<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
MASCOTECH
- -------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
MASCOTECH
- -------------------------------------------------------------------------------
(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
MASCOTECH, INC.
21001 Van Born Road
Taylor, Michigan 48180
-------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO THE STOCKHOLDERS OF MASCOTECH, INC.:
The Annual Meeting of Stockholders of MascoTech, Inc. will be held at its
offices at 21001 Van Born Road, Taylor, Michigan 48180, on Tuesday, May 20, 1997
at 2:00 P.M., Eastern daylight time. The purposes of the meeting, which are set
forth in detail in the accompanying Proxy Statement, are:
1. To elect two Class III Directors;
2. To consider and act upon a proposal to approve the 1997 Non-Employee
Directors Stock Plan;
3. To consider and act upon a proposal to approve the 1997 Annual Incentive
Compensation Plan;
4. To consider and act upon a proposal to approve the Amendment of the 1991
Long Term Stock Incentive Plan;
5. To consider and act upon the ratification of the selection of Coopers &
Lybrand L.L.P. as independent auditors for the Company for the year
1997; and
6. To transact such other business as may properly come before the meeting.
The Board of Directors has fixed the close of business on March 28, 1997 as
the record date for the determination of stockholders entitled to notice of and
to vote at the meeting and at any adjournment thereof.
Your attention is called to the accompanying Proxy Statement and Proxy.
Whether or not you plan to be present at the meeting, you are requested to sign
and return the Proxy in the enclosed envelope to which no postage need be
affixed if mailed in the United States. Your prompt attention will be
appreciated. Prior to being voted, the Proxy may be withdrawn in the manner
specified in the Proxy Statement.
By Order of the Board of Directors
EUGENE A. GARGARO, JR.
EUGENE A. GARGARO, JR.
Secretary
April 25, 1997
<PAGE> 3
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS OF
MASCOTECH, INC.
May 20, 1997
GENERAL INFORMATION
The solicitation of the enclosed Proxy is made by the Board of Directors of
MascoTech, Inc. (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 Tuesday, May 20, 1997 at 2:00 P.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. The Company will also reimburse
brokers and other persons holding Company Common Stock or Preferred Stock in
their names or in the names of their nominees for their reasonable expenses in
forwarding Proxies and Proxy materials to beneficial owners.
Stockholders of record as of the close of business on March 28, 1997 will
be entitled to vote at the Annual Meeting. On that date, the outstanding voting
securities of the Company consisted of 37,231,739 shares of common stock, $1 par
value share ("Company Common Stock"), and 10,800,000 shares of $1.20 Convertible
Preferred Stock ("Company Preferred Stock"). Each share of outstanding Company
Common Stock entitles the holder to one vote and each share of outstanding
Company Preferred Stock entitles the holder to 4/5 of one vote. The Company
Common Stock and the Company Preferred Stock vote together as a single class.
The Company has been advised that Masco Corporation and Directors and officers
of the Company hold in the aggregate approximately 25 percent of the voting
power of the Company and intend to vote their shares in favor of the nominees,
for approval of the proposals described in the Proxy Statement, for the
ratification of the selection of Coopers & Lybrand L.L.P. and in accordance with
the recommendations of the Company's Board of Directors on any other matters.
Presence in person or by proxy of holders of a majority of outstanding
shares of capital stock of the Company will constitute a quorum at the Annual
Meeting. Broker non-votes and abstentions will be counted toward the
establishment of a quorum. The affirmative vote of holders of a majority of
shares of capital stock present and entitled to vote at the Annual Meeting is
required for approval of proposals hereby being submitted to stockholders and
for ratification of the selection of auditors. Abstentions are considered
present and entitled to vote and therefore have the effect of votes against the
proposals and ratification, while broker non-votes do not affect the number of
affirmative votes needed to approve or ratify these matters.
The shares represented by the Proxy will be voted as instructed if received
in time for the Annual Meeting. Any person signing and mailing the Proxy may,
nevertheless, revoke it at any time before it is exercised by written notice to
the Company (Attention: Eugene A. Gargaro, Jr., Secretary) at its executive
offices at 21001 Van Born Road, Taylor, Michigan 48180, or at the Annual
Meeting. This Proxy Statement and the enclosed Proxy are being mailed or given
to stockholders on or about April 29, 1997.
ELECTION OF DIRECTORS
The Board of Directors is divided into three classes. The term of office of
the Class III Directors, Erwin H. Billig and John A. Morgan, expires at the
meeting. Erwin H. Billig, who has been a Director since 1988, has decided not to
stand for re-election. The Board of Directors wishes to express its deep
appreciation to Mr. Billig for his guidance and dedication during his many years
of service as a director of the Company. The Board of Directors proposes the
re-election of John A. Morgan and nominates William K. Howenstein for election
to the Board as Class III Directors. There is currently a vacancy in the Class I
Directors, for which
<PAGE> 4
the Board of Directors has not presently proposed a nominee. Proxies can not be
voted for a greater number of persons than the number of nominees named.
The Class III Directors will serve for a term expiring at the Annual
Meeting in 2000, or until their respective successors are elected and qualified.
The current Class I and Class II Directors have been elected to serve for terms
which expire at the Annual Meeting of Stockholders in 1998 and 1999,
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 two nominees who receive the largest number of votes cast will
be elected as Class III Directors; therefore, shares not voted (whether due to
abstention or broker non-vote) do not affect the election of Directors.
Information concerning the nominees and continuing Directors is set forth
below.
<TABLE>
<CAPTION>
NAME, PRINCIPAL OCCUPATION AND PERIOD AGE, BUSINESS EXPERIENCE, DIRECTORSHIPS
OF SERVICE AS A DIRECTOR AND OTHER INFORMATION
------------------------------------- ---------------------------------------
<S> <C>
CLASS I (TERM TO EXPIRE AT THE ANNUAL MEETING IN 1998)
Richard A. Manoogian...................... Mr. Manoogian, 60, has served as Chairman, Chief
Executive
Chairman of the Board and Chief Officer and Director of the Company since its formation
Executive Officer of the Company and of in 1984. He joined Masco Corporation in 1958, was
Masco Corporation and Chairman of the elected Vice President and a director in 1964, President
Board of TriMas Corporation. Director in 1968 and Chairman and Chief Executive Officer in
since 1984. 1985. He has served as Chairman of the Board of TriMas
Corporation since 1989. He is a director of First
Chicago NBD Corporation, MSX International, Inc.,
Detroit Renaissance and The American Business
Conference, president of the Founders Society of the
Detroit Institute of Arts and a trustee of the Archives
of American Art (Smithsonian Institute), Center for
Creative Studies, The Fine Arts Committee of the State
Department, Trustees Council of the National Gallery of
Art, Armenian General Benevolent Union, Detroit
Investment Fund and Henry Ford Health System.
CLASS II (TERM TO EXPIRE AT THE ANNUAL MEETING IN 1999)
Peter A. Dow.............................. Mr. Dow, 63, initially joined Campbell-Ewald Company in
1958
Private investor; Retired Vice Chairman, and returned in 1979 to serve as Executive Vice
Chief Operating Officer and Chairman of President and Director of General Accounts. Beginning in
the Executive Committee of 1982, he became President, Chief Operating Officer and
Campbell-Ewald, an advertising and Chairman of the Executive Committee, and then served as
marketing communications company. Vice Chairman from 1993 until his retirement in 1995. He
Director since 1992. was named Director of Advertising for the
Chrysler-Plymouth Division of Chrysler Corporation in
1968. Subsequently, he became responsible for the
advertising and merchandising for Chrysler Corporation
and all of its divisions. In 1978 he was named Director
of Marketing for Chrysler Corporation. Mr. Dow is
currently a director of The Invetech Company, Inc. and
Comtrad Industries, Inc. He is also Trustee Emeritus of
The Lawrenceville School, a trustee of the Alice Kales
Hartwick Foundation and of the Detroit Institute of
Arts.
</TABLE>
2
<PAGE> 5
<TABLE>
<CAPTION>
NAME, PRINCIPAL OCCUPATION AND PERIOD AGE, BUSINESS EXPERIENCE, DIRECTORSHIPS
OF SERVICE AS A DIRECTOR AND OTHER INFORMATION
------------------------------------- ---------------------------------------
<S> <C>
Roger T. Fridholm......................... Mr. Fridholm, 56, has been President of St. Clair Group, Inc.
President of St. Clair Group, Inc., a since 1991. He also serves as Chairman of Ad Hoc Legal
private investment company. Director Resources LLC since 1995 and as President of IPG
since 1996. Services Corporation since 1996, both of which are
staffing service companies. He is the past President and
Chief Executive Officer of Of Counsel, Enterprises, Inc.
and past Senior Vice President of Corporate Development
of Kelly Services, Inc. He served as President and Chief
Operating Officer of The Stroh Brewery Company from 1979
to 1991. He is currently a director of The Stroh Brewery
Company, The Stroh Companies, Inc., MCN Energy Group,
Inc. and Comerica Bank.
Eugene A. Gargaro, Jr. ................... Mr. Gargaro, 55, joined Masco Corporation as Vice President
Vice President and Secretary of Masco and Secretary in 1993. From 1967 to 1993 he was a member
Corporation. Director since 1984. in the law firm of Dykema Gossett PLLC. He currently
serves as a director of TriMas Corporation and Allied
Digital Technologies Corp. He also serves as a trustee
of the Founders Society of the Detroit Institute of Arts
and University of Detroit/Mercy; member of the Michigan
Council for Arts and Cultural Affairs; director of the
Michigan Manufacturers Association and Citizens Research
Counsel of Michigan.
CLASS III (NOMINEES FOR A TERM TO EXPIRE AT THE ANNUAL MEETING IN 2000)
William K. Howenstein..................... Mr. Howenstein, 63, held various positions at Copper
Executive Vice President of Thyssen, and Brass Sales, Inc., including Chairman and Chief
Inc., NA, a $2.5 billion materials Executive Officer, from 1965 until its acquisition in
management company 1997 by Thyssen, Inc., NA. He continues to serve as
President of Copper and Brass Sales, Inc., a $500
million processor and distributor of metals. He is a
director of The Stroh Brewery Company and The Stroh
Companies, Inc. He serves as director and executive
committee member of the Greater Detroit Chamber of
Commerce, director of The Economic Club of Detroit,
advisory board member of the Boys & Girls Club of Metro
Detroit and director of United Way Community Services
for Southeastern Michigan.
John A. Morgan............................ Mr. Morgan, 66, has been a partner in Morgan Lewis
Partner, Morgan Lewis Githens & Ahn, Githens & Ahn since founding that firm in 1982.
investment bankers. Director since 1984. From 1977 to 1982, he was Vice Chairman of 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 is a
director of Allied Digital Technologies Corp., Furnishings
International Inc., Masco Corporation, and TriMas
Corporation. He also serves as a trustee of the
Provident Loan Society of New York.
</TABLE>
Further information concerning Masco Corporation and TriMas Corporation is
set forth in "Certain Relationships and Related Transactions."
The Board of Directors held six meetings during 1996. The Audit Committee
of the Board of Directors, consisting of Messrs. Dow, Fridholm and Morgan, held
two meetings during 1996. It reviews and acts or reports to the Board with
respect to various auditing and accounting matters, including the selection and
fees
3
<PAGE> 6
of the Company's independent auditors, the scope of audit procedures, the
Company's internal audit program and results, the nature of services to be
performed by the independent auditors and the Company's accounting practices.
The Compensation Committee of the Board of Directors, consisting of Messrs. Dow,
Gargaro and Morgan, held five meetings during 1996. It establishes and monitors
executive compensation and administers and determines awards and options granted
under the Company's restricted stock incentive and stock option plans. The Board
of Directors has not established a separate committee of its members to nominate
candidates for election as Directors.
COMPENSATION OF DIRECTORS
Each Director who is not a Company employee receives an annual fee and
$1,000 for each Board of Directors meeting (and committee meeting if not held on
a date on which the entire Board holds a meeting) which the Director physically
attends. The annual fee paid to Directors (other than Mr. Manoogian who is a
Company employee) for 1996 was $44,000. Beginning in 1997, the Board of
Directors proposes to change the compensation of non-employee Directors so that
compensation is aligned more closely with the long-term interests of the
Company's stockholders. Under the 1997 Non-Employee Directors Stock Plan, which
is being presented to the stockholders for approval at the Annual Meeting,
one-half of the current annual Directors' fee will be paid to non-employee
Directors in restricted shares of Company Common Stock and each non-employee
Director will receive annually options to purchase 5,000 shares of Company
Common Stock at the then current market price. See "Proposal to Approve the 1997
Non-Employee Directors Stock Plan" for information regarding this Plan.
4
<PAGE> 7
SECURITY OWNERSHIP OF MANAGEMENT
AND CERTAIN BENEFICIAL OWNERS
Set forth below is information concerning beneficial ownership of the
Company's securities as of March 31, 1997 by (i) all persons known by the
Company to be the beneficial owners of five percent or more of either Company
Common Stock or Company Preferred Stock, (ii) each of the nominees and current
Directors, (iii) each of the named executive officers, and (iv) all current
Directors and executive officers of the Company as a group. If the 1997
Non-Employee Directors Stock Plan is approved by stockholders, the non-employee
Directors will also beneficially own shares of Company Common Stock
conditionally awarded under that Plan. Except as indicated below, each person
exercises sole voting and investment power with respect to the shares listed.
<TABLE>
<CAPTION>
SHARES OF PERCENTAGE OF COMPANY
COMPANY COMMON STOCK COMMON STOCK
NAME BENEFICIALLY OWNED BENEFICIALLY OWNED
---- -------------------- ---------------------
<S> <C> <C>
Masco Corporation.................................... 7,824,690 21.0%
21001 Van Born Road
Taylor, Michigan 48180
Richard A. Manoogian(1)(2)........................... 4,543,042 11.7%
Erwin H. Billig(2)................................... 229,980 *
Peter A. Dow......................................... 22,350 *
Roger T. Fridholm.................................... 1,000 *
Eugene A. Gargaro, Jr.(1)(3)......................... 652,920 1.7%
William K. Howenstein................................ 1,000** *
John A. Morgan....................................... 24,000 *
Lee M. Gardner(2).................................... 251,800 *
Timothy Wadhams(2)................................... 178,289 *
All eight current Directors and executive officers of
the Company as a group (excluding subsidiary,
divisional and group executives)(1)(2)(3).......... 5,313,815 13.6%
</TABLE>
- -------------------------
* Less than one percent.
** Shares acquired after March 31, 1997.
(1) Includes 202,560 shares owned by a charitable foundation for which Messrs.
Manoogian and Gargaro serve as directors, and 387,006 shares which could be
acquired upon conversion of convertible securities owned by charitable
foundations for which Messrs. Manoogian and Gargaro serve as directors. In
addition, Messrs. Manoogian and Gargaro each may be deemed to be the
beneficial owner of 200,000 shares of Company Preferred Stock (1.9 percent
of the total issue outstanding) owned by one of the charitable foundations.
The directors of the foundations share voting and investment power with
respect to the securities owned by the foundations, but Messrs. Manoogian
and Gargaro each disclaim beneficial ownership of such securities.
(2) Includes shares which may be acquired on or before May 30, 1997 upon
exercise of stock options (120,000 shares for Mr. Billig, 113,430 shares for
Mr. Gardner, 1,080,000 shares for Mr. Manoogian, 51,980 shares for Mr.
Wadhams and 1,365,410 shares for all current Directors and executive
officers of the Company as a group), as well as unvested restricted stock
award shares held under the Company's restricted stock incentive plans
(35,680 shares for Mr. Billig, 131,500 shares for Mr. Gardner, 69,260 shares
for Mr. Manoogian, 71,920 shares for Mr. Wadhams and 308,360 shares for all
current Directors and executive officers of the Company as a group). Holders
exercise neither voting nor investment power over unexercised option shares
and have sole voting but no investment power over unvested restricted
shares.
(3) Includes 2,000 shares held by a charitable foundation for which Mr. Gargaro
serves as a director, and 27,000 shares held by trusts for which Mr. Gargaro
serves as a trustee and 4,354 shares which can be acquired upon conversion
of convertible debt securities owned by such trusts. The directors of
foundation and the trustees share voting and investment power with respect
to the securities owned by such entities, but Mr. Gargaro disclaims
beneficial ownership of such securities.
Masco Corporation and Mr. Manoogian may each be deemed a controlling person
of the Company by reason of their respective significant ownership of shares of
the Company's securities and, in the case of Mr. Manoogian, his positions as a
Director and an executive officer of the Company and the other matters described
under "Certain Relationships and Related Transactions."
5
<PAGE> 8
EXECUTIVE COMPENSATION COMMITTEE REPORT
In order for the Company to enhance stockholder value through continued
strong improvement in its financial performance, it is essential that the
Company attract, retain and motivate the highest quality management team. The
Company seeks talented individuals who have the ability to implement competitive
business and value-creation strategies, product development, manufacturing
technologies and marketing and service programs to generate long-term profit
growth.
The Company's compensation programs are designed to accomplish these
objectives. The Compensation Committee has adopted a primarily subjective
approach to compensation arrangements. The Compensation Committee identifies
relevant factors to be considered, such as the need to be competitive in the
market for executive talent and to provide incentives and rewards for individual
and corporate performance. This is combined with a significant degree of
flexibility that allows the exercise of judgment and discretion and reflects the
Company's entrepreneurial operating environment and long-term performance
orientation. Precise formulas, targets or goals are not utilized and specific
weights are not assigned to the various factors. The use of stock-based
incentive programs with extended vesting schedules reflects the emphasis on the
goal of long-term enhancement of stockholder value. The Compensation Committee
believes that these incentives are necessary in order to retain and motivate the
talented, results-oriented individuals who are key to the Company's continued
leadership and growth.
Executive officers currently receive a combination of base salary, annual
cash bonus and long-term (up to ten-year) incentives utilizing Company Common
Stock. In making its decisions, the Compensation 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 Trucks & Parts
Index). In addition, the Compensation Committee takes into account the
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 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 are
usually determined annually. A range of increases is established by management
for corporate office employees generally that reflects inflation, promotions and
merit. The Compensation Committee then establishes a similar range for the
executive officers. These salary 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 the range for year-end
bonuses than in determining the salary range. 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. However, the Committee does not identify
specific goals that must be satisfied in order for bonuses to be paid. There can
be variations 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.
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 Compensation Committee in determining whether to grant
options and awards are generally the same factors considered in determining
salaries and bonuses described above. In order to provide a strong incentive and
reinforce the individual's commitment to the Company, there can be awards that
are significant in size and potential value. 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
6
<PAGE> 9
annual restricted stock awards under the Company's restricted stock award
program is up to thirty percent of base salary. In addition, supplemental
restricted stock awards are granted periodically.
The Company has historically purchased shares of Company Common Stock in
the open market sufficient to cover all restricted stock awards in order to
reflect consistent, non-variable expense related to these awards and to avoid
any dilution resulting from these awards. This prepaid expense is fixed and
amortized over the extended vesting period of the awards. Because the Company's
tax deduction is based on the fair market value at the time the restrictions
lapse, the after-tax cost of this program can be very favorable to the Company
based on future appreciation of Company Common Stock. The Company believes that
the extended vesting of stock awards promotes retention, but also spreads
compensation expense over a longer term, which generally results in a
significant reduction in the Company's after-tax cost of the compensation. The
Compensation Committee recognizes that the dollar value of these stock-based
incentives can appreciate to substantial amounts as a result of the Company's
extended vesting schedule, as compared to the shorter vesting schedules that
distribute incentives in a shorter time period, which are used by many other
companies.
Restricted stock awards 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. Each of the named executive
officers received restricted stock awards in early 1996 in conjunction with
awards made to other key corporate office employees based on the Company's
financial performance during 1995.
Stock option grants were made to named executive officers in 1996 as
compensation intended to give Company leaders a direct interest in the market
value of Company Common Stock. 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, generally deductible by the
Company for federal income tax purposes and thereby provides tax savings to the
Company. The Compensation 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 Compensation
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. The Compensation Committee believes that restoration options help to
align more closely the interests of executives with the long-term interests of
stockholders and allow executives to maintain the level of their equity-based
interest in the Company through a combination of direct stock ownership and
stock options. No restoration options were granted to the named executive
officers in 1996. The 1991 Plan also provides that, upon the occurrence of
certain events constituting a change in control of the Company, all stock
options previously granted immediately become fully exercisable, and all
restricted stock awards immediately vest. Generally, if a participant incurs an
excise tax under Section 4999 of the Internal Revenue Code in connection with a
payment or distribution following a change in control, the 1991 Plan provides
that the participant will receive additional payments to make the participant
whole for such excise tax.
In addition to the stock-based programs noted above, most Company salaried
employees participate in defined contribution profit sharing retirement plans,
which further link compensation to Company
7
<PAGE> 10
performance. Discretionary contributions are made into these plans based on the
Company's performance. Historically, aggregate annual contributions to the
profit sharing plans in which executive officers participate have ranged from
approximately four percent to seven percent of participants' base salaries. See
footnote(2) to the "Summary Compensation Table."
The Compensation Committee has reviewed the regulations relating to Code
Section 162(m), which limits the deductibility of annual executive compensation
in excess of $1,000,000 for each of the five highest paid executives. The Board
has amended the 1991 Plan and is presenting that plan as amended to stockholders
for approval so that future stock options granted under the 1991 Plan will
continue to result in compensation fully deductible by the Company under the
regulations. See "Proposal to Approve the Amendment of the 1991 Long Term Stock
Incentive Plan." In addition, the Compensation Committee has approved the 1997
Annual Incentive Compensation Plan and is presenting that plan to stockholders
for approval to structure determinations for cash bonuses to make them
performance-based and therefore fully tax deductible. Historically, the
compensation of the Company's named executive officers has not exceeded the
$1,000,000 limit. The Compensation Committee continues to believe it is in the
Company's interest to retain flexibility in its compensation programs, and
although compensation may in some circumstances exceed the limitation of Section
162(m), the Compensation Committee believes any tax deduction lost on account of
such excess compensation will be insignificant for the foreseeable future.
Compensation decisions for 1996 for all executives, including Mr.
Manoogian, the Chairman of the Board and Chief Executive Officer, are generally
based on the criteria described above.
Eugene A. Gargaro, Jr.
Peter A. Dow
John A. Morgan
8
<PAGE> 11
COMPENSATION OF EXECUTIVE OFFICERS
SUMMARY COMPENSATION TABLE
The following table summarizes the annual and long-term compensation of the
Company's executive officers (collectively, the "named executive officers") for
1996, 1995 and 1994.
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION AWARDS
------------------------
ANNUAL COMPENSATION RESTRICTED SECURITIES
-------------------- STOCK UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS AWARDS(1) OPTIONS COMPENSATION(2)
--------------------------- ---- ------ ----- ---------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Richard A. Manoogian 1996 $400,000 $188,000 $ 653,000 140,000 $44,000
Chairman of the Board 1995 400,000 170,000 118,000 0 53,000
and Chief Executive 1994 400,000 200,000 122,000 0 32,000
Officer(3)
Lee M. Gardner 1996 $579,000 $273,000 $1,015,000 200,000 $73,000
President and Chief 1995 568,000 242,000 163,000 0 79,000
Operating Officer 1994 531,000 279,000 153,000 7,430(4) 61,000
Timothy Wadhams 1996 $322,500 $152,000 $ 580,000 120,000 $42,000
Vice President -- 1995 316,000 135,000 92,000 0 45,000
Controller and Treasurer 1994 297,000 155,000 87,000 2,769(4) 34,000
</TABLE>
- -------------------------
(1) 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"). Restricted stock awards granted to date vest over a
period of ten years from the date of grant with ten percent of each award
vesting annually. In general, vesting is contingent on a continuing
employment or consulting relationship with the Company. The following number
of shares were awarded to the named executive officers in 1996: Mr.
Manoogian -- 45,000 shares; Mr. Gardner -- 70,000 shares; and Mr. Wadhams --
40,000 shares. As of December 31, 1996, the aggregate number and market
value of unvested restricted shares of Company Common Stock (which are
expensed by the Company over their remaining term) held by each of the named
executive officers were: Mr. Manoogian -- 66,840 shares valued at
$1,095,000; Mr. Gardner -- 128,370 shares valued at $2,102,000; and Mr.
Wadhams -- 70,040 shares valued at $1,147,000. As of December 31, 1996, Mr.
Manoogian also held restricted stock awards of Company Common Stock granted
to him under a Masco Corporation plan, as to which there was no cost to the
Company. Recipients of restricted stock awards have the right to receive
dividends on unvested shares.
(2) This column includes (a) Company contributions and allocations under the
Company's defined contribution retirement plans for 1996 for the accounts of
each of the named executive officers other than Mr. Manoogian, who does not
participate in these plans: (for 1996: Mr. Gardner -- $40,000; and Mr.
Wadhams -- $22,000), and (b) cash payments made pursuant to certain tandem
rights associated with the annual vesting of certain restricted stock awards
granted in 1989 (in 1996: Mr. Manoogian -- $44,000, Mr. Gardner -- $33,000
and Mr. Wadhams -- $20,000). For further information regarding these rights,
see "Certain Relationships and Related Transactions."
(3) Does not reflect the salary Mr. Manoogian received from TriMas Corporation
as its Chairman of the Board ($100,000 for 1996) or salary and bonus from
Masco Corporation as its Chairman of the Board and Chief Executive Officer.
(4) No original stock options were granted in 1994 or 1995. Options shown in
1994 consist solely of restoration options granted upon the exercise of
previously held stock options. As described in more detail under "Executive
Compensation Committee Report," a restoration option does not increase the
number of shares covered by the original option or extend the term of the
original option.
9
<PAGE> 12
OPTION GRANT TABLE
The following table sets forth information concerning options granted to
the named executive officers in 1996.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
INDIVIDUAL GRANTS ANNUAL RATES
------------------------------------------------------------ OF STOCK PRICE
NUMBER OF % OF TOTAL APPRECIATION FOR
SECURITIES OPTIONS GRANTED OPTION TERM(2)
UNDERLYING TO EMPLOYEES EXERCISE EXPIRATION ------------------------
NAME OPTIONS GRANTED IN 1996 PRICE DATE 5% 10%
---- --------------- --------------- -------- ---------- -- ---
<S> <C> <C> <C> <C> <C> <C>
Richard A. Manoogian... 140,000 10.22% $14.50 8/21/06 $1,277,000 $3,235,000
Lee M. Gardner......... 200,000 14.60% $14.50 8/21/06 $1,824,000 $4,622,000
Timothy Wadhams........ 120,000 8.76% $14 50 8/21/06 $1,094,000 $2,773,000
</TABLE>
- -------------------------
(1) All of the options shown in the table were granted under the 1991 Plan at
the market price on the date of grant. For further information, see
"Executive Compensation Committee Report."
(2) 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.
YEAR-END OPTION VALUE TABLE
The following table sets forth information concerning each exercise of
stock options during 1996 by each named executive officer and the value at
December 31, 1996 of unexercised options held by such individuals under the
Company's stock option plans. In general, options vest over a period of eight
years from the date of grant and expire ten years from the date of grant, and
generally, vesting is contingent on a continuing employment or consulting
relationship with the Company. The value of unexercised options reflects the
increase in market value of Company Common Stock from the date of grant through
December 31, 1996 (the closing price of Company Common Stock on December 31,
1996 was $16 3/8 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 1996 AND DECEMBER 31, 1996 OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
SHARES UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
ACQUIRED AT DECEMBER 31, 1996 AT DECEMBER 31, 1996
ON VALUE ---------------------------- ----------------------------
NAME EXERCISE REALIZED UNEXERCISABLE EXERCISABLE UNEXERCISABLE EXERCISABLE
---- -------- -------- ------------- ----------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Richard A. Manoogian........ 320,000 $1,760,000 620,000 1,000,000 $5,183,000 $6,125,000
Lee M. Gardner.............. -- -- 370,000 163,430 $2,019,000 $1,270,000
Timothy Wadhams............. -- -- 195,000 84,980 $1,116,000 $ 704,000
</TABLE>
10
<PAGE> 13
PENSION PLANS
The executive officers other than Mr. Manoogian 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
--------------- ------- ------- -------- -------- -------- --------
<C> <C> <C> <C> <C> <C> <C>
$100,000 $ 5,645 $11,290 $ 16,935 $ 22,580 $ 28,225 $ 33,870
200,000 11,290 22,580 33,870 45,161 56,451 67,741
300,000 16,935 33,870 50,806 67,741 84,676 101,611
400,000 22,580 45,161 67,741 90,321 112,902 135,482
500,000 28,225 56,451 84,676 112,902 141,127 169,352
600,000 33,870 67,741 101,611 135,482 169,352 203,223
700,000 39,516 79,031 118,547 158,062 197,578 237,093
</TABLE>
- -------------------------
(1) The plans provide for credit for employment with any of the Company, Masco
Corporation, TriMas Corporation 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 Masco Corporation or TriMas Corporation 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. Messrs. Gardner
and Wadhams have approximately 10 years and 21 years of credited service,
respectively.
(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
$386,890. A participant may also receive supplemental medical benefits. A
participant who has been employed at least two years and becomes disabled prior
to retirement will receive annually 60 percent of the participant's total
annualized cash compensation in the year in which the participant becomes
disabled, subject to certain limitations on the maximum payment and reduced by
benefits payable pursuant to the Company's long-term disability insurance and
similar plans. Upon a disabled participant's reaching age 65, 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
other than Mr. Manoogian participate in this plan.
11
<PAGE> 14
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 and Poor's Trucks &
Parts Index ("S&P Trucks Index") for the period from January 1, 1992 through
December 31, 1996. The graph assumes investments of $100 on December 31, 1991 in
Company Common Stock, the S&P 500 Index and the S&P Trucks Index, and the
reinvestment of dividends.
<TABLE>
<CAPTION>
MEASUREMENT PERIOD MASCOTECH S&P 500 INDEX S&P TRUCKS INDEX
(FISCAL YEAR COVERED)
<S> <C> <C> <C>
1991 $100.00 100.00 100.00
1992 $242.11 107.61 133.65
1993 $585.11 118.39 165.73
1994 $276.13 119.99 142.79
1995 $233.83 164.92 153.48
1996 $356.43 202.69 190.94
</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, 1991 in each of
Company Common Stock, the S&P 500 Index, and the S&P Trucks Index, and the
reinvestment of dividends.
<TABLE>
<CAPTION>
MEASUREMENT PERIOD MASCOTECH S&P 500 INDEX S&P TRUCKS INDEX
(FISCAL YEAR COVERED)
<S> <C> <C> <C>
1991 $100.00 100.00 100.00
1992 $242.11 107.61 133.65
1993 $585.11 118.39 165.73
1994 $276.13 119.99 142.79
1995 $233.83 164.92 153.48
1996 $356.43 202.69 190.94
</TABLE>
12
<PAGE> 15
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Board of Directors consists of Messrs.
Dow, Gargaro and Morgan. 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 Masco Corporation. Mr. Gargaro, an executive officer of
Masco Corporation, is the Secretary of the Company although he is not an
employee. 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 Masco
Corporation in October 1993. Dykema Gossett provides legal services to the
Company from time to time. Mr. Gargaro receives no compensation from the firm.
Richard A. Manoogian, an executive officer of the Company, is a director of
Masco Corporation.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
MASCO CORPORATION
The Company became a publicly owned company in July 1984 as part of a
restructuring of Masco Corporation, a manufacturer of home improvement and
building products.
In October 1996, the Company purchased from Masco Corporation 17 million
shares of Company Common Stock and warrants to acquire 10 million shares of
Company Common Stock, reducing Masco Corporation's equity ownership from
approximately 45 percent to approximately 21 percent of the Company's
outstanding Common Stock. The Company paid $115 million of the purchase price in
cash at closing and the balance of $151,375,000, which bears interest at the
rate of 6 5/8% per annum, is due by September 30, 1997. The balance of the
purchase price is payable in cash or, at the Company's option and subject to
obtaining any necessary approvals, in cash and publicly traded securities of
Emco Limited held by the Company. Emco Limited is a Canadian manufacturer and
distributor of home improvement and building products. The purchase price for
the Company Common Stock and warrants was determined through arms-length
negotiations by the Company's Board of Directors (with Messrs. Manoogian,
Gargaro and Morgan abstaining) and with the assistance of the Company's outside
legal counsel and investment bankers. As part of this transaction, Masco
Corporation granted the Company a right of first refusal, which expires
September 30, 2000, to purchase the remaining shares of Company Common Stock
held by Masco Corporation.
Concurrently with the purchase of securities from Masco Corporation, the
Company also purchased one million shares of Company Common Stock from Richard
A. Manoogian, at the then current market price, for $13,625,000, of which $6
million was paid in cash at closing, with the balance, which bears interest at
the rate of 6 5/8% per annum, due September 30, 1997. Mr. Manoogian is the
Chairman and Chief Executive Officer of both the Company and Masco Corporation.
As a result of the purchase of Mr. Manoogian's shares of Company Common Stock,
his ownership interest in the Company remained at approximately the same
percentage after giving effect to the purchase of shares from Masco Corporation.
The Company is a party to certain agreements with Masco Corporation as
described below, certain of which were amended in connection with the
above-described purchase from Masco Corporation of Company Common Stock and
warrants.
MASCO CORPORATION CORPORATE SERVICES AGREEMENT
Under a Corporate Services Agreement, Masco Corporation provides the
Company and its subsidiaries with office space for its executive offices, use of
Masco Corporation's data processing equipment and services, certain research and
development services, corporate administrative staff and other support services
in return for the Company'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 Masco Corporation's performance of research and
development services on behalf of the Company. For 1996, approximately $7.1
million was paid to Masco Corporation under this agreement, which continues in
effect until September 30, 1998 and thereafter will be renewed automatically
13
<PAGE> 16
for one-year periods, unless termination by either party upon at least 90 days
notice before any October 1 renewal date.
MASCO CORPORATION CORPORATE OPPORTUNITIES AGREEMENT
The Company and Masco Corporation are parties to a Corporate Opportunities
Agreement which addresses potential conflicts of interests 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 will continue in effect until September 30,
1998, and will thereafter automatically renew for one-year periods, unless
terminated by either party at least 90 days before any October 1 renewal date.
MASCO CORPORATION STOCK REPURCHASE AGREEMENT
Under a Stock Repurchase Agreement, Masco Corporation has the right to sell
to the Company, at a price based on fair market value, shares of Company Common
Stock upon certain events that would result in Masco Corporation's ownership of
Company Common Stock exceeding 49 percent of the Company's then outstanding
shares. Such events include repurchases of Company Common Stock initiated by the
Company or any of its subsidiaries and reacquisitions of Company Common Stock
through forfeitures of shares previously awarded by the Company or Masco
Corporation pursuant to their respective employee stock incentive plans. In each
case the Company has control over the amount of Company Common Stock it would
ultimately acquire, including shares subject to repurchase under the Stock
Repurchase Agreement. These rights expire 30 days from the date notice of an
event is given by the Company. Masco Corporation has advised the Company that it
intends to exercise such right whenever necessary, to prevent its ownership from
exceeding 49 percent of the Company Common Stock then outstanding; however, in
view of Masco Corporation's current level of ownership of Company Common Stock,
the Company does not anticipate that this agreement will ever be operative.
MASCO CORPORATION ASSUMPTION AND INDEMNIFICATION AGREEMENT
Under an Assumption and Indemnification Agreement, the Company assumed, and
agreed to indemnify Masco Corporation against, all of the liabilities and
obligations of the businesses transferred to it in Masco Corporation's 1984
restructuring, including claims and litigation resulting from events or
circumstances that occurred or existed prior to the transfer, but excluding
specified liabilities, including those related to certain of Masco Corporation's
stock option, restricted stock and pension plans.
MASCOTECH SECURITIES PURCHASE AGREEMENT
Under a Securities Purchase Agreement, the Company and Masco Corporation
agreed that Masco Corporation will purchase from the Company at the Company's
option up to $200 million of subordinated debentures and, in connection
therewith, the Company pays an annual commitment fee to Masco Corporation of
$250,000. This commitment was extended to March 31, 2002 in connection with the
Company's 1996 purchase from Masco Corporation of Company Common Stock and
warrants. The Company has also agreed to file registration statements under the
federal securities laws to enable Masco Corporation from time to time to
publicly dispose of securities of the Company held by Masco Corporation.
MASCO CAPITAL CORPORATION
In 1988 the Company and Masco Corporation 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 sold
its 50 percent ownership interest in Masco Capital to Masco Corporation for
approximately $49.5 million and may receive additional payments based upon any
aggregate net increase in the value of Masco Capital's remaining investments.
14
<PAGE> 17
TRIMAS CORPORATION
Effective October 1, 1988, the Company transferred to TriMas Corporation
various businesses and cash in exchange for common stock and other securities of
TriMas. In a related transaction, Masco Corporation, which prior to such
transfer had an equity ownership interest in TriMas, purchased additional TriMas
common stock for cash. As part of these transactions, the three companies
entered into certain agreements described below. As of March 31, 1997 the
Company and Masco Corporation owned 36.8 percent and 3.8 percent, respectively,
of the outstanding TriMas common stock.
TRIMAS CORPORATE SERVICES AGREEMENT
Under a Corporate Services Agreement, Masco Corporation provides TriMas and
its subsidiaries with use of Masco Corporation's data processing equipment and
services, certain research and development services, corporate administrative
staff and other support services, in return for TriMas' payment of an annual
base service fee of .8 percent of TriMas' consolidated annual net sales, subject
to adjustments. This agreement also provides for various license rights and the
confidential treatment of certain information which may arise from Masco
Corporation's performance of research and development services on behalf of
TriMas. For 1996, $3.3 million was paid to Masco Corporation under this
agreement, which is terminable by TriMas at any time upon at least 90 days
notice and by Masco Corporation at the end of any calendar year upon at least
180 days notice.
TRIMAS CORPORATE OPPORTUNITIES AGREEMENT
The Company, Masco Corporation and TriMas are parties to a Corporate
Opportunities Agreement which addresses potential conflicts of interest with
respect to future business opportunities. It materially restricts TriMas'
ability to enter into businesses in which either the Company or Masco
Corporation is engaged without the consent of the Company or Masco Corporation.
This agreement will continue in effect until at least two years after the
termination of the TriMas Corporate Services Agreement and thereafter will be
renewed automatically for one-year periods, unless terminated by any party at
least 90 days prior to any such scheduled renewal date.
TRIMAS STOCK REPURCHASE AGREEMENT
Under a Stock Repurchase Agreement, which expires in December 1998, the
Company and Masco Corporation have the right to sell to TriMas, at approximate
fair market value, shares of TriMas common stock following the occurrence of
certain events that would result in an increase in their respective ownership
percentage of the then outstanding shares of TriMas common stock. Such events
include repurchases of TriMas common stock initiated by TriMas or any of its
subsidiaries and reacquisitions of TriMas common stock through forfeitures of
shares previously awarded by TriMas pursuant to its employee stock incentive
plans. In each case TriMas has control over the amount of TriMas common stock it
would ultimately acquire, including shares subject to repurchase under the Stock
Repurchase Agreement. These rights expire 30 days from the date notice of an
event is given by TriMas. Neither the Company nor Masco Corporation has ever
exercised its right to sell TriMas Common Stock to TriMas. The Company and Masco
Corporation have advised TriMas that they intend to exercise their respective
rights whenever necessary to prevent their ownership of TriMas common stock from
equaling or exceeding 50 percent and 20 percent, respectively, of the TriMas
common stock then outstanding or if the Company or Masco Corporation then
determines such action to be in its respective best interest.
TRIMAS ASSUMPTION AND INDEMNIFICATION AGREEMENT
Under an Assumption and Indemnification Agreement, TriMas assumed, and
agreed to indemnify the Company against, all of the liabilities and obligations
of the businesses acquired by TriMas from the Company, including claims and
litigation resulting from events which occurred prior to October 1, 1988, but
excluding certain income tax and other specified liabilities.
15
<PAGE> 18
In 1993, as part of its plan to dispose of its energy related businesses,
the Company sold Lamons Metal Gasket Co. to TriMas for a purchase price of $60
million plus additional future payments contingent upon the level of
profitability of Lamons. The Company expects to receive a contingent payment
from TriMas during 1997. As part of the transaction, the Company agreed to
indemnify TriMas against certain liabilities of the acquired business.
TriMas acquired several businesses from Masco Corporation in early 1990,
and as part of the transaction, Masco Corporation agreed to indemnify TriMas
against certain liabilities of the acquired businesses.
Subject to certain conditions, and upon the request of the Company or Masco
Corporation, TriMas has agreed to file registration statements under the federal
securities laws to permit the sale in public offerings of TriMas common stock
held by the Company and Masco Corporation. In addition, the Company and Masco
Corporation entered into arrangements with TriMas pursuant to which TriMas has
registered shares of TriMas common stock held by certain executives of the
Company and Masco Corporation, including Richard A. Manoogian, under incentive
programs established by such companies. TriMas provides indemnification against
certain liabilities arising from such transactions.
OTHER RELATED PARTY TRANSACTIONS
MascoTech GmbH, a German subsidiary of the Company, and Masco GmbH, a
German subsidiary of Masco Corporation, have from time to time advanced excess
funds held in such foreign country to one another to be used for working
capital. The parties negotiate a fluctuating rate of interest for these loans.
The largest amount outstanding payable to MascoTech GmbH during 1996 was
approximately $864,000.
Sales of products and services and other transactions occur from time to
time among the Company, Masco Corporation and TriMas. As a result of such
transactions in 1996, the Company paid approximately $41,000 to Masco
Corporation and approximately $4 million to TriMas, and received approximately
$17.3 million from Masco Corporation and approximately $.4 million from TriMas.
In addition, Masco Corporation paid approximately $1 million to TriMas as a
result of transactions in 1996. The Company also participates with Masco
Corporation and TriMas in a number of national purchasing programs which enable
each of them to obtain favorable terms from certain of their service and product
suppliers.
In 1989 the Company made long-term restricted stock awards to a 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 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.
The Company pays Erwin H. Billig, the Company's Vice Chairman of the Board
and former President and Chief Operating Officer, $15,000 per month for
consulting and advisory services.
Ownership of securities and various other relationships and incentive
arrangements may result in conflicts of interest in the Company's dealings with
Masco Corporation, TriMas and others. The Masco Corporation and TriMas Corporate
Opportunities Agreements and other aspects of the relationships among the three
companies may affect their ability to make acquisitions and develop new
businesses under certain circumstances, although the Company does not believe it
has experienced any such effect to date. Three persons affiliated with Masco
Corporation are currently members of both the Company's Board of Directors and
TriMas' Board of Directors. Persons affiliated with the Company constitute
one-half of the Board of Directors of TriMas. Mr. Manoogian, the Company's
Chairman of the Board and Chief Executive Officer, is also the Chairman of the
Board and Chief Executive Officer of Masco Corporation, Chairman of the Board of
TriMas
16
<PAGE> 19
and a significant stockholder of all three companies. Mr. Morgan, who is a
Director of the Company, is also a director of Masco Corporation and TriMas. Mr.
Gargaro, a director and the Secretary of the Company, is also an executive
officer and the Secretary of Masco Corporation and a director and the Secretary
of TriMas. Certain Directors, officers and other key employees of the Company
receive benefits based upon the value of the common stock of the Company, Masco
Corporation and TriMas under certain Company and Masco Corporation incentive
compensation programs. See "Compensation of Executive Officers." Because of
these relationships, an independent committee of the Company's Board of
Directors reviews its significant transactions with affiliated companies.
The following table sets forth the number of shares of Masco Corporation
and TriMas Corporation common stock beneficially owned as of March 31, 1997 by
the nominees, the current Directors and named executive officers and the current
Directors and executive officers of the Company as a group. Except as indicated
below, each person exercises sole voting and investment power with respect to
the shares listed.
<TABLE>
<CAPTION>
SHARES OF SHARES OF
COMMON STOCK OF COMMON STOCK OF
MASCO CORPORATION TRIMAS CORPORATION
NAME(1) BENEFICIALLY OWNED BENEFICIALLY OWNED
------- ------------------ ------------------
<S> <C> <C>
Erwin H. Billig............................................. 2,800 15,000
Peter A. Dow................................................ 5,500 7,000
Roger T. Fridholm........................................... 0 0
Lee M. Gardner.............................................. 400 0
Eugene A. Gargaro, Jr.(2)(3)................................ 2,453,118 101,876
William K. Howenstein....................................... 0 0
Richard A. Manoogian(2)(3).................................. 5,567,188 1,801,852
John A. Morgan.............................................. 1,600 8,000
Timothy Wadhams............................................. 9,000 45,848
All eight current Directors and executive officers of the
Company as a group (excluding subsidiary, divisional and
group executives)(2)(3)................................... 5,699,406 1,946,568
</TABLE>
- -------------------------
(1) The only nominee, current Director or executive officer of the Company who
beneficially own one percent or more of Masco Corporation or TriMas common
stock are Mr. Manoogian, who beneficially owns 3.4 percent of Masco
Corporation common stock and 4.4 percent of TriMas common stock, and Mr.
Gargaro, who beneficially owns 1.5 percent of Masco Corporation common
stock. Current Directors and executive officers of the Company as a group
beneficially own 3.5 percent of Masco Corporation common stock and 4.7
percent of TriMas common stock.
(2) Includes 2,340,200 shares of Masco Corporation common stock and 33,008
shares of TriMas common stock owned by charitable foundations for which
Messrs. Manoogian and Gargaro serve as directors. Shares beneficially owned
by Mr. Manoogian and by all current Directors and executive officers of the
Company as a group include in each case 1,044,500 shares of Masco
Corporation common stock owned by a trust for which Mr. Manoogian serves as
a trustee. Shares beneficially owned by Mr. Gargaro and by all current
Directors and executive officers of the Company as a group include in each
case 28,448 shares of Masco Corporation common stock and 7,184 shares of
TriMas common stock owned by a charitable foundation for which Mr. Gargaro
serves as a director and 25,530 shares of Masco Corporation common stock and
11,684 shares of TriMas common stock held by trusts for which Mr. Gargaro
serves as a trustee. The directors of the foundations and the trustees share
voting and investment power with respect to the Masco Corporation common
stock and the TriMas common stock owned by the foundations and trusts, but
Messrs. Manoogian and Gargaro each disclaim beneficial ownership of such
shares.
(3) Ownership of Masco Corporation common stock includes shares which may be
acquired on or before May 30, 1997 upon exercise of stock options (1,097,740
shares for Mr. Manoogian, 18,000 shares for
17
<PAGE> 20
Mr. Gargaro and 1,115,740 shares for all current Directors and executive
officers of the Company as a group) and unvested restricted stock award
shares of Masco Corporation common stock issued under Masco Corporation's
restricted stock incentive plan (33,633 shares for Mr. Gargaro, 97,518
shares for Mr. Manoogian and 131,151 shares for all current Directors and
executive officers of the Company as a group). Holders exercise neither
voting nor investment power over unexercised option shares and have voting
but no investment power over unvested restricted shares.
Mr. Manoogian may be deemed to be a controlling person of Masco Corporation
by reason of his significant ownership of Masco Corporation common stock and his
position as a director and executive officer of Masco Corporation. Mr.
Manoogian, Masco Corporation and the Company each may be deemed a controlling
person of TriMas by reason of their respective ownership of TriMas common stock,
Mr. Manoogian's position as a director and an executive officer of TriMas, and
Masco Corporation's ownership of Company Common Stock.
PROPOSAL TO APPROVE THE 1997 NON-EMPLOYEE DIRECTORS STOCK PLAN
The Board of Directors has adopted and is presenting for stockholder
approval the MascoTech, Inc. 1997 Non-Employee Directors Stock Plan (the
"Directors Stock Plan"). Under the Directors Stock Plan, non-employee Directors'
compensation will be paid in part in Company Common Stock and in part in cash,
instead of 100 percent in cash. The Board has adopted this plan as a key
component of an overall Company compensation strategy which will more closely
align the compensation of Directors, officers and other key employees with the
long-term enhancement of stockholder value. In addition, by offering
non-employee Directors the opportunity to participate in the future growth of
the Company as stockholders, the Board believes the plan will enhance the
Company's ability to attract, motivate and retain Directors of exceptional
ability. A summary of the plan is set forth below and is qualified in its
entirety by reference to the full text of the Directors Stock Plan, which is
attached to this Proxy Statement as Annex A.
GENERAL INFORMATION
If it is approved by stockholders, the Directors Stock Plan will replace
one-half of the cash compensation paid to each non-employee Director with an
award of restricted shares of Company Common Stock. Currently, non-employee
Directors are paid annual cash compensation of $44,000. Under the plan, one-half
of the cash compensation for a five-year period beginning in 1997 will be
replaced with 5,790 restricted shares of Company Common Stock. Each award will
vest in 20 percent annual installments (1,158 shares) on January 1 of each of
the five years following the year of award. These shares had a value of
approximately $110,000 based on the $19 closing price of the Company Common
Stock on February 14, 1997, the last trading date before the date of grant, and
accordingly, assuming a $19 share price, shares received on each vesting date
would be equivalent to the $22,000 of cash compensation not being received.
Since the number of shares is fixed at the beginning of the five-year period,
the entire value of five-year, non-cash compensation is at risk, and
non-employee Directors may ultimately receive Company Common Stock having a
value more or less than the annual cash payment of $22,000 that they would have
otherwise received.
If the plan is approved and assuming Mr. Howenstein is elected to the Board
at the 1997 Annual Meeting, he will receive an award as of the date of the
Annual Meeting based on the closing price of Company Common Stock on that date.
Assuming the election of all nominees for Director at the Annual Meeting, there
will be five non-employee Directors. Any new non-employee Director elected or
appointed to the Board in the future will receive an award of restricted shares
as set forth above, with the number of shares awarded based on the closing price
of Company Common Stock on the date of grant. The amount of restricted stock
awarded to a non-employee Director who begins service other than at January 1
will be prorated to reflect the partial year of service during the Director's
initial term.
The non-employee Directors will be entitled to vote and receive dividends
on the unvested shares of restricted stock, but cannot transfer them. All shares
of restricted stock not yet vested are forfeited upon termination of a
non-employee Director's service as such, except that if termination is due to
death or permanent and total disability, all restrictions lapse immediately.
Upon full vesting of an award, the plan permits a new award to be granted for
the subsequent five-year period, calculated in a similar manner;
18
<PAGE> 21
provided, however, the Board may adjust the amount of compensation then to be
paid in the form of shares of Company Common Stock and the terms of any such
award. If the plan is not approved, the conditionally granted awards will be
canceled, no other awards will be made under the plan and the non-employee
Directors' cash compensation will be restored to its previous level.
To further align Director compensation with the enhancement of stockholder
value and subject to stockholder approval, the Directors Stock Plan also
provides for the grant of a non-qualified option to purchase 5,000 shares of
Company Common Stock to each person who is a non-employee Director on the date
of the 1997 Annual Meeting. These options will have an exercise price equal to
the closing price of Company Common Stock on the date of grant. Thereafter, each
person who is then serving as a non-employee Director or who becomes a
non-employee Director on the date of any subsequent annual stockholders meeting
and whose service on the Board will continue after that date will be granted an
option to purchase 5,000 shares of Company Common Stock at the then current
market price. The term of each option is ten years from the date of grant,
except that options may be exercised for only a limited period of time following
termination of a non-employee Director's service as a non-employee Director.
Each option will become exercisable with respect to 20 percent of the underlying
shares on each of the first five anniversaries of the grant date.
The maximum number of shares of Company Common Stock available under the
Directors Stock Plan is 500,000. Shares subject to awards that are forfeited or
terminated will again be available for awards, as will shares tendered to the
Company in satisfaction or partial satisfaction of the exercise price of an
option. Shares to be delivered under the plan will be made available from newly
issued shares or shares reacquired by the Company. In the event of a merger,
reorganization, consolidation, recapitalization, stock split, stock dividend or
other change in corporate structure affecting shares of Company Common Stock,
the number of shares which may be issued under the plan and the number of shares
subject to any outstanding awards will be adjusted to avoid the enhancement or
diminution of the benefits intended to be provided under the plan.
The Directors Stock Plan will be administered by the Board of Directors.
The Board has the authority to interpret the plan, to establish, amend and
rescind any rules and regulations relating to the plan and to make all other
determinations for the administration of the plan. The determinations of the
Board in the administration of the plan, as described herein, will be final and
conclusive. The Secretary of the Company will be authorized to take such
ministerial actions as may be necessary to effectuate the intent of the plan.
The Board may amend, suspend or discontinue the Directors Stock Plan as it
considers advisable or to conform to any change in any law or regulation
applicable thereto. Without the approval of stockholders, however, the Board may
not modify the class of individuals who constitute non-employee Directors or
increase the total number of shares available under the plan.
The following summarizes the awards to be received by non-employee
Directors as a group for 1997 under the Directors Stock Plan:
NEW PLAN BENEFITS
1997 NON-EMPLOYEE DIRECTORS STOCK PLAN
<TABLE>
<CAPTION>
AGGREGATE AGGREGATE
NON-EMPLOYEE DIRECTOR GROUP (FIVE INDIVIDUALS) DOLLAR VALUE NUMBER OF SHARES
---------------------------------------------- ------------ ----------------
<S> <C> <C>
Five-year restricted awards................................. $544,500(1) 28,194(2)
Options..................................................... -- 25,000
</TABLE>
- -------------------------
(1) Represents the amount of cash compensation for five years to be replaced by
awards of restricted stock equivalent in value on the date of grant. The
annual cash compensation to be replaced by the award would be $22,000 for
each non-employee Director, prorated to reflect the partial year of service
for Mr. Howenstein, a nominee for Director at the 1997 Annual Meeting.
(2) Calculated using the closing price of Company Common Stock on February 14,
1997, the last trading date before the date of grant, for the awards granted
as of February 17, 1997 and the closing price of Company Common Stock on
April 15, 1997 for the awards to be granted as of the date of the 1997
Annual Meeting.
19
<PAGE> 22
On April 15, 1997, the closing price per share of Company Common Stock on
the New York Stock Exchange Composite Tape was $20 3/4. If the plan is not
approved, the conditionally granted awards will be canceled, no further awards
will be made under the plan and the Board will consider other alternatives.
FEDERAL INCOME TAX CONSEQUENCES OF OPTIONS
For information concerning the federal income tax consequences of the
issuance and exercise of stock options, see "Proposal to Approve the Amendment
of the 1991 Long Term Stock Incentive Plan -- Federal Income Tax Consequences."
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE 1997
NON-EMPLOYEE DIRECTORS STOCK PLAN.
PROPOSAL TO APPROVE THE 1997 ANNUAL INCENTIVE COMPENSATION PLAN
The Board of Directors has adopted and is presenting for stockholder
approval the MascoTech, Inc. 1997 Annual Incentive Compensation Plan (the "1997
Cash Incentive Plan"). The 1997 Cash Incentive Plan is being submitted for
stockholder approval in order to comply with the requirements of Section 162(m)
of the Code. In general, Section 162(m) disallows deductions for compensation in
excess of $1 million paid to any of the five most highly compensated executives
of a public corporation, unless the compensation is based on performance
criteria. Historically, the compensation of the Company's named executive
officers has not exceeded the $1 million limit, but in the event that this may
occur in the future, bonuses will be paid in accordance with the provisions of
the 1997 Cash Incentive Plan and will therefore be deductible compensation. The
following summary is qualified in its entirety by reference to the full text of
the 1997 Cash Incentive Plan, which is attached to this Proxy Statement as Annex
B.
Under the 1997 Cash Incentive Plan, during the first quarter of each year
the Compensation Committee of the Board of Directors will establish in writing
for that year one or more performance criteria, consisting of net income,
earnings per share, cash flow, revenues, return on assets or total shareholder
return. The Compensation Committee will designate the participants and grant
each such participant a performance incentive award. Eligibility under the plan
is limited to the executive officers of the Company. After the Company's
financial results for the year have been determined, the Committee will certify
the attainment of the performance criteria and will calculate the possible
payout of awards. The Compensation Committee has the power and authority to
reduce or eliminate (but not to increase) for any reason the amount that would
otherwise be payable to a participant based on the performance criteria and the
Company's financial performance for the year. In no event shall an award exceed
$2 million.
The Compensation Committee has established performance criteria for 1997
based on the Company's net income and has granted an award to Mr. Gardner under
the plan, conditioned upon stockholder approval. If approved by stockholders,
the plan will be effective beginning January 1, 1997 for a period of five years
unless sooner terminated by the Compensation Committee. For 1997, the
Compensation Committee has established performance criteria based on the
Company's net income. If the plan is not approved, the conditional award will be
canceled, no further awards will be made under the plan and the Compensation
Committee will consider other alternatives.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE 1997
ANNUAL INCENTIVE COMPENSATION PLAN.
PROPOSAL TO APPROVE THE AMENDMENT OF THE
1991 LONG TERM STOCK INCENTIVE PLAN
Subject to stockholder approval, the Board of Directors has amended the
MascoTech, Inc. 1991 Long Term Stock Incentive Plan (the "1991 Plan"). The 1991
Plan is a key part of the Company's overall compensation strategy of aligning
compensation programs with long-term enhancement of stockholder value objectives
and requiring executives and key employees to remain at risk by maintaining an
investment in Company Common Stock. The 1991 Plan is designed to encourage
selected employees of and consultants to the Company and its affiliates to
acquire a proprietary interest in the Company's growth and performance in
20
<PAGE> 23
order to provide increased incentive for such individuals to contribute to the
Company's future success and prosperity. The Board believes that the 1991 Plan
has enhanced the ability of the Company and its affiliates to attract and retain
exceptionally qualified individuals upon whom the Company's sustained progress,
growth and profitability depend, thus enhancing the value of the Company for the
benefit of its stockholders.
As noted in the Executive Compensation Committee Report, stock options and
restricted stock awards granted under the 1991 Plan and prior plans are an
established part of Company compensation arrangements. The amendment to the 1991
Plan that is being proposed for stockholder approval limits the number of shares
upon which options and stock appreciation rights can be granted to any
participant in any calendar year. Stockholder approval of this amendment is
required under Code Section 162(m) in order for the Company to claim income tax
deductions relating to future grants of stock options and stock appreciation
rights. Certain other amendments were made to the 1991 Plan relating to recent
changes in Section 16 of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). In addition, because the Company has not issued discounted
stock options under the 1991 Plan nor repriced any options issued under the 1991
Plan, and does not intend to do so in the future, certain amendments have been
made to the 1991 Plan to prohibit the issuing of discounted options and the
repricing of options issued under the plan. The following summary is qualified
in its entirety by reference to the full text of the 1991 Plan as amended, which
is attached to this Proxy Statement as Annex C.
GENERAL INFORMATION
Employees of and consultants to the Company and its affiliates are eligible
to receive awards under the 1991 Plan. An affiliate is any entity in which the
Company has a 20 percent or greater equity interest and any other entity in
which the Committee administering the 1991 Plan determines the Company has a
significant equity interest.
The 1991 Plan permits granting awards of: (1) stock options, including
incentive stock options ("ISOs") meeting the requirements of Section 422 of the
Code and restoration options described below, (2) stock appreciation rights
("SARs"), (3) restricted stock and restricted stock units, (4) performance
awards, (5) dividend equivalents and (6) other awards valued in whole or in part
by reference to or otherwise based on Company Common Stock ("other stock-based
awards"). The 1991 Plan is administered by a Committee composed of at least two
of the Company's Directors, each of whom must be a "non-employee director" as
such term is defined in Rule 16b-3 under the Exchange Act. The Committee has the
authority to establish rules for the administration of the 1991 Plan; to select
the employees and consultants to whom awards are granted; to determine the types
of awards to be granted and the number of shares covered by such awards; to set
the terms and conditions of such awards; and to cancel, suspend and amend
awards. The Committee may also determine whether the payment of any proceeds of
any award shall or may be deferred and may authorize payments representing
dividends or interest or their equivalents in connection with any deferred
award. Determinations and interpretations of the Committee will be binding on
all parties. The Committee may delegate to one or more Directors who may be
participants in the 1991 Plan the authority to grant awards under the Plan.
The Board may amend, alter or discontinue the 1991 Plan at any time. No
amendment may impair the rights of any outstanding award holder without such
holder's consent.
Awards may be granted for no cash consideration or for such minimal cash
consideration as may be required by applicable law. Awards may provide that upon
their exercise or vesting the holder will receive cash, stock, other securities,
other awards, other property or any combination thereof, as the Committee shall
determine. The 1991 Plan as amended provides that no participant may receive
stock options or SARs in any calendar year that relate to more than 1,000,000
shares of Company Common Stock; provided, however, that such number may be
increased with respect to any participant by any shares available for grant to
such participant in any prior years that were not granted in such prior years
beginning on or after January 1, 1997. Any shares of stock deliverable under the
1991 Plan may consist in whole or in part of authorized and unissued shares or
treasury shares. Subject to certain limited exceptions and the authority of the
Committee to determine otherwise, awards under the 1991 Plan may not be
transferred. The 1991 Plan provides that
21
<PAGE> 24
immediately upon certain events constituting a change in control of the Company
the vesting of all rights of participants accelerates and all restrictions on
all awards under the 1991 Plan terminate.
The Committee establishes the purchase price per share for options (not
less than the fair market value of a share of Company Common Stock on the date
of grant), the term of options, the time at which they may be exercised and such
other terms as the Committee deems appropriate. Unless the Committee determines
otherwise, payment of the purchase price in full in cash or in shares of Company
Common Stock or any combination thereof, at the option of the participant, is
required upon option exercise, and options may be exercised for only a limited
period of time following termination of the employment or consulting
relationship (up to one year in the event of death). If the exercise price of an
option granted under the 1991 Plan or of any other option is paid in Company
Common Stock, the Committee may grant the exercising optionee a restoration
option covering a number of shares equal to the number of shares delivered upon
such exercise.
The holder of an SAR will be entitled to receive the excess of the fair
market value (calculated as of the exercise date or, if the Committee shall so
determine in the case of any SAR not related to an ISO, as of any time during a
specified period before or after the exercise date) of a specified number of
shares over the grant date price of the SAR.
A restricted stock award may provide the recipient with all of the rights
of a stockholder of the Company, including the right to vote the shares and to
receive any dividends. Restricted stock and restricted stock units generally
will be subject to certain forfeiture conditions and may not be transferred by
the recipient until such restrictions lapse. In general, unless the Committee
determines otherwise, all shares of restricted stock are forfeited upon
termination of the employment or consulting relationship during the restricted
period, except that if termination is due to death or permanent and total
disability, all restrictions lapse immediately and if termination of employment
is due to retirement, the restrictions continue to lapse in the same manner as
though employment had not terminated.
Performance awards will provide the holder with rights valued as determined
by the Committee and payable to, or exercisable by, the holder, in whole or in
part, upon the achievement of such performance goals during such performance
periods as the Committee establishes. Dividend equivalents will entitle the
holder to receive payments equivalent to dividends or interest with respect to a
specified number of shares. The Committee is also authorized to establish the
terms and conditions of other stock-based awards.
There were approximately 6,400,000 shares of Company Common Stock initially
available for issuance under the 1991 Plan (including shares carried forward
from prior plans), of which approximately 5,800,000 remain available for
issuance under the 1991 Plan. An additional 6,000,000 reacquired shares can be
added to the authorized shares available for awards under the 1991 Plan. For
this purpose, reacquired shares consist of shares reacquired by the Company in
full or partial payment for the exercise price of an option granted under the
1991 Plan or any other employee stock plan of the Company, and shares reacquired
in open market transactions or otherwise in connection with the 1991 Plan or any
award thereunder or any other employee stock option or restricted stock issued
by the Company. Also, shares covered by an award under the 1991 Plan which are
forfeited or shares covered by an award which is terminated may be included in
the additional shares under the 1991 Plan. Since 1991, the Company has
reacquired in connection with the activities described above approximately
3,500,000 shares. For purposes of the approval of the 1991 Plan as amended,
these reacquired shares are not being applied to reduce the number of reacquired
shares which can be added back to the shares authorized under the 1991 Plan for
future awards. Thus, if the 1991 Plan as amended is approved by stockholders, a
maximum of 6,000,000 reacquired shares will be available for awards issuable
under the 1991 Plan.
If any dividend or other distribution, recapitalization, stock split,
reverse stock split, reorganization, merger, consolidation, split-up, spin-off,
combination, repurchase. or exchange of shares or other securities of the
Company, issuance of warrants or other rights to purchase shares or other
securities of the Company, or other similar corporate transaction or event
affects the shares, then the Committee may in such manner as it deems equitable,
adjust (1) the number and type of shares (or other securities or property) which
thereafter may be made the subject of awards, (2) outstanding awards, including
without limitation the number and type of shares (or other securities or
property) subject thereto, and (3) the grant, purchase or exercise price with
22
<PAGE> 25
respect to any award, and may make provision for a cash payment to the holder of
an outstanding award. The Committee is authorized, for similar purposes, to make
adjustments in performance award criteria or in the terms and conditions of
other awards in recognition of unusual or nonrecurring events affecting the
Company or its financial statements or of changes in applicable laws,
regulations or accounting principles.
The Committee may correct any defect, supply any omission, or reconcile any
inconsistency in the 1991 Plan or in any award in the manner and to the extent
it shall deem desirable to effectuate 1991 Plan. Nothing contained in the 1991
Plan shall prevent the Company or any affiliate from adopting or continuing in
effect other or additional compensation arrangements.
The benefits or amounts that will be received or allocated in the future
under the 1991 Plan as amended have not yet been determined. The benefits
received under the 1991 Plan by the named executive officers are set forth in
the Summary Compensation Table. The table below sets forth the awards received
by the Company's executive officers as a group and by other employees (including
officers who are not executive officers) of the Company as a group under the
1991 Plan during 1996.
<TABLE>
<CAPTION>
STOCK AWARDS* STOCK OPTIONS**
-------------------------------- ---------------
DOLLAR VALUE NUMBER OF SHARES
------------ ----------------
<S> <C> <C> <C>
Executive Officer Group............................ $2,248,000 155,000 460,000
Non-Executive Officer Employee Group............... $6,280,000 454,410 910,000
</TABLE>
- -------------------------
* Table includes number of shares granted and the dollar value of the grant on
the date of grant. See "Summary Compensation Table" for further information.
** See "Option Grant Table" for further information.
On April 15, 1997, the closing price of Company Common Stock on the New
York Stock Exchange Composite Tape was $20 3/4 per share.
FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the principal federal income tax consequences
generally applicable to awards under the 1991 Plan. The grant of a stock option
or SAR will generally create no immediate tax consequences for the recipient or
the Company or an affiliate employing such individual. The holder of an ISO
generally will have no taxable income upon exercising the ISO (except that the
alternative minimum tax may apply), and the employer generally will receive no
tax deduction when an ISO is exercised. Upon exercising a stock option other
than an ISO, the optionee must recognize ordinary income equal to the excess of
the fair market value of the shares acquired on the date of exercise over the
option exercise price, and the employer will then be entitled to a tax deduction
for the same amount. Upon exercising an SAR, the amount of any cash received and
the fair market value on the exercise date of any shares or other property
received are taxable to the recipient as ordinary income and that amount is also
deductible by the employer.
The tax consequence to an optionee of a disposition of shares acquired
through the exercise of an SAR or a stock option will depend on how long the
shares have been held and upon whether such shares were acquired by exercising
an ISO or by exercising an SAR or stock option other than an ISO. Generally,
there will be no tax consequence to the employer in connection with a
disposition of shares acquired under an option, except that the employer may be
entitled to a tax deduction in the case of a disposition of shares acquired
under an ISO before the applicable ISO holding periods have been satisfied.
With respect to awards granted under the 1991 Plan that are settled in cash
or in shares or other property that is either transferable or not subject to
substantial risk of forfeiture, the holder must recognize ordinary income equal
to the excess of (a) the cash or the fair market value of the shares or other
property received (determined as of the first time the shares or other property
become transferable or not subject to substantial risk of forfeiture, whichever
occurs earlier) over (b) the amount paid, if any, for such shares or other
property by the holder, and the employer will then be entitled to a deduction
for the same amount.
23
<PAGE> 26
IF THE AMENDMENT TO THE 1991 PLAN IS NOT APPROVED BY STOCKHOLDERS, THE 1991
PLAN WILL REMAIN IN EFFECT WITHOUT THE LIMITATION ADDED BY THE PROPOSED
AMENDMENT.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE AMENDMENT
OF THE 1991 LONG TERM STOCK INCENTIVE PLAN.
RATIFICATION OF SELECTION OF
INDEPENDENT PUBLIC ACCOUNTANTS
Upon the recommendation of the Audit Committee, the Board of Directors has
selected the independent public accounting firm of Coopers & Lybrand L.L.P.
("Coopers & Lybrand") to audit the Company's financial statements for the year
1997, and believes it appropriate to submit its choice for ratification by
stockholders.
Coopers & Lybrand has acted as the Company's independent certified public
accounting firm since the Company's formation in 1984. During such time, it has
performed services of an accounting and auditing nature for the Company as well
as for Masco Corporation and TriMas. Representatives of Coopers & Lybrand are
expected to be present at the meeting, will have the opportunity to make a
statement and are expected to be available to respond to appropriate questions.
If the selection is not ratified, the Board will consider selecting another
public accounting firm as the independent auditors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF THE
SELECTION OF COOPERS & LYBRAND L.L.P. AS INDEPENDENT AUDITORS FOR THE COMPANY
FOR THE YEAR 1997.
STOCKHOLDERS' PROPOSALS
Stockholders' proposals intended to be presented at the 1998 Annual Meeting
of Stockholders of the Company must be received by the Company at its address
stated above by December 30, 1997, to be considered for inclusion in the
Company's Proxy Statement and Proxy relating to such meeting.
OTHER MATTERS
The Board of Directors knows of no other matters to be voted upon at the
meeting. If any other matters properly come before the meeting, it is the
intention of the proxies named in the enclosed Proxy to vote the shares
represented thereby with respect to such matters in accordance with their best
judgment.
By Order of the Board of Directors
EUGENE A. GARGARO, JR.
EUGENE A. GARGARO, JR.
Secretary
Taylor, Michigan
April 25, 1997
24
<PAGE> 27
ANNEX A
MASCOTECH, INC.
1997 NON-EMPLOYEE DIRECTORS STOCK PLAN
SECTION 1. PURPOSE
The purpose of this Plan is to ensure that the non-employee Directors of
MascoTech, Inc. (the "Company") have an equity interest in the Company and
thereby have a direct and long term interest in the growth and prosperity of the
Company by payment of part of their compensation in the form of common stock of
the Company.
SECTION 2. ADMINISTRATION OF THE PLAN
This Plan will be administered by the Company's Board of Directors (the
"Board"). The Board shall be authorized to interpret the Plan, to establish,
amend, and rescind any rules and regulations relating to the Plan and to make
all other determinations necessary or advisable for the administration of the
Plan. The Board's interpretation of the terms and provisions of this Plan shall
be final and conclusive. The Secretary of the Company shall be authorized to
implement the Plan in accordance with its terms and to take such actions of a
ministerial nature as shall be necessary to effectuate the intent and purposes
thereof. The validity, construction and effect of the Plan and any rules and
regulations relating to the Plan shall be determined in accordance with the laws
of the State of Michigan and applicable Federal law.
SECTION 3. ELIGIBILITY
Participation will be limited to individuals who are Eligible Directors, as
hereinafter defined. Eligible Director shall mean any Director of the Company
who is not an employee of the Company and who receives a fee for service as a
Director.
SECTION 4. SHARES SUBJECT TO THE PLAN
(a) Subject to the adjustments set forth below, the aggregate number of
shares of Company Common Stock, par value $1.00 per share ("Shares"), which may
be the subject of awards issued under the Plan shall be 500,000.
(b) Any Shares to be delivered under the Plan shall be made available from
newly issued Shares or from Shares reacquired by the Company, including Shares
purchased in the open market.
(c) To the extent a Stock Option award, as hereinafter defined, terminates
without having been exercised, or an award of Restricted Stock, as hereinafter
defined, is forfeited, the Shares subject to such Stock Option or Restricted
Stock award shall again be available for distribution in connection with future
awards under the Plan. Shares equal in number to the Shares surrendered to the
Company in payment of the option exercise price or withholding taxes (if any)
relating to or arising in connection with any Restricted Stock or Stock Option
hereunder shall be added to the number of Shares then available for future
awards under clause (a) above.
(d) In the event of any merger, reorganization, consolidation,
recapitalization, stock split, stock dividend, or other change in corporate
structure affecting the Shares, the aggregate number of Shares which may be
issued under the Plan, the number of Shares subject to Stock Options to be
granted under Section 6(a) hereof and the number of Shares subject to any
outstanding award of Restricted Stock or unexercised Stock Option shall be
adjusted to avoid enhancement or diminution of the benefits intended to be made
available hereunder.
SECTION 5. DIRECTOR STOCK COMPENSATION
(a) The compensation of each Eligible Director for the five year period
beginning January 1, 1997 shall be payable in part with an award of Restricted
Stock determined as set forth below, and in part in cash. Compensation for this
purpose means annual retainer fees but does not include supplemental retainer
fees for
A-1
<PAGE> 28
committee positions or fees for attendance at meetings, which shall be paid in
cash. The portion of compensation payable in Restricted Stock during the five
year period shall be equal to one-half of the annual compensation paid to
Eligible Directors in the year immediately prior to the award multiplied by
five, and the balance of compensation, unless otherwise determined by the Board,
shall be payable in cash. Each award of Restricted Stock shall vest in twenty
percent annual installments (disregarding fractional shares) on January 1 of
each of the five consecutive years following the year in which the award is
made. Subject to the approval of this Plan by the Company's stockholders, each
Eligible Director on February 17, 1997 is awarded as of that date 5,790 Shares
of Restricted Stock, based on the closing price of the Shares as reported on the
New York Stock Exchange Composite Tape (the "NYSE") on February 14, 1997, the
last trading date preceding the grant. Cash shall be paid to an Eligible
Director in lieu of a fractional share.
(b) Subject to the approval of this Plan by the Company's stockholders,
each Eligible Director who is first elected or appointed to the Board on or
after the date of the Company's 1997 annual meeting of stockholders shall
receive, as of the date of such election or appointment, an award of Restricted
Stock determined in accordance with Section 5(a) for the five year period
beginning on January 1 of the year in which such election or appointment
occurred; provided, however, that the price of the Shares used in determining
the number of Shares of Restricted Stock which shall be issued to such Eligible
Director shall be the closing price of the Shares as reported on the NYSE on the
date on which such Eligible Director is elected or appointed, and provided,
further, that the amount of Restricted Stock awarded to any Eligible Director
who begins serving as a Director other than at the beginning of a calendar year
shall be prorated to reflect the partial service of the initial year of such
Director's term, such proration to be effected in the initial vesting.
(c) Upon the full vesting of any award of Restricted Stock awarded pursuant
to Section 5(a) or 5(b), each affected Eligible Director shall be eligible to
receive a new award of Restricted Stock, subject to Section 4. The number of
Shares subject to such award shall be determined generally in accordance with
the provisions of Section 5(b); provided, however, that the Board shall have
sole discretion to adjust the amount of compensation then to be paid in the form
of Shares and the terms of any such award of Shares. Except as the Board may
otherwise determine, any increase or decrease in an Eligible Director's annual
compensation during the period when such Director has an outstanding award of
Restricted Stock shall be implemented by increasing or decreasing the cash
portion of such Director's compensation.
(d) Each Eligible Director shall be entitled to vote and receive dividends
on the unvested portion of his or her Restricted Stock, but will not be able to
obtain a stock certificate or sell, encumber or otherwise transfer such
Restricted Stock except in accordance with the terms of the Company's 1991 Long
Term Stock Incentive Plan (the "Long Term Plan"). If an Eligible Director's term
is terminated by reason of death or permanent and total disability, the
restrictions on the Restricted Stock will lapse and such Eligible Director's
rights to the Shares will become vested on the date of such termination. If an
Eligible Director's term is terminated for any reason other than death or
permanent and total disability, the Restricted Stock that has not vested shall
be forfeited and transferred back to the Company; provided, however, that a pro
rata portion of the Restricted Stock which would have vested on January 1 of the
year following the year of the Eligible Director's termination shall vest on the
date of termination, based upon the portion of the year during which the
Eligible Director served as a Director of the Company.
SECTION 6. STOCK OPTION GRANT
(a) Subject to approval of this Plan by the Company's stockholders, each
Eligible Director on the date of such approval will be granted on such date a
stock option to purchase 5,000 Shares (the "Stock Option"). Thereafter, on the
date of each of the Company's subsequent annual stockholders meetings, each
person who is or becomes an Eligible Director on that date and whose service on
the Board will continue after such date shall be granted a Stock Option, subject
to Section 4, effective as of the date of such meeting.
(b) Stock Options Granted under this Section 6 shall be non-qualified stock
options and shall have the following terms and conditions.
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1. Option Price. The option price per Share shall be equal to the closing
price of the Shares as reflected on the NYSE on the date of grant (or if there
were no sales on such date, the most recent prior date on which there were
sales).
2. Term of Option. The term of the Stock Option shall be ten years from the
date of grant, subject to earlier termination in the event of termination of
service as an Eligible Director. If an Eligible Director's term is terminated
for any reason other than death at a time when such Director is entitled to
exercise an outstanding Stock Option, then at any time or times within three
months after termination such Stock Option may be exercised as to all or any of
the Shares which the Eligible Director was entitled to purchase at the date of
termination. If an Eligible Director dies at a time when such Director is
entitled to exercise a Stock Option, then at any time or times within one year
after death such Stock Option may be exercised as to all or any of the Shares
which the Eligible Director was entitled to purchase immediately prior to such
Director's death. Except as so exercised, such Stock Options shall expire at the
end of such periods. That portion of a Stock Option not exercisable at the time
of such termination shall be forfeited and transferred back to the Company on
the date of such termination.
3. Exercisability. Subject to clause 2 above, each Stock Option shall vest
and become exercisable with respect to twenty percent of the underlying Shares
on each of the first five anniversaries of the date of grant, provided that the
optionee is an Eligible Director on such date.
4. Method of Exercise. A Stock Option may be exercised in whole or in part
during the period in which such Stock Option is exercisable by giving written
notice of exercise to the Company specifying the number of shares to be
purchased, accompanied by payment of the purchase price. Payment of the purchase
price shall be made in cash, by delivery of Shares, or by any combination of the
foregoing.
5. Non-Transferability. Unless otherwise provided by the terms of the Long
Term Plan or the Board, (i) Stock Options shall not be transferable by the
optionee other than by will or by the laws of descent and distribution, and (ii)
during the optionee's lifetime, all Stock Options shall be exercisable only by
the optionee or by his or her guardian or legal representative.
6. Stockholder Rights. The holder of a Stock Option shall, as such, have
none of the rights of a stockholder.
SECTION 7. GENERAL
(a) Plan Amendments. The Board may amend, suspend or discontinue the Plan
as it shall deem advisable or to conform to any change in any law or regulation
applicable thereto; provided, that the Board may not, without the authorization
and approval of the stockholders of the Company: (a) modify the class of persons
who constitute Eligible Directors as defined in the Plan; or (b) increase the
total number of Shares available under the Plan. In addition, without the
consent of affected participants, no amendment of the Plan or any award under
the Plan may impair the rights of participants under outstanding awards.
(b) Listing and Registration. If at any time the Board shall determine, in
its discretion, that the listing, registration or qualification of the Shares
under the Plan upon any securities exchange or under any state or Federal law,
or the consent or approval of any governmental regulatory body, is necessary or
desirable as a condition of, or in connection with, the granting of any award
hereunder, no Shares may be delivered or disposed of unless such listing,
registration, qualification, consent or approval shall have been effected or
obtained free of any condition not acceptable to the Board.
(c) Award Agreements. Each award of Restricted Stock and Stock Option
granted hereunder shall be evidenced by the Eligible Director's written
agreement with the Company which shall contain such terms and conditions not
inconsistent with the provisions of the Plan as shall be determined by the Board
in its discretion.
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ANNEX B
MASCOTECH, INC.
1997 ANNUAL INCENTIVE
COMPENSATION PLAN
SECTION 1. PURPOSE
The purpose of the MascoTech, Inc. 1997 Annual Incentive Compensation Plan
(the "Plan") is to provide selected executive officers of MascoTech, Inc. (the
"Company") with incentive compensation based upon the achievement of established
annual performance goals.
SECTION 2. ELIGIBILITY
The individuals eligible to participate in the Plan (the "Participants")
are the executive officers of the Company.
SECTION 3. PERFORMANCE PERIOD
Each Performance Period for purposes of the Plan shall have a duration of
one calendar year, commencing January 1 and ending December 31.
SECTION 4. ADMINISTRATION
The Compensation Committee of the Board of Directors of the Company (the
"Committee") shall have the full power and authority to administer and interpret
the Plan and to establish rules for its administration.
SECTION 5. PERFORMANCE GOALS
On or before the 90th day of each Performance Period, the Committee shall
establish in writing one or more performance criteria for the Performance Period
and the weighting of the performance criteria if more than one. The performance
criteria shall consist of one or more of the following: net income, earnings per
share, cash flow, revenues, return on assets or total shareholder return.
SECTION 6. AWARDS
On or before the 90th day of each Performance Period, the Committee shall
establish in writing a performance incentive award for such Participants as
shall be designated by the Committee and in such amounts as the Committee shall
determine, subject to the limitations of the Plan. No award to any Participant
shall be greater than $2 million. The Committee shall have the power and
authority to reduce or eliminate for any reason the amount of the award that
would otherwise be payable to a Participant based on the performance criteria.
SECTION 7. CERTIFICATION AND PAYMENT
As soon as practicable after release of the Company's financial results for
the Performance Period, the Committee will certify the Company's attainment of
the criteria established for such Performance Period pursuant to Section 5, will
calculate the possible payment of an award for each Participant and will certify
the amount of the award to each Participant for such Performance Period.
Payments of the awards shall be made in cash. To the extent net income is used
alone or as a component of another performance criterion, it shall mean net
income as reported to stockholders, but before losses resulting from
discontinued operations, extraordinary losses (in accordance with generally
accepted accounting principles, as currently in effect), the cumulative effect
of changes in accounting principles and other unusual, nonrecurring items of
loss that are separately identified and quantified in the Company's audited
financial statements.
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SECTION 8. AMENDMENT
The Committee shall have the right to suspend or terminate this Plan at any
time and may amend or modify the Plan at any time.
SECTION 9. ADOPTION AND DURATION
The Plan was approved by the Committee on February 17, 1997, subject to the
approval of the stockholders of the Company at the 1997 Annual Meeting of
Stockholders. The effective date of the Plan shall be January 1, 1997 and the
Plan shall remain in effect for a period of five years.
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ANNEX C
MASCOTECH, INC.
1991 LONG TERM STOCK INCENTIVE PLAN
(AMENDED AND RESTATED APRIL 23, 1997)
SECTION 1. PURPOSES
The purposes of the 1991 Long Term Stock Incentive Plan (the "Plan") are to
encourage selected employees of and consultants to MascoTech, Inc. (the
"Company") and its Affiliates to acquire a proprietary interest in the Company
in order to create an increased incentive to contribute to the Company's future
success and prosperity, and enhance the ability of the Company and its
Affiliates to attract and retain exceptionally qualified individuals upon whom
the sustained progress, growth and profitability of the Company depend, thus
enhancing the value of the Company for the benefit of its stockholders.
SECTION 2. DEFINITIONS
As used in the Plan, the following terms shall have the meanings set forth
below:
(a) "Affiliate" shall mean any entity in which the Company's direct or
indirect equity interest is at least twenty percent, and any other entity in
which the Company has a significant direct or indirect equity interest, whether
more or less than twenty percent, as determined by the Committee.
(b) "Award" shall mean any Option, Stock Appreciation Right, Restricted
Stock, Restricted Stock Unit, Performance Award, Dividend Equivalent or Other
Stock-Based Award granted under the Plan.
(c) "Award Agreement" shall mean any written agreement, contract or other
instrument or document evidencing any Award granted under the Plan.
(d) "Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
(e) "Committee" shall mean a committee of the Company's directors
designated by the Board of Directors to administer the Plan and composed of not
less than two directors, each of whom is a "non-employee director" within the
meaning of Rule 16b-3.
(f) "Dividend Equivalent" shall mean any right granted under Section 6(e)
of the Plan.
(g) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
(h) "Incentive Stock Option" shall mean an Option granted under Section
6(a) of the Plan that is intended to meet the requirements of Section 422 of the
Code, or any successor provision thereto.
(i) "Non-Qualified Stock Option" shall mean an Option granted under Section
6(a) of the Plan that is not intended to be an Incentive Stock Option.
(j) "Option" shall mean an Incentive Stock Option or a Non-Qualified Stock
Option.
(k) "Other Stock-Based Award" shall mean any right granted under Section
6(f) of the Plan.
(l) "Participant" shall mean an employee of or consultant to the Company or
any Affiliate designated to be granted an Award under the Plan.
(m) "Performance Award" shall mean any right granted under Section 6(d) of
the Plan.
(n) "Restricted Period" shall mean the period of time during which Awards
of Restricted Stock or Restricted Stock Units are subject to restrictions.
(o) "Restricted Stock" shall mean any Share granted under Section 6(c) of
the Plan.
(p) "Restricted Stock Unit" shall mean any right granted under Section 6(c)
of the Plan that is denominated in Shares.
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(q) "Rule 16b-3" shall mean Rule 16b-3 promulgated by the Securities and
Exchange Commission under the Exchange Act, or any successor rule or regulation.
(r) "Section 16" shall mean Section 16 of the Exchange Act, the rules and
regulations promulgated by the Securities and Exchange Commission thereunder, or
any successor provision, rule or regulation.
(s) "Shares" shall mean the Company's common stock, par value $1.00 per
share, and such other securities or property as may become the subject of
Awards, or become subject to Awards, pursuant to an adjustment made under
Section 4(c) of the Plan.
(t) "Stock Appreciation Right" shall mean any right granted under Section
6(b) of the Plan.
SECTION 3. ADMINISTRATION
The Committee shall administer the Plan, and subject to the terms of the
Plan and applicable law, the Committee's authority shall include without
limitation the power to:
(i) designate Participants;
(ii) determine the types of Awards to be granted;
(iii) determine the number of Shares to be covered by Awards and any
payments, rights or other matters to be calculated in connection therewith;
(iv) determine the terms and conditions of Awards and amend the terms
and conditions of outstanding Awards;
(v) determine how, whether, to what extent, and under what
circumstances Awards may be settled or exercised in cash, Shares, other
securities, other Awards or other property, or canceled, forfeited or
suspended;
(vi) determine how, whether, to what extent, and under what
circumstances cash, Shares, other securities, other Awards, other property
and other amounts payable with respect to an Award shall be deferred either
automatically or at the election of the holder thereof or of the Committee;
(vii) determine the methods or procedures for establishing the fair
market value of any property (including, without limitation, any Shares or
other securities) transferred, exchanged, given or received with respect to
the Plan or any Award;
(viii) prescribe and amend the forms of Award Agreements and other
instruments required under or advisable with respect to the Plan;
(ix) designate Options granted to key employees of the Company or its
subsidiaries as Incentive Stock Options;
(x) interpret and administer the Plan, Award Agreements, Awards and
any contract, document, instrument or agreement relating thereto;
(xi) establish, amend, suspend or waive such rules and regulations and
appoint such agents as it shall deem appropriate for the administration of
the Plan;
(xii) decide all questions and settle all controversies and disputes
which may arise in connection with the Plan, Award Agreements and Awards;
(xiii) delegate to directors of the Company the authority to designate
Participants and grant Awards, and to amend Awards granted to Participants;
(xiv) make any other determination and take any other action that the
Committee deems necessary or desirable for the interpretation, application
and administration of the Plan, Award Agreements and Awards.
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All designations, determinations, interpretations and other decisions under
or with respect to the Plan, Award Agreements or any Award shall be within the
sole discretion of the Committee, may be made at any time and shall be final,
conclusive and binding upon all persons, including the Company, Affiliates,
Participants, beneficiaries of Awards and stockholders of the Company.
SECTION 4. SHARES AVAILABLE FOR AWARDS
(a) Shares Available. Subject to adjustment as provided in Section 4(c):
(i) Initial Authorization. There shall be 6,000,000 Shares initially
available for issuance under the Plan.
(ii) Acquired Shares. In addition to the amount set forth above, up to
6,000,000 Shares acquired by the Company subsequent to the 1997 Annual
Meeting of Stockholders as full or partial payment for the exercise price
for an Option or any other stock option granted by the Company, or acquired
by the Company, in open market transactions or otherwise, in connection
with the Plan or any Award hereunder or any other employee stock option or
restricted stock issued by the Company may thereafter be included in the
Shares available for Awards. If any Shares covered by an Award or to which
an Award relates are forfeited, or if an Award expires, terminates or is
cancelled, then the Shares covered by such Award, or to which such Award
relates, or the number of Shares otherwise counted against the aggregate
number of Shares available under the Plan by reason of such Award, to the
extent of any such forfeiture, expiration, termination or cancellation, may
thereafter be available for further granting of Awards and included as
acquired Shares for purposes of the preceding sentence.
(iii) Shares Under Prior Plans. In addition to the amounts set forth
above, shares remaining available for issuance upon any termination of
authority to make further awards under both the Company's 1984 Restricted
Stock Incentive Plan and its 1984 Stock Option Plan shall thereafter be
available for issuance hereunder.
(iv) Accounting for Awards. For purposes of this Section 4,
(A) if an Award (other than a Dividend Equivalent) is denominated
in Shares, the number of Shares covered by such Award, or to which such
Award relates, shall be counted on the date of grant of such Award
against the aggregate number of Shares available for granting Awards
under the Plan to the extent determinable on such date and insofar as
the number of Shares is not then determinable under procedures adopted
by the Committee consistent with the purposes of the Plan; and
(B) Dividend Equivalents and Awards not denominated in Shares shall
be counted against the aggregate number of Shares available for granting
Awards under the Plan in such amount and at such time as the Committee
shall determine under procedures adopted by the Committee consistent
with the purposes of the Plan;
provided, however, that Awards that operate in tandem with (whether granted
simultaneously with or at a different time from), or that are substituted
for, other Awards or restricted stock awards or stock options granted under
any other plan of the Company may be counted or not counted under
procedures adopted by the Committee in order to avoid double counting. Any
Shares that are delivered by the Company or its Affiliates, and any Awards
that are granted by, or become obligations of, the Company, through the
assumption by the Company of, or in substitution for, outstanding
restricted stock awards or stock options previously granted by an acquired
company shall not, except in the case of Awards granted to Participants who
are directors or officers of the Company for purposes of Section 16, be
counted against the Shares available for Granting Awards under the Plan.
(v) Sources of Shares Deliverable Under Awards. Any Shares delivered
pursuant to an Award may consist, in whole or in part, of authorized but
unissued Shares or of Shares reacquired by the Company, including but not
limited to Shares purchased on the open market.
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(b) Individual Stock-Based Awards. Subject to adjustment as provided in
Section 4(c), no Participant may receive Options or Stock Appreciation Rights
under the Plan in any calendar year that relate to more than 1,000,000 Shares in
the aggregate; provided, however, that such number may be increased with respect
to any Participant by any Shares available for grant to such Participant in
accordance with this Paragraph 4(b) in any prior years that were not granted in
any such prior year beginning on or after January 1, 1997. No provision of this
Paragraph 4(b) shall be construed as limiting the amount of any other
stock-based or cash-based Award which may be granted to any Participant.
(c) Adjustments. Upon the occurrence of any dividend or other distribution
(whether in the form of cash, Shares, other securities or other property),
change in the capital or shares of capital stock, recapitalization, stock split,
reverse stock split, reorganization, merger, consolidation, split-up, spin-off,
combination, repurchase, or exchange of Shares or other securities of the
Company, issuance of warrants or other rights to purchase Shares or other
securities of the Company or extraordinary transaction or event which affects
the Shares, then the Committee shall have the authority to make such adjustment,
if any, in such manner as it deems appropriate, in (i) the number and type of
Shares (or other securities or property) which thereafter may be made the
subject of Awards, (ii) outstanding Awards including without limitation the
number and type of Shares (or other securities or property) subject thereto, and
(iii) the grant, purchase or exercise price with respect to outstanding Awards
and, if deemed appropriate, make provision for cash payments to the holders of
outstanding Awards; provided, however, that the number of Shares subject to any
Award denominated in Shares shall always be a whole number.
SECTION 5. ELIGIBILITY
Any employee of or consultant to the Company or any Affiliate, including
any officer of the Company (who may also be a director, any person who serves
only as a director of the Company and any consultant to the Company or an
Affiliate who is also a director of the Company and who is not rendering
services pursuant to a written agreement with the entity in question), as may be
selected from time to time by the Committee or by the directors to whom
authority may be delegated pursuant to Section 3 hereof in its or their
discretion, is eligible to be designated a Participant.
SECTION 6. AWARDS
(a) Options. The Committee is authorized to grant Options to Participants.
(i) Committee Determinations. Subject to the terms of the Plan, the
Committee shall determine:
(A) the purchase price per Share under each Option, provided,
however, that such price shall not be less than 100% of the fair market
value of the Shares underlying such Option on the date of grant;
(B) the term of each Option; and
(C) the time or times at which an Option may be exercised, in whole
or in part, the method or methods by which and the form or forms
(including, without limitation, cash, Shares, other Awards or other
property, or any combination thereof, having a fair market value on the
exercise date equal to the relevant exercise price) in which payment of
the exercise price with respect thereto may be made or deemed to have
been made. The terms of any Incentive Stock Option granted under the
Plan shall comply in all respects with the provisions of Section 422 of
the Code, or any successor provision thereto, and any regulations
promulgated thereunder.
Subject to the terms of the Plan, the Committee may impose such conditions
or restrictions on any Option as it deems appropriate.
(ii) Other Terms. Unless otherwise determined by the Committee:
(A) A Participant electing to exercise an Option shall give written
notice to the Company, as may be specified by the Committee, of exercise
of the Option and the number of Shares elected for exercise, such notice
to be accompanied by such instruments or documents as may be required by
the Committee, and shall tender the purchase price of the Shares elected
for exercise.
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<PAGE> 36
(B) At the time of exercise of an Option payment in full in cash or
in Shares (that have been held by the Participant for at least six
months) or any combination thereof, at the option of the Participant,
shall be made for all Shares then being purchased.
(C) The Company shall not be obligated to issue any Shares unless
and until:
(I) if the class of Shares at the time is listed upon any stock
exchange, the Shares to be issued have been listed, or authorized to
be added to the list upon official notice of issuance, upon such
exchange, and
(II) in the opinion of the Company's counsel there has been
compliance with applicable law in connection with the issuance and
delivery of Shares and such issuance shall have been approved by the
Company's counsel.
Without limiting the generality of the foregoing, the Company may
require from the Participant such investment representation or such
agreement, if any, as the Company's counsel may consider necessary in
order to comply with the Securities Act of 1933 as then in effect, and
may require that the Participant agree that any sale of the Shares will
be made only in such manner as shall be in accordance with law and that
the Participant will notify the Company of any intent to make any
disposition of the Shares whether by sale, gift or otherwise. The
Participant shall take any action reasonably requested by the Company in
such connection. A Participant shall have the rights of a stockholder
only as and when Shares have been actually issued to the Participant
pursuant to the Plan.
(D) If the employment of or consulting arrangement with a
Participant terminates for any reason (including termination by reason
of the fact that an entity is no longer an Affiliate) other than the
Participant's death, the Participant may thereafter exercise the Option
as provided below, except that the Committee may terminate the
unexercised portion of the Option concurrently with or at any time
following termination of the employment or consulting arrangement
(including termination of employment upon a change of status from
employee to consultant) if it shall determine that the Participant has
engaged in any activity detrimental to the interests of the Company or
an Affiliate. If such termination is voluntary on the part of the
Participant, the option may be exercised only within ten days after the
date of termination. If such termination is involuntary on the part of
the Participant, if an employee retires on or after normal retirement
date or if the employment or consulting relationship is terminated by
reason of permanent and total disability, the Option may be exercised
within three months after the date of termination or retirement. For
purposes of this Paragraph (D), a Participant's employment or consulting
arrangement shall not be considered terminated (i) in the case of
approved sick leave or other bona fide leave of absence (not to exceed
one year), (ii) in the case of a transfer of employment or the
consulting arrangement among the Company and Affiliates, or (iii) by
virtue of a change of status from employee to consultant or from
consultant to employee, except as provided above.
(E) If a Participant dies at a time when entitled to exercise an
Option, then at any time or times within one year after death such
Option may be exercised, as to all or any of the Shares which the
Participant was entitled to purchase immediately prior to death. The
Company may decline to deliver Shares to a designated beneficiary until
it receives indemnity against claims of third parties satisfactory to
the Company. Except as so exercised such Option shall expire at the end
of such period.
(F) An Option may be exercised only if and to the extent such
Option was exercisable at the date of termination of employment or the
consulting arrangement, and an Option may not be exercised at a time
when the Option would not have been exercisable had the employment or
consulting arrangement continued.
(iii) Restoration Options. The Committee may grant a Participant the
right to receive a restoration Option with respect to an Option or any
other option granted by the Company. Unless the Committee shall otherwise
determine, a restoration Option shall provide that the underlying option
must be exercised
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while the Participant is an employee of or consultant to the Company or an
Affiliate and the number of Shares which are subject to a restoration
Option shall not exceed the number of whole Shares exchanged in payment of
the original option.
(b) Stock Appreciation Rights. The Committee is authorized to grant Stock
Appreciation Rights to Participants. Subject to the terms of the Plan, a Stock
Appreciation Right granted under the Plan shall confer on the holder thereof a
right to receive, upon exercise thereof, the excess of (i) the fair market value
of one Share on the date of exercise or, if the Committee shall so determine in
the case of any such right other than one related to any Incentive Stock Option,
at any time during a specified period before or after the date of exercise over
(ii) the grant price of the right as specified by the Committee. Subject to the
terms of the Plan, the Committee shall determine the grant price, term, methods
of exercise and settlement and any other terms and conditions of any Stock
Appreciation Right and may impose such conditions or restrictions on the
exercise of any Stock Appreciation Right as it may deem appropriate.
(c) Restricted Stock and Restricted Stock Units.
(i) Issuance. The Committee is authorized to grant to Participants
Awards of Restricted Stock, which shall consist of Shares, and Restricted
Stock Units which shall give the Participant the right to receive cash,
other securities, other Awards or other property, in each case subject to
the termination of the Restricted Period determined by the Committee.
(ii) Restrictions. The Restricted Period may differ among Participants
and may have different expiration dates with respect to portions of Shares
covered by the same Award. Subject to the terms of the Plan, Awards of
Restricted Stock and Restricted Stock Units shall have such restrictions as
the Committee may impose (including, without limitation, limitations on the
right to vote Restricted Stock or the right to receive any dividend or
other right or property), which restrictions may lapse separately or in
combination at such time or times, in installments or otherwise. Unless the
Committee shall otherwise determine, any Shares or other securities
distributed with respect to Restricted Stock or which a Participant is
otherwise entitled to receive by reason of such Shares shall be subject to
the restrictions contained in the applicable Award Agreement. Subject to
the aforementioned restrictions and the provisions of the Plan,
Participants shall have all of the rights of a stockholder with respect to
Shares of Restricted Stock.
(iii) Registration. Restricted Stock granted under the Plan may be
evidenced in such manner as the Committee may deem appropriate, including,
without limitation, book-entry registration or issuance of stock
certificates.
(iv) Forfeiture. Except as otherwise determined by the Committee:
(A) If the employment of or consulting arrangement with a
Participant terminates for any reason (including termination by reason
of the fact that any entity is no longer an Affiliate), other than the
Participant's death or permanent and total disability or, in the case of
an employee, retirement on or after normal retirement date, all Shares
of Restricted Stock theretofore awarded to the Participant which are
still subject to restrictions shall upon such termination of employment
or the consulting relationship be forfeited and transferred back to the
Company. Notwithstanding the foregoing or Paragraph (C) below, if a
Participant continues to hold an Award of Restricted Stock following
termination of the employment or consulting arrangement (including
retirement and termination of employment upon a change of status from
employee to consultant), the Shares of Restricted Stock which remain
subject to restrictions shall nonetheless be forfeited and transferred
back to the Company if the Committee at any time thereafter determines
that the Participant has engaged in any activity detrimental to the
interests of the Company or an Affiliate. For purposes of this Paragraph
(A), a Participant's employment or consulting arrangement shall not be
considered terminated (i) in the case of approved sick leave or other
bona fide leave of absence (not to exceed one year), (ii) in the case of
a transfer of employment or the consulting arrangement among the Company
and Affiliates, or (iii) by virtue of a change of status from employee
to consultant or from consultant to employee, except as provided above.
C-6
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(B) If a Participant ceases to be employed or retained by the
Company or an Affiliate by reason of death or permanent and total
disability or if following retirement a Participant continues to have
rights under an Award of Restricted Stock and thereafter dies, the
restrictions contained in the Award shall lapse with respect to such
Restricted Stock.
(C) If an employee ceases to be employed by the Company or an
Affiliate by reason of retirement on or after normal retirement date,
the restrictions contained in the Award of Restricted Stock shall
continue to lapse in the same manner as though employment had not
terminated.
(D) At the expiration of the Restricted Period as to Shares covered
by an Award of Restricted Stock, the Company shall deliver the Shares as
to which the Restricted Period has expired, as follows:
(1) if an assignment to a trust has been made in accordance with
Section 6(g)(iv)(B)(2)(c), to such trust; or
(2) if the Restricted Period has expired by reason of death and
a beneficiary has been designated in form approved by the Company, to
the beneficiary so designated; or
(3) in all other cases, to the Participant or the legal
representative of the Participant's estate.
(d) Performance Awards. The Committee is authorized to grant Performance
Awards to Participants. Subject to the terms of the Plan, a Performance Award
granted under the Plan (i) may be denominated or payable in cash, Shares
(including, without limitation, Restricted Stock), other securities, other
Awards, or other property and (ii) shall confer on the holder thereof rights
valued as determined by the Committee and payable to, or exercisable by, the
holder of the Performance Award, in whole or in part, upon the achievement of
such performance goals during such performance periods as the Committee shall
establish. Subject to the terms of the Plan, the performance goals to be
achieved during any performance period, the length of any performance period,
the amount of any Performance Award granted, the amount of any payment or
transfer to be made pursuant to any Performance Award and other terms and
conditions shall be determined by the Committee.
(e) Dividend Equivalents. The Committee is authorized to grant to
Participants Awards under which the holders thereof shall be entitled to receive
payments equivalent to dividends or interest with respect to a number of Shares
determined by the Committee, and the Committee may provide that such amounts (if
any) shall be deemed to have been reinvested in additional Shares or otherwise
reinvested. Subject to the terms of the Plan, such Awards may have such terms
and conditions as the Committee shall determine.
(f) Other Stock-Based Awards. The Committee is authorized to grant to
Participants such other Awards that are denominated or payable in, valued in
whole or in part by reference to or otherwise based on or related to Shares
(including, without limitation, securities convertible into Shares), as are
deemed by the Committee to be consistent with the purposes of the Plan,
provided, however, that such grants to persons who are subject to Section 16
must comply with the provisions of Rule 16b-3. Subject to the terms of the Plan,
the Committee shall determine the terms and conditions of such Awards. Shares or
other securities delivered pursuant to a purchase right granted under this
Section 6(f) shall be purchased for such consideration, which may be paid by
such method or methods and in such form or forms, including, without limitation,
cash, Shares, other securities, other Awards or other property or any
combination thereof, as the Committee shall determine.
(g) General.
(i) No Cash Consideration for Awards. Awards may be granted for no
cash consideration or for such minimal cash consideration as may be
required by applicable law.
(ii) Awards May Be Granted Separately or Together. Awards may, in the
discretion of the Committee, be granted either alone or in addition to, in
tandem with or in substitution for any other Award or any award granted
under any other plan of the Company or any Affiliate. Awards granted in
addition to or in tandem with other Awards or in addition to or in tandem
with awards granted under
C-7
<PAGE> 39
another plan of the Company or any Affiliate, may be granted either at the
same time as or at a different time from the grant of such other Awards or
awards.
(iii) Forms of Payment Under Awards. Subject to the terms of the Plan
and of any applicable Award Agreement, payments or transfers to be made by
the Company or an Affiliate upon the grant, exercise, or payment of an
Award may be made in such form or forms as the Committee shall determine,
including, without limitation, cash, Shares, other securities, other
Awards, or other property, or any combination thereof, and may be made in a
single payment or transfer, in installments, or on a deferred basis, in
each case in accordance with rules and procedures established by the
Committee. Such rules and procedures may include, without limitation,
provisions for the payment or crediting of reasonable interest on
installment or deferred payments or the grant or crediting of Dividend
Equivalents in respect of installment or deferred payments.
(iv) Limits on Transfer of Awards.
(A) Except as the Committee may otherwise determine, no Award or
right under any Award may be sold, encumbered, pledged, alienated,
attached, assigned or transferred in any manner and any attempt to do
any of the foregoing shall be void and unenforceable against the
Company.
(B) Notwithstanding the provisions of Paragraph (A) above:
(1) An Option may be transferred:
(a) to a beneficiary designated by the Participant in
writing on a form approved by the Committee;
(b) by will or the applicable laws of descent and
distribution to the personal representative, executor or
administrator of the Participant's estate; or
(c) to a revocable grantor trust established by the
Participant for the sole benefit of the Participant during the
Participant's life, and under the terms of which the Participant
is and remains the sole trustee until death or physical or mental
incapacity. Such assignment shall be effected by a written
instrument in form and content satisfactory to the Committee, and
the Participant shall deliver to the Committee a true copy of the
agreement or other document evidencing such trust. If in the
judgment of the Committee the trust to which a Participant may
attempt to assign rights under such an Award does not meet the
criteria of a trust to which an assignment is permitted by the
terms hereof, or if after assignment, because of amendment, by
force of law or any other reason such trust no longer meets such
criteria, such attempted assignment shall be void and may be
disregarded by the Committee and the Company and all rights to
any such Options shall revert to and remain solely in the
Participant. Notwithstanding a qualified assignment, the
Participant, and not the trust to which rights under such an
Option may be assigned, for the purpose of determining
compensation arising by reason of the Option shall continue to be
considered an employee or consultant, as the case may be, of the
Company or an Affiliate, but such trust and the Participant shall
be bound by all of the terms and conditions of the Award
Agreement and this Plan. Shares issued in the name of and
delivered to such trust shall be conclusively considered issuance
and delivery to the Participant.
(2) A Participant may assign or transfer rights under an Award
of Restricted Stock or Restricted Stock Units:
(a) to a beneficiary designated by the Participant in
writing on a form approved by the Committee;
(b) by will or the applicable laws of descent and
distribution to the personal representative, executor or
administrator of the Participant's estate; or
C-8
<PAGE> 40
(c) to a revocable grantor trust established by the
Participant for the sole benefit of the Participant during the
Participant's life, and under the terms of which the Participant
is and remains the sole trustee until death or physical or mental
incapacity. Such assignment shall be effected by a written
instrument in form and content satisfactory to the Committee, and
the Participant shall deliver to the Committee a true copy of the
agreement or other document evidencing such trust. If in the
judgment of the Committee the trust to which a Participant may
attempt to assign rights under such an Award does not meet the
criteria of a trust to which an assignment is permitted by the
terms hereof, or if after assignment, because of amendment, by
force of law or any other reason such trust no longer meets such
criteria, such attempted assignment shall be void and may be
disregarded by the Committee and the Company and all rights to
any such Awards shall revert to and remain solely in the
Participant. Notwithstanding a qualified assignment, the
Participant, and not the trust to which rights under such an
Award may be assigned, for the purpose of determining
compensation arising by reason of the Award shall continue to be
considered an employee or consultant, as the case may be, of the
Company or an Affiliate, but such trust and the Participant shall
be bound by all of the terms and conditions of the Award
Agreement and this Plan. Shares issued in the name of and
delivered to such trust shall be conclusively considered issuance
and delivery to the Participant.
(3) The Committee shall not permit directors or officers of the
Company for purposes of Section 16 to transfer or assign Awards
except as permitted under Rule 16b-3.
(C) The Committee, the Company and its officers, agents and
employees may rely upon any beneficiary designation, assignment or other
instrument of transfer, copies of trust agreements and any other
documents delivered to them by or on behalf of the Participant which
they believe genuine and any action taken by them in reliance thereon
shall be conclusive and binding upon the Participant, the personal
representatives of the Participant's estate and all persons asserting a
claim based on an Award. The delivery by a Participant of a beneficiary
designation, or an assignment of rights under an Award as permitted
hereunder, shall constitute the Participant's irrevocable undertaking to
hold the Committee, the Company and its officers, agents and employees
harmless against claims, including any cost or expense incurred in
defending against claims, of any person (including the Participant)
which may be asserted or alleged to be based on an Award subject to a
beneficiary designation or an assignment. In addition. the Company may
decline to deliver Shares to a beneficiary until it receives indemnity
against claims of third parties satisfactory to the Company.
(v) Share Certificates. All certificates for Shares or other
securities delivered under the Plan pursuant to any Award or the exercise
thereof shall be subject to such stop transfer orders and other
restrictions as the Committee may deem advisable under the Plan or the
rules, regulations and other requirements of the Securities and Exchange
Commission, any stock exchange upon which such Shares or other securities
are then listed and any applicable Federal or state securities laws, and
the Committee may cause a legend or legends to be put on any such
certificates to make appropriate reference to such restrictions.
(vi) Change in Control. (A) Notwithstanding any of the provisions of
this Plan or instruments evidencing Awards granted hereunder, upon a Change
in Control of the Company (as hereinafter defined) the vesting of all
rights of Participants under outstanding Awards shall be accelerated and
all restrictions thereon shall terminate in order that Participants may
fully realize the benefits thereunder. Such acceleration shall include,
without limitation, the immediate exercisability in full of all Options and
the termination of restrictions on Restricted Stock and Restricted Stock
Units. Further, in addition to the Committee's authority set forth in
Section 4(c), the Committee, as constituted before such Change in Control,
is authorized, and has sole discretion, as to any Award, either at the time
such Award is made hereunder or any time thereafter, to take any one or
more of the following actions: (i) provide for the purchase of any such
Award, upon the Participant's request, for an amount of cash equal to the
amount that could have been attained upon the exercise of such Award or
realization of the Participant's rights had such Award been currently
exercisable or payable; (ii) make such adjustment to any such Award
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<PAGE> 41
then outstanding as the Committee deems appropriate to reflect such Change
in Control; and (iii) cause any such Award then outstanding to be assumed,
or new rights substituted therefore, by the acquiring or surviving after
such Change in Control.
(B) With respect to any Award granted hereunder prior to December
6, 1995, a Change in Control shall occur if:
(1) any "person" or "group of persons" as such terms are used in
Sections 13(d) and 14(d) of the Exchange Act, other than pursuant to
a transaction or agreement previously approved by the Board of
Directors of the Company, directly or indirectly purchases or
otherwise becomes the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act) or has the right to acquire such beneficial
ownership (whether or not such right is exercisable immediately, with
the passage of time, or subject to any condition) of voting
securities representing 25 percent or more of the combined voting
power of all outstanding voting securities of (A) the Company or (B)
Masco Corporation, a Delaware corporation ("Masco"); or
(2) during any period of twenty-four consecutive calendar
months, the individuals who at the beginning of such period
constitute the Company's or Masco's Board of Directors, and any new
directors whose election by such Board or nomination for election by
stockholders was approved by a vote of at least two-thirds of the
members of such Board who were either directors on such Board at the
beginning of the period or whose election or nomination for election
as directors was previously so approved, for any reason cease to
constitute at least a majority of the members thereof.
(C) Notwithstanding the provisions of subparagraph (B), with
respect to Awards granted hereunder on or after December 6, 1995, a
Change in Control shall occur only if the event described in this
subparagraph (C) shall have occurred. With respect to any other Award
granted prior thereto, a Change in Control shall occur if any of the
events described in subparagraphs (B) or (C) shall have occurred, unless
the holder of any such Award shall have consented to the application of
this subparagraph (C) in lieu of the foregoing subparagraph (B). A
Change in Control for purposes of this subparagraph (C) shall occur if,
during any period of twenty-four consecutive calendar months, the
individuals who at the beginning of such period constitute the Company's
Board of Directors, and any new directors (other than Excluded
Directors, as hereinafter defined), whose election by such Board or
nomination for election by stockholders was approved by a vote of at
least two-thirds of the members of such Board who were either directors
on such Board at the beginning of the period or whose election or
nomination for election as directors was previously so approved, for any
reason cease to constitute at least a majority of the members thereof.
For purposes hereof, "Excluded Directors" are directors whose election
by the Board or approval by the Board for stockholder election occurred
within one year of any "person" or "group of persons", as such terms are
used in Sections 13(d) and 14(d) of the Exchange Act, commencing a
tender offer for, or becoming the beneficial owner of, voting securities
representing 25 percent or more of the combined voting power of all
outstanding voting securities of the Company, other than pursuant to a
tender offer approved by the Board prior to its commencement or pursuant
to stock acquisitions approved by the Board prior to their representing
25 percent or more of such combined voting power.
(D) (1) In the event that subsequent to a Change in Control it is
determined that any payment or distribution by the Company to or for the
benefit of a Participant, whether paid or payable or distributed or
distributable pursuant to the terms of this Plan or otherwise, other
than any payment pursuant to this subparagraph (D) (a "Payment"), would
be subject to the excise tax imposed by Section 4999 of the Code or any
interest or penalties with respect to such excise tax (such excise tax,
together with any such interest and penalties, are hereinafter
collectively referred to as the "Excise Tax"), then such Participant
shall be entitled to receive from the Company, within 15 days following
the determination described in (2) below, an additional payment ("Excise
Tax Adjustment Payment") in an amount such that after payment by such
Participant of all applicable Federal, state and local taxes (computed
at the maximum marginal rates and including any interest
C-10
<PAGE> 42
or penalties imposed with respect to such taxes), including any Excise
Tax, imposed upon the Excise Tax Adjustment Payment, such Participant
retains an amount of the Excise Tax Adjustment Payment equal to the
Excise Tax imposed upon the Payments.
(2) All determinations required to be made under this Section
6(g)(vi)(D), including whether an Excise Tax Adjustment Payment is
required and the amount of such Excise Tax Adjustment Payment, shall be
made by Coopers & Lybrand L.L.P., or such other national accounting firm
as the Company, or, subsequent to a Change in Control, the Company and
the Participant jointly, may designate, for purposes of the Excise Tax,
which shall provide detailed supporting calculations to the Company and
the affected Participant within 15 business days of the date of the
applicable Payment. Except as hereinafter provided, any determination by
Coopers & Lybrand L.L.P., or such other national accounting firm, shall
be binding upon the Company and the Participant. As a result of the
uncertainty in the application of Section 4999 of the Code that may
exist at the time of the initial determination hereunder, it is possible
that (x) certain Excise Tax Adjustment Payments will not have been made
by the Company which should have been made (an "Underpayment"), or (y)
certain Excise Tax Adjustment Payments will have been made which should
not have been made (an "Overpayment"), consistent with the calculations
required to be made hereunder. In the event of an Underpayment, such
Underpayment shall be promptly paid by the Company to or for the benefit
of the affected Participant. In the event that the Participant discovers
that an Overpayment shall have occurred, the amount thereof shall be
promptly repaid to the Company.
(3) This Section 6(g)(vi)(D) shall not apply to any Award (x) that
was granted prior to February 17, 1993 and (y) the holder of which is an
executive officer of the Company, as determined under the Exchange Act.
(vii) Cash Settlement. Notwithstanding any provision of this Plan or
of any Award Agreement to the contrary, any Award outstanding hereunder may
at any time be cancelled in the Committee's sole discretion upon payment of
the value of such Award to the holder thereof in cash or in another Award
hereunder, such value to be determined by the Committee in its sole
discretion.
SECTION 7. AMENDMENT AND TERMINATION
Except to the extent prohibited by applicable law and unless otherwise
expressly provided in an Award Agreement or in the Plan:
(a) Amendments to the Plan. The Board of Directors of the Company may amend
the Plan and the Board of Directors or the Committee may amend any outstanding
Award; provided, however, that (i) no Plan amendment shall be effective until
approved by stockholders of the Company insofar as stockholder approval thereof
is required in order for the Plan to continue to satisfy the conditions of Rule
16b-3, (ii) without the consent of affected Participants no amendment of the
Plan or of any Award may impair the rights of Participants under outstanding
Awards, and (iii) no Option may be amended to reduce its initial exercise price
other than in connection with an event described in Section 4(c) hereof.
(b) Waivers. The Committee may waive any conditions or rights under any
Award theretofore granted, prospectively or retroactively, without the consent
of any Participant.
(c) Adjustments of Awards Upon the Occurrence of Certain Unusual or
Nonrecurring Events. The Committee shall be authorized to make adjustments in
the terms and conditions of, and the criteria included in, Awards in recognition
of unusual or nonrecurring events (including, without limitation, the events
described in Section 4(c) hereof) affecting the Company, any Affiliate, or the
financial statements of the Company or any Affiliate, or of changes in
applicable laws, regulations, or accounting principles, whenever the Committee
determines that such adjustments are appropriate in order to prevent dilution or
enlargement of the benefits or potential benefits to be made available under the
Plan.
(d) Correction of Defects, Omissions, and Inconsistencies. The Committee
may correct any defect, supply any omission or reconcile any inconsistency in
the Plan or any Award in the manner and to the extent it shall deem desirable to
effectuate the Plan.
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<PAGE> 43
SECTION 8. GENERAL PROVISIONS
(a) No Rights to Awards. No Participant or other person shall have any
claim to be granted any Award under the Plan, and there is no obligation for
uniformity of treatment of Participants or holders or beneficiaries of Awards
under the Plan. The terms and conditions of Awards of the same type and the
determination of the Committee to grant a waiver or modification of any Award
and the terms and conditions thereof need not be the same with respect to each
Participant.
(b) Withholding. The Company or any Affiliate shall be authorized to
withhold from any Award granted or any payment due or transfer made under any
Award or under the Plan the amount (in cash, Shares, other securities, other
Awards or other property) of withholding taxes due in respect of an Award, its
exercise or any payment or transfer under such Award or under the Plan and to
take such other action as may be necessary in the opinion of the Company or
Affiliate to satisfy all obligations for the payment of such taxes.
(c) No Limit on Other Compensation Arrangements. Nothing contained in the
Plan shall prevent the Company or any Affiliate from adopting or continuing in
effect other or additional compensation arrangements, including the grant of
options and other stock-based awards, and such arrangements may be either
generally applicable or applicable only in specific cases.
(d) No Right to Employment. The grant of an Award shall not be construed as
giving a Participant the right to be retained in the employ of the Company or
any Affiliate. Further, the Company or an Affiliate may at any time dismiss a
Participant from employment, free from any liability, or any claim under the
Plan, unless otherwise expressly provided in the Plan or in any Award Agreement
or other written agreement with the Participant.
(e) Governing Law. The validity, construction and effect of the Plan and
any rules and regulations relating to the Plan shall be determined in accordance
with the laws of the State of Michigan and applicable Federal law.
(f) Severability. If any provision of the Plan or any Award is or becomes
or is deemed to be invalid, illegal or unenforceable in any jurisdiction or as
to any person or Award, or would disqualify the Plan or any Award under any law
deemed applicable by the Committee, such provision shall be construed or deemed
amended to conform to applicable laws, or if it cannot be so construed or deemed
amended without, in the determination of the Committee, materially altering the
intent of the Plan or the Award, such provision shall be stricken as to such
jurisdiction, person or Award, and the remainder of the Plan and any such Award
shall remain in full force and effect.
(g) No Trust or Fund Created. Neither the Plan nor any Award shall create
or be construed to create a trust or separate fund of any kind or a fiduciary
relationship between the Company or any Affiliate and a Participant or any other
person. To the extent that any person acquires a right to receive payments from
the Company or any Affiliate pursuant to an Award, such right shall be no
greater than the right of any unsecured general creditor of the Company or any
Affiliate.
(h) No Fractional Shares. No fractional Shares shall be issued or delivered
pursuant to the Plan or any Award, and the Committee shall determine whether
cash, other securities, or other property shall be paid or transferred in lieu
of any fractional Shares, or whether such fractional Shares or any rights
thereto shall be cancelled, terminated or otherwise eliminated.
(i) Headings. Headings are given to the Sections and subsections of the
Plan solely as a convenience to facilitate reference. Such headings shall not be
deemed in any way material or relevant to the construction or interpretation of
the Plan or any provision thereof.
SECTION 9. EFFECTIVE DATE OF THE PLAN
The Plan shall be effective as of the date of its approval by the Company's
stockholders.
C-12
<PAGE> 44
MASCOTECH, INC.
ANNUAL MEETING OF STOCKHOLDERS
AT 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> 45
<TABLE>
<S><C>
[ ]
(1) ELECTION OF DIRECTORS FOR all nominees WITHHOLD AUTHORITY to vote EXCEPTIONS / /
listed below / / for both nominees listed below / /
Class III Directors to hold office until the Annual Meeting of Stockholders in 2000 or until their respective successors are
elected and qualified:
NOMINEES: WILLIAM K. HOWENSTEIN 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) Proposal to approve the 1997 Non-Employee Directors Stock Plan. (3) Proposal to approve the 1997 Annual Incentive
Compensation Plan.
FOR / / AGAINST / / ABSTAIN / / FOR / / AGAINST / / ABSTAIN / /
(4) Proposal to approve the Amendment of the 1991 Long Term Stock (5) Ratification of the selection of Coopers &
Incentive Plan. Lybrand L.L.P. as independent auditors for
the Company for the year 1997.
FOR / / AGAINST / / ABSTAIN / / FOR / / AGAINST / / ABSTAIN / /
(6) In their discretion upon such other business as may properly
come before the meeting.
The shares represented by this Proxy will be voted in accordance with the specifications above.
IF SPECIFICATIONS ARE NOT MADE, THE PROXY WILL BE VOTED FOR THE ELECTION OF ALL NOMINEES, Change of Address or
FOR THE PROPOSALS AND FOR RATIFICATION. Comments Mark Here / /
Please sign exactly as name appears at left.
Executors, administrators, trustees, et al.
should so indicate when signing. If the
signature is for a corporation, please sign
the full corporate name by an authorized
officer. If the signature is for a
partnership, please sign the full
partnership name by an authorized person.
If shares are registered in more than one
name, all holders must sign.
Dated:________________________________1997
______________________________________(L.S.)
Signature
______________________________________(L.S.)
Signature
VOTES MUST BE INDICATED
(X) IN BLACK OR BLUE INK. / /
PLEASE SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE.
</TABLE>
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS TO BE HELD MAY 20, 1997
MASCOTECH, INC
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 Preferred Stock (each such share representing four-fifths of
one vote) 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 MascoTech, Inc. to be held at the offices of the
Company at 21001 Van Born Road, Taylor, Michigan 48180, on Tuesday, May 20,
1997, at 2:00 P.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 dated and
signed on the reverse side.)
MASCOTECH, INC.
P.O. BOX 11275
NEW YORK, N.Y. 10203-0275
<PAGE> 46
<TABLE>
<S><C>
[ ]
(1) ELECTION OF DIRECTORS FOR all nominees WITHHOLD AUTHORITY to vote EXCEPTIONS / /
listed below / / for both nominees listed below / /
Class III Directors to hold office until the Annual Meeting of Stockholders in 2000 or until their respective successors are
elected and qualified:
NOMINEES: WILLIAM K. HOWENSTEIN 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) Proposal to approve the 1997 Non-Employee Directors Stock Plan. (3) Proposal to approve the 1997 Annual Incentive
Compensation Plan.
FOR / / AGAINST / / ABSTAIN / / FOR / / AGAINST / / ABSTAIN / /
(4) Proposal to approve the Amendment of the 1991 Long Term Stock (5) Ratification of the selection of Coopers &
Incentive Plan. Lybrand L.L.P. as independent auditors for
the Company for the year 1997.
FOR / / AGAINST / / ABSTAIN / / FOR / / AGAINST / / ABSTAIN / /
(6) In their discretion upon such other business as may properly
come before the meeting.
The shares represented by this Proxy will be voted in accordance with the specifications above.
IF SPECIFICATIONS ARE NOT MADE, THE PROXY WILL BE VOTED FOR THE ELECTION OF ALL NOMINEES, Change of Address or
FOR THE PROPOSALS AND FOR RATIFICATION. Comments Mark Here / /
Please sign exactly as name appears at left.
Executors, administrators, trustees, et al.
should so indicate when signing. If the
signature is for a corporation, please sign
the full corporate name by an authorized
officer. If the signature is for a
partnership, please sign the full
partnership name by an authorized person.
If shares are registered in more than one
name, all holders must sign.
Dated:________________________________1997
______________________________________(L.S.)
Signature
______________________________________(L.S.)
Signature
VOTES MUST BE INDICATED
(X) IN BLACK OR BLUE INK. / /
PLEASE SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE.
</TABLE>
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS TO BE HELD MAY 20, 1997
MASCOTECH, INC
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 MascoTech, Inc. to be held at the
offices of the Company at 21001 Van Born Road, Taylor, Michigan 48180, on
Tuesday, May 20, 1997, at 2:00 P.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 dated and
signed on the reverse side.)
MASCOTECH, INC.
P.O. BOX 11275
NEW YORK, N.Y. 10203-0275
