<PAGE> 1
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
MASCO CORPORATION
- -------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- -------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing
fee is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
- --------------------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
- --------------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
- --------------------------------------------------------------------------------
(3) Filing party:
- --------------------------------------------------------------------------------
(4) Date filed:
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<PAGE> 2
MASCO CORPORATION
21001 Van Born Road
Taylor, Michigan 48180
-------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO THE STOCKHOLDERS OF MASCO CORPORATION:
The Annual Meeting of Stockholders of Masco Corporation will be held at the
offices of the Company, 21001 Van Born Road, Taylor, Michigan 48180, on
Wednesday, May 21, 1997 at 10:00 A.M., Eastern daylight time. The purposes of
the meeting, which are set forth in detail in the accompanying Proxy Statement,
are:
1. To elect two Class III Directors and one Class II Director;
2. To consider and act upon a proposal to approve the 1997 Non-Employee
Directors Stock Plan;
3. To consider and act upon a proposal to approve the 1997 Annual Incentive
Compensation Plan;
4. To consider and act upon a proposal to approve the Amendment of the 1991
Long Term Stock Incentive Plan;
5. To consider and act upon the ratification of the selection of Coopers &
Lybrand L.L.P. as independent auditors for the Company for the year
1997; and
6. To transact such other business as may properly come before the meeting.
The Board of Directors has fixed the close of business on March 28, 1997 as
the record date for the determination of stockholders entitled to notice of and
to vote at the meeting and at any adjournment thereof.
Your attention is called to the accompanying Proxy Statement and Proxy.
Whether or not you plan to be present at the meeting, you are requested to sign
and return the Proxy in the enclosed envelope to which no postage need be
affixed if mailed in the United States. Your prompt attention will be
appreciated. Prior to being voted, the Proxy may be withdrawn in the manner
specified in the Proxy Statement.
By Order of the Board of Directors
EUGENE A. GARGARO, JR.
EUGENE A. GARGARO, JR.
Secretary
April 25, 1997
<PAGE> 3
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS OF
MASCO CORPORATION
May 21, 1997
GENERAL INFORMATION
The solicitation of the enclosed Proxy is made by the Board of Directors of
Masco Corporation (the "Company") for use at the Annual Meeting of Stockholders
of the Company to be held at its offices at 21001 Van Born Road, Taylor,
Michigan 48180, on Wednesday, May 21, 1997 at 10:00 A.M., Eastern daylight time,
and at any adjournment thereof.
The expense of this solicitation will be borne by the Company. Solicitation
will be by use of the mails, and executive officers and other employees of the
Company may solicit Proxies, without extra compensation, personally and by
telephone and other means of communication. In addition, the Company has
retained Morrow & Company, Inc. to assist in the solicitation of Proxies for a
fee of $10,000, plus expenses. The Company will also reimburse brokers and other
persons holding Company Common Stock in their names or in the names of their
nominees for their reasonable expenses in forwarding Proxies and Proxy materials
to beneficial owners.
Stockholders of record as of the close of business on March 28, 1997 will
be entitled to vote at the Annual Meeting. On that date, there were 160,718,633
shares of Company Common Stock, $1 par value, outstanding and entitled to vote.
Each share of outstanding Company Common Stock entitles the holder to one vote.
Presence in person or by proxy of holders of a majority of outstanding shares of
Company Common Stock will constitute a quorum at the Annual Meeting. Broker
non-votes and abstentions will be counted toward the establishment of a quorum.
The affirmative vote of holders of a majority of the shares of Company Common
Stock present and entitled to vote at the Annual Meeting is required for
approval of the proposals hereby being submitted to stockholders and the
ratification of the selection of independent auditors. Abstentions are
considered present and entitled to vote and therefore have the effect of votes
against the proposals and ratification, while broker non-votes do not affect the
number of affirmative votes needed to approve or ratify these matters.
The shares represented by the Proxy will be voted as instructed if received
in time for the Annual Meeting. Any person signing and mailing the Proxy may,
nevertheless, revoke it at any time before it is exercised by written notice to
the Company (Attention: Eugene A. Gargaro, Jr., Secretary) at its executive
offices at 21001 Van Born Road, Taylor, Michigan 48180, or at the Annual
Meeting. This Proxy Statement and the enclosed Proxy are being mailed or given
to stockholders on or about April 29, 1997.
ELECTION OF DIRECTORS
The Board of Directors is divided into three classes. The term of office of
the two current Class III Directors, Richard A. Manoogian and Erwin L. Koning,
expires at the meeting. Erwin L. Koning, who has been a Director since 1964, has
decided not to stand for re-election. The Board of Directors wishes to express
its deep appreciation to Mr. Koning for his guidance and dedication during his
many years of service as a Director of the Company. The Board of Directors
proposes the re-election of Richard A. Manoogian and nominates Mary Ann Krey for
election to the Board as Class III Directors.
Dr. Lillian Bauder, a member of the Class II Directors, has resigned from
the Board of Directors effective immediately prior to the Annual Meeting. In
late 1996, Dr. Bauder resigned from her position as the President and Chief
Executive of Cranbrook Educational Community and then joined the Company as Vice
President -- Corporate Affairs. The Board of Directors wishes to express its
appreciation to Dr. Bauder for her
<PAGE> 4
contributions as a Director of the Company since 1992 and looks forward to her
ongoing contributions as an officer of the Company. The Board of Directors
nominates Verne G. Istock for election to the Board as a Class II Director.
The Class II and III Directors will serve for terms expiring at the Annual
Meetings of Stockholders in 1999 and 2000, respectively, or until their
respective successors are elected and qualified. The Class I Directors have been
elected to serve for a term which expires at the Annual Meeting of Stockholders
in 1998 or until their respective successors are elected and qualified. The
Board of Directors expects that the persons named as proxies in the Proxy will
vote the shares represented by each Proxy for the election as Directors of the
above nominees unless a contrary direction is indicated. If prior to the meeting
any nominee is unable or unwilling to serve as a Director, which the Board of
Directors does not expect, the persons named as proxies will vote for such
alternate nominee, if any, as may be recommended by the Board of Directors.
Assuming a quorum is present, Directors are elected by a plurality of the
votes cast. The two nominees for Class III Directors who receive the largest
number of votes cast will be elected as Class III Directors and the nominee for
the Class II Director who receives the largest number of votes cast will be
elected as a Class II Director; therefore, shares not voted (whether due to
abstention or broker non-vote) do not affect the election of Directors.
Information concerning the nominees and continuing Directors is set forth
below.
<TABLE>
<CAPTION>
NAME, PRINCIPAL OCCUPATION AND PERIOD OF
SERVICE AS A DIRECTOR AGE, BUSINESS EXPERIENCE, DIRECTORSHIPS AND OTHER INFORMATION
---------------------------------------- -------------------------------------------------------------
<S> <C>
CLASS I (TERM TO EXPIRE AT 1998 ANNUAL MEETING)
Wayne B. Lyon............................. Mr. Lyon, 64, joined LifeStyle Furnishings International Ltd. in
Chairman, President and Chief Executive his present position upon its formation in 1996. Previously, he
Officer of LifeStyle Furnishings served the Company as a Group Vice President beginning in 1972,
International Ltd. Director since 1988. was named Executive Vice President and Chief Operating Officer in
1974 and served as President and Chief Operating Officer from 1985
until 1996. Mr. Lyon is also a director of Comerica Incorporated,
Furnishings International Inc., Payless Cashways, Inc. and Emco Limited.
He is a trustee of Cranbrook Educational Community and a member of the
Board of Governors of Cranbrook Schools.
Arman Simone.............................. Mr. Simone, 69, is a founding director of the Mind/Body Medical Institute
Retired President of Simone Corporation, at Harvard Medical School and a founding director of the Laurens van der
commercial builders and developers. Post Foundation, London, England. He is a director for the National
Director from 1952 to 1969 and since Alliance to End Homelessness Inc.
1972.
Peter W. Stroh............................ Mr. Stroh, 69, has been Chairman of the Board and Chief Executive Officer
of The Stroh Companies, Inc. since 1990. He is also Chairman of the
Chairman and Chief Executive Officer of Board of The Stroh Brewery Company and of Apex Bioscience, Inc. and a
The Stroh Companies, Inc., parent director of NBD Bank. He is a director of Detroit Renaissance and the
company of The Stroh Brewery Company. Detroit Economic Growth Corporation, as well as a member of the Board of
Director since 1992. Visitors, Nicholas School of the Environment at Duke University, a trustee
of the Alcoholic Beverage Medical Research Foundation and a trustee of the
McGregor Fund.
</TABLE>
2
<PAGE> 5
<TABLE>
<CAPTION>
NAME, PRINCIPAL OCCUPATION AND PERIOD OF
SERVICE AS A DIRECTOR AGE, BUSINESS EXPERIENCE, DIRECTORSHIPS AND OTHER INFORMATION
---------------------------------------- -------------------------------------------------------------
<S> <C>
CLASS II (NOMINEE FOR TERM TO EXPIRE AT 1999 ANNUAL MEETING)
Verne G. Istock........................... Mr. Istock, 56, joined NBD Bank in 1963 and served as Vice Chairman and
Chairman, President and Chief Executive director of NBD Bank and its parent, NBD Bancorp, from 1985 until he
Officer of First Chicago NBD was named Chairman and Chief Executive Officer in 1994. Upon the merger
Corporation. Nominee for Director. of NBD and First Chicago Corporation in December 1995, he was named President
and Chief Executive Officer of First Chicago NBD Corporation and was elected
Chairman in May 1996. He presently also serves as Chairman, Chief Executive
Officer and director of The First National Bank of Chicago and NBD Bank. Mr.
Istock is a director of Kelly Services, Inc., the Federal Reserve Bank of
Chicago, the Bankers Roundtable and the International Monetary Conference. He
is a director of Detroit Renaissance, The Economic Club of Detroit, the
Greater Detroit and Windsor Japan-America Society, The Business Roundtable and
the Illinois Business Roundtable. Mr. Istock is also a director of the Chicago
Council on Foreign Relations, a principal of Chicago United, a member of the
Civic Committee of The Commercial Club of Chicago and The Economic Club of Chicago.
CLASS II (TERM TO EXPIRE AT 1999 ANNUAL MEETING)
Joseph L. Hudson, Jr. .................... Mr. Hudson, 65, was elected in 1956 as a trustee of the Hudson-Webber Foundation
Trustee, Hudson-Webber Foundation and subsequently served as Chairman until 1996. Mr Hudson was vice president
(philanthropic organization). Director of The J.L. Hudson Company beginning in 1957, was named President and Chief
since 1996. Executive Officer in 1961, and Chairman in 1972. Upon the merger of that company
with Dayton's of Minneapolis in 1969, he served as vice chairman and director of
the Dayton Hudson Corporation. He served as the first President and Chief
Executive Officer of The Detroit Medical Center from 1985 until his retirement in
1990. Mr. Hudson is currently a director of NBD Bank. Mr. Hudson is Vice President
of the City of Detroit Arts Commission and Vice President of the Founders Society
of the Detroit Institute of Arts. He is founding chairman of Community Foundation
for Southeastern Michigan; Vice President of United Way Community Services;
Active Honorary Trustee and founding Chairman of New Detroit, Inc.; and a director
of Detroit Renaissance.
John A. Morgan............................ Mr. Morgan, 66, has been a partner in Morgan Lewis Githens & Ahn since founding
Partner, Morgan Lewis Githens & Ahn, that firm in 1982. From 1977 to 1982, was Vice Chairman of Smith Barney, Harris
investment bankers. Director since 1969. Upham & Co., Inc., in charge of the firm's merger and acquisition activities, a
member of the executive committee and a director of Smith Barney International
Inc. Prior to becoming Vice Chairman of Smith Barney, Mr. Morgan had been Senior
Vice President in charge of the Corporate Finance Department. He is a director
of Allied Digital Technologies Corp., Furnishings International Inc., MascoTech,
Inc. and TriMas Corporation. He also serves as a trustee of the Provident Loan
Society of New York.
</TABLE>
3
<PAGE> 6
<TABLE>
<CAPTION>
NAME, PRINCIPAL OCCUPATION AND PERIOD OF
SERVICE AS A DIRECTOR AGE, BUSINESS EXPERIENCE, DIRECTORSHIPS AND OTHER INFORMATION
---------------------------------------- -------------------------------------------------------------
<S> <C>
CLASS III (NOMINEES FOR TERM TO EXPIRE AT ANNUAL MEETING IN 2000)
Richard A. Manoogian...................... Mr. Manoogian, 60, joined the Company in 1958, was elected Vice President
Chairman of the Board and Chief and a Director in 1964 and President in 1968 and has served as Chairman
Executive Officer of the Company and of and Chief Executive Officer since 1985. He has also served as Chairman,
MascoTech, Inc. and Chairman of the Chief Executive Officer and director of MascoTech, Inc. since its
Board of TriMas Corporation. Director formation in 1984 and as Chairman of the Board of TriMas Corporation since
since 1964. 1989. He is a director of First Chicago NBD Corporation, MSX International,
Inc., Detroit Renaissance and The American Business Conference, president
of the Founders Society of the Detroit Institute of Arts and a trustee of
the Archives of American Art (Smithsonian Institute), Center for Creative
Studies, The Fine Arts Committee of the State Department, Trustees Council
of the National Gallery of Art, Armenian General Benevolent Union, Detroit
Investment Fund and Henry Ford Health System.
Mary Ann Krey............................. Ms. Krey, 49, joined Krey Distributing Company as Secretary in 1978 and has
Chairman and Chief Executive Officer of served the firm in her present positions since 1987. She serves as a
Krey Distributing Company, beverage director of Commerce Bancshares, CPI Corporation and Laclede Gas Company.
distribution firm. Nominee for Director. Ms. Krey is a director of the St. Louis Children's Hospital, St. Louis
Regional Commerce and Growth Association, St. Louis Symphony and the St.
Louis Variety Club. She is an executive board member of United Way Community
Services and a member of Washington University Board of Trustees. Ms. Krey
received the Washington University 1996 Distinguished Alumni Award and was
named 1994 Woman of the Year by the St. Louis Variety Club.
</TABLE>
Further information concerning MascoTech, Inc. and TriMas Corporation is
set forth in "Certain Relationships and Related Transactions."
The Board of Directors held ten meetings during 1996. The Audit Committee
of the Board of Directors, consisting of Dr. Bauder and Messrs. Hudson, Koning,
Morgan and Stroh, held two meetings during 1996. It reviews and acts or reports
to the Board with respect to various auditing and accounting matters, including
the selection and fees of the Company's independent auditors, the scope of audit
procedures, the Company's internal audit program and results, the nature of
services to be performed by the independent auditors and the Company's
accounting practices. The Compensation Committee of the Board of Directors,
consisting of Messrs. Koning, Morgan and Simone, held six meetings during 1996.
It establishes and monitors executive compensation and administers and
determines awards and options granted under the Company's restricted stock
incentive and stock option plans. The Nominating Committee of the Board of
Directors, consisting of Dr. Bauder and Messrs. Morgan and Stroh, held a number
of individual conferences and two meetings during 1996. It was established to
identify and consider candidates to serve as Directors of the Company. The
Nominating Committee will consider candidates submitted by stockholders for
election as Directors of the Company. Any stockholder who wishes to have the
Committee consider a candidate should submit the name of the candidate, along
with any biographical or other relevant information the stockholder wishes the
Committee to consider, to the Secretary of the Company at the address appearing
on the first page of this proxy statement.
COMPENSATION OF DIRECTORS
Each Director who is not a Company employee receives an annual fee and
$1,000 for each Board of Directors meeting (and committee meeting if not held on
a date on which the entire Board holds a meeting)
4
<PAGE> 7
which the Director physically attends. The annual fee paid to Directors (other
than Messrs. Manoogian and Lyon, who were also Company employees) for 1996 was
$50,000. Beginning in 1997, the Board of Directors proposes to change the
compensation of non-employee Directors so that compensation is aligned more
closely with the long-term interests of the Company's stockholders. Under the
1997 Non-Employee Directors Stock Plan, which is being presented to the
stockholders for approval at the Annual Meeting, one-half of the current annual
Directors' fee will be paid to non-employee Directors in restricted shares of
Company Common Stock and each non-employee Director will receive annually
options to purchase 4,000 shares of Company Common Stock at the then current
market price. See "Proposal to Approve the 1997 Non-Employee Directors Stock
Plan" for information regarding this Plan.
SECURITY OWNERSHIP OF MANAGEMENT
AND CERTAIN BENEFICIAL OWNERS
Set forth below is information concerning beneficial ownership of Company
Common Stock as of March 31, 1997 by (i) each of the nominees and current
Directors, (ii) each of the named executive officers, (iii) all current
Directors and executive officers of the Company as a group, and (iv) all persons
known by the Company to be the beneficial owners of five percent or more of
Company Common Stock. If the 1997 Non-Employee Directors Stock Plan is approved
by stockholders, the non-employee Directors will also beneficially own shares of
Company Common Stock conditionally awarded under that Plan. Except as indicated
below, each person exercises sole voting and investment power with respect to
the shares listed.
<TABLE>
<CAPTION>
SHARES OF COMPANY COMMON PERCENTAGE OF COMPANY COMMON
NAME AND ADDRESS STOCK BENEFICIALLY OWNED STOCK BENEFICIALLY OWNED
---------------- ------------------------ ----------------------------
<S> <C> <C>
Dr. Lillian Bauder(1)....................... 30,841 *
Joseph L. Hudson, Jr........................ 1,000 *
Verne G. Istock............................. 500** *
Erwin L. Koning............................. 4,000 *
Mary Ann Krey............................... 1,000** *
Wayne B. Lyon(1)(2)......................... 595,053 *
Richard A. Manoogian(1)(2).................. 5,567,188 3.4%
John A. Morgan.............................. 1,600 *
Arman Simone................................ 72,000 *
Peter W. Stroh.............................. 500 *
Frank M. Hennessey(1)....................... 170,650 *
Raymond F. Kennedy(1)....................... 488,600 *
John R. Leekley(1)(2)....................... 160,769 *
Richard G. Mosteller(1)..................... 230,432 *
All 17 current Directors and executive
officers of the Company as a group
(excluding subsidiary, divisional and
group executives)(1)(2)................... 7,951,054 4.9%
FMR Corp.(3)
82 Devonshire Street
Boston, Massachusetts 02109............... 16,792,477 10.4%
</TABLE>
- -------------------------
* Less than one percent
** Includes shares acquired after March 31, 1997.
(1) Includes shares which may be acquired on or before May 30, 1997 upon
exercise of stock options (1,097,740 shares for Mr. Manoogian, 55,000 shares
for Mr. Hennessey, 231,310 shares for Mr. Kennedy, 85,047 shares for Mr.
Leekley, 346,125 shares for Mr. Lyon, 152,411 shares for Mr. Mosteller and
2,266,222 shares for all current Directors and executive officers of the
Company as a group) as well as unvested restricted stock award shares held
under the Company's stock incentive plans (97,518 shares for Mr. Manoogian,
108,268 shares for Mr. Hennessey, 194,130 shares for Mr. Kennedy, 58,138
shares for
5
<PAGE> 8
Mr. Leekley, 29,682 shares for Mr. Lyon, 49,601 shares for Mr. Mosteller,
29,330 shares for Dr. Bauder and 714,448 shares for all current Directors
and executive officers of the Company as a group). Holders exercise neither
voting nor investment power over unexercised option shares and have sole
voting but no investment power over unvested restricted shares.
(2) Shares owned by Mr. Manoogian and by all current Directors and executive
officers of the Company as a group include in each case an aggregate of
2,340,200 shares owned by charitable foundations for which Mr. Manoogian
serves as a director and 1,044,500 shares held by a trust for which he
serves as a trustee. Shares owned by Mr. Lyon and by all current Directors
and executive officers of the Company as a group include in each case 28,448
shares owned by a charitable foundation for which Mr. Lyon serves as a
director. Shares owned by Mr. Leekley and by all current Directors and
executive officers of the Company as a group include 14,396 shares held by a
trust for which Mr. Leekley serves as a trustee. Shares owned by all current
Directors and executive officers of the Company as a group include 25,530
shares held by trusts for which an executive officer serves as a trustee.
The directors of the foundations and the trustees share voting and
investment power with respect to shares owned by the foundations and trusts,
but Messrs. Manoogian, Lyon and Leekley and the executive officer who serves
as a trustee for certain trusts each disclaims beneficial ownership of such
shares.
(3) Based on a Schedule 13G dated February 7, 1997 and filed with the Securities
and Exchange Commission by FMR Corp. and certain of its affiliates, these
shares were beneficially owned at January 31, 1997 by Fidelity Management &
Research Company and Fidelity Management Trust Company, subsidiaries of FMR
Corp. which provide investment advisory services to investment companies and
investment management services to institutional accounts. According to the
filing, Edward C. Johnson 3d and FMR Corp., through control of the
subsidiaries, each has sole dispositive power over 16,792,477 shares and
sole voting power over 683,009 shares, but no voting power over the balance
of the shares held by various investors. In addition, an affiliate of FMR
Corp. has sole voting and investment power over 97,100 shares. Members of
the Edward C. Johnson 3d family may be deemed, under the Investment Company
Act of 1940, to form a controlling group with respect to FMR Corp.
Mr. Manoogian may be deemed a controlling person of the Company by reason
of his significant ownership of Company Common Stock and his positions as a
Director and an executive officer of the Company.
EXECUTIVE COMPENSATION COMMITTEE REPORT
1996 was a pivotal year for Masco Corporation. Among the many positive
changes which occurred, one of the more significant was the Board of Directors'
and management's renewed commitment to ensure that compensation programs for
Directors and officers are more closely aligned with the long-term enhancement
of stockholder value. Challenged to implement this commitment while maintaining
the Company's ability to attract, retain and motivate the highest quality
management team, the Compensation Committee reviewed a broad spectrum of
compensation alternatives, and developed a compensation strategy with several
components intended to closely align officers' and Directors' interests with
those of stockholders. The key components of this strategy as it applies to
officers are described below.
1996 COMPENSATION AND NEW PROGRAMS TO ENHANCE STOCKHOLDER VALUE
The annual salary and bonus of the Company's Chairman and Chief Executive
Officer, Richard A. Manoogian, of approximately $1.4 million, have been reduced
at his request, effective January 1, 1996, to $1 per year. Mr. Manoogian
requested the Compensation Committee to implement this reduction to reflect his
commitment to enhance stockholder value and his personal disappointment with the
Company's stock price performance in recent years. The Compensation Committee,
in acceding to this request, considered alternative compensation arrangements
for Mr. Manoogian based upon the Board's own desire to improve stockholder value
in the future, and accordingly in April 1996 granted Mr. Manoogian a ten-year
option to purchase 1,000,000 shares of Company Common Stock. This option,
however, will become exercisable only if the price of Company Common Stock
exceeds $41 per share (an all time record price for Company Common Stock) within
three years of the date of grant or, if that target is not met, exceeds $50 per
share within five years of the date of grant. The exercise price for this option
is set at $41 or $50 per share, based on whether the
6
<PAGE> 9
three-year or five-year target is exceeded. Since the closing price of Company
Common Stock was $27 7/8 per share on the date of grant for this option, the
exercise price represents a requirement for a minimum 47 percent or 79 percent
increase, respectively, from the market value of Company Common Stock on the
date of grant. Mr. Manoogian can benefit from the option grant only by the
amount of any price appreciation above the target exercise price (i.e. above $41
if the three-year target is exceeded, or above $50 if the three-year target is
not exceeded but the five-year target is). The option will expire unexercised if
neither target price is achieved within the specified time periods.
In support of Mr. Manoogian's commitment to increase stockholder value as
evidenced by the compensation arrangement discussed above, in mid-1996 the
executive officers and group executives of the Company volunteered a 10 percent
reduction in their base salaries and agreed to forego a then anticipated average
increase of approximately five percent. In addition, their base salaries were
indefinitely frozen at this lower level. The Compensation Committee offset this
reduction in compensation with stock incentives by granting specially designed
stock options and restricted stock awards. The stock options have an exercise
price of $32 per share (market price on date of grant); however, the officers
have pledged not to exercise these options unless the same $41 or $50 record
share price levels as those required for Mr. Manoogian's option are attained
within the same specified time periods. Even if these price levels are attained,
these options generally would become exercisable only in installments,
retroactive to May 1997, over a period of eight years. The annual vesting of the
restricted stock awards granted to officers under this arrangement commences if
the Company's share price reaches $50 by April 2001. If such share price is not
attained for such period by that date, then the vesting does not commence until
retirement. In conjunction with these awards, a restricted stock award and an
additional stock option grant, on the same terms as those awarded to other
executive officers and group executives, were made to Mr. Manoogian.
In order to further align the objectives of the Company's other key
employees and its stockholders, restricted stock awards were also granted in
1996 to approximately 1,000 corporate and operating employees with vesting
linked to the achievement of either record share prices or fifteen percent
annual compound earnings per share growth. If such prices or growth is not
achieved, the vesting will not commence until retirement.
Although Company Common Stock has historically been a major part of
compensation for key employees because of its inherent alignment with the
interests of stockholders, the Compensation Committee believes that by directly
linking stock compensation to the attainment of record share prices of Company
Common Stock, the arrangements implemented in 1996 more directly align officers'
and other key employees' interests with those of stockholders. The Committee's
strategy includes the continued use of Company Common Stock in the future.
Because the compensation strategy includes a variety of components, the terms
and conditions of future options and awards may vary from those granted in 1996.
The customary terms and conditions of restricted stock awards and stock options
granted prior to 1996 are described below.
In order to formalize the Board's policy of encouraging stock ownership by
officers and to require them to remain at risk by maintaining a substantial
interest in Company Common Stock, the Board in 1996 implemented stock ownership
guidelines for officers. The guidelines require the Chief Executive Officer to
own stock with a value of at least five times base pay; the President to own
stock with a value of at least four times base pay; Executive Vice Presidents
and Senior Vice Presidents to own stock with a value of at least three times
base pay; and all other officers to own stock with a value of at least two times
base pay. Officers are required to achieve the share ownership (including
restricted stock awards) necessary to meet the guidelines within three years of
becoming subject to the guidelines. At April 15, 1997, all of the named
executive officers met or exceeded the guidelines.
GENERAL COMPENSATION INFORMATION
Compensation arrangements for executive officers generally consist of a
blend of base salary, annual cash bonus and long-term incentives utilizing
Company Common Stock. The Committee uses a variety of resources, including
published compensation surveys, as it considers information concerning current
compensation practices within the Company's industries (including companies that
are included in the Standard & Poor's Building Materials Index). In addition,
the Committee reviews compensation policies and practices of
7
<PAGE> 10
corporations in other industries which are similar to the Company in terms of
revenues and market value, because the Committee believes the Company competes
with such companies for executive talent. Although the Committee reviews such
information for general guidance, it does not specifically target compensation
of the executive officers to compensation levels at other companies.
Annual cash compensation consists of salary and bonus. Base salaries for
executive officers are usually adjusted annually by establishing ranges for
increases for executive officers that reflect inflation, promotions and merit
and that are similar to the ranges established for other corporate office
employees. These ranges reflect changes observed in general compensation levels
of salaried employees, and in particular, within the geographic area of the
Company's corporate office and within the Company's industries. The Company's
performance for the particular year and the Company's prospects are more
significant factors in determining ranges for year-end bonuses than in
determining salary ranges. In connection with the payment of bonuses, corporate
performance goals are considered by the Committee in light of general economic
conditions, and include items such as comparisons of year-to-year operating
results, market share performance and the achievement of budget objectives and
forecasts. Salary and bonus determinations are subject to variances from the
established ranges for a variety of subjective factors such as an individual's
contribution to the performance of the Company and its affiliates in addition to
the competitive considerations noted above. In general, the potential cash bonus
opportunity for executive officers has been up to fifty percent of base salary.
For 1996, bonuses paid to executive officers (other than Mr. Manoogian, who
received no bonus) were based on their reduced salary levels, but due to the
improved performance of the Company were paid generally at fifty percent of such
levels rather than at a reduced percentage as was paid in the previous year.
Restricted stock awards and stock options granted under the 1991 Long Term
Stock Incentive Plan (the "1991 Plan") are generally used as part of the
Company's long-term incentive arrangements, which focus the recipient on
long-term enhancement in stockholder value and help retain key employees.
Factors reviewed by the Committee in determining whether to grant options and
awards are generally the same factors considered in determining salaries and
bonuses described above. The Committee believes that the level of restricted
stock awards and stock option grants must be sufficient in size and potential
value to provide a strong incentive and to reinforce the individual's commitment
to the Company. The history of restricted stock awards and stock option grants
previously granted to an executive is also a factor in determining new awards
and grants. In general, the potential opportunity for executives for annual
restricted stock awards under the Company's restricted stock award program is up
to thirty percent of base salary. In addition, supplemental restricted stock
awards are granted periodically.
The Company has historically purchased shares of Company Common Stock in
the open market sufficient to cover all restricted stock awards in order to
reflect consistent, non-variable expense related to these awards and to avoid
any dilution resulting from these awards. This prepaid expense is fixed and
amortized over the extended vesting period of the awards. Because the Company's
tax deduction is based on the fair market value at the time the restrictions
lapse, the after-tax cost of this program can be very favorable to the Company
based on future appreciation of Company Common Stock. The Company believes that
the extended vesting of stock awards promotes retention, but also spreads
compensation expense over a longer term, which generally results in a
significant reduction in the Company's after-tax cost of the compensation. The
Committee recognizes that the dollar value of these stock-based incentives can
appreciate to substantial amounts as a result of the Company's extended vesting
schedule as compared to the shorter vesting schedules that distribute incentives
in a shorter time period, which are used by many other companies.
Restricted stock awards granted prior to 1996 under the 1991 Plan generally
vest in ten percent annual installments over a period of ten years from the date
of grant. In general, vesting is contingent on a continuing employment or
consulting relationship with the Company. The 1991 Plan provides, however, that
all shares vest immediately upon death, permanent and total disability or the
occurrence of certain events constituting a change in control of the Company.
Original stock option grants made under the 1991 Plan generally vest in
installments beginning in the third year and extending through the eighth year
after grant and, unless otherwise provided, may be exercised until the earlier
of ten years from the date of grant or, as to the number of shares then
exercisable, the termination of the employment or consulting relationship of the
participant. Stock option grants generally do
8
<PAGE> 11
not have a financial reporting expense associated with them since they are
granted at fair market value, and in fact, raise additional equity for the
Company. The difference between the exercise price and fair market value of the
Company Common Stock on the date of exercise is, however, generally deductible
by the Company for federal income tax purposes and thereby provides tax savings
to the Company. The Committee permits Company Common Stock to be used in payment
of federal, state and local withholding tax obligations attributable to the
exercise of stock options. The 1991 Plan also permits the Committee to accept
the surrender of an exercisable stock option and to authorize payment by the
Company of an amount equal to the difference between the option exercise price
of the stock and its then fair market value.
Recipients of stock options are eligible to receive restoration options. A
restoration option is granted when a participant exercises a stock option and
pays the exercise price by delivering shares of Company Common Stock. The
restoration option is granted equal to the number of shares delivered by the
participant and does not increase the number of shares covered by the original
stock option. The exercise price is 100 percent of the fair market value of
Company Common Stock on the date the restoration option is granted so that the
participant benefits only from subsequent increases in the Company's stock
price. No restoration options were granted to the named executive officers in
1996. The 1991 Plan also provides that, upon the occurrence of certain events
constituting a change in control of the Company, all stock options previously
granted immediately become fully exercisable and all restricted stock awards
immediately vest. Generally, if a participant incurs an excise tax under Section
4999 of the Code in connection with a payment or distribution following a change
in control, the 1991 Plan provides that the participant will receive additional
payments to make the participant whole for such excise tax.
In addition to the stock-based programs noted above, most Company salaried
employees participate in defined contribution profit sharing retirement plans,
which further link compensation to Company performance. Discretionary
contributions are made into these plans based on the Company's performance.
Historically, aggregate annual contributions to the profit sharing plans in
which executive officers participate have ranged from approximately four percent
to seven percent of participants' base salaries. See footnote (3) to the
"Summary Compensation Table."
The Committee has reviewed the regulations relating to Code Section 162(m),
which limits the deductibility of annual executive compensation in excess of
$1,000,000 for each of the five highest paid executives. The Board has amended
the 1991 Plan and is presenting that plan as amended to stockholders for
approval so that future stock options granted under the 1991 Plan will continue
to result in compensation fully deductible by the Company under the regulations.
See "Proposal to Approve the Amendment of the 1991 Long Term Stock Incentive
Plan." In addition, the Committee has approved the 1997 Annual Incentive
Compensation Plan and is presenting that plan to stockholders for approval to
continue the Committee's practice of structuring determinations for cash bonuses
to make them performance-based and therefore fully tax deductible. See "Proposal
to Approve the 1997 Annual Incentive Compensation Plan." The Committee continues
to believe it is in the Company's interest to retain flexibility in its
compensation programs, and although compensation may in some circumstances
exceed the limitation of Section 162(m), the Committee believes any tax
deduction lost on account of such excess compensation will be insignificant for
the foreseeable future.
Erwin L. Koning
John A. Morgan
Arman Simone
9
<PAGE> 12
COMPENSATION OF EXECUTIVE OFFICERS
SUMMARY COMPENSATION TABLE
The following table summarizes the annual and long-term compensation of the
Company's chief executive officer and the other four highest paid executive
officers (collectively, the "named executive officers") for 1996, 1995 and 1994.
Mr. Manoogian's salary and bonus were reduced at his request, effective January
1, 1996, to $1 per year. Mr. Manoogian requested the Compensation Committee of
the Board of Directors to implement this reduction to reflect his commitment to
enhance stockholder value and his personal disappointment with the Company's
stock price performance in recent years. For further information concerning this
action and related arrangements, see "Executive Compensation Committee Report."
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION AWARDS
ANNUAL ------------------------
COMPENSATION(1) RESTRICTED SECURITIES
-------------------- STOCK UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUSES AWARDS(2) OPTIONS COMPENSATION(3)
- --------------------------- ---- ------ ------- ---------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Richard A. Manoogian......... 1996 $ 1 $ 0 $1,536,000 1,300,000 $106,000
Chairman of the Board 1995 972,000 382,000 558,000 0 210,000
and Chief Executive 1994 930,000 477,000 220,000 0 214,000
Officer(4)
Raymond F. Kennedy........... 1996 $684,000 $338,000 $1,152,000 150,000 $102,000
President and Chief 1995 675,000 301,000 3,699,000 100,000 121,000
Operating Officer 1994 578,000 298,000 137,000 30,773(5) 118,000
Frank M. Hennessey........... 1996 $476,000 $225,000 $ 768,000 100,000 $ 33,000
Executive Vice President(6) 1995 401,000 228,000 2,156,000 100,000 27,000
Richard G. Mosteller......... 1996 $497,000 $235,000 $ 800,000 100,000 $ 87,000
Senior Vice President -- 1995 512,000 226,000 294,000 0 106,000
Finance(7) 1994 490,000 251,000 117,000 27,000(5) 109,000
John R. Leekley.............. 1996 $431,000 $216,000 $ 736,000 90,000 $ 69,000
Senior Vice President and 1995 428,000 189,000 246,000 0 81,000
General Counsel 1994 410,000 210,000 97,000 0 83,000
</TABLE>
- -------------------------
(1) Salary information is disclosed in the table on a calendar year basis.
Annual salary increases, when granted, are normally effective in July.
Therefore, if an increase is granted in any year, the salary reported in the
table for that year is a blend of two different salary levels. On July 1,
1996, Mr. Kennedy voluntarily agreed to reduce his salary by ten percent,
and to forego an anticipated mid-year increase. Accordingly, his salary was
reduced from an annual rate of $700,000 to $630,000. In August, Mr. Kennedy
was promoted and succeeded Mr. Lyon as President and Chief Operating Officer
and received a 7.1% increase to an annual salary level of $675,000. In
September, 1995, Mr. Hennessey was promoted to Executive Vice President with
a salary of $500,000. On July 1, 1996, Mr. Hennessey voluntarily agreed to
reduce his salary by ten percent, and to forego an anticipated mid-year
increase. Accordingly, his salary was reduced from an annual rate of
$500,000 to $450,000. On July 1, 1996, Mr. Mosteller voluntarily agreed to
reduce his salary by ten percent, and to forego an anticipated mid-year
increase. Accordingly, his salary was reduced from an annual rate of
$522,000 to $469,800. On July 1, 1996, Mr. Leekley voluntarily agreed to
reduce his salary by ten percent, and to forego an anticipated mid-year
increase. Accordingly, his salary was reduced from an annual rate of
$437,000 to $393,300. In August, Mr. Leekley was promoted to Senior Vice
President and received a 9.8% increase to an annual salary level of
$432,000. For further information, see "Executive Compensation Committee
Report." Officers may receive certain perquisites and personal benefits, the
dollar amounts of which are below current Securities and Exchange Commission
thresholds for reporting requirements. For purposes of applying these
thresholds, Mr. Manoogian has been treated as if his 1996 salary and bonus
equaled his 1995 salary and bonus.
10
<PAGE> 13
(2) This column sets forth the dollar value, as of the date of grant, of
restricted stock awarded under the Company's 1991 Long Term Stock Incentive
Plan (the "1991 Plan"). The restricted stock awards made to the named
executive officers in 1996 generally will not vest unless the officers
retire from the Company after reaching age 65, and then the awards will vest
in three annual installments. However, ten percent of these awards will
begin to vest on an annual basis if Company Common Stock reaches $50 per
share by April 2001 as described under "Executive Compensation Committee
Report." The following number of shares were awarded to the named executive
officers in 1996: Mr. Manoogian -- 48,000 shares; Mr. Kennedy -- 36,000
shares; Mr. Hennessey -- 24,000 shares; Mr. Mosteller -- 25,000 shares; and
Mr. Leekley -- 23,000 shares. Restricted stock awards granted prior to 1996
generally vest over a period of ten years from the date of grant with ten
percent of each award vesting annually and vesting is contingent on a
continuing employment or consulting relationship with the Company. However,
the 1995 awards to Mr. Kennedy (100,000 shares with a grant date value of
$2,825,000) and Mr. Hennessey (50,000 shares with a grant date value of
$1,413,000), which were granted in order to reflect promotions and provide
additional incentives to the recipients and assure the continuation of their
services to the Company until retirement, generally vest over a three-year
period only if the recipient remains with and retires from the Company. As
of December 31, 1996, the aggregate number and market value of unvested
restricted shares of Company Common Stock held by each of the named
executive officers under all vesting arrangements were: Mr. Manoogian --
99,869 shares valued at $3,595,000; Mr. Kennedy -- 195,086 shares valued at
$7,023,000; Mr. Hennessey -- 106,610 shares valued at $3,838,000; Mr.
Mosteller -- 50,619 shares valued at $1,822,000; and Mr. Leekley -- 42,382
shares valued at $1,526,000. As of December 31, 1996, Mr. Manoogian held
5,000 restricted shares of MascoTech common stock granted under the
Company's Restricted Stock (Industries) Incentive Plan valued at $82,000.
Recipients of restricted stock awards have the right to receive dividends on
unvested shares.
(3) This column includes (a) Company contributions and allocations under the
Company's defined contribution retirement plans for the accounts of each of
the named executive officers (for 1996: Mr. Manoogian -- none; Mr. Kennedy
-- $47,000; Mr. Hennessey -- $33,000; Mr. Mosteller -- $34,000; and Mr.
Leekley $30,000) and (b) cash payments made pursuant to certain tandem
rights associated with the annual vesting of certain restricted stock awards
granted in 1989 (in 1996: Mr. Manoogian -- $106,000; Mr. Kennedy -- $55,000;
Mr. Mosteller -- $53,000; and Mr. Leekley -- $39,000). For further
information regarding these rights, see "Certain Relationships and Related
Transactions."
(4) The information does not reflect salary and bonus Mr. Manoogian received
from MascoTech as its Chairman of the Board and Chief Executive Officer
($588,000 for 1996) or from TriMas as its Chairman of the Board ($100,000
for 1996).
(5) No original stock options were granted in 1994. Options shown consist solely
of restoration options granted upon the exercise of previously held stock
options. As described in more detail under "Executive Compensation Committee
Report," a restoration option does not increase the number of shares covered
by the original option nor extend the term of the original option.
(6) Mr. Hennessey became an executive officer in 1995. Consequently, the table
does not set forth information for 1994, but information for 1995 includes
the entire year. The information does not include director fees received by
Mr. Hennessey from Emco Limited.
(7) The information does not include director fees received by Mr. Mosteller
from MascoTech for periods during which he served as a director of that
Company.
11
<PAGE> 14
OPTION GRANT TABLE
The following table sets forth information concerning options granted to
the named executive officers in 1996.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
---------------------------------------------------------
% OF TOTAL EXERCISE POTENTIAL REALIZABLE VALUE AT
NUMBER OF OPTIONS PRICE ASSUMED ANNUAL RATES OF STOCK PRICE
SECURITIES GRANTED TO (SUBJECT TO APPRECIATION FOR OPTION TERM
UNDERLYING EMPLOYEES CERTAIN EXPIRATION ------------------------------------
NAME OPTIONS GRANTED IN 1996 RESTRICTIONS) DATE 5% 10%
---- --------------- ---------- ------------- ---------- -- ---
<S> <C> <C> <C> <C> <C> <C>
Richard A. Manoogian.... 1,000,000 37.3% $41 or $50 4/18/06 $0 or $4,405,000 $0 or
$31,301,000
300,000 11.2% $32 5/22/06 $0 or $6,037,000 $15,300,000
Raymond F. Kennedy...... 150,000 5.6% $32 5/22/06 $0 or $3,019,000 $7,650,000
Frank M. Hennessey...... 100,000 3.7% $32 5/22/06 $0 or $2,012,000 $5,100,000
Richard G. Mosteller.... 100,000 3.7% $32 5/22/06 $0 or $2,012,000 $5,100,000
John R. Leekley......... 90,000 3.4% $32 5/22/06 $0 or $1,811,000 $4,590,000
</TABLE>
Securities and Exchange Commission regulations require information as to
the potential realizable value of each of these options, assuming that the
market price of Company Common Stock appreciates in value from the date of grant
to the end of the option term at annual rates of five percent and ten percent.
These options, which are discussed further under "Executive Compensation
Committee Report," are not exercisable (either by their terms or due to pledges
by the holders thereof) unless Company Common Stock attains certain price
targets ($41 per share by April 1999 or, if the foregoing three-year target is
not attained, $50 per share by April 2001). As shown in the table, these price
targets would not be attained, and the potential realizable value would be $0,
if Company Common Stock only appreciates in value from the date of grant at an
annual rate of five percent, and with respect to Mr. Manoogian's option which
expires April 18, 2006, the price targets would not be met, and the potential
realizable value would be $0, even if Company Common Stock appreciates in value
from the date of grant at an annual rate of ten percent. Further, Mr. Manoogian
can benefit from the option expiring April 18, 2006 only by the amount of any
price appreciation above the target exercise price (i.e., above $41 if the
three-year target is exceeded, or above $50 if the three-year target is not
exceeded but the five-year target is). Assuming the $41 target is attained, the
potential realizable value at the end of the option term at assumed annual rates
of stock price appreciation of five percent and ten percent are as set forth
above. These amounts are based on assumed rates of appreciation only. Actual
gains, if any, on stock option exercises and Company Common Stock holdings will
depend on overall market conditions and the future performance of the Company
and its Common Stock. There can be no assurance that the amounts reflected in
this table will be realized. If the three-year target is not exceeded but the
five-year target is exceeded, the potential realizable value for Mr. Manoogian's
option expiring April 18, 2006 would be $0 at a five percent assumed annual rate
of stock price appreciation and $22,301,000 at a 10 percent rate.
12
<PAGE> 15
YEAR-END OPTION VALUE TABLE
No options were exercised in 1996 by any named executive officer. The
following table sets forth information concerning the value at December 31, 1996
of unexercised options held by each of the named executive officers under the
Company's stock option plans. The value of unexercised options reflects the
increase in market value of Company Common Stock from the date of grant through
December 31, 1996 (the closing price of Company Common Stock on December 31,
1996 was $36 per share). The value actually realized upon future option
exercises by the named executive officers will depend on the value of Company
Common Stock at the time of exercise.
DECEMBER 31, 1996 OPTION VALUE
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS AT
DECEMBER 31, 1996 DECEMBER 31, 1996
------------------------------- -------------------------------
NAME UNEXERCISABLE EXERCISABLE UNEXERCISABLE EXERCISABLE
---- ------------- ----------- ------------- -----------
<S> <C> <C> <C> <C>
Richard A. Manoogian.................. 1,500,000 1,057,740 $4,250,000 $12,554,000
Raymond F. Kennedy.................... 350,000 191,310 $2,900,000 $ 2,033,000
Frank M. Hennessey.................... 220,000 30,000 $1,395,000 $ 330,000
Richard G. Mosteller.................. 175,000 184,722 $1,544,000 $ 2,203,000
John R. Leekley....................... 140,000 75,047 $1,123,000 $ 1,032,000
</TABLE>
PENSION PLANS
The executive officers participate in pension plans maintained by the
Company for certain of its salaried employees. The following table shows
estimated annual retirement benefits payable for life at age 65 for various
levels of compensation and service under these plans.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF SERVICE
--------------------------------------------------------------
REMUNERATION(2) 5 10 15 20 25 30
--------------- ------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
$ 200,000....... $11,290 $ 22,580 $ 33,870 $ 45,161 $ 56,451 $ 67,741
400,000...... 22,580 45,161 67,741 90,321 112,902 135,482
600,000...... 33,870 67,741 101,611 135,482 169,352 203,223
800,000...... 45,160 90,321 135,482 180,643 225,803 270,964
1,000,000...... 56,451 112,902 169,352 225,803 282,254 338,705
1,200,000...... 67,741 135,482 203,223 270,964 338,705 406,446
</TABLE>
- -------------------------
(1) The plans provide for credit for employment with any of the Company,
MascoTech, TriMas and their subsidiaries. Vesting occurs after five full
years of employment. The benefit amounts set forth in the table above have
been converted from the plans' calculated five-year certain and life benefit
and are not subject to reduction for social security benefits or for other
offsets, except to the extent that pension or equivalent benefits are
payable under a MascoTech or TriMas plan. The table does not depict Code
limitations on tax-qualified plans because one of the plans is a
nonqualified plan established by the Company to restore for certain salaried
employees (including the named executive officers) benefits that are
otherwise limited by the Code. For each year of credited service prior to
July 1, 1971 there is an additional annual benefit equal to .2 of 1 percent
of final average earnings in excess of $9,000. Approximate years of credited
service for the named executive officers participating in the plan are: Mr.
Manoogian and Mr. Mosteller -- 30 (the maximum credited service); Mr.
Kennedy -- 19; Mr. Hennessey -- 7; and Mr. Leekley -- 21.
(2) For purposes of determining benefits payable, remuneration is equal to the
average of the highest five consecutive January 1 annual base salary rates
paid by the Company prior to retirement.
13
<PAGE> 16
Under the Company's Supplemental Executive Retirement and Disability Plan,
certain officers and other key executives of the Company, or any company in
which the Company or a subsidiary owns at least 20 percent of the voting stock,
may receive retirement benefits in addition to those provided under the
Company's other retirement plans and supplemental disability benefits. Each
participant is designated by the Chairman of the Board (and approved by the
Compensation Committee) to receive annually upon retirement on or after age 65,
an amount which, when combined with benefits from the Company's other retirement
plans and for most participants any retirement benefits payable by reason of
employment by prior employers, equals 60 percent of the average of the
participant's highest three years' cash compensation received from the Company
(limited to base salary and regular year-end cash bonus). Participants are
limited to an annual payment under this plan, which when combined with benefits
under the Company's non-qualified plan, may not exceed a maximum, currently
$386,890. A participant may also receive supplemental medical benefits. A
participant who has been employed at least two years and becomes disabled prior
to retirement will receive annually 60 percent of the participant's total
annualized cash compensation in the year in which the participant becomes
disabled, subject to certain limitations on the maximum payment and reduced by
benefits payable pursuant to the Company's long-term disability insurance and
similar plans. Upon a disabled participant's reaching age 65, the participant
receives the annual cash benefits payable upon retirement, as determined above.
A surviving spouse will receive reduced benefits upon the participant's death.
Participants are required to agree that they will not engage in competitive
activities for at least two years after termination of employment, and if
employment terminates by reason of retirement or disability, during such longer
period as benefits are received under this plan. The named executive officers
participate in this plan.
14
<PAGE> 17
PERFORMANCE GRAPH
Set forth below is a line graph comparing the cumulative total stockholder
return on Company Common Stock with the cumulative total return of the Standard
& Poor's 500 Stock Index ("S&P 500 Index") and the Standard & Poor's Building
Materials Index ("S&P Building Materials Index") for the period from January 1,
1992 through December 31, 1996. The graph assumes investments of $100 on
December 31, 1991 in Company Common Stock, the S&P 500 Index and the S&P
Building Materials Index and the reinvestment of dividends.
<TABLE>
<CAPTION>
MEASUREMENT PERIOD MASCO CORPORATION S&P 500 INDEX S&P BUILDING
(FISCAL YEAR COVERED) MATERIALS INDEX
<S> <C> <C> <C>
1991 100.00 100.00 100.00
1992 128.90 107.61 127.89
1993 164.18 118.38 158.36
1994 103.90 119.99 116.85
1995 146.88 164.92 158.18
1996 173.70 202.69 189.99
</TABLE>
The table below sets forth the value, as of December 31 of each of the
years indicated, of $100 investments made on December 31, 1991 in Company Common
Stock, the S&P 500 Index and the S&P Building Materials Index, and the
reinvestment of dividends.
<TABLE>
<CAPTION>
MEASUREMENT PERIOD MASCO S&P 500 INDEX S&P BUILDING
(FISCAL YEAR COVERED) MATERIALS INDEX
<S> <C> <C> <C>
1991 $100.00 100.00 100.00
1992 $128.90 107.61 127.89
1993 $164.18 118.38 158.36
1994 $103.90 119.99 116.85
1995 $146.88 164.92 158.18
1996 $173.70 202.69 189.99
</TABLE>
15
<PAGE> 18
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Board of Directors consists of Messrs.
Koning, Morgan and Simone. From time to time Morgan Lewis Githens & Ahn ("Morgan
Lewis"), of which Mr. Morgan is a partner, performs investment banking and other
related services for the Company and MascoTech, Inc. During 1995 the Company
retained Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch")
and Morgan Lewis to assist the Company with the divestiture of its Home
Furnishings Group. Such assistance included the evaluation of alternatives for
the divestiture, the development and implementation of strategies, the
negotiation of the sale of the Home Furnishings Group, and the valuation of the
Home Furnishings Group and the consideration to be received by the Company.
Following the completion of the divestiture in 1996, the Company and Morgan
Lewis established an appropriate fee for services provided during 1995 and 1996,
including the firm's assistance with the Home Furnishings Group divestiture,
based on a review of the contribution of such services to the Company generally
and to such divestiture. The fee, aggregating approximately $6 million, was
approved by the Company's other outside Directors. Eugene A. Gargaro, Jr., an
executive officer of the Company, serves on the Compensation Committees of the
Boards of Directors of MascoTech and TriMas. Mr. Gargaro is of counsel to Dykema
Gossett PLLC, for certain matters on which he worked as a partner at the firm
prior to his employment with the Company in October 1993. Dykema Gossett
provides legal services to the Company from time to time. Mr. Gargaro receives
no compensation from the firm. Richard A. Manoogian, an executive officer of
both MascoTech and TriMas, is Chairman of the Board and Chief Executive Officer
of the Company.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
MASCOTECH, INC.
The Company owns approximately 21 percent of MascoTech, Inc. (formerly
Masco Industries, Inc.), a leading supplier of metalworked and aftermarket
products for the transportation industry. MascoTech was formed in a 1984
restructuring of the Company.
In October 1996, the Company reduced its common equity interest in
MascoTech from approximately 45 percent through the sale to MascoTech of
MascoTech common stock and warrants to purchase shares of MascoTech common
stock. This action was taken to effectuate the Company's long-standing objective
to simplify its affiliate relationships. MascoTech's conversion of its
outstanding preferred stock in mid-1997 will further reduce the Company's
ownership of MascoTech's common stock to approximately 17 percent. The Company
received $115 million of the purchase price for the common stock and warrants in
cash at closing and the balance of $151,375,000, which bears interest at the
rate of 6 5/8% per annum, is due by September 30, 1997. The balance of the
purchase price is payable in cash or, at MascoTech's option and subject to
obtaining any necessary approvals, in cash and publicly traded securities of
Emco Limited held by MascoTech. Emco Limited is a Canadian manufacturer and
distributor of home improvement and building products. The purchase price
received by the Company for the common stock and warrants was determined through
arms-length negotiations by the Company's Board of Directors (with Messrs.
Manoogian and Morgan abstaining) and with the assistance of the Company's
outside legal counsel and investment bankers. As part of this transaction, the
Company granted MascoTech a right of first refusal, which expires September 30,
2000, to purchase the remaining shares of MascoTech common stock held by the
Company.
Concurrently with the purchase of securities from the Company, MascoTech
also purchased one million shares of its common stock from Richard A. Manoogian
(at the then current market price) for $13,625,000, of which $6 million was paid
in cash at closing, with the balance, which bears interest at the rate of 6 5/8%
per annum, due by September 30, 1997. Mr. Manoogian is the Chairman and Chief
Executive Officer of both MascoTech and the Company. As a result of the purchase
of Mr. Manoogian's shares, his ownership interest in MascoTech common stock
remained at approximately the same percentage after giving effect to MascoTech's
purchase of shares from the Company.
The Company is a party to certain agreements with MascoTech as described
below, certain of which were amended in connection with the above-described sale
to MascoTech of its common stock and warrants.
16
<PAGE> 19
MASCOTECH CORPORATE SERVICES AGREEMENT
Under a Corporate Services Agreement, the Company provides MascoTech and
its subsidiaries with office space for its executive offices, use of the
Company's data processing equipment and services, certain research and
development services, corporate administrative staff and other support services
in return for MascoTech's payment of an annual base service fee of .8 percent of
its consolidated annual net sales, subject to adjustments. This agreement also
provides for various license rights and confidential treatment of information
which may arise from the Company's performance of research and development
services on behalf of MascoTech. For 1996, approximately $7.1 million was paid
to the Company under this agreement, which continues in effect until September
30, 1998 and thereafter will be renewed automatically for one-year periods,
unless terminated by either party upon at least 90 days notice before any
October 1 renewal date.
MASCOTECH CORPORATE OPPORTUNITIES AGREEMENT
The Company and MascoTech are parties to a Corporate Opportunities
Agreement which addresses potential conflicts of interest with respect to future
business opportunities. This agreement materially restricts the ability of
either party to enter into acquisitions, joint ventures or similar transactions
involving businesses in which the other party is engaged without the consent of
the other party. This agreement continues until September 30, 1998, and will
thereafter automatically renew for one-year periods, unless terminated by either
party upon at least 90 days notice prior to any October 1 renewal date.
MASCOTECH STOCK REPURCHASE AGREEMENT
Under a Stock Repurchase Agreement, the Company has the right to sell to
MascoTech, at a price based on fair market value, shares of MascoTech common
stock upon certain events that would result in the Company's ownership of
MascoTech common stock exceeding 49 percent of MascoTech's then outstanding
common shares. Such events include repurchases of MascoTech common stock
initiated by MascoTech or any of its subsidiaries and reacquisitions of
MascoTech common stock through forfeitures of shares previously awarded by
MascoTech or the Company pursuant to their respective employee stock incentive
plans. In each case MascoTech has control over the amount of MascoTech common
stock it would ultimately acquire, including shares subject to repurchase under
the Stock Repurchase Agreement. These rights expire 30 days from the date the
notice of an event is given by MascoTech to the Company. The Company has advised
MascoTech that it intends to exercise such right whenever necessary to prevent
its ownership of MascoTech common stock from exceeding 49 percent of the
MascoTech common stock then outstanding; however, in view of the Company's
current level of share ownership in MascoTech, the Company does not anticipate
that this agreement will ever be operative.
MASCOTECH ASSUMPTION AND INDEMNIFICATION AGREEMENT
Under an Assumption and Indemnification Agreement, MascoTech assumed, and
agreed to indemnify the Company against, all of the liabilities and obligations
of the businesses transferred to it in the Company's 1984 restructuring,
including claims and litigation resulting from events or circumstances that
occurred or existed prior to the transfer, but excluding specified liabilities,
including those related to certain of the Company's stock option, restricted
stock and pension plans.
MASCOTECH SECURITIES PURCHASE AGREEMENT
Under a Securities Purchase Agreement, the Company agreed to purchase from
MascoTech at MascoTech's option up to $200 million of subordinated debentures
and, in connection therewith, MascoTech pays an annual commitment fee to the
Company of $250,000. This commitment was extended to March 31, 2002 in
connection with MascoTech's 1996 purchase from the Company of MascoTech common
stock and warrants. MascoTech has also agreed to file registration statements
under the federal securities laws to enable the Company from time to time to
publicly dispose of securities of MascoTech held by the Company.
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<PAGE> 20
MASCO CAPITAL CORPORATION
In 1988 the Company and MascoTech jointly established Masco Capital
Corporation to seek business and other investment opportunities of mutual
interest that for various reasons were viewed as more appropriately undertaken
on a joint basis rather than individually. In December 1991, the Company
purchased MascoTech's 50 percent ownership interest in Masco Capital for
approximately $49.5 million and may make additional payments based upon any
aggregate net increase in the value of Masco Capital's remaining investments.
TRIMAS CORPORATION
Effective October 1, 1988, MascoTech transferred to TriMas various
businesses and cash in exchange for common stock and other securities of TriMas.
In a related transaction, the Company, which prior to such transfer had an
equity ownership interest in TriMas, purchased additional TriMas common stock
for cash. As part of these transactions, TriMas agreed to indemnify MascoTech
against substantially all of the liabilities and obligations of the businesses
transferred to it, and the three companies entered into certain other agreements
described below. As of March 31, 1997 the Company and MascoTech owned 3.8
percent and 36.8 percent, respectively, of the outstanding TriMas common stock.
TRIMAS CORPORATE SERVICES AGREEMENT
Under a Corporate Services Agreement, the Company provides TriMas and its
subsidiaries with use of the Company's data processing equipment and services,
certain research and development services, corporate administrative staff and
other support services, in return for TriMas' payment of an annual base service
fee of .8 percent of TriMas' consolidated annual net sales, subject to
adjustments. This agreement also provides for various license rights and
confidential treatment of certain information which may arise from the Company's
performance of research and development services on behalf of TriMas. For 1996,
$3.3 million was paid to the Company under this agreement, which is terminable
by TriMas at any time upon at least 90 days notice and by the Company at the end
of any calendar year upon at least 180 days notice.
TRIMAS CORPORATE OPPORTUNITIES AGREEMENT
The Company, MascoTech and TriMas are parties to a Corporate Opportunities
Agreement which addresses potential conflicts of interest with respect to future
business opportunities. It materially restricts TriMas' ability to enter into
businesses in which the Company or MascoTech is engaged without the consent of
the Company or MascoTech. This agreement will continue in effect until at least
two years after the termination of the TriMas Corporate Services Agreement and
thereafter will be renewed automatically for one-year periods, subject to
termination by any party at least 90 days prior to any such scheduled renewal
date.
TRIMAS STOCK REPURCHASE AGREEMENT
Under a Stock Repurchase Agreement, which expires in December 1998, the
Company and MascoTech have the right to sell to TriMas, at approximate fair
market value, shares of TriMas common stock following the occurrence of certain
events that would result in an increase in their respective ownership percentage
of the then outstanding shares of TriMas common stock. Such events include
repurchases of TriMas common stock initiated by TriMas or any of its
subsidiaries and the reacquisitions of TriMas common stock through forfeitures
of shares previously awarded by TriMas pursuant to its employee stock incentive
plans. In each case TriMas has control over the amount of TriMas common stock it
would ultimately acquire, including shares subject to repurchase under the Stock
Repurchase Agreement. These rights expire 30 days from the date notice of an
event is given by TriMas. Neither the Company nor MascoTech has ever exercised
its right to sell TriMas common stock to TriMas. The Company and MascoTech have
advised TriMas that they intend to exercise their respective rights whenever
necessary to prevent their ownership of TriMas common stock from equaling or
exceeding 20 percent and 50 percent, respectively, of the TriMas common stock
then outstanding, or if the Company or MascoTech then determines such action to
be in its respective best interest.
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<PAGE> 21
FURNISHINGS INTERNATIONAL INC.
On August 5, 1996, the Company sold its Home Furnishings Group to
Furnishings International Inc. ("FII"), a corporation which is owned by a group
of investors, including 399 Venture Partners, Inc. (an affiliate of Citicorp),
the Company, certain affiliates of Travelers Group, Inc., and certain members of
FII's management, including Wayne B. Lyon, a Director of the Company and the
Company's former President. The Home Furnishings Group is a manufacturer and
marketer of residential furniture and a designer, marketer and distributor of
decorative home furnishing fabrics.
Total proceeds to the Company from the sale of the Home Furnishings Group
were approximately $1,050 million, with approximately $708 million in cash. The
balance consisted of $285 million of 12% pay-in-kind junior debt securities, and
equity securities totalling $57 million, consisting of 13% cumulative preferred
stock with a stated value of $55 million, 15 percent of the common stock of FII
and convertible preferred stock. The convertible preferred stock represents
transferable rights for up to a 25 percent common ownership, although the
Company is restricted from maintaining an ownership in excess of 20 percent of
FII's common equity. As part of the transaction, FII assumed approximately $30
million of bank and other third party indebtedness of the Home Furnishings Group
and the Company agreed to indemnify FII against certain liabilities of the Home
Furnishings Group and to provide $15 million of credit support arrangements for
a period of time. The Company recorded approximately $14.3 million of
pay-in-kind interest income from FII for 1996. The Company received an opinion
from Merrill Lynch that, based upon the provisions contained therein, the
consideration received by the Company in the Home Furnishings Group sale
transaction was fair, from a financial point of view, to the Company.
The determination of the amount of consideration received by the Company
from FII for the Home Furnishings Group and the terms of the transaction
resulted from extensive negotiations between the parties. As previously reported
to stockholders, FII expressed its strong desire that Wayne B. Lyon, the
Company's President and Chief Operating officer at the time, join FII and its
subsidiary, LifeStyle Furnishings International Ltd., as full-time Chairman,
President and Chief Executive Officer following the consummation of the sale of
the Home Furnishings Group to FII, and the Company reluctantly acceded to this
request. Mr. Lyon abstained from voting at the meeting of the Board of Directors
of the Company at which the transaction was reviewed and approved.
As part of the disposition of the Home Furnishings Group, the Company and
FII entered into a Transitional Services Agreement pursuant to which the Company
has provided FII with certain corporate support staff and administrative
services, including data processing, accounting, treasury and tax services,
human resources and employee benefit management services, research and
development services and other support services in return for FII's payment of a
monthly fee of $500,000, subject to certain adjustments. This agreement also
provides for various license rights and confidential treatment of information
which may arise from the Company's performance of research and development
services on behalf of FII. FII paid the Company approximately $2.2 million for
services during 1996 under this agreement. Services will be substantially
discontinued following the April 30, 1997 expiration of this agreement. For 1996
FII paid the Company approximately $145,900 for the purchase of products from
the Company and the Company paid FII approximately $228,900 for purchases from
FII.
Subject to certain conditions, and upon the request of the Company, FII has
agreed to file registration statements under the federal securities laws to
permit the sale in public offerings of FII common stock held by the Company. FII
also has agreed, subject to certain conditions and upon the request of the
Company, to conduct an exchange offer under the federal securities laws or to
file a registration statement under the federal securities laws, in each case to
permit the sale by the Company (or a permitted transferee of the Company) in
public offerings of 12% junior debt securities of FII held by the Company. FII
provides indemnification against certain liabilities arising from such
transactions.
19
<PAGE> 22
OTHER RELATED PARTY TRANSACTIONS
MascoTech holds CDN $17,680,000 of 8% subordinated debentures and CDN
$33,040,000 of 7 1/4% convertible subordinated debentures issued by Emco
Limited, for which Frank M. Hennessey, the Company's Executive Vice President,
also serves as Chairman of the Board and Chief Executive Officer.
MascoTech GmbH, a German subsidiary of MascoTech, and Masco GmbH, a German
subsidiary of the Company, have from time to time advanced excess funds held in
such foreign country to one another to be used for working capital. The parties
negotiate a fluctuating rate of interest for these loans. The largest amount
outstanding payable by MascoTech GmbH during 1996 was approximately U.S.
$188,000.
TriMas acquired several businesses from the Company in early 1990, and as
part of the transaction, the Company agreed to indemnify TriMas against certain
liabilities of the acquired businesses. In 1993, as part of its plan to dispose
of its energy-related businesses, MascoTech sold Lamons Metal Gasket Co. to
TriMas for a purchase price of $60 million plus additional future payments
contingent upon the level of profitability of Lamons. TriMas expects to make a
contingent payment to MascoTech during 1997. As part of the transaction,
MascoTech agreed to indemnify TriMas against certain liabilities of the acquired
business.
Sales of products and services and other transactions occur from time to
time among the Company, MascoTech and TriMas. As a result of such transactions
in 1996, the Company paid approximately $17.3 million to MascoTech and
approximately $1 million to TriMas, and received approximately $41,000 from
MascoTech. In addition, MascoTech paid approximately $4 million to TriMas and
TriMas paid approximately $.4 million to MascoTech as a result of such
transactions in 1996. MascoTech and TriMas participate with the Company in a
number of national purchasing programs, which enable each of them to obtain
favorable terms from certain of their service and product suppliers.
In 1989 the Company made long-term restricted stock awards to a large
number of key Company employees that were combined with tandem rights to phantom
TriMas shares. The value of a phantom TriMas share is deemed to be equal to the
value of a share of TriMas common stock. At the time of the grant, the aggregate
value of the shares of Company Common Stock awarded to each participant was
equal to the aggregate value of the alternative phantom TriMas shares that were
awarded. The phantom TriMas shares vest on the same schedule as the shares of
Company Common Stock. On each vesting date the participant receives the benefit
of the then current value of the vesting shares of Company Common Stock or the
then current value of the vesting phantom TriMas shares, whichever is greater.
If the value of the vesting phantom TriMas shares is greater, the participant
receives the vesting shares of the Company Common Stock and the excess is paid
in cash. If the value of the vesting phantom TriMas shares is less, the
participant receives only the vesting shares of Company Common Stock.
Subject to certain conditions, and upon the request of MascoTech or the
Company, TriMas has agreed to file registration statements under the federal
securities laws to permit the sale in public offerings of TriMas common stock
held by the Company and MascoTech. In addition, the Company and MascoTech
entered into arrangements with TriMas pursuant to which TriMas registered shares
of TriMas common stock held by certain executives of the Company and MascoTech,
including Richard A. Manoogian, under incentive programs established by such
companies. TriMas provides indemnification against certain liabilities arising
from such transactions.
Ownership of securities and various other relationships and incentive
arrangements may result in conflicts of interest in the Company's dealings with
MascoTech, TriMas and others. The MascoTech and TriMas Corporate Opportunities
Agreements and other aspects of the relationships among the three companies may
affect their ability to make acquisitions and develop new businesses under
certain circumstances although the Company does not believe it has experienced
any such effect to date. Three persons affiliated with the Company are currently
members of both MascoTech's Board of Directors and TriMas' Board of Directors.
Mr. Manoogian, the Company's Chairman of the Board and Chief Executive Officer,
is also the Chairman of the Board and Chief Executive Officer of MascoTech, the
Chairman of the Board of TriMas and a significant stockholder of all three
companies. Mr. Morgan, who is a Director of the Company, is also a director of
MascoTech and TriMas. Mr. Gargaro, an executive officer of the Company, is also
a director and the
20
<PAGE> 23
\
Secretary of both MascoTech and TriMas. Certain officers and other key employees
of the Company receive benefits based upon the value of the common stock of the
Company, MascoTech and TriMas under certain Company and MascoTech incentive
compensation programs. See "Compensation of Executive Officers."
The following table sets forth the number of shares of MascoTech and TriMas
common stock beneficially owned as of March 31, 1997 by the nominees, the
current Directors and named executive officers and by the current Directors and
executive officers of the Company as a group. Except as indicated below, each
person exercises sole voting and investment power with respect to the shares
listed.
<TABLE>
<CAPTION>
SHARES OF SHARES OF
COMMON STOCK OF COMMON STOCK OF
MASCOTECH, INC. TRIMAS CORPORATION
NAME(1) BENEFICIALLY OWNED BENEFICIALLY OWNED
------- ------------------ ------------------
<S> <C> <C>
Dr. Lillian Bauder............................................... 0 0
Frank M. Hennessey............................................... 0 40,000
Joseph L. Hudson, Jr. ........................................... 0 0
Verne G. Istock.................................................. 0 0
Raymond F. Kennedy............................................... 0 40,000
Mary Ann Krey.................................................... 0 0
Erwin L. Koning.................................................. 3,000 500
John R. Leekley(2)(8)............................................ 6,800 14,650
Wayne B. Lyon(3)(8).............................................. 42,514 179,084
Richard A. Manoogian(4)(5)(8).................................... 4,543,042 1,801,852
John A. Morgan................................................... 24,000 8,000
Richard G. Mosteller............................................. 0 0
Arman Simone(6)(8)............................................... 20,000 2,880
Peter W. Stroh................................................... 0 0
All 17 current Directors and executive officers of the
Company as a group (excluding subsidiary, divisional and
group executives)(2)(3)(4)(5)(6)(7)(8)......................... 4,747,630 2,291,670
</TABLE>
- -------------------------
(1) The only nominee, current Director or named executive officer of the Company
who beneficially owns one percent or more of MascoTech or TriMas common
stock is Mr. Manoogian, who beneficially owns 11.7 percent of MascoTech
common stock and 4.4 percent of TriMas common stock. Current Directors and
executive officers of the Company as a group beneficially own 12.3 percent
of MascoTech common stock and 5.5 percent of TriMas common stock.
(2) Includes 3,767 shares of MascoTech common stock and 12,650 shares of TriMas
common stock held by a trust for which Mr. Leekley serves as a trustee.
(3) Includes 2,000 shares of MascoTech common stock and 7,184 shares of TriMas
common stock owned by a foundation for which Mr. Lyon serves as a director,
3,321 shares of MascoTech common stock which may be acquired upon conversion
of convertible securities and 3,000 shares of TriMas common stock held by
trusts for which Mr. Lyon serves as a trustee and 1,193 shares of MascoTech
common stock which may be acquired upon conversion of convertible securities
held by a Keogh Plan for Mr. Lyon.
(4) Includes 202,560 shares of MascoTech common stock and 33,008 shares of
TriMas common stock owned by charitable foundations for which Mr. Manoogian
serves as a director, and 387,006 shares of MascoTech common stock which can
be acquired upon conversion of convertible securities owned by the
foundations. In addition, Mr. Manoogian may be deemed to be the beneficial
owner of 200,000 shares of MascoTech's $1.20 Convertible Preferred Stock
(1.9 percent of the total issue outstanding) owned by one of the
foundations.
(5) Includes shares of MascoTech common stock which may be acquired on or before
May 30, 1997 upon exercise of stock options (1,080,000 shares for both Mr.
Manoogian and all current Directors and executive officers of the Company as
a group), and unvested restricted shares issued under the Company's or
MascoTech's restricted stock incentive plans (69,260 shares for Mr.
Manoogian and
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<PAGE> 24
90,380 shares for all current Directors and executive officers of the
Company as a group). Holders exercise neither voting nor investment power
over unexercised option shares and have voting but no investment power over
unvested restricted shares.
(6) Includes 10,000 shares of MascoTech common stock owned by a charitable
organization for which Mr. Simone serves as a director.
(7) Includes 27,000 shares of MascoTech common stock and 11,684 shares of TriMas
common stock owned by trusts for which an executive officer serves as a
trustee and 4,354 shares of MascoTech common stock which could be acquired
upon conversion of convertible debt securities owned by such trusts.
(8) The directors of the foundations and the charitable organization and the
trustees share voting and investment power with respect to the MascoTech
securities and the TriMas common stock owned by such entities; however,
Messrs. Manoogian, Lyon, Simone and Leekley and the executive officer who
serves as a trustee for certain trusts each disclaim beneficial ownership of
such securities.
PROPOSAL TO APPROVE THE 1997 NON-EMPLOYEE DIRECTORS STOCK PLAN
The Board of Directors has adopted and is presenting for stockholder
approval the Masco Corporation 1997 Non-Employee Directors Stock Plan (the
"Directors Stock Plan"). Under the Directors Stock Plan, non-employee Directors'
compensation will be paid in part in Company Common Stock and in part in cash,
instead of 100 percent in cash. The Board has adopted this plan as a key
component of an overall Company compensation strategy which will more closely
align the compensation of Directors, officers and other key employees with the
long-term enhancement of stockholder value. In addition, by offering
non-employee Directors the opportunity to participate in the future growth of
the Company as stockholders, the Board believes the plan will enhance the
Company's ability to attract, motivate and retain Directors of exceptional
ability. A summary of the plan is set forth below and is qualified in its
entirety by reference to the full text of the Directors Stock Plan, which is
attached to this Proxy Statement as Annex A.
GENERAL INFORMATION
If it is approved by stockholders, the Directors Stock Plan will replace
one-half of the cash compensation paid to each non-employee Director with an
award of restricted shares of Company Common Stock. Currently, non-employee
Directors are paid annual cash compensation of $50,000. Under the plan, one-half
of the cash compensation for a five-year period beginning in 1997 will be
replaced with 3,470 restricted shares of Company Common Stock. Each award will
vest in 20 percent annual installments (694 shares) on January 1 of each of the
five years following the year of award. These shares had a value of
approximately $125,000 based on the $36 closing price of the Company Common
Stock on February 18, 1997, the date of grant, and accordingly, assuming a $36
share price, shares received on each vesting date would be equivalent to the
$25,000 of cash compensation not being received. Since the number of shares is
fixed at the beginning of the five-year period, the entire value of five-year,
non-cash compensation is at risk, and non-employee Directors may ultimately
receive Company Common Stock having a value more or less than the annual cash
payment of $25,000 that they would have otherwise received.
If the plan is approved and assuming Mr. Istock and Ms. Krey are elected to
the Board at the 1997 Annual Meeting, they will each receive an award as of the
date of the Annual Meeting based on the closing price of Company Common Stock on
that date. Assuming the election of all nominees for Director at the Annual
Meeting, there will be seven non-employee Directors. Any new non-employee
Director elected or appointed to the Board in the future will receive an award
of restricted shares as set forth above, with the number of shares awarded based
on the closing price of Company Common Stock on the date of grant. The amount of
restricted stock awarded to a non-employee Director who begins service other
than at January 1 will be prorated to reflect the partial year of service during
the Director's initial term.
The non-employee Directors will be entitled to vote and receive dividends
on the unvested shares of restricted stock, but cannot transfer them. All shares
of restricted stock not yet vested are forfeited upon termination of a
non-employee Director's service as such, except that if termination is due to
death or
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<PAGE> 25
permanent and total disability, all restrictions lapse immediately. Upon full
vesting of an award, the plan permits a new award to be granted for the
subsequent five-year period, calculated in a similar manner; provided, however,
the Board may adjust the amount of compensation then to be paid in the form of
shares of Company Common Stock and the terms of any such award. If the plan is
not approved, the conditionally granted awards will be canceled, no other awards
will be made under the plan and the non-employee Directors' cash compensation
will be restored to its previous level.
To further align Director compensation with the enhancement of stockholder
value and subject to stockholder approval, the Directors Stock Plan also
provides for the grant of a non-qualified option to purchase 4,000 shares of
Company Common Stock to each person who is a non-employee Director on the date
of the 1997 Annual Meeting. These options will have an exercise price equal to
the closing price of Company Common Stock on the date of grant. Thereafter, each
person who is then serving as a non-employee Director or who becomes a
non-employee Director on the date of any subsequent annual stockholders meeting
and whose service on the Board will continue after that date will be granted an
option to purchase 4,000 shares of Company Common Stock at the then current
market price. The term of each option is ten years from the date of grant,
except that options may be exercised for only a limited period of time following
termination of a non-employee Director's service as a non-employee Director.
Each option will become exercisable with respect to 20 percent of the underlying
shares on each of the first five anniversaries of the grant date.
The maximum number of shares of Company Common Stock available under the
Directors Stock Plan is 500,000. Shares subject to awards that are forfeited or
terminated will again be available for awards, as will shares tendered to the
Company in satisfaction or partial satisfaction of the exercise price of an
option. Shares to be delivered under the plan will be made available from newly
issued shares or shares reacquired by the Company. In the event of a merger,
reorganization, consolidation, recapitalization, stock split, stock dividend or
other change in corporate structure affecting shares of Company Common Stock,
the number of shares which may be issued under the plan and the number of shares
subject to any outstanding awards will be adjusted to avoid the enhancement or
diminution of the benefits intended to be provided under the plan.
The Directors Stock Plan will be administered by the Board of Directors.
The Board has the authority to interpret the plan, to establish, amend, and
rescind any rules and regulations relating to the plan and to make all other
determinations for the administration of the plan. The determinations of the
Board in the administration of the plan, as described herein, will be final and
conclusive. The Secretary of the Company will be authorized to take such
ministerial actions as may be necessary to effectuate the intent of the plan.
The Board may amend, suspend or discontinue the Directors Stock Plan as it
considers advisable or to conform to any change in any law or regulation
applicable thereto. Without the approval of stockholders, however, the Board may
not modify the class of individuals who constitute non-employee Directors or
increase the total number of shares available under the plan.
The following summarizes the awards to be received by non-employee
Directors as a group for 1997 under the Directors Stock Plan:
NEW PLAN BENEFITS
1997 NON-EMPLOYEE DIRECTORS STOCK PLAN
<TABLE>
<CAPTION>
AGGREGATE AGGREGATE
NON-EMPLOYEE DIRECTOR GROUP (SEVEN INDIVIDUALS) DOLLAR VALUE NUMBER OF SHARES
----------------------------------------------- ------------ ----------------
<S> <C> <C>
Five-year restricted awards....................... $862,500(1) 23,790(2)
Options........................................... -- 28,000
</TABLE>
- -------------------------
(1) Represents the amount of cash compensation for five years to be replaced by
awards of restricted stock equivalent in value on the date of grant. The
annual cash compensation to be replaced by the award would be $25,000 for
each non-employee Director, prorated to reflect the partial year of service
for Mr. Istock and Ms. Krey, nominees for Director at the 1997 Annual
Meeting.
(2) Calculated using the closing price of Company Common Stock on February 18,
1997 for the awards granted as of such date and the closing price of Company
Common Stock on April 15, 1997 for the awards to be granted as of the date
of the 1997 Annual Meeting.
23
<PAGE> 26
On April 15, 1997, the closing price per share of Company Common Stock on
the New York Stock Exchange Composite Tape was $36 7/8. If the plan is not
approved, the conditionally granted awards will be canceled, no further awards
will be made under the plan and the Board will consider other alternatives.
FEDERAL INCOME TAX CONSEQUENCES OF OPTIONS
For information concerning the federal income tax consequences of the
issuance and exercise of stock options, see "Proposal to Approve the Amendment
of the 1991 Long Term Stock Incentive Plan -- Federal Income Tax Consequences."
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE 1997
NON-EMPLOYEE DIRECTORS STOCK PLAN.
PROPOSAL TO APPROVE THE 1997 ANNUAL INCENTIVE COMPENSATION PLAN
The Board of Directors has adopted and is presenting for stockholder
approval the Masco Corporation 1997 Annual Incentive Compensation Plan (the
"1997 Cash Incentive Plan"). The 1997 Cash Incentive Plan is being submitted for
stockholder approval in order to comply with the requirements of Section 162(m)
of the Code. In general, Section 162(m) disallows deductions for compensation in
excess of $1 million paid to any of the five most highly compensated executives
of a public corporation, unless the compensation is based on performance
criteria. The named executive officers' annual cash bonuses have been paid in
accordance with the provisions of Section 162(m) since the regulations were
implemented, but stockholder approval is now required in order to maintain
deductibility under Section 162(m). The following summary is qualified in its
entirety by reference to the full text of the 1997 Cash Incentive Plan, which is
attached to this Proxy Statement as Annex B.
Under the 1997 Cash Incentive Plan, during the first quarter of each year
the Compensation Committee of the Board of Directors will establish in writing
for that year one or more performance criteria, consisting of net income,
earnings per share, cash flow, revenues, return on assets or total shareholder
return. The Compensation Committee will designate the participants and grant
each such participant a performance incentive award. Eligibility under the plan
is limited to the executive officers of the Company. After the Company's
financial results for the year have been determined, the Committee will certify
the attainment of the performance criteria and will calculate the possible
payout of awards. The Compensation Committee has the power and authority to
reduce or eliminate (but not to increase) for any reason the amount that would
otherwise be payable to a participant based on the performance criteria and the
Company's financial performance for the year. In no event shall an award exceed
$2 million.
Awards have been granted under the plan for 1997, subject to stockholder
approval. If approved by stockholders, the plan will be effective beginning
January 1, 1997 for a period of five years unless sooner terminated by the
Compensation Committee. For 1997, the Compensation Committee has established
performance criteria based on the Company's net income. If the plan is not
approved, the conditional awards will be canceled, no further awards will be
made under the plan and the Compensation Committee will consider other
alternatives.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE 1997
ANNUAL INCENTIVE COMPENSATION PLAN.
PROPOSAL TO APPROVE THE AMENDMENT OF THE
1991 LONG TERM STOCK INCENTIVE PLAN
Subject to stockholder approval, the Board of Directors has amended the
Masco Corporation 1991 Long Term Stock Incentive Plan (the "1991 Plan"). The
1991 Plan is a key part of the Company's overall compensation strategy of
aligning compensation programs with long-term enhancement of stockholder value
objectives and requiring executives and key employees to remain at risk by
maintaining an investment in Company Common Stock. The 1991 Plan is designed to
encourage selected employees of and consultants to the Company and its
affiliates to acquire a proprietary interest in the Company's growth and
performance in order to provide increased incentive for such individuals to
contribute to the Company's future success and prosperity. The Board believes
that the 1991 Plan has enhanced the ability of the Company and its affiliates to
24
<PAGE> 27
attract and retain exceptionally qualified individuals upon whom the Company's
sustained progress, growth and profitability depend, thus enhancing the value of
the Company for the benefit of its stockholders.
As noted in the Executive Compensation Committee Report, stock options and
restricted stock awards granted under the 1991 Plan and prior plans are an
established part of Company compensation arrangements. The amendment to the 1991
Plan that is being proposed for stockholder approval limits the number of shares
upon which options and stock appreciation rights can be granted to any
participant in any calendar year. Stockholder approval of this amendment is
required under Code Section 162(m) in order for the Company to claim income tax
deductions relating to future grants of stock options and stock appreciation
rights. Certain other amendments were made to the 1991 Plan relating to recent
changes in Section 16 of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). In addition, because the Company has not issued discounted
stock options under the 1991 Plan nor repriced any options issued under the 1991
Plan, and does not intend to do so in the future, certain amendments have been
made to the 1991 Plan to prohibit the issuing of discounted options and the
repricing of options issued under the plan. The following summary is qualified
in its entirety by reference to the full text of the 1991 Plan as amended, which
is attached to this Proxy Statement as Annex C.
GENERAL INFORMATION
Employees of and consultants to the Company and its affiliates are eligible
to receive awards under the 1991 Plan. An affiliate is any entity in which the
Company has a 20 percent or greater equity interest and any other entity in
which the Committee administering the 1991 Plan determines the Company has a
significant equity interest.
The 1991 Plan permits granting awards of: (1) stock options, including
incentive stock options ("ISOs") meeting the requirements of Section 422 of the
Code and restoration options described below, (2) stock appreciation rights
("SARs"), (3) restricted stock and restricted stock units, (4) performance
awards, (5) dividend equivalents and (6) other awards valued in whole or in part
by reference to or otherwise based on Company Common Stock ("other stock-based
awards"). The 1991 Plan is administered by a Committee composed of at least two
of the Company's Directors, each of whom must be a "non-employee director" as
such term is defined in Rule 16b-3 under the Exchange Act. The Committee has the
authority to establish rules for the administration of the 1991 Plan; to select
the employees and consultants to whom awards are granted; to determine the types
of awards to be granted and the number of shares covered by such awards; to set
the terms and conditions of such awards; and to cancel, suspend and amend
awards. The Committee may also determine whether the payment of any proceeds of
any award shall or may be deferred and may authorize payments representing
dividends or interest or their equivalents in connection with any deferred
award. Determinations and interpretations of the Committee will be binding on
all parties. The Committee may delegate to one or more Directors who may be
participants in the 1991 Plan the authority to grant awards under the Plan.
The Board may amend, alter or discontinue the 1991 Plan at any time. No
amendment may impair the rights of any outstanding award holder without such
holder's consent.
Awards may be granted for no cash consideration or for such minimal cash
consideration as may be required by applicable law. Awards may provide that upon
their exercise or vesting the holder will receive cash, stock, other securities,
other awards, other property or any combination thereof, as the Committee shall
determine. The 1991 Plan as amended provides that no participant may receive
stock options or SARs in any calendar year that relate to more than 1,000,000
shares of Company Common Stock; provided, however, that such number may be
increased with respect to any participant by any shares available for grant to
such participant in any prior years that were not granted in such prior years
beginning on or after January 1, 1997. Any shares of stock deliverable under the
1991 Plan may consist in whole or in part of authorized and unissued shares or
treasury shares. Subject to certain limited exceptions and the authority of the
Committee to determine otherwise, awards under the 1991 Plan may not be
transferred. The 1991 Plan provides that immediately upon certain events
constituting a change in control of the Company the vesting of all rights of
participants accelerates and all restrictions on all awards under the 1991 Plan
terminate.
The Committee establishes the purchase price per share for options (not
less than the fair market value of a share of Company Common Stock on the date
of grant), the term of options, the time at which they may
25
<PAGE> 28
be exercised and such other terms as the Committee deems appropriate. Unless the
Committee determines otherwise, payment of the purchase price in full in cash or
in shares of Company Common Stock or any combination thereof, at the option of
the participant, is required upon option exercise, and options may be exercised
for only a limited period of time following termination of the employment or
consulting relationship (up to one year in the event of death). If the exercise
price of an option granted under the 1991 Plan or of any other option is paid in
Company Common Stock, the Committee may grant the exercising optionee a
restoration option covering a number of shares equal to the number of shares
delivered upon such exercise.
The holder of an SAR will be entitled to receive the excess of the fair
market value (calculated as of the exercise date or, if the Committee shall so
determine in the case of any SAR not related to an ISO, as of any time during a
specified period before or after the exercise date) of a specified number of
shares over the grant date price of the SAR.
A restricted stock award may provide the recipient with all of the rights
of a stockholder of the Company, including the right to vote the shares and to
receive any dividends. Restricted stock and restricted stock units generally
will be subject to certain forfeiture conditions and may not be transferred by
the recipient until such restrictions lapse. In general, unless the Committee
determines otherwise, all shares of restricted stock are forfeited upon
termination of the employment or consulting relationship during the restricted
period, except that if termination is due to death or permanent and total
disability, all restrictions lapse immediately and if termination of employment
is due to retirement, the restrictions continue to lapse in the same manner as
though employment had not terminated.
Performance awards will provide the holder with rights valued as determined
by the Committee and payable to, or exercisable by, the holder, in whole or in
part, upon the achievement of such performance goals during such performance
periods that the Committee establishes. Dividend equivalents will entitle the
holder to receive payments equivalent to dividends or interest with respect to a
specified number of shares. The Committee is also authorized to establish the
terms and conditions of other stock-based awards.
There were approximately 10,000,000 shares of Company Common Stock
initially available for issuance under the 1991 Plan (including shares carried
forward from prior plans), of which approximately 8,000,000 remain available for
issuance under the 1991 Plan. An additional 8,000,000 reacquired shares can be
added to the authorized shares available for awards under the 1991 Plan. For
this purpose, reacquired shares consist of shares reacquired by the Company in
full or partial payment for the exercise price of an option granted under the
1991 Plan or any other employee stock plan of the Company, and shares reacquired
in open market transactions or otherwise in connection with the 1991 Plan or any
award thereunder or any other employee stock option or restricted stock issued
by the Company. Also, shares covered by an award under the 1991 Plan which are
forfeited or shares covered by an award which is terminated may be included in
the additional shares under the 1991 Plan. Since 1991, the Company has
reacquired in connection with the activities described above approximately
6,600,000 shares. For purposes of the approval of the 1991 Plan as amended,
these reacquired shares are not being applied to reduce the number of reacquired
shares which can be added back to the shares authorized under the 1991 Plan for
future awards. Thus, if the 1991 Plan as amended is approved by stockholders, a
maximum of 8,000,000 reacquired shares will be available for awards issuable
under the 1991 Plan.
If any dividend or other distribution, recapitalization, stock split,
reverse stock split, reorganization, merger, consolidation, split-up, spin-off,
combination, repurchase, or exchange of shares or other securities of the
Company, issuance of warrants or other rights to purchase shares or other
securities of the Company, or other similar corporate transaction or event
affects the shares, then the Committee may in such manner as it deems equitable,
adjust (1) the number and type of shares (or other securities or property) which
thereafter may be made the subject of awards, (2) outstanding awards, including
without limitation the number and type of shares (or other securities or
property) subject thereto, and (3) the grant, purchase or exercise price with
respect to any award, and may make provision for a cash payment to the holder of
an outstanding award. The Committee is authorized, for similar purposes, to make
adjustments in performance award criteria or in the terms and conditions of
other awards in recognition of unusual or nonrecurring events affecting the
Company or its financial statements or of changes in applicable laws,
regulations or accounting principles.
26
<PAGE> 29
The Committee may correct any defect, supply any omission, or reconcile any
inconsistency in the 1991 Plan or in any award in the manner and to the extent
it shall deem desirable to effectuate the 1991 Plan. Nothing contained in the
1991 Plan shall prevent the Company or any affiliate from adopting or continuing
in effect other or additional compensation arrangements.
The benefits or amounts that will be received or allocated in the future
under the 1991 Plan as amended have not yet been determined. The benefits
received under the 1991 Plan by the named executive officers are set forth in
the Summary Compensation Table. The table below sets forth the awards received
by the Company's executive officers as a group and by other employees (including
officers who are not executive officers) of the Company as a group under the
1991 Plan during 1996. See "Executive Compensation Committee Report" for
additional information regarding the terms and conditions that must be satisfied
for the awards set forth below to be realized.
<TABLE>
<CAPTION>
STOCK AWARDS* STOCK OPTIONS**
------------------------------- ---------------
DOLLAR VALUE NUMBER OF SHARES
------------ ----------------
<S> <C> <C> <C>
Executive Officer Group............................ $ 8,372,000 258,700 2,080,000
Non-Executive Officer Employee Group............... $27,477,000 899,480 600,401
</TABLE>
- -------------------------
* Table includes number of shares granted and the dollar value of the grant on
the date of grant. See "Summary Compensation Table" for further information.
** See "Option Grant Table" for further information.
On April 15, 1997, the closing price of Company Common Stock on the New
York Stock Exchange Composite Tape was $36 7/8 per share.
FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the principal federal income tax consequences
generally applicable to awards under the 1991 Plan. The grant of a stock option
or SAR will generally create no immediate tax consequences for the recipient or
the Company or an affiliate employing such individual. The holder of an ISO
generally will have no taxable income upon exercising the ISO (except that the
alternative minimum tax may apply), and the employer generally will receive no
tax deduction when an ISO is exercised. Upon exercising a stock option other
than an ISO, the optionee must recognize ordinary income equal to the excess of
the fair market value of the shares acquired on the date of exercise over the
option exercise price, and the employer will then be entitled to a tax deduction
for the same amount. Upon exercising an SAR, the amount of any cash received and
the fair market value on the exercise date of any shares or other property
received are taxable to the recipient as ordinary income and that amount is also
deductible by the employer.
The tax consequence to an optionee of a disposition of shares acquired
through the exercise of an SAR or a stock option will depend on how long the
shares have been held and upon whether such shares were acquired by exercising
an ISO or by exercising an SAR or stock option other than an ISO. Generally,
there will be no tax consequence to the employer in connection with a
disposition of shares acquired under an option, except that the employer may be
entitled to a tax deduction in the case of a disposition of shares acquired
under an ISO before the applicable ISO holding periods have been satisfied.
With respect to awards granted under the 1991 Plan that are settled in cash
or in shares or other property that is either transferable or not subject to
substantial risk of forfeiture, the holder must recognize ordinary income equal
to the excess of (a) the cash or the fair market value of the shares or other
property received (determined as of the first time the shares or other property
become transferable or not subject to substantial risk of forfeiture, whichever
occurs earlier) over (b) the amount paid, if any, for such shares or other
property by the holder, and the employer will then be entitled to a deduction
for the same amount.
IF THE AMENDMENT OF THE 1991 PLAN IS NOT APPROVED BY STOCKHOLDERS, THE 1991
PLAN WILL REMAIN IN EFFECT WITHOUT THE LIMITATION ADDED BY THE PROPOSED
AMENDMENT.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE AMENDMENT
OF THE 1991 LONG TERM STOCK INCENTIVE PLAN.
27
<PAGE> 30
RATIFICATION OF SELECTION OF
INDEPENDENT PUBLIC ACCOUNTANTS
Upon the recommendation of the Audit Committee, the Board of Directors has
selected the independent public accounting firm of Coopers & Lybrand L.L.P.
("Coopers & Lybrand") to audit the Company's financial statements for the year
1997, and believes it appropriate to submit its choice for ratification by
stockholders.
Coopers & Lybrand has acted as the Company's independent certified public
accounting firm for over 36 years. During such time, it has performed services
of an accounting and auditing nature for the Company as well as for MascoTech
and TriMas. Representatives of Coopers & Lybrand are expected to be present at
the meeting, will have the opportunity to make a statement and are expected to
be available to respond to appropriate questions.
If the selection is not ratified, the Board will consider selecting another
public accounting firm as the independent auditors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF THE
SELECTION OF COOPERS & LYBRAND L.L.P. AS INDEPENDENT AUDITORS FOR THE COMPANY
FOR THE YEAR 1997.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive officers and directors, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange Commission
and the New York Stock Exchange. Officers, directors and greater than ten
percent shareholders are required by regulations of the Securities and Exchange
Commission to furnish the Company copies of all Section 16(a) forms they file.
Based solely on the Company's review of copies of such forms received by
it, or written representations from certain reporting persons that no Forms 5 is
required for those persons, the Company believes that its Directors, officers
and greater than ten percent beneficial owners met all applicable filing
requirements during the last fiscal year, except that a report of Mr. Lyon's
charitable contributions of 215 shares of Company Common Stock in December 1996
is being filed after the due date.
STOCKHOLDERS' PROPOSALS
Stockholders' proposals intended to be presented at the 1998 Annual Meeting
of Stockholders of the Company must be received by the Company at its address
stated above by December 30, 1997, to be considered for inclusion in the
Company's Proxy Statement and Proxy relating to such meeting.
OTHER MATTERS
The Board of Directors knows of no other matters to be voted upon at the
meeting. If any other matters properly come before the meeting, it is the
intention of the proxies named in the enclosed Proxy to vote the shares
represented thereby with respect to such matters in accordance with their best
judgment.
By Order of the Board of Directors
Eugene A. Garagaro, Jr.
EUGENE A. GARGARO, JR.
Secretary
Taylor, Michigan
April 25, 1997
28
<PAGE> 31
ANNEX A
MASCO CORPORATION
1997 NON-EMPLOYEE DIRECTORS STOCK PLAN
SECTION 1. PURPOSE
The purpose of this Plan is to ensure that the non-employee Directors of
Masco Corporation (the "Company") have an equity interest in the Company and
thereby have a direct and long term interest in the growth and prosperity of the
Company by payment of part of their compensation in the form of common stock of
the Company.
SECTION 2. ADMINISTRATION OF THE PLAN
This Plan will be administered by the Company's Board of Directors (the
"Board"). The Board shall be authorized to interpret the Plan, to establish,
amend, and rescind any rules and regulations relating to the Plan and to make
all other determinations necessary or advisable for the administration of the
Plan. The Board's interpretation of the terms and provisions of this Plan shall
be final and conclusive. The Secretary of the Company shall be authorized to
implement the Plan in accordance with its terms and to take such actions of a
ministerial nature as shall be necessary to effectuate the intent and purposes
thereof. The validity, construction and effect of the Plan and any rules and
regulations relating to the Plan shall be determined in accordance with the laws
of the State of Michigan and applicable Federal law.
SECTION 3. ELIGIBILITY
Participation will be limited to individuals who are Eligible Directors, as
hereinafter defined. Eligible Director shall mean any Director of the Company
who is not an employee of the Company and who receives a fee for services as a
Director.
SECTION 4. SHARES SUBJECT TO THE PLAN
(a) Subject to the adjustments set forth below, the aggregate number of
shares of Company Common Stock, par value $1.00 per share ("Shares"), which may
be the subject of awards issued under the Plan shall be 500,000.
(b) Any Shares to be delivered under the Plan shall be made available from
newly issued Shares or from Shares reacquired by the Company, including Shares
purchased in the open market.
(c) To the extent a Stock Option award, as hereinafter defined, terminates
without having been exercised, or an award of Restricted Stock, as hereinafter
defined, is forfeited, the Shares subject to such Stock Option or Restricted
Stock award shall again be available for distribution in connection with future
awards under the Plan. Shares equal in number to the Shares surrendered to the
Company in payment of the option exercise price or withholding taxes (if any)
relating to or arising in connection with any Restricted Stock or Stock Option
hereunder shall be added to the number of Shares then available for future
awards under clause (a) above.
(d) In the event of any merger, reorganization, consolidation,
recapitalization, stock split, stock dividend, or other change in corporate
structure affecting the Shares, the aggregate number of Shares which may be
issued under the Plan, the number of Shares subject to Stock Options to be
granted under Section 6(a) hereof and the number of Shares subject to any
outstanding award of Restricted Stock or unexercised Stock Option shall be
adjusted to avoid enhancement or diminution of the benefits intended to be made
available hereunder.
SECTION 5. DIRECTOR STOCK COMPENSATION
(a) The compensation of each Eligible Director for the five year period
beginning January 1, 1997 shall be payable in part with an award of Restricted
Stock determined as set forth below, and in part in cash. Compensation for this
purpose means annual retainer fees but does not include supplemental retainer
fees for
A-1
<PAGE> 32
committee positions or fees for attendance at meetings, which shall be paid in
cash. The portion of compensation payable in Restricted Stock during the five
year period shall be equal to one-half of the annual compensation paid to
Eligible Directors in the year immediately prior to the award multiplied by
five, and the balance of compensation, unless otherwise determined by the Board,
shall be payable in cash. Each award of Restricted Stock shall vest in twenty
percent annual installments (disregarding fractional shares) on January 1 of
each of the five consecutive years following the year in which the award is
made. Subject to the approval of this Plan by the Company's stockholders, each
Eligible Director on February 18, 1997 is awarded as of that date 3,470 Shares
of Restricted Stock, based on the closing price of the Shares as reported on the
New York Stock Exchange Composite Tape (the "NYSE") on February 18, 1997. Cash
shall be paid to an Eligible Director in lieu of a fractional share.
(b) Subject to the approval of this Plan by the Company's stockholders,
each Eligible Director who is first elected or appointed to the Board on or
after the date of the Company's 1997 annual meeting of stockholders shall
receive, as of the date of such election or appointment, an award of Restricted
Stock determined in accordance with Section 5(a) for the five year period
beginning on January 1 of the year in which such election or appointment
occurred; provided, however, that the price of the Shares used in determining
the number of Shares of Restricted Stock which shall be issued to such Eligible
Director shall be the closing price of the Shares as reported on the NYSE on the
date on which such Eligible Director is elected or appointed, and provided,
further, that the amount of Restricted Stock awarded to any Eligible Director
who begins serving as a Director other than at the beginning of a calendar year
shall be prorated to reflect the partial service of the initial year of such
Director's term, such proration to be effected in the initial vesting.
(c) Upon the full vesting of any award of Restricted Stock awarded pursuant
to Section 5(a) or 5(b), each affected Eligible Director shall be eligible to
receive a new award of Restricted Stock, subject to Section 4. The number of
Shares subject to such award shall be determined generally in accordance with
the provisions of Section 5(b); provided, however, that the Board shall have
sole discretion to adjust the amount of compensation then to be paid in the form
of Shares and the terms of any such award of Shares. Except as the Board may
otherwise determine, any increase or decrease in an Eligible Director's annual
compensation during the period when such Director has an outstanding award of
Restricted Stock shall be implemented by increasing or decreasing the cash
portion of such Director's compensation.
(d) Each Eligible Director shall be entitled to vote and receive dividends
on the unvested portion of his or her Restricted Stock, but will not be able to
obtain a stock certificate or sell, encumber or otherwise transfer such
Restricted Stock except in accordance with the terms of the Company's 1991 Long
Term Stock Incentive Plan (the "Long Term Plan"). If an Eligible Director's term
is terminated by reason of death or permanent and total disability, the
restrictions on the Restricted Stock will lapse and such Eligible Director's
rights to the Shares will become vested on the date of such termination. If an
Eligible Director's term is terminated for any reason other than death or
permanent and total disability, the Restricted Stock that has not vested shall
be forfeited and transferred back to the Company; provided, however, that a pro
rata portion of the Restricted Stock which would have vested on January 1 of the
year following the year of the Eligible Director's termination shall vest on the
date of termination, based upon the portion of the year during which the
Eligible Director served as a Director of the Company.
SECTION 6. STOCK OPTION GRANT
(a) Subject to approval of this Plan by the Company's stockholders, each
Eligible Director on the date of such approval will be granted on such date a
stock option to purchase 4,000 Shares (the "Stock Option"). Thereafter, on the
date of each of the Company's subsequent annual stockholders meetings, each
person who is or becomes an Eligible Director on that date and whose service on
the Board will continue after such date shall be granted a Stock Option, subject
to Section 4, effective as of the date of such meeting.
(b) Stock Options granted under this Section 6 shall be non-qualified stock
options and shall have the following terms and conditions.
A-2
<PAGE> 33
1. Option Price. The option price per Share shall be equal to the closing
price of the Shares as reflected on the NYSE on the date of grant (or if there
were no sales on such date, the most recent prior date on which there were
sales).
2. Term of Option. The term of the Stock Option shall be ten years from the
date of grant, subject to earlier termination in the event of termination of
service as an Eligible Director. If an Eligible Director's term is terminated
for any reason other than death at a time when such Director is entitled to
exercise an outstanding Stock Option, then at any time or times within three
months after termination such Stock Option may be exercised as to all or any of
the Shares which the Eligible Director was entitled to purchase at the date of
termination. If an Eligible Director dies at a time when such Director is
entitled to exercise a Stock Option, then at any time or times within one year
after death such Stock Option may be exercised as to all or any of the Shares
which the Eligible Director was entitled to purchase immediately prior to such
Director's death. Except as so exercised, such Stock Options shall expire at the
end of such periods. That portion of a Stock Option not exercisable at the time
of such termination shall be forfeited and transferred back to the Company on
the date of such termination.
3. Exercisability. Subject to clause 2 above, each Stock Option shall vest
and become exercisable with respect to twenty percent of the underlying Shares
on each of the first five anniversaries of the date of grant, provided that the
optionee is an Eligible Director on such date.
4. Method of Exercise. A Stock Option may be exercised in whole or in part
during the period in which such Stock Option is exercisable by giving written
notice of exercise to the Company specifying the number of shares to be
purchased, accompanied by payment of the purchase price. Payment of the purchase
price shall be made in cash, by delivery of Shares, or by any combination of the
foregoing.
5. Non-Transferability. Unless otherwise provided by the terms of the Long
Term Plan or the Board, (i) Stock Options shall not be transferable by the
optionee other than by will or by the laws of descent and distribution, and (ii)
during the optionee's lifetime, all Stock Options shall be exercisable only by
the optionee or by his or her guardian or legal representative.
6. Stockholder Rights. The holder of a Stock Option shall, as such, have
none of the rights of a stockholder.
SECTION 7. GENERAL
(a) Plan Amendments. The Board may amend, suspend or discontinue the Plan
as it shall deem advisable or to conform to any change in any law or regulation
applicable thereto; provided, that the Board may not, without the authorization
and approval of the stockholders of the Company: (a) modify the class of persons
who constitute Eligible Directors as defined in the Plan; or (b) increase the
total number of Shares available under the Plan. In addition, without the
consent of affected participants, no amendment of the Plan or any award under
the Plan may impair the rights of participants under outstanding awards.
(b) Listing and Registration. If at any time the Board shall determine, in
its discretion, that the listing, registration or qualification of the Shares
under the Plan upon any securities exchange or under any state or Federal law,
or the consent or approval of any governmental regulatory body, is necessary or
desirable as a condition of, or in connection with, the granting of any award
hereunder, no Shares may be delivered or disposed of unless such listing,
registration, qualification, consent or approval shall have been effected or
obtained free of any condition not acceptable to the Board.
(c) Award Agreements. Each award of Restricted Stock and Stock Option
granted hereunder shall be evidenced by the Eligible Director's written
agreement with the Company which shall contain such terms and conditions not
inconsistent with the provisions of the Plan as shall be determined by the Board
in its discretion.
A-3
<PAGE> 34
ANNEX B
MASCO CORPORATION
1997 ANNUAL INCENTIVE
COMPENSATION PLAN
SECTION 1. PURPOSE
The purpose of the Masco Corporation 1997 Annual Incentive Compensation
Plan (the "Plan") is to provide selected executive officers of Masco Corporation
(the "Company") with incentive compensation based upon the achievement of
established annual performance goals.
SECTION 2. ELIGIBILITY
The individuals eligible to participate in the Plan (the "Participants")
are the executive officers of the Company.
SECTION 3. PERFORMANCE PERIOD
Each Performance Period for purposes of the Plan shall have a duration of
one calendar year, commencing January 1 and ending December 31.
SECTION 4. ADMINISTRATION
The Compensation Committee of the Board of Directors of the Company (the
"Committee") shall have the full power and authority to administer and interpret
the Plan and to establish rules for its administration.
SECTION 5. PERFORMANCE GOALS
On or before the 90th day of each Performance Period, the Committee shall
establish in writing one or more performance criteria for the Performance Period
and the weighting of the performance criteria if more than one. The performance
criteria shall consist of one or more of the following: net income, earnings per
share, cash flow, revenues, return on assets or total shareholder return.
SECTION 6. AWARDS
On or before the 90th day of each Performance Period, the Committee shall
establish in writing a performance incentive award for such Participants as
shall be designated by the Committee and in such amounts as the Committee shall
determine, subject to the limitations of the Plan. No award to any Participant
shall be greater than $2 million. The Committee shall have the power and
authority to reduce or eliminate for any reason the amount of the award that
would otherwise be payable to a Participant based on the performance criteria.
SECTION 7. CERTIFICATION AND PAYMENT
As soon as practicable after release of the Company's financial results for
the Performance Period, the Committee will certify the Company's attainment of
the criteria established for such Performance Period pursuant to Section 5, will
calculate the possible payment of an award for each Participant and will certify
the amount of the award to each Participant for such Performance Period.
Payments of the awards shall be made in cash. To the extent net income is used
alone or as a component of another performance criterion, it shall mean net
income as reported to stockholders, but before losses resulting from
discontinued operations, extraordinary losses (in accordance with generally
accepted accounting principles, as currently in effect), the cumulative effect
of changes in accounting principles and other unusual, non-recurring items of
loss that are separately identified and quantified in the Company's audited
financial statements.
B-1
<PAGE> 35
SECTION 8. AMENDMENT
The Committee shall have the right to suspend or terminate this Plan at any
time and may amend or modify the Plan at any time.
SECTION 9. ADOPTION AND DURATION
The Plan was approved by the Committee on February 18, 1997, subject to the
approval of the stockholders of the Company at the 1997 Annual Meeting of
Stockholders. The effective date of the Plan shall be January 1, 1997 and the
Plan shall remain in effect for a period of five years.
B-2
<PAGE> 36
ANNEX C
MASCO CORPORATION
1991 LONG TERM STOCK INCENTIVE PLAN
(AMENDED AND RESTATED APRIL 23, 1997)
SECTION 1. PURPOSES
The purposes of the 1991 Long Term Stock Incentive Plan (the "Plan") are to
encourage selected employees of and consultants to Masco Corporation (the
"Company") and its Affiliates to acquire a proprietary interest in the Company
in order to create an increased incentive to contribute to the Company's future
success and prosperity, and enhance the ability of the Company and its
Affiliates to attract and retain exceptionally qualified individuals upon whom
the sustained progress, growth and profitability of the Company depend, thus
enhancing the value of the Company for the benefit of its stockholders.
SECTION 2. DEFINITIONS
As used in the Plan, the following terms shall have the meanings set forth
below:
(a) "Affiliate" shall mean any entity in which the Company's direct or
indirect equity interest is at least twenty percent, and any other entity in
which the Company has a significant direct or indirect equity interest, whether
more or less than twenty percent, as determined by the Committee.
(b) "Award" shall mean any Option, Stock Appreciation Right, Restricted
Stock, Restricted Stock Unit, Performance Award, Dividend Equivalent or Other
Stock-Based Award granted under the Plan.
(c) "Award Agreement" shall mean any written agreement, contract or other
instrument or document evidencing any Award granted under the Plan.
(d) "Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
(e) "Committee" shall mean a committee of the Company's directors
designated by the Board of Directors to administer the Plan and composed of not
less than two directors, each of whom is a "non-employee director" within the
meaning of Rule 16b-3.
(f) "Dividend Equivalent" shall mean any right granted under Section 6(e)
of the Plan.
(g) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
(h) "Incentive Stock Option" shall mean an Option granted under Section
6(a) of the Plan that is intended to meet the requirements of Section 422 of the
Code, or any successor provision thereto.
(i) "Non-Qualified Stock Option" shall mean an Option granted under Section
6(a) of the Plan that is not intended to be an Incentive Stock Option.
(j) "Option" shall mean an Incentive Stock Option or a Non-Qualified Stock
Option.
(k) "Other Stock-Based Award" shall mean any right granted under Section
6(f) of the Plan.
(l) "Participant" shall mean an employee of or consultant to the Company or
any Affiliate designated to be granted an Award under the Plan.
(m) "Performance Award" shall mean any right granted under Section 6(d) of
the Plan.
(n) "Restricted Period" shall mean the period of time during which Awards
of Restricted Stock or Restricted Stock Units are subject to restrictions.
(o) "Restricted Stock" shall mean any Share granted under Section 6(c) of
the Plan.
(p) "Restricted Stock Unit" shall mean any right granted under Section 6(c)
of the Plan that is denominated in Shares.
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(q) "Rule 16b-3" shall mean Rule 16b-3 promulgated by the Securities and
Exchange Commission under the Exchange Act, or any successor rule or regulation.
(r) "Section 16" shall mean Section 16 of the Exchange Act, the rules and
regulations promulgated by the Securities and Exchange Commission thereunder, or
any successor provision, rule or regulation.
(s) "Shares" shall mean the Company's common stock, par value $1.00 per
share, and such other securities or property as may become the subject of
Awards, or become subject to Awards, pursuant to an adjustment made under
Section 4(c) of the Plan.
(t) "Stock Appreciation Right" shall mean any right granted under Section
6(b) of the Plan.
SECTION 3. ADMINISTRATION
The Committee shall administer the Plan, and subject to the terms of the
Plan and applicable law, the Committee's authority shall include without
limitation the power to:
(i) designate Participants;
(ii) determine the types of Awards to be granted;
(iii) determine the number of Shares to be covered by Awards and any
payments, rights or other matters to be calculated in connection therewith;
(iv) determine the terms and conditions of Awards and amend the terms
and conditions of outstanding Awards;
(v) determine how, whether, to what extent, and under what
circumstances Awards may be settled or exercised in cash, Shares, other
securities, other Awards or other property, or canceled, forfeited or
suspended;
(vi) determine how, whether, to what extent, and under what
circumstances cash, Shares, other securities, other Awards, other property
and other amounts payable with respect to an Award shall be deferred either
automatically or at the election of the holder thereof or of the Committee;
(vii) determine the methods or procedures for establishing the fair
market value of any property (including, without limitation, any Shares or
other securities) transferred, exchanged, given or received with respect to
the Plan or any Award;
(viii) prescribe and amend the forms of Award Agreements and other
instruments required under or advisable with respect to the Plan;
(ix) designate Options granted to key employees of the Company or its
subsidiaries as Incentive Stock Options;
(x) interpret and administer the Plan, Award Agreements, Awards and
any contract, document, instrument or agreement relating thereto;
(xi) establish, amend, suspend or waive such rules and regulations and
appoint such agents as it shall deem appropriate for the administration of
the Plan;
(xii) decide all questions and settle all controversies and disputes
which may arise in connection with the Plan, Award Agreements and Awards;
(xiii) delegate to directors of the Company the authority to designate
Participants and grant Awards, and to amend Awards granted to Participants;
(xiv) make any other determination and take any other action that the
Committee deems necessary or desirable for the interpretation, application
and administration of the Plan, Award Agreements and Awards.
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All designations, determinations, interpretations and other decisions under
or with respect to the Plan, Award Agreements or any Award shall be within the
sole discretion of the Committee, may be made at any time and shall be final,
conclusive and binding upon all persons, including the Company, Affiliates,
Participants, beneficiaries of Awards and stockholders of the Company.
SECTION 4. SHARES AVAILABLE FOR AWARDS
(a) Shares Available. Subject to adjustment as provided in Section 4(c):
(i) Initial Authorization. There shall be 8,000,000 Shares initially
available for issuance under the Plan.
(ii) Acquired Shares. In addition to the amount set forth above, up to
8,000,000 Shares acquired by the Company subsequent to the 1997 Annual
Meeting of Stockholders as full or partial payment for the exercise price
for an Option or any other stock option granted by the Company, or acquired
by the Company, in open market transactions or otherwise, in connection
with the Plan or any Award hereunder or any other employee stock option or
restricted stock issued by the Company may thereafter be included in the
Shares available for Awards. If any Shares covered by an Award or to which
an Award relates are forfeited, or if an Award expires, terminates or is
cancelled, then the Shares covered by such Award, or to which such Award
relates, or the number of Shares otherwise counted against the aggregate
number of Shares available under the Plan by reason of such Award, to the
extent of any such forfeiture, expiration, termination or cancellation, may
thereafter be available for further granting of Awards and included as
acquired Shares for purposes of the preceding sentence.
(iii) Shares Under Prior Plans. In addition to the amounts set forth
above, shares remaining available for issuance upon any termination of
authority to make further awards under both the Company's 1988 Restricted
Stock Incentive Plan and its 1988 Stock Option Plan shall thereafter be
available for issuance hereunder.
(iv) Accounting for Awards. For purposes of this Section 4,
(A) if an Award (other than a Dividend Equivalent) is denominated
in Shares, the number of Shares covered by such Award, or to which such
Award relates, shall be counted on the date of grant of such Award
against the aggregate number of Shares available for granting Awards
under the Plan to the extent determinable on such date and insofar as
the number of Shares is not then determinable under procedures adopted
by the Committee consistent with the purposes of the Plan; and
(B) Dividend Equivalents and Awards not denominated in Shares shall
be counted against the aggregate number of Shares available for granting
Awards under the Plan in such amount and at such time as the Committee
shall determine under procedures adopted by the Committee consistent
with the purposes of the Plan;
provided, however, that Awards that operate in tandem with (whether granted
simultaneously with or at a different time from), or that are substituted
for, other Awards or restricted stock awards or stock options granted under
any other plan of the Company may be counted or not counted under
procedures adopted by the Committee in order to avoid double counting. Any
Shares that are delivered by the Company or its Affiliates, and any Awards
that are granted by, or become obligations of, the Company, through the
assumption by the Company of, or in substitution for, outstanding
restricted stock awards or stock options previously granted by an acquired
company shall not, except in the case of Awards granted to Participants who
are directors or officers of the Company for purposes of Section 16, be
counted against the Shares available for granting Awards under the Plan.
(v) Sources of Shares Deliverable Under Awards. Any Shares delivered
pursuant to an Award may consist, in whole or in part, of authorized but
unissued Shares or of Shares reacquired by the Company, including but not
limited to Shares purchased on the open market.
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(b) Individual Stock-Based Awards. Subject to adjustment as provided in
Section 4(c), no Participant may receive Options or Stock Appreciation Rights
under the Plan in any calendar year that relate to more than 1,000,000 Shares in
the aggregate; provided, however, that such number may be increased with respect
to any Participant by any Shares available for grant to such Participant in
accordance with this Paragraph 4(b) in any prior years that were not granted in
any such prior year beginning on or after January 1, 1997. No provision of this
Paragraph 4(b) shall be construed as limiting the amount of any other
stock-based or cash-based Award which may be granted to any Participant.
(c) Adjustments. Upon the occurrence of any dividend or other distribution
(whether in the form of cash, Shares, other securities or other property),
change in the capital or shares of capital stock, recapitalization, stock split,
reverse stock split, reorganization, merger, consolidation, split-up, spin-off,
combination, repurchase, or exchange of Shares or other securities of the
Company, issuance of warrants or other rights to purchase Shares or other
securities of the Company or extraordinary transaction or event which affects
the Shares, then the Committee shall have the authority to make such adjustment,
if any, in such manner as it deems appropriate, in (i) the number and type of
Shares (or other securities or property) which thereafter may be made the
subject of Awards, (ii) outstanding Awards including without limitation the
number and type of Shares (or other securities or property) subject thereto, and
(iii) the grant, purchase or exercise price with respect to outstanding Awards
and, if deemed appropriate, make provision for cash payments to the holders of
outstanding Awards; provided, however, that the number of Shares subject to any
Award denominated in Shares shall always be a whole number.
SECTION 5. ELIGIBILITY
Any employee of or consultant to the Company or any Affiliate, including
any officer of the Company (who may also be a director, any person who serves
only as a director of the Company and any consultant to the Company or an
Affiliate who is also a director of the Company and who is not rendering
services pursuant to a written agreement with the entity in question), as may be
selected from time to time by the Committee or by the directors to whom
authority may be delegated pursuant to Section 3 hereof in its or their
discretion, is eligible to be designated a Participant.
SECTION 6. AWARDS
(a) Options. The Committee is authorized to grant Options to Participants.
(i) Committee Determinations. Subject to the terms of the Plan, the
Committee shall determine:
(A) the purchase price per Share under each Option, provided,
however, that such price shall be not less than 100% of the fair market
value of the Shares underlying such Option on the date of grant;
(B) the term of each Option; and
(C) the time or times at which an Option may be exercised, in whole
or in part, the method or methods by which and the form or forms
(including, without limitation, cash, Shares, other Awards or other
property, or any combination thereof, having a fair market value on the
exercise date equal to the relevant exercise price) in which payment of
the exercise price with respect thereto may be made or deemed to have
been made. The terms of any Incentive Stock Option granted under the
Plan shall comply in all respects with the provisions of Section 422 of
the Code, or any successor provision thereto, and any regulations
promulgated thereunder.
Subject to the terms of the Plan, the Committee may impose such conditions
or restrictions on any Option as it deems appropriate.
(ii) Other Terms. Unless otherwise determined by the Committee:
(A) A Participant electing to exercise an Option shall give written
notice to the Company, as may be specified by the Committee, of exercise
of the Option and the number of Shares elected for
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exercise, such notice to be accompanied by such instruments or documents
as may be required by the Committee, and shall tender the purchase price
of the Shares elected for exercise.
(B) At the time of exercise of an Option, payment in full in cash
or in Shares (that have been held by the Participant for at least six
months) or any combination thereof, at the option of the Participant,
shall be made for all Shares then being purchased.
(C) The Company shall not be obligated to issue any Shares unless
and until:
(I) if the class of Shares at the time is listed upon any stock
exchange, the Shares to be issued have been listed, or authorized to
be added to the list upon official notice of issuance, upon such
exchange, and
(II) in the opinion of the Company's counsel there has been
compliance with applicable law in connection with the issuance and
delivery of Shares and such issuance shall have been approved by the
Company's counsel.
Without limiting the generality of the foregoing, the Company may
require from the Participant such investment representation or such
agreement, if any, as the Company's counsel may consider necessary in
order to comply with the Securities Act of 1933 as then in effect, and
may require that the Participant agree that any sale of the Shares will
be made only in such manner as shall be in accordance with law and that
the Participant will notify the Company of any intent to make any
disposition of the Shares whether by sale, gift or otherwise. The
Participant shall take any action reasonably requested by the Company in
such connection. A Participant shall have the rights of a stockholder
only as and when Shares have been actually issued to the Participant
pursuant to the Plan.
(D) If the employment of or consulting arrangement with a
Participant terminates for any reason (including termination by reason
of the fact that an entity is no longer an Affiliate) other than the
Participant's death, the Participant may thereafter exercise the Option
as provided below, except that the Committee may terminate the
unexercised portion of the Option concurrently with or at any time
following termination of the employment or consulting arrangement
(including termination of employment upon a change of status from
employee to consultant) if it shall determine that the Participant has
engaged in any activity detrimental to the interests of the Company or
an Affiliate. If such termination is voluntary on the part of the
Participant, the Option may be exercised only within ten days after the
date of termination. If such termination is involuntary on the part of
the Participant, if an employee retires on or after normal retirement
date or if the employment or consulting relationship is terminated by
reason of permanent and total disability, the Option may be exercised
within three months after the date of termination or retirement. For
purposes of this Paragraph (D), a Participant's employment or consulting
arrangement shall not be considered terminated (i) in the case of
approved sick leave or other bona fide leave of absence (not to exceed
one year), (ii) in the case of a transfer of employment or the
consulting arrangement among the Company and Affiliates, or (iii) by
virtue of a change of status from employee to consultant or from
consultant to employee, except as provided above.
(E) If a Participant dies at a time when entitled to exercise an
Option, then at any time or times within one year after death such
Option may be exercised, as to all or any of the Shares which the
Participant was entitled to purchase immediately prior to death. The
Company may decline to deliver Shares to a designated beneficiary until
it receives indemnity against claims of third parties satisfactory to
the Company. Except as so exercised such Option shall expire at the end
of such period.
(F) An Option may be exercised only if and to the extent such
Option was exercisable at the date of termination of employment or the
consulting arrangement, and an Option may not be exercised at a time
when the Option would not have been exercisable had the employment or
consulting arrangement continued.
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(iii) Restoration Options. The Committee may grant a Participant the
right to receive a restoration Option with respect to an Option or any
other stock option granted by the Company. Unless the Committee shall
otherwise determine, a restoration Option shall provide that the underlying
option must be exercised while the Participant is an employee of or
consultant to the Company or an Affiliate and the number of Shares which
are subject to a restoration Option shall not exceed the number of whole
Shares exchanged in payment for the exercise of the original option.
(b) Stock Appreciation Rights. The Committee is authorized to grant Stock
Appreciation Rights to Participants. Subject to the terms of the Plan, a Stock
Appreciation Right granted under the Plan shall confer on the holder thereof a
right to receive, upon exercise thereof, the excess of (i) the fair market value
of one Share on the date of exercise or, if the Committee shall so determine in
the case of any such right other than one related to any Incentive Stock Option,
at any time during a specified period before or after the date of exercise over
(ii) the grant price of the right as specified by the Committee. Subject to the
terms of the Plan, the Committee shall determine the grant price, term, methods
of exercise and settlement and any other terms and conditions of any Stock
Appreciation Right and may impose such conditions or restrictions on the
exercise of any Stock Appreciation Right as it may deem appropriate.
(c) Restricted Stock and Restricted Stock Units.
(i) Issuance. The Committee is authorized to grant to Participants
Awards of Restricted Stock, which shall consist of Shares, and Restricted
Stock Units which shall give the Participant the right to receive cash,
other securities, other Awards or other property, in each case subject to
the termination of the Restricted Period determined by the Committee.
(ii) Restrictions. The Restricted Period may differ among
Participants and may have different expiration dates with respect to
portions of Shares covered by the same Award. Subject to the terms of the
Plan, Awards of Restricted Stock and Restricted Stock Units shall have such
restrictions as the Committee may impose (including, without limitation,
limitations on the right to vote Restricted Stock or the right to receive
any dividend or other right or property), which restrictions may lapse
separately or in combination at such time or times, in installments or
otherwise. Unless the Committee shall otherwise determine, any Shares or
other securities distributed with respect to Restricted Stock or which a
Participant is otherwise entitled to receive by reason of such Shares shall
be subject to the restrictions contained in the applicable Award Agreement.
Subject to the aforementioned restrictions and the provisions of the Plan,
Participants shall have all of the rights of a stockholder with respect to
Shares of Restricted Stock.
(iii) Registration. Restricted Stock granted under the Plan may be
evidenced in such manner as the Committee may deem appropriate, including,
without limitation, book-entry registration or issuance of stock
certificates.
(iv) Forfeiture. Except as otherwise determined by the Committee:
(A) If the employment of or consulting arrangement with a
Participant terminates for any reason (including termination by reason
of the fact that any entity is no longer an Affiliate), other than the
Participant's death or permanent and total disability or, in the case of
an employee, retirement on or after normal retirement date, all Shares
of Restricted Stock theretofore awarded to the Participant which are
still subject to restrictions shall upon such termination of employment
or the consulting relationship be forfeited and transferred back to the
Company. Notwithstanding the foregoing or Paragraph (C) below, if a
Participant continues to hold an Award of Restricted Stock following
termination of the employment or consulting arrangement (including
retirement and termination of employment upon a change of status from
employee to consultant), the Shares of Restricted Stock which remain
subject to restrictions shall nonetheless be forfeited and transferred
back to the Company if the Committee at any time thereafter determines
that the Participant has engaged in any activity detrimental to the
interests of the Company or an Affiliate. For purposes of this Paragraph
(A), a Participant's employment or consulting arrangement shall not be
considered terminated (i) in the case of approved sick leave or other
bona fide leave of absence (not to exceed
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one year), (ii) in the case of a transfer of employment or the
consulting arrangement among the Company and Affiliates, or (iii) by
virtue of a change of status from employee to consultant or from
consultant to employee, except as provided above.
(B) If a Participant ceases to be employed or retained by the
Company or an Affiliate by reason of death or permanent and total
disability or if following retirement a Participant continues to have
rights under an Award of Restricted Stock and thereafter dies, the
restrictions contained in the Award shall lapse with respect to such
Restricted Stock.
(C) If an employee ceases to be employed by the Company or an
Affiliate by reason of retirement on or after normal retirement date,
the restrictions contained in the Award of Restricted Stock shall
continue to lapse in the same manner as though employment had not
terminated.
(D) At the expiration of the Restricted Period as to Shares covered
by an Award of Restricted Stock, the Company shall deliver the Shares as
to which the Restricted Period has expired, as follows:
(1) if an assignment to a trust has been made in accordance with
Section 6(g)(iv)(B)(2)(c), to such trust; or
(2) if the Restricted Period has expired by reason of death and
a beneficiary has been designated in form approved by the Company, to
the beneficiary so designated; or
(3) in all other cases, to the Participant or the legal
representative of the Participant's estate.
(d) Performance Awards. The Committee is authorized to grant Performance
Awards to Participants. Subject to the terms of the Plan, a Performance Award
granted under the Plan (i) may be denominated or payable in cash, Shares
(including, without limitation, Restricted Stock), other securities, other
Awards, or other property and (ii) shall confer on the holder thereof rights
valued as determined by the Committee and payable to, or exercisable by, the
holder of the Performance Award, in whole or in part, upon the achievement of
such performance goals during such performance periods as the Committee shall
establish. Subject to the terms of the Plan, the performance goals to be
achieved during any performance period, the length of any performance period,
the amount of any Performance Award granted, the amount of any payment or
transfer to be made pursuant to any Performance Award and other terms and
conditions shall be determined by the Committee.
(e) Dividend Equivalents. The Committee is authorized to grant to
Participants Awards under which the holders thereof shall be entitled to receive
payments equivalent to dividends or interest with respect to a number of Shares
determined by the Committee, and the Committee may provide that such amounts (if
any) shall be deemed to have been reinvested in additional Shares or otherwise
reinvested. Subject to the terms of the Plan, such Awards may have such terms
and conditions as the Committee shall determine.
(f) Other Stock-Based Awards. The Committee is authorized to grant to
Participants such other Awards that are denominated or payable in, valued in
whole or in part by reference to or otherwise based on or related to Shares
(including, without limitation, securities convertible into Shares), as are
deemed by the Committee to be consistent with the purposes of the Plan,
provided, however, that such grants to persons who are subject to Section 16
must comply with the provisions of Rule 16b-3. Subject to the terms of the Plan,
the Committee shall determine the terms and conditions of such Awards. Shares or
other securities delivered pursuant to a purchase right granted under this
Section 6(f) shall be purchased for such consideration, which may be paid by
such method or methods and in such form or forms, including, without limitation,
cash, Shares, other securities, other Awards or other property or any
combination thereof, as the Committee shall determine.
(g) General.
(i) No Cash Consideration for Awards. Awards may be granted for no
cash consideration or for such minimal cash consideration as may be
required by applicable law.
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(ii) Awards May Be Granted Separately or Together. Awards may, in the
discretion of the Committee, be granted either alone or in addition to, in
tandem with or in substitution for any other Award or any award granted
under any other plan of the Company or any Affiliate. Awards granted in
addition to or in tandem with other Awards or in addition to or in tandem
with awards granted under another plan of the Company or any Affiliate, may
be granted either at the same time as or at a different time from the grant
of such other Awards or awards.
(iii) Forms of Payment Under Awards. Subject to the terms of the Plan
and of any applicable Award Agreement, payments or transfers to be made by
the Company or an Affiliate upon the grant, exercise, or payment of an
Award may be made in such form or forms as the Committee shall determine,
including, without limitation, cash, Shares, other securities, other
Awards, or other property, or any combination thereof, and may be made in a
single payment or transfer, in installments, or on a deferred basis, in
each case in accordance with rules and procedures established by the
Committee. Such rules and procedures may include, without limitation,
provisions for the payment or crediting of reasonable interest on
installment or deferred payments or the grant or crediting of Dividend
Equivalents in respect of installment or deferred payments.
(iv) Limits on Transfer of Awards.
(A) Except as the Committee may otherwise determine, no Award or
right under any Award may be sold, encumbered, pledged, alienated,
attached, assigned or transferred in any manner and any attempt to do
any of the foregoing shall be void and unenforceable against the
Company.
(B) Notwithstanding the provisions of Paragraph (A) above:
(1) An Option may be transferred:
(a) to a beneficiary designated by the Participant in
writing on a form approved by the Committee;
(b) by will or the applicable laws of descent and
distribution to the personal representative, executor or
administrator of the Participant's estate; or
(c) to a revocable grantor trust established by the
Participant for the sole benefit of the Participant during the
Participant's life, and under the terms of which the Participant
is and remains the sole trustee until death or physical or mental
incapacity. Such assignment shall be effected by a written
instrument in form and content satisfactory to the Committee, and
the Participant shall deliver to the Committee a true copy of the
agreement or other document evidencing such trust. If in the
judgment of the Committee the trust to which a Participant may
attempt to assign rights under such an Award does not meet the
criteria of a trust to which an assignment is permitted by the
terms hereof, or if after assignment, because of amendment, by
force of law or any other reason such trust no longer meets such
criteria, such attempted assignment shall be void and may be
disregarded by the Committee and the Company and all rights to
any such Options shall revert to and remain solely in the
Participant. Notwithstanding a qualified assignment, the
Participant, and not the trust to which rights under such an
Option may be assigned, for the purpose of determining
compensation arising by reason of the Option shall continue to be
considered an employee or consultant, as the case may be, of the
Company or an Affiliate, but such trust and the Participant shall
be bound by all of the terms and conditions of the Award
Agreement and this Plan. Shares issued in the name of and
delivered to such trust shall be conclusively considered issuance
and delivery to the Participant.
(2) A Participant may assign or transfer rights under an Award
of Restricted Stock or Restricted Stock Units:
(a) to a beneficiary designated by the Participant in
writing on a form approved by the Committee;
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(b) by will or the applicable laws of descent and
distribution to the personal representative, executor or
administrator of the Participant's estate; or
(c) to a revocable grantor trust established by the
Participant for the sole benefit of the Participant during the
Participant's life, and under the terms of which the Participant
is and remains the sole trustee until death or physical or mental
incapacity. Such assignment shall be effected by a written
instrument in form and content satisfactory to the Committee, and
the Participant shall deliver to the Committee a true copy of the
agreement or other document evidencing such trust. If in the
judgment of the Committee the trust to which a Participant may
attempt to assign rights under such an Award does not meet the
criteria of a trust to which an assignment is permitted by the
terms hereof, or if after assignment, because of amendment, by
force of law or any other reason such trust no longer meets such
criteria, such attempted assignment shall be void and may be
disregarded by the Committee and the Company and all rights to
any such Awards shall revert to and remain solely in the
Participant. Notwithstanding a qualified assignment, the
Participant, and not the trust to which rights under such an
Award may be assigned, for the purpose of determining
compensation arising by reason of the Award shall continue to be
considered an employee or consultant, as the case may be, of the
Company or an Affiliate, but such trust and the Participant shall
be bound by all of the terms and conditions of the Award
Agreement and this Plan. Shares issued in the name of and
delivered to such trust shall be conclusively considered issuance
and delivery to the Participant.
(3) The Committee shall not permit directors or officers of the
Company for purposes of Section 16 to transfer or assign Awards
except as permitted under Rule 16b-3.
(C) The Committee, the Company and its officers, agents and
employees may rely upon any beneficiary designation, assignment or other
instrument of transfer, copies of trust agreements and any other
documents delivered to them by or on behalf of the Participant which
they believe genuine and any action taken by them in reliance thereon
shall be conclusive and binding upon the Participant, the personal
representatives of the Participant's estate and all persons asserting a
claim based on an Award. The delivery by a Participant of a beneficiary
designation, or an assignment of rights under an Award as permitted
hereunder, shall constitute the Participant's irrevocable undertaking to
hold the Committee, the Company and its officers, agents and employees
harmless against claims, including any cost or expense incurred in
defending against claims, of any person (including the Participant)
which may be asserted or alleged to be based on an Award subject to a
beneficiary designation or an assignment. In addition, the Company may
decline to deliver Shares to a beneficiary until it receives indemnity
against claims of third parties satisfactory to the Company.
(v) Share Certificates. All certificates for Shares or other
securities delivered under the Plan pursuant to any Award or the exercise
thereof shall be subject to such stop transfer orders and other
restrictions as the Committee may deem advisable under the Plan or the
rules, regulations and other requirements of the Securities and Exchange
Commission, any stock exchange upon which such Shares or other securities
are then listed and any applicable Federal or state securities laws, and
the Committee may cause a legend or legends to be put on any such
certificates to make appropriate reference to such restrictions.
(vi) Change in Control. (A) Notwithstanding any of the provisions of
this Plan or instruments evidencing Awards granted hereunder, upon a Change
in Control of the Company (as hereinafter defined) the vesting of all
rights of Participants under outstanding Awards shall be accelerated and
all restrictions thereon shall terminate in order that Participants may
fully realize the benefits thereunder. Such acceleration shall include,
without limitation, the immediate exercisability in full of all Options and
the termination of restrictions on Restricted Stock and Restricted Stock
Units. Further, in addition to the Committee's authority set forth in
Section 4(c), the Committee, as constituted before such Change in Control,
is authorized, and has sole discretion, as to any Award, either at the time
such Award is made hereunder or any time thereafter, to take any one or
more of the following actions: (i) provide for the
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purchase of any such Award, upon the Participant's request, for an amount
of cash equal to the amount that could have been attained upon the exercise
of such Award or realization of the Participant's rights had such Award
been currently exercisable or payable; (ii) make such adjustment to any
such Award then outstanding as the Committee deems appropriate to reflect
such Change in Control; and (iii) cause any such Award then outstanding to
be assumed, or new rights substituted therefor, by the acquiring or
surviving corporation after such Change in Control.
(B) With respect to any Award granted hereunder prior to December
6, 1995, a Change in Control shall occur if:
(1) any "person" or "group of persons" as such terms are used in
Sections 13(d) and 14(d) of the Exchange Act, other than pursuant to
a transaction or agreement previously approved by the Board of
Directors of the Company, directly or indirectly purchases or
otherwise becomes the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act) or has the right to acquire such beneficial
ownership (whether or not such right is exercisable immediately, with
the passage of time, or subject to any condition) of voting
securities representing 25 percent or more of the combined voting
power of all outstanding voting securities of the Company; or
(2) during any period of twenty-four consecutive calendar
months, the individuals who at the beginning of such period
constitute the Company's Board of Directors, and any new directors
whose election by such Board or nomination for election by
stockholders was approved by a vote of at least two-thirds of the
members of such Board who were either directors on such Board at the
beginning of the period or whose election or nomination for election
as directors was previously so approved, for any reason cease to
constitute at least a majority of the members thereof.
(C) Notwithstanding the provisions of subparagraph (B), with
respect to Awards granted hereunder on or after December 6, 1995, a
Change in Control shall occur only if the event described in this
subparagraph (C) shall have occurred. With respect to any other Award
granted prior thereto, a Change in Control shall occur if any of the
events described in subparagraphs (B) or (C) shall have occurred, unless
the holder of any such Award shall have consented to the application of
this subparagraph (C) in lieu of the foregoing subparagraph (B). A
Change in Control for purposes of this subparagraph (C) shall occur if,
during any period of twenty-four consecutive calendar months, the
individuals who at the beginning of such period constitute the Company's
Board of Directors, and any new directors (other than Excluded
Directors, as hereinafter defined), whose election by such Board or
nomination for election by stockholders was approved by a vote of at
least two-thirds of the members of such Board who were either directors
on such Board at the beginning of the period or whose election or
nomination for election as directors was previously so approved, for any
reason cease to constitute at least a majority of the members thereof.
For purposes hereof, "Excluded Directors" are directors whose election
by the Board or approval by the Board for stockholder election occurred
within one year of any "person" or "group of persons", as such terms are
used in Sections 13(d) and 14(d) of the Exchange Act, commencing a
tender offer for, or becoming the beneficial owner of, voting securities
representing 25 percent or more of the combined voting power of all
outstanding voting securities of the Company, other than pursuant to a
tender offer approved by the Board prior to its commencement or pursuant
to stock acquisitions approved by the Board prior to their representing
25 percent or more of such combined voting power.
(D) (1) In the event that subsequent to a Change in Control it is
determined that any payment or distribution by the Company to or for the
benefit of a Participant, whether paid or payable or distributed or
distributable pursuant to the terms of this Plan or otherwise, other
than any payment pursuant to this subparagraph (D) (a "Payment"), would
be subject to the excise tax imposed by Section 4999 of the Code or any
interest or penalties with respect to such excise tax (such excise tax,
together with any such interest and penalties, are hereinafter
collectively referred to as the "Excise Tax"), then such Participant
shall be entitled to receive from the Company, within 15
C-10
<PAGE> 46
days following the determination described in (2) below, an additional
payment ("Excise Tax Adjustment Payment") in an amount such that after
payment by such Participant of all applicable Federal, state and local
taxes (computed at the maximum marginal rates and including any interest
or penalties imposed with respect to such taxes), including any Excise
Tax, imposed upon the Excise Tax Adjustment Payment, such Participant
retains an amount of the Excise Tax Adjustment Payment equal to the
Excise Tax imposed upon the Payments.
(2) All determinations required to be made under this Section
6(g)(vi)(D), including whether an Excise Tax Adjustment Payment is
required and the amount of such Excise Tax Adjustment Payment, shall be
made by Coopers & Lybrand L.L.P., or such other national accounting firm
as the Company, or, subsequent to a Change in Control, the Company and
the Participant jointly, may designate, for purposes of the Excise Tax,
which shall provide detailed supporting calculations to the Company and
the affected Participant within 15 business days of the date of the
applicable Payment. Except as hereinafter provided, any determination by
Coopers & Lybrand L.L.P., or such other national accounting firm, shall
be binding upon the Company and the Participant. As a result of the
uncertainty in the application of Section 4999 of the Code that may
exist at the time of the initial determination hereunder, it is possible
that (x) certain Excise Tax Adjustment Payments will not have been made
by the Company which should have been made (an "Underpayment"), or (y)
certain Excise Tax Adjustment Payments will have been made which should
not have been made (an "Overpayment"), consistent with the calculations
required to be made hereunder. In the event of an Underpayment, such
Underpayment shall be promptly paid by the Company to or for the benefit
of the affected Participant. In the event that the Participant discovers
that an Overpayment shall have occurred, the amount thereof shall be
promptly repaid to the Company.
(3) This Section 6(g)(vi)(D) shall not apply to any Award (x) that
was granted prior to February 17, 1993 and (y) the holder of which is an
executive officer of the Company, as determined under the Exchange Act.
(vii) Cash Settlement. Notwithstanding any provision of this Plan or
of any Award Agreement to the contrary, any Award outstanding hereunder may
at any time be cancelled in the Committee's sole discretion upon payment of
the value of such Award to the holder thereof in cash or in another Award
hereunder, such value to be determined by the Committee in its sole
discretion.
SECTION 7. AMENDMENT AND TERMINATION
Except to the extent prohibited by applicable law and unless otherwise
expressly provided in an Award Agreement or in the Plan:
(a) Amendments to the Plan. The Board of Directors of the Company may amend
the Plan and the Board of Directors or the Committee may amend any outstanding
Award; provided, however, that (i) no Plan amendment shall be effective until
approved by stockholders of the Company insofar as stockholder approval thereof
is required in order for the Plan to continue to satisfy the conditions of Rule
16b-3, (ii) without the consent of affected Participants no amendment of the
Plan or of any Award may impair the rights of Participants under outstanding
Awards, and (iii) no Option may be amended to reduce its initial exercise price
other than in connection with an event described in Section 4(c) hereof.
(b) Waivers. The Committee may waive any conditions or rights under any
Award theretofore granted, prospectively or retroactively, without the consent
of any Participant.
(c) Adjustments of Awards Upon the Occurrence of Certain Unusual or
Nonrecurring Events. The Committee shall be authorized to make adjustments in
the terms and conditions of, and the criteria included in, Awards in recognition
of unusual or nonrecurring events (including, without limitation, the events
described in Section 4(c) hereof) affecting the Company, any Affiliate, or the
financial statements of the Company or any Affiliate, or of changes in
applicable laws, regulations, or accounting principles, whenever the Committee
determines that such adjustments are appropriate in order to prevent dilution or
enlargement of the benefits or potential benefits to be made available under the
Plan.
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<PAGE> 47
(d) Correction of Defects, Omissions, and Inconsistencies. The Committee
may correct any defect, supply any omission or reconcile any inconsistency in
the Plan or any Award in the manner and to the extent it shall deem desirable to
effectuate the Plan.
SECTION 8. GENERAL PROVISIONS
(a) No Rights to Awards. No Participant or other person shall have any
claim to be granted any Award under the Plan, and there is no obligation for
uniformity of treatment of Participants or holders or beneficiaries of Awards
under the Plan. The terms and conditions of Awards of the same type and the
determination of the Committee to grant a waiver or modification of any Award
and the terms and conditions thereof need not be the same with respect to each
Participant.
(b) Withholding. The Company or any Affiliate shall be authorized to
withhold from any Award granted or any payment due or transfer made under any
Award or under the Plan the amount (in cash, Shares, other securities, other
Awards or other property) of withholding taxes due in respect of an Award, its
exercise or any payment or transfer under such Award or under the Plan and to
take such other action as may be necessary in the opinion of the Company or
Affiliate to satisfy all obligations for the payment of such taxes.
(c) No Limit on Other Compensation Arrangements. Nothing contained in the
Plan shall prevent the Company or any Affiliate from adopting or continuing in
effect other or additional compensation arrangements, including the grant of
options and other stock-based awards, and such arrangements may be either
generally applicable or applicable only in specific cases.
(d) No Right to Employment. The grant of an Award shall not be construed as
giving a Participant the right to be retained in the employ of the Company or
any Affiliate. Further, the Company or an Affiliate may at any time dismiss a
Participant from employment, free from any liability, or any claim under the
Plan, unless otherwise expressly provided in the Plan or in any Award Agreement
or other written agreement with the Participant.
(e) Governing Law. The validity, construction and effect of the Plan and
any rules and regulations relating to the Plan shall be determined in accordance
with the laws of the State of Michigan and applicable Federal law.
(f) Severability. If any provision of the Plan or any Award is or becomes
or is deemed to be invalid, illegal or unenforceable in any jurisdiction or as
to any person or Award, or would disqualify the Plan or any Award under any law
deemed applicable by the Committee, such provision shall be construed or deemed
amended to conform to applicable laws, or if it cannot be so construed or deemed
amended without, in the determination of the Committee, materially altering the
intent of the Plan or the Award, such provision shall be stricken as to such
jurisdiction, person or Award, and the remainder of the Plan and any such Award
shall remain in full force and effect.
(g) No Trust or Fund Created. Neither the Plan nor any Award shall create
or be construed to create a trust or separate fund of any kind or a fiduciary
relationship between the Company or any Affiliate and a Participant or any other
person. To the extent that any person acquires a right to receive payments from
the Company or any Affiliate pursuant to an Award, such right shall be no
greater than the right of any unsecured general creditor of the Company or any
Affiliate.
(h) No Fractional Shares. No fractional Shares shall be issued or delivered
pursuant to the Plan or any Award, and the Committee shall determine whether
cash, other securities, or other property shall be paid or transferred in lieu
of any fractional Shares, or whether such fractional Shares or any rights
thereto shall be cancelled, terminated or otherwise eliminated.
(i) Headings. Headings are given to the Sections and subsections of the
Plan solely as a convenience to facilitate reference. Such headings shall not be
deemed in any way material or relevant to the construction or interpretation of
the Plan or any provision thereof.
SECTION 9. EFFECTIVE DATE OF THE PLAN
The Plan shall be effective as of the date of its approval by the Company's
stockholders.
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<PAGE> 48
MASCO CORPORATION
ANNUAL MEETING OF STOCKHOLDERS
AT MASCO CORPORATE HEADQUARTERS
21001 VAN BORN ROAD
TAYLOR, MICHIGAN 48180
[MAP]
FROM DOWNTOWN DETROIT (EAST)
- - Take I-94 west to the Pelham Road exit.
- - Turn right onto Pelham Road and travel to Van Born Road.
- - Turn left onto Van Born Road and proceed to the corporate office.
FROM METRO AIRPORT (WEST)
- - Take I-94 east to Pelham/Southfield Road exit.
- - Turn left onto Pelham and travel to Van Born Road.
- - Turn left onto Van Born Road and proceed to the corporate office.
FROM SOUTHFIELD/BIRMINGHAM (NORTH)
- - Take the Southfield Freeway to the Outer Drive/Van Born Road exit.
- - Stay on the service drive and proceed to Van Born Road.
- - Bear right onto Van Born Road and travel to the corporate office.
FROM TOLEDO (SOUTH)
- - Take I-75 north to the Telegraph Road north exit.
- - Proceed on Telegraph Road north to Van Born Road.
- - Turn right on Van Born Road and proceed to the corporate office.
<PAGE> 49
<TABLE>
<S><C>
[ ]
(1) ELECTION OF DIRECTORS FOR all nominees WITHHOLD AUTHORITY to vote EXCEPTIONS /X/
listed below /X/ for all nominees listed below /X/
Class III Directors to hold office until the Annual Meeting of Stockholders in 2000 or until their respective successors are
elected and qualified:
NOMINEES: RICHARD A. MANOOGIAN AND MARY ANN KREY
Class II Director to hold office until the Annual Meeting of Stockholders in 1999 or until his successor is elected and qualified:
NOMINEE: VERNE G. ISTOCK
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, MARK THE "EXCEPTIONS" BOX AND STRIKE A LINE THROUGH THAT
NOMINEE'S NAME.)
(2) Proposal to approve the 1997 Non-Employee Directors Stock Plan. (3) Proposal to approve the 1997 Annual Incentive
Compensation Plan.
FOR / / AGAINST / / ABSTAIN / / FOR / / AGAINST / / ABSTAIN / /
(4) Proposal to approve the Amendment of the 1991 Long Term Stock (5) Ratification of the selection of Coopers &
Incentive Plan. Lybrand L.L.P. as independent auditors for
the Company for the year 1997.
FOR / / AGAINST / / ABSTAIN / / FOR / / AGAINST / / ABSTAIN / /
(6) In their discretion upon such other business as may properly
come before the meeting.
The shares represented by this Proxy will be voted in accordance with the specifications above.
IF SPECIFICATIONS ARE NOT MADE, THE PROXY WILL BE VOTED FOR THE ELECTION OF ALL NOMINEES, Change of Address or
FOR THE PROPOSALS AND FOR RATIFICATION. Comments Mark Here / /
Please sign exactly as name appears at left.
Executors, administrators, trustees, et al.
should so indicate when signing. If the
signature is for a corporation, please sign
the full corporate name by an authorized
officer. If the signature is for a
partnership, please sign the full
partnership name by an authorized person.
If shares are registered in more than one
name, all holders must sign.
Dated:________________________________1997
______________________________________(L.S.)
Signature
______________________________________(L.S.)
Signature
VOTES MUST BE INDICATED
(X) IN BLACK OR BLUE INK. / /
PLEASE SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE ENVELOPE.
</TABLE>
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS TO BE HELD MAY 21, 1997
MASCO CORPORATION
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned, hereby revoking any Proxy heretofore given, appoints
RICHARD A. MANOOGIAN and EUGENE A. GARGARO, JR. and each of them attorneys and
proxies for the undersigned, each with full power of substitution, to vote the
shares of Company Common Stock registered in the name of the undersigned to the
same extent the undersigned would be entitled to vote if then personally present
at the Annual Meeting of Stockholders of Masco Corporation to be held at the
offices of the Company at 21001 Van Born Road, Taylor, Michigan 48180, on
Wednesday, May 21, 1997, at 10:00 A.M. Eastern daylight time and at any
adjournment thereof.
The undersigned hereby acknowledges receipt of the accompanying Notice of
Annual Meeting of Stockholders and Proxy Statement.
(Continued and to be signed and
dated on the reverse side.)
MASCO CORPORATION
P.O. BOX 11261
NEW YORK, N.Y. 10203-0261
