Document:

Exhibit 10.2

 

Execution Version

 

TRANSITION SERVICES AGREEMENT

 

dated as of June 29, 2015

 

by and between

 

MASCO CORPORATION

 

and

 

TOPBUILD CORP.

 

 

TABLE OF CONTENTS

 

	
 
    	
PAGE
    
	
 
    	
 
    
	
ARTICLE 1
    
	
DEFINITIONS
    
	
 
    	
 
    
	
Section 1.01. Definitions
    	
3
    
	
 
    	
 
    
	
ARTICLE 2
    
	
PURCHASE AND SALE OF SERVICES
    
	
 
    	
 
    
	
Section 2.01. Purchase and Sale of Services
    	
7
    
	
Section 2.02. Third Party Licenses and Consents
    	
7
    
	
Section 2.03. Third Party Providers
    	
8
    
	
Section 2.04. Cooperation
    	
8
    
	
 
    	
 
    
	
ARTICLE 3
    
	
SERVICE COSTS;   OTHER CHARGES
    
	
 
    	
 
    
	
Section 3.01. Service Costs Generally
    	
8
    
	
Section 3.02. Taxes
    	
9
    
	
Section 3.03. Invoicing and Settlement
    	
9
    
	
 
    	
 
    
	
ARTICLE 4
    
	
THE SERVICES
    
	
 
    	
 
    
	
Section 4.01. Standards of Service
    	
9
    
	
Section 4.02. Changes to Services
    	
10
    
	
Section 4.03. Management of Services By Provider
    	
10
    
	
Section 4.04. Liaisons
    	
10
    
	
Section 4.05. Special Rules for Tax Services
    	
11
    
	
 
    	
 
    
	
ARTICLE 5
    
	
DISCLAIMER, LIABILITY AND INDEMNIFICATION
    
	
 
    	
 
    
	
Section 5.01. EXCLUSION OF WARRANTIES
    	
11
    
	
Section 5.02. Limitation of Liability
    	
11
    
	
Section 5.03. Indemnification of Provider by Recipient
    	
12
    
	
Section 5.04. Indemnification of Recipient by Provider
    	
12
    
	
Section 5.05. Indemnification as Exclusive Remedy
    	
13
    
	
Section 5.06. Conduct of Proceedings
    	
13
    
	
 
    	
 
    
	
ARTICLE 6
    
	
TERM AND TERMINATION
    
	
 
    	
 
    
	
Section 6.01. Term
    	
13
    

 

 

	
Section 6.02. Termination
    	
13
    
	
Section 6.03. Effect of Termination
    	
14
    
	
 
    	
 
    
	
ARTICLE 7
    
	
ADDITIONAL AGREEMENTS
    
	
 
    	
 
    
	
Section 7.01. Confidential Information
    	
15
    
	
Section 7.02. Ownership of Assets
    	
16
    
	
Section 7.03. Security
    	
17
    
	
Section 7.04. Access to Information and Audit
    	
17
    
	
Section 7.05. Compliance with Applicable Law
    	
17
    
	
Section 7.06. Labor Matters
    	
18
    
	
Section 7.07. Record Retention
    	
18
    
	
 
    	
 
    
	
ARTICLE 8
    
	
MISCELLANEOUS
    
	
 
    	
 
    
	
Section 8.01. No Agency; Independent Contractor Status
    	
18
    
	
Section 8.02. Subcontractors
    	
18
    
	
Section 8.03. Force Majeure
    	
19
    
	
Section 8.04. Entire Agreement
    	
19
    
	
Section 8.05. Notices
    	
19
    
	
Section 8.06. Governing Law
    	
20
    
	
Section 8.07. Jurisdiction
    	
21
    
	
Section 8.08. Specific Performance
    	
21
    
	
Section 8.09. WAIVER OF JURY TRIAL
    	
21
    
	
Section 8.10. Severability
    	
21
    
	
Section 8.11. Amendments; No Waivers
    	
22
    
	
Section 8.12. Successors and Assigns
    	
22
    
	
Section 8.13. Third Party Beneficiaries
    	
22
    
	
Section 8.14. Counterparts
    	
22
    
	
Section 8.15. Construction and Interpretation
    	
23
    
	
Section 8.16. Conflict of Terms
    	
23
    

 

SCHEDULES

 

Schedule A —                   Services

 

EXHIBITS

 

Exhibit A — Tax Services

 

TRANSITION SERVICES AGREEMENT

 

This TRANSITION SERVICES AGREEMENT (this “Agreement”) is entered into as of June 29, 2015 by and between Masco Corporation, a Delaware

 

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corporation (“Masco”) and TopBuild Corp., a Delaware corporation (“TopBuild”).

 

RECITALS

 

WHEREAS, Masco and TopBuild have entered enter into a Separation and Distribution Agreement dated as of June 29, 2015 (as amended from time to time, the “Separation and Distribution Agreement”) providing for the distribution by Masco to its stockholders of all of the common stock of TopBuild; and

 

WHEREAS, the Separation and Distribution contemplates that the parties hereto will enter into this Agreement pursuant to which Masco will provide, or cause to be provided, certain services to TopBuild (and if requested, one or more of its Subsidiaries), and TopBuild will provide, or cause to be provided, certain services to Masco and, if requested, one or more of its Subsidiaries, in each case on the terms and conditions set forth herein.

 

ACCORDINGLY, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, for themselves, their successors and permitted assigns, hereby agree as follows:

 

ARTICLE 1
 DEFINITIONS

 

Section 1.01.  Definitions.  (a)  Any capitalized term that is used, but not defined, herein shall have the meaning assigned to such term in the Separation and Distribution Agreement, or if not defined therein, the Tax Matters Agreement.

 

(b)         As used in this Agreement, the following terms shall have the following meanings, applicable both to the singular and the plural forms of the terms described:

 

“Affiliate” means, with respect to any Person, any other Person directly or indirectly controlling, controlled by, or under common control with, such other Person.  For the purposes of this definition, “control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise, and the terms “controlling” and “controlled” have meanings correlative to the foregoing.  Notwithstanding any provision of this Agreement to the contrary (except where the relevant provision states explicitly to the contrary), no member of the Masco Group, on the one hand, and no member of the TopBuild Group, on the other hand, shall be deemed to be an Affiliate of the other.

 

“Applicable Law” means, with respect to any Person, any federal, state, local or foreign law (statutory, common or otherwise), constitution, treaty,

 

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convention, ordinance, code, rule, regulation, order, injunction, judgment, decree, ruling, directive, guidance, instruction, direction, permission, waiver, notice, condition, limitation, restriction or prohibition or other similar requirement enacted, adopted, promulgated, imposed, issued or applied by a Governmental Authority that is binding upon or applicable to such Person, its properties or assets or its business or operations, as amended unless expressly specified otherwise.

 

“Business Day” means a day, other than Saturday, Sunday or other day on which commercial banks in New York, New York are authorized or required by Applicable Law to close.

 

“Change of Control” means, with respect to Masco or TopBuild, the occurrence of any of the following: (i) a “Person” (as such term is used in Sections 13(d) and 14(d)(2) of the Exchange Act) becomes a beneficial owner, directly or indirectly, of equity representing fifty percent (50%) or more of the total voting power of Masco’s or TopBuild’s, as applicable, then outstanding equity capital; (ii) such entity merges into, is consolidated with or effects an amalgamation with another Person, or merges another Person into such entity, on a basis whereby less than fifty percent (50%) of the total voting power of the surviving Person immediately after such merger, consolidation or amalgamation is represented by equity held directly or indirectly by former equityholders of (and in respect of their former equity holdings in) such entity immediately prior to such merger, consolidation or amalgamation; and (iii) such entity directly or indirectly sells, transfers or exchanges all, or substantially all, of its assets to another Person unless at least fifty percent (50%) of the total voting power of the transferee is directly or indirectly owned by the equityholders of Masco or TopBuild, as applicable, in respect of their former equity holdings in Masco or TopBuild immediately prior to transfer; provided that in no event shall the consummation, execution or closing of the Spin-Off constitute a Change of Control with respect to Masco or TopBuild.

 

“Distribution” has the meaning set forth in the Separation and Distribution Agreement.

 

“Distribution Time” has the meaning set forth in the Separation and Distribution Agreement.

 

“Governmental Authority” means any multinational, foreign, federal, state, local or other governmental, statutory or administrative authority, regulatory body or commission or any court, tribunal or judicial or arbitral authority which has any jurisdiction or control over either party (or any of their Affiliates).

 

“Group” means, as the context requires, the TopBuild Group or the Masco Group.

 

“Insolvency Event” means with respect to either party, as applicable, (i) the making by such party of any assignment for the benefit of creditors of all or substantially all of its assets or the admission by such party in writing of its

 

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inability to pay all or substantially all of its debts as they become due; (ii) the adjudication of such party as bankrupt or insolvent or the filing by such party of a petition or application to any tribunal for the appointment of a trustee or receiver for such party or any substantial part of the assets of such party; or (iii) the commencement of any voluntary or involuntary bankruptcy proceedings (and, with respect to involuntary bankruptcy proceedings, the failure of such proceedings to be discharged within 60 days), reorganization proceedings or similar proceeding with respect to such party or the entry of an order appointing a trustee or receiver or approving a petition in any such proceeding.

 

“Intercompany Charge-Out Rate” means with respect to any Service, the rate applicable to such Service as set forth opposite such Service in the fourth column of Schedule A representing the blended rate for all Services that has been agreed by the parties.

 

“Interest Rate” means the lesser of (i) the one-month LIBOR rate as published in the Wall Street Journal plus 2.00% or (ii) the maximum rate of interest permitted to be charged by the applicable Governmental Authority.

 

“Masco Entity” means any member of the Masco Group.

 

“Masco Systems” means any computer hardware or software program or routine or part thereof owned, licensed or provided by any Masco Entity or any of their suppliers on any Masco Entity’s behalf, each as modified, maintained or enhanced from time to time by any Masco Entity, any TopBuild Entity or any third party.

 

“Person” means an individual, corporation, partnership, limited liability company, association, trust or other entity or organization, including a Governmental Authority.

 

“Provider Group” means, as the context requires, the Masco Group, in the case of Services to be provided by Masco, or the TopBuild Group, in the case of Services to be provided by TopBuild.

 

“Recipient Entity” means any member of the Recipient Group.

 

“Recipient Group” means, as the context requires, the Masco Group, in the case of Services to be received by the Masco Group, or the TopBuild Group, in the case of Services to be received by the TopBuild Group.

 

“Schedule” means a Schedule attached hereto forming part of this Agreement.

 

“Service Costs” means the reasonable and actual out-of-pocket costs attributable to the provision of the applicable Service, calculated as the product of (i) the Intercompany Charge-Out Rate and (ii) the number of hours attributable to

 

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the provision of such Service.  The parties agree that such costs with respect to any given good or service will be considered reasonable if the relevant out-of-pocket cost for such good or service either (x) does not exceed the comparable cost being paid by Provider or an Affiliate for such good or service prior to the Distribution Time or (y) does not exceed the cost being paid by Provider or an Affiliate for such good or service being rendered to Provider or its Affiliates not in connection with the provision of the Services.

 

“Subsidiary” means, with respect to any Person, any other entity of which securities or other ownership interests having ordinary voting power to elect a majority of the board of directors or other persons performing similar functions are at the time directly or indirectly owned by such Person.

 

“Systems” means the Masco Systems or the TopBuild Systems, individually, or the Masco Systems and the TopBuild Systems, collectively, as the context may indicate or require.

 

“Tax Service Provider” means, pursuant to the terms set forth in Article 2 of this Agreement and in consideration of the payment of the Service Costs pursuant to Exhibit A of this Agreement, after the Distribution Time, Masco (in its capacity as a provider of Services).

 

“Tax Service Recipient” means, pursuant to the terms set forth in Article 2 of this Agreement and in consideration of the payment of the Service Costs pursuant to Exhibit A of this Agreement, after the Distribution Time, TopBuild (in its capacity as a recipient of Services).

 

“TopBuild Entity” means any member of the TopBuild Group.

 

“TopBuild Systems” means any computer hardware or software program or routine or part thereof owned, licensed or provided by any TopBuild Entity or any of their suppliers on any TopBuild Entity’s behalf, each as modified, maintained or enhanced from time to time by any TopBuild Entity, any Masco Entity or any third party.

 

(c)                        Each of the following terms is defined in the Section set forth opposite such term:

 

	
Term
    	
 
    	
Section
    
	
Actions
    	
 
    	
5.03
    
	
Agreement
    	
 
    	
Preamble
    
	
Baseline Period
    	
 
    	
4.01(a)
    
	
Confidential Information
    	
 
    	
7.01
    
	
End Date
    	
 
    	
Section 6.01
    
	
force majeure
    	
 
    	
8.03
    
	
Invoice Date
    	
 
    	
3.03(a)
    
	
Liaison
    	
 
    	
Section 4.04
    

 

6

 

	
Masco
    	
 
    	
Preamble
    
	
Tax Services
    	
 
    	
Section 4.05
    
	
Tax Systems
    	
 
    	
Section 4.05(a)
    
	
TopBuild
    	
 
    	
Preamble
    
	
Payment Date
    	
 
    	
3.03(b)
    
	
Provider
    	
 
    	
Section 2.01
    
	
Provider Indemnified Person
    	
 
    	
5.02
    
	
Recipient
    	
 
    	
Section 2.01
    
	
Recipient Indemnified Person
    	
 
    	
5.04
    
	
Separation and Distribution Agreement
    	
 
    	
Recitals
    
	
Services
    	
 
    	
Section 2.01
    

 

ARTICLE 2
 PURCHASE AND SALE OF SERVICES

 

Section 2.01.  Purchase and Sale of Services.  (a)  On the terms and subject to the conditions of this Agreement and in consideration of the payment of the Service Costs in accordance with Section 3.01, after the Distribution Time, each of Masco and TopBuild (each in its capacity as a provider of Services, “Provider”) agrees to provide to the other party (in its capacity as a recipient of Services, “Recipient”), or procure the provision to Recipient of, and Recipient agrees to purchase from Provider, the transition services set forth on Schedule A as Services to be provided by the relevant Provider (the “Services”).

 

(b)                       It is understood that (i) the Services to be provided to Recipient under this Agreement shall, at Recipient’s request, be provided to Recipient or any other Person that is a Subsidiary of Recipient (and to the extent Services are so provided, references to “Recipient” (and related references) shall be construed accordingly as the context requires), and (ii) Provider may satisfy its obligation to provide or procure Services hereunder by causing one or more of its Affiliates to provide or procure such Services (and, to the extent Services are so provided, references to “Provider” (and related references) shall be construed accordingly as the context requires), which Affiliates it may change at its discretion from time to time; provided that Provider shall remain responsible for the performance of such Affiliates.  With respect to Services provided to, or procured on behalf of, any Subsidiary of Recipient, Recipient agrees to pay on behalf of such Subsidiary, or cause such Subsidiary to pay, all amounts payable by or in respect of such Services pursuant to this Agreement.

 

(c)                        Except for the Services expressly contemplated to be provided in accordance with this Section 2.01, Provider shall have no obligation under this Agreement to provide any services to the Recipient Group.

 

Section 2.02.  Third Party Licenses and Consents.  Provider and Recipient shall use commercially reasonable efforts to obtain, and to keep and maintain in effect, all governmental or third party licenses and consents required for the

 

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provision of any Service by Provider in accordance with the terms of this Agreement; provided that, if Provider is unable to obtain any such license or consent, Provider shall promptly notify Recipient in writing and shall, and shall cause its Affiliates to, use commercially reasonable efforts to implement an appropriate alternative arrangement.  The costs relating to obtaining any such licenses or consents shall be borne by Recipient; provided that Provider shall not incur any such costs without the prior written consent of Recipient.  If any such license, consent or alternative arrangement is not available despite the commercially reasonable efforts of Provider and its Affiliates or as a result of Recipient failing to consent to the incurrence of costs relating to obtaining any such license or consent, Provider shall not be required to provide the affected Services.

 

Section 2.03.  Third Party Providers.  If Provider receives written notice from any third party service provider that such Person intends to terminate a service pursuant to which Provider provides a Service to Recipient, then Provider shall provide a copy of such written notice to Recipient and shall use commercially reasonable efforts to secure the continued provision of that service from such third party or an alternative service provider.  If Provider is unable to secure the continued provision of that service from such third party or an alternative service provider, then Provider shall not be required to provide the affected Service.

 

Section 2.04.  Cooperation.  Provider and Recipient agree to cooperate in providing for an orderly transition of Services, including Services terminated pursuant to Section 6.02, to Recipient or a successor service provider designated by Recipient.  Such cooperation shall be subject to the provisions hereof relating to the provision of Services including that Recipient shall pay to Provider the Service Costs related thereto.

 

ARTICLE 3
 SERVICE COSTS; OTHER CHARGES

 

Section 3.01.  Service Costs Generally.  Unless the parties agree in writing to a different arrangement, for each period in which Recipient receives a Service hereunder, Recipient shall pay Provider the Service Costs for the applicable Service. In the case of a termination of any or all Services prior to the End Date (other than (x) a termination of a Service (in whole) under Section 6.02(a), (y) a termination under Section 6.02(c), or (z) a termination under Section 6.02(f) arising from Provider suffering an Insolvency Event), (i) Recipient shall continue to be responsible for the reasonable out-of-pocket costs associated with such Services until the End Date, (ii) Provider shall use reasonable efforts to eliminate such costs referenced in clause (i) as soon as possible and (iii) until such costs referenced in clause (i) are eliminated they will be treated as Service Costs relating to Services provided prior to termination and may be invoiced as incurred.  Provider may not rely on the prior sentence with respect to the costs for a given contract if the contract was entered into in connection with providing the Services

 

8

 

and the term of the contract was more than three months unless Recipient approved Provider entering into such contract.  If the End Date is extended pursuant to Section 6.01, the parties shall negotiate in good faith to determine the compensation to be paid to Provider by Recipient for Services to be provided during the period of the extension.

 

Section 3.02.  Taxes.  (a) Recipient shall pay all applicable sales or use taxes incurred with respect to provision of the Services.  Such taxes shall be incremental to other payments or charges identified in this Agreement.

 

(b)                       All sums payable under this Agreement shall be paid free and clear of all deductions or withholdings unless the deduction or withholding is required by Applicable Law, in which event the amount of the payment due from the party required to make such payment shall be increased to an amount which after any withholding or deduction leaves an amount equal to the payment which would have been due if no such deduction or withholding had been required.

 

Section 3.03.  Invoicing and Settlement.  (a) Unless any Schedule hereto indicates otherwise or the parties agree in writing to a different arrangement, Provider shall invoice or notify in writing the Recipient on a monthly basis (not later than 30 days after the end of each month) for the charges for Services hereunder for the prior month (the date of delivery of such invoice, the “Invoice Date”).

 

(b)                       Recipient agrees to pay on or before the date (each, a “Payment Date”) that is 30 days after the Invoice Date by wire transfer of immediately available funds payable to the order of Provider to such account(s) designated by Provider all amounts invoiced by Provider pursuant to Section 3.03(a), except for any portion of those amounts reasonably disputed in good faith.  Payment for amounts reasonably disputed in good faith for any Services may be withheld beyond their due date by Recipient until such dispute is resolved pursuant to Section 4.04, in which event the relevant payment shall include interest at the Interest Rate from the date that is 15 days after the original relevant Payment Date to the actual payment date.  In the event of any overpayments by Recipient, Provider agrees to promptly refund any such overpaid amount to Recipient no later than 15 days from the date it is determined that there has been an overpayment.

 

ARTICLE 4
 THE SERVICES

 

Section 4.01.  Standards of Service.  (a) The level or volume of any specific Service required to be provided to Recipient hereunder shall be at a level or volume consistent in all material respects with the level or volume, as the case may be, of such specific Service as utilized by the Recipient Group during the twelve month period prior to the Distribution Time (the “Baseline Period”).  Provider agrees to consider in good faith any requests by Recipient to modify the level or

 

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volume of any specific Service.  Any modification to which Provider agrees will be on such terms and conditions (including pricing) as the parties shall mutually and reasonably agree.

 

(b)   The manner, nature, quality and standard of care applicable to the delivery by Provider of the Services hereunder shall be substantially the same as that of similar services which Provider provided to the Recipient Group during the Baseline Period.

 

(c)   Provider shall have no obligation to provide any Services hereunder in respect of any business, assets or properties not forming part of the Recipient Group’s business as of the Distribution Time.

 

Section 4.02.  Changes to Services.  It is understood and agreed that Provider may from time to time modify or change the manner, nature, quality and/or standard of care of any Service provided to Recipient to the extent Provider is making a similar change in the performance of such services for the Provider and its Affiliates and provided that any such modification, change or enhancement will not reasonably be expected to materially affect such Service.  Provider shall furnish to Recipient substantially the same notice (in content and timing), if any, as Provider furnishes to its own organization with respect to such modifications or changes.

 

Section 4.03.  Management of Services By Provider.  Except as may otherwise be expressly provided in this Agreement, the management of and control over the provision of the Services by Provider shall reside solely with Provider and notwithstanding anything to the contrary Provider shall be permitted to choose the personnel, methodology, systems, applications and third party providers it utilizes in the provision of such Services; provided that Provider shall remain responsible for the performance of the Services in accordance with this Agreement.  The provision, use of and access to the Services shall be subject to (i) Provider’s business, operational and technical environment, standards, policies and procedures as in effect from time to time, (ii) Applicable Law and (iii) the terms of this Agreement.

 

Section 4.04.  Liaisons.  Each party shall designate its Chief Financial Officer (or his or her designee) to act as such party’s primary contact person in connection with the Services, and each party may also designate a separate liaison for each Service provided hereunder (who shall act as such party’s primary contact person in connection with the applicable Service) (each, a “Liaison”).  The Liaisons will oversee the implementation and ongoing operation of this Agreement and shall attempt in good faith to resolve disputes between the parties.  The parties have designated their respective initial Liaisons on Schedule A.  The parties shall ensure that their respective Liaisons shall meet in person or telephonically at such times as are reasonably requested by Provider or Recipient to review and discuss the status of, and any issues arising in connection with, the Services or this

 

10

 

Agreement.  Each party may re-designate its Liaison from time to time; provided that it shall notify the other party in writing of the name and contact information for the newly designated Liaison in accordance with Section 8.05.

 

Section 4.05.  Special Rules for Tax Services.  This Section 4.05 shall apply to the transition services set forth on Exhibit A (the “Tax Services”).

 

(a)   Use of Masco Systems.  Tax Service Provider’s obligation to perform each Tax Service is conditional upon Tax Service Recipient’s use of the Masco Systems set forth in Exhibit A, paragraph 2 (the “Tax Systems”), through December 31, 2015 in a manner that is consistent with Tax Service Provider’s historical practice and methodologies for the use of such Tax Systems.  In the event that Tax Service Recipient fails to fully use the Tax Systems in a manner that is consistent with Tax Service Provider’s historical practice through December 31, 2015, Tax Service Provider shall have no obligation to provide any Tax Service hereunder.

 

(b)   Consistency.  All Tax Services to be provided hereunder relating to the preparation of Tax Service Recipient’s Returns shall be performed using Tax Service Provider’s historical methods of accounting and, to the extent that a position has historically been taken on Tax Service Provider’s Returns, in a manner otherwise consistent with such Tax position.

 

ARTICLE 5
 DISCLAIMER, LIABILITY AND INDEMNIFICATION

 

Section 5.01.  EXCLUSION OF WARRANTIES.  EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, THE SERVICES ARE PROVIDED “AS-IS” WITH NO WARRANTIES, AND PROVIDER EXPRESSLY EXCLUDES AND DISCLAIMS ANY WARRANTIES UNDER OR ARISING AS A RESULT OF THIS AGREEMENT, WHETHER EXPRESS, IMPLIED OR STATUTORY, INCLUDING, WITHOUT LIMITATION, THE IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, TITLE, NON-INFRINGEMENT OR ANY OTHER WARRANTY WHATSOEVER.

 

Section 5.02.  Limitation of Liability.  (a)  Recipient agrees that, except for the indemnity obligation set forth in Section 5.04, none of the Provider or its Affiliates or any of its or their respective directors, officers, agents, consultants, representatives and/or employees (each, a “Provider Indemnified Person”) shall have any liability, whether direct or indirect, in contract or tort or otherwise, to any Recipient Entity or any other Person for or in connection with the Services rendered or to be rendered by or on behalf of any Provider Indemnified Person pursuant to this Agreement, the transactions contemplated hereby or any actions or inactions by or on behalf of a Provider Indemnified Person in connection with any such Services or the transactions contemplated hereby, except to the extent any

 

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damages have resulted from such Provider Indemnified Person’s gross negligence or willful misconduct in connection with any such Services, actions or inactions.

 

(b)   Notwithstanding the provisions of Section 5.02(a), no Provider Indemnified Person or Recipient Indemnified Person shall be liable for any special, indirect, incidental, consequential or punitive damages of any kind whatsoever in any way due to, resulting from or arising in connection with any of the Services or the performance of or failure to perform Provider’s or Recipient’s obligations under this Agreement, as applicable, except to the extent the same are payable by a party or its Affiliates to an unaffiliated third party in respect of a claim by such third party and are covered by the other party’s indemnification obligations hereunder. This disclaimer applies without limitation (i) to claims arising from the provision of the Services or any failure or delay in connection therewith, (ii) to claims for lost profits or opportunities, (iii) regardless of the form of action, whether in contract, tort (including negligence), strict liability, or otherwise, and (iv) regardless of whether such damages are foreseeable or whether Provider or Recipient, as applicable, or any of its Affiliates has been advised of the possibility of such damages.

 

(c)   In addition to the foregoing, each party hereto agrees that it shall, in all circumstances, use commercially reasonable efforts to mitigate and otherwise minimize its damages and those of its Affiliates, whether direct or indirect, due to, resulting from or arising in connection with any failure by the other party to comply fully with its obligations under this Agreement.

 

Section 5.03.  Indemnification of Provider by Recipient.  Recipient agrees to indemnify and hold harmless each Provider Indemnified Person from and against any damages, and to reimburse each Provider Indemnified Person for all costs, damages, liabilities and fees and expenses (including reasonable attorneys’ fees and expenses and any other expenses reasonably incurred in connection with investigating, prosecuting or defending any Action) (collectively, but subject to Section 5.02, “Losses”) incurred in investigating, preparing, pursuing, or defending any claim, action, proceeding, or investigation, whether or not in connection with pending or threatened litigation and whether or not any Provider Indemnified Person is a party (collectively, “Actions”), arising out of or in connection with Services rendered or to be rendered by or on behalf of any Provider Indemnified Person pursuant to this Agreement, the transactions contemplated hereby or any actions or inactions by or on behalf of any Provider Indemnified Person in connection with any such Services or transactions; provided that Recipient shall not be responsible for any Losses of any Provider Indemnified Person to the extent such Losses have resulted from such Provider Indemnified Person’s gross negligence or willful misconduct in connection with any of such Services, actions or inactions.

 

Section 5.04.  Indemnification of Recipient by Provider.  Provider agrees to indemnify and hold harmless the Recipient, each of its Affiliates and its and their

 

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respective directors, officers, agents, consultants, representatives and/or employees (each, a “Recipient Indemnified Person”) from and against any Losses incurred (including in investigating, preparing, or defending any Action) to the extent such Losses have arisen out of the gross negligence or willful misconduct of any Provider Indemnified Person in connection with the Services rendered or to be rendered pursuant to this Agreement.

 

Section 5.05.  Indemnification as Exclusive Remedy.  Without limitation to the termination rights provided under Sections  6.02(b) and 6.02(c) or to the rights under Section 8.08, the indemnification provisions of this Article 5 shall be the exclusive remedy for money damages for breach of this Agreement and any matters relating to this Agreement.

 

Section 5.06.  Conduct of Proceedings.  Any proceedings relating to indemnification under Section 5.03 or 5.04 shall be conducted in accordance with the procedures set forth in Section 6.04 of the Separation and Distribution Agreement.

 

ARTICLE 6
 TERM AND TERMINATION

 

Section 6.01.  Term.  Except as otherwise provided in this  Article 6 or  Section 8.03, the term of this Agreement with respect to each Service shall commence as of the Distribution Time, and shall cease on the earlier of (i) the date set forth in respect of such Service on the applicable Schedule hereto, (ii) the date that is the first anniversary of the Distribution Time (the “End Date,” as may be extended pursuant to the proviso below) or (iii) such earlier date as determined in accordance with Section 6.02; provided that upon giving prior written notice to Provider at least 30 days prior to the then-applicable End Date, Recipient may extend the End Date until a date that is no more than 24 months after the Distribution Time, subject to Recipient and Provider agreeing, pursuant to Section 3.01, to the compensation to be paid to Provider for Services to be provided during the period of extension.  This Agreement shall terminate in its entirety upon the expiration of the terms (as determined pursuant to the preceding sentence) of all Services; provided that the provisions of Articles 3, 5, 6 and 8 and Sections 7.01, 7.02, Section 7.04, and Section 7.07 shall survive any such termination indefinitely.

 

Section 6.02.  Termination.  (a)  Recipient may from time to time terminate this Agreement with respect to one or more of the Services it receives, in whole or in part, upon giving at least 30 days’ prior notice to Provider.

 

(b)   Provider may terminate any Service or any part thereof it provides at any time if Recipient shall have failed to perform any of its material obligations under this Agreement relating to any such Service, Provider has notified Recipient in writing of such failure and such failure (i) shall have continued uncured for a

 

13

 

period of 30 days after receipt by Recipient of written notice of such failure or (ii) is incapable of remedy.  For the avoidance of doubt, the failure by Recipient to pay the full amount of any invoiced amount when due shall be considered a breach of Recipient’s material obligations under this Agreement, unless such failure to pay results from a good faith dispute in accordance with and subject to Section 3.03(b).

 

(c)   Recipient may terminate any Service it receives as provided in the applicable Schedule or at any time if Provider shall have failed to perform any of its material obligations under this Agreement relating to any such Service, Recipient has notified Provider in writing of such failure, and such failure (i) shall have continued for a period of 30 days after receipt by Provider of written notice of such failure or (ii) is incapable of remedy.

 

(d)   At any time following announcement of a transaction involving a Change of Control of Recipient, Provider may elect, by delivery of notice in writing to Recipient, to terminate any or all Services hereunder, such termination to take effect on the date or dates specified by Provider in such notice; provided that without the written consent of Recipient, no such termination of Service shall occur prior to the closing of such Change of Control transaction.

 

(e)   Upon completion of the sale or other disposition of any portion of the Recipient Group’s business, assets or properties, Provider’s obligation to provide to Recipient, and Recipient’s obligation to pay the Service Cost to Provider for, any Service in respect of the business, assets or properties so disposed shall continue in full force and effect in accordance with the terms and conditions of this Agreement, except as the parties may otherwise agree.

 

(f)    Either party may terminate this Agreement at any time with immediate effect upon serving written notice upon the other party if the other party suffers an Insolvency Event.

 

(g)   For the avoidance of doubt, any notice of termination under this Section 6.02 shall be delivered in accordance with Section 8.05.

 

Section 6.03.  Effect of Termination.  (a)  Other than as required by Applicable Law, upon termination of any Service pursuant to Section 6.02, Provider shall have no further obligation to provide the terminated Service and Recipient shall have no obligation to pay any fees relating to such Services; provided that, notwithstanding such termination, (i) Recipient shall remain liable to Provider for Service Costs and other fees owed and payable in respect of Services provided prior to the effective date of the termination, and (ii) Recipient shall be responsible for the costs referred to in the second sentence to Section 3.01 to the extent set forth therein.

 

(b)   Termination of this Agreement as provided for herein shall not prejudice or affect any rights or remedies which shall have accrued to either party,

 

14

 

a Recipient Indemnified Person or a Provider Indemnified Person in respect of Services provided or to have been provided prior to termination.

 

ARTICLE 7
 ADDITIONAL AGREEMENTS

 

Section 7.01.  Confidential Information.  (a)  The parties hereby covenant and agree to keep, and to cause its Affiliates to keep, confidential all Confidential Information relating to the other party or any of such other party’s Affiliates.  Without limiting the generality of the foregoing, each party shall, and shall cause its Affiliates and its and their employees and agents to, exercise the same level of care with respect to Confidential Information relating to the other party or any of its Affiliates as it would with respect to proprietary information, materials and processes relating to itself or any of its Affiliates.  “Confidential Information” shall mean all confidential and proprietary information, materials and processes relating to a party or any Affiliate of such party obtained by the other party or any Affiliate of such other party at any time (whether prior to or after the date hereof) in any format whatsoever (whether orally, visually, in writing, electronically or in any other form) to the extent arising out of the rendering or receipt of Services hereunder (or preparations for the same or for the termination thereof) and shall include, but not be limited to, economic and business information or data, business plans, computer software and information relating to employees, vendors, customers, products, financial performance and projections, processes, strategies and systems but shall not include (i) information of the other party or its Affiliates which is or becomes generally available to the public other than by release in violation of the provisions of this Section 7.01, (ii) information of the other party or its Affiliates which is or becomes available on a non-confidential basis to a party from a source other than the other party or its Affiliates, provided the party in question reasonably believes that such source is not or was not bound by an obligation to the other party or one of its Affiliates to hold such information confidential and (iii) information developed independently by a party or its Affiliates without use or reference to otherwise Confidential Information of the other party or its Affiliates.  Except with the prior written consent of the other party, each party will, and will cause its Affiliates to, use the other party’s and its Affiliates’ Confidential Information only in connection with the performance of its obligations hereunder and each party shall, and shall cause its Affiliates to, use commercially reasonable efforts to restrict access to the other party’s and its Affiliates’ Confidential Information to those employees of such party and its Affiliates requiring access for the purpose of providing or receiving Services hereunder.  Notwithstanding any provision of this Section 7.01 to the contrary, a party may disclose such portion of the Confidential Information relating to the other party or its Affiliates to the extent, but only to the extent, the disclosing party reasonably believes that such disclosure is required under Applicable Law or the rules of a Governmental Authority; provided that if permissible under Applicable Law and practicable, the disclosing party shall first notify the other party hereto of

 

15

 

such requirement and allow such party a reasonable opportunity to seek a protective order or other appropriate remedy to prevent such disclosure.  The parties acknowledge that money damages would not be a sufficient remedy for any breach of the provisions of this Section 7.01 and that the non-breaching party shall be entitled to equitable relief in a court of law in the event of, or to prevent, a breach of this Section 7.01.  In the event that a party learns or has reason to believe that Confidential Information of the other party or its Affiliates has been disclosed or accessed by an unauthorized Person, such party will immediately give notice of such event to its Liaison at the other party.

 

(b)   Upon the written request of the other party, except to the extent otherwise required by Applicable Law and/or its internal policies and procedures, each party shall, at its election, promptly return to the other party or destroy all Confidential Information of the other party received under or pursuant to the performance of this Agreement (including, to the extent practicable, all copies (in any and all media) and summaries thereof) that is within such party’s or its Affiliates’ possession, power, custody or control.  Notwithstanding the foregoing, each party may maintain a copy of the other party’s Confidential Information in its restricted access files for actual or anticipated litigation, regulatory compliance or corporate record keeping purposes, and neither party shall be required to destroy any computer records or files containing any Confidential Information that have been created pursuant to automatic electronic archiving and back-up procedures in the ordinary course of business where it would be unduly burdensome to do so or would be contrary to Applicable Law; provided that any Confidential Information retained by such party or its Affiliates shall continue to be subject to Section 7.01(a).  Promptly upon the written request of a party (and in any event within ten business days), the other party shall confirm in writing to such first party that it has complied with this Section 7.01(b).

 

Section 7.02.  Ownership of Assets.  (a) Masco Systems and any and all enhancements thereof or improvements thereto are and shall remain the sole exclusive property of the relevant Masco Entity(ies) and/or its Affiliates and/or its or their suppliers as applicable.

 

(b)   TopBuild Systems and any and all enhancements thereof or improvements thereto are and shall remain the sole exclusive property of the relevant TopBuild Entity(ies) and/or its Affiliates and/or its or their suppliers as applicable.

 

(c)   With respect to any Systems that a Masco Entity, a TopBuild Entity, or any of their respective Affiliates, as applicable, is required to maintain or enhance hereunder, as between the Masco Entities and the TopBuild Entities, all right, title and interest in and to such enhancements and any related documentation, whether created by the party that provides the Service or any employee, contractor, Affiliate or supplier on such party’s behalf, shall be owned

 

16

 

exclusively by and vested exclusively in the party or its Group member by whom the applicable System is owned, licensed or provided.

 

(d)   As between any Masco Entity, on the one hand, and any TopBuild Entity, on the other hand, all right, title and interest in and to all data processed hereunder shall be owned exclusively by the Masco Entity or the TopBuild Entity that originally supplied it to the other; provided that all data created hereunder in connection with the delivery of any Service to Recipient or otherwise on behalf of Recipient shall be owned exclusively by Provider.  Each of Masco and TopBuild hereby assign to the other, and shall cause any of its respective employees, contractors, Affiliates, suppliers or third parties performing Services on its behalf pursuant to this Agreement to assign to the other, as applicable, all right, title and interest that any Masco Entity or any TopBuild Entity, as applicable, may have in the other’s or its Affiliates’ data acquired hereunder.

 

Section 7.03.  Security.  Each party, its Affiliates and their respective employees, authorized agents and subcontractors shall only use or access such other party’s and its Affiliates’ Systems, premises or data to the extent such Person is authorized by the other party or pursuant to the terms hereof.  Each party, its Affiliates and their employees, authorized agents and subcontractors shall comply with the other party’s and its Affiliates’ policies and procedures in relation to the use and access of the other party’s and its Affiliates’ Systems provided that they do not conflict with the terms of this Agreement; provided that to the extent such policies and procedures of Recipient make the provision of a given Service impracticable, Provider will be relieved of the obligation to provide such Service; provided further that Provider will give reasonable advance notice prior to terminating any Services pursuant to the preceding proviso.

 

Section 7.04.  Access to Information and Audit.  Subject to Applicable Law, each party shall, and shall cause its Affiliates to, with respect to any Service during the term of such Service, upon reasonable advance notice, afford the requesting party and its representatives reasonable access, during normal business hours, to the employees, properties, books and records and other documents that are reasonably requested in connection with the provision or receipt of such Service hereunder.  Recipient or its representatives shall have reasonable access, after requesting such access in writing in advance, during normal business hours to such records for the purpose of verifying the accuracy of the invoices submitted regarding such amounts due.  Any such investigation performed by or on behalf of Recipient shall be at Recipient’s sole cost and expense.  Recipient shall have the right to investigate Provider’s books for this purpose for a period of one (1) year after the month in which the Services were rendered, except in those circumstances where contracts by Provider or any of its Affiliates with third parties limit the investigation period to less than one year.

 

Section 7.05.  Compliance with Applicable Law.  Each party shall (and shall cause its Affiliates to) at all times fully comply with all Applicable Law to

 

17

 

which such party and its Affiliates (to the extent such Affiliates are engaged in the receipt or provision of Services) is subject in connection with the receipt or provision of Services hereunder, as applicable.

 

Section 7.06.  Labor Matters.  All labor matters relating to employees of Provider and its Affiliates (including, without limitation, employees involved in the provision of Services to Recipient or any of its Affiliates) shall be within the exclusive control of Provider, and Recipient shall not take any action affecting such matters.  Nothing in this Agreement is intended to transfer the employment of employees engaged in the provision of any Service from one party or its Affiliates to the other or its Affiliates.  All employees and representatives of a party and any of its Affiliates will be deemed for all compensation, employee benefits, tax and social security contribution purposes to be employees or representatives of such party or its Affiliates (or their subcontractors) and not employees or representatives of the other party or any of its Affiliates (or their subcontractors).  In providing the Services, such employees and representatives of Provider and its Affiliates (or their subcontractors) will be under the direction, control and supervision of Provider or its Affiliates (or their subcontractors) and not of Recipient or its Affiliates.

 

Section 7.07.  Record Retention.  Each party shall take reasonable steps to preserve and maintain complete and accurate accounts, books, and records of and supporting documentation relating to the Services provided hereunder, which records shall be retained by such party and/or its Affiliates for the period of time specified in Provider’s record retention policies and procedures (which shall comply with Applicable Law).

 

ARTICLE 8
 MISCELLANEOUS

 

Section 8.01.  No Agency; Independent Contractor Status.  Nothing in this Agreement shall constitute or be deemed to constitute a partnership or joint venture between the parties hereto or constitute or be deemed to constitute any party the agent or employee of the other party for any purpose whatsoever and neither party shall have authority or power to bind the other or to contract in the name of, or create a liability against, the other in any way or for any purpose.  The parties hereto acknowledge and agree that Provider is an independent contractor in the performance of each and every part of this Agreement and nothing herein shall be construed to be inconsistent with this status.  Subject to the terms and conditions of this Agreement, Provider shall have the authority to select the means, methods and manner by which any Service is performed.

 

Section 8.02.  Subcontractors.  Provider may hire or engage one or more subcontractors to perform all or any of its obligations under this Agreement; provided that (i) Provider shall use the same degree of care in selecting any subcontractors as it would if such subcontractor was being retained to provide

 

18

 

similar services to Provider and (ii) Provider shall in all cases remain responsible for ensuring that obligations with respect to the standards of services set forth in this Agreement are satisfied with respect to any Service provided by a subcontractor hired or engaged by Provider.

 

Section 8.03.  Force Majeure.  (a)  For purposes of this Section 8.03, “force majeure” means an event beyond the reasonable control of either party, which by its nature was not foreseen by such party, or, if it was foreseen, was not reasonably avoidable, and includes without limitation, acts of God, storms, floods, riots, fires, sabotage, civil commotion or civil unrest, interference by civil or military authorities, threat, declaration, continuation, escalation or acts of war (declared or undeclared) or acts of terrorism, failure or shortage of energy sources, raw materials or components, strike, walkout, lockout or other labor trouble or shortage, delays by unaffiliated suppliers or carriers, and acts, omissions or delays in acting by any Governmental Authority or the other party.

 

(b)   Without limiting the generality of Section 5.02, neither party shall be under any liability for failure to fulfill any obligation to provide Services under this Agreement, so long as and to the extent to which the fulfillment of such obligation is prevented, frustrated, hindered, or delayed as a consequence of circumstances of force majeure; provided that (i) such party shall have used commercially reasonable efforts to minimize to the extent practicable the effect of force majeure on its obligations hereunder and (ii) nothing in this Section 8.03 shall be construed to require the settlement of any strike, walkout, lockout or other labor dispute on terms which, in the reasonable judgment of the affected party, are contrary to its interests.  It is understood that the settlement of a strike, walkout, lockout or other labor dispute will be entirely within the discretion of the affected party.  The party affected by the force majeure event shall notify the other party of that fact as soon as practicable.

 

Section 8.04.  Entire Agreement.  This Agreement constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior agreements and understandings, both oral and written, between the parties with respect to the subject matter hereof.

 

Section 8.05.  Notices.  Any notice, instruction, direction or demand under the terms of this Agreement required to be in writing shall be duly given upon delivery, if delivered by hand, facsimile transmission, or mail, to the following addresses:

 

If to Masco to:

 

Masco Corporation

21001 Van Born Road

Taylor, Michigan 48180

Attn: General Counsel

 

19

 

Facsimile: (313) 792-6430

 

with a copy to:

 

Davis Polk & Wardwell LLP

450 Lexington Avenue

New York, New York 10017

Attn: John D. Amorosi

Bruce Dallas

Facsimile: (212) 701-5010

 

If to TopBuild to:

 

TopBuild Corp.

260 Jimmy Ann Drive

Daytona Beach, FL 32114

Attn: General Counsel

Facsimile: (386) 304-2144

 

with a copy to:

 

McDermott Will & Emery

333 SE 2nd Ave #4500

Miami, Florida 33131

Attn:  Harris C. Siskind

Facsimile: (305) 347-6500

 

and

 

Davis Polk & Wardwell LLP

450 Lexington Avenue

New York, New York 10017

Attn: John D. Amorosi

Bruce Dallas

Facsimile: (212) 701-5010

 

or such other address or facsimile number as such party may hereafter specify for the purpose by notice to the other party hereto.  All such notices, requests and other communications shall be deemed received on the date of receipt by the recipient thereof if received prior to 5:00 p.m. in the place of receipt and such day is a Business Day in the place of receipt.  Otherwise, any such notice, request or communication shall be deemed not to have been received until the next succeeding Business Day in the place of receipt.

 

Section 8.06.  Governing Law.  This Agreement shall be governed by and construed in accordance with the law of the State of Delaware, without regard to the conflicts of law rules of such state.

 

20

 

Section 8.07.  Jurisdiction. The parties hereto agree that any suit, action or proceeding seeking to enforce any provision of, or based on any matter arising out of or in connection with, this Agreement or the transactions contemplated hereby shall be brought in the Delaware Chancery Court, or if such court shall not have jurisdiction, any federal court located in the State of Delaware or any Delaware state court, so long as one of such courts shall have subject matter jurisdiction over such suit, action or proceeding, and that any cause of action arising out of this Agreement shall be deemed to have arisen from the transaction of business in the State of Delaware, and each of the parties hereby irrevocably consents to the exclusive jurisdiction of such courts (and of the appropriate appellate courts therefrom) in any such suit, action or proceeding and irrevocably waives, to the fullest extent permitted by law, any objection that it may now or hereafter have to the laying of the venue of any such suit, action or proceeding in any such court or that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum.  Process in any such suit, action or proceeding may be served on any party anywhere in the world, whether within or outside of the jurisdiction of any such court.  Without limiting the foregoing, each party agrees that service of process on such party as provided in  Section 8.05 shall be deemed effective service of process on such party.

 

Section 8.08.  Specific Performance.  Each party to this Agreement acknowledges and agrees that damages for a breach or threatened breach of any of the provisions of this Agreement would be inadequate and irreparable harm would occur.  In recognition of this fact, each party agrees that, if there is a breach or threatened breach, in addition to any damages, the other nonbreaching party to this Agreement, without posting any bond, shall be entitled to seek and obtain equitable relief in the form of specific performance, temporary restraining order, temporary or permanent injunction, attachment, or any other equitable remedy which may then be available to obligate the breaching party (i) to perform its obligations under this Agreement or (ii) if the breaching party is unable, for whatever reason, to perform those obligations, to take any other actions as are necessary, advisable or appropriate to give the other party to this Agreement the economic effect which comes as close as possible to the performance of those obligations (including, but not limited to, transferring, or granting liens on, the assets of the breaching party to secure the performance by the breaching party of those obligations).

 

Section 8.09.  WAIVER OF JURY TRIAL.  EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.

 

Section 8.10.  Severability.  If any one or more of the provisions contained in this Agreement should be declared invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions

 

21

 

contained in this Agreement shall not in any way be affected or impaired thereby so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party.  Upon such a declaration, the parties shall modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner so that the transactions contemplated hereby are consummated as originally contemplated to the fullest extent possible.

 

Section 8.11.  Amendments; No Waivers.  (a)  Any provision of this Agreement (including the Schedules hereto) may be amended or waived if, and only if, such amendment or waiver is in writing and is signed, in the case of an amendment, by Masco and TopBuild, or in the case of a waiver, by the party against whom the waiver is to be effective.

 

(b)   No failure or delay by any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege.  The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by Applicable Law.

 

Section 8.12.  Successors and Assigns.  The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns; provided that neither party may assign, delegate or otherwise transfer any of its rights or obligations under this Agreement without the consent of the other party hereto.  If any party or any of its successors or permitted assigns (i) shall consolidate with or merge into any other Person and shall not be the continuing or surviving corporation or entity of such consolidation or merger or (ii) shall transfer all or substantially all of its properties and assets to any Person, then, and in each such case, proper provisions shall be made so that the successors and assigns of such party shall assume all of the obligations of such party under this Agreement.

 

Section 8.13.  Third Party Beneficiaries.  Except as set forth in Sections 5.02, 5.03 and 5.04, neither this Agreement nor any provision hereof is intended to confer any rights, benefits, remedies, obligations, or liabilities hereunder upon any Person other than the parties hereto and their respective successors and permitted assigns.

 

Section 8.14.  Counterparts.  This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument.  This Agreement shall become effective when each party hereto shall have received a counterpart hereof signed by the other party hereto.  Until and unless each party has received a counterpart hereof signed by the other party hereto, this Agreement shall have no

 

22

 

effect and no party shall have any right or obligation hereunder (whether by virtue of any other oral or written agreement or other communication).

 

Section 8.15.  Construction and Interpretation.  The parties hereto agree that in the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the parties, and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of its authorship of any of the provisions of this Agreement.  Each party shall cause to be performed all actions, agreements and obligations set forth herein to be performed by any member of such party’s Group.

 

Section 8.16.  Conflict of Terms.  If the terms of this Agreement conflict with terms of the Separation and Distribution Agreement with respect to any matter, then the terms of this Agreement will control.  If the terms of this Agreement conflict with the terms of the Tax Matters Agreement with respect to any matter, then the terms of the Tax Matters Agreement will control.

 

[Remainder of page intentionally left blank]

 

23

 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the date first above written.

 

	
 
    	
MASCO   CORPORATION
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/   Kenneth G. Cole
    
	
 
    	
 
    	
Name:   Kenneth G. Cole
    
	
 
    	
 
    	
Title:   Vice   President, General Counsel and Secretary
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
TOPBUILD   CORP.
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/   John G. Sznewajs
    
	
 
    	
 
    	
Name:   John G. Sznewajs
    
	
 
    	
 
    	
Title:   President   and Treasurer
    

 

(Signature Page to Transition Services Agreement)Exhibit 10.3

 

Execution Version

 

EMPLOYEE MATTERS AGREEMENT

 

dated as of June 29, 2015

 

by and between

 

MASCO CORPORATION

 

and

 

TOPBUILD CORP.

 

 

TABLE OF CONTENTS

 

	
 
    	
Page
    
	
 
    	
 
    
	
ARTICLE 1
    
	
DEFINITIONS
    
	
 
    
	
Section 1.01. Definitions
    	
1
    
	
 
    	
 
    
	
ARTICLE 2
    
	
GENERAL   ALLOCATION OF LIABILITIES
    
	
 
    	
 
    
	
Section 2.01. Allocation of Liabilities Generally
    	
5
    
	
Section 2.02. Method of Settlement
    	
6
    
	
Section 2.03. Further Assurances
    	
6
    
	
Section 2.04. Assignment of Certain Rights; Non-Solicitation
    	
7
    
	
 
    	
 
    
	
ARTICLE 3
    
	
EMPLOYEES;   ASSUMPTION AND/OR ADOPTION OF PLANS; OPTION ADJUSTMENTS
    
	
 
    	
 
    
	
Section 3.01. Employees
    	
7
    
	
Section 3.02. Adoption of Plans
    	
8
    
	
Section 3.03. Masco Equity-Based Plan Retention; Equity Award Adjustments; Bonus   and Other Payments
    	
8
    
	
 
    	
 
    
	
ARTICLE 4
    
	
DC AND   RETIREMENT PLANS
    
	
 
    	
 
    
	
Section 4.01. Defined Contribution Plans
    	
10
    
	
Section 4.02. Retirement Plan Liabilities
    	
10
    
	
 
    	
 
    
	
ARTICLE 5
    
	
HEALTH AND   WELFARE PLANS
    
	
 
    	
 
    
	
Section 5.01. Assumption of Health and Welfare Plan Liabilities; General   Provisions
    	
11
    
	
Section 5.02. Post-Retirement Health and Retired Life Insurance Benefits
    	
12
    
	
Section 5.03. Effect of Change in Rates
    	
12
    
	
Section 5.04. COBRA and HIPAA
    	
12
    
	
Section 5.05. Leave of Absence Programs and FMLA
    	
13
    
	
Section 5.06. TopBuild Workers’ Compensation Program
    	
13
    
	
Section 5.07. Flexible Benefit Plans
    	
14
    
	
Section 5.08. Application of Article 5 to the TopBuild Group
    	
14
    

 

 

	
ARTICLE 6
    
	
INDEMNIFICATION
    
	
 
    
	
ARTICLE 7
    
	
GENERAL   PROVISIONS
    
	
 
    	
 
    
	
Section 7.01. Notices
    	
15
    
	
Section 7.02. Amendments; No Waivers
    	
16
    
	
Section 7.03. Successors and Assigns
    	
16
    
	
Section 7.04. Governing Law
    	
16
    
	
Section 7.05. Jurisdiction
    	
16
    
	
Section 7.06. Counterparts; Effectiveness
    	
17
    
	
Section 7.07. Entire Agreement; No Change in Control or Severance Event
    	
17
    
	
Section 7.08. No Third Party Beneficiaries
    	
17
    
	
Section 7.09. Headings
    	
17
    
	
Section 7.10. Severability
    	
17
    
	
Section 7.11. Withholdings
    	
18
    

 

ii

 

EMPLOYEE MATTERS AGREEMENT

 

EMPLOYEE MATTERS AGREEMENT dated as of June 29, 2015 (as the same may be amended from time to time in accordance with its terms, this “Agreement”) between Masco Corporation, a Delaware corporation (“Masco”), and TopBuild Corp., a Delaware corporation (“TopBuild”).

 

W  I  T  N  E  S  S  E  T  H :

 

WHEREAS, Masco has decided to distribute the common stock of TopBuild to the holders of Masco Common Stock (the “Distribution”); and

 

WHEREAS, in furtherance of the foregoing, Masco and TopBuild have entered into the Separation and Distribution Agreement dated as of June 29, 2015 (the “Distribution Agreement”) and certain other agreements that will govern certain matters relating to the Distribution and the relationship of Masco and TopBuild and their respective Subsidiaries following the Distribution; and

 

WHEREAS, pursuant to the Distribution Agreement, Masco and TopBuild have agreed to enter into this Agreement for the purpose of allocating between them assets, liabilities, and responsibilities with respect to certain employee compensation and benefit plans and programs; and

 

WHEREAS, Masco and TopBuild have agreed that, except as otherwise specifically provided herein, the general approach and philosophy underlying this agreement is to allocate assets, liabilities and responsibilities between Masco and TopBuild on the basis of the employment relationships in effect at the time of the Distribution.

 

NOW, THEREFORE, in consideration of the mutual promises contained herein and in the Distribution Agreement, the parties agree as follows:

 

ARTICLE 1
 DEFINITIONS

 

Section 1.01.  Definitions.  (a) As used in this Agreement, the following terms shall have the following meanings.  Any other capitalized term that is used, but not defined, herein shall have the meaning set forth in the Distribution Agreement.

 

“Applicable Law” shall have the meaning set forth in the Distribution Agreement.

 

“Close of the Distribution Date” means 11:59:59 P.M., Eastern Standard Time or Eastern Daylight Time (whichever shall then be in effect), on the Distribution Date.

 

“Code” shall have the meaning set forth in the Distribution Agreement.

 

 

“COBRA” means the continuation coverage requirements for “group health plans” under Title X of the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended, and as codified in Code § 4980B and ERISA §§ 601 through 608.

 

“Distribution” has the meaning set forth in the recitals to this Agreement.

 

“Distribution Agreement” has the meaning set forth in the recitals to this Agreement.

 

“Distribution Date” shall have the meaning set forth in the Distribution Agreement.

 

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended, or any successor federal labor or employment law. Reference to a specific ERISA provision also includes any proposed, temporary, or final regulation in force under that provision.

 

“FMLA” means the Family Leave and Medical Act of 1993, as amended.

 

“Immediately after the Distribution Date” means 12:00 A.M., Eastern Standard Time or Eastern Daylight Time (whichever shall then be in effect), on the day after the Distribution Date.

 

“Liabilities” shall have the meaning set forth in the Distribution Agreement.

 

“Masco Business” shall have the meaning set forth in the Distribution Agreement.

 

“Masco Common Stock” shall have the meaning set forth in the Distribution Agreement.

 

“Masco Defined Contribution Plan” means each of the Masco Corporation 401(k) Plan and the Masco Corporation Hourly 401(k) Plan.

 

“Masco Employee” means each Person who, on the Distribution Date (a) is actively employed in the Masco Business and who is listed on the payroll records of any member of the Masco Group, (b) is on short-term disability leave, authorized leave of absence, military service or lay-off with recall rights and who was last actively employed in the Masco Business by any member of the Masco Group, (c) is an inactive or former employee and who was last actively employed in the Masco Business by any member of the Masco Group, including any former employee who has been on long-term disability leave or unauthorized leave of absence or who has terminated his or her employment, retired or died on or before the Distribution Date, and, in each case, their respective beneficiaries and dependents or (d) is an individual set forth on Schedule 1.01(a); provided that Masco Employees shall not include the individuals set forth on Schedule 1.01(b).

 

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“Masco Equity-Based Plans” means the Masco Corporation 2014 Long Term Stock Incentive Plan, the Masco Corporation 2005 Long Term Stock Incentive Plan and the Masco Corporation 1991 Long Term Stock Incentive Plan.

 

“Masco ERISA Affiliate” means any entity that, together with Masco and after giving effect to the Distribution, would be treated as a single employer under Section 414(b) or (c) of the Code without regard to Sections 4069 and 4212(c) of ERISA.

 

“Masco Group” shall have the meaning set forth in the Distribution Agreement.

 

“Masco Health and Welfare Plans” means the plans set forth on Schedule 5.01(a).

 

“Masco Retirement Plans” means the Masco Corporation Pension Plan, the Masco Corporation Supplemental Executive Retirement Plan and the Masco Corporation Benefits Restoration Plan.

 

“Multi-Employer Plan” means any collectively bargained retirement or health or welfare plan or fund to which any TopBuild Business has ever had a contribution obligation under a collective bargaining agreement or otherwise, including (by way of example and not limitation) those plans shown on Schedule 1.01(c).

 

“New TopBuild Health and Welfare Plans” means new, duplicate or mirror plans, policies or programs, as applicable, adopted or to be adopted by TopBuild as of the Distribution Date, including those set forth on Schedule 5.01(b), that correspond to the Masco Health and Welfare Plans, with such changes therein as are necessary or appropriate to effectuate the terms of this Agreement.

 

“Specified Masco Rights” means any and all rights to enjoy, benefit from or enforce any and all restrictive covenants including, without limitation, covenants relating to non-disclosure, non-solicitation, non-competition, confidentiality or trade secrets, applicable or related, in whole or in part, to the Masco Business that are provided for, contained or set forth in any Masco Retirement Plan, any Masco Corporation Confidential Proprietary Information and Invention Assignment Agreement, in the Masco Equity-Based Plans or any award agreement issued thereunder, or pursuant to any non-competition, consulting, employment, termination, separation or severance agreement or arrangement (including by way of example and not limitation that certain Severance Benefit Agreement, including Masco’s payment obligations thereunder, dated June 2015 between Masco Corporation and Gerald Volas) with any TopBuild Employee or Masco Employee and to which any member of the TopBuild Group or the Masco Group is a party.

 

“Specified TopBuild Rights” means any and all rights to enjoy, benefit from or enforce any and all restrictive covenants including, without limitation covenants relating to non-disclosure, non-solicitation, non-competition, confidentiality or trade secrets, applicable or related, in whole or in part, to the TopBuild Business that are provided for, contained or set forth in any Masco Retirement Plan, any Masco Corporation

 

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Confidential Proprietary Information and Invention Assignment Agreement, in the Masco Equity-Based Plans or any award agreement issued thereunder, or pursuant to any non-competition, consulting, employment, termination, separation or severance agreement or arrangement (including by way of example and not limitation that certain Severance Benefit Agreement dated June 2015 between Masco Corporation and Gerald Volas) with any TopBuild Employee or Masco Employee and to which any member of the TopBuild Group or Masco Group is a party.

 

“TopBuild Business” shall have the meaning set forth in the Distribution Agreement.

 

“TopBuild Employee” means (i) each Person who, on the Distribution Date, is or has at any time been employed in the TopBuild Business who is not a Masco Employee and (ii) each Person listed on Schedule 1.01(b).

 

“TopBuild ERISA Affiliate” means any entity that, together with TopBuild and after giving effect to the Distribution, would be treated as a single employer under Section 414(b) or (c) of the Code without regard to Sections 4069 and 4212(c) of ERISA.

 

“TopBuild Group” shall have the meaning set forth in the Distribution Agreement.

 

“Tax Matters Agreement” shall have the meaning set forth in the Distribution Agreement.

 

(b)                                 Each of the following terms is defined in the Section set forth opposite such term:

 

	
TERMS
    	
 
    	
SECTION
    
	
 
    	
 
    	
 
    
	
Employee Withholding Documents
    	
 
    	
7.11
    
	
Masco Retained Liabilities
    	
 
    	
2.01
    
	
Masco Bonus Liabilities
    	
 
    	
3.03
    
	
Masco Health and Welfare Liabilities
    	
 
    	
5.01
    
	
Masco Health and Welfare Plans
    	
 
    	
5.01
    
	
Masco Retained Liabilities
    	
 
    	
2.01
    
	
Masco WCP Liabilities
    	
 
    	
5.06
    
	
TopBuild Assumed Liabilities
    	
 
    	
2.01
    
	
TopBuild Bonus Liabilities
    	
 
    	
3.03
    
	
TopBuild DC Plan
    	
 
    	
4.01
    
	
TopBuild DC Plan Liabilities
    	
 
    	
4.01
    
	
TopBuild Health and Welfare Liabilities
    	
 
    	
5.01
    
	
TopBuild Assumed Liabilities
    	
 
    	
2.01
    
	
TopBuild WCP Liabilities
    	
 
    	
5.06
    
	
Retained Retiree Health and Life Liabilities
    	
 
    	
5.02
    
	
Retained DC Plan Liabilities
    	
 
    	
4.01
    
	
RSAs
    	
 
    	
3.03
    

 

4

 

	
TERMS
    	
 
    	
SECTION
    
	
 
    	
 
    	
 
    
	
Standard Procedure
    	
 
    	
7.11
    

 

ARTICLE 2
 GENERAL ALLOCATION OF LIABILITIES

 

Section 2.01.  Allocation of Liabilities Generally.

 

(a)                       Subject to the terms and conditions of this Agreement, effective as of the Close of the Distribution Date, Masco hereby assumes and agrees to pay when due, honor and discharge, the following Liabilities, whether incurred before, on or after the Distribution Date (“Masco Retained Liabilities”):

 

(i)                                     all Liabilities to the extent relating to, arising out of or resulting from any employment, separation or retirement agreement or arrangement to the extent applicable to any Masco Employee;

 

(ii)                                  the Masco Bonus Liabilities, Masco WCP Liabilities, Retained Retiree Health and Life Liabilities, Masco Health and Welfare Liabilities, Retained DC Plan Liabilities and all Liabilities to the extent relating to, arising out of or resulting from the Masco Equity-Based Plans and the Masco Retirement Plans;

 

(iii)                               all Liabilities to the extent relating to, arising out of or resulting from any other employee benefit plan or arrangement sponsored or maintained at any time after the Distribution Date by any of the Masco Companies to the extent applicable to any member of the Masco Group;

 

(iv)                              all Liabilities to the extent relating to, arising out of or resulting from any federal, state, local or foreign law, order or regulation (including, without limitation, ERISA and the Code) to the extent they relate to participation by any Masco Employee in any employee benefit plan sponsored or maintained by any member of the Masco Group, whether relating to events occurring on, prior to or after the Close of the Distribution Date or arising by reason of the transactions contemplated by this Agreement or otherwise;

 

(v)                                 all statutory Liabilities with respect to any Masco Employee, which arise, directly or indirectly, by reason of the transactions contemplated by this Agreement; and

 

(vi)                              all other Liabilities attributable to actions specified to be taken by Masco under this Agreement.

 

(b)                       Subject to the terms and conditions of this Agreement, effective as of Immediately after the Distribution Date, TopBuild hereby assumes and agrees to pay

 

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when due, honor and discharge, the following Liabilities, whether incurred before, on or after the Distribution Date (“TopBuild Assumed Liabilities”):

 

(i)                                     all Liabilities to the extent relating to, arising out of or resulting from any employment, separation or retirement agreement or arrangement (including, without limitation, claims founded in any theory of joint employer liability) to the extent applicable to any TopBuild Employee, including by way of example and not limitation that certain Severance Benefit Agreement, and Masco’s payment obligations thereunder, dated June 2015 between Masco Corporation and Gerald Volas and separately assigned to TopBuild on even date herewith;

 

(ii)                                  the TopBuild Bonus Liabilities, the New TopBuild Health and Welfare Plans, TopBuild DC Plan Liabilities, TopBuild Health and Welfare Liabilities, and the TopBuild WCP Liabilities;

 

(iii)                               all Liabilities to the extent relating to, arising out of or resulting from any other employee benefit plan or arrangement sponsored or maintained at any time after the Distribution Date by any member of the TopBuild Group;

 

(iv)                              all Liabilities to the extent relating to, arising out of or resulting from any federal, state, local or foreign law, order or regulation (including, without limitation, ERISA and the Code) to the extent they relate to participation by any TopBuild Employee (A) in any New TopBuild Health and Welfare Plan or other employee benefit plan sponsored or maintained by any member of the TopBuild Group, or (B) in any Multi-Employer Plan at any time prior to, on or after the Distribution Date;

 

(v)                                 all statutory Liabilities with respect to any TopBuild Employee which arise, directly or indirectly, by reason of the transactions contemplated by this Agreement; and

 

(vi)                              all other Liabilities attributable to actions specified to be taken by TopBuild under this Agreement.

 

Section 2.02.  Method of Settlement.  Notwithstanding anything herein to the contrary but except as set forth in Schedule 2.02, to the extent possible, any transfer or assumption of Liabilities (including, where applicable, assets or reserves corresponding to such Liabilities) pursuant to this Article 2 shall be effected, prior to the Distribution Date (through a corresponding adjustment in the relevant intercompany account balances of the parties hereto) or as soon thereafter as is reasonably practicable (through cash payments).

 

Section 2.03.  Further Assurances.

 

(a)                       On and after the date hereof, TopBuild will, at the reasonable request of Masco, execute, acknowledge and deliver all such endorsements, assurances, consents,

 

6

 

assignments, transfers, conveyances, powers of attorney and other instruments and documents, and take such other actions necessary (i) to assign, transfer, convey and deliver to Masco, acting in its fiduciary capacity, all the assets to be transferred to Masco pursuant to this Agreement and (ii) to assist Masco in obtaining the consent and approval of all Governmental Authorities and other Persons required to be obtained by Masco to effect the transfer thereof and the assumption of the Masco Retained Liabilities by Masco or otherwise appropriate to carry out the transactions contemplated hereby.

 

(b)                       On and after the date hereof, Masco will, at the reasonable request of TopBuild, execute, acknowledge and deliver all such endorsements, assurances, consents, assignments, transfers, conveyances, powers of attorney and other instruments and documents, and take such other actions necessary (i) to assign, transfer, convey and deliver to TopBuild, acting in its fiduciary capacity, all the assets to be transferred to TopBuild pursuant to this Agreement, and (ii) to assist TopBuild in obtaining the consent and approval of all Governmental Authorities and other Persons required to be obtained by TopBuild to effect the transfer thereof and the assumption of the TopBuild Assumed Liabilities by TopBuild or otherwise appropriate to carry out the transactions contemplated hereby.

 

Section 2.04.  Assignment of Certain Rights; Non-Solicitation.

 

(a)                       To the extent permitted by applicable law, Masco hereby assigns, to the maximum extent possible, on behalf of itself and the Masco Group, the Specified TopBuild Rights, to TopBuild, and Masco shall take such actions to effect such assignment pursuant to Section 2.03(b) as TopBuild may reasonably request.

 

(b)                       To the extent permitted by applicable law, TopBuild hereby assigns, to the maximum extent possible, on behalf of itself and the TopBuild Group, the Specified Masco Rights, to Masco, and TopBuild shall take such actions to effect such assignment pursuant to Section 2.03(a) as Masco may reasonably request.

 

(c)                        Masco and TopBuild agree that neither party, nor any of their respective Subsidiaries, shall, without the prior written approval of the other, directly or indirectly for 12 months after the Distribution Date, solicit any employee of the other party to terminate his or her relationship with any member of the TopBuild Group or Masco Group, respectively, provided that the foregoing shall not apply to (i) the use of an independent employment agency (so long as the agency was not directed to solicit such person) or (ii) as a result of the use of a general solicitation (such as an advertisement) not specifically directed to employees of the other party.

 

ARTICLE 3
 EMPLOYEES; ASSUMPTION AND/OR ADOPTION OF PLANS; OPTION ADJUSTMENTS

 

Section 3.01.  Employees.  No provision of this Agreement shall require Masco or TopBuild or any of their respective Subsidiaries to continue the employment of any of their respective employees following the Distribution Date.

 

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Section 3.02.  Adoption of Plans.

 

(a)                       Effective as of not later than Immediately after the Distribution Date, TopBuild and any applicable member of the TopBuild Group shall adopt, or cause to be adopted, the New TopBuild Health and Welfare Plans, provided that nothing contained herein shall prevent TopBuild from terminating or amending such plans except to the extent such termination or amendment is precluded by Applicable Law, as would result in the loss of grandfathered status under the Patient Protection and Affordable Care Act or as otherwise provided herein.

 

(b)                       The New TopBuild Health and Welfare Plans shall be, with respect to all TopBuild Employees, in all respects the successors in interest to any corresponding Masco Health and Welfare Plans.  With respect to TopBuild Employees, each New TopBuild Health and Welfare Plan and any other benefit plan, arrangement or policy applicable after the Distribution Date for TopBuild Employees shall provide that all service, compensation, and other benefit-affecting determinations, as of the Close of the Distribution Date, that were otherwise recognized under the corresponding Masco Health and Welfare Plan (for periods ending on the Distribution Date) shall, as of Immediately after the Distribution Date, receive full recognition and credit to the extent the recognition or credit can validly be taken into account under the New TopBuild Health and Welfare Plan to the same extent as if those items occurred under the Masco Health and Welfare Plans, except to the extent that duplication of benefits would result.

 

Section 3.03.  Masco Equity-Based Plan Retention; Equity Award Adjustments; Bonus and Other Payments.

 

(a)                       Masco Equity-Based Plans; Equity Award Adjustments. In connection with the Distribution, Masco shall retain the Masco Equity-Based Plans and shall cause such actions to be taken thereunder as are necessary or appropriate to reflect the Distribution as provided in this Section 3.03(a).

 

(i)                                     Vested Options.  In connection with the Distribution and effective as of the Distribution Date, all outstanding vested options to purchase shares of Masco Common Stock, whether held by a current or a former Masco Employee, a current or a former TopBuild Employee or a current or former non-employee director of Masco will be adjusted pursuant to the terms of the applicable Masco Equity-Based Plan and Applicable Law to preserve the intrinsic value thereof and the ratio of the exercise price to the fair market value of Masco Common Stock.  Such adjusted vested options held by TopBuild Employees will be exercisable for the period following their separation from Masco as is set forth in the Masco Equity-Based Plans or applicable award agreement or, if earlier, until the stated expiration date of the grant.

 

(ii)                                  Unvested Options.  In connection with the Distribution and effective as of the Distribution Date, any outstanding unvested options to purchase Masco Common Stock which are held by Masco Employees will be adjusted as described in Section 3.03 (a)(i).  TopBuild will replace any

 

8

 

outstanding unvested options to purchase shares of Masco Common Stock which are held by TopBuild Employees at the Close of the Distribution Date (and forfeited as a result of the Distribution) with long-term incentive awards of generally equivalent intrinsic value, and preserving the remaining vesting and expiration dates, under one or more long-term incentive plans to be adopted by TopBuild.

 

(iii)                               Restricted Stock Awards.  In connection with the Distribution and effective as of the Distribution Date, awards of unvested shares of restricted stock (“RSAs”), whether held by a current or a former Masco Employee or a current or former non-employee director of Masco, or (to the extent not forfeited at the Distribution Date) a current or a former TopBuild Employee, will be adjusted pursuant to the terms of the applicable Masco Equity-Based Plan and Applicable Law to preserve the intrinsic value thereof.  TopBuild will replace any outstanding unvested RSAs which are held by TopBuild Employees at the Close of the Distribution Date (and forfeited as a result of the Distribution) with long-term incentive awards of generally equivalent intrinsic value, and preserving the remaining vesting dates, under one or more long-term incentive plans to be adopted by TopBuild.

 

(iv)                              Cash-Based Long-Term Awards.  In connection with the Distribution and effective as of the Distribution Date, the Liability for cash-based long-term performance awards granted under the applicable Masco Equity-Based Plan, whether held by a current or a former TopBuild Employee (pro-rated through the Distribution Date) or by a current or a former Masco Employee, will be retained by Masco.

 

(b)                       Bonus and Other Payments.  Masco hereby retains Liability for all annual bonus payments for fiscal 2015 to Masco Employees (the “Masco Bonus Liabilities”). TopBuild hereby retains or assumes, as applicable, (i) all annual bonus payments for fiscal 2015 (including amounts accrued or payable with respect to the period of the fiscal year prior to the Distribution Date) to TopBuild Employees, (ii) all annual bonus payments (for the period of the fiscal year prior to the Distribution Date) for those persons shown on Schedule 1.01(b) under the Masco executive annual cash performance bonus, the Masco executive annual restricted share award performance bonus, and any other Masco annual bonus plan (together with the amounts in clause (i), the “TopBuild Bonus Liabilities”), and (iii) termination and severance and other liabilities accrued or payable to Masco Employees to whom an offer was made and accepted for employment with TopBuild effective as of the Distribution Date, which offer has been rescinded by TopBuild on or prior to the Distribution Date.

 

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ARTICLE 4
 DC AND RETIREMENT PLANS

 

Section 4.01.  Defined Contribution Plans.

 

(a)                       Masco shall retain all Liabilities and obligations to the extent relating to, arising out of or resulting from benefits accrued by each Masco Employee under the Masco Defined Contribution Plans.

 

(b)                       Effective as of not later than Immediately after the Distribution Date, TopBuild or a TopBuild ERISA Affiliate shall adopt one or more savings plans for the benefit of TopBuild Employees intended to qualify under Section 401(a) of the Code (the “TopBuild DC Plan”).  Not later than the end of the calendar year in which the Distribution Date occurs or as soon following the Distribution Date as is reasonably practicable, (1) Masco shall cause the Masco Defined Contribution Plan accounts of all TopBuild Employees which are held by the applicable Masco Defined Contribution Plan’s related trust to be transferred to the TopBuild DC Plan and its related trust, and TopBuild shall cause those transferred accounts (all of which shall remain 100% vested) to be accepted by the TopBuild DC Plan and its related trust, and (2) the TopBuild DC Plan shall assume and be solely responsible for Liabilities only with respect to transferred accounts of such TopBuild Employees (all such assumed liabilities, “TopBuild DC Plan Liabilities”). Such transfer of accounts and related trust assets shall be in-kind, including loans, and shall be mapped to investment choices in the TopBuild DC Plan trust which are comparable to the investment choices which TopBuild Employees had designated under the Masco Defined Contribution Plan to the maximum extent practicable and shall not favor participants who are Masco Employees over participants who are TopBuild Employees.  Any TopBuild DC Plan fund relating to Masco Common Stock shall be administered so as to permit transfers out of, but not additions to, such fund.

 

(c)                        After the Distribution Date, Masco shall retain all assets and Liabilities under the Masco Defined Contribution Plans except as otherwise provided in Section 4.01(b) (“Retained DC Plan Liabilities”).

 

(d)                                 TopBuild and Masco shall use their reasonable efforts to cause each of the trustees, custodians, advisors and administrators providing services and benefits under the New TopBuild Defined Contribution Plans and the Masco Defined Contribution Plans to maintain the fee structures based on the aggregate number of participants in both the New TopBuild Defined Contribution Plans and the Masco Defined Contribution Plans through the expiration of the financial fee or rate guarantees in effect as of the Close of the Distribution Date under the respective agreements separately rated or adjusted for the demographics, experience or other relevant factors related to the covered participants of TopBuild and Masco, respectively.  To the extent they are not successful in such efforts, TopBuild and Masco shall each bear the revised fee structures attributable to the individuals covered by their respective defined contribution plans.

 

Section 4.02.  Retirement Plan Liabilities.  Masco shall retain and remain responsible for all assets and Liabilities under the Masco Retirement Plans accrued in

 

10

 

respect of Masco Employees and TopBuild Employees pursuant to the terms of the Masco Retirement Plans.  For the avoidance of doubt, no TopBuild Employee shall accrue any benefit after the Distribution Date under the Masco Retirement Plans.

 

ARTICLE 5
 Health and Welfare Plans

 

Section 5.01.  Assumption of Health and Welfare Plan Liabilities; General Provisions.

 

(a)                       Effective as of the Close of the Distribution Date and except to the extent provided in this Article 5, all Liabilities relating to claims incurred prior to, on or after the Distribution Date by each TopBuild Employee under the Masco Health and Welfare Plans shall be transferred to and assumed by TopBuild as of the Close of the Distribution Date (“TopBuild Health and Welfare Liabilities”) under the corresponding New TopBuild Health and Welfare Plans.  Masco shall retain all other Liabilities under the Masco Health and Welfare Plans (“Masco Health and Welfare Liabilities”).

 

(b)                       TopBuild shall cause the New TopBuild Health and Welfare Plans to recognize and maintain all coverage and contribution elections made by TopBuild Employees under the Masco Health and Welfare Plans as of the Distribution Date and apply such elections under the New TopBuild Health and Welfare Plans for the remainder of the period or periods for which such elections are by their terms applicable. The transfer or other movement of employment from Masco to TopBuild at any time before the Close of the Distribution Date shall neither constitute nor be treated as a “status change” under the New TopBuild Health and Welfare Plans or the Masco Health and Welfare Plans.

 

(c)                        TopBuild shall cause the New TopBuild Health and Welfare Plans to recognize and give credit for all amounts applied to deductibles, out-of-pocket maximums, and other applicable benefit coverage limits with respect to which such expenses have been incurred by TopBuild Employees under the Masco Health and Welfare Plans for the remainder of the year in which the Distribution Date occurs to the extent recognized under the comparable Masco Health and Welfare Plans.

 

(d)                       TopBuild shall provide coverage to TopBuild Employees under the New TopBuild Health and Welfare Plans without the need to undergo a physical examination or otherwise provide evidence of insurability to the extent provided under the comparable Masco Health and Welfare Plans.

 

(e)                        TopBuild shall cause the New TopBuild Health and Welfare Plans to recognize and credit all service of each TopBuild Employee recognized by the corresponding Masco Health and Welfare Plans before the Close of the Distribution Date for all purposes, including, but not limited to, severance, disability, vacation and paid time off.  On or as soon as reasonably practicable after the Distribution Date, Masco shall deliver to TopBuild a schedule setting forth the accrued and unused vacation and paid time off for each TopBuild Employee as of the Distribution Date, and TopBuild shall

 

11

 

assume and be responsible for all Liabilities therefor which, for the avoidance of doubt, shall be included in TopBuild Health and Welfare Liabilities.

 

(f)                         Education or tuition reimbursement liabilities shall be the responsibility of the employer of the tuition reimbursement program participant at the time the education or tuition reimbursement request is formally submitted by the program participant in accordance with the terms and conditions of such program.

 

Section 5.02.  Post-Retirement Health and Retired Life Insurance Benefits.  Other than for the coverages set forth on Schedule 1.01(c)(ii) which are carried on the books of TopBuild and so, for the avoidance of doubt, shall be retained by TopBuild, Masco shall be responsible for providing to TopBuild Employees who are eligible to receive post-retirement medical or retired life insurance coverage under the Masco Health and Welfare Plans and retire prior to the Close of the Distribution Date and to all Masco Employees such coverage under the Masco Health and Welfare Plans (“Retained Retiree Health and Life Liabilities”), in each case pursuant to the terms of the applicable Masco Health and Welfare Plans.  Nothing herein shall prevent (i) Masco from amending or terminating such plans or (ii) notwithstanding  Section 2.04(c) hereof, TopBuild from actively employing any retired Masco Employees.

 

Section 5.03.  Effect of Change in Rates.  TopBuild and Masco shall use their reasonable efforts to cause each of the insurance companies, point-of-service vendors and third-party administrators providing services and benefits under the New TopBuild Health and Welfare Plans and the Masco Health and Welfare Plans to maintain the premium and/or administrative rates based on the aggregate number of participants in both the New TopBuild Health and Welfare Plans and the Masco Health and Welfare Plans through the expiration of the financial fee or rate guarantees in effect as of the Close of the Distribution Date under the respective contracts, policies, and agreements separately rated or adjusted for the demographics, experience or other relevant factors related to the covered participants of TopBuild and Masco, respectively.  To the extent they are not successful in such efforts, TopBuild and Masco shall each bear the revised premium or administrative rates attributable to the individuals covered by their respective health and welfare plans.

 

Section 5.04.  COBRA and HIPAA.

 

(a)                       Masco shall be solely responsible for administering compliance with the health care continuation coverage requirements of COBRA and the Masco Health and Welfare Plans (i) with respect to Masco Employees and, (ii) for the limited purposes of initial notification and premium administration compliance through the Distribution Date, with respect to TopBuild Employees and their dependents who incur a COBRA qualifying event prior to the Distribution Date.

 

(b)                       Effective as of Immediately after the Distribution Date, TopBuild shall solely be responsible for administering compliance with the health care continuation coverage requirements of COBRA and the New TopBuild Health and Welfare plans with respect to (i) TopBuild Employees and their dependents who incur a COBRA qualifying

 

12

 

event on or after the Distribution Date and (ii) those TopBuild Employees described in Section 5.04(a)(ii).

 

(c)                        For periods before the Distribution Date, Masco shall be responsible for administering compliance with the portability requirements under the Health Insurance Portability and Accountability Act of 1996 with respect to TopBuild Employees and beginning not later than Immediately after the Distribution Date TopBuild shall be responsible for filing all necessary employee change notices with respect to and in accordance with applicable Masco policies and procedures.  Effective as of the Close of the Distribution Date, Masco shall be solely responsible for administering compliance with such health care continuation coverage and portability requirements with respect to Masco Employees, and TopBuild shall be solely responsible for administering compliance with such requirements with respect to TopBuild Employees.

 

Section 5.05.  Leave of Absence Programs and FMLA.

 

(a)                       TopBuild shall be responsible for administering compliance with the TopBuild leave of absence programs and FMLA with respect to TopBuild Employees.

 

(b)                       Effective as of the Close of the Distribution Date: (i) TopBuild shall adopt, and shall cause each member of the TopBuild Group to adopt, leave of absence programs; (ii) TopBuild shall honor, and shall cause each member of the TopBuild Group to honor, all terms and conditions of leaves of absence which have been granted to any TopBuild Employee under a Masco leave of absence program or FMLA before the Distribution Date, including such leaves that are to commence after the Distribution Date; (iii) Masco and each member of the Masco Group shall be solely responsible for administering leaves of absence and compliance with FMLA with respect to their employees; and (iv) TopBuild and each member of the TopBuild Group shall recognize all periods of service of each TopBuild Employee with the Masco Group to the extent such service is recognized by Masco for the purpose of eligibility for leave entitlement under the Masco leave of absence programs and FMLA.

 

(c)                        As soon as administratively possible and not later than the Close of the Distribution Date, Masco shall provide to TopBuild copies of all records pertaining to the Masco leave of absence programs and FMLA with respect to all TopBuild Employees to the extent such records have not been provided previously to TopBuild or a member of the TopBuild Group.

 

Section 5.06.  TopBuild Workers’ Compensation Program.

 

(a)                       (i)  Effective as of the Close of the Distribution Date, TopBuild shall assume, retain and be responsible for all workers’ compensation Liabilities relating to claims incurred prior to, on or after the Distribution Date by TopBuild Employees (the “TopBuild WCP Liabilities”).

 

(ii)                                  Effective as of the Close of the Distribution Date, Masco shall assume, retain and be responsible for all workers compensation Liabilities relating

 

13

 

to claims incurred prior to, on or after the Distribution Date by Masco Employees (“Masco WCP Liabilities”).

 

(iii)                               For the avoidance of doubt, workers’ compensation Liabilities in respect of claims incurred prior to, on or after the Distribution Date by any current or former employee shall be the responsibility of such employee’s employer on the Distribution Date or, in the case of former employees, any such former employee’s last employer prior to the Distribution Date; and in each case where there is a question as to the date of claim occurrence in fixing such Liabilities, an independent claims administrator shall be appointed to allocate such Liability based on its determination of the date of claim occurrence.

 

(b)                       Masco and TopBuild shall cooperate with respect to the issuance of new, or transfer of, existing workers’ compensation policies and licenses.

 

Section 5.07.  Flexible Benefit Plans.  To the extent any TopBuild Employee contributed to an account under a Masco Health and Welfare Plan that provides or constitutes a health care or dependent care flexible spending account (“Masco Flex Plan”) during the calendar year that includes the Distribution Date, effective the Close of the Distribution Date Masco shall transfer to the corresponding New TopBuild Health and Welfare Plan the account balances of such TopBuild Employees for such calendar year under the Masco Flex Plan, regardless of whether the account balance is positive or negative.

 

Section 5.08.  Application of Article 5 to the TopBuild Group.  Any reference in this Article 5 to “TopBuild” shall include a reference to the TopBuild Group when and to the extent TopBuild has caused a member of the TopBuild Group to (a) become a party to a vendor contract, group insurance contract, or HMO letter agreement associated with a New TopBuild Health and Welfare Plan, (b) become a self-insured entity for the purposes of one or more New TopBuild Health and Welfare Plans, (c) assume all or a portion of the Liabilities or administrative responsibilities for benefits which arose before the Distribution Date under a Masco Health and Welfare Plan and which were expressly assumed by TopBuild pursuant to the terms of this Agreement, or (d) take any other action, extend any coverage, assume any other Liability or fulfill any other responsibility that TopBuild would otherwise be required to take under the terms of this Article 5, unless it is clear from the context that the particular reference is not intended to include a member of the TopBuild Group. In all such instances in which a reference in this Article 5 to “TopBuild” includes a reference to a member of the TopBuild Group, TopBuild shall be responsible to Masco for ensuring that the member of the TopBuild Group complies with the applicable terms of this Agreement.

 

ARTICLE 6
 INDEMNIFICATION

 

With respect to indemnification, the parties hereto agree to the Article 6, Release; Indemnification, of the Distribution Agreement.

 

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ARTICLE 7
 GENERAL PROVISIONS

 

Section 7.01.  Notices.  Any notice, instruction, direction or demand under the terms of this Agreement required to be in writing shall be duly given upon delivery, if delivered by hand, facsimile transmission, or mail, to the following addresses:

 

If to Masco, to:

 

Masco Corporation

21001 Van Born Road

Taylor, Michigan 48180

Attn: General Counsel

Facsimile: (313) 792-6430

 

with a copy to:

 

Davis Polk & Wardwell LLP

450 Lexington Avenue

New York, New York  10017

Attn:  John D. Amorosi

Bruce Dallas

Facsimile: (212) 701-5010

 

If to TopBuild, to:

 

TopBuild Corp.

260 Jimmy Ann Dr

Dayton Beach, FL 32114

Attn: General Counsel

Facsimile: (386) 304-2144

 

with a copy to:

 

McDermott Will & Emery

333 Avenue of the Americas, Suite 4500

Miami, Florida  33131

Attn:  Harris C. Siskind

Facsimile: (305) 347-6500

 

and

 

Davis Polk & Wardwell LLP

450 Lexington Avenue

New York, New York  10017

Attn:  John D. Amorosi

Bruce Dallas

 

15

 

Facsimile: (212) 701-5010

 

or such other address or facsimile number as such party may hereafter specify for the purpose by notice to the other party hereto.  All such notices, requests and other communications shall be deemed received on the date of receipt by the recipient thereof if received prior to 5:00 p.m. in the place of receipt and such day is a Business Day in the place of receipt.  Otherwise, any such notice, request or communication shall be deemed not to have been received until the next succeeding Business Day in the place of receipt.

 

Section 7.02.  Amendments; No Waivers.  (a) Any provision of this Agreement may be amended or waived if, and only if, such amendment or waiver is in writing and signed, in the case of an amendment, by Masco and TopBuild, or in the case of a waiver, by the party against whom the waiver is to be effective.

 

(b)                       No failure or delay by any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege.  The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law.

 

Section 7.03.  Successors and Assigns.  The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns; provided that neither party may assign, delegate or otherwise transfer any of its rights or obligations under this Agreement without the consent of the other parties hereto.  If any party or any of its successors or permitted assigns (i) shall consolidate with or merge into any other Person and shall not be the continuing or surviving corporation or entity of such consolidation or merger or (ii) shall transfer all or substantially all of its properties and assets to any Person, then, and in each such case, proper provisions shall be made so that the successors and assigns of such party shall assume all of the obligations of such party under the Distribution Documents.

 

Section 7.04.  Governing Law.  This Agreement shall be construed in accordance with and governed by the law of the State of Delaware, without regard to the conflicts of laws rules thereof.

 

Section 7.05.  Jurisdiction.  The parties hereto agree that any suit, action or proceeding seeking to enforce any provision of, or based on any matter arising out of or in connection with, this Agreement or the transactions contemplated hereby shall be brought in the Delaware Chancery Court, or if such court shall not have jurisdiction, any federal court located in the State of Delaware or any Delaware state court, so long as one of such courts shall have subject matter jurisdiction over such suit, action or proceeding, and that any cause of action arising out of this Agreement shall be deemed to have arisen from the transaction of business in the State of Delaware, and each of the parties hereby irrevocably consents to the exclusive jurisdiction of such courts (and of the appropriate appellate courts therefrom) in any such suit, action or proceeding and irrevocably waives, to the fullest extent permitted by law, any objection that it may now or hereafter have to the laying of the venue of any such suit, action or proceeding in any such court or that

 

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any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum.  Process in any such suit, action or proceeding may be served on any party anywhere in the world, whether within or outside of the jurisdiction of any such court.  Without limiting the foregoing, each party agrees that service of process on such party as provided in Section 7.01 shall be deemed effective service of process on such party.

 

Section 7.06.  Counterparts; Effectiveness.  This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument.  This Agreement shall become effective when each party hereto shall have received a counterpart hereof signed by the other party hereto.  Until and unless each party has received a counterpart hereof signed by the other party hereto, this Agreement shall have no effect and no party shall have any right or obligation hereunder (whether by virtue of any other oral or written agreement or other communication).

 

Section 7.07.  Entire Agreement; No Change in Control or Severance Event.  (a) This Agreement constitutes the entire understanding of the parties with respect to the subject matter hereof and thereof and supersedes all prior agreements, understandings and negotiations, both written and oral, between the parties with respect to the subject matter hereof and thereof.  No representation, inducement, promise, understanding, condition or warranty not set forth herein has been made or relied upon by any party hereto or any member of their Group with respect to the transactions contemplated by this Agreement. To the extent that the provisions of this Agreement are inconsistent with the provisions of the Tax Matters Agreement, the provisions of the Tax Matters Agreement shall prevail.

 

(b)                       Neither the Distribution nor the consummation of the transactions contemplated herein or under the Distribution Agreement shall constitute a change in control for purposes of, or trigger or otherwise give rise to any severance obligations or entitlements under, any Masco or TopBuild plan, program, agreement or arrangement.

 

Section 7.08.  No Third Party Beneficiaries.  Nothing contained in this Agreement is intended to constitute an amendment to any plan or arrangement governed by ERISA, or to confer upon any person or entity other than the parties hereto and their respective successors and permitted assigns, any benefit, right or remedies under or by reason of this Agreement.

 

Section 7.09.  Headings.  The section and other headings contained in this Agreement are for reference purposes only and shall not in any way affect the meaning or interpretation of this Agreement.

 

Section 7.10.  Severability.  If any one or more of the provisions contained in this Agreement should be declared invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained in this Agreement shall not in any way be affected or impaired thereby so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party.  Upon such a declaration, the parties shall modify this

 

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Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner so that the transactions contemplated hereby are consummated as originally contemplated to the fullest extent possible.

 

Section 7.11.  Withholdings.  To the extent consistent with the terms of the Tax Matters Agreement, the party that is responsible for making a payment hereunder shall be responsible for making the appropriate withholdings, if any, attributable to such payments.

 

[Signature Page Follows]

 

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IN WITNESS WHEREOF the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the date first above written.

 

	
 
    	
MASCO CORPORATION
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/ Kenneth G. Cole
    
	
 
    	
 
    	
Name: Kenneth G. Cole
    
	
 
    	
 
    	
Title:   Vice President, General Counsel and   Secretary
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
TOPBUILD CORP.
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/ John G. Sznewajs
    
	
 
    	
 
    	
Name: John G. Sznewajs
    
	
 
    	
 
    	
Title:   President and Treasurer
    

 

[Signature Page to Employee Matters Agreement]

 

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