10.b
MASCO CORPORATION
1991 LONG TERM STOCK INCENTIVE PLAN
 (Amended and Restated September 13, 2000)
SECTION 1. PURPOSES
The purposes of the 1991 Long Term Stock Incentive Plan (the "Plan") are to encourage selected employees of and consultants to Masco Corporation (the "Company") and its Affiliates to acquire a proprietary interest in the Company in order to create an increased incentive to contribute to the Company's future success and prosperity, and enhance the ability of the Company and its Affiliates to attract and retain exceptionally qualified individuals upon whom the sustained progress, growth and profitability of the Company depend, thus enhancing the value of the Company for the benefit of its stockholders.
SECTION 2. DEFINITIONS
As used in the Plan, the following terms shall have the meanings set forth below:
(a) "Affiliate" shall mean any entity in which the Company's direct or indirect equity interest is at least twenty percent, and any other entity in which the Company has a significant direct or indirect equity interest, whether more or less than twenty percent, as determined by the Committee.
(b) "Award" shall mean any Option, Stock Appreciation Right, Restricted Stock, Restricted Stock Unit, Performance Award, Dividend Equivalent or Other Stock-Based Award granted under the Plan.
(c) "Award Agreement" shall mean any written agreement, contract or other instrument or document evidencing any Award granted under the Plan.
(d) "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time.
(e) "Committee" shall mean a committee of the Company's directors designated by the Board of Directors to administer the Plan and composed of not less than two directors, each of whom is a "non-employee director" within the meaning of Rule 16b-3.
(f) "Dividend Equivalent" shall mean any right granted under Section 6(e) of the Plan.
(g) "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
(h) "Incentive Stock Option" shall mean an Option granted under Section 6(a) of the Plan that is intended to meet the requirements of Section 422 of the Code, or any successor provision thereto.
(i) "Non-Qualified Stock Option" shall mean an Option granted under Section 6(a) of the Plan that is not intended to be an Incentive Stock Option.
(j) "Option" shall mean an Incentive Stock Option or a Non-Qualified Stock Option.
(k) "Other Stock-Based Award" shall mean any right granted under Section 6(f) of the Plan.
(l) "Participant" shall mean an employee of or consultant to the Company or any Affiliate or a director of the Company designated to be granted an Award under the Plan.
(m) "Performance Award" shall mean any right granted under Section 6(d) of the Plan.
(n) "Prior Plans" shall mean the Company's 1988 Restricted Stock Incentive Plan and 1988 Stock Option Plan.
(o) "Restricted Period" shall mean the period of time during which Awards of Restricted Stock or Restricted Stock Units are subject to restrictions.
(p) "Restricted Stock" shall mean any Share granted under Section 6(c) of the Plan.
(q) "Restricted Stock Unit" shall mean any right granted under Section 6(c) of the Plan that is denominated in Shares.
(r) "Rule 16b-3" shall mean Rule 16b-3 promulgated by the Securities and Exchange Commission under the Exchange Act, or any successor rule or regulation.
(s) "Section 16" shall mean Section 16 of the Exchange Act, the rules and regulations promulgated by the Securities and Exchange Commission thereunder, or any successor provision, rule or regulation.
(t) "Shares" shall mean the Company's common stock, par value $1.00 per share, and such other securities or property as may become the subject of Awards, or become subject to Awards, pursuant to an adjustment made under
Section 4(c) of the Plan.
(u) "Stock Appreciation Right" shall mean any right granted under Section 6(b) of the Plan.
SECTION 3. ADMINISTRATION
The Committee shall administer the Plan, and subject to the terms of the Plan and applicable law, the Committee's authority shall include without limitation the power to:
(i) designate Participants;
(ii) determine the types of Awards to be granted;
(iii) determine the number of Shares to be covered by Awards and any payments, rights or other matters to be calculated in connection therewith;
(iv) determine the terms and conditions of Awards and amend the terms and conditions of outstanding Awards;
(v) determine how, whether, to what extent, and under what circumstances Awards may be settled or exercised in cash, Shares, other securities, other Awards or other property, or canceled, forfeited or suspended;
(vi) determine how, whether, to what extent, and under what circumstances cash, Shares, other securities, other Awards, other property and other amounts payable with respect to an Award shall be deferred either automatically or at the election of the holder thereof or of the Committee;
(vii) determine the methods or procedures for establishing the fair market value of any property (including, without limitation, any Shares or other securities) transferred, exchanged, given or received with respect to the Plan or any Award;
(viii) prescribe and amend the forms of Award Agreements and other instruments required under or advisable with respect to the Plan;
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(ix) designate Options granted to key employees of the Company or its subsidiaries as Incentive Stock Options;
(x) interpret and administer the Plan, Award Agreements, Awards and any contract, document, instrument or agreement relating thereto;
(xi) establish, amend, suspend or waive such rules and regulations and appoint such agents as it shall deem appropriate for the administration of the Plan;
(xii) decide all questions and settle all controversies and disputes which may arise in connection with the Plan, Award Agreements and Awards;
(xiii) delegate to directors of the Company the authority to designate Participants and grant Awards, and to amend Awards granted to Participants;
(xiv) make any other determination and take any other action that the Committee deems necessary or desirable for the interpretation, application and administration of the Plan, Award Agreements and Awards.
All designations, determinations, interpretations and other decisions under or with respect to the Plan, Award Agreements or any Award shall be within the sole discretion of the Committee, may be made at any time and shall be final, conclusive and binding upon all persons, including the Company, Affiliates, Participants, beneficiaries of Awards and stockholders of the Company.
SECTION 4. SHARES AVAILABLE FOR AWARDS
(a) Shares Available. Subject to adjustment as provided in Section 4(c):
The maximum number of Shares available for issuance in respect of Awards made under the Plan on or after May 17, 2000 shall be 20,000,000 Shares plus up to an additional 20,000,000 Shares to the extent Shares are acquired by the Company, including Shares purchased in the open market, on or after May 17, 2000 in connection with awards made under the Plan, provided, however, that in the event (i) an Award in respect of Shares under the Plan or the Prior Plans is settled for cash or expires or is terminated unexercised as to any Shares covered thereby, (ii) any Award under the Plan or the Prior Plans in respect of shares is cancelled or forfeited for any reason without the delivery of Shares,
(iii) any Option or other Award granted is exercised through the surrender of Shares, or (iv) tax obligations are satisfied through the surrender or withholding of Shares, the number of Shares available for issuance in respect of Awards under the Plan shall be increased by the number of Shares not delivered in connection with any such Award or so surrendered or withheld. Not more than 20,000,000 shares may be awarded as incentive stock options on or after May 17, 2000. Subject to the foregoing, Shares may be made available from the authorized but unissued Shares of the Company or from Shares reacquired by the Company, including but not limited to Shares purchased in the open market.
(b) Individual Stock-Based Awards. Subject to adjustment as provided in
Section 4(c), no Participant may receive Options or Stock Appreciation Rights under the Plan in any calendar year that relate to more than 4,000,000 Shares in the aggregate; provided, however, that such number may be increased with respect to any Participant by any Shares available for grant to such Participant in accordance with this Paragraph 4(b) in any prior years that were not granted in such prior year beginning on or after January 1, 2000. No provision of this Paragraph 4(b) shall be construed as limiting the amount of any other stock-based or cash-based Award which may be granted to any Participant.
(c) Adjustments. Upon the occurrence of any dividend or other distribution (whether in the form of cash, Shares, other securities or other property), change in the capital or shares of capital stock, recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off,
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combination, repurchase, or exchange of Shares or other securities of the Company, issuance of warrants or other rights to purchase Shares or other securities of the Company or extraordinary transaction or event which affects the Shares, then the Committee shall have the authority to make such adjustment, if any, in such manner as it deems appropriate, in (i) the number and type of Shares (or other securities or property) which thereafter may be made the subject of Awards, (ii) outstanding Awards including without limitation the number and type of Shares (or other securities or property) subject thereto, and
(iii) the grant, purchase or exercise price with respect to outstanding Awards and, if deemed appropriate, make provision for cash payments to the holders of outstanding Awards; provided, however, that the number of Shares subject to any Award denominated in Shares shall always be a whole number.
SECTION 5. ELIGIBILITY
Any employee of or consultant to the Company or any Affiliate, or any director of the Company, is eligible to be designated a Participant.
SECTION 6. AWARDS
(a) Options. The Committee is authorized to grant Options to Participants.
(i) Committee Determinations. Subject to the terms of the Plan, the Committee shall determine:
(A) the purchase price per Share under each Option, provided, however, that such price shall be not less than 100% of the fair market value of the Shares underlying such Option on the date of grant;
(B) the term of each Option; and
(C) the time or times at which an Option may be exercised, in whole or in part, the method or methods by which and the form or forms (including, without limitation, cash, Shares, other Awards or other property, or any combination thereof, having a fair market value on the exercise date equal to the relevant exercise price) in which payment of the exercise price with respect thereto may be made or deemed to have been made. The terms of any Incentive Stock Option granted under the Plan shall comply in all respects with the provisions of Section 422 of the Code, or any successor provision thereto, and any regulations promulgated thereunder.
Subject to the terms of the Plan, the Committee may impose such conditions or restrictions on any Option as it deems appropriate.
(ii) Other Terms. Unless otherwise determined by the Committee:
(A) A Participant electing to exercise an Option shall give written notice to the Company, as may be specified by the Committee, of exercise of the Option and the number of Shares elected for exercise, such notice to be accompanied by such instruments or documents as may be required by the Committee, and shall tender the purchase price of the Shares elected for exercise.
(B) At the time of exercise of an Option payment in full in cash or in Shares (that have been held by the Participant for at least six months) or any combination thereof, at the option of the Participant, shall be made for all Shares then being purchased.
(C) The Company shall not be obligated to issue any Shares unless and until:
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(I) if the class of Shares at the time is listed upon any stock exchange, the Shares to be issued have been listed, or authorized to be added to the list upon official notice of issuance, upon such exchange, and
(II) in the opinion of the Company's counsel there has been compliance with applicable law in connection with the issuance and delivery of Shares and such issuance shall have been approved by the Company's counsel.
Without limiting the generality of the foregoing, the Company may require from the Participant such investment representation or such agreement, if any, as the Company's counsel may consider necessary in order to comply with the Securities Act of 1933 as then in effect, and may require that the Participant agree that any sale of the Shares will be made only in such manner as shall be in accordance with law and that the Participant will notify the Company of any intent to make any disposition of the Shares whether by sale, gift or otherwise. The Participant shall take any action reasonably requested by the Company in such connection. A Participant shall have the rights of a stockholder only as and when Shares have been actually issued to the Participant pursuant to the Plan.
(D) If the employment of or consulting arrangement with a Participant terminates for any reason (including termination by reason of the fact that an entity is no longer an Affiliate) other than the Participant's death, the Participant may thereafter exercise the Option as provided below, except that the Committee may terminate the unexercised portion of the Option concurrently with or at any time following termination of the employment or consulting arrangement (including termination of employment upon a change of status from employee to consultant) if it shall determine that the Participant has engaged in any activity detrimental to the interests of the Company or an Affiliate. If such termination is voluntary on the part of the Participant (other than retirement on or after normal retirement date), the Option may be exercised only within ten days after the date of termination. If such termination is involuntary on the part of the Participant, the Option may be exercised within three months after the date of termination. If an employee retires on or after normal retirement date or if the employment or consulting relationship is terminated by reason of permanent and total disability, Options shall continue to become exercisable and shall remain exercisable in accordance with their terms and the provisions of this Plan. Unless the Committee determines otherwise, a change in a Participant's status from employee to consultant shall be considered a voluntary termination of employment as to any Option granted on or after September 13, 2000 (other than restoration Options granted with respect to Options granted prior to September 13, 2000). For purposes of this Paragraph (D), a Participant's employment or consulting arrangement shall not be considered terminated (i) in the case of approved sick leave or other bona fide leave of absence (not to exceed one year), (ii) in the case of a transfer of employment or the consulting arrangement among the Company and Affiliates, or (iii) by virtue of a change of status from employee to consultant or from consultant to employee, except as provided above.
(E) If a Participant dies, all unexercisable installments of the Option shall thereupon become exercisable and, at any time or times within one year after death such Option may be exercised, as to all or any unexercised portion of the Option. The Company may decline to deliver Shares to a designated beneficiary until it receives indemnity against claims of third parties satisfactory to the Company. Except as so exercised such Option shall expire at the end of such period.
(F) Except as provided above, an Option may be exercised only if and to the extent such Option was exercisable at the date of termination of employment or the consulting arrangement, and an Option may not be exercised at a time when the Option would not have been exercisable had the employment or consulting arrangement continued.
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(G) The foregoing provisions of clauses (ii)(D) and (ii)(E)
with respect to death, disability and retirement shall apply to all outstanding Options granted prior to September 13, 2000 other than substitute Options granted in replacement of options issued by a company prior to its acquisition by the Company.
(iii) Restoration Options. The Committee may grant a Participant the right to receive a restoration Option with respect to an Option or any other stock option granted by the Company. Unless the Committee shall otherwise determine, a restoration Option shall provide that the underlying option must be exercised while the Participant is an employee of or, with respect to Options granted prior to September 13, 2000, a consultant to the Company or an Affiliate and the number of Shares which are subject to a restoration Option shall not exceed the number of whole Shares exchanged in payment for the exercise of the original option.
(b) Stock Appreciation Rights. The Committee is authorized to grant Stock Appreciation Rights to Participants. Subject to the terms of the Plan, a Stock Appreciation Right granted under the Plan shall confer on the holder thereof a right to receive, upon exercise thereof, the excess of (i) the fair market value of one Share on the date of exercise or, if the Committee shall so determine in the case of any such right other than one related to any Incentive Stock Option, at any time during a specified period before or after the date of exercise over
(ii) the grant price of the right as specified by the Committee. Subject to the terms of the Plan, the Committee shall determine the grant price, term, methods of exercise and settlement and any other terms and conditions of any Stock Appreciation Right and may impose such conditions or restrictions on the exercise of any Stock Appreciation Right as it may deem appropriate.
(c) Restricted Stock and Restricted Stock Units.
(i) Issuance. The Committee is authorized to grant to Participants Awards of Restricted Stock, which shall consist of Shares, and Restricted Stock Units which shall give the Participant the right to receive cash, other securities, other Awards or other property, in each case subject to the termination of the Restricted Period determined by the Committee.
(ii) Restrictions. The Restricted Period may differ among Participants and may have different expiration dates with respect to portions of Shares covered by the same Award. Subject to the terms of the Plan, Awards of Restricted Stock and Restricted Stock Units shall have such restrictions as the Committee may impose (including, without limitation, limitations on the right to vote Restricted Stock or the right to receive any dividend or other right or property), which restrictions may lapse separately or in combination at such time or times, in installments or otherwise. Unless the Committee shall otherwise determine, any Shares or other securities distributed with respect to Restricted Stock or which a Participant is otherwise entitled to receive by reason of such Shares shall be subject to the restrictions contained in the applicable Award Agreement. Subject to the aforementioned restrictions and the provisions of the Plan, Participants shall have all of the rights of a stockholder with respect to Shares of Restricted Stock.
(iii) Registration. Restricted Stock granted under the Plan may be evidenced in such manner as the Committee may deem appropriate, including, without limitation, book-entry registration or issuance of stock certificates.
(iv) Forfeiture. Except as otherwise determined by the Committee:
(A) If the employment of or consulting arrangement with a Participant terminates for any reason (including termination by reason of the fact that any entity is no longer an Affiliate), other than the Participant's death or permanent and total disability or, in the case of an employee, retirement on or after normal retirement date, all Shares of Restricted Stock theretofore awarded to the Participant which are still subject to restrictions shall upon
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such termination of employment or the consulting relationship be forfeited and transferred back to the Company. Unless the Committee determines otherwise, a change in a Participant's status from employee to consultant shall be considered a termination of employment as to any Award of Restricted Stock granted on or after September 13, 2000. Notwithstanding the foregoing or Paragraph (C) below, if a Participant continues to hold an Award of Restricted Stock following termination of the employment or consulting arrangement (including retirement), the Shares of Restricted Stock which remain subject to restrictions shall nonetheless be forfeited and transferred back to the Company if the Committee at any time thereafter determines that the Participant has engaged in any activity detrimental to the interests of the Company or an Affiliate. For purposes of this Paragraph (A), a Participant's employment or consulting arrangement shall not be considered terminated (i) in the case of approved sick leave or other bona fide leave of absence (not to exceed one year), (ii) in the case of a transfer of employment or the consulting arrangement among the Company and Affiliates, or
(iii) by virtue of a change of status from employee to consultant or from consultant to employee, except as provided above.
(B) If a Participant ceases to be employed or retained by the Company or an Affiliate by reason of death or permanent and total disability or if following retirement a Participant continues to have rights under an Award of Restricted Stock and thereafter dies, the restrictions contained in the Award shall lapse with respect to such Restricted Stock.
(C) If an employee ceases to be employed by the Company or an Affiliate by reason of retirement on or after normal retirement date, the restrictions contained in the Award of Restricted Stock shall continue to lapse in the same manner as though employment had not terminated.
(D) At the expiration of the Restricted Period as to Shares covered by an Award of Restricted Stock, the Company shall deliver the Shares as to which the Restricted Period has expired, as follows:
(1) if an assignment to a trust has been made in accordance with Section 6(g)(iv)(B)(2)(c), to such trust; or
(2) if the Restricted Period has expired by reason of death and a beneficiary has been designated in form approved by the Company, to the beneficiary so designated; or
(3) in all other cases, to the Participant or the legal representative of the Participant's estate.
(d) Performance Awards. The Committee is authorized to grant Performance Awards to Participants. Subject to the terms of the Plan, a Performance Award granted under the Plan (i) may be denominated or payable in cash, Shares (including, without limitation, Restricted Stock), other securities, other Awards, or other property and (ii) shall confer on the holder thereof rights valued as determined by the Committee and payable to, or exercisable by, the holder of the Performance Award, in whole or in part, upon the achievement of such performance goals during such performance periods as the Committee shall establish. Subject to the terms of the Plan, the performance goals to be achieved during any performance period, the length of any performance period, the amount of any Performance Award granted, the amount of any payment or transfer to be made pursuant to any Performance Award and other terms and conditions shall be determined by the Committee.
(e) Dividend Equivalents. The Committee is authorized to grant to Participants Awards under which the holders thereof shall be entitled to receive payments equivalent to dividends or interest with respect to a number of Shares determined by the Committee, and the Committee may provide that such amounts (if any) shall be deemed to have been reinvested in additional Shares or otherwise reinvested.
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Subject to the terms of the Plan, such Awards may have such terms and conditions as the Committee shall determine.
(f) Other Stock-Based Awards. The Committee is authorized to grant to Participants such other Awards that are denominated or payable in, valued in whole or in part by reference to or otherwise based on or related to Shares (including, without limitation, securities convertible into Shares), as are deemed by the Committee to be consistent with the purposes of the Plan, provided, however, that such grants to persons who are subject to Section 16 must comply with the provisions of Rule 16b-3. Subject to the terms of the Plan, the Committee shall determine the terms and conditions of such Awards. Shares or other securities delivered pursuant to a purchase right granted under this
Section 6(f) shall be purchased for such consideration, which may be paid by such method or methods and in such form or forms, including, without limitation, cash, Shares, other securities, other Awards or other property or any combination thereof, as the Committee shall determine.
(g) General.
(i) No Cash Consideration for Awards. Awards may be granted for no cash consideration or for such minimal cash consideration as may be required by applicable law.
(ii) Awards May Be Granted Separately or Together. Awards may, in the discretion of the Committee, be granted either alone or in addition to, in tandem with or in substitution for any other Award or any award granted under any other plan of the Company or any Affiliate. Awards granted in addition to or in tandem with other Awards or in addition to or in tandem with awards granted under another plan of the Company or any Affiliate, may be granted either at the same time as or at a different time from the grant of such other Awards or awards.
(iii) Forms of Payment Under Awards. Subject to the terms of the Plan and of any applicable Award Agreement, payments or transfers to be made by the Company or an Affiliate upon the grant, exercise, or payment of an Award may be made in such form or forms as the Committee shall determine, including, without limitation, cash, Shares, other securities, other Awards, or other property, or any combination thereof, and may be made in a single payment or transfer, in installments, or on a deferred basis, in each case in accordance with rules and procedures established by the Committee. Such rules and procedures may include, without limitation, provisions for the payment or crediting of reasonable interest on installment or deferred payments or the grant or crediting of Dividend Equivalents in respect of installment or deferred payments.
(iv) Limits on Transfer of Awards.
(A) Except as the Committee may otherwise determine, no Award or right under any Award may be sold, encumbered, pledged, alienated, attached, assigned or transferred in any manner and any attempt to do any of the foregoing shall be void and unenforceable against the Company.
(B) Notwithstanding the provisions of Paragraph (A) above:
(1) An Option may be transferred:
(a) to a beneficiary designated by the Participant in writing on a form approved by the Committee;
(b) by will or the applicable laws of descent and distribution to the personal representative, executor or administrator of the Participant's estate; or
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(c) to a revocable grantor trust established by the Participant for the sole benefit of the Participant during the Participant's life, and under the terms of which the Participant is and remains the sole trustee until death or physical or mental incapacity. Such assignment shall be effected by a written instrument in form and content satisfactory to the Committee, and the Participant shall deliver to the Committee a true copy of the agreement or other document evidencing such trust. If in the judgment of the Committee the trust to which a Participant may attempt to assign rights under such an Award does not meet the criteria of a trust to which an assignment is permitted by the terms hereof, or if after assignment, because of amendment, by force of law or any other reason such trust no longer meets such criteria, such attempted assignment shall be void and may be disregarded by the Committee and the Company and all rights to any such Options shall revert to and remain solely in the Participant. Notwithstanding a qualified assignment, the Participant, and not the trust to which rights under such an Option may be as signed, for the purpose of determining compensation arising by reason of the Option shall continue to be considered an employee or consultant, as the case may be, of the Company or an Affiliate, but such trust and the Participant shall be bound by all of the terms and conditions of the Award Agreement and this Plan. Shares issued in the name of and delivered to such trust shall be conclusively considered issuance and delivery to the Participant.
(2) A Participant may assign or transfer rights under an Award of Restricted Stock or Restricted Stock Units:
(a) to a beneficiary designated by the Participant in writing on a form approved by the Committee;
(b) by will or the applicable laws of descent and distribution to the personal representative, executor or administrator of the Participant's estate; or
(c) to a revocable grantor trust established by the Participant for the sole benefit of the Participant during the Participant's life, and under the terms of which the Participant is and remains the sole trustee until death or physical or mental incapacity. Such assignment shall be effected by a written instrument in form and content satisfactory to the Committee, and the Participant shall deliver to the Committee a true copy of the agreement or other document evidencing such trust. If in the judgment of the Committee the trust to which a Participant may attempt to assign rights under such an Award does not meet the criteria of a trust to which an assignment is permitted by the terms hereof, or if after assignment, because of amendment, by force of law or any other reason such trust no longer meets such criteria, such attempted assignment shall be void and may be disregarded by the Committee and the Company and all rights to any such Awards shall revert to and remain solely in the Participant. Notwithstanding a qualified assignment, the Participant, and not the trust to which rights under such an Award may be assigned, for the purpose of determining compensation arising by reason of the Award shall continue to be considered an employee or consultant, as the case may be, of the Company or an Affiliate, but such trust and the Participant shall be bound by all of the terms and conditions of the Award Agreement and this Plan. Shares issued in the name of and delivered to such trust shall be conclusively considered issuance and delivery to the Participant.
(3) The Committee shall not permit directors or officers of the Company for purposes of Section 16 to transfer or assign Awards except as permitted under Rule 16b-3.
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(C) The Committee, the Company and its officers, agents and employees may rely upon any beneficiary designation, assignment or other instrument of transfer, copies of trust agreements and any other documents delivered to them by or on behalf of the Participant which they believe genuine and any action taken by them in reliance thereon shall be conclusive and binding upon the Participant, the personal representatives of the Participant's estate and all persons asserting a claim based on an Award. The delivery by a Participant of a beneficiary designation, or an assignment of rights under an Award as permitted hereunder, shall constitute the Participant's irrevocable undertaking to hold the Committee, the Company and its officers, agents and employees harmless against claims, including any cost or expense incurred in defending against claims, of any person (including the Participant) which may be asserted or alleged to be based on an Award subject to a beneficiary designation or an assignment. In addition, the Company may decline to deliver Shares to a beneficiary until it receives indemnity against claims of third parties satisfactory to the Company.
(v) Share Certificates. All certificates for Shares or other securities delivered under the Plan pursuant to any Award or the exercise thereof shall be subject to such stop transfer orders and other restrictions as the Committee may deem advisable under the Plan or the rules, regulations and other requirements of the Securities and Exchange Commission, any stock exchange upon which such Shares or other securities are then listed and any applicable Federal or state securities laws, and the Committee may cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions.
(vi) Change in Control.
(A) Notwithstanding any of the provisions of this Plan or instruments evidencing Awards granted hereunder, upon a Change in Control of the Company (as hereinafter defined) the vesting of all rights of Participants under outstanding Awards shall be accelerated and all restrictions thereon shall terminate in order that Participants may fully realize the benefits thereunder. Such acceleration shall include, without limitation, the immediate exercisability in full of all Options and the termination of restrictions on Restricted Stock and Restricted Stock Units. Further, in addition to the Committee's authority set forth in Section 4(c), the Committee, as constituted before such Change in Control, is authorized, and has sole discretion, as to any Award, either at the time such Award is made hereunder or any time thereafter, to take any one or more of the following actions: (i) provide for the purchase of any such Award, upon the Participant's request, for an amount of cash equal to the amount that could have been attained upon the exercise of such Award or realization of the Participant's rights had such Award been currently exercisable or payable; (ii) make such adjustment to any such Award then outstanding as the Committee deems appropriate to reflect such Change in Control; and (iii) cause any such Award then outstanding to be assumed, or new rights substituted therefor, by the acquiring or surviving corporation after such Change in Control.
(B) With respect to any Award granted hereunder prior to December 6, 1995, a Change in Control shall occur if:
(1) any "person" or "group of persons" as such terms are used in Sections 13(d) and 14(d) of the Exchange Act, other than pursuant to a transaction or agreement previously approved by the Board of Directors of the Company, directly or indirectly purchases or otherwise becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act) or has the right to acquire such beneficial ownership (whether or not such right is exercisable immediately, with the passage of time, or subject to any condition) of voting securities representing 25 percent or more of the combined voting power of all outstanding voting securities of the Company; or
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(2) during any period of twenty-four consecutive calendar months, the individuals who at the beginning of such period constitute the Company's Board of Directors, and any new directors whose election by such Board or nomination for election by stockholders was approved by a vote of at least two-thirds of the members of such Board who were either directors on such Board at the beginning of the period or whose election or nomination for election as directors was previously so approved, for any reason cease to constitute at least a majority of the members thereof.
(C) Notwithstanding the provisions of subparagraph (B), with respect to Awards granted hereunder on or after December 6, 1995, a Change in Control shall occur only if the event described in this subparagraph (C) shall have occurred. With respect to any other Award granted prior thereto, a Change in Control shall occur if any of the events described in subparagraphs (B) or (C) shall have occurred, unless the holder of any such Award shall have consented to the application of this subparagraph (C) in lieu of the foregoing subparagraph (B). A Change in Control for purposes of this subparagraph
(C) shall occur if, during any period of twenty-four consecutive calendar months, the individuals who at the beginning of such period constitute the Company's Board of Directors, and any new directors (other than Excluded Directors, as hereinafter defined), whose election by such Board or nomination for election by stockholders was approved by a vote of at least two-thirds of the members of such Board who were either directors on such Board at the beginning of the period or whose election or nomination for election as directors was previously so approved, for any reason cease to constitute at least a majority of the members thereof. For purposes hereof, "Excluded Directors" are directors whose election by the Board or approval by the Board for stockholder election occurred within one year of any "person" or "group of persons", as such terms are used in Sections 13(d) and 14(d) of the Exchange Act, commencing a tender offer for, or becoming the beneficial owner of, voting securities representing 25 percent or more of the combined voting power of all outstanding voting securities of the Company, other than pursuant to a tender offer approved by the Board prior to its commencement or pursuant to stock acquisitions approved by the Board prior to their representing 25 percent or more of such combined voting power.
(D) (1) In the event that subsequent to a Change in Control it is determined that any payment or distribution by the Company to or for the benefit of a Participant, whether paid or payable or distributed or distributable pursuant to the terms of this Plan or otherwise, other than any payment pursuant to this subparagraph (D) (a "Payment"), would be subject to the excise tax imposed by Section 4999 of the Code or any interest or penalties with respect to such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the "Excise Tax"), then such Participant shall be entitled to receive from the Company, within 15 days following the determination described in (2) below, an additional payment ("Excise Tax Adjustment Payment") in an amount such that after payment by such Participant of all applicable Federal, state and local taxes (computed at the maximum marginal rates and including any interest or penalties imposed with respect to such taxes), including any Excise Tax, imposed upon the Excise Tax Adjustment Payment, such Participant retains an amount of the Excise Tax Adjustment Payment equal to the Excise Tax imposed upon the Payments.
(2) All determinations required to be made under this Section
6(g)(vi)(D), including whether an Excise Tax Adjustment Payment is required and the amount of such Excise Tax Adjustment Payment, shall be made by PricewaterhouseCoopers LLP, or such other national accounting firm as the Company, or, subsequent to a Change in Control, the Company and the Participant jointly, may designate, for purposes of the Excise Tax, which shall provide detailed supporting calculations to the Company and the affected Participant within 15 business days of the date of the applicable Payment. Except as hereinafter provided, any determination by PricewaterhouseCoopers LLP, or such other national accounting firm, shall be binding upon the
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Company and the Participant. As a result of the uncertainty in the application of Section 4999 of the Code that may exist at the time of the initial determination hereunder, it is possible that (x) certain Excise Tax Adjustment Payments will not have been made by the Company which should have been made (an "Underpayment"), or (y) certain Excise Tax Adjustment Payments will have been made which should not have been made (an "Overpayment"), consistent with the calculations required to be made hereunder. In the event of an Underpayment, such Underpayment shall be promptly paid by the Company to or for the benefit of the affected Participant. In the event that the Participant discovers that an Overpayment shall have occurred, the amount thereof shall be promptly repaid to the Company.
(3) This Section 6(g)(vi)(D) shall not apply to any Award (x) that was granted prior to February 17, 1993 and (y) the holder of which is an executive officer of the Company, as determined under the Exchange Act.
(vii) Cash Settlement. Notwithstanding any provision of this Plan or of any Award Agreement to the contrary, any Award outstanding hereunder may at any time be cancelled in the Committee's sole discretion upon payment of the value of such Award to the holder thereof in cash or in another Award hereunder, such value to be determined by the Committee in its sole discretion.
(viii)Replacement Options. No outstanding option may be cancelled and replaced with an option having a lower exercise price.
SECTION 7. AMENDMENT AND TERMINATION
Except to the extent prohibited by applicable law and unless otherwise expressly provided in an Award Agreement or in the Plan:
(a) Amendments to the Plan. The Board of Directors of the Company may amend the Plan and the Board of Directors or the Committee may amend any outstanding Award; provided, however, that (i) no Plan amendment shall be effective until approved by stockholders of the Company insofar as stockholder approval thereof is required in order for the Plan to continue to satisfy the conditions of Rule 16b-3, and (ii) without the consent of affected Participants no amendment of the Plan or of any Award may impair the rights of Participants under outstanding Awards, and (iii) no Option may be amended to reduce its initial exercise price other than in connection with an event described in Section 4(c) hereof.
(b) Waivers. The Committee may waive any conditions or rights under any Award theretofore granted, prospectively or retroactively, without the consent of any Participant.
(c) Adjustments of Awards Upon the Occurrence of Certain Unusual or Nonrecurring Events. The Committee shall be authorized to make adjustments in the terms and conditions of, and the criteria included in, Awards in recognition of unusual or nonrecurring events (including, without limitation, the events described in Section 4(c) hereof) affecting the Company, any Affiliate, or the financial statements of the Company or any Affiliate, or of changes in applicable laws, regulations, or accounting principles, whenever the Committee determines that such adjustments are appropriate in order to prevent dilution or enlargement of the benefits or potential benefits to be made available under the Plan.
(d) Correction of Defects, Omissions, and Inconsistencies. The Committee may correct any defect, supply any omission or reconcile any inconsistency in the Plan or any Award in the manner and to the extent it shall deem desirable to effectuate the Plan.
SECTION 8. GENERAL PROVISIONS
(a) No Rights to Awards. No Participant or other person shall have any claim to be granted any Award under the Plan, and there is no obligation for uniformity of treatment of Participants or holders or
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beneficiaries of Awards under the Plan. The terms and conditions of Awards of the same type and the determination of the Committee to grant a waiver or modification of any Award and the terms and conditions thereof need not be the same with respect to each Participant.
(b) Withholding. The Company or any Affiliate shall be authorized to withhold from any Award granted or any payment due or transfer made under any Award or under the Plan the amount (in cash, Shares, other securities, other Awards or other property) of withholding taxes due in respect of an Award, its exercise or any payment or transfer under such Award or under the Plan and to take such other action as may be necessary in the opinion of the Company or Affiliate to satisfy all obligations for the payment of such taxes.
(c) No Limit on Other Compensation Arrangements. Nothing contained in the Plan shall prevent the Company or any Affiliate from adopting or continuing in effect other or additional compensation arrangements, including the grant of options and other stock-based awards, and such arrangements may be either generally applicable or applicable only in specific cases.
(d) No Right to Employment. The grant of an Award shall not be construed as giving a Participant the right to be retained in the employ of the Company or any Affiliate. Further, the Company or an Affiliate may at any time dismiss a Participant from employment, free from any liability, or any claim under the Plan, unless otherwise expressly provided in the Plan or in any Award Agreement or other written agreement with the Participant.
(e) Governing Law. The validity, construction and effect of the Plan and any rules and regulations relating to the Plan shall be determined in accordance with the laws of the State of Michigan and applicable Federal law.
(f) Severability. If any provision of the Plan or any Award is or becomes or is deemed to be invalid, illegal or unenforceable in any jurisdiction or as to any person or Award, or would disqualify the Plan or any Award under any law deemed applicable by the Committee, such provision shall be construed or deemed amended to conform to applicable laws, or if it cannot be so construed or deemed amended without, in the determination of the Committee, materially altering the intent of the Plan or the Award, such provision shall be stricken as to such jurisdiction, person or Award, and the remainder of the Plan and any such Award shall remain in full force and effect.
(g) No Trust or Fund Created. Neither the Plan nor any Award shall create or be construed to create a trust or separate fund of any kind or a fiduciary relationship between the Company or any Affiliate and a Participant or any other person. To the extent that any person acquires a right to receive payments from the Company or any Affiliate pursuant to an Award, such right shall be no greater than the right of any unsecured general creditor of the Company or any Affiliate.
(h) No Fractional Shares. No fractional Shares shall be issued or delivered pursuant to the Plan or any Award, and the Committee shall determine whether cash, other securities, or other property shall be paid or transferred in lieu of any fractional Shares, or whether such fractional Shares or any rights thereto shall be cancelled, terminated or otherwise eliminated.
(i) Headings. Headings are given to the Sections and subsections of the Plan solely as a convenience to facilitate reference. Such headings shall not be deemed in any way material or relevant to the construction or interpretation of the Plan or any provision thereof.
SECTION 9. EFFECTIVE DATE OF THE PLAN
The Plan shall be effective as of the date of its approval by the Company's stockholders.
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EXHIBIT 10.c
October 2, 2000
Dear :
Our company's Board of Directors has adopted a plan whereby supplemental retirement and other benefits, in addition to those provided under the Company's pension and other benefit plans, will be made available to those Company and subsidiary executives as may be designated from time to time by the company's Chief Executive Officer. The plan providing such benefits, as originally made available to designated executives in 1987 and as subsequently amended from time to time heretofore or in the future, is referred to in this letter as the "Plan". You are currently a participant in the Plan upon the terms of a letter agreement signed by you and dated , . This Agreement amends and replaces in its entirety your previously signed letter agreement and describes in full your benefits pursuant to the Plan and all of the Company's obligations to you, and yours to the Company. These benefits as described below are contractual obligations of the Company.
For the purposes of this Agreement, words and terms are defined as follows:
a. "Average Compensation" shall mean the aggregate of your highest three years' total annual cash compensation paid to you by the Company, consisting of (i) base salaries and (ii) regular year-end cash bonuses paid with respect to the years in which such salaries are paid, divided by three, provided, however, (x) if you have on the date of determination less than three full years of employment the foregoing calculation shall be based on the average base salaries and regular year-end cash bonuses paid to you while so employed, and (y) if the determination of Average Compensation includes any year in which you volunteered to reduce your salary or, as part of a program generally applicable to participants in the Plan, you did not receive an increase in salary compared with the immediately preceding year, the Committee referred to in paragraph 11 shall make a
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good faith determination of what your Average Compensation would have been absent such salary reduction and absent such generally applicable program.
b. A "Change in Control" shall be deemed to have occurred if, during any period of twenty-four consecutive calendar months, the individuals who at the beginning of such period constitute the Company"s Board of Directors, and any new directors (other than Excluded Directors) whose election by such Board or nomination for election by stockholders was approved by a vote of at least two-thirds of the members of such Board who were either directors on such Board at the beginning of the period or whose election or nomination for election as directors was previously so approved, for any reason cease to constitute at least a majority of the members thereof. Excluded Directors are directors whose election by the Board or approval by the Board for stockholder election occurred within one year after any "person" or "group of persons" as such terms are used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934 commencing a tender offer for, or becoming the beneficial owner of, voting securities representing 25 percent or more of the combined voting power of all outstanding voting securities of the Company, other than pursuant to a tender offer approved by the Board prior to its commencement or pursuant to stock acquisitions approved by the Board prior to their representing 25 percent or more of such combined voting power.
c. "Code" means the Internal Revenue Code of 1986, as amended.
d. "Company" shall mean Masco Corporation or any corporation in which Masco Corporation owns directly or indirectly stock possessing in excess of 50% of the total combined voting power of all classes of stock.
e. The "Deferred Compensation Trust" shall mean any trust created by the Company to receive the deposit referred to in clause (2) of paragraph 10.
f. "Disability" and "Disabled" shall mean your being unable to perform your duties as a Company executive by reason
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of your physical or mental condition, prior to your attaining age 65, provided that you have been employed by the Company for two consecutive Years or more at the time you first became Disabled.
g. The "Gross-Up Amount" (i) shall be determined if any payment or distribution by the Company to or for your benefit, whether paid, distributed, payable or distributed or distributable pursuant to the terms of this Agreement, any stock option or stock award plan, retirement plan or otherwise (such payment or distribution, other than an Excise Tax Adjustment Payment under clause (ii), is referred to herein as a "Payment"), would be subject to the excise tax imposed by
Section 4999 of the Code (or any successor provision) or any interest or penalties with respect to such excise tax (such excise tax together with any such interest or penalties are referred to herein as the "Excise Tax"), and (ii) shall mean an additional payment (the "Excise Tax Adjustment Payment") in an amount such that after subtracting from the Excise Tax Adjustment Payment your payment of all applicable Federal, state and local taxes (computed at the maximum marginal rates and including any interest or penalties imposed with respect to such taxes), including any Excise Tax imposed upon the Excise Tax Adjustment Payment, the balance will be equal to the Excise Tax imposed upon the Payments. All determinations required to be made with respect to the "Gross-Up Amount", including whether an Excise Tax Adjustment Payment is required and the amount of such Excise Tax Adjustment Payment, shall be made by PricewaterhouseCoopers LLP, or such national accounting firm as the Company may designate prior to a Change in Control, which shall provide detailed supporting calculations to the Company and you. Except as provided in clause (iv) of paragraph 10, all such determinations shall be binding upon you and the Company.
h. "PBGC" shall mean the Pension Benefit Guaranty Corporation.
i. "Present Value" of future benefits means the discounted present value of those benefits (including therein the benefits, if any, your Surviving Spouse would be entitled to receive under this Agreement upon your death), using the
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UP-1984 Mortality Table and discounted by the interest rate used, for purposes of determining the present value of a lump sum distribution on plan termination, by the PBGC on the first day of the month which is four months prior to the month in which a Change in Control occurs (or if the PBGC has ceased publishing such interest rate, such other interest rate as the Board of Directors deems is an appropriate substitute). The above PBGC interest rate is intended to be determined based on PBGC methodology and regulations in effect on September 1, 1993 (as contained in 29 CFR Part 2619).
j. "Profit Sharing Conversion Factor" shall be a factor equal to the present value of a life annuity payable at the later of age 65 or attained age based on the 1983 Group Annuity Mortality Table using a blend of 50% of the male mortality rates and 50% of the female mortality rates as set forth in Revenue Ruling 95-6 (or such other mortality table that the Internal Revenue Service may prescribe in the future) and an interest rate equal to the average yield for 30-year Treasury Constant Maturities, as reported in Federal Reserve Statistical Releases G.13 and H.15, four months prior to the month of the date of determination (or, if such interest rate ceases to be so reported, such other interest rate as the Board of Directors deems is an appropriate substitute).
k. "Retirement" shall mean your termination of employment with the Company, on or after you attain age 65. Your acting as a consultant shall not be considered employment.
l. "SERP Percentage" of your Average Compensation is 60%.
m. "Surviving Spouse" shall be the person to whom you shall be legally married (under the law of the jurisdiction of your permanent residence) at the date of (i) your Retirement or death after attaining age 65 (if death terminated employment with the Company) for the purposes of paragraphs 1, 2 and 3, (ii) your death for the purposes of paragraph 5 and, if paragraph 5 is applicable, for the purposes of paragraph 3,(iii) the commencement of your Disability for the purposes of paragraphs 6 and 7 and, as long as paragraphs 6 or 7 are
Page 5 October 2, 2000
applicable, for the purposes of paragraph 3, (iv) your termination of employment for the purposes of paragraph 4 and, if paragraph 4 is applicable, for purposes of paragraph 3 and (v) a "Change in Control" for the purposes of paragraph 10 if none of clauses (i) through (iv) has become applicable prior to the Change in Control and, if this clause (v) is applicable, for purposes of paragraph 3. For the purposes of paragraphs 11a, 11e, 11f, 11g, 11h, 11i and 11j, "Surviving Spouse" shall be any spouse entitled to any benefits hereunder.
n. If you become Disabled, "Total Compensation" shall mean your annual base salary rate at the time of your Disability plus the regular year-end cash bonus paid to you for the year immediately prior thereto, provided, however, if the determination of Total Compensation is for a year in which you volunteered to reduce your salary or, as part of a program generally applicable to participants in the Plan, you did not receive an increase in salary compared with the immediately preceding year, the Committee referred to in paragraph 11 shall make a good faith determination of what your Total Compensation would have been absent such salary reduction and absent such generally applicable program.
o. "Vested Percentage" shall mean the sum of the following percentages: (i) 2% multiplied by your Years of Service, plus (ii) 8% multiplied by the number of Years you have been designated a participant in the Plan; provided, however, (w) prior to completing five Years of Service the Vested Percentage is 0,(x) on or prior to your fiftieth birthday your Vested Percentage may not exceed 50%, (y) on or prior to each of your birthdays following your fiftieth birthday your Vested Percentage may not exceed the sum of 50% plus the product obtained by multiplying 5% by the number of birthdays that have occurred following your fiftieth birthday, and (z) your Vested Percentage in no event may exceed 100%.
p. "Year" shall mean twelve full consecutive months, and "year" shall mean a calendar year.
q. "Years of Service" shall mean the number of Years during which you were employed by the Company (excluding,
Page 6 October 2, 2000
however, Years of Service with a corporation prior to the time it became a subsidiary of or otherwise affiliated with Masco Corporation).
1. In accordance with the Plan, upon your Retirement the Company will pay you annually during your lifetime, subject to paragraph 8 below, the SERP Percentage of your Average Compensation, less: (i) a sum equal to the annual benefit which would be payable to you upon your Retirement if benefits payable to you under the Company funded qualified pension plans and the defined benefit (pension) plan provisions of the Company"s Retirement Benefits Restoration Plan and any similar plan were converted to a life annuity, or if you are married when you retire, to a 50% joint and spouse survivor life annuity, and (ii) a sum equal to the annual benefit which would be payable to you upon Retirement if your vested accounts in the Company's qualified defined contribution plans
(excluding your contributions and earnings thereon in the Company's 401(k) Savings Plan) and the defined contribution (profit sharing) provisions of the Company"s Retirement Benefits Restoration Plan and any similar plan were converted to a life annuity in accordance with the Profit Sharing Conversion Factor, provided, however, in all cases the amount offset pursuant to these subsections (i) and (ii) shall be determined prior to the effect of any payments from the plans and trusts referred to therein which are authorized pursuant to any Qualified Domestic Relations Order under ERISA, or other comparable order allocating marital or other rights under state law as applied to retirement benefits from non-qualified plans.
2. Upon your death after Retirement or while employed by the Company after attaining age 65, your Surviving Spouse shall receive for life 75% of the annual benefit pursuant to paragraph 1 of this Agreement which was payable to you prior to your death (or, if death terminated employment after attaining age 65, which would have been payable to you had your Retirement occurred immediately prior to your death).
3. The Company will provide, purchase or at its option provide reimbursement for premiums paid for such supplemental medical insurance as the Company in its sole discretion may deem advisable from time to time (i) for you and your Surviving Spouse for the lifetime of each of you (A) following a termination of your
Page 7 October 2, 2000
employment with the Company due to Retirement or Disability, and (B) following any other termination of employment with the Company provided (x) you and your Surviving Spouse are not covered by another medical insurance program substantially all of the cost of which is paid by another employer, (y) on the date of such termination your Vested Percentage is not less than 80% and (z) the benefits under this paragraph 3 shall not commence until you have attained age 60 or your earlier death to the extent you die leaving a Surviving Spouse, and
(ii) for your Surviving Spouse for his or her lifetime upon a termination of your employment with the Company due to your death.
4. If your employment with the Company is for any reason terminated prior to Retirement, other than as a result of circumstances described in paragraphs 2, 5 or 6 of this Agreement or following a Change in Control, and if prior to the date of termination you have completed 5 or more Years of Service, upon your attaining age 65 the Company will pay to you annually during your lifetime, subject to paragraph 8 below, the Vested Percentage of the result obtained by (1) multiplying your SERP Percentage at the date your employment terminated by your Average Compensation, less (2) the sum of the following: (i) a sum equal to the annual benefit which would be payable to you upon your attaining age 65 if benefits payable to you under the Company funded qualified pension plans and the defined benefit (pension) plan provisions of the Company"s Retirement Benefits Restoration Plan and any similar plan were converted to a life annuity, or if you are married when you attain age 65, to a 50% joint and spouse survivor life annuity, (ii) a sum equal to the annual benefit which would be payable to you upon your attaining age 65 if an amount equal to your vested accounts at the date of your termination of employment with the Company in the Company"s qualified defined contribution plans (excluding your contributions and earnings thereon in the Company's 401(k) Savings Plan) and the defined contribution (profit sharing) provisions of the Company"s Retirement Benefits Restoration Plan and any similar plan (in each case increased from the date of termination to age 65 at the imputed rate of 4% per annum) were converted to a life annuity in accordance with the Profit Sharing Conversion Factor, and (iii) to the extent the annual payments described in this clause (iii) and the annual payments you
Page 8 October 2, 2000
would otherwise be entitled to receive under this paragraph 4 would, in the aggregate exceed (the "excess amount") the annual payments you would have received under paragraph 1 had you remained employed by the Company until Retirement (assuming for purposes of this clause no compensation increases), any retirement benefits paid or payable to you by reason of employment by all other previous or future employers, but only to the extent of such excess amount (the amount of such deduction, in the case of benefits paid or payable other than on an annual basis, to be determined on an annualized basis by the Committee referred to in paragraph 11 and excluding from such deduction any portion thereof, and earnings thereon, determined by such Committee to have been contributed by you rather than your prior or future employers), provided, however, in all cases the amount offset pursuant to these subsections (i) and
(ii) shall be determined prior to the effect of any payments from the plans and trusts referred to therein which are authorized pursuant to any Qualified Domestic Relations Order under ERISA, or other comparable order allocating marital or other rights under state law as applied to retirement benefits from non-qualified plans. Upon your death on or after age 65 should you be survived by your Surviving Spouse, your Surviving Spouse shall receive for life, commencing upon the date of your death, 75% of the annual benefit payable to you under the preceding sentence following your attainment of age 65; provided, further, if your death should occur prior to age 65, your Surviving Spouse shall receive for life, commencing upon the date of your death, 75% of the annual benefit which would have been payable to you under the preceding sentence following your attainment of age 65, reduced by a factor of actuarial equivalence as determined by the Committee, such that the Present Value of the aggregate payments to be received by your Surviving Spouse based on his or her life expectancy as of the date of your death is equal to the discounted Present Value, determined at the date of your death, of the aggregate payments estimated to be received by your Surviving Spouse based on his or her life expectancy at an age, and as if your Surviving Spouse had begun receiving payments, when you would have attained age 65.
5. If while employed by the Company you die prior to your attaining age 65 leaving a Surviving Spouse, and provided you shall have been employed by the Company for two consecutive Years or more, your Surviving Spouse shall receive annually for life, subject to paragraph 8 below, 75% of the SERP Percentage of your Average Compensation (assuming no compensation increases between the date of your death and the date you would have attained age
Page 9 October 2, 2000
65), less: (i) a sum equal to the annual benefit which would be payable to your Surviving Spouse under the Company funded qualified pension plans and the defined benefit (pension) plan provisions of the Company's Retirement Benefits Restoration Plan and any similar plan if such benefit were converted to a life annuity (such deduction, however, only to commence on the date such benefit is first payable), and (ii) a sum equal to the annual payments which would be received by your Surviving Spouse as if your spouse were designated as the beneficiary of your vested accounts in the Company's qualified defined benefit contribution plans (excluding your contributions and earnings thereon in the Company's 401(k) Savings Plan) and the defined contribution (profit sharing) provisions of the Company"s Retirement Benefits Restoration Plan and any similar plan and such accounts were converted to a life annuity at the time of your death in accordance with the Profit Sharing Conversion Factor, provided, however, in all cases the amount offset pursuant to these subsections (i) and
(ii) shall be determined prior to the effect of any payments from the plans and trusts referred to therein which are authorized pursuant to any Qualified Domestic Relations Order under ERISA, or other comparable order allocating marital or other rights under state law as applied to retirement benefits from non-qualified plans. No death benefits are payable except to your Surviving Spouse.
6. If you shall have been employed by the Company for two Years or more and while employed by the Company you become Disabled prior to your attaining age 65, until the earlier of your death, termination of Disability or attaining age 65 the Company will pay you an annual benefit, subject to paragraph 8 below, equal to 60% of your Total Compensation less any benefits payable to you pursuant to long-term disability insurance under programs provided by the Company. If your Disability continues until you attain age 65, you shall be considered retired and you shall receive retirement benefits pursuant to paragraph 1 above, based upon your Average Compensation as of the date it is determined you became Disabled.
7. If you die leaving a Surviving Spouse while receiving Disability benefits pursuant to paragraph 6 of this Agreement, you will be deemed to have retired on your death and your Surviving Spouse shall receive for life 75% of the annual benefit which would have been payable to you if you had retired on the date of your
Page 10 October 2, 2000
death and your benefit determined pursuant to paragraph 1, based upon your Average Compensation as of the date you became Disabled.
8. If the age of your Surviving Spouse is more than 20 years younger than your age, then the annual benefit payable under paragraphs 1, 4, 5 and 6 of this Agreement and the benefit payable as "the SERP Percentage of your Average Compensation", as that phrase is used in paragraph 5 of this Agreement, shall be reduced by the percentage obtained by multiplying 1.5% times the number of Years or portion thereof by which your Surviving Spouse is more than 20 years younger than you.
9. If you or your Surviving Spouse is eligible to receive benefits hereunder, unless otherwise specifically agreed by the Company in writing, you and your Surviving Spouse will not be able to receive benefits under any other Company sponsored non-qualified retirement plans other than the Company"s Retirement Benefits Restoration Plan. For this purpose benefits received under the Company's non-qualified stock option or stock award plans will not be considered to have been received under a Company sponsored non-qualified retirement plan even though such benefits are received after retirement. Except as provided in the last sentence of paragraph 4 and in paragraph 10 of this Agreement, no benefits will be paid to your Surviving Spouse pursuant to this Agreement unless upon your death you were employed by the Company, Disabled or had taken Retirement from the Company.
10. Change in Control. (i) Immediately upon the occurrence of any Change in Control:
(1) If you are then employed by the Company, your Vested Percentage, if not already 100%, shall be deemed for all purposes of this Agreement to be 100%.
(2) If the Deferred Compensation Trust has theretofore been established or is established within thirty days after the Change in Control, the Company shall forthwith deposit to an account in your name (or that of your Surviving Spouse if you are then deceased and your Surviving Spouse is entitled to benefits hereunder) in the Deferred Compensation Trust 110% of the sum of the Gross-Up Amount plus:
Page 11 October 2, 2000
(A) If you are then employed by the Company, an amount equal to the discounted Present Value of the benefits which would have been payable under paragraphs 1 and 2 of this Agreement upon Retirement at age 65 or attained age if greater, assuming for purposes of this clause, no compensation increases and that if younger than age 65 you and your Surviving Spouse had attained such age;
(B) If employment has previously been terminated but you or your Surviving Spouse is then entitled in the future to receive benefits under paragraph 4 of this Agreement, an amount equal to the discounted Present Value of the benefits which would have been payable under such paragraph;
(C) If you or your Surviving Spouse is then receiving payments under paragraphs 1, 2, 4, 5 or 7 of this Agreement, an amount equal to the Present Value of those benefits payable in the future to you and your Surviving Spouse; and
(D) If you are then receiving payments under paragraph 6 of this Agreement, an amount equal to the Present Value of the benefits which would have been payable under paragraphs 6 and 7 on the assumption you would have continued to receive benefits under paragraph 6 until you had attained age 65 and thereafter continued to receive benefits as though you were deemed to have retired.
(3) The Company shall thereafter be obligated to provide such supplemental medical insurance as has theretofore in the discretion of the Company been generally provided to participants and their Surviving Spouses under the Plan (A) to you and your Surviving Spouse if you or your Surviving Spouse is then receiving benefits under paragraph 3, (B) to you and your Surviving Spouse if you become Disabled if you are employed by the Company at the time of the Change in Control, (C) to your Surviving Spouse upon your death if you are employed by the Company at the time of the Change in Control and (D) to you and your Surviving Spouse upon any
Page 12 October 2, 2000
termination of employment following any Change in Control but only during the periods when you and your Surviving Spouse are not covered by another medical insurance program substantially all of the cost of which is paid by another employer. The obligations of the Company under this clause (i)(3) shall remain in effect for the lifetime of both you and your Surviving Spouse.
(4) If the Deferred Compensation Trust is not established prior to or within thirty days after the Change in Control, all payments which would have otherwise have been made to you or your Surviving Spouse from the Deferred Compensation Trust shall immediately after such thirty day period be made to you or your Surviving Spouse by the Company.
(ii) Any deposit by the Company to an account in your name or that of your Surviving Spouse in the Deferred Compensation Trust prior to the occurrence of the Change in Control, together with all income then accrued thereon (but only to the extent of the value of such deposited amount and the income accrued thereon on the day of any deposit under clause (i)(2) of this paragraph 10), shall reduce by an equal amount the obligations of the Company to make the deposit required under clause (i)(2) of this paragraph 10.
(iii) At or prior to making the deposit required by clause (i)(2) of this paragraph 10, the Company shall deliver to the Trustee under the Deferred Compensation Trust a certificate specifying that portion, if any, of the amount in the trust account, after giving effect to the deposit, which is represented by the Gross-Up Amount. Payment of 90.91% of the amount required by clause
(i)(2) of this paragraph 10 to be paid to the trust account, together with any income accrued thereon from the date of the Change in Control, is to be made to you or your Surviving Spouse, as applicable, under the terms of the Deferred Compensation Trust, at the earlier of (1) immediately upon a Change in Control if you then are deceased or have attained age 65 or are Disabled, (2) your death subsequent to the Change in Control, or (3) the date which is one year after the Change in Control; provided, however, that the Trustee under the Deferred Compensation Trust is required promptly to pay to you or your Surviving Spouse, as applicable, from the trust account from time to time amounts, not exceeding in the
Page 13 October 2, 2000
aggregate the Gross-Up Amount, upon your or your Surviving Spouse's certification to the Trustee that the amount to be paid has been or within 60 days will be paid by you or your Surviving Spouse to a Federal, state or local taxing authority as a result of the Change in Control and the imposition of the excise tax under Section 4999 of the Code (or any successor provision) on the receipt of any portion of the Gross-Up Amount. All amounts in excess of the amount required to be paid from the trust account by the preceding sentence, after all expenses of the Deferred Compensation Trust have been paid, shall revert to the Company provided that the Company has theretofore expressly affirmed its continuing obligations under clause (i)(3) of this Paragraph 10.
(iv) Subject to the next sentence of this clause (iv), the payment of the Gross-Up Amount to you or your Surviving Spouse or the account in your or your Surviving Spouse"s name in the Deferred Compensation Trust will thereby discharge the Company from any obligations it may have under any present or future stock option or stock award plan, retirement plan or otherwise, to make any other payment as a result of your income becoming subject to the excise tax imposed by Section 4999 of the Code (or any successor provision) or any interest or penalties with respect to such excise tax. As a result of the uncertainty which will be present in the application of Section 4999 of the Code (or any successor provision) at the time of the determination of the Gross-Up Amount and the possibility that between the date of determination of the Gross-Up Amount and the dates payments are to be made to you or your Surviving Spouse under this Agreement, changes in applicable tax laws will result in an incorrect determination of the Gross-Up Amount having been made, it is possible that (1) payment of a portion of the Gross-Up Amount will not have been made by the Company which should have been made (an "Underpayment"), or (2) payment of a portion of the Gross-Up Amount will have been made which should not have been made (an "Overpayment"), consistent with the calculations required to be made hereunder. In the event of an Underpayment, such Underpayment shall be promptly paid by the Company to or for your benefit. In the event that you or your Surviving Spouse discover that an Overpayment shall have occurred, the amount thereof shall be promptly repaid by you or your Surviving Spouse to the Company.
Page 14 October 2, 2000
(v) Prior to the occurrence of a Change in Control, any deposits made by the Company to an account in the Deferred Compensation Trust may be withdrawn by the Company. Upon the occurrence of a Change in Control, all further obligations of the Company under this Agreement (other than under this Paragraph 10 to the extent not theretofore performed) shall terminate in all respects.
11. We also agree upon the following:
a. Prior to the occurrence of a Change in Control, the Compensation Committee of the Company's Board of Directors, or any other committee however titled which shall be vested with authority with respect to the compensation of the Company's officers and executives (in either case, the "Committee"), shall have the exclusive authority to make all determinations which may be necessary in connection with this Agreement including the dates of and whether you are or continue to be Disabled, the amount of annual benefits payable hereunder by reason of offsets hereunder due to employment by other employers, the interpretation of this Agreement, and all other matters or disputes arising under this Agreement. The determinations and findings of the Committee shall be conclusive and binding, without appeal, upon both of us.
b. You will not during your employment or Disability, and after Retirement or the termination of your employment, for any reason disclose or make use of for your own or another person's benefit under any circumstances any of the Company's Proprietary Information. Proprietary Information shall include trade secrets, secret processes, information concerning products, developments, manufacturing techniques, new product or marketing plans, inventions, research and development information or results, sales, pricing and financial data, information relating to the management, operations or planning of the Company and any other information treated as confidential or proprietary.
c. You agree that you will not following your termination of employment for any reason (whether on Retirement, Disability or termination prior to attaining age 65) thereafter directly or indirectly engage in any business
Page 15 October 2, 2000
activities, whether as a consultant, advisor or otherwise, in which the Company is engaged in any geographic area in which the products or services of the Company have been sold, distributed or provided during the five year period prior to the date of your termination of employment. In light of ongoing payments to be received by you and your Surviving Spouse for your respective lives, the restrictions contained in the preceding sentence shall be unlimited in duration provided no Change in Control has occurred and, in the event of a Change in Control, all such restrictions shall terminate one year thereafter.
In addition to the foregoing and provided no Change in Control has occurred, if while you or your Surviving Spouse is receiving retirement or other benefits pursuant to this Agreement, in the judgment of the Committee you or your Surviving Spouse directly or indirectly engage in activity or act in a manner which can be considered adverse to the interest of the Company or any of its direct or indirect subsidiaries or affiliated companies, the Committee may terminate rights to any further benefits hereunder.
d. Except as may be provided to the contrary in a duly authorized written agreement between you and the Company you acknowledge that the Company has made no commitments to you of any kind with respect to the continuation of your employment, which we expressly agree is an employment at will, and you or the Company shall have the unrestricted right to terminate your employment with or without cause, at any time in your or its discretion.
e. At the Company's request, expressed through a Company officer, you agree to provide such information with respect to matters which may arise in connection with this Agreement as may be deemed necessary by the Company or the Committee, including for example only and not in limitation, information concerning benefits payable to you from third parties, and you further agree to submit to such medical examinations by duly licensed physicians as may be requested by the Company from time to time. You also agree to direct third parties to provide such information, and your Surviving Spouse's cooperation in providing such information is a condition to the receipt of survivor's benefits under this Agreement.
Page 16 October 2, 2000
f. To the extent permitted by law, no interest in this Agreement or benefits payable to you or to your Surviving Spouse shall be subject to anticipation, or to pledge, assignment, sale or transfer in any manner nor shall you or your Surviving Spouse have the power in any manner to charge or encumber such interest or benefits, nor shall such interest or benefits be liable or subject in any manner for the liabilities of you or your Surviving Spouse's debts, contracts, torts or other engagements of any kind.
g. No person other than you and your Surviving Spouse shall have any rights or property interest of any kind whatsoever pursuant to this Agreement, and neither you nor your Surviving Spouse shall have any rights hereunder other than those expressly provided in this Agreement. Upon the death of you and your Surviving Spouse no further benefits of whatsoever kind or nature shall accrue or be payable pursuant to this Agreement.
h. All benefits payable pursuant to this Agreement, other than pursuant to paragraph 10, shall be paid in installments of one-twelfth of the annual benefit, or at such shorter intervals as may be deemed advisable by the Company in its discretion, upon receipt of your or your Surviving Spouse's written application, or by the applicant's personal representative in the event of any legal disability.
i. Except as provided in paragraph 10, all benefits under this Agreement shall be payable from the Company's general assets, which assets (including all funds in the Deferred Compensation Trust) are subject to the claims of the Company"s general creditors, and are not set aside for your or your Surviving Spouse's benefit.
j. You agree that, if the Company establishes the Deferred Compensation Trust, the Company is entitled at any time prior to a Change in Control to revoke such trust and withdraw all funds theretofore deposited in such trust. You acknowledge that although this Agreement refers from time to
Page 17 October 2, 2000
time to your or your Surviving Spouse"s trust account, no separate trust will be created and all assets of any Deferred Compensation Trust will be commingled.
k. This Agreement shall be governed by the laws of the State of Michigan.
12. We have agreed that the determinations of the Committee described in paragraph 11a shall be conclusive as provided in such paragraph, but if for any reason a claim is asserted which subverts the provisions of paragraph 11a, we agree that, except for causes of action which may arise under paragraph 11b and the first paragraph of paragraph 11c and provided no Change in Control has occurred, arbitration shall be the sole and exclusive remedy to resolve all disputes, claims or controversies which could be the subject of litigation (hereafter referred to as "dispute") involving or arising out of this Agreement. It is our mutual intention that the arbitration award will be final and binding and that a judgment on the award may be entered in any court of competent jurisdiction and enforcement may be had according to its terms.
The arbitrator shall be chosen in accordance with the commercial arbitration rules of the American Arbitration Association and the expenses of the arbitration shall be borne equally by the parties to the dispute. The place of the
Page 18 October 2, 2000
arbitration shall be the principal offices of the American Arbitration Association in the metropolitan Detroit area.
The arbitrator's sole authority shall be to apply the clauses of this Agreement.
We agree that the provisions of this paragraph 12, and the decision of the arbitrator with respect to any dispute, with only the exceptions provided in the first paragraph of this paragraph 12, shall be the sole and exclusive remedy for any alleged cause of action in any manner based upon or arising out of this Agreement. Subject to the foregoing exceptions, we acknowledge that since arbitration is the exclusive remedy, neither of us or any party claiming under this Agreement has the right to resort to any federal, state or local court or administrative agency concerning any matters dealt with by this Agreement and that the decision of the arbitrator shall be a complete defense to any action or proceeding instituted in any tribunal or agency with respect to any dispute. The arbitration provisions contained in this paragraph shall survive the termination or expiration of this Agreement, and shall be binding on our respective successors, personal representatives and any other party asserting a claim based upon this Agreement.
We further agree that any demand for arbitration must be made within one year of the time any claim accrues which you or any person claiming hereunder may have against the Company; unless demand is made within such period, it is forever barred.
Page 19 October 2, 2000
We are pleased to be able to make this supplemental plan available to you. Please examine the terms of this Agreement carefully and at your earliest convenience indicate your assent to all of its terms and conditions by signing and dating where provided below and returning a signed copy to me.
Sincerely,
MASCO CORPORATION

By/s/Richard A. Manoogian
  -------------------------
   Richard A. Manoogian
   Chief Executive Officer	

DATE:
 
EXHIBIT 10.e
MASCO CORPORATION
1997 NON-EMPLOYEE DIRECTORS STOCK PLAN
 (Amended and Restated December 6, 2000)
SECTION 1. PURPOSE
The purpose of this Plan is to ensure that the non-employee Directors of Masco Corporation (the "Company") have an equity interest in the Company and thereby have a direct and long term interest in the growth and prosperity of the Company by payment of part of their compensation in the form of common stock of the Company.
SECTION 2. ADMINISTRATION OF THE PLAN
This Plan will be administered by the Company's Board of Directors (the "Board"). The Board shall be authorized to interpret the Plan, to establish, amend, and rescind any rules and regulations relating to the Plan and to make all other determinations necessary or advisable for the administration of the Plan. The Board's interpretation of the terms and provisions of this Plan shall be final and conclusive. The Secretary of the Company shall be authorized to implement the Plan in accordance with its terms and to take such actions of a ministerial nature as shall be necessary to effectuate the intent and purposes thereof. The validity, construction and effect of the Plan and any rules and regulations relating to the Plan shall be determined in accordance with the laws of the State of Michigan and applicable Federal law.
SECTION 3. ELIGIBILITY
Participation will be limited to individuals who are Eligible Directors, as hereinafter defined. Eligible Director shall mean any Director of the Company who is not an employee of the Company and who receives a fee for services as a Director.
SECTION 4. SHARES SUBJECT TO THE PLAN
(a) Subject to the adjustments set forth below, the aggregate number of shares of Company Common Stock, par value $1.00 per share ("Shares"), which may be the subject of awards issued under the Plan shall be 1,000,000.
(b) Any Shares to be delivered under the Plan shall be made available from newly issued Shares or from Shares reacquired by the Company, including Shares purchased in the open market.
(c) To the extent a Stock Option award, as hereinafter defined, terminates without having been exercised, or an award of Restricted Stock, as hereinafter defined, is forfeited, the Shares subject to such Stock Option or Restricted Stock award shall again be available for distribution in connection with future awards under the Plan. Shares equal in number to the Shares surrendered to the Company in payment of the option price or withholding taxes (if any) relating to or arising in connection with any Restricted Stock or Stock Option hereunder shall be added to the number of Shares then available for future awards under clause (a) above.
(d) In the event of any merger, reorganization, consolidation, recapitalization, stock split, stock dividend, or other change in corporate structure affecting the Shares, the aggregate number of Shares which may be issued under the Plan, the number of Shares subject to Stock Options to be granted under Section 6(a) hereof and the number of Shares subject to any outstanding award of Restricted Stock or unexercised Stock Option shall be adjusted to avoid enhancement or diminution of the benefits intended to be made available hereunder.
SECTION 5. DIRECTOR STOCK COMPENSATION
(a) The compensation of each Eligible Director for the five year period beginning January 1, 1997 shall be payable in part with an award of Restricted Stock determined as set forth below, and in part in cash. Compensation for this purpose means annual retainer fees but does not include supplemental retainer fees for committee positions or fees for attendance at meetings, which shall be paid in cash. The portion of compensation payable in Restricted Stock during the five year period shall be equal to one-half of the annual compensation paid to Eligible Directors in the year immediately prior to the award multiplied by five, and the balance of compensation, unless otherwise determined by the Board, shall be payable in cash. Each award of Restricted Stock shall vest in twenty percent annual installments (disregarding fractional shares) on January 1 of each of the five consecutive years following the year in which the award is made. Subject to the approval of this Plan by the Company's stockholders, each Eligible
1
Director on February 18, 1997 is awarded as of that date 6,940 Shares of Restricted Stock, based on the closing price of the Shares as reported on the New York Stock Exchange Composite Tape (the "NYSE") on February 18, 1997. Cash shall be paid to an Eligible Director in lieu of a fractional share.
(b) Subject to the approval of this Plan by the Company's stockholders, each Eligible Director who is first elected or appointed to the Board on or after the date of the Company's 1997 annual meeting of stockholders shall receive, as of the date of such election or appointment, an award of Restricted Stock determined in accordance with Section 5(a) for the five year period beginning on January 1 of the year in which such election or appointment occurred; provided, however, that the price of the Shares used in determining the number of Shares of Restricted Stock which shall be issued to such Eligible Director shall be the closing price of the Shares as reported on the NYSE on the date on which such Eligible Director is elected or appointed, and provided, further, that the amount of Restricted Stock awarded to any Eligible Director who begins serving as a Director other than at the beginning of a calendar year shall be prorated to reflect the partial service of the initial year of the Director's term, such proration to be effected in the initial vesting.
(c) Upon the full vesting of any award of Restricted Stock awarded pursuant to Section 5(a) or 5(b), each affected Eligible Director shall be eligible to receive a new award of Restricted Stock, subject to Section 4. The number of Shares subject to such award shall be determined generally in accordance with the provisions of Section 5(b); provided, however, that the Board shall have sole discretion to adjust the amount of compensation then to be paid in the form of Shares and the terms of any such award of Shares. Except as the Board may otherwise determine, any increase or decrease in an Eligible Director's annual compensation during the period when such Director has an outstanding award of Restricted Stock shall be implemented by increasing or decreasing the cash portion of such Director's compensation.
(d) Each Eligible Director shall be entitled to vote and receive dividends on the unvested portion of his or her Restricted Stock, but will not be able to obtain a stock certificate or sell, encumber or otherwise transfer such Restricted Stock except in accordance with the terms of the Company's 1991 Long Term Stock Incentive Plan (the "Long Term Plan"). If an Eligible Director's term is terminated by reason of death or permanent and total disability, the restrictions on the Restricted Stock will lapse and such Eligible Director's rights to the Shares will become vested on the date of such termination. If an Eligible Director's term is terminated for any reason other than death or permanent and total disability, the Restricted Stock that has not vested shall be forfeited and transferred back to the Company; provided, however, that a pro rata portion of the Restricted Stock which would have vested on January 1 of the year following the year of the Eligible Director's termination shall vest on the date of termination, based upon the portion of the year during which the Eligible Director served as a Director of the Company.
SECTION 6. STOCK OPTION GRANT
(a) Subject to approval of this Plan by the Company's stockholders, each Eligible Director on the date of such approval will be granted on such date a stock option to purchase 8,000 Shares (the "Stock Option"). Thereafter, on the date of each of the Company's subsequent annual stockholders meetings, each person who is or becomes an Eligible Director on that date and whose service on the Board will continue after such date shall be granted a Stock Option, subject to Section 4, effective as of the date of such meeting.
(b) Stock Options granted under this Section 6 shall be non-qualified stock options and shall have the following terms and conditions.
1. Option Price. The option price per Share shall be equal to the closing price of the Shares as reflected on the NYSE on the date of grant (or if there were no sales on such date, the most recent prior date on which there were sales).
2. Term of Option. The term of the Stock Option shall be ten years from the date of grant, subject to earlier termination in the event of termination of service as an Eligible Director. If an Eligible Director's term is terminated for any reason other than death or permanent and total disability at a time when such Director is entitled to exercise an outstanding Stock Option, then at any time or times within three months after termination such Stock Option may be exercised as to all or any of the Shares which the Eligible Director was entitled to purchase at the date of termination. That portion of the Stock Option not exercisable at the time of such termination shall be forfeited and transferred back to the Company on the date of such termination. If an Eligible Director's term is terminated by reason of permanent and total disability, such Stock Option shall continue to become exercisable and shall remain exercisable in accordance with its terms and the provisions of this Plan. If an Eligible Director dies, all
2
unexercisable installments of the Stock Option shall thereupon become exercisable and at any time or times within one year after death such Stock Option may be exercised as to all or any unexercised portion of the Stock Option. Except as so exercised, such Stock Option shall expire at the end of such period. Except as provided above, a Stock Option may be exercised only if and to the extent such Stock Option was exercisable at the date of termination of service as an Eligible Director, and a Stock Option may not be exercised at a time when the Stock Option would not have been exercisable had the service as an Eligible Director continued.
3. Exercisability. Subject to clause 2 above, each Stock Option shall vest and become exercisable with respect to twenty percent of the underlying Shares on each of the first five anniversaries of the date of grant, provided that the optionee is an Eligible Director on such date.
4. Method of Exercise. A Stock Option may be exercised in whole or in part during the period in which such Stock Option is exercisable by giving written notice of exercise to the Company specifying the number of shares to be purchased, accompanied by payment of the purchase price. Payment of the purchase price shall be made in cash, by delivery of Shares, or by any combination of the foregoing.
5. Forfeiture. If a Director's term is terminated for any reason other than death, permanent and total disability or following a Change in Control, as hereinafter defined, and if any installments of a Stock Option granted upon any exercise of the Stock Option became exercisable within the two year period prior to the date of such termination (such installments being referred to as the "Subject Options"), by accepting the Stock Option each Director agrees that the following provisions will apply:
(1) Upon the demand of the Company such individual will pay to the Company in cash within 30 days after the date of such termination the amount of income realized for income tax purposes from the exercise of any Subject Options, net of all federal, state and other taxes payable on the amount of such income, plus all costs and expenses of the Company in any effort to enforce its rights hereunder; and
(2) Any right such individual would otherwise have, pursuant to the terms of the Plan and the applicable Award Agreement, to exercise any Subject Options on or after the date of such termination, shall be extinguished as of the date of such termination.
The Company shall have the right to set off or withhold any amount owed to such individual by the Company or any of its subsidiaries or affiliates for any amount owed to the Company by such individual hereunder.
6. Non-Transferability. Unless otherwise provided by the terms of the Long Term Plan or the Board, (i) Stock Options shall not be transferable by the optionee other than by will or by the laws of descent and distribution, and (ii) during the optionee's lifetime, all Stock Options shall be exercisable only by the optionee or by his or her guardian or legal representative.
7. Stockholder Rights. The holder of a Stock Option shall, as such, have none of the rights of a stockholder.
SECTION 7. GENERAL
(a) Plan Amendments. The Board may amend, suspend or discontinue the Plan as it shall deem advisable or to conform to any change in any law or regulation applicable thereto; provided, that the Board may not, without the authorization and approval of the stockholders of the Company: (a) modify the class of persons who constitute Eligible Directors as defined in the Plan; or
(b) increase the total number of Shares available under the Plan. In addition, without the consent of affected participants, no amendment of the Plan or any award under the Plan may impair the rights of participants under outstanding awards.
(b) Listing and Registration. If at any time the Board shall determine, in its discretion, that the listing, registration or qualification of the Shares under the Plan upon any securities exchange or under any state or Federal law, or the consent or approval of any governmental regulatory body, is necessary or desirable as a condition of, or in connection with, the granting of any award hereunder, no Shares may be delivered or disposed of unless such listing, registration, qualification, consent or approval shall have been effected or obtained free of any condition not acceptable to the Board.
3
(c) Award Agreements. Each award of Restricted Stock and Stock Option granted hereunder shall be evidenced by the Eligible Director's written agreement with the Company which shall contain such terms and conditions not inconsistent with the provisions of the Plan as shall be determined by the Board in its discretion.
(d) Change in Control.
1. Notwithstanding any of the provisions of this Plan or instruments evidencing awards granted hereunder, upon a Change in Control of the Company (as hereinafter defined) the vesting of all rights of Directors under outstanding awards of Restricted Stock and Stock Options shall be accelerated and all restrictions thereon shall terminate in order that participants may fully realize the benefits thereunder. Such acceleration shall include, without limitation, the immediate exercisability in full of all Stock Options and the termination of restrictions on Restricted Stock. Further, in addition to the Board's authority set forth in Section 4(d), the Board, as constituted before such Change in Control, is authorized, and has sole discretion, as to any award, either at the time such award is made hereunder or any time thereafter, to take any one or more of the following actions:
(i) provide for the purchase of any such award, upon the participant's request, for an amount of cash equal to the amount that could have been attained upon the exercise of such award or realization of the participant's rights had such award been currently exercisable or payable; (ii) make such adjustment to any such award then outstanding as the Board deems appropriate to reflect such Change in Control; and (iii) cause any such award then outstanding to be assumed, or new rights substituted therefor, by the acquiring or surviving corporation after such Change in Control. A Change in Control shall occur if, during any period of twenty-four consecutive calendar months, the individuals who at the beginning of such period constitute the Company's Board of Directors, and any new Directors (other than Excluded Directors, as hereinafter defined), whose election by such Board or nomination for election by stockholders was approved by a vote of at least two-thirds of the members of such Board who were either Directors on such Board at the beginning of the period or whose election or nomination for election as Directors was previously so approved, for any reason cease to constitute at least a majority of the members thereof. For purposes hereof, "Excluded Directors" are Directors whose election by the Board or approval by the Board for stockholder election occurred within one year of any "person" or "group of persons", as such terms are used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, commencing a tender offer for, or becoming the beneficial owner of, voting securities representing 25 percent or more of the combined voting power of all outstanding voting securities of the Company, other than pursuant to a tender offer approved by the Board prior to its commencement or pursuant to stock acquisitions approved by the Board prior to their representing 25 percent or more of such combined voting power.
2. In the event that subsequent to a Change in Control it is determined that any payment or distribution by the Company to or for the benefit of a participant, whether paid or payable or distributed or distributable pursuant to the terms of this Plan or otherwise, other than any payment pursuant to this subparagraph 2 (a "Payment"), would be subject to the excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended from time to time (the "Code") or any interest or penalties with respect to such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the "Excise Tax"), then such participant shall be entitled to receive from the Company, within 15 days following the determination described in subparagraph 3 below, an additional payment ("Excise Tax Adjustment Payment") in an amount such that after payment by such participant of all applicable Federal, state and local taxes (computed at the maximum marginal rates and including any interest or penalties imposed with respect to such taxes), including any Excise Tax, imposed upon the Excise Tax Adjustment Payment, such participant retains an amount of the Excise Tax Adjustment Payment equal to the Excise Tax imposed upon the Payments.
3. All determinations required to be made under this Section
7(d), including whether an Excise Tax Adjustment Payment is required and the amount of such Excise Tax Adjustment Payment, shall be made by PricewaterhouseCoopers LLP, or such other national accounting firm as the Company, or, subsequent to a Change in Control, the Company and the participant jointly, may designate, for purposes of the Excise Tax, which shall provide detailed supporting calculations to the Company and the affected participant within 15 business days of the date of the applicable Payment. Except as hereinafter provided, any determination by PricewaterhouseCoopers LLP, or such other
4
national accounting firm, shall be binding upon the Company and the participant. As a result of the uncertainty in the application of Section 4999 of the Code that may exist at the time of the initial determination hereunder, it is possible that (x) certain Excise Tax Adjustment Payments will not have been made by the Company which should have been made (an "Underpayment"), or (y) certain Excise Tax Adjustment Payments will have been made which should not have been made (an "Overpayment"), consistent with the calculations required to be made hereunder. In the event of an Underpayment, such Underpayment shall be promptly paid by the Company to or for the benefit of the affected participant. In the event that the participant discovers that an Overpayment shall have occurred, the amount thereof shall be promptly repaid to the Company.
(e) Non-compete. Each award of Restricted Stock and Stock Option granted hereunder shall contain a provision whereby the award holder shall agree, in consideration for the award and regardless of whether restrictions on shares of Restricted Stock have lapsed or whether the Stock Option becomes exercisable or is exercised, as the case may be, as follows:
(i) While the holder is a Director of the Company and for a period of one year following the termination of such holder's term as a Director of the Company, other than a termination following a Change in Control, not to engage in, and not to become associated in a "Prohibited Capacity" (as hereinafter defined) with any other entity engaged in, any "Business Activities" (as hereinafter defined) and not to encourage or assist others in encouraging any employee of the Company or any of its subsidiaries to terminate employment or to become engaged in any such Prohibited Capacity with an entity engaged in any Business Activities. "Business Activities" shall mean the design, development, manufacture, sale, marketing or servicing of any product or providing of services competitive with the products or services of the Company or any subsidiary at any time the award is outstanding, to the extent such competitive products or services are distributed or provided either (1) in the same geographic area as are such products or services of the Company or any of its subsidiaries, or (2) to any of the same customers as such products or services of the Company or any of its subsidiaries are distributed or provided. "Prohibited Capacity" shall mean being associated with an entity as a director, employee, consultant, investor or another capacity where (1) confidential business information of the Company or any of its subsidiaries could be used in fulfilling any of the holder's duties or responsibilities with such other entity, or (2) an investment by the award holder in such other entity represents more than 1% of such other entity's capital stock, partnership or other ownership interests.
(ii) Should the award holder either breach or challenge in judicial or arbitration proceedings the validity of any of the restrictions contained in the preceding paragraph, by accepting an award each award holder shall agree, independent of any equitable or legal remedies that the Company may have and without limiting the Company's right to any other equitable or legal remedies, to pay to the Company in cash immediately upon the demand of the Company (1) the amount of income realized for income tax purposes from an award of Restricted Stock and/or the exercise of a Stock Option, net of all federal, state and other taxes payable on the amount of such income (and, in the case of a Stock Option, reduced by any amount already paid to the Company under Section 5(e) hereof), but only to the extent such income is realized from restrictions lapsing on shares or exercises occurring, as the case may be, on or after the termination of the award holder's term as a Director of the Company or within the two year period prior to the date of such termination, plus (2) all costs and expenses of the Company in any effort to enforce its rights under this or the preceding paragraph. The Company shall have the right to set off or withhold any amount owed to the award holder by the Company or any of its subsidiaries or affiliates for any amount owed to the Company by the award holder hereunder.
(f) Applicability. The provisions of this Plan as amended and restated December 6, 2000 shall apply to all outstanding Stock Options and awards of Restricted Stock granted prior to December 6, 2000.
5
  
EXHIBIT 12
MASCO CORPORATION AND CONSOLIDATED SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES

                                                                 (THOUSANDS OF DOLLARS)
                                                                 YEAR ENDED DECEMBER 31
                                               ----------------------------------------------------------
                                                  2000         1999         1998        1997       1996
                                               ----------   ----------   ----------   --------   --------
EARNINGS BEFORE INCOME TAXES AND FIXED
  CHARGES:
    Income from continuing operations before
      income taxes...........................  $  893,400   $  904,100   $  905,500   $733,800   $575,600
    Deduct/add equity in undistributed
      (earnings) loss of
      fifty-percent-or-less-owned
      companies..............................      (9,640)     (18,720)     (24,070)   (19,470)   (12,310)
    Add interest on indebtedness, net........     193,000      121,520      115,700     94,780     78,790
    Add amortization of debt expense.........       2,430        1,350        2,130      2,310      1,400
    Add estimated interest factor for
      rentals................................      18,760       16,080       11,430      9,270      7,120
                                               ----------   ----------   ----------   --------   --------
    Earnings before income taxes and fixed
      charges................................  $1,097,950   $1,024,330   $1,010,690   $820,690   $650,600
                                               ==========   ==========   ==========   ========   ========
FIXED CHARGES:
    Interest on indebtedness.................  $  202,630   $  129,860   $  119,750   $ 97,910   $ 81,250
    Amortization of debt expense.............       2,430        1,350        2,130      2,310      1,400
    Estimated interest factor for rentals....      18,760       16,080       11,430      9,270      7,120
                                               ----------   ----------   ----------   --------   --------
                                               $  223,820   $  147,290   $  133,310   $109,490   $ 89,770
                                               ==========   ==========   ==========   ========   ========
Ratio of earnings to fixed charges...........         4.9          7.0          7.6        7.5        7.2
                                               ==========   ==========   ==========   ========   ========

  
EXHIBIT 21
MASCO CORPORATION
 (A DELAWARE CORPORATION)
Subsidiaries as of January 31, 2001*

                                                                                       JURISDICTION OF
         NAME                                                                   INCORPORATION OR ORGANIZATION
         ----                                                                   -----------------------------
Alsons Corporation                                                                         Michigan
American Metal Products Company                                                            Delaware
         A.M.P. Industrial Mexicana S.A. de C.V. (97%)                                     Mexico
American Shower & Bath Corporation                                                         Michigan
Aqua Glass Corporation                                                                     Tennessee
         Tombigbee Transport Corporation                                                   Tennessee
Arrow Fastener Co., Inc.                                                                   New Jersey
Baldwin Hardware Corporation                                                               Pennsylvania
         Baldwin Hardware Service Corp.                                                    Delaware
Behr Holdings Corporation                                                                  Delaware
         Behr Process Corporation                                                          California
                  Behr Paint Corp.                                                         California
                  Behr International Corporation                                           U.S. Virgin Islands
                  Behr Process Canada, Ltd.                                                Alberta, Canada
                  Standard Brands Paint Company, Inc.                                      California
                  Color.Axis, a Corporation                                                California
                  BEHR PAINTS IT!, INC.                                                    California
Brass-Craft Manufacturing Company                                                          Michigan
         Brass-Craft Holding Company                                                       Michigan
                  Brass-Craft Canada Ltd.                                                  Canada
         Brass-Craft Western Company                                                       Texas
         Plumbers Quality Tool Mfg. Co., Inc.                                              Michigan
         Tempered Products, Inc.                                                           Taiwan
         Thomas Mfg. Company Inc. of Thomasville                                           North Carolina
Brugman, L.L.C.                                                                            Delaware
Brush Creek Ranch II, Inc.                                                                 Missouri
BSI Holdings, Inc.                                                                         Delaware
         The Hill Companies, Inc.                                                          California
                  Coast Insulation Contractors, Inc.                                       California
                  Schmid Insulation Contractors, Inc.                                      California	

* Directly owned subsidiaries appear at the left hand margin, first tier and second tier subsidiaries are indicated by single and double indentation, respectively, and are listed under the names of their respective parent companies. Unless otherwise indicated, all subsidiaries are wholly owned. Certain of these companies may also use trade names or other assumed names in the conduct of their business.
1

                                                                                       JURISDICTION OF
         NAME                                                                   INCORPORATION OR ORGANIZATION
         ----                                                                   -----------------------------

                  Sacramento Insulation Contractors                                        California
                  InsulPro Projects LLC                                                    Washington
         Q.I. Corp.                                                                        Connecticut
         Ameralum, Inc.                                                                    Delaware
         Insulpro Projects LLC                                                             Washington
                  FCI Insulation Systems, Ltd.                                             British Columbia
                  Inland Spray On, Inc.                                                    British Columbia
                  InsulPro (Kelowana) Ltd.                                                 British Columbia
Cal-Style Furniture Mfg. Co.                                                               California
Cary Corporation                                                                           Delaware
           Cary Commercial Corporation                                                     Delaware
            Superior Contracting Corporation                                               Delaware
Chatsworth Bathrooms, Inc.                                                                 Delaware
Cobra Products, Inc.                                                                       Delaware
Composite Products, Inc.                                                                   Delaware
Delta Faucet Services International, Inc.                                                  Delaware
Epic Fine Arts Company                                                                     Delaware
         Beacon Hill Fine Art Corporation                                                  New York
         Morning Star Gallery, Ltd.                                                        New Mexico
The Faucet-Queens Inc.                                                                     Delaware
Fieldstone Cabinetry, Inc.                                                                 Iowa
Franklin Brass Manufacturing Co.                                                           Delaware
Gale Industries, Inc.                                                                      Florida
         American National Services Corporation                                            Delaware
         ContractorProducts.com, Inc.                                                      Delaware
Gamco Products Company                                                                     Delaware
General Accessory Manufacturing Co.                                                        Oklahoma
H & H Tube & Manufacturing Company                                                         Michigan
Jarry Realty, Inc.                                                                         Florida
KraftMaid Cabinetry, Inc.                                                                  Ohio
         KraftMaid Trucking, Inc.                                                          Ohio
         KraftMaid Distribution Centers, Inc.                                              Delaware
Landex, Inc.                                                                               Michigan
Landex of Wisconsin, Inc.                                                                  Wisconsin
Liberty Hardware Mfg. Corp.                                                                Florida	

* Directly owned subsidiaries appear at the left hand margin, first tier and second tier subsidiaries are indicated by single and double indentation, respectively, and are listed under the names of their respective parent companies. Unless otherwise indicated, all subsidiaries are wholly owned. Certain of these companies may also use trade names or other assumed names in the conduct of their business.
2

                                                                                       JURISDICTION OF
         NAME                                                                   INCORPORATION OR ORGANIZATION
         ----                                                                   -----------------------------
The Marvel Group, Inc.                                                                     Delaware
Masco Building Products Corp.                                                              Delaware
         Computerized Security Systems, Inc.                                               Michigan
                  Computerized Security Systems of Canada, Inc.                            Ontario
         Weiser Lock Corporation                                                           California
                  Weiser Lock Mexico S.A. de C.V.                                          Mexico
         Winfield Locks, Inc.                                                              California
         Weiser Thailand                                                                   Thailand
Masco Cabinetry Holdings, Inc.                                                             Delaware
Masco Capital Corporation                                                                  Delaware
         Masco Holdings Limited                                                            Delaware
Masco Chile Limited (99%)                                                                  Chile
Masco Contractor Services, Inc.                                                            Delaware
Masco Corporation of Indiana                                                               Indiana
         Delta Faucet Company of Tennessee                                                 Delaware
         Delta Faucet of Oklahoma, Inc.                                                    Delaware
         Delta Faucet Services (Korea)                                                     Korea
         Delta Faucet Services (Singapore)                                                 Singapore
         Delta Faucet Services (Thailand)                                                  Thailand
         Delta International Services, Inc.                                                Delaware
         Hydrotech, Inc.                                                                   Michigan
         Masco Canada Limited                                                              Ontario
                  3072002 Canada Limited                                                   Canada
         Masco Europe, Inc.                                                                Delaware
         Masco Corporation Europe S.a.r.l.                                                 Luxembourg
                  CSS Europe S.A.                                                          Belgium
                  Masco Europe S.a.r.l.                                                    Luxembourg
                           GESTMasco - SGPS Lda                                            Portugal
                                    Metalurgica Recor, S.A.                                Portugal
                           Masco Europe Iberica S.L.                                       Spain
                                    GMU S.A.                                               Spain
                                            Grumal S.L.                                    Spain
                                                     Perfima S.A.                          Spain
                                                     Lagunzzialle S.A.                     Spain
                                                     Seitu S.A.                            Spain	

* Directly owned subsidiaries appear at the left hand margin, first tier and second tier subsidiaries are indicated by single and double indentation, respectively, and are listed under the names of their respective parent companies. Unless otherwise indicated, all subsidiaries are wholly owned. Certain of these companies may also use trade names or other assumed names in the conduct of their business.
3

                                                                              JURISDICTION OF
NAME                                                                   INCORPORATION OR ORGANIZATION
----                                                                   -----------------------------

                                            Pevac S.A.                            Spain
                                            Pemec S.A.                            Spain
                                   XEY Corporacion Empresarial S.L.               Spain
                                            Comercial XEU S.A.                    Spain
                                                     Lindhogar S.A.               Spain
                                                     Decox S.A.                   Spain
                                                     Cobade S.A.                  Spain
                                                     Valcode S.A.                 Spain
                                                     Burcosa S.A.                 Spain
                  Masco B.V.                                                      Netherlands
                           Turad B.V.                                             Netherlands
                                   Bridgebros Lease B.V.                          Netherlands
                                   Brugman Radiatorenfabriek B.V.                 Netherlands
                                   Brugman Polska Sp Zoo                          Poland
                                   Brugman SARL                                   France
                                   Brugman GmbH                                   Germany
                                   Northor AS                                     Denmark
                                   Brugman Industries SpZoo                       Poland
                  Damixa A/S                                                      Denmark
                           KS Beheer B.V.                                         Netherlands
                                   Damixa Nederland B.V.                          Netherlands
                           Damixa AB                                              Sweden
                           N.V. Damixa S.A.                                       Belgium
                           Damixa Armaturen GmbH                                  Germany
                           Damixa SARL                                            France
                           Rubinetterie Mariani S.P.A. (49%)                      Italy
                  Masco Corporation Limited                                       United Kingdom
                           Avocet Hardware PLC                                    United Kingdom
                           Avocet Architectural Products Ltd                      United Kingdom
                                   Avocet Hardware (Taiwan) Ltd.                  Taiwan
                                   Bond It Ltd.                                   United Kingdom
                                   Colin & Sons (Locks) Ltd.                      United Kingdom
                                   WMS PVC Hardware Ltd.                          United Kingdom
                           Berglen Group Limited                                  United Kingdom
                           A&J Gummers Limited                                    United Kingdom	

* Directly owned subsidiaries appear at the left hand margin, first tier and second tier subsidiaries are indicated by single and double indentation, respectively, and are listed under the names of their respective parent companies. Unless otherwise indicated, all subsidiaries are wholly owned. Certain of these companies may also use trade names or other assumed names in the conduct of their business.
4

                                                                              JURISDICTION OF
NAME                                                                   INCORPORATION OR ORGANIZATION
----                                                                   -----------------------------

                           Heritage Bathrooms PLC                                 United Kingdom
                                   Bristol Bathrooms Co. Ltd.                     United Kingdom
                                   Heritage Bathrooms Distribution                United Kingdom
                                   Ltd. Bristol
                                   Heritage J. Ceramics Ltd.                      United Kingdom
                                   Brighouse
                                   Heritage Acrylic Ltd.                          United Kingdom
                                   Heritage Bathroom Furniture Ltd.               United Kingdom
                                   H. J. Ceramics Ltd.                            United Kingdom
                                            Heritage D Ceramics Ltd.              United Kingdom
                           Kiloheat Limited                                       United Kingdom
                           Moore Group Limited                                    United Kingdom
                                   Moores Furniture Group Limited                 United Kingdom
                           NewTeam Export (Jersey) Limited                        Jersey
                           NewTeam Management Services Ltd.                       Jersey
                           NewTeam Ltd.                                           United Kingdom
                           Chromeco Ltd.                                          United Kingdom
                           Harplace Ltd.                                          United Kingdom
                           Weiser (U.K.) Ltd.                                     United Kingdom
                  Masco GmbH                                                      Germany
                           Alfred Reinecke GmbH & Co. KG                          Germany
                           Alma Kuechen Aloys Meyer GmbH & Co.                    Germany
                             KG
                           Dusakabin - Wien Austria                               Austria
                           E. Missel GmbH & Co.                                   Germany
                           Gebhardt Flaektteknik Aktiebolag                       Sweden
                           H. Breuer GmbH & Co.                                   Germany
                           Gebhardt Ventilatoren GmbH & Co.                       Germany
                           Gebhardt Singapore Pte Ltd                             Singapore
                           Gebhardt Ventilatoren A/S                              Denmark
                           Gebhart Ventiladores, S.L.                             Spain
                           Hueppe Belgium N.V./S.A.                               Belgium
                           Hueppe GesmbH                                          Austria
                           Hueppe GmbH & Co.                                      Germany
                           Hueppe Sarl                                            France	

* Directly owned subsidiaries appear at the left hand margin, first tier and second tier subsidiaries are indicated by single and double indentation, respectively, and are listed under the names of their respective parent companies. Unless otherwise indicated, all subsidiaries are wholly owned. Certain of these companies may also use trade names or other assumed names in the conduct of their business.
5

                                                                              JURISDICTION OF
NAME                                                                   INCORPORATION OR ORGANIZATION
----                                                                   -----------------------------

                           Hueppe Czech Republik                                  Czech Republic
                           Hueppe Netherlands                                     Holland
                           Hueppe Poland                                          Poland
                           Hueppe Switzerland                                     Switzerland
                           Hueppe Italy                                           Italy
                           Intermart Insaat Malzemeleri Sanayi ve                 Turkey
                             Ticaret AS
                           Jung Pumpen GesmbH                                     Austria
                           Jung Pumpen GmbH&Co.                                   Germany
                                   Jung Pumpen SARL                               France
                                   Jung Pumpen Ltd.                               United Kingdom
                           Masco Mobiliario S.L.                                  Spain
                           Reser SL                                               Spain
                           SKS Stakusit-Bautechnik Beteiligungs                   Germany
                             GmbH
                           SKS Stakusit Bautechnik GmbH                           Germany
                                   SKS Stakusit-Stahl-Kunststoff                  Germany
                                   GmbH
                                            Bauelemente Bertram GmbH              Germany
                                            RH Balcon                             Germany
                                            SKS Stakusit Polska Sp.               Poland
                                              2.0.0.
                           SKS Stakusit Austria GmbH                              Austria
                           SKS France SARL                                        France
                           SKS Stakusit Turkey                                    Turkey
                           SKS Stausit Moscow                                     Russia
                           Vasco N.V.                                             Belgium
                                   Imperial Towel Rails Ltd.                      United Kingdom
                                   Masco International Services                   Belgium
                                   B.V.B.A.
                                   Superia Radiatoren, N.V.                       Belgium
                                            Dura B.V.                             Netherlands
                                   Vasco GmbH                                     Denmark
                                   Vasco Ltd. UK                                  Great Britain	

* Directly owned subsidiaries appear at the left hand margin, first tier and second tier subsidiaries are indicated by single and double indentation, respectively, and are listed under the names of their respective parent companies. Unless otherwise indicated, all subsidiaries are wholly owned. Certain of these companies may also use trade names or other assumed names in the conduct of their business.
6

                                                                                       JURISDICTION OF
         NAME                                                                   INCORPORATION OR ORGANIZATION
         ----                                                                   -----------------------------

                                            Vasco B.V.                                     Netherlands
                                            Vasco Ges.m.b.H.                               Austria
                                    Vasco BC S.C.                                          France
                                    Vasco sp z.o.o.                                        Poland
                           Masco Belgium N.V.                                              Belgium
                                    Thermic N.V.                                           Belgium
                                    LTV Transport N.V.                                     Belgium
         Rubinetterie Mariani S.P.A. (51%)                                                 Italy
         Weiser Inc.                                                                       Canada
Masco de Puerto Rico, Inc.                                                                 Puerto Rico
Masco International Sales, Inc.                                                            Barbados
Masco International, Inc.                                                                  Delaware
Masco Japan Ltd.                                                                           Delaware
Masco ML, Inc.                                                                             Delaware
Masco Philippines Inc.                                                                     Philippines
Masco of Russia                                                                            Russia
Masco Retail Sales Support, Inc.                                                           Delaware
Masco Support Services, Inc.                                                               Delaware
Masco Services, Inc.                                                                       Delaware
MascoFW Corporation                                                                        Delaware
Mascomex S.A. de C.V.                                                                      Mexico
Masterchem Industries, Inc.                                                                Missouri
Melard Manufacturing Corp.                                                                 Delaware
Merillat Industries, Inc.                                                                  Michigan
         Merillat Corporation                                                              Delaware
         Merillat Transportation Company                                                   Delaware
Mill's Pride, Inc.                                                                         Connecticut
         Premier Vanity Tops L.L.C.                                                        Ohio
         Mill's Pride LLC                                                                  Ohio
         Mill's Pride Limited Partnership                                                  Ohio
         Mill's Pride Pennsylvania, LLC                                                    Ohio
         United Kitchens PLC (75%)                                                         United Kingdom
         Store Support, Inc.                                                               Florida
         Mill's Pride Premier, Inc.                                                        Ohio
         Mill's Pride Chile Limitada                                                       Chile	

* Directly owned subsidiaries appear at the left hand margin, first tier and second tier subsidiaries are indicated by single and double indentation, respectively, and are listed under the names of their respective parent companies. Unless otherwise indicated, all subsidiaries are wholly owned. Certain of these companies may also use trade names or other assumed names in the conduct of their business.
7

                                                                                       JURISDICTION OF
         NAME                                                                   INCORPORATION OR ORGANIZATION
         ----                                                                   -----------------------------

Mirolin Industries Corporation                                                             Ontario
Morgantown Plastics Company                                                                Delaware
Outlet Corp.                                                                               Delaware
Quality Awning & Construction Co.                                                          Michigan
         Inrecon, L.L.C.                                                                   Michigan
                  CRL Acquisition Corp.                                                    Canada
                           The Cromwell Financial Group Ltd.                               British Columbia
                                    Cromwell Restoration Ltd.                              British Columbia
                  Inrecon West, Inc.                                                       Michigan
                  Inrecon Puerto Rico, L.L.C.                                              Michigan
                  Peck Jones/Inrecon #2                                                    Michigan
RDJ Limited                                                                                Bahamas
         Arrow Fastener (U.K.) Ltd.                                                        United Kingdom
         Jardel Distributors, Inc.                                                         Canada
StarMark, Inc.                                                                             South Dakota
         SMI Retail Corp.                                                                  Delaware
         SMI Transportation, Inc.                                                          Delaware
         StarMark of Virginia, Inc.                                                        Virginia
Thematic Advertising Productions, Inc.                                                     New Jersey
Texwood Industries, L.P.                                                                   Delaware
Tvilum-Scanbirk A/S                                                                        Denmark
         Tvilum-Scanbirk GmbH                                                              Germany
         Tvilum-Scanbirk Inc.                                                              Illinois
Vapor Technologies, Inc.                                                                   Delaware
Watkins Manufacturing Corporation                                                          California
         Hot Spring Spas New Zealand (50%)                                                 New Zealand
W/C Technology Corporation                                                                 Delaware
Zenith Products Corporation                                                                Delaware	

* Directly owned subsidiaries appear at the left hand margin, first tier and second tier subsidiaries are indicated by single and double indentation, respectively, and are listed under the names of their respective parent companies. Unless otherwise indicated, all subsidiaries are wholly owned. Certain of these companies may also use trade names or other assumed names in the conduct of their business.
8
 
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration Statements on Form S-3 (Nos. 333-40122 and 333-40120) and Form S-8 (Nos. 33-42229, 333-64573, 333-30867, 333-74815 and 333-37338) of Masco Corporation of our report dated February 14, 2001 relating to the financial statements and financial statement schedule, which appears in this Form 10-K.
PricewaterhouseCoopers LLP
Detroit, Michigan
March 29, 2001