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<SEC-DOCUMENT>/in/edgar/work/20000810/0000950124-00-004793/0000950124-00-004793.txt : 20000921
<SEC-HEADER>0000950124-00-004793.hdr.sgml : 20000921
ACCESSION NUMBER:		0000950124-00-004793
CONFORMED SUBMISSION TYPE:	10-Q
PUBLIC DOCUMENT COUNT:		5
CONFORMED PERIOD OF REPORT:	20000630
FILED AS OF DATE:		20000810

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			MASCO CORP /DE/
		CENTRAL INDEX KEY:			0000062996
		STANDARD INDUSTRIAL CLASSIFICATION:	 [3430
]		IRS NUMBER:				381794485
		STATE OF INCORPORATION:			DE
		FISCAL YEAR END:			1231
</COMPANY-DATA>

		FILING VALUES:
			FORM TYPE:		10-Q
			SEC ACT:		
			SEC FILE NUMBER:	001-05794
			FILM NUMBER:		691804
</FILING-VALUES>

			BUSINESS ADDRESS:	
				STREET 1:		21001 VAN BORN RD
				CITY:			TAYLOR
				STATE:			MI
				ZIP:			48180
				BUSINESS PHONE:		3132747400
</BUSINESS-ADDRESS>

				MAIL ADDRESS:	
					STREET 1:		21001 VAN BORN ROAD
					CITY:			TAYLOR
					STATE:			MI
					ZIP:			48180
</MAIL-ADDRESS>

					FORMER COMPANY:	
						FORMER CONFORMED NAME:	MASCO SCREW PRODUCTS CO
						DATE OF NAME CHANGE:	19731025
</FORMER-COMPANY>
</FILER>
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-Q
<SEQUENCE>1
<FILENAME>e10-q.txt
<DESCRIPTION>FORM 10-Q
<TEXT>

<PAGE>   1
                                    FORM 10-Q

                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549


               QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934


FOR QUARTER ENDED JUNE 30, 2000.  COMMISSION FILE NUMBER 1-5794

                                MASCO CORPORATION
- -------------------------------------------------------------------------------
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)



        DELAWARE                                              38-1794485
- -------------------------------------------------------------------------------
(STATE OR OTHER JURISDICTION OF                            (I.R.S. EMPLOYER
 INCORPORATION OR ORGANIZATION)                            IDENTIFICATION NO.)



 21001 VAN BORN ROAD, TAYLOR, MICHIGAN                                 48180
- -------------------------------------------------------------------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)                             (ZIP CODE)



                                   (313) 274-7400
- -------------------------------------------------------------------------------
                                 (TELEPHONE NUMBER)


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 THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE ISSUER'S CLASSES OF
COMMON STOCK, AS OF THE LATEST PRACTICAL DATE.

<TABLE>
<CAPTION>

                                                         SHARES OUTSTANDING AT
            CLASS                                            AUGUST 1, 2000
            -----                                            --------------
<S>                                                       <C>
COMMON STOCK, PAR VALUE $1 PER SHARE                           457,092,100
</TABLE>





<PAGE>   2



                                MASCO CORPORATION

                                      INDEX

<TABLE>
<CAPTION>


                                                                   PAGE NO.
                                                                   --------

<S>                                                                <C>
Part I.     Financial Information

  Item 1.    Financial Statements:

                 Condensed Consolidated Balance Sheet -
                     June 30, 2000 and December 31, 1999               1

                 Condensed Consolidated Statement of
                     Income for the Three Months and Six
                     Months Ended June 30, 2000 and 1999               2

                 Condensed Consolidated Statement of
                     Cash Flows for the Six Months Ended
                     June 30, 2000 and 1999                            3

                 Notes to Condensed Consolidated
                     Financial Statements                           4-11

  Item 2.    Management's Discussion and Analysis of
                 Financial Condition and Results of
                 Operations                                        12-15

             Unaudited Information Regarding Equity
                 Investments for the Three Months and
                 Six Months Ended June 30, 2000 and 1999              16

Part II.    Other Information and Signature                        17-18
</TABLE>





<PAGE>   3



                                MASCO CORPORATION
                      CONDENSED CONSOLIDATED BALANCE SHEET

                       JUNE 30, 2000 AND DECEMBER 31, 1999
                  (DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>

                                                    JUNE 30,     DECEMBER 31,
          ASSETS                                     2000            1999
          ------                                  ----------     ------------
<S>                                               <C>            <C>
Current assets:
     Cash and cash investments                    $  122,820      $  230,780
     Accounts and notes receivable, net            1,192,790       1,002,630
     Prepaid expenses and other                      114,810         106,500
     Inventories:
           Raw material                              340,650         307,060
           Finished goods                            398,440         290,440
           Work in process                           199,450         172,370
                                                  ----------      ----------
                                                     938,540         769,870
                                                  ----------      ----------
               Total current assets                2,368,960       2,109,780

Equity investment in MascoTech, Inc.                  75,650          69,930
Equity investments in other affiliates               128,320         133,550
Securities of Furnishings International Inc.         527,010         481,270
Property and equipment, net                        1,797,970       1,624,360
Acquired goodwill, net                             2,172,580       1,742,930
Other noncurrent assets                              680,040         473,100
                                                  ----------      ----------
               Total assets                       $7,750,530      $6,634,920
                                                  ==========      ==========

          LIABILITIES
          -----------
Current liabilities:
     Notes payable                                $  890,220      $   62,300
     Accounts payable                                269,840         243,810
     Accrued liabilities                             621,460         540,320
                                                  ----------      ----------
               Total current liabilities           1,781,520         846,430

Long-term debt                                     2,346,730       2,431,270
Deferred income taxes and other                      230,710         220,720
                                                  ----------      ----------
               Total liabilities                   4,358,960       3,498,420
                                                  ----------      ----------

          SHAREHOLDERS' EQUITY
          --------------------
Common stock, par value $1 per share
     Authorized shares: 900,000,000                  448,660         443,510
Preferred stock, par value $1 per share
     Authorized shares: 1,000,000                      ---             ---
Paid-in capital                                      690,040         601,990
Retained earnings                                  2,403,250       2,151,520
Other comprehensive income (loss)                   (150,380)        (60,520)
                                                  ----------      ----------
               Total shareholders' equity          3,391,570       3,136,500
                                                  ----------      ----------
               Total liabilities and
                 shareholders' equity             $7,750,530      $6,634,920
                                                  ==========      ==========
</TABLE>





           See notes to condensed consolidated financial statements.

                                        1

<PAGE>   4



                                MASCO CORPORATION
                   CONDENSED CONSOLIDATED STATEMENT OF INCOME

        FOR THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 2000 AND 1999
                  (DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
                                      THREE MONTHS ENDED            SIX MONTHS ENDED
                                            JUNE 30                      JUNE 30
                                    ----------------------       ----------------------
                                       2000        1999             2000        1999
                                    ----------  ----------       ----------  ----------
<S>                                 <C>         <C>              <C>         <C>
Net sales                           $1,871,000  $1,567,000       $3,617,000  $2,958,000
Cost of sales                        1,196,700     986,200        2,322,600   1,860,600
                                    ----------  ----------       ----------  ----------

      Gross profit                     674,300     580,800        1,294,400   1,097,400

Selling, general and administrative
  expenses                             357,100     304,500          694,500     578,000
Amortization of acquired goodwill       15,900      10,300           30,100      18,600
                                    ----------  ----------       ----------  ----------


      Operating profit                 301,300     266,000          569,800     500,800
                                    ----------  ----------       ----------  ----------

Other income (expense), net:
   Interest expense                    (47,700)    (28,200)         (86,500)    (54,800)
   Equity earnings from
     MascoTech, Inc.                     4,200       4,400            8,500       8,400
   Other, net                           36,600      36,700           78,600      67,800
                                    ----------  ----------       ----------  ----------
                                        (6,900)     12,900              600      21,400
                                    ----------  ----------       ----------  ----------

      Income before income taxes       294,400     278,900          570,400     522,200

Income taxes                           109,000     104,800          211,000     196,200
                                    ----------  ----------       ----------  ----------

      Net income                    $  185,400  $  174,100       $  359,400  $  326,000
                                    ==========  ==========       ==========  ==========

Earnings per share:
      Basic                              $ .42       $ .40            $ .82       $ .75
                                         =====       =====            =====       =====
      Diluted                            $ .41       $ .39            $ .80       $ .73
                                         =====       =====            =====       =====


Cash dividends declared and
    paid per share                       $ .12       $ .11            $ .24       $ .22
                                         =====       =====            =====       =====
</TABLE>




            See notes to condensed consolidated financial statements.

                                        2

<PAGE>   5



                                MASCO CORPORATION
                 CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

                 FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND 1999
                             (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>

                                                           SIX MONTHS ENDED
                                                               JUNE 30
                                                       -----------------------
                                                          2000          1999
                                                       ---------     ---------
<S>                                                    <C>           <C>
CASH FLOWS FROM (FOR) OPERATING ACTIVITIES:
     Cash provided by operations                       $ 360,580     $ 350,850
     Increase in receivables                            (117,640)     (145,430)
     Increase in inventories                            (110,400)      (75,220)
     Increase in accounts payable and
       accrued liabilities, net                           68,550        54,840
                                                       ---------     ---------

          Total cash from operating activities           201,090       185,040
                                                       ---------     ---------

CASH FLOWS FROM (FOR) FINANCING ACTIVITIES:
     Increase in debt                                    841,010       168,640
     Payment of debt                                    (136,820)      (43,460)
     Purchase of Company common stock                    (20,560)     (106,760)
     Cash dividends paid                                (107,260)      (74,460)
                                                       ---------     ---------

          Total cash from (for) financing activities     576,370       (56,040)
                                                       ---------     ---------

CASH FLOWS FROM (FOR) INVESTING ACTIVITIES:
     Acquisition of companies, net of cash acquired     (509,950)     (405,360)
     Capital expenditures                               (169,840)     (157,240)
     Investments in non-operating assets, net           (160,600)      (49,140)
     Other, net                                          (45,030)       22,610
                                                       ---------     ---------

          Total cash (for) investing activities         (885,420)     (589,130)
                                                       ---------     ---------

CASH AND CASH INVESTMENTS:
     Decrease for the period                            (107,960)     (460,130)
     At January 1                                        230,780       553,150
                                                       ---------     ---------

     At June 30                                        $ 122,820     $  93,020
                                                       =========     =========
</TABLE>



           See notes to condensed consolidated financial statements.

                                        3

<PAGE>   6



                                MASCO CORPORATION
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

A.      In the opinion of the Company, the accompanying unaudited condensed
        consolidated financial statements contain all adjustments, of a normal
        recurring nature, necessary to present fairly its financial position as
        at June 30, 2000 and the results of operations for the three months and
        six months ended June 30, 2000 and 1999 and changes in cash flows for
        the six months ended June 30, 2000 and 1999. The condensed consolidated
        balance sheet at December 31, 1999 was derived from audited financial
        statements. The three month and six month periods ended June 30, 1999
        have been restated to include the results of transactions accounted for
        as poolings of interests during the third quarter of 1999.

        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. Capital transactions by equity affiliates, which change the
        Company's ownership interest at amounts differing from the Company's
        carrying amount, are reflected in other income or expense and the
        investment in affiliates account.

        The Company generally recognizes revenue as products are shipped to
        customers or services are rendered, net of applicable provisions for
        discounts, returns and allowances. The Company provides for its estimate
        of potential bad debt and warranty expense at the time of sale.

        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.

        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 as a separate component of
        shareholders' equity. Realized foreign currency transaction gains and
        losses are included in consolidated net income.

        Additional accounting policy disclosures are set forth in the Notes to
        Consolidated Financial Statements included in Part II, Item 8 of the
        Company's Annual Report on Form 10-K for the year ended December 31,
        1999.

B.      The following are reconciliations of the numerators and denominators
        used in the computations of basic and diluted earnings per share, in
        thousands:

<TABLE>
<CAPTION>

                                             THREE MONTHS ENDED       SIX MONTHS ENDED
                                                   JUNE 30                 JUNE 30
                                          ---------------------     ---------------------
                                            2000         1999         2000         1999
                                          --------     --------     --------     --------
<S>                                       <C>          <C>          <C>          <C>
Numerator:
   Net income                             $185,400     $174,100     $359,400     $326,000
                                          ========     ========     ========     ========

Denominator:
   Basic shares (based on weighted
     average)                              441,500      433,400      440,400      435,000
   Add:
     Contingently issued award shares        7,100        7,400        7,100        7,300
     Stock option dilution                   1,600        3,600        1,600        3,800
                                          --------     --------     --------     --------
   Diluted shares                          450,200      444,400      449,100      446,100
                                          ========     ========     ========     ========
</TABLE>




                                        4

<PAGE>   7



                                MASCO CORPORATION
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

C.      During the second quarter of 2000, the Company acquired Masterchem
        Industries, Inc., a manufacturer and supplier of paint primer and paint
        primer-related products and several smaller companies. In the first
        quarter of 2000, the Company acquired Tvilum-Scanbirk A/S, a
        manufacturer of ready-to-assemble products including cabinetry,
        shelving, storage units and workstations, and a smaller company.

        The aggregate net purchase price of these purchase acquisitions,
        excluding assumed debt of approximately $70 million, was approximately
        $600 million and included approximately four million shares of Company
        common stock valued at approximately $90 million. Combined 1999 annual
        net sales of the above companies was approximately $400 million.

D.      During the third quarter of 2000, the Company reported that it is
        participating in a transaction in which an affiliate of Heartland
        Industrial Partners, L.P. has agreed to acquire all of the common shares
        of MascoTech, Inc., an 18 percent owned affiliate of the Company. As
        part of the transaction, the Company would receive cash, preferred
        stock, an approximate ten percent minority interest in the new entity
        and a reduction from $200 million to $100 million in MascoTech's option
        to issue subordinated debt securities to the Company. A special
        committee of the Company's Board of Directors was advised by Merrill
        Lynch & Company and special legal counsel in the committee's negotiation
        of the Company's participation in this transaction. If the transaction
        is completed in the fourth quarter of 2000, as anticipated, the Company
        is expected to report a relatively modest after-tax gain from the sale.

E.      Other income (expense), net consists of the following, in thousands:

<TABLE>
<CAPTION>

                                      THREE MONTHS ENDED        SIX MONTHS ENDED
                                           JUNE 30                   JUNE 30
                                     --------------------     --------------------
                                       2000        1999         2000        1999
                                     --------    --------     --------    --------
<S>                                  <C>         <C>          <C>         <C>
          Interest expense           $(47,700)   $(28,200)    $(86,500)   $(54,800)
          Equity earnings from
            MascoTech, Inc.             4,200       4,400        8,500       8,400
          Equity earnings, other          700       2,300        1,700       3,900
          Income from cash and
            cash investments              800       1,200        2,200       6,500
          Other interest income        14,900      12,800       29,000      25,600
          Other, net                   20,200      20,400       45,700      31,800
                                     --------    --------     --------    --------
                                     $ (6,900)   $ 12,900     $    600    $ 21,400
                                     ========    ========     ========    ========
</TABLE>



        Included in other interest income for the three months and six months
        ended June 30, 2000 and 1999 is interest income of approximately $12.8
        million and $25.6 million, and approximately $11.3 million and $22.6
        million, respectively, from the 12% pay-in-kind junior debt securities
        of Furnishings International Inc. (approximately $424 million principal
        amount at December 31, 1999).

        Other, net for the three month and six month periods ended June 30, 2000
        and June 30, 1999 results primarily from income and gains, net regarding
        certain non-operating assets.



                                        5

<PAGE>   8



                                MASCO CORPORATION
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

F.      The following table presents information about the Company by segment,
        in millions.


<TABLE>
<CAPTION>


                                              THREE MONTHS ENDED JUNE 30                 SIX MONTHS ENDED JUNE 30
                                         ------------------------------------     ------------------------------------
                                           2000     1999      2000      1999        2000     1999      2000      1999
                                         ------------------------------------     ------------------------------------
                                           Net Sales (1)     Operating Profit(2)    Net Sales (1)     Operating Profit(2)
                                         ------------------------------------     ------------------------------------
<S>                                      <C>       <C>       <C>      <C>        <C>        <C>       <C>       <C>
The Company's operations by
 segment were:
  North America                          $1,532    $1,296    $  282    $  254     $2,946    $2,461    $  533    $  480
  International, principally Europe         339       271        45        34        671       497        87        65
                                         ------    ------    ------    ------     ------    ------    ------    ------
             Total                       $1,871    $1,567       327       288     $3,617    $2,958       620       545
                                         ======    ======                         ======    ======


General corporate expense, net                                  (25)      (22)                           (50)      (44)
                                                             ------    ------                         ------    ------
Operating profit, after general
  corporate expense                                             302       266                            570       501
Other income (expense), net                                      (7)       13                              1        21
                                                             ------    ------                         ------    ------
Income before income taxes                                   $  295    $  279                         $  571    $  522
                                                             ======    ======                         ======    ======
</TABLE>



(1)  Intra-company sales among segments were not material.

(2)  Operating profit shown is after reduction for amortization of acquired
     goodwill.


                                        6

<PAGE>   9



                                MASCO CORPORATION
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


G.      The Company's total comprehensive income was as follows, in thousands:

<TABLE>
<CAPTION>


                                            THREE MONTHS ENDED    SIX MONTHS ENDED
                                                 JUNE 30              JUNE 30
                                            ------------------   ------------------
                                              2000      1999       2000      1999
                                            --------  --------   --------  --------
<S>                                         <C>       <C>        <C>       <C>
      Net income                            $185,400  $174,100   $359,400  $326,000
      Other comprehensive (loss)             (70,710)  (25,460)   (89,860)  (49,970)
                                            --------  --------   -------- ---------

         Total comprehensive income         $114,690  $148,640   $269,540  $276,030
                                            ========  ========   ========  ========
</TABLE>


H.      The Company is subject to lawsuits and claims pending or asserted with
        respect to matters arising in the ordinary course of business.

        A civil suit is pending in Superior Court in the State of Washington
        against Behr Process Corporation, a wholly owned 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 unique humid climate of
        western Washington. The trial court has conditionally certified the case
        as a class action, including in this case 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. 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. Behr believes that there are substantial
        grounds for reversal and will appeal this verdict.




                                        7

<PAGE>   10



                                MASCO CORPORATION
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Note H - Concluded:

        Behr has recently received a letter from a consumer, on behalf of
        himself and all others similarly situated, alleging that Behr has
        violated the California Consumer Legal Remedies Act in the sale of
        exterior wood coating products. The letter requested that Behr pay all
        costs required to repair or replace the wood surfaces of individuals in
        the United States on which the products have been applied, and that Behr
        disgorge all of the profits received from the sale of the products. The
        consumer subsequently filed a complaint with another consumer in the San
        Joachin County, California Superior Court.

        In addition, Behr and the Company were recently served with complaints
        filed by two consumers in the Solano County and San Mateo County,
        California Superior Courts, and by a consumer in the Mobile County,
        Alabama Circuit Court. All of the complaints contain similar allegations
        regarding some of Behr's exterior wood coating products. The California
        complaints seek nationwide class action certification. The Alabama
        complaint seeks class action certification for consumers in Alabama,
        Florida, Georgia and Texas. The Company is investigating the allegations
        in the complaints and believes that there are substantial grounds for
        denial of class certification and that there are substantial defenses to
        the claims.

I.      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 must be adopted during
        the fourth quarter of 2000. The Company is evaluating the effect, if
        any, that such an adoption may have on its financial position and
        results of operations.



                                        8

<PAGE>   11



                                MASCO CORPORATION
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

J.      The following presents the combined unaudited financial statements of
        the Company and MascoTech, Inc. as one entity with Masco Corporation as
        the parent company. Intercompany transactions have been eliminated.
        Amounts, except per share data, are in thousands.


     COMBINED BALANCE SHEET


<TABLE>
<CAPTION>
                                                          JUNE 30,     DECEMBER 31,
     ASSETS                                                 2000           1999
                                                         ----------     ----------
<S>                                                      <C>            <C>
     Current assets:
       Cash and cash investments                         $  125,660     $  235,270
       Receivables                                        1,401,780      1,221,590
       Prepaid expenses and other                           157,750        169,570
       Inventories:
         Raw material                                       388,640        358,480
         Finished goods                                     477,690        376,680
         Work in process                                    249,660        218,310
                                                         ----------     ----------
                                                          1,115,990        953,470
                                                         ----------     ----------
           Total current assets                           2,801,180      2,579,900

     Equity investments in affiliates                       244,510        244,280
     Securities of Furnishings International Inc.           527,010        481,270
     Property and equipment, net                          2,535,300      2,347,040
     Acquired goodwill, net                               2,952,210      2,519,530
     Other noncurrent assets                                719,020        511,510
                                                         ----------     ----------
           Total assets                                  $9,779,230     $8,683,530
                                                         ==========     ==========

     LIABILITIES AND SHAREHOLDERS' EQUITY
     Current liabilities:
       Notes payable                                     $  892,610     $   62,300
       Accounts payable                                     389,870        358,300
       Accrued liabilities                                  736,170        654,230
                                                         ----------     ----------
           Total current liabilities                      2,018,650      1,074,830

     Long-term debt                                       3,630,510      3,804,160
     Deferred income taxes and other                        461,490        420,320
     Other interests in combined affiliates                 277,010        247,720
     Equity of shareholders of Masco Corporation          3,391,570      3,136,500
                                                         ----------     ----------
           Total liabilities and shareholders' equity    $9,779,230     $8,683,530
                                                         ==========     ==========
</TABLE>





                                       9




<PAGE>   12



                                MASCO CORPORATION
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


Note J - Continued:


<TABLE>
<CAPTION>

                                          THREE MONTHS ENDED        SIX MONTHS ENDED
                                                JUNE 30                  JUNE 30
                                        ----------------------   ----------------------
COMBINED STATEMENT OF INCOME               2000        1999         2000        1999
                                        ----------  ----------   ----------  ----------
<S>                                     <C>         <C>          <C>         <C>
Net sales                               $2,312,060  $2,000,700   $4,516,160  $3,837,360
                                        ----------  ----------   ----------  ----------

Costs and expenses, net:
  Cost of sales                          1,523,680   1,306,210    2,988,280   2,510,250
                                        ----------  ----------   ----------  ----------
  Selling, general and
    administrative expenses                429,990     371,020      837,760     699,960
                                        ----------  ----------   ----------  ----------
  Other income (expense), net:
    Interest expense                       (69,670)    (48,520)    (130,280)    (96,070)
    Other income, net                       44,730      38,230       87,990      68,140
                                        ----------  ----------   ----------  ----------
                                           (24,940)    (10,290)     (42,290)    (27,930)
                                        ----------  ----------   ----------  ----------
                                         1,978,610   1,687,520    3,868,330   3,238,140
                                        ----------  ----------   ----------  ----------
Income before income taxes and
  other interests                          333,450     313,180      647,830     599,220
Income taxes                               126,450     117,530      245,530     231,890
                                        ----------  ----------   ----------   ---------
Income before other interests              207,000     195,650      402,300     367,330

Other interests in combined affiliates      21,600      21,550       42,900      41,330
                                        ----------  ----------   ----------  ----------

Net income                              $  185,400  $  174,100   $  359,400  $  326,000
                                        ==========  ==========   ==========  ==========

Earnings per share:
  Basic                                      $ .42       $ .40        $ .82       $ .75
                                             =====       =====        =====       =====
  Diluted                                    $ .41       $ .39        $ .80       $ .73
                                             =====       =====        =====       =====

Cash dividends declared and paid
  per share:                                 $ .12       $ .11        $ .24       $ .22
                                             =====       =====        =====       =====
</TABLE>



                                       10

<PAGE>   13



                                MASCO CORPORATION
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONCLUDED)


Note J - Concluded:

<TABLE>
<CAPTION>

                                                             SIX MONTHS ENDED
                                                                  JUNE 30
                                                          ----------------------
COMBINED STATEMENT OF CASH FLOWS                             2000         1999
                                                          ---------    ---------
<S>                                                       <C>          <C>
CASH FLOWS FROM (FOR) OPERATING ACTIVITIES:
  Cash provided by operations                             $ 462,630    $ 452,580
  Increase in receivables                                  (154,500)    (184,260)
  Increase in inventories                                  (101,270)     (64,240)
  Increase in accounts payable and
    accrued liabilities, net                                 99,200       65,510
                                                          ---------    ---------
     Total cash from operating activities                   306,060      269,590
                                                          ---------    ---------

CASH FLOWS FROM (FOR) FINANCING ACTIVITIES:
  Increase in debt                                          881,470      172,900
  Payment of debt                                          (270,770)    (122,460)
  Purchase of Company common stock                          (20,560)    (123,040)
  Cash dividends paid                                      (113,120)     (80,210)
  Other, net                                                 10,790       (6,720)
                                                          ---------    ---------
     Total cash from (for) financing activities             487,810     (159,530)
                                                          ---------    ---------

CASH FLOWS FROM (FOR) INVESTING ACTIVITIES:
  Acquisition of companies, net of cash acquired           (531,040)    (405,360)
  Capital expenditures                                     (223,810)    (229,570)
  Investments in non-operating assets, net                 (160,600)     (49,140)
  Other, net                                                 11,970      118,480
                                                          ---------    ---------
     Total cash (for) investing activities                 (903,480)    (565,590)
                                                          ---------    ---------

CASH AND CASH INVESTMENTS:
  Decrease for the period                                  (109,610)    (455,530)
  At January 1                                              235,270      582,540
                                                          ---------    ---------
  At June 30                                              $ 125,660    $ 127,010
                                                          =========    =========
</TABLE>




                                       11

<PAGE>   14



                                MASCO CORPORATION

ITEM 2.             MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS

SECOND QUARTER 2000 AND THE FIRST SIX MONTHS 2000 VERSUS
SECOND QUARTER 1999 AND THE FIRST SIX MONTHS 1999

        Management's discussion and analysis of financial condition and results
of operations pertaining to the three months and six months ended June 30, 1999
has been restated for transactions accounted for as poolings of interests during
the third quarter of 1999.

                              SALES AND OPERATIONS

        Net sales for the three month and six month periods ended June 30, 2000
increased 19 percent and 22 percent to $1,871 million and $3,617 million,
respectively, from $1,567 million and $2,958 million, respectively, for the
comparable periods in 1999. Excluding purchase acquisitions, net sales increased
8 percent and 9 percent for the three month and six month periods ended June 30,
2000, respectively, over the comparable periods of the prior year; these
increases in net sales principally include increases in unit sales volume of
architectural coatings, faucets and cabinets, and higher installation sales of
fiberglass insulation.

        Net sales from North American operations for the three months and six
months ended June 30, 2000 were $1,532 million and $2,946 million, respectively,
representing increases of 18 percent and 20 percent, respectively, from the
comparable periods in 1999; excluding purchase acquisitions, net sales from
these operations increased 10 percent and 11 percent, respectively, from the
comparable periods in 1999. Net sales from International operations for the
three months and six months ended June 30, 2000 were $339 million and $671
million, respectively, representing increases of 25 percent and 35 percent,
respectively, from the comparable periods in 1999; excluding purchase
acquisitions, net sales from International operations decreased approximately 4
percent and 3 percent, respectively, when compared with the comparable periods
in 1999. A stronger U.S. dollar, principally against the German deutsche mark,
had an unfavorable effect on the translation of International sales in the three
month and six month periods ended June 30, 2000 as compared with the three month
and six month periods of 1999; the Company anticipates that unfavorable foreign
currency translation effects may continue for the balance of the year. Excluding
purchase acquisitions, net sales from International operations for both the
three month and six month periods ended June 30, 2000, in local currencies,
increased by approximately 6 percent.

        Cost of sales as a percentage of sales increased to 64.0 percent and
64.2 percent for the three months and six months ended June 30, 2000,
respectively, from 62.9 percent for both of the comparable periods in 1999. The
increase in cost of sales as a percentage of sales includes the under-absorption
of costs related to a slower than anticipated new product launch, plant start-up
and relocation costs and a less favorable product mix. Excluding amortization of
acquired goodwill ($15.9 million and $30.1 million for the three months and six
months ended June 30, 2000, respectively), selling, general and administrative
expenses as a percentage of sales for the three months and six months ended June
30, 2000, respectively, decreased to 19.1 percent and 19.2 percent from 19.4
percent and 19.5 percent for the comparable periods in 1999. The Company's cost-
containment initiatives including the leveraging of fixed costs over a higher
sales base contributed to the decrease in selling, general and administrative
expenses as a percentage of sales.





                                       12

<PAGE>   15



                                MASCO CORPORATION

ITEM 2.            MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                FINANCIAL CONDITION AND RESULTS OF OPERATIONS

        The Company's operating profit margins, before general corporate expense
and goodwill amortization, were 18.3 percent and 18.0 percent for the three
months and six months ended June 30, 2000, respectively, as compared with 19.0
percent for both of the comparable periods in 1999. Operating profit margins,
after general corporate expense and goodwill amortization, were 16.1 percent and
15.8 percent for the three months and six months ended June 30, 2000,
respectively, as compared with 17.0 percent and 16.9 percent for the comparable
periods in 1999. The Company's operating profit margin decreased in the three
months and six months ended June 30, 2000, respectively, as compared with the
comparable periods in 1999, due principally to higher cost of sales and higher
goodwill amortization as a percentage of sales.

                           OTHER INCOME (EXPENSE), NET

        Equity earnings from MascoTech, Inc. for the three months and six months
ended June 30, 2000, respectively, were $4.2 million and $8.5 million as
compared with equity earnings from MascoTech of $4.4 million and $8.4 million
for the comparable periods of 1999.

        Included in other interest income for the three months and six months
ended June 30, 2000 and 1999 is $12.8 million and $25.6 million, and $11.3
million and $22.6 million, respectively, of interest income from the 12%
pay-in-kind junior debt securities of Furnishings International Inc.
(approximately $424 million at December 31, 1999).

        Other, net for the three month and six month periods ended June 30, 2000
and June 30, 1999 results primarily from income and gains, net regarding certain
nonoperating assets.

        Interest expense for the three months and six months ended June 30, 2000
was $47.7 million and $86.5 million, respectively, as compared with $28.2
million and $54.8 million for the comparable periods of 1999. The year 2000
increases primarily relate to borrowings for recent acquisitions.

                        NET INCOME AND EARNINGS PER SHARE

        Net income for the second quarter of 2000 increased 6 percent to $185.4
million from $174.1 million in the comparable 1999 period. Diluted earnings per
share for the second quarter of 2000 increased 5 percent to $.41 from $.39 for
the comparable period of 1999.

        Net income for the six months ended June 30, 2000 increased 10 percent
to $359.4 million from $326.0 million in the comparable 1999 period. Diluted
earnings per share for the six months ended June 30, 2000 also increased 10
percent to $.80 from $.73 for the comparable period of 1999.

                           OTHER FINANCIAL INFORMATION

        The Company's current ratio was 1.3 to 1 at June 30, 2000, and was
negatively influenced by recent short-term acquisition-related borrowings; such
ratio was 2.5 to 1 at December 31, 1999. The Company intends to refinance
certain short-term borrowings with long-term borrowings.



                                       13

<PAGE>   16



                                MASCO CORPORATION

ITEM 2.            MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                FINANCIAL CONDITION AND RESULTS OF OPERATIONS

        For the six months ended June 30, 2000, cash of $201.1 million was
provided by operating activities. Cash provided by financing activities was
$576.4 million, including $841.0 million from an increase in bank debt largely
for acquisitions. Cash used for financing activities included $136.8 million for
the payment of debt, $20.6 million for the purchase of Company common stock, and
$107.3 million for cash dividends paid. Cash used for investing activities was
$885.4 million, including $510.0 million for acquisitions, $169.8 million for
capital expenditures, $160.6 million for investments in non-operating assets and
$45.0 million for other cash outflows. The aggregate of the preceding items
represents a net cash outflow of $108.0 million. Changes in working capital and
debt as indicated on the statement of cash flows exclude the working capital and
debt of acquired companies at the time of acquisition.

        First and second quarter 2000 cash from operations was affected by an
expected and annually recurring seasonal first-half increase in accounts
receivable (although there was no significant increase in receivable days). Most
of the annual increase in accounts receivable resulting from sales increases is
typically experienced in the first half of the year.

        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.

        The Company has on file with the Securities and Exchange Commission
("SEC"), an unallocated shelf registration pursuant to which the Company is able
to issue up to a combined $109 million of debt and equity securities. The
Company filed a shelf registration statement with the SEC during the second
quarter of 2000 to authorize the issuance of additional debt and equity
securities; such registration statement has not yet become effective.

        The Company is subject to lawsuits and claims pending or asserted with
respect to matters generally arising in the ordinary course of business. Note H
of the Consolidated Financial Statements discusses specific claims pending
against the Company and its subsidiary, Behr Process Corporation, with respect
to several of Behr's exterior wood coating products.

        The Company believes that its present cash balance, its cash flows from
operations and, to the extent necessary, bank borrowings and future financial
market activities, are sufficient to fund its working capital and other
investment needs.

                             OUTLOOK FOR THE COMPANY

        The Company experienced a modest softening of incoming orders for home
improvement products during the second quarter of 2000. This slowdown combined
with continuing new product launch and plant relocation costs resulted in a
reduction of the Company's earnings for the three month and six month periods
ended June 30, 2000.

        Although the Company continues to expect increases in sales and earnings
for the calendar year 2000 compared with 1999, if present trends continue for
the balance of the year, the Company believes that its sales growth in the
calendar year 2000 may be slightly lower than the previously anticipated sales
increase of approximately 20 percent. The Company anticipates that the slightly
lower sales increase combined with the impact of higher interest rates, a
stronger U.S. dollar and the above-mentioned other costs will lower the
previously anticipated increase in the Company's earnings for the calendar year
2000 compared with 1999.


                                       14

<PAGE>   17



                                MASCO CORPORATION

ITEM 2.           MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                FINANCIAL CONDITION AND RESULTS OF OPERATIONS

                                  OTHER MATTERS

MascoTech, Inc. Transaction

        During the third quarter of 2000 the Company reported that it is
participating in a transaction in which an affiliate of Heartland Industrial
Partners, L.P. has agreed to acquire all of the common shares of MascoTech,
Inc., an 18 percent owned affiliate of the Company. As part of the transaction,
the Company would receive cash, preferred stock, an approximate ten percent
minority interest in the new entity and a reduction from $200 million to $100
million in MascoTech's option to issue subordinated debt securities to the
Company. A special committee of the Company's Board of Directors was advised by
both Merrill Lynch & Company and special legal counsel in the committee's
negotiation of the Company's participation in this transaction. If the
transaction is completed in the fourth quarter of 2000, as anticipated, the
Company is expected to report a relatively modest after-tax gain from the sale.

Executive Stock Program

        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
totaling $156.0 million under a recently adopted Executive Stock Purchase
Program ("Program"). The stock was purchased for cash at $18.50 per share, the
approximate market price of the common stock at the time of purchase. The
Program was made available worldwide to the Company's senior divisional and
corporate management members.

        Participants in the Program financed their purchases with five-year full
recourse personal loans, at a market interest rate, from a bank syndicate
arranged by Bank One Capital Markets and syndicated by Bank One, N.A. 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. In order to subsidize
the effective interest rate on the participants' loan and 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
non-competition agreement for the Company businesses which employ them.

        The Executive Stock Purchase Program is a voluntary plan designed to
increase at-risk stock ownership on the part of senior management, and thereby
further align the Company's management team with the interests of its
shareholders.

European Currency Transition

        The Company is currently completing changes to existing systems to
facilitate a smooth transition to the new single currency called the euro,
introduced in Europe on January 1, 1999. The Company believes that conversion to
the euro will not have a material effect on the Company's financial position or
results of operations.




                                       15

<PAGE>   18



                                MASCO CORPORATION

               UNAUDITED INFORMATION REGARDING EQUITY INVESTMENTS
            FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2000 AND 1999


        Equity investments in affiliates consist primarily of the following
approximate common stock and partnership interests at June 30:

<TABLE>
<CAPTION>

                                               2000      1999
                                               ----      ----
<S>                                            <C>       <C>
         Emco Limited, a Canadian company       42%       42%
         MascoTech, Inc.                        18%       17%
         Hans Grohe, a German partnership       27%       27%
</TABLE>


        The following presents condensed financial data of MascoTech, Inc.
Amounts are in thousands.


<TABLE>
<CAPTION>

                                      THREE MONTHS ENDED        SIX MONTHS ENDED
                                           JUNE 30                  JUNE 30
                                     --------------------    --------------------
                                       2000        1999        2000        1999
                                     --------    --------    --------    --------
<S>                                  <C>         <C>         <C>         <C>
     Net Sales                       $442,310    $436,510    $901,710    $885,170
                                     ========    ========    ========    ========
     Gross Profit                    $114,080    $113,690    $233,480    $229,710
                                     ========    ========    ========    ========
     Net Income                      $ 26,180    $ 26,110    $ 52,000    $ 49,970
                                     ========    ========    ========    ========
</TABLE>





                                       16

<PAGE>   19



                                MASCO CORPORATION

                           PART II. OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

         Information regarding this item is set forth in Note H to the Company's
Condensed Consolidated Financial Statements included in Part I, Item 1 of this
Report.

ITEMS 2 THROUGH 3 AND ITEM 5 ARE NOT APPLICABLE.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

         The annual meeting of stockholders was held on May 17, 2000 at which
the stockholders voted upon the election of three nominees for Class III
Directors; approval of an amendment of the Company's 1991 Long Term Stock
Incentive Plan; and ratification of the selection of PricewaterhouseCoopers LLP
as independent auditors for the Company for 2000. The following is a tabulation
of the votes.

         Election of Class III Directors

<TABLE>
<CAPTION>

                                                                                For               Withheld
                                                                                ---               --------
<S>                                                                         <C>                   <C>
            Thomas G. Denomme                                               393,330,230           2,298,107
            Mary Ann Krey                                                   393,329,367           2,298,970
            Richard A. Manoogian                                            393,351,785           2,276,552
</TABLE>


         Approval of an Amendment of the Company's 1991 Long Term Stock
         Incentive Plan.

<TABLE>
<CAPTION>
                                                                                         Abstentions and
                       For                                  Against                      Broker Non-Votes
                       ---                                  -------                      ----------------
<S>                                                        <C>                          <C>
                 243,167,056                              125,409,871                       27,051,410
</TABLE>


         Approval of the appointment of PricewaterhouseCoopers LLP as
         independent auditors for the Company for 2000.

<TABLE>
<CAPTION>
                                                                                         Abstentions and
                       For                                  Against                      Broker Non-Votes
                       ---                                  -------                      ----------------
<S>                                                         <C>                          <C>
                 393,065,278                                1,759,656                        803,403
</TABLE>


ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

           (A)   EXHIBITS:

                 10a-  1991 Long Term Stock Incentive Plan (Amended and Restated
                       May 17, 2000)

                 10b-  Executive Stock Purchase Program

                 12 -  Computation of Ratio of Earnings to Fixed Charges

                 27 -  Financial Data Schedule


           (B)   REPORTS ON FORM 8-K:

                 Report on Form 8-K dated June 14, 2000, reporting under
                 item 5 an update to the description of the legal
                 proceedings contained in the Company's Quarterly Report
                 on Form 10-Q for the quarter ended March 31, 2000 and the
                 issuance of a press release relating to the announcement
                 of the Company's earnings for 2000.

                                       17

<PAGE>   20



                                MASCO CORPORATION

                      PART II. OTHER INFORMATION, CONCLUDED


                                    SIGNATURE

        Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

                                               MASCO CORPORATION

                                                 (Registrant)



DATE:    AUGUST 10, 2000             BY:  /s/ Richard G. Mosteller
       -----------------------            -------------------------------------
                                          Richard G. Mosteller
                                          Senior Vice-President - Finance
                                          (Chief Financial Officer
                                           and Authorized Signatory)


                                       18

<PAGE>   21



                                MASCO CORPORATION

                                  EXHIBIT INDEX



 EXHIBIT



Exhibit 10a    1991 Long Term Stock Incentive Plan (Amended and Restated
               May 17, 2000)

Exhibit 10b    Executive Stock Purchase Program

Exhibit 12     Computation of Ratio of Earnings to Fixed Charges

Exhibit 27     Financial Data Schedule




</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.A
<SEQUENCE>2
<FILENAME>ex10-a.txt
<DESCRIPTION>1991 LONG TERM STOCK INCENTIVE PLAN
<TEXT>

<PAGE>   1
                                                                  EXHIBIT 10.a

                                MASCO CORPORATION
                       1991 LONG TERM STOCK INCENTIVE PLAN
                       (Amended and Restated May 17, 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.



<PAGE>   2


     (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;

              (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;



                                       -2-
<PAGE>   3

              (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,
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



                                       -3-
<PAGE>   4

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:

                           (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.



                                      -4-
<PAGE>   5

         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, 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, 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, the Option may be
              exercised within three months after the date of termination or
              retirement. 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 at a time when entitled to exercise
              an Option, then at any time or times within one year after death
              such Option may be exercised, as to all or any of the Shares which
              the Participant was entitled to purchase immediately prior to
              death. 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) 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.

              (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 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




                                      -5-
<PAGE>   6

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 such termination of employment or the consulting
              relationship be forfeited and transferred back to the Company.
              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 and termination of employment upon a change
              of status from employee to consultant), 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.



<PAGE>   7

                  (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. 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.





                                       -7-
<PAGE>   8


         (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

                           (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


                                      -8-
<PAGE>   9

                           (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.

              (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,




                                      -9-
<PAGE>   10

         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

                  (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



                                      -10-
<PAGE>   11

         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 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.




                                      -11-
<PAGE>   12


     (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 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.




                                      -12-
<PAGE>   13

     (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.











                                      -13-
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.B
<SEQUENCE>3
<FILENAME>ex10-b.txt
<DESCRIPTION>EXECUTIVE STOCK PURCHASE PROGRAM
<TEXT>

<PAGE>   1
                                                                    EXHIBIT 10.b


                               MASCO CORPORATION

                        EXECUTIVE STOCK PURCHASE PROGRAM


1.   Purpose. The purpose of the Masco Corporation Executive Stock Purchase
     Program (the "Plan") is to facilitate the immediate purchase, by key
     employees and the Directors of and certain consultants to Masco Corporation
     ("Masco") and its subsidiaries (collectively, the "Company"), of Masco's
     Common Stock (the "Common Stock"). The purchases facilitated by the Plan
     are intended to achieve the following:

     a.  Increasing the ownership of Common Stock among key management of the
         Company;

     b.  More closely aligning financial rewards to key management with any
         financial rewards realized by all other holders of Common Stock; and

     c.  Increasing the motivation of key management to manage the Company as
         owners.

2.   Eligibility. To be eligible to participate in this Plan, in addition to the
     Directors of the Company, an employee of or consultant to the Company shall
     be designated as an "Eligible Participant" by the Compensation Committee of
     the Board of Directors of Masco (the "Committee") prior to the date on
     which Stock is to be purchased under this Plan (the "Purchase Date").

3.   Participation. To become a Plan participant (a "Participant"), an Eligible
     Participant shall satisfy the following requirements:

     a.  Submit a completed, signed and irrevocable agreement to purchase Stock
         on the Purchase Date;

     b.  Complete and sign all necessary agreements and other documents relating
         to the ESP Loan described in Section 5 hereof; and

     c.  Satisfy all other terms and conditions of participation specified in
         this Plan.

     The agreements and other documents specified in subsection 3(a), (b) and
     (c) hereof shall be in such forms and shall be submitted at such times and
     to such Eligible Participants as specified by the Committee or its
     designee(s). No Eligible Participant shall be required to participate in
     this Plan.

4.   Responsibilities of the Committee. The Committee or its designee(s) shall
     have the following responsibilities under this Plan:

     a.  Adoption, alteration, waiver and repeal of such administrative rules,
         guidelines, practices and provisions of or governing this Plan as the
         Committee shall, from time to time, deem advisable; interpretation of
         the terms and provisions of this Plan (and any agreements relating
         hereto); and supervision of the administration of this Plan;



                                       1
<PAGE>   2

     b.  Selection of Eligible Participants;

     c.  Designation of Purchase Date;

     d.  Designation of minimum and maximum purchases under this Plan, either by
         number of shares of Stock or by purchase price;

     e.  Determining whether any restricted share grant shall be made to a
         Participant in conjunction with a purchase of shares of Stock under the
         Plan; and

     f.  Negotiation of terms and conditions of the guaranty described in
         Section 9 hereof and the Participant's reimbursement agreement with the
         Company and promissory note to the Bank referred to herein.

5.   Payment of Purchase Price. The purchase price for each share of Stock under
     this Plan shall be determined by the Committee based on the reported
     trading price of the Common Stock immediately prior to the Purchase Date or
     on such formula as the Committee shall determine fairly reflects the fair
     market value of the Common Stock at the time of purchase. Each Participant
     shall deliver to the Company in cash one hundred percent (100%) of the
     purchase price of the shares of Stock which such Participant has elected to
     purchase under this Plan (the "Purchased Shares"). The payment must be made
     at the time, place and manner specified by the Committee or its
     designee(s).

     Each Participant shall obtain an unsecured loan through a bank or banks
     (the "Bank") to fund the purchase of the Purchased Shares -- the "ESP
     Loan". Each Participant shall sign a letter of direction which shall direct
     all ESP Loan proceeds to be paid directly to Masco in payment for the
     Purchased Shares. Each Participant is responsible for satisfying all of the
     lending requirements specified by the Bank to qualify for his or her ESP
     Loan. Each Participant shall be fully obligated to repay to the Bank all
     principal, interest and any early payment fees on the ESP Loan when due and
     payable.

6.   Registration of Shares. The Purchased Shares shall be registered in the
     name of the Participant or the Participant's grantor trust.

7.   Stockholder Rights. Subject to such rules as the Committee shall prescribe,
     each Participant shall have all of the rights of a stockholder with respect
     to the Purchased Shares, including the right to vote the shares and the
     right to receive all dividends paid on the Purchased Shares.

8.   Sale of Purchased Shares. Each Participant shall be permitted to sell all
     or any portion of the Purchased Shares at any time subject to adherence to
     standard Company policy regarding employee and Director sales of stock.

9.   Loan Guarantees. The Company shall guarantee repayment to the Bank of one
     hundred percent (100%) of all principal, interest, early payment fees and
     other obligations of each Participant under such Participant's ESP Loan
     described in Section 5 hereof. The terms and conditions of the guaranty are
     as agreed by Masco and the Bank. Each Participant shall be



                                       2
<PAGE>   3

     fully obligated to repay the Bank all principal, interest and other amounts
     due in connection with such Participant's ESP Loan when due and payable.
     The Company may take all actions relating to the Participant and his or her
     assets which the Committee deems reasonable and necessary to obtain full
     reimbursement for amounts the Company pays to the Bank under its guaranty
     related to the Participant's ESP Loan.

10.  Waiver and Amendment. The Committee may waive, amend, alter or discontinue
     all or any provision of this Plan, but no waiver, amendment, alteration or
     discontinuation shall be made which would impair the right of a Participant
     without his or her consent.

11.  This Plan is established under the Company's 1991 Long Term Stock Incentive
     Plan.
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-12
<SEQUENCE>4
<FILENAME>ex12.txt
<DESCRIPTION>COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
<TEXT>

<PAGE>   1


                                                                      EXHIBIT 12


                 MASCO CORPORATION AND CONSOLIDATED SUBSIDIARIES

                COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES




<TABLE>
<CAPTION>

                                                 (THOUSANDS OF DOLLARS)
                             --------------------------------------------------------------
                               SIX
                              MONTHS
                              ENDED                   YEAR ENDED DECEMBER 31
                             JUNE 30,  ----------------------------------------------------
                               2000        1999        1998      1997      1996      1995
                             --------  ----------  ----------  --------  --------  --------
<S>                          <C>       <C>         <C>         <C>       <C>        <C>
EARNINGS BEFORE INCOME TAXES
  AND FIXED CHARGES:

  Income from continuing
    operations before
    income taxes             $570,400  $  904,100  $  905,500  $733,800  $575,600  $396,600

  Deduct/add equity in
    undistributed
    (earnings)/loss of
    fifty-percent-or-
    less-owned companies       (8,960)    (18,720)    (24,070)  (19,470)  (12,310)  (17,770)

  Add interest on
    indebtedness, net          87,110     121,520     115,700    94,780    78,790    78,350

  Add amortization of debt
    expense                     1,160       1,350       2,130     2,310     1,400     1,930

  Add estimated interest
    factor for rentals          9,440      16,080      11,430     9,270     7,120     5,870
                             --------  ----------  ----------  --------  --------  --------

  Earnings before income
    taxes and fixed charges  $659,150  $1,024,330  $1,010,690  $820,690  $650,600  $464,980
                             ========  ==========  ==========  ========  ========  ========


FIXED CHARGES:

  Interest on indebtedness   $ 90,730  $  129,860  $  119,750  $ 97,910  $ 81,250  $ 81,410

  Amortization of debt
    expense                     1,160       1,350       2,130     2,310     1,400     1,930

  Estimated interest factor
    for rentals                 9,440      16,080      11,430     9,270     7,120     5,870
                             --------  ----------  ----------  --------  --------  --------

                             $101,330  $  147,290  $  133,310  $109,490  $ 89,770  $ 89,210
                             ========  ==========  ==========  ========  ========  ========

Ratio of earnings to fixed
  charges                         6.5         7.0         7.6       7.5       7.2       5.2
                                  ===         ===         ===       ===       ===       ===
</TABLE>



</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-27
<SEQUENCE>5
<FILENAME>ex27.txt
<DESCRIPTION>FINANCIAL DATA SCHEDULE
<TEXT>

<TABLE> <S> <C>

<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM MASCO
CORPORATION'S JUNE 30, 2000 FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>

<S>                             <C>
<PERIOD-TYPE>                   6-MOS
<FISCAL-YEAR-END>                          DEC-31-2000
<PERIOD-END>                               JUN-30-2000
<CASH>                                         122,820
<SECURITIES>                                         0
<RECEIVABLES>                                1,192,790
<ALLOWANCES>                                         0
<INVENTORY>                                    938,540
<CURRENT-ASSETS>                             2,368,960
<PP&E>                                       1,797,970<F1>
<DEPRECIATION>                                       0
<TOTAL-ASSETS>                               7,750,530
<CURRENT-LIABILITIES>                        1,781,520
<BONDS>                                      2,346,730
<PREFERRED-MANDATORY>                                0
<PREFERRED>                                          0
<COMMON>                                       448,660
<OTHER-SE>                                   2,942,910
<TOTAL-LIABILITY-AND-EQUITY>                 7,750,530
<SALES>                                      3,617,000
<TOTAL-REVENUES>                             3,617,000
<CGS>                                        2,322,600
<TOTAL-COSTS>                                2,322,600
<OTHER-EXPENSES>                                     0
<LOSS-PROVISION>                                     0
<INTEREST-EXPENSE>                              86,500
<INCOME-PRETAX>                                570,400
<INCOME-TAX>                                   211,000
<INCOME-CONTINUING>                            359,400
<DISCONTINUED>                                       0
<EXTRAORDINARY>                                      0
<CHANGES>                                            0
<NET-INCOME>                                   359,400
<EPS-BASIC>                                        .82
<EPS-DILUTED>                                      .80
<FN>
<F1>RECEIVABLES AND PROPERTY AND EQUIPMENT ARE PRESENTED NET OF ALLOWANCES FOR
DOUBTFUL ACCOUNTS AND ACCUMULATED DEPRECIATION AND AMORTIZATION, RESPECTIVELY.
</FN>


</TABLE>
</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
-----END PRIVACY-ENHANCED MESSAGE-----
