MASCO CORP /DE/, PRE 14A, 1998-04-17

MASCO CORP /DE/
PRE 14A, 1998-04-17
HOUSEHOLD FURNITURE

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<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:

[X] Preliminary proxy statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] 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)

MASCO CORPORATION
- -------------------------------------------------------------------------------
(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:

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

<PAGE> 2

PRELIMINARY COPIES

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 20, 1998 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 three Class I Directors and to approve the appointment of one
Class II Director and one Class III Director;

2. To consider and act upon a proposal to amend Article Fourth of the
Company's Certificate of Incorporation to increase the number of shares of the
Company's authorized $1 par value common stock from 400,000,000 shares to
900,000,000 shares;

3. 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 1998; and

4. To transact such other business as may properly come before the meeting.

The Board of Directors has fixed the close of business on March 27, 1998 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 28, 1998
<PAGE> 3

PRELIMINARY COPIES

PROXY STATEMENT

ANNUAL MEETING OF STOCKHOLDERS OF
MASCO CORPORATION

May 20, 1998

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 20, 1998 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 $8,000, 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 27, 1998 will
be entitled to vote at the Annual Meeting. On that date, there were 169,679,803
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 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 scheduled to be mailed
or given to stockholders on or about April 28, 1998.
<PAGE> 4

ELECTION OF DIRECTORS

The Board of Directors is divided into three classes. The term of office of
the Class I Directors expires at this meeting and the Board of Directors
proposes the re-election of Wayne B. Lyon, Arman Simone and Peter W. Stroh as
Class I Directors. The Board of Directors has increased the number of Directors
constituting the Board of Directors from eight to ten effective as of this
Annual Meeting. Under the Company's Certificate of Incorporation, new positions
are to be filled by the Board of Directors. The Board filled these positions by
appointment subject to stockholder approval at the Annual Meeting. The Board of
Directors proposes the election of Raymond F. Kennedy and Thomas G. Denomme as
Class II and Class III Directors, respectively.

The Class I, Class II and Class III Directors will serve for terms expiring
at the Annual Meeting of Stockholders in 2001, 1999 and 2000, respectively, 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 three nominees for Class I Directors who receive the largest
number of votes cast will be elected as Class I Directors, the nominee for the
Class II Director who receives a largest number of votes cast will be elected as
a Class II Director and the nominee for the Class III Director who receives the
largest number of votes cast will be elected as a Class III 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.

Wayne B. Lyon.......................... Mr. Lyon, 65, joined LifeStyle Furnishings
Chairman, President and International Ltd. in his present position upon its
Chief Executive Officer formation in 1996. Previously, he served the Company
of LifeStyle Furnishings as a Group Vice President beginning in 1972, was
International Ltd. named Executive Vice President and Chief Operating
Director since 1988. 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. and Emco Limited. He is a trustee
of Cranbrook Educational Community and a member of
the Board of Governors of Cranbrook Schools.
</TABLE>

2
<PAGE> 5

<TABLE>
<CAPTION>
NAME, PRINCIPAL OCCUPATION AGE, BUSINESS EXPERIENCE,
AND PERIOD OF SERVICE AS A DIRECTOR DIRECTORSHIPS AND OTHER INFORMATION
----------------------------------- -----------------------------------
<S> <C>
Arman Simone........................... Mr. Simone, 70, is a founding director of the
Retired President of Simone Mind/Body Medical Institute at Harvard Medical School
Corporation, commercial builders and a founding director of the Laurens van der Post
and developers. Director from Foundation, London, England.
1952 to 1969 and since 1972.
Peter W. Stroh......................... Mr. Stroh, 70, served as Chairman of the Board and
Retired Chairman and Chief Chief Executive Officer of The Stroh Companies, Inc.
Executive Officer of The Stroh from 1990 until August, 1997. He served as the Chief
Companies, Inc., parent company Executive Officer of The Stroh Brewery Company from
of The Stroh Brewery Company. 1980 until 1994 and as its Chairman from 1982 until
Director since 1992. December, 1997. He is a director of The Stroh Brewery
Company and Apex Bioscience, Inc. He is also a
director of Detroit Renaissance and the Detroit Eco-
nomic Growth Corporation, as well as a member of the
Board of 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.
CLASS II (NOMINEE FOR TERM TO EXPIRE AT THE ANNUAL MEETING IN 1999)
Raymond F. Kennedy..................... Mr. Kennedy, 55, was elected President and Chief
President and Chief Operating Operating Officer of the Company in August 1996. He
Officer of Masco Corporation. joined the Company in 1978 as President of Delta
Faucet Company and served as a Group President from
1983 to 1989 when he was promoted to President --
Building Products. In 1995 he became the Company's
Executive Vice President. Previously, Mr. Kennedy
held a number of positions at AMF, Inc., including
Presidencies of Skamper Corp., and AMF's Wheel Goods
Division. He serves as a director of Emco Limited.
</TABLE>

3
<PAGE> 6

Verne G. Istock........................ Mr. Istock, 57, joined NBD Bank in 1963 and served as
Chairman, President and Chief Vice Chairman and director of NBD Bank and its parent
Executive Officer of First NBD Bancorp, from 1985 until he was named Chairman
Chicago NBD Corporation. and Chief Executive Officer in 1994. Upon the merger
Director since 1997. 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 a
director of The First National Bank of Chicago. Mr.
Istock is a director of Kelly Services, Inc., the
Federal Reserve Bank of Chicago, the Bankers
Roundtable and the International Monetary Con-
ference. He is a director of Detroit Renaissance, The
Economic Club of Detroit and the Illinois Business
Roundtable and is a member of the Michigan 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, and serves on the Board of Trustees of
Northwestern University.

Joseph L. Hudson, Jr................... Mr. Hudson, 66, was elected in 1956 as a trustee of
Trustee, Hudson-Webber the Hudson-Webber Foundation and subsequently served
Foundation. (philanthropic as Chairman until 1996. Mr. Hudson was Vice President
organization). Director of the J.L. Hudson Company beginning in 1957, was
since 1996. named President and Chief 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
Vice President of the City of Detroit Arts
Commission. 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.
</TABLE>

4
<PAGE> 7

CLASS III (NOMINEE FOR TERM TO EXPIRE AT THE ANNUAL MEETING IN 2000)

Thomas G. Denomme...................... Mr. Denomme, 58, served as Vice Chairman and Chief
Retired Vice Chairman and Administrative Officer of Chrysler Corporation from
Chief Administrative Officer of 1994 until he retired in December 1997 and has been a
Chrysler Corporation. director of Chrysler Corporation since 1993. He
joined Chrysler Corporation in 1980 and was elected
Vice President -- Corporate Strategic Planning in
1981, Executive Vice President -- Corporate Staff
Group in 1991, and Executive Vice President and Chief
Administrative Officer in 1993. Previously, he held a
number of positions at Ford Motor Company, including
Director, Marketing Policy and Strategy Office and
Director, Sales Operations Planning. He is Chairman
of the Board of Trustees of the University of
Detroit-Mercy, Chairman of the Michigan Gaming
Control Board and Immediate Past Chairman of the
Michigan Thanksgiving Parade Foundation. Mr. Denomme
is also a director of Pro-Air, Inc., William Beaumont
Hospital and Operation Outreach, USA, a children's
literacy program.
</TABLE>

5
<PAGE> 8

Richard A. Manoogian................... Mr. Manoogian, 61, joined the Company in 1958, was
Chairman of the Board and Chief elected Vice President and a Director in 1964 and
Executive Officer of the President in 1968 and has served as Chairman and
Company and Chairman of the Chief Executive Officer since 1985. He has also
Board of MascoTech, Inc. served as Chairman and a director of MascoTech, Inc.
Director since 1964. since its formation in 1984 and until January 1998 as
its Chief Executive Officer. He was Chairman of the
Board of TriMas Corporation from 1989 until it was
acquired by MascoTech, Inc. in January 1998. He is
also a director of First Chicago NBD Corporation, MSX
International, Inc., Detroit Renaissance and The
American Business Conference, president of the Board
of Directors 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 Hospital.
Mary Ann Krey.......................... Ms. Krey, 50, joined Krey Distributing Company as
Chairman and Chief Executive Secretary in 1978 and has served Krey Distributing
Officer of Krey Distributing Company in her present positions since 1987. She also
Company, beverage distribution serves as director of Commerce Bancshares, Inc., CPI
firm. Director since 1997. Corporation and Laclede Gas Company. Ms. Krey is also
a director of the St. Louis Children's Hospital, St.
Louis Symphony and 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 Univer-
sity 1996 Distinguished Alumni Award and was named
1994 Woman of the Year by the St. Louis Variety Club.
</TABLE>

Further information concerning MascoTech, Inc. is set forth in "Certain
Relationships and Related Transactions."

The Board of Directors held four meetings during 1997. The Audit Committee
of the Board of Directors, consisting of Messrs. Hudson, Istock, Morgan and
Stroh, held two meetings during 1997. It reviews and acts on or reports to the
Board with respect to various auditing and accounting matters, including the
selection and fees of the Company's independent accountants, 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 Ms. Krey and Messrs. Simone and Stroh, held four meetings during
1997. It establishes and monitors executive compensation and administers and
determines awards and

6
<PAGE> 9

options granted under the Company's restricted stock incentive and stock option
plans. The Nominating Committee of the Board of Directors, consisting of Messrs.
Hudson, Lyon, Morgan and Stroh, was established to identify and consider
candidates to serve as Directors of the Company. During 1997, the Committee
members participated in several conferences relating to possible candidates. 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

In 1997, the Company implemented a compensation program to more closely
align the compensation of Directors with the long-term interests of
stockholders. As Company employees, Mr. Manoogian and Mr. Kennedy are not
eligible for compensation as Directors. Under the 1997 Non-Employee Directors
Stock Plan (the "Directors Stock Plan") approved by stockholders at last year's
Annual Meeting, part of the cash compensation previously paid to Directors has
been replaced with an annual vesting of shares of restricted stock and Directors
also receive stock options. For 1997, Directors received the annual cash fee of
$25,000 and $1,000 for each Board of Directors meeting (and committee meeting if
not held on a date on which the entire Board held a meeting). Under the
Directors Stock Plan, Directors received an award of 3,470 shares of Company
Common Stock (pro rated for Ms. Krey and Mr. Istock to reflect the partial year
of service during their initial term), which vests over a five-year period in 20
percent annual installments. The value of each annual installment on the date of
the original grant equaled the amount by which the annual cash compensation was
reduced on the date of grant. The Directors Stock Plan also provides for the
grant on the date of each Annual Meeting of a non-qualified option to purchase
4,000 shares of Company Common Stock at the then current market price,
commencing with the 1997 Annual Meeting. These options become exercisable in 20
percent increments on the first five anniversaries of the grant date. Each
option has a ten year term from the date of grant, except that options may be
exercised for only a limited period of time following termination of service.

7
<PAGE> 10

SECURITY OWNERSHIP OF MANAGEMENT
AND CERTAIN BENEFICIAL OWNERS

Set forth below is information concerning beneficial ownership of Company
Common Stock as of March 13, 1998 by (i) each of the nominees and current
Directors, (ii) each of the named executive officers, (iii) all current
Directors and current 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. Except as indicated below, each person exercises sole
voting and investment power with respect to the shares listed.

<TABLE>
<CAPTION>
SHARES PERCENTAGE
OF COMPANY OF COMPANY
COMMON STOCK COMMON STOCK
NAME AND ADDRESS BENEFICIALLY OWNED BENEFICIALLY OWNED
---------------- ------------------ ------------------
<S> <C> <C>
Thomas G. Denomme....................................... 3,000** *
Joseph L. Hudson, Jr.(1)................................ 4,470 *
Verne G. Istock(1)...................................... 4,000 *
Mary Ann Krey(1)........................................ 4,000 *
Wayne B. Lyon(1)(2)(3).................................. 260,366 *
Richard A. Manoogian(2)(3).............................. 5,832,610 3.4%
John A. Morgan(1)....................................... 5,070 *
Arman Simone(1)......................................... 75,470 *
Peter W. Stroh(1)....................................... 3,970 *
Frank M. Hennessey(4)................................... 168,903 *
Raymond F. Kennedy(3)................................... 454,267 *
John R. Leekley(2)(3)................................... 132,094 *
Richard G. Mosteller(1)................................. 120,548 *
All 17 current Directors and current executive officers
of the Company as a group (excluding subsidiary,
divisional and group executives)(1)(2)(3)............. 7,309,900 4.3%
FMR Corp.(5)
82 Devonshire Street
Boston, Massachusetts 02109........................... 16,637,234 10.1%
</TABLE>

- -------------------------
* Less than one percent

** Includes shares acquired after March 13, 1998.

(1) Includes unvested restricted stock award shares held under the Company's
1997 Non-Employee Directors Stock Plan (2,776 for each of Messrs. Hudson,
Morgan, Simone and Stroh; 2,520 for each of Mr. Istock and Ms. Krey; and
16,144 for all current Directors and current executive officers of the
Company as a group). Holders have sole voting but no investment power over
unvested restricted shares.

(2) Shares owned by Mr. Manoogian and by all current Directors and current
executive officers of the Company as a group include in each case an
aggregate of 1,965,200 shares owned by charitable

8
<PAGE> 11

foundations for which Mr. Manoogian serves as a director and 914,500 shares held
by a trust for which he serves as a trustee. Shares owned by Mr. Lyon and by all
current Directors and current executive officers of the Company as a group
include in each case 13,401 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
8,041 shares held by a trust for which Mr. Leekley serves as a trustee.
Shares owned by all current Directors and current executive officers of the
Company as a group include 12,670 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, Leekley and the
executive officer who serves as a trustee for certain trusts each disclaims
beneficial ownership of such shares.

(3) Includes shares which may be acquired on or before May 12, 1998 upon
exercise of stock options (1,310,000 shares for Mr. Manoogian, 158,055
shares for Mr. Kennedy, 59,000 shares for Mr. Leekley, 185,956 shares for
Mr. Lyon, 31,373 shares for Mr. Mosteller and 1,888,384 shares for all
current Directors and current executive officers of the Company as a group)
as well as unvested restricted stock award shares held under the Company's
stock incentive plans (182,097 shares for Mr. Manoogian, 230,991 shares for
Mr. Kennedy, 49,047 shares for Mr. Leekley, 25,824 shares for Mr. Lyon,
42,112 shares for Mr. Mosteller and 700,179 shares for all current Directors
and current executive officers 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.

(4) Includes 35,633 shares for Mr. Hennessey which may be acquired on or before
May 12, 1998 upon exercise of stock options and 101,503 unvested restricted
stock award shares held under the Company's stock incentive plans. Mr.
Hennessey exercises neither voting nor investment power over unexercised
option shares and has sole voting but no investment power over unvested
restricted shares.

(5) Based on a Schedule 13G dated February 14, 1998 and filed with the
Securities and Exchange Commission by FMR Corp. and certain of its
affiliates, at December 31, 1997, 16,407,234 shares were owned 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
16,407,234 shares and sole voting power over 969,645 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 230,000
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.

9
<PAGE> 12

EXECUTIVE COMPENSATION COMMITTEE REPORT

1997 was a year of significant progress for Masco Corporation. The Board of
Directors and senior management of the Company believe that the Company's
compensation strategy of directly linking compensation to record share price
targets, which was implemented in 1996, was important in more closely aligning
management's interests with those of stockholders. Record share prices were
achieved in 1997 and, based upon the success of the 1996 programs, the
Compensation Committee implemented new programs in 1997 contingent on share
prices reaching new record levels. The Compensation Committee believes that the
Company's current compensation strategy closely aligns officers' interests with
the long-term interests of stockholders, while maintaining the Company's ability
to attract, retain and motivate the highest quality management team. The key
components of this strategy as it applies to officers are described below.

COMPENSATION PROGRAMS TO ENHANCE STOCKHOLDER VALUE

The Company's Chairman and Chief Executive Officer, Richard A. Manoogian,
requested that his annual salary and bonus of approximately $1.4 million be
reduced to $1 per year, effective January 1, 1996, to demonstrate his commitment
to enhance stockholder value and his personal disappointment with the Company's
stock price performance in prior years. The Compensation Committee, in
accordance with its strategy of more closely aligning executives' interests with
those of stockholders, replaced this compensation with a stock option
exercisable only if the price of Company Common Stock exceeded a record $41 per
share within three years from the April 1996 date of grant or $50 per share
within five years from that date. This option became exercisable in June 1997
when the price of Company Common Stock exceeded $41 per share, a 47% increase
from the $27 7/8 price on the date of grant. Pursuant to its terms, Mr.
Manoogian benefits from this option grant only by the amount of any price
appreciation above $41.

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, 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 based on share prices reaching record
levels.

In order to further align the objectives of the Company's other key
employees and its stockholders, special restricted stock awards were also
granted in 1996 to approximately 1,000 corporate and operating employees. Under
the terms of these awards vesting would not commence until retirement, except
that accelerated annual vesting would occur if either record share prices or
fifteen percent annual compound earnings per share growth was achieved. Because
the share price targets were achieved, these awards became eligible for earlier
vesting, commencing, retroactive to April 18, 1997, in annual installments of
10% of the award over a period of ten years. The Committee believes that such
long-term vesting not only focuses the recipient on long-term enhancement of
stockholder value but also helps retain key employees. In addition, the holders
of these awards will benefit from continued long-term appreciation in the price
of Company Common Stock.
10
<PAGE> 13

For 1997, salaries and bonuses of executive officers and group executives
remained frozen (including the $1 level for Mr. Manoogian). The Compensation
Committee, again in accordance with its policy of linking compensation to the
long-term interests of stockholders and also reflecting the improvement in the
Company's performance, granted stock options in part to replace this
compensation based on the price of Company Common Stock reaching new record
levels. Holders of these options, which have an exercise price of $39, the grant
date market price, pledged not to exercise the options unless the share price
reached record levels of $50, $55 and $60 per share. The options vest in
installments only if these record prices were met for a specified period of time
before certain dates. Even if the price targets were met, the options would then
only vest over time, retroactive to May 1998, at an annual rate of 10% of the
options through May 2004, and 30% of the options in May 2005. In late 1997, 20%
of the options became eligible for vesting when Company Common Stock satisfied
the $50 per share requirement, and an additional 20% became eligible for vesting
in the first quarter of 1998 when Company Common Stock satisfied the $55 per
share requirement, in each case subject to the vesting schedule described in the
preceding sentence. These price targets were met because the price of Company
Common Stock appreciated at an annualized rate of approximately 50% from the $39
price on the May 1997 date of grant. The remaining 60% of the options will
become eligible for vesting only if Company Common Stock attains $60 per share
for ten days in any 90 day period by May 2001. Even if the $60 target is
attained, the Compensation Committee's long-term philosophy is reflected in the
fact that realization of the value of the additional 60% of the shares that may
become eligible for vesting and the 40% that have already become eligible for
earlier vesting will be subject to the above long-term vesting schedule. These
options were also granted, in part, because Mr. Manoogian and certain other
executive officers and group executives received a stock option with a ten year
term in 1987, and the Compensation Committee desired to maintain the level of
benefits and equity incentive for these executives in addition to aligning
compensation with the interests of stockholders as described above.

In light of the growth of the Company and the performance of Company Common
Stock in 1997, additional restricted stock awards with new record price targets
were granted in late 1997 to approximately 1,000 corporate and operating
employees. Under the terms of these awards, vesting would not commence until
retirement, but could be accelerated to permit annual vesting upon attainment of
share price targets of $50, $55, and $60, or fifteen percent compound growth in
earnings per share. Because the first two targets have been attained, 40% of the
awards will vest in four ten percent annual installments. An additional ten
percent of the awards will thereafter vest annually for each year in which the
earnings growth requirement is satisfied, or the remaining 60% of the awards
will vest in ten percent annual installments contingent upon the achievement of
the $60 share price target.

Executive officers, group executives and key corporate and operating
employees also received restricted stock awards in 1997 as part of the Company's
annual long-term incentive compensation program, which generally vest in ten
percent annual installments over a period of ten years from the date of grant.
The terms of these awards are similar to those granted prior to 1996, as more
fully described below.

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

11
<PAGE> 14

of Company Common Stock, the new arrangements implemented in 1996 and 1997 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 and 1997. The customary terms and conditions of
restricted stock awards and stock options granted prior to 1996 are described
below under "General Compensation Information." 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.

In order to formalize the Board's policy of encouraging stock ownership by
officers and require executives to remain at risk by maintaining a substantial
interest in Company Common Stock, the Board has established stock ownership
guidelines for officers. The guidelines require the officers to own stock with a
value that is not less than a specified multiple of base pay (at least five
times base pay (prior to the 1996 reduction) in the case of the Chief Executive
Officer). 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.

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 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 historically have been 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. The 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 bonus

12
<PAGE> 15

opportunity for executive officers has been up to fifty percent of base salary.
For 1997, bonuses paid to executive officers (other than Mr. Manoogian, who
received no bonus) were frozen at the amount paid in 1996.

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 with the opportunity for substantial
appreciation promotes retention, and also spreads compensation expense over a
longer term, which generally has resulted in a significant reduction in the
Company's after-tax cost of the compensation.

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 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, 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

13
<PAGE> 16

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. Restoration options were granted in 1997 to Messrs. Kennedy and Mosteller
in connection with such individuals' exercise of original stock options. 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
Internal Revenue Code of 1986 (the "Code") in connection with a payment or
distribution following such a change in control, the 1991 Plan provides that the
participant will receive additional payments to make him 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 for the profit sharing plan in
which executive officers participate have ranged from four percent to seven
percent of participants' base salary. See footnote (3) to the "Summary
Compensation Table."

Beginning in 1994, Section 162(m) of the Code limits deductibility of
compensation in excess of $1 million paid to the Company's chief executive
officer and to each of the other four highest paid executive officers unless
this compensation qualifies as "performance-based." In 1997, the Board approved,
and the stockholders adopted, amendments to the 1991 Plan so that stock options
granted under the 1991 Plan will continue to result in compensation fully
deductible by the Company under Section 162(m). In addition, the Committee
approved, and stockholders adopted, the 1997 Annual Incentive Compensation Plan
to continue the Committee's practice of structuring determinations for cash
bonuses to make them performance-based and therefore tax deductible. The
Committee continues to believe that it is in the Company's interest to retain
flexibility in its compensation program, and although compensation may in some
circumstances exceed the limitation of Section 162(m), the Committee believes
that the tax deduction lost on account of such excess compensation will be
insignificant for the foreseeable future.

Peter W. Stroh, Chairman
Mary Ann Krey
Arman Simone

14
<PAGE> 17
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 1997, 1996 and 1995.
Mr. Manoogian requested in 1996 that his salary and bonus be reduced
indefinitely to $1 per year, to demonstrate his commitment to increase the
market value of Company Common Stock for the benefit of stockholders. In support
of Mr. Manoogian's initiative, the top 20 officers of the Company voluntarily
agreed to reduce their salaries in 1996, and their salaries remained frozen at
the reduced level in 1997. In addition, these officers agreed to forego any
increase in bonus for 1997. 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 BONUS AWARDS(2) OPTIONS COMPENSATION(3)
--------------------------- ---- ------ ----- ---------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Richard A. Manoogian........... 1997 $ 1 $ 0 $ 210,000 1,000,000 $133,000
Chairman of the Board 1996 1 0 1,536,000 1,300,000 106,000
and Chief Executive 1995 972,000 382,000 558,000 0 210,000
Officer(4)

Raymond F. Kennedy............. 1997 $675,000 $338,000 $ 158,000 300,000 $116,000
President and Chief 63,160(5)
Operating Officer 1996 684,000 338,000 1,152,000 150,000 102,000
1995 675,000 301,000 3,699,000 100,000 121,000

Frank M. Hennessey............. 1997 $450,000 $225,000 $ 105,000 200,000 $ 31,000
Executive Vice President(6) 1996 476,000 225,000 768,000 100,000 33,000
1995 401,000 228,000 2,156,000 100,000 27,000

Richard G. Mosteller........... 1997 $470,000 $235,000 $ 110,000 140,000 $ 98,000
Senior Vice President -- 36,582(5)
Finance(7) 1996 497,000 235,000 800,000 100,000 87,000
1995 512,000 226,000 294,000 0 106,000

John R. Leekley................ 1997 $432,000 $216,000 $ 678,000(8) 140,000 $ 79,000
Senior Vice President 1996 431,000 216,000 736,000 90,000 69,000
and General Counsel 1995 428,000 189,000 246,000 0 81,000
</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. In July,
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 1996, Mr.
Kennedy was promoted to President and Chief Operating Officer and received a
7.1% increase to an annual salary level of $675,000, which remained his
salary in

15
<PAGE> 18

1997. In September, 1995, Mr. Hennessey was promoted to Executive Vice
President with a salary of $500,000. In July, 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, and remained at that level in 1997. In
July, 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 $470,000, which
remained his salary in 1997. In July, 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 $393,000. In August, Mr. Leekley was promoted to Senior Vice
President and received a 9.8% increase to an annual salary level of
$432,000, which remained his salary in 1997. 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 1997 salary and bonus equaled his 1995 salary and
bonus.

(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 1997 and 1995 generally vest over a period of ten
years from the date of grant with ten percent of each award vesting annually
and vesting contingent on a continuing employment or consulting relationship
with the Company. However, the 1995 awards to Mr. Kennedy (100,000 shares)
and Mr. Hennessey (50,000 shares), 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 following retirement only if the
recipient has continued to provide services to the Company. The following
number of shares were awarded to the named executive officers in 1997: Mr.
Manoogian -- 5,820 shares; Mr. Kennedy -- 4,400 shares; Mr.
Hennessey -- 2,930 shares; Mr. Mosteller -- 3,060 shares; and Mr.
Leekley -- 18,820 shares. The terms of restricted stock awards granted in
1996 provided that vesting generally occurs over a three year period after
the recipients retire from the Company after reaching age 65; however, ten
percent annual vesting of these awards was triggered when the price of
Company Common Stock reached $50 per share prior to April 2001. As of
December 31, 1997, 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 -- 87,200 shares valued at $4,436,000; Mr. Kennedy -- 185,637
shares valued at $9,444,000; Mr. Hennessey -- 102,768 shares valued at
$5,228,000; Mr. Mosteller -- 45,376 shares valued at $2,309,000; and Mr.
Leekley -- 53,203 shares valued at $2,707,000. 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 1997: Mr. Manoogian -- none; Mr. Kennedy
-- $47,000; Mr. Hennessey -- $31,000; Mr. Mosteller -- $32,000; 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 1997:

16
<PAGE> 19

Mr. Manoogian -- $133,000; Mr. Kennedy -- $69,000; Mr. Mosteller --
$66,000; and Mr. Leekley -- $49,000). 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 1997) or from TriMas as its Chairman of the Board ($100,000
for 1996).

(5) 63,160 of Mr. Kennedy's options and 36,582 of Mr. Mosteller's options shown
are 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 or extend the term of the original option.

(6) Mr. Hennessey became an executive officer in 1995, but pursuant to
Securities and Exchange Commission rules, information shown for 1995
includes the entire year. In early 1998, Mr. Hennessey resigned as Executive
Vice President of the Company and became a director and Vice Chairman and
Chief Executive Officer of MascoTech. Mr. Hennessey has agreed to serve as a
part-time employee of the Company (for no more than twenty percent of his
time) in connection with matters with which he was involved as Executive
Vice President of the Company for a salary of $100,000 plus a bonus
opportunity of up to $50,000. 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 during 1995 and 1996 for the period during which he served as
a director of that Company.

(8) Reflects an award in 1997 to Mr. Leekley of 16,000 shares in recognition of
his promotion to Senior Vice President in August 1996.

17
<PAGE> 20

Option Grant Table

The following table sets forth information concerning options granted to
the named executive officers in 1997.

<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
--------------------------------------------------------- POTENTIAL REALIZABLE VALUE
NUMBER OF % OF TOTAL EXERCISE AT ASSUMED ANNUAL RATES OF
SECURITIES OPTIONS PRICE STOCK PRICE APPRECIATION
UNDERLYING GRANTED (SUBJECT TO FOR OPTION TERM(1)
OPTIONS TO EMPLOYEES CERTAIN EXPIRATION --------------------------
NAME GRANTED IN 1997 RESTRICTIONS) DATE 5% 10%
---- ---------- ------------ ------------- ---------- -- ---
<S> <C> <C> <C> <C> <C> <C>
Richard A. Manoogian.... 1,000,000(2) 33.3% $39 5/21/07 $0 or up to $0 or up to
$24,527,000 $62,156,000
Raymond F. Kennedy...... 300,000(2) 10% $39 5/21/07 $0 or up to $0 or up to
$7,358,000 $18,647,000
63,160(3) 2.1% $36 12/10/97 $76,000 $150,000
Frank M. Hennessey...... 200,000(2) 6.7% $39 5/21/07 $0 or up to $0 or up to
$4,905,000 $12,431,000
Richard G. Mosteller.... 140,000(2) 4.7% $39 5/21/07 $0 or up to $0 or up to
$3,434,000 $8,702,000
18,019(3) .6% $35.125 12/10/97 $24,000 $47,000
10,401(3) .3% $36.375 12/10/97 $14,000 $28,000
8,162(3) .3% $52 2/28/01 $73,000 $154,000
John R. Leekley......... 140,000(2) 4.7% $39 5/21/07 $0 or up to $0 or up to
$3,434,000 $8,702,000
</TABLE>

- -------------------------
(1) 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 annualized rates of five percent and
ten percent. 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.

(2) These options, which are discussed further under "Executive Compensation
Committee Report," are exercisable only if Company Common Stock attains
certain record price targets. The options, which have a $39 grant date
exercise price, would become exercisable (in installments) only if record
prices for Company Common Stock of $50, $55 and $60 were met for a specified
period of time before certain dates. Even if the price targets were met, the
options would only vest over time, retroactive to May 1998, at an annual
rate of 10% through May 2004 and 30% in May 2005. In late 1997, 20% of the
options became eligible for vesting when Company Common Stock satisfied the
$50 per share requirement and an additional 20% became eligible for vesting
in the first quarter of 1998 when Company Common Stock satisfied the $55 per
share requirement, in each case subject to the vesting schedule described in
the preceding sentence. The remaining 60% will become eligible for vesting
if Company Common Stock attains $60 per share for 10 days in any 90-day

18
<PAGE> 21

period by May 2001, and will be subject to the vesting schedule after
becoming exercisable. 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
annualized rate of five or ten percent. The $50 and $55 price targets were
met in late 1997 and early 1998, respectively, because Company Common
Stock appreciated at an annualized rate of approximately 50 percent from
the $39 price on May 21, 1997, the date of the option grant. Assuming the
$60 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.

(3) These options consist solely of restoration options, and are equal to the
number of shares delivered to exercise prior options. The exercise price of
restoration options is equal to the market value of Company Common Stock on
the date the original options were exercised. All of these options were
exercised in 1997 except for Mr. Mosteller's option for 8,162 shares.

Option Exercises and Year-End Option Value Table

The following table sets forth information concerning each exercise of
stock options during 1997 by each of the named executive officers and the value
at December 31, 1997 of unexercised options held by such individuals 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 (from
December 1987 to April 1997 with grant date market prices ranging from $20 3/4
to $39 3/4) through December 31, 1997 (the closing price of Company Common Stock
on December 31, 1997 was $50 7/8 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.

AGGREGATED OPTION EXERCISES IN 1997, AND DECEMBER 31, 1997 OPTION VALUES

<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS AT
SHARES DECEMBER 31, 1997 DECEMBER 31, 1997
ACQUIRED VALUE --------------------------- ---------------------------
NAME ON EXERCISE REALIZED UNEXERCISABLE EXERCISABLE UNEXERCISABLE EXERCISABLE
---- ----------- -------- ------------- ----------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Richard A. Manoogian... 857,740 $17,759,000 1,430,000 1,270,000 $21,791,000 $17,671,000
Raymond F. Kennedy..... 171,415 $ 1,872,000 595,000 138,055 $10,331,000 $ 3,489,000
Frank M. Hennessey..... 0 0 385,000 65,000 $ 6,272,000 $ 1,547,000
Richard G. Mosteller... 221,769 $ 4,194,000 298,162 16,373 $ 5,169,000 $ 326,000
John R. Leekley........ 45,047 $ 807,000 261,000 49,000 $ 4,396,000 $ 1,375,000
</TABLE>

19
<PAGE> 22

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(1)
--------------------------------------------------------------
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
- 20; Mr. Hennessey - 8; and Mr. Leekley - 22.

(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.

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
approximately $400,000. A participant may also receive supplemental medical
benefits. A participant who has been

20
<PAGE> 23

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.

21
<PAGE> 24

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,
1993 through December 31, 1997, when the closing price of Company Common Stock
was $50 7/8 per share (on April , 1998 the closing price was $ per
share). The graph assumes investments of $100 on December 31, 1992 in Company
Common Stock, the S&P 500 Stock Index and the S&P Building Materials Index and
the reinvestment of dividends.

[GRAPH]

The table below sets forth the value, as of December 31 of each of the
years indicated, of $100 investments made on December 31, 1992 in Company Common
Stock, the S&P 500 Index and the S&P Building Materials Index, and reinvestment
of dividends.

<TABLE>
<CAPTION>
S&P
Building
Measurement Period Masco S&P 500 Materials
(Fiscal Year Covered) Corporation Index Index
<S> <C> <C> <C>
1992 100.00 100.00 100.00
1993 127.09 109.92 123.69
1994 80.70 111.34 91.36
1995 113.87 152.66 123.50
1996 134.18 187.28 148.01
1997 191.90 249.28 172.13
</TABLE>

22
<PAGE> 25

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The Compensation Committee of the Board of Directors consists of Peter W.
Stroh, Mary Ann Krey and Arman Simone. Mr. Istock, a director of the Company, is
the Chairman, President and Chief Executive Officer of First Chicago NBD
Corporation. Mr. Manoogian, an executive officer of the Company, is one of six
members of the Organization, Compensation and Nominating Committee of First
Chicago NBD Corporation, but recuses himself from any decisions relating to Mr.
Istock's compensation.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

MASCOTECH, INC.

The Company owns approximately 17 percent of MascoTech, Inc. (formerly
Masco Industries, Inc.), a leading supplier of metal formed components primarily
for vehicle engine and drivetrain applications and automotive aftermarket
products. MascoTech was formed in a 1984 restructuring of the Company.

In January 1998, MascoTech expanded its business operations when it
acquired the remaining 63 percent of the outstanding shares of TriMas
Corporation that it did not previously own for approximately $920 million in
cash. Through a tender offer, MascoTech paid $34.50 net per share and the
Company tendered the 1,583,708 shares (approximately 4 percent) of TriMas it
held. TriMas is a diversified proprietary products company with leadership
positions in commercial, industrial and consumer niche markets.

On September 30, 1997, MascoTech transferred to the Company approximately
9.9 million shares (approximately 42 percent) of the outstanding common stock of
Emco Limited held by MascoTech and $45.6 million in cash in payment of a
promissory note owed by MascoTech to the Company in the principal amount of
$151,375,000, with interest at the rate of 6 5/8% per annum, issued by MascoTech
in connection with its October 1996 purchase of MascoTech common stock (at the
then current market price) and warrants to purchase shares of MascoTech common
stock held by the Company. The value of the shares received by the Company was
based on the market price of Emco Limited common stock on the Toronto Stock
Exchange, translated into U.S. dollars, in accordance with the terms of the
agreement entered into in October 1996 between the Company and MascoTech. Emco
Limited is a Canadian manufacturer and distributor of home improvement and
building products. 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 MascoTech's purchase of securities from the Company in
October 1996, 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, and the balance, together with
accrued interest at the rate of 6 5/8% per annum, was paid on September 30,
1997. Mr. Manoogian is the Chairman and Chief Executive Officer of the Company
and the Chairman of MascoTech. As a result of the purchase of Mr. Manoogian's
shares, his ownership interest in

23
<PAGE> 26

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.

CORPORATE SERVICES AGREEMENT

Under a Corporate Services Agreement (the "MascoTech Corporate Services
Agreement"), the Company provides MascoTech and its subsidiaries with office
space for 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.
Approximately $5 million has been charged to MascoTech by the Company for 1997,
subject to adjustment in accordance with the terms of 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. In connection with
MascoTech's acquisition of TriMas, the parties terminated the Corporate Services
Agreement between the Company and TriMas, pursuant to which the Company received
$3.8 million for services provided during 1997, and amended the MascoTech
Corporate Services Agreement to include the TriMas companies and provide for the
same credits that were permitted to TriMas under its agreement.

CORPORATE OPPORTUNITIES AGREEMENTS

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.

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
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
24
<PAGE> 27

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.

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.

In early 1990, TriMas acquired several businesses from the Company and as
part of the transaction, the Company agreed to indemnify TriMas against certain
liabilities of the acquired businesses.

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.

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.

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 distributer 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 totaling $57 million, consisting of 13% cumulative preferred
stock with a stated value of $55 million, 15 percent of the common stock of FII
and
25
<PAGE> 28

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. For 1997 the Company recorded approximately $36.9 million of
pay-in-kind interest income from FII and received approximately $10.8 million in
dividends on the preferred stock.

As part of the disposition of the Home Furnishings Group, the Company and
FII entered into a Transitional Services Agreement which expired April 30, 1997.
Pursuant to this agreement, the Company 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 provided for various license rights and
confidential treatment of information which may have arisen from the Company's
performance of research and development services on behalf of FII. FII paid the
Company approximately $1.7 million for services during 1997 under this
agreement. For 1997 FII paid the Company approximately $106,900 for the purchase
of products from the Company and the Company paid FII approximately $280,000 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 request of the Company,
to conduct an exchange offer under the federal securities laws or to file
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.

OTHER RELATED PARTY TRANSACTIONS

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
negotiated a fluctuating rate of interest for these loans. The largest amount
outstanding payable by MascoTech GmbH during 1997 was approximately $475,000.

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 1997, the Company paid approximately $20.9 million to MascoTech and
approximately $1 million to TriMas, and received approximately $124,000 from
MascoTech. In addition, MascoTech paid approximately $4.1 million to TriMas and
TriMas paid approximately $355,000 to MascoTech as a result of such transactions
in 1997. MascoTech participates with the Company in a number of national
purchasing programs, which enable them to obtain favorable terms from certain of
their service and product suppliers.

26
<PAGE> 29

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. For the
1998 vesting and the final vesting in 1999, the Board of Directors has
determined the per share value of TriMas to be $34.50, the price per share paid
by MascoTech in connection with its acquisition of TriMas.

Ownership of securities and various other relationships and incentive
arrangements may result in conflicts of interest in the Company's dealings with
MascoTech and others. The MascoTech Corporate Opportunities Agreement and other
aspects of the relationship between the 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. Several persons affiliated with the Company are currently members of
MascoTech's Board of Directors. Mr. Manoogian, the Company's Chairman of the
Board and Chief Executive Officer, is also the Chairman of the Board of
MascoTech and a significant stockholder of the Company and MascoTech. Mr.
Hennessey served as the Company's Executive Vice President until January 1998
when he became a Director and the Vice Chairman and Chief Executive Officer of
MascoTech. Mr. Morgan, who is a Director of the Company, is also a Director of
MascoTech. From time to time Morgan Lewis Githens & Ahn, of which Mr. Morgan is
a partner, performs investment banking and other related services for the
Company and MascoTech. Fees payable by MascoTech to such firm for financial
advisory services for 1997, including services in connection with MascoTech's
acquisition of TriMas, were $1,750,000, plus expenses. Eugene A. Gargaro, Jr.,
an executive officer of the Company, has been a director and is also the
Secretary of MascoTech. 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 1993. Dykema Gossett provides legal services to
the Company from time to time. Mr. Gargaro receives no compensation from Dykema
Gossett.

27
<PAGE> 30

The following table sets forth the number of shares of MascoTech common
stock beneficially owned as of March 13, 1998 by the nominees, the current
Directors and named executive officers and by the current Directors and current
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
COMMON STOCK
OF MASCOTECH
NAME(1) BENEFICIALLY OWNED
------- ------------------
<S> <C>
Thomas G. Denomme........................................ 0
Joseph L. Hudson, Jr..................................... 0
Verne G. Istock.......................................... 0
Mary Ann Krey............................................ 0
Wayne B. Lyon(3)(8)...................................... 61,160
Richard A. Manoogian(4)(5)(8)............................ 5,032,819
John A. Morgan(9)........................................ 29,790
Arman Simone(6)(8)....................................... 20,000
Peter W. Stroh........................................... 0
Frank M. Hennessey(10)................................... 218,400
Raymond F. Kennedy....................................... 0
Richard G. Mosteller..................................... 0
John R. Leekley(2)(8).................................... 3,767
All 17 current Directors and current executive officers
of the Company as a group (excluding subsidiary,
divisional and group
executives)(2)(3)(4)(5)(6)(7)(8)(9).................... 5,288,280
</TABLE>

- -------------------------
(1) The only nominee, current Director or named executive officer of the
Company who beneficially owns one percent or more of MascoTech common stock
is Mr. Manoogian, who beneficially owns 10.4 percent of MascoTech common
stock. Current Directors and current executive officers of the Company as a
group beneficially own 10.9 percent of MascoTech common stock.

(2) These 3,767 shares are held by a trust for which Mr. Leekley serves as a
trustee.

(3) Includes 2,000 shares owned by a foundation for which Mr. Lyon serves as
director, 22,580 shares which may be acquired upon conversion of
convertible securities and 580 shares which may be acquired upon conversion
of convertible securities held by a trust for which Mr. Lyon serves as a
trustee.

(4) Includes 708,560 shares owned by charitable foundations for which Mr.
Manoogian serves as a director, and 235,483 shares which can be acquired
upon conversion of convertible securities owned by the foundations.

(5) Includes shares of MascoTech common stock which may be acquired on or
before May 12, 1998 upon exercise of stock options (1,000,000 shares for
both Mr. Manoogian and all current Directors and current executive officers
of the Company as a group), and unvested restricted shares issued under the
Company's or MascoTech's restricted stock incentive plans (114,890 shares
for Mr. Manoogian, and 213,434 shares for all current Directors and current
executive officers of the

28
<PAGE> 31

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 owned by trusts for which an executive officer
serves as a trustee and 4,354 shares 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 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.

(9) Includes 2,776 unvested restricted stock awards shares of MascoTech common
stock for each of Mr. Morgan and Eugene A. Gargaro, Jr. issued under the
MascoTech 1997 Non-Employee Directors Stock Plan. Holders have voting but
no investment power over these shares.

(10) Includes 75,000 unvested restricted stock award shares issued under
MascoTech's restricted stock incentive plan. Mr. Hennessey has voting but
no investment power over those shares.

PROPOSAL TO AMEND THE CERTIFICATE OF INCORPORATION
TO INCREASE AUTHORIZED COMMON STOCK

The Board of Directors has unanimously adopted a resolution approving and
recommending to the stockholders a proposal to amend the Company's Certificate
of Incorporation to increase the number of authorized shares of $1 par value
Common Stock from 400,000,000 to 900,000,000 shares. As of March 31, 1998,
approximately 169,680,000 shares were outstanding and approximately 13,535,000
were reserved for issuance under the Company's stock incentive and stock option
plans. Accordingly, there were approximately 216,785,000 shares remaining
available for issuance or sale by the Company other than those issuable as
described above. The proposed amendment will not change the number of the
Company's 1,000,000 shares of authorized preferred stock, $1 par value, none of
which is outstanding.

The proposal is intended to increase the Company's financial flexibility by
increasing the number of shares of Common Stock that can be issued without the
delay and expense incident to further stockholder approval. The Board of
Directors believes that the increase in shares will provide the Company greater
flexibility in the consideration of future acquisitions, stock dividends or
stock splits, sales of Common Stock or convertible securities to enhance capital
or liquidity, and other corporate purposes. The Company has no immediate plans
or commitments for the issuance of additional shares, but believes that having
such shares available for future issuances will allow the Company to act
promptly as needs or opportunities arise.

If the amendment is approved, the additional shares could be issued by the
Board of Directors without further stockholder approval, except as may be
required by applicable law or under the rules of any stock exchange on which the
Company's shares are listed. Should the Board of Directors elect to issue
additional shares of Common Stock, existing stockholders would not have any
preemptive rights to

29
<PAGE> 32

subscribe for or purchase such additional shares. The issuance of the additional
shares could reduce the percentage ownership of stockholders of the Company and
could have the effect of diluting earnings per share and book value of existing
shares of Common Stock.

The Board of Directors has not proposed the amendment with the intention
that the additional shares be used to discourage third parties from attempting
to effect a change in control of the Company, although it is possible that the
additional authorized shares could be used for that purpose in the future.
Consequently, under rules adopted by the Securities and Exchange Commission, the
Company is required to provide certain disclosure of charter, bylaw, and similar
provisions that could have an anti-takeover effect. These include the following:
(i) the Company has a classified Board with Directors serving three-year terms;
(ii) charter provisions giving incumbent Directors sole power to fill vacancies,
requiring advance written notice by stockholders wishing to propose nominees,
prohibiting stockholder action by written consent and limiting who may call
special meetings of stockholders; (iii) supermajority voting requirements to
approve certain business combinations unless certain "fair price" criteria are
satisfied, and to amend certain provisions in the Certificate of Incorporation
and Bylaws; (iv) Board authority to issue up to 1,000,000 shares of preferred
stock; (v) plans that provide for the accelerated vesting of options, restricted
stock and other benefits in the event of a change in control; and (vi) the
Rights Agreement dated as of December 6, 1995, between the Company and The Bank
of New York. The Board is not aware of any specific effort to accumulate the
Company's securities or to cause a change in control of the Company.

The approval of the amendment to Article Fourth of the Certificate of
Incorporation requires the affirmative vote of holders of a majority of the
issued and outstanding shares of Company Common Stock. Abstentions and broker
non-votes will have the same effect as votes against the proposal.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE PROPOSED
AMENDMENT.

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
1998, 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 37 years. During such time, it has performed services
of an accounting and auditing nature for the Company as well as for MascoTech.
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.

The affirmative vote of a majority of the votes cast on the proposal is
required for the ratification of the selection of independent auditors.
Abstentions and broker non-votes are not counted as votes cast, and therefore do
not affect the ratification of the selection of auditors. If the selection is
not ratified, the Board will consider selecting another public accounting firm
as the independent auditors.

30
<PAGE> 33

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 1998.

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
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 David A.
Doran, Vice President -- Taxes, covering the sale of 2,070 shares of Company
common stock was filed after the due date.

STOCKHOLDERS' PROPOSALS

Stockholders' proposals intended to be presented at the 1999 Annual Meeting
of Stockholders of the Company must be received by the Company at its address
stated above by December 29, 1998, 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. GARGARO, JR.
EUGENE A. GARGARO, JR.
Secretary

Taylor, Michigan
April 28, 1998

31
<PAGE> 34

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> 35

PRELIMINARY COPY

[ ]

(1) Election of Directors FOR all nominees [ ] WITHHOLD AUTHORITY to vote [ ] EXCEPTIONS [ ]
listed below for all nominees listed below

Class I Directors to hold office until the Annual Meeting of Stockholders in 2001 or until their respective successors are elected
and qualified.
NOMINEES: WAYNE B. LYON, ARMAN SIMONE AND PETER W. STROH
Class II Director to hold office until the Annual Meeting in 1999 or until his successor is elected and qualified.
NOMINEE: RAYMOND F. KENNEDY
Class III Director to hold office until the Annual Meeting in 2000 or until his successor is elected and qualified.
NOMINEE: THOMAS G. DENOMME
(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 amendment (3) Ratification of the selection of
to Article Fourth of the Company's Coopers & Lybrand L.L.P. as
Certificate of Incorporation. independent auditors for the
Company for the year 1998.

FOR [ ] AGAINST [ ] ABSTAIN [ ] FOR [ ] AGAINST [ ] ABSTAIN [ ]

Change of Address or
Comments Mark Here [ ]

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,
FOR THE PROPOSAL AND FOR RATIFICATION.

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: ____________________________, 1998

_____________________________________ (L.S.)
Signature

PLEASE SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE. VOTES MUST BE INDICATED
(X) IN BLACK OR BLUE INK. [X]
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

PROXY FOR ANNUAL MEETING OF STOCKHOLDERS TO BE HELD MAY 20, 1998
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 20, 1998, 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