MASCO CORP /DE/, DEF 14A, 1999-04-21

MASCO CORP /DE/
DEF 14A, 1999-04-21
HEATING EQUIP, EXCEPT ELEC & WARM AIR; & PLUMBING FIXTURES

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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:

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

[X] Definitive proxy statement

[ ] Definitive additional materials

[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
MASCO CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
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:

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<PAGE> 2

MASCO CORPORATION
-------------------------

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

<TABLE>
<S> <C>
DATE: MAY 19, 1999
TIME: 10:00 A.M.
PLACE: MASCO CORPORATION
21001 VAN BORN ROAD
TAYLOR, MICHIGAN 48180
</TABLE>

The purposes of the Annual Meeting are:

1. To elect four Class II Directors;

2. To ratify the selection of PricewaterhouseCoopers LLP as independent
auditors for the Company for the year 1999; and

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

Stockholders of record at the close of business on March 26, 1999 are
entitled to vote at the Meeting or 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 postage prepaid envelope. 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

/s/EUGENE A. GARGARO, JR.

EUGENE A. GARGARO, JR.
Secretary
April 21, 1999
<PAGE> 3

PROXY STATEMENT

ANNUAL MEETING OF STOCKHOLDERS OF
MASCO CORPORATION

May 19, 1999

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 19, 1999 at 10:00 A.M., and at any
adjournment. This Proxy Statement and the enclosed Proxy are being mailed or
given to stockholders on or about April 21, 1999.

The expense of this solicitation will be borne by the Company. Solicitation
will be by mail, 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 at the close of business on March 26, 1999 will be
entitled to vote at the Meeting. On that date, there were 337,663,043 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. The Meeting
will be held if a quorum, consisting of a majority of the outstanding shares of
common stock entitled to vote, is represented in person or by proxy. When
nominees, such as banks and brokers, holding shares on behalf of beneficial
owners, do not receive voting instructions from the beneficial owners by a
specified date, the nominees may vote those shares only on matters deemed
routine by the New York Stock Exchange, such as the election of Directors and
ratification of the selection of independent auditors. On a non-routine matter,
nominees cannot cast a vote (a so-called "broker non-vote"). The ratification of
the selection of PricewaterhouseCoopers LLP must be approved by a majority of
the votes cast. Directors are elected by a plurality of the votes cast. The four
nominees for Class II Directors who receive the largest number of votes cast
will be elected as Class II Directors. Abstentions and broker non-votes, if any,
will not be treated as votes cast, and therefore, will not affect the outcome of
the matters referred to above.

The shares represented by the Proxy will be voted as instructed if received
in time for the 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 Meeting.
<PAGE> 4

ELECTION OF DIRECTORS

The Board of Directors is divided into three classes. The term of office of
the Class II Directors expires at this meeting and the Board of Directors
proposes the re-election of Joseph L. Hudson, Jr., Verne G. Istock, Raymond A.
Kennedy and John A. Morgan as Class II Directors.

The Class I, Class II and Class III Directors will serve for terms expiring
at the Annual Meeting of Stockholders in 2001, 2002 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.

Information concerning the nominees and continuing Directors is set forth
below.

Wayne B. Lyon....................... Mr. Lyon, 66, joined LifeStyle Furnishings in his
Chairman, President and present positions upon its formation in 1996.
Chief Executive Officer Previously, he served the Company as a Group Vice
of LifeStyle Furnishings President beginning in 1972, was named Executive Vice
International Ltd. President and Chief Operating Officer in 1974 and
Director since 1988. 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.

Arman Simone........................ Mr. Simone, 71, is involved in various philanthropic
Retired President of Simone endeavors focusing on children, education and
Corporation, commercial builders alternative medicine.
and developers. Director from 1952
to 1969 and since 1972.

Peter W. Stroh...................... Mr. Stroh, 71, 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 of Executive Officer of The Stroh Brewery Company from
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
Economic 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.
</TABLE>

2
<PAGE> 5

CLASS II (NOMINEES FOR TERM TO EXPIRE AT THE ANNUAL MEETING IN 2002)

Joseph L. Hudson, Jr................ Mr. Hudson, 67, was elected in 1956 as a trustee of
Trustee, Hudson-Webber Foundation, the Hudson-Webber Foundation and subsequently served
philanthropic organization. as Chairman until 1996. Mr. Hudson was Vice President
Director since 1996. of the J.L. Hudson Company beginning in 1957, was
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, retiring in 1981. 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
the Community Foundation for Southeastern Michigan;
Active Honorary Trustee and founding Chairman of New
Detroit, Inc.; and a director of Detroit Renaissance.

Verne G. Istock..................... Mr. Istock, 58, joined NBD Bank in 1963 and served as
Chairman of the Board of Bank One Vice Chairman and director of NBD Bank and its
Corporation. Director since 1997. parent, NBD Bancorp, from 1985 until he was named
Chairman and Chief Executive Officer in 1994. Upon
the merger 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. Upon the merger
of First Chicago NBD Corporation and Banc One
Corporation on October 1, 1998, he was named Chairman
of the Board of Bank One Corporation. He presently
also serves as Chairman of the Board and a director
of The First National Bank of Chicago and Chairman
and Chief Executive Officer of NBD Bank, Michigan.
Mr. Istock is a director of Kelly Services, Inc., The
Federal Reserve Bank of Chicago, the Bankers
Roundtable and the International Monetary Conference.
He is a director of Detroit Renaissance, the Greater
Detroit Partnership in Detroit, 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 director of the United
Way/Crusade of Mercy, Chicago, a principal of Chicago
United, a member of The Commercial Club of Chicago
and The Economic Club of Chicago, and serves on the
Board of Trustees of Northwestern University.
</TABLE>

3
<PAGE> 6

<TABLE>
<CAPTION>
NAME, PRINCIPAL OCCUPATION AGE, BUSINESS EXPERIENCE,
AND PERIOD OF SERVICE AS A DIRECTOR DIRECTORSHIPS AND OTHER INFORMATION
- ----------------------------------- -----------------------------------
<S> <C>
Raymond F. Kennedy.................. Mr. Kennedy, 56, 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
Director since 1998. 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 and
Flint Ink Corporation.

John A. Morgan...................... Mr. Morgan, 68, has been Managing Director of Morgan
Managing Director, Morgan Lewis Lewis Githens & Ahn, Inc. since founding that firm in
Githens & Ahn, Inc., investment 1982. From 1977 to 1982, he was Vice Chairman of
bankers. Director since 1969. Smith Barney, Harris Upham & Co., Inc., in charge of
the firm's merger and acquisition activities, a
member of the executive committee and a director of
Smith Barney International Inc. Prior to becoming
Vice Chairman of Smith Barney, Mr. Morgan had been
Senior Vice President in charge of the Corporate
Finance Department. He was a director of TriMas
Corporation from 1989 until it was acquired by
MascoTech, Inc. in January 1998. He is currently a
director of Furnishings International Inc. and
MascoTech, Inc. He also serves as a trustee of the
Provident Loan Society of New York.

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

Thomas G. Denomme................... Mr. Denomme, 59, served as Vice Chairman and Chief
Retired Vice Chairman and Chief Administrative Officer of Chrysler Corporation from
Administrative Officer of Chrysler 1994 until he retired in December 1997 and had been a
Corporation. Director since 1998. 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 immediate
past Chairman of the Board of Trustees of the
University of Detroit-Mercy and of the Michigan
Thanksgiving Parade Foundation. He is also Chairman
of the Michigan Gaming Control Board. Mr. Denomme is
a director of William Beaumont Hospital, Pro-Air,
Inc. and Operation Outreach, USA, a children's
literacy program.
</TABLE>

4
<PAGE> 7

Mary Ann Krey....................... Ms. Krey, 51, 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 a director of Commerce Bancshares, Inc.,
firm. Director since 1997. CPI 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, a member of Washington University Board of
Trustees and serves as Chairman of the Board of
Trustees of the St. Louis Art Museum. Ms. Krey
received the Washington University 1996 Distinguished
Alumni Award and was named 1994 Woman of the Year by
the St. Louis Variety Club.
Richard A. Manoogian................ Mr. Manoogian, 62, 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 Company President in 1968 and has served as Chairman and
and Chairman of the Board of Chief Executive Officer since 1985. He has also
MascoTech, Inc. Director since served as Chairman and a director of MascoTech, Inc.
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 Bank One Corporation, MSX
International, Inc., Detroit Renaissance and The
American Business Conference, President of the Board
of Trustees 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 and Detroit Investment Fund.
</TABLE>

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

The Board of Directors held four meetings during 1998. The Audit Committee
of the Board of Directors, consisting of Messrs. Hudson, Istock, Stroh, and
Denomme, held two meetings during 1998. 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 auditors, the scope of audit
procedures, the Company's internal audit program and results, the nature of
services to be performed by the independent auditors and the Company's
accounting practices. The Compensation Committee of the Board of Directors,
consisting of Ms. Krey and Messrs. Simone and Stroh, held four meetings during
1998. Mr. Morgan joined the Compensation Committee in December, 1998. This
Committee
5
<PAGE> 8

establishes and monitors executive compensation and administers and determines
awards and options granted under the Company's restricted stock incentive and
stock option plans. The Nominating Committee of the Board of Directors,
consisting of Messrs. Hudson, Lyon, Morgan and Stroh, was established to
identify and consider candidates to serve as Directors of the Company. During
1998, the Committee members participated in several conferences relating to
possible candidates. The Nominating Committee will consider candidates for
nominees for election as Directors of the Company submitted by stockholders. 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") which was previously approved by
stockholders, one-half of the cash compensation formerly paid to Directors has
been replaced with an annual vesting of shares of restricted stock. Under the
Directors Stock Plan, each Director received an award of Company Common Stock in
1997 to vest over a five-year period in 20 percent annual installments. The
value of the stock awards was based on the market price of Company Common Stock
on the date of grant and the value equaled five years of the replaced cash
compensation. All Directors, except Ms. Krey and Messrs. Istock and Denomme,
received awards of 6,940 shares in 1997. Ms. Krey and Mr. Istock were each
awarded 6,000 shares following their election at the 1997 Annual Meeting, and
Mr. Denomme was awarded 4,100 shares following his election at the 1998 Annual
Meeting, reflecting proration for their partial first years of service. For
1998, Directors received a cash fee of $25,000 and $1,000 for each Board of
Directors meeting attended (and committee meeting attended if not held on a date
on which the entire Board met). The Directors Stock Plan also provides for the
grant to each non-employee Director on the date of each annual meeting of a
non-qualified option to purchase 8,000 shares of Company Common Stock at the
then current market price. These options become exercisable in 20 percent
installments 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 as a non-employee
Director.

6
<PAGE> 9

SECURITY OWNERSHIP OF MANAGEMENT
AND CERTAIN BENEFICIAL OWNERS

Set forth below is information concerning beneficial ownership of Company
Common Stock as of March 15, 1999 by (i) each of the nominees and current
Directors, (ii) each of the named executive officers, (iii) all Directors and
executive officers of the Company as a group, and (iv) all persons known by the
Company to be the beneficial owners of five percent or more of Company Common
Stock. 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 BENEFICIALLY OWNED BENEFICIALLY OWNED
---- ------------------ ------------------
<S> <C> <C>
Thomas G. Denomme(1).................................... 20,100 *
Joseph L. Hudson, Jr.(1)................................ 10,540 *
Verne G. Istock(1)...................................... 9,600 *
Raymond F. Kennedy(2)................................... 976,202 *
Mary Ann Krey(1)........................................ 9,600 *
Wayne B. Lyon(1)(2)(3).................................. 698,242 *
Richard A. Manoogian(2)(3).............................. 8,588,329 2.5%
John A. Morgan(1)....................................... 11,740 *
Arman Simone(1)......................................... 152,540 *
Peter W. Stroh(1)....................................... 9,540 *
John R. Leekley(2)(3)................................... 306,910 *
Richard G. Mosteller(2)................................. 356,771 *
Robert B. Rosowski(2)................................... 256,694 *
All 17 Directors and executive officers of the Company
as a group (excluding subsidiary, divisional and group
executives)(1)(2)(3).................................. 11,983,727 3.5%
FMR Corp.
82 Devonshire Street
Boston, Massachusetts 02109(4)........................ 39,581,109 11.67%
</TABLE>

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

(1) Includes unvested restricted stock award shares held under the Company's
1997 Non-Employee Directors Stock Plan (3,456 for Mr. Denomme; 4,164 for
each of Messrs. Hudson, Lyon, Morgan, Simone and Stroh; 3,780 for each of
Mr. Istock and Ms. Krey; and 31,836 for all Directors and executive officers
of the Company as a group) and shares which may be acquired before May 15,
1999 upon exercise of stock options issued under such Plan (1,600 for each
of Messrs. Hudson, Istock, Lyon, Morgan, Simone, Stroh and Ms. Krey; and
11,200 for all Directors and executive officers of the Company as a group).
Holders have sole voting but no investment power over unvested restricted
shares and have neither voting nor investment power over unexercised option
shares.

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<PAGE> 10

(2) Includes unvested restricted stock award shares held under the Company's
stock incentive plans (569,992 shares for Mr. Manoogian; 547,544 shares for
Mr. Kennedy; 97,144 shares for Mr. Leekley; 32,828 shares for Mr. Lyon;
84,422 shares for Mr. Mosteller; 42,370 shares for Mr. Rosowski; and
1,579,924 shares for all Directors and executive officers of the Company as
a group) and shares which may be acquired before May 15, 1999 upon exercise
of stock options (463,461 shares for Mr. Manoogian; 260,228 shares for Mr.
Kennedy; 164,362 shares for Mr. Leekley; 551,912 shares for Mr. Lyon;
162,041 shares for Mr. Mosteller; 150,000 shares for Mr. Rosowski; and
1,977,476 shares for all Directors and executive officers of the Company as
a group). Holders have sole voting but no investment power over unvested
restricted shares and exercise neither voting nor investment power over
unexercised option shares.

(3) Shares owned by Mr. Manoogian and by all Directors and executive officers of
the Company as a group include in each case an aggregate of 3,273,800 shares
owned by charitable foundations for which Mr. Manoogian serves as a director
and 1,429,000 shares held by a trust for which he serves as a trustee.
Shares owned by Mr. Lyon and by all Directors and executive officers of the
Company as a group include in each case 26,802 shares owned by a charitable
foundation for which Mr. Lyon serves as a director. Shares owned by Mr.
Leekley and by all Directors and executive officers of the Company as a
group include 16,082 shares held by a trust for which Mr. Leekley serves as
a trustee. Shares owned by all Directors and executive officers of the
Company as a group include 29,240 shares held by trusts for which an
executive officer serves as a trustee. The directors of the foundations and
the trustees share voting and investment power with respect to shares owned
by the foundations and trusts, but Messrs. Manoogian, Lyon and Leekley and
the executive officer who serves as a trustee for certain trusts each
disclaims beneficial ownership of such shares.

(4) Based on a Schedule 13G dated February 1, 1999 and filed with the Securities
and Exchange Commission by FMR Corp. and certain of its affiliates, at
December 31, 1998, 38,824,438 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 35,072,548 shares and
sole voting power over 2,587,190 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 756,671 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.

8
<PAGE> 11

EXECUTIVE COMPENSATION COMMITTEE REPORT

In 1998 Masco Corporation achieved record earnings, and Company Common
Stock reached record share price levels. The Board of Directors and senior
management of the Company believe that the Company's compensation strategy of
directly linking a significant portion of compensation to record share price
targets, implemented in 1996, has played a significant role in these
achievements by more directly aligning management's interests with those of
stockholders. Based upon this success, the Compensation Committee has
implemented new programs beginning in late 1998 based 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 executive management team. The
key components of this strategy as it applies to officers are described below.
The following information has been adjusted to reflect a 100 percent stock
distribution effected in July 1998.

COMPENSATION PROGRAMS TO ENHANCE STOCKHOLDER VALUE

The Company's Chairman and Chief Executive Officer, Richard A. Manoogian,
received annual salary and bonus of $1 in 1998, an arrangement that began
January 1, 1996. At that time, Mr. Manoogian requested that his annual salary
and bonus of approximately $1.4 million be reduced to $1 to demonstrate his
commitment to enhance stockholder value and his personal disappointment with the
Company's stock price performance in prior years. The 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 $20.50 per share within
three years from the April 1996 date of grant or $25 per share within five years
from that date. This option became exercisable in June 1997 when the price of
Company Common Stock exceeded $20.50 per share, a 46 percent increase from the
$14 price on the date of grant. Pursuant to its terms, Mr. Manoogian benefited
from this option grant only by the amount of any price appreciation above
$20.50.

In support of Mr. Manoogian's commitment to increase stockholder value, in
mid-1996 the other executive officers and group executives of the Company
volunteered an effective fifteen percent reduction in their base salaries, which
were then frozen at the lower level. The Compensation Committee offset this
reduction in cash compensation with stock incentives by granting stock options
and restricted stock awards based on share prices reaching the same record
levels as Mr. Manoogian's option within a five year period. These record levels
were achieved when the price of Company Common Stock increased from $16 per
share in May 1996 to in excess of $20.50 in June 1997 and $25 in December 1997.

In order to further align the objectives of the Company's other key
employees with its stockholders, special restricted stock awards were also
granted in 1996 to approximately 1,000 corporate and operating employees.
Vesting of these awards would not commence until normal retirement, except that
accelerated annual vesting would occur if record share prices ($20.50 and $25)
were achieved. Because these share prices were achieved, these awards became
eligible for earlier vesting, commencing, retroactive to April 1997, in ten
percent annual installments over a period of ten years. The Committee believes
that such long-term vesting not only focuses the recipient on long-term
enhancement of
9
<PAGE> 12

stockholder value but also helps to retain key employees. In addition, the
holders of these awards will benefit from continued long-term appreciation in
the price of Company Common Stock.

For 1997, salaries and bonuses of executive officers and group executives
remained frozen. 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
to executive officers and group executives. Holders of these options, which have
an exercise price of $19.50 (grant date market price), pledged not to exercise
the options unless the share price appreciated from the May 1997 grant date
price to record levels of $25, $27.50 and $30 per share, increases of
approximately 28, 41 and 54 percent, respectively. However, even though the
price targets were attained by mid-1998, the Compensation Committee's long-term
philosophy is reflected in the fact that full realization of the value of these
options is subject to a long-term vesting schedule.

In light of the growth of the Company and the performance of Company Common
Stock in 1997, additional restricted stock awards with the same record price
targets ($25, $27.50 and $30 per share) were granted in late 1997 to
approximately 1,000 corporate and operating employees. Under the terms of these
awards, vesting would not commence until normal retirement, but could be
accelerated to permit annual vesting upon attainment of share price targets or
fifteen percent compound annual growth in earnings per share. Because all of the
share price targets have been attained, the awards have commenced vesting in ten
percent annual installments over a period of ten years.

In 1998, the Committee undertook a general review of the compensation
programs described above and the Company's performance, including sales,
earnings, and profit margins as well as share prices, over the prior three
years. Salaries and bonuses of executive officers and group executives remained
frozen. Executive officers, group executives and key corporate and operating
employees received restricted stock awards in 1998 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 more fully described below. No original stock
options were granted to executive officers or group executives in 1998. (Certain
of these individuals did receive restoration options upon the exercise of
previously held stock options. As described more fully below, a restoration
option does not increase the number of shares covered by the original option or
extend the term of the original option.)

Upon completion of its review in late 1998, given management's commitment
to enhancing stockholder value and the resulting record performance of the
Company and Company Common Stock since 1996, the Committee decided to end the
freeze on salaries and bonuses of executive officers and group executives as of
January 1, 1999, and to restore such individuals' cash compensation to normal
levels. In recognition of Mr. Manoogian's performance, the Committee believed it
appropriate to restore Mr. Manoogian's cash compensation to normal levels as
well. However, Mr. Manoogian requested that his annual salary remain at $1 to
demonstrate to stockholders his continuing commitment to enhancing stockholder
value, a commitment he believes is underscored by linking his compensation
almost entirely to the value of Company Common Stock. The Compensation
Committee, in acceding to Mr. Manoogian's request, considered alternative
arrangements, and in February 1999 granted Mr. Manoogian a stock option to
purchase 600,000 shares of Company Common Stock. This option has an exercise
price of $28 per share (market price on date of grant); however, Mr. Manoogian
has pledged
10
<PAGE> 13

not to exercise the option unless the price of Company Common Stock reaches $50
per share by February 2003 (representing a 79 percent increase). Even if this
price level is attained, the option generally becomes exercisable in
installments, over a period of eight years. In addition, Mr. Manoogian received
a restricted stock award for 225,000 shares of Company Common Stock, which
generally vests in ten percent annual installments over a period of ten years
from the date of grant.

In recognition of the effectiveness of the compensation programs designed
to closely link the interests of management with stockholders implemented over
the past few years, the Committee decided to continue to use these types of
programs. Accordingly, in late 1998, the Committee granted restricted stock
awards with new record price targets to executive officers (including Mr.
Manoogian). Under the terms of these awards, vesting would not commence until
the later of February, 2003 or after the recipients attain age 65, but could be
accelerated to permit annual vesting upon attainment of record share price
targets of $30, $35, $40, $45 and $50 by specified dates within a five year
period. Even if the targets are met by the specified dates, vesting still
generally occurs at a rate no faster than ten percent annual installments over a
ten year period. The initial ten percent installment will vest in July 1999
because the $30 price target was attained within the required period.

Although Company Common Stock has historically been a major part of
compensation for key employees because of its inherent alignment with the
interests of stockholders, the Compensation Committee believes that, by directly
linking stock compensation to the attainment of record share prices of Company
Common Stock, the arrangements implemented in the past few years 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 the past. The customary terms and conditions of restricted stock
awards and stock options granted prior to 1996 are described below under
"General Compensation Information."

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 (in the case of the
Chief Executive Officer at least five times regular base pay, as determined by
the Compensation Committee). 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 and trends 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 that the Company
competes with such companies for executive talent. Although the Committee
reviews such information for general
11
<PAGE> 14

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 may vary from the established ranges
for a variety of subjective factors such as an individual's contribution to the
performance of the Company and its affiliates in addition to the competitive
considerations noted above. In general, the potential cash bonus opportunity for
executive officers has been up to fifty percent of base salary. For 1998,
bonuses paid to executive officers (other than Mr. Manoogian, who received no
bonus) were generally frozen at the amounts paid for 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 provide for all restricted stock awards so that
the expense related to these awards is more consistent and less variable, as
well as to avoid any earnings per share dilution resulting from these awards.
This expense is amortized over the 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 this stock-related compensation.

12
<PAGE> 15

Restricted stock awards granted under the 1991 Plan generally vest in ten
percent annual installments over a period of ten years from the date of grant,
except for those awards described above with vesting tied to the achievement of
share price targets. In general, vesting is contingent on a continuing
employment or post-employment 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 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 1998 to all of the named executive
officers, except Mr. Rosowski, 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 or her 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 and accruals 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
annual compensation in excess of $1 million paid to the Company's chief
executive officer and to each of the other four highest
13
<PAGE> 16

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. In order for stock options and cash bonuses to
qualify as deductible under Section 162(m), Mr. Morgan does not participate in
any Committee decisions relating to the granting of options and cash bonuses to
the named executive officers. 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
John A. Morgan
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 1998, 1997 and 1996.
Mr. Manoogian's salary and bonus for 1998 was $1, a rate which has been in
effect since January 1996. At that time Mr. Manoogian requested that his annual
salary and bonus of approximately $1.4 million 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, top officers of the Company voluntarily agreed to reduce their
salaries in 1996, and their salaries generally remained frozen at the reduced
level through 1998. In addition, these officers agreed to forego any increase in
bonus for 1997, and their bonuses generally remained frozen at the reduced level
in 1998. The information below has been adjusted to reflect a 100 percent stock
distribution effected in July 1998. For further information, 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(4)... 1998 $ 1 $ 0 $6,149,000(5) 223,461(6) $188,000
Chairman of the Board 1997 1 0 210,000 2,000,000 133,000
and Chief Executive 1996 1 0 1,536,000 2,600,000 106,000
Officer
Raymond F. Kennedy....... 1998 $675,000 $338,000 $3,239,000(7) 140,228(6) $145,000
President and Chief 1997 675,000 338,000 158,000 600,000 116,000
Operating Officer 126,320(6)
1996 684,000 338,000 1,152,000 300,000 102,000
Richard G. Mosteller(8)... 1998 $470,000 $235,000 $ 449,000 72,041(6) $128,000
Senior Vice President 1997 470,000 235,000 110,000 280,000 98,000
Finance 73,164(6)
1996 497,000 235,000 800,000 200,000 87,000
John R. Leekley.......... 1998 $432,000 $216,000 $ 414,000 15,362(6) $100,000
Senior Vice President 1997 432,000 216,000 678,000(9) 280,000 79,000
and General Counsel 1996 431,000 216,000 736,000 180,000 69,000
Robert B. Rosowski....... 1998 $254,000 $127,000 $ 230,000 0 $ 52,000
Vice President 1997 239,000 120,000 56,000 100,000 40,000
Controller & Treasurer 1996 253,000 120,000 416,000 100,000 37,000
</TABLE>

- -------------------------
(1) 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

15
<PAGE> 18

purposes of applying these thresholds, Mr. Manoogian has been treated as if
his 1998 salary and bonus equaled his 1995 salary and bonus of approximately
$1.4 million.

(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"). Vesting of all shares is generally contingent on a
continuing employment or consulting relationship with the Company. The
following number of shares were awarded to the named executive officers in
1998: Mr. Manoogian -- 238,000 shares; Mr. Kennedy -- 125,500 shares; Mr.
Mosteller --17,740 shares; Mr. Leekley -- 16,380 shares; and Mr. Rosowski --
9,080 shares. A portion of these 1998 awards (Mr. Manoogian -- 26,100
shares; Mr. Kennedy -- 17,400 shares; Mr. Mosteller -- 12,100 shares; Mr.
Leekley -- 11,200 shares; and Mr. Rosowski -- 6,200 shares) provide that ten
percent of the shares vest in July 1999, a result of the price of Company
Common Stock reaching $30 per share prior to February 12, 1999, with the
balance vesting in ten percent annual installments beginning on the later of
February 12, 2003 or after the recipients attain age 65; however, vesting of
part or all of the balance in ten percent annual installments begins earlier
if Company Common Stock attains certain price targets ($35, $40, $45 and $50
per share) by specified dates within a five year period. The remaining
restricted stock awards made to the named executive officers in 1998 and all
of the awards made in 1997 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. 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 $25 per share prior to April 2001. As of
December 31, 1998, 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 -- 379,258 shares valued at $10,904,000; Mr. Kennedy -- 469,596
shares valued at $13,501,000; Mr. Mosteller -- 92,874 shares valued at
$2,670,000; Mr. Leekley -- 107,224 shares valued at $3,083,000; and Mr.
Rosowski -- 46,318 shares valued at $1,332,000. 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 1998: Mr. Manoogian -- none; Mr. Kennedy
-- $48,000; Mr. Mosteller -- $34,000; Mr. Leekley -- $31,000; and Mr.
Rosowski -- $17,000); and (b) cash payments made pursuant to certain tandem
rights associated with the annual vesting of certain restricted stock awards
granted in 1989 (in 1998: Mr. Manoogian -- $188,000; Mr. Kennedy -- $97,000;
Mr. Mosteller -- $94,000; Mr. Leekley -- $69,000; and Mr. Rosowski --
$35,000). For further information regarding these rights, see "Certain
Relationships and Related Transactions."

(4) Mr. Manoogian received $1 from MascoTech as its Chairman of the Board for
1998.

(5) Reflects an award in 1998 to Mr. Manoogian of 200,000 shares primarily in
recognition of 1997 Company performance.

16
<PAGE> 19

(6) These options are restoration options granted upon the exercise of
previously held stock options. No original options were granted to the named
executive officers in 1998. 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.

(7) Reflects an award in 1998 to Mr. Kennedy of 100,000 shares primarily in
recognition of 1997 Company performance.

(8) The information does not include director fees received by Mr. Mosteller
from MascoTech during 1996 for the period during which he served as a
director of that company.

(9) Reflects an award in 1997 to Mr. Leekley of 32,000 shares in recognition of
his promotion to Senior Vice President in August 1996.

OPTION GRANT TABLE

The following table sets forth information concerning options granted to
the named executive officers in 1998, which consist solely of restoration
options. Restoration options 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.

<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------------------------------- POTENTIAL REALIZABLE VALUE
NUMBER OF % OF TOTAL AT ASSUMED ANNUAL RATES OF
SECURITIES OPTIONS STOCK PRICE APPRECIATION
UNDERLYING GRANTED FOR OPTION TERM
OPTIONS TO EMPLOYEES EXERCISE EXPIRATION ---------------------------
NAME GRANTED IN 1998 PRICE DATE 5% 10%
---- ---------- ------------ -------- ---------- -- ---
<S> <C> <C> <C> <C> <C> <C>
Richard A. Manoogian..... 223,461 29.5% $26 2/28/01 $740,000 $1,534,000
Raymond F. Kennedy....... 55,705 7.4% $29 2/28/01 $215,000 $ 447,000
31,988 4.2% $30.0109 5/22/06 $441,000 $1,049,000
4,068 .5% $30.0109 2/28/01 $ 16,000 $ 33,000
28,239 3.7% $30.0109 5/18/05 $329,000 $ 762,000
20,228 2.7% $30.04 5/21/07 $314,000 $ 764,000
Richard G. Mosteller..... 31,526 4.1% $29.2733 2/28/01 $110,000 $ 228,000
18,652 2.5% $29.2733 5/21/07 $282,000 $ 686,000
21,863 2.9% $29.2733 5/22/06 $285,000 $ 673,000
John R. Leekley.......... 15,362 2.0% $29.6673 2/28/01 $ 54,000 $ 112,000
Robert B. Rosowski....... 0
</TABLE>

Securities and Exchange Commission regulations require information as to
the potential realizable value of each of these options, assuming that the
market price of Company Common Stock appreciates in value from the date of grant
to the end of the option term at 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.

17
<PAGE> 20

OPTION EXERCISES AND YEAR-END OPTION VALUE TABLE

The following table sets forth information concerning each exercise of
stock options during 1998 by each named executive officer and the value at
December 31, 1998 of unexercised options held by such individuals under the
Company's stock option plans. The information in the table has been adjusted to
reflect a 100 percent stock distribution effected in July 1998. At December 31,
1998, when the closing price of Company Common Stock was $28 3/4 per share, the
value of unexercised options reflects the increase in market value of Company
Common Stock from the date of grant (from February, 1991 to November, 1998, with
grant date market prices ranging from $10 3/8 to $30). 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 1998, AND DECEMBER 31, 1998 OPTION VALUES

<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS AT
SHARES DECEMBER 31, 1998 DECEMBER 31, 1998
ACQUIRED VALUE ---------------------------- ----------------------------
NAME ON EXERCISE REALIZED UNEXERCISABLE EXERCISABLE UNEXERCISABLE EXERCISABLE
---- ----------- ---------- ------------- ----------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Richard A. Manoogian... 560,000 $8,750,000 2,743,461 2,320,000 $27,795,000 $19,880,000
Raymond F. Kennedy..... 426,110 $6,751,000 1,180,228 0 $12,308,000 $ 0
Richard G. Mosteller... 127,070 $1,611,000 574,041 0 $ 6,025,000 $ 0
John R. Leekley........ 75,000 $1,447,000 471,362 89,000 $ 5,270,000 $ 1,177,000
Robert B. Rosowski..... 0 $ 0 206,000 114,000 $ 2,514,000 $ 1,891,000
</TABLE>

PENSION PLANS

The executive officers participate in pension plans maintained by the
Company for certain of its salaried employees. The following table shows
estimated annual retirement benefits payable for life at age 65 for various
levels of compensation and service under these plans.

PENSION PLAN TABLE

<TABLE>
<CAPTION>
YEARS OF SERVICE(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 or
MascoTech 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

18
<PAGE> 21

pension or equivalent benefits are payable under a MascoTech plan. The table
does not depict Code limitations on tax-qualified plans because one of the
plans is a non-qualified 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 0.2
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 -- 21; Mr. Leekley -- 23; and Mr. Rosowski -- 27.

(2) For purposes of determining benefits payable, remuneration in general 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 $405,000. A participant may also receive supplemental medical
benefits. A participant who has been employed at least two years and becomes
disabled prior to retirement will receive annually 60 percent of the
participant's total annualized cash compensation in the year in which the
participant becomes disabled, subject to certain limitations on the maximum
payment and reduced by benefits payable pursuant to the Company's long-term
disability insurance and similar plans. Upon a disabled participant's reaching
age 65, such 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.

19
<PAGE> 22

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 Composite Stock Price Index ("S&P 500 Index") and the Standard &
Poor's Building Materials Index ("S&P Building Materials Index") for the period
from January 1, 1994 through December 31, 1998, when the closing price of
Company Common Stock was $28 3/4 per share (on April 15, 1999 the closing price
was $31.25 per share). The graph assumes investments of $100 on December 31,
1993 in Company Common Stock, the S&P 500 Index and the S&P Building Materials
Index and the reinvestment of dividends.

[Performance Graph]

<TABLE>
<CAPTION>
S&P BUILDING MATERIALS
MASCO CORPORATION S&P 500 INDEX INDEX
----------------- ------------- ----------------------
<S> <C> <C> <C>
'1993' 100.00 100.00 100.00
'1994' 63.50 101.28 73.86
'1995' 89.60 138.88 99.84
'1996' 105.58 170.38 119.66
'1997' 150.99 226.78 139.16
'1998' 173.21 291.04 154.69
</TABLE>

The table below sets forth the value, as of December 31 of each of the
years indicated, of a $100 investment made on December 31, 1993 in each of
Company Common Stock, the S&P 500 Index and the S&P Building Materials Index,
and the reinvestment of dividends.

1993 1994 1995 1996 1997 1998
<S> <C> <C> <C> <C> <C> <C>
Masco Corporation $100.00 $ 63.50 $ 89.60 $105.58 $150.99 $173.21
S&P 500 Index 100.00 101.28 138.88 170.38 226.78 291.04
S&P Building Materials
Index 100.00 73.86 99.84 119.66 139.16 154.69
</TABLE>

20
<PAGE> 23

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The Compensation Committee of the Board of Directors currently consists of
Mary Ann Krey, John A. Morgan, Arman Simone, and Peter W. Stroh. Verne G.
Istock, a Director of the Company, is the Chairman of the Board of Bank One
Corporation. Mr. Manoogian, an executive officer of the Company, is one of six
members of the Organization, Compensation and Nominating Committee of the Board
of Directors of Bank One Corporation, but recuses himself from any decisions
relating to Mr. Istock's compensation. From time to time Morgan Lewis Githens &
Ahn, Inc., of which Mr. Morgan is Managing Director, performs investment banking
and other related services for the Company and MascoTech. No fees were paid by
the Company or MascoTech to such firm for financial advisory services rendered
in 1998. The Company has committed to invest up to $40 million in a private
equity fund whose investment activities will be managed by the fund's sole
general partner, Long Point Capital Partners, LLC ("Long Point"). The objective
of the fund will be to make leveraged acquisitions or investments in the United
States. Mr. Morgan is one of the principals of Long Point, and Mr. Morgan and
Mr. Manoogian (who has no personal financial interest in the fund) serve on an
investment committee that advises on possible investments by the fund. Long
Point is entitled to receive an annual fee equal to two percent of the aggregate
commitments of all investors to the fund during a specified commitment period
and thereafter is entitled to receive an annual fee equal to two percent of the
fund's invested capital. The Company paid additional fees of $800,000 to Long
Point for 1998 and has agreed to pay fees of $500,000 for 1999 and $300,000 for
2000. Long Point will generally be entitled to a twenty percent "carried
interest" on the profits on investments by the fund. The Company has invested $3
million in Long Point, which will entitle the Company to a certain percentage of
this carried interest earned by Long Point. In addition to the potential capital
appreciation from the Company's investment in the fund and the Company's share
in the carried interest on the fund's profits, the Company expects to receive
additional benefits from this investment with its right of first refusal with
respect to any investments by the fund in the home improvement, building
products and related services industries. The Company believes that the terms of
its investment in the fund are comparable to or better than the terms applicable
to investments in other equivalent funds.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

MASCOTECH, INC.

The Company owns approximately 17 percent of MascoTech, Inc. (formerly
Masco Industries, Inc.), a diversified manufacturing company utilizing advanced
metalworking capabilities to supply metal formed components used in vehicle
engine and drivetrain applications, specialty fasteners, towing systems,
packaging and sealing products and other industrial products. MascoTech was
formed in a 1984 restructuring of the Company and in January 1998, 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.

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<PAGE> 24

The Company is a party to certain agreements with MascoTech as described
below.

CORPORATE SERVICES AGREEMENT

Under a 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. In connection with MascoTech's acquisition of
TriMas, the parties terminated the Corporate Services Agreement between the
Company and TriMas and amended the Corporate Services Agreement with MascoTech
to include the TriMas companies and provide for the same credits that were
permitted to TriMas under its agreement. Approximately $9 million has been
charged to MascoTech and TriMas by the Company for 1998, subject to adjustment
in accordance with the terms of the agreement, which renews automatically for
one-year periods, unless terminated by either party upon at least 90 days'
notice before any October 1 renewal date.

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. It renews automatically from year to year, unless terminated by
either party at least 90 days before 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 pursuant to
its 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. The Company's rights
expire 30 days from the date the notice of an event is given by MascoTech to the
Company. In view of the Company's current level of share ownership in MascoTech,
the Company does not anticipate that this right will ever be invoked.

22
<PAGE> 25

RIGHT OF FIRST REFUSAL

In connection with MascoTech's 1996 purchase from the Company of MascoTech
common stock and warrants, 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.

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. As part of
the 1996 transaction referred to above, 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 distributor of
decorative home furnishing fabrics.

Total proceeds to the Company from the sale of the Home Furnishings Group
were approximately $1,050 million, with approximately $708 million in cash. The
balance consisted of $285 million of 12% pay-in-kind junior debt securities, and
equity securities totaling $57 million, consisting of 13%

23
<PAGE> 26

cumulative preferred stock with a stated value of $55 million, 15 percent of the
common stock of FII and convertible preferred stock. The convertible preferred
stock represents transferable rights for up to a 25 percent common stock
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 1998 the Company recorded
approximately $41.5 million of pay-in-kind interest income from FII and received
approximately $7.6 million in cash dividends on the preferred stock.

For 1998 FII paid the Company approximately $700,000 for the purchase of
products from the Company.

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 a
registration statement under the federal securities laws, in each case to permit
the sale by the Company (or a permitted transferee of the Company) in public
offerings of 12% junior debt securities of FII held by the Company. FII provides
indemnification against certain liabilities arising from such transactions.

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 1998 was approximately $1.5
million.

Sales of products and services and other transactions occur from time to
time between the Company and MascoTech. As a result of such transactions in
1998, the Company paid approximately $12.8 million to MascoTech and received
approximately $80,000 from MascoTech. MascoTech participates with the Company in
a number of national purchasing programs, which enable the Company and MascoTech
to obtain favorable terms from certain of their service and product suppliers.

In 1989 the Company made long-term restricted stock awards to a large
number of key Company employees, which included tandem rights to phantom TriMas
shares having a value equal to the value of a share of TriMas common stock. At
the time of the grant, the aggregate value of the award of Company Common Stock
to each participant was equal to the aggregate value of the alternative phantom
TriMas shares that were awarded. On each vesting date the participant received
the vesting shares of Company Common Stock and, if the value of the vesting
phantom TriMas shares was greater, the participant also received the excess paid
in cash. For the 1998 vesting and the final vesting in 1999, the Compensation
Committee of the Board of Directors 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.

24
<PAGE> 27

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 Corporate Opportunities Agreement with MascoTech and
other aspects of the relationship between the companies may affect their ability
to make acquisitions and develop new business under certain circumstances,
although the Company does not believe that it has experienced any such effect to
date. Three 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. Frank M.
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. He 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 an Executive Vice President of the Company. Mr. Morgan, who is a
Director of the Company, is also a director of MascoTech.

25
<PAGE> 28

The following table sets forth the number of shares of MascoTech common
stock beneficially owned as of March 15, 1999 by the nominees, the Directors and
named executive officers and by the Directors and executive officers of the
Company as a group. Except as indicated below, each person exercises sole voting
and investment power with respect to the shares listed.

<TABLE>
<CAPTION>
SHARES OF
COMMON STOCK
OF MASCOTECH
NAME BENEFICIALLY OWNED(1)
---- ---------------------
<S> <C>
Thomas G. Denomme...................................... 0
Joseph L. Hudson, Jr................................... 0
Verne G. Istock........................................ 0
Raymond F. Kennedy..................................... 15,000
Mary Ann Krey.......................................... 0
Wayne B. Lyon(2)(3).................................... 62,159
Richard A. Manoogian(3)(4)(5).......................... 6,286,229
John A. Morgan(6)...................................... 30,790
Arman Simone(3)(7)..................................... 20,000
Peter W. Stroh......................................... 0
Richard G. Mosteller................................... 0
John R. Leekley(3)(8).................................. 26,800
Robert B. Rosowski..................................... 18,600
All 17 Directors and executive officers of the Company
as a group (excluding subsidiary, divisional and
group executives)(2)(3)(4)(5)(6)(7)(8)(9)............ 6,615,430
</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 13.9 percent of MascoTech common
stock. Directors and executive officers of the Company as a group
beneficially own 14.7 percent of MascoTech common stock.

(2) Includes 2,000 shares owned by a foundation for which Mr. Lyon serves as
director and 24,159 shares which may be acquired upon conversion of
convertible securities, of which 386 shares are issuable upon conversion of
convertible securities owned by trusts for which Mr. Lyon serves as a
trustee.

(3) 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. Lyon, Manoogian, Simone
and Leekley and the executive officer who serves as a trustee for certain
trusts each disclaim beneficial ownership of such securities.

(4) Includes 1,640,960 shares owned by charitable foundations for which Mr.
Manoogian serves as a director, and 334,193 shares which can be acquired
upon conversion of convertible securities owned by the foundations.

(5) Includes unvested restricted shares issued under the MascoTech's restricted
stock incentive plans (213,900 shares for Mr. Manoogian, and 250,502 shares
for all current Directors and executive

26
<PAGE> 29

officers of the Company as a group) and shares of MascoTech common stock
which may be acquired before May 15, 1999 upon exercise of stock options
(108,000 shares for both Mr. Manoogian and all Directors and executive
officers of the Company as a group). Holders have voting but no investment
power over unvested restricted shares and exercise neither voting nor
investment power over unexercised option shares.

(6) Includes for Mr. Morgan 3,474 unvested restricted stock award shares of
MascoTech common stock issued under the MascoTech 1997 Non-Employee
Directors Stock Plan and 1,000 shares of MascoTech common stock which may
be acquired upon exercise of stock options issued under such plan. Holders
have voting but no investment power over unvested restricted shares and
exercise neither voting nor investment power over unexercised option
shares.

(7) Includes 10,000 shares owned by a charitable organization for which Mr.
Simone serves as a director.

(8) Includes 6,800 shares held by a trust for which Mr. Leekley serves as a
trustee.

(9) 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.

RATIFICATION OF SELECTION OF
INDEPENDENT AUDITORS

Upon the recommendation of the Audit Committee, the Board of Directors has
selected the independent public accounting firm of PricewaterhouseCoopers LLP
("PricewaterhouseCoopers") to audit the Company's financial statements for the
year 1999, and believes it appropriate to submit its selection for ratification
by stockholders.

PricewaterhouseCoopers has acted as the Company's independent certified
public accounting firm for over 38 years. It has performed services of an
accounting and auditing nature and, from time to time, has provided other
consulting services for the Company as well as for MascoTech. Representatives of
PricewaterhouseCoopers are expected to be present at the Meeting, will have the
opportunity to make a statement and are expected to be available to respond to
appropriate questions. If the selection is not ratified, the Board will consider
selecting another public accounting firm as the independent auditors.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF THE
SELECTION OF PRICEWATERHOUSECOOPERS AS INDEPENDENT AUDITORS FOR THE COMPANY FOR
THE YEAR 1999.

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 stockholders are required by regulations of the Securities and Exchange
Commission to furnish the Company copies of all Section 16(a) forms they file.
27
<PAGE> 30

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
are 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 (i) a report of Mr.
Lyon, covering sales by his children's trusts, of which his wife is a trustee,
of 23,620 and 2,100 shares Company Common Stock, was filed after the due date,
(ii) four reports of Mr. Stroh, covering his wife's purchases of 670, 700, 335
and 170 shares of Company Common Stock, were filed after the due date, and (iii)
a report of Mr. Hennessey, a former executive officer, covering his exercise of
two options for 19,367 and 10,000 shares of Company Common Stock and receipt of
two restoration options in connection therewith for a total of 17,065 shares of
Company Common Stock was filed after the due date.

STOCKHOLDER PROPOSALS FOR NEXT YEAR'S ANNUAL MEETING

Stockholders who intend to present a proposal for inclusion in the
Company's proxy statement and proxy relating to the 2000 Annual Meeting or at
such Meeting must provide written notice of such intent to the Chairman or
Secretary of the Company at its address stated in the Notice of Annual Meeting
of Stockholders by December 23, 1999. Management's proxies will have the right
to exercise discretionary voting authority on any matter with respect to which
the Company has not received notice in writing by December 23, 1999.

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

/s/EUGENE A. GARGARO, JR.

EUGENE A. GARGARO, JR.
Secretary

Taylor, Michigan
April 21, 1999

28
<PAGE> 31

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 headquarters.

FROM METRO AIRPORT (WEST)
- - Take I-94 east to the Pelham Road exit.
- - Turn left onto Pelham and travel to Van Born Road.
- - Turn left onto Van Born Road and proceed to the corporate headquarters.
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 headquarters.

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 headquarters.
<PAGE> 32

PROXY FOR ANNUAL MEETING OF STOCKHOLDERS TO BE HELD MAY 19, 1999
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 19, 1999, 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
<PAGE> 33
<TABLE>
<CAPTION>
<S><C>
(1) Election of Directors FOR all nominees [X] WITHHOLD AUTHORITY to vote [X] EXCEPTIONS [X]
listed below for all nominees listed below

Class II Directors to hold office until the Annual Meeting of Stockholders in 2002 or until their respective successors are elected
and qualified.
NOMINEES: RAYMOND F. KENNEDY, VERNE G. ISTOCK, JOSEPH L. HUDSON, JR. AND JOHN A. MORGAN
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, MARK THE "EXCEPTIONS" BOX AND STRIKE A LINE THROUGH THAT
NOMINEE'S NAME.)

(2) Ratification of the selection of PricewaterhouseCoopers LLP as (3) In the proxies' discretion upon such other
independent auditors for the Company for the year 1999. business as may properly come before the
meeting.

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

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 RATIFICATION OF Change of Address or
INDEPENDENT AUDITORS AND IN THE PROXIES' DISCRETION ON ANY OTHER MATTER Comments Mark Here [X]
THAT MAY PROPERLY COME BEFORE THE MEETING.

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: ,1999
--------------------------------------

(L.S.)
--------------------------------------------
Signature

VOTES MUST BE INDICATED
(X) IN BLACK OR BLUE INK. [ ]

PLEASE SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY IN THE ENCLOSED ENVELOPE.
</TABLE>