<PAGE>
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 Section 240.14a-11(c) or Section 240.14a-12
Material Sciences Corporation
- - --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- - --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
[_] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[_] 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>
MATERIAL SCIENCES CORPORATION
2300 EAST PRATT BOULEVARD
LOGO ELK GROVE VILLAGE, ILLINOIS 60007
May 17, 1995
Dear Shareholder:
The 1995 Annual Meeting of Shareholders will be held on Thursday, June 22,
1995, at 10:00 a.m. CDT in the Shareholders Room on the 21st floor of Bank of
America Illinois, 231 South LaSalle Street, Chicago, Illinois. I hope you will
attend. We will be voting on the election of directors, the approval of a
proposal to amend the 1992 Omnibus Stock Awards Plan for Key Employees, and
such other matters as may properly come before the meeting. We also will hear
management's report regarding the past fiscal year's operations.
The attached notice of meeting and proxy statement fully describe the
matters upon which the shareholders will vote. It is important that your
shares be represented, regardless of the number you own. Accordingly, I urge
you to complete the enclosed proxy and promptly return it to us so that your
shares can be voted at the meeting in accordance with your instructions.
Sincerely,
G. ROBERT EVANS
Chairman and Chief Executive Officer
<PAGE>
MATERIAL SCIENCES CORPORATION
2300 EAST PRATT BOULEVARD
ELK GROVE VILLAGE, ILLINOIS 60007
LOGO
----------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
----------------
The Annual Meeting of Shareholders of Material Sciences Corporation will be
held on Thursday, June 22, 1995, at 10:00 a.m. CDT, at Bank of America
Illinois, 231 South LaSalle Street, Chicago, Illinois, in the Shareholders Room
(21st floor), for the following purposes:
1. To elect a Board of seven directors;
2. To consider and vote upon the approval of a proposal to amend the 1992
Omnibus Stock Awards Plan for Key Employees;
3. To act upon such other matters as may properly come before the meeting
or any adjournment thereof.
Shareholders of record at the close of business on April 28, 1995, are
entitled to notice of and to vote at this meeting and any adjournment thereof.
Shareholders are requested to sign and date the enclosed proxy and promptly
return it in the envelope enclosed for that purpose, whether or not they expect
to be present at the meeting. Any person giving a proxy has the power to revoke
it at any time prior to its exercise at the meeting.
By Order of the Board of Directors,
William H. Vrba
Senior Vice President,
Chief Financial Officer, and Secretary
Elk Grove Village, Illinois
May 17, 1995
<PAGE>
LOGO
MATERIAL SCIENCES CORPORATION
2300 EAST PRATT BOULEVARD
ELK GROVE VILLAGE, ILLINOIS 60007
---------------------------
PROXY STATEMENT
---------------------------
This proxy statement is furnished to shareholders of Material Sciences
Corporation ("MSC" or the "Company") in connection with the solicitation, by
order of the Board of Directors of the Company (the "Board"), of proxies for
use at the Annual Meeting of Shareholders of the Company to be held at 10:00
a.m. CDT, on Thursday, June 22, 1995, at the place and for the purposes set
forth in the accompanying notice of the meeting.
The accompanying proxy is solicited on behalf of the Board and is revocable
at any time before the voting thereof by filing with the Secretary of the
Company, prior to the shareholder vote, a written revocation or duly executed
form of proxy bearing a later date, or by voting in person at the meeting. All
outstanding shares of the Company's common stock, par value $.02 per share (the
"common stock"), represented by properly executed and unrevoked proxies
received in time for the meeting will be voted. Shares will be voted as
instructed in the accompanying proxy on each matter to be submitted to
shareholders. If no instructions are given, the shares will be voted for the
election to the Board of the nominees indicated in the proxy, and for approval
of the proposal to amend the 1992 Omnibus Stock Awards Plan for Key Employees.
The close of business on April 28, 1995, has been fixed as the record date
for the determination of shareholders entitled to notice of and vote at the
meeting. On that date, there were issued and outstanding 15,201,066 shares of
common stock. The Company first sent this proxy statement and the accompanying
form of proxy to shareholders entitled thereto on or about May 17, 1995.
A majority of the outstanding shares of common stock, represented in person
or by proxy, shall constitute a quorum for the transaction of business at the
meeting. Each holder of common stock is entitled to one vote per share. If one
or more shareholders give notice at the meeting before the voting of their
intention to cumulate their votes in the election of directors, all
shareholders entitled to vote shall have the right to so cumulate their votes.
With cumulative voting, holders of common stock are entitled, for each share
held by them, to one vote for each director being elected and may cast all such
votes for a single nominee (who has been nominated prior to voting) or
distribute them among two or more nominees. Under cumulative voting, the seven
persons receiving the greatest number of votes shall be elected as directors.
Broker non-votes (where a broker submits a proxy but does not have authority to
vote a customer's shares on one or more matters) on the election of directors
and shares as to which authority to vote for the election of one or more
director nominees is withheld on the enclosed proxy will not be counted in
determining which director nominees receive the greatest number of votes.
Broker non-votes on the proposal to amend the 1992 Omnibus Stock Awards Plan
for Key Employees and shares as to which authority to vote for such proposal is
withheld on the enclosed proxy will not be counted. Discretionary authority to
cumulate votes is being solicited. If the vote is not conducted by cumulative
voting, the holders of a majority of shares of common stock represented at the
meeting in person or by proxy will be able to elect all the directors. The
affirmative vote of the holders of a majority of the shares of common stock
represented at the meeting in person or by proxy is required for approval of
the proposal to amend the 1992 Omnibus Stock Awards Plan for Key Employees.
<PAGE>
ELECTION OF DIRECTORS
The seven persons listed below are proposed to be elected for a period to end
at the 1996 Annual Meeting of Shareholders, when, they may be proposed to be
re-elected or a successor is elected and qualified at that meeting or, as
provided in the Company by-laws, upon earlier death, resignation or removal.
Unless authority to vote for one or more nominees is withheld in the proxy,
signed proxies that are returned will be voted for the election of the seven
nominees listed below. All nominees have indicated a willingness to serve as
directors, but if any of them should decline or be unable to act as a director,
the persons named in the proxy will vote for the election of another person or
persons as the Board recommends. All of the nominees presently are directors of
the Company and were elected at the 1994 Annual Meeting.
Certain information regarding the nominees, as of April 28, 1995, is set
forth below, including their ages, the period each has served as a director,
and the business experience of each during the past five years.
----------------
JEROME B. COHEN DIRECTOR SINCE 1988
- - ------------
- - ------------ AGE 62
Dr. Cohen has served as Dean of the Robert R. McCormick School
of Engineering and Applied Science (formerly the Technological
Institute) at Northwestern University since 1986. Dr. Cohen has
been a professor of Materials Science at the Robert R. McCormick
School of Engineering and Applied Science at Northwestern
University since 1959, and was awarded the Engelhart Chair in
Materials Science in 1974. In February 1993, Dr. Cohen was
elected to the National Academy of Engineering.
ROXANNE J. DECYK DIRECTOR SINCE 1988
- - ------------
- - ------------ AGE 42
Ms. Decyk is Vice President, Planning, for Amoco Oil & Gas, a
subsidiary of Amoco Corporation, since June 1994, and was
previously Vice President--Sales & Marketing-Polymers, Amoco
Chemical Company, from March 1993 and before that was Vice
President--Commercial and Industrial Sales for Amoco Oil
Company, a producer of petroleum products, from May 1991.
Previously, Ms. Decyk was Senior Vice President--Distribution of
Navistar International Transportation Corporation ("Navistar"),
a manufacturer of medium and heavy duty trucks from June 1989
until April 1991 and before that was Senior Vice President--
Administration for Navistar from 1986 until 1989. Prior to 1986,
Ms. Decyk was Senior Vice President--Corporate Relations for
Navistar. Ms. Decyk also serves as a director of Snap-On Tools,
Inc., and Harris Bankcorp.
EUGENE W. EMMERICH DIRECTOR SINCE 1979
- - ------------
- - ------------ AGE 64
Dr. Emmerich has served as President and Chief Executive Officer
(CEO) of Cadtrak Corporation, a licensor of patented technology
to the computer industry with emphasis on graphics related
patents, for more than the past five years.
2
<PAGE>
G. ROBERT EVANS DIRECTOR SINCE 1991
- - ------------
- - ------------ AGE 63
Mr. Evans served as Chairman, President, and CEO of the Company
from February 1991 until June 1991, and has since June 1991
served as Chairman and CEO. From July 1990 until joining the
Company, Mr. Evans served as President, CEO, and a director of
Corporate Finance Associates Illinois, Inc., a financial
intermediary and consulting firm. From February 1987 until
January 1990, Mr. Evans served as President, CEO, and a director
of Bemrose Group USA, a British-owned holding company engaged in
value-added manufacturing and sale of products to the
advertising specialty industry. Prior to this, from August 1984
until January 1987, Mr. Evans served as President, CEO, and a
director of Allsteel, Inc., a manufacturer of office furniture
systems. Mr. Evans also serves as a director of Consolidated
Freightways, Inc., Elco Industries, Inc., Fiberboard
Corporation, and Swift Energy Company.
E. F. HEIZER, JR. DIRECTOR SINCE 1976
- - ------------
- - ------------ AGE 65
Mr. Heizer is a venture capitalist involved in developing early
stage companies for more than the past five years. He was
formerly CEO of Heizer Corporation, a publicly-held business
development company, from its founding in 1969 until 1985. Mr.
Heizer also serves as a director of Amdahl Corporation,
Chesapeake Energy Corporation, and Needham & Company, Inc.
J. FRANK LEACH DIRECTOR SINCE 1993
- - ------------
- - ------------ AGE 74
Mr. Leach retired in 1993 as Vice Chairman of the Board of
Consolidated Freightways Inc., the California based diversified
trucking and transportation company. He had been a director of
Consolidated Freightways since 1973 and President during 1990-
1991. Since 1982 he has been a special partner of Sequoia
Associates, a private investment firm. From 1972 to 1985, Mr.
Leach was President, Chairman and CEO of Arcata Corporation, a
printing and forest products company. Prior to that, Mr. Leach
served as Executive Vice President and Chief Operating Officer
(COO) of Bunker Ramo Corporation and President of Amphenol
Electronics Corporation. Mr. Leach serves on the Boards of Basic
American Foods, Inc., Champion Road Machinery Company, Ltd.,
Acme Fixture & Casework, Inc., Deanco, Inc., and Newell
Industries, Inc.
- - ------------ IRWIN P. POCHTER DIRECTOR SINCE 1982
- - ------------
AGE 71
Mr. Pochter retired as Chairman of the Illinois operations of
Frank B. Hall & Co., an international insurance brokerage firm,
in November 1987. Mr. Pochter had served in this capacity since
June 1984.
3
<PAGE>
COMMITTEES AND MEETINGS OF THE BOARD
The Board held five meetings during fiscal 1995. Included among the
committees of the Board are standing Audit, Compensation and Organization, and
Technology Committees. During fiscal 1995, directors in total attended
approximately 96% of the aggregate number of meetings of the Board and the
committees on which they served.
The Audit Committee, currently consisting of Messrs. Heizer (Chairperson),
Leach and Pochter, met two times during fiscal 1995. The functions of this
committee include recommending the selection of independent public accountants
to the Board; reviewing the scope of the audits performed by the independent
public accountants, the audit reports, and any recommendations made by them;
reviewing in April of each year the results of the audit for the prior fiscal
year with the independent public accountants before the shareholders' report
for that fiscal year is released publicly; and reviewing any non-audit services
provided by the independent public accountants.
The Compensation and Organization Committee, currently consisting of Ms.
Decyk (Chairperson) and Messrs. Heizer and Leach, met three times during fiscal
1995. The functions of this committee include determining, in consultation with
the Company's Chairman and CEO, the compensation of the Company's officers;
reviewing and approving bonus compensation paid to the Company's key employees;
and reviewing and making recommendations to the Board with respect to the
Company's compensation and benefit plans and policies.
The Technology Committee, currently consisting of Drs. Cohen (Chairperson)
and Emmerich, met three times during fiscal 1995. The functions of this
committee include analyzing current technology and its use and application in
the Company's processes; and evaluating technological developments and the
suitability of new technology for the Company's operations.
During fiscal 1995, directors who are not executive officers of the Company
received an annual retainer of $15,000, plus $1,000 per meeting for attendance
at Board meetings, $3,000 per year for chairing a Board committee, $1,000 per
meeting for attendance at Board committee meetings, and reimbursement for
normal travel expenses. In addition, each non-employee director receives an
automatic grant of an option to purchase 18,000 shares of common stock of the
Company at the fair market value on the date of grant every five years. Messrs.
Heizer and Pochter and Dr. Emmerich will receive new grants in fiscal 1997 and
Dr. Cohen, Ms. Decyk, and Mr. Leach will receive new grants in fiscal 1999 if
at that time they are still serving as non-employee directors of the Company.
4
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT OF THE COMPANY
The following table provides certain information, as of April 28, 1995
(except as otherwise noted), on the beneficial ownership of the common stock as
to each director of the Company, the four most highly paid executive officers
of the Company other than the CEO, and all officers and directors of the
Company as a group. To the knowledge of the Company, each person has sole
voting and investment power for the shares shown unless otherwise noted. The
address of all officers and directors is the address of the Company.
<TABLE>
<CAPTION>
NUMBER OF SHARES SHARES UNDER PERCENT
NAME BENEFICIALLY OWNED(1) EXERCISABLE OPTIONS(2) TOTAL OF CLASS
- - ---- --------------------- ---------------------- --------- --------
<S> <C> <C> <C> <C>
Jerome B. Cohen......... 2,000 3,600 5,600 (3)
Roxanne J. Decyk........ 2,557 3,600 6,157 (3)
Eugene W. Emmerich...... 6,525 14,400 20,925 (3)
G. Robert Evans......... 104,629 116,100 220,729 1.5%
E. F. Heizer, Jr........ 152,251 10,800 163,051 1.1%
J. Frank Leach.......... 7,500 7,200 14,700 (3)
Irwin P. Pochter........ 69,376 14,400 83,776 (3)
Gerald G. Nadig......... 59,359 72,900 132,259 (3)
William H. Vrba......... 27,192 50,850 78,042 (3)
Frank D. Graziano....... 99,754 22,500 122,254 (3)
Anton F. Vitzthum....... 76,425 19,125 95,550 (3)
All officers and direc-
tors as a group
(19 persons)........... 762,747 426,225 1,188,972 7.8%
</TABLE>
- - --------
(1) For purposes of the table, a person generally is deemed to be a beneficial
owner of a security if such person has or shares voting power or investment
power (including the power to dispose of the security) with respect to such
security or has the right to acquire beneficial ownership thereof within 60
days. Does not include shares under exercisable options (which information
is set forth separately).
(2) Includes shares subject to options that are exercisable on April 28, 1995
and options which become exercisable within 60 days thereafter.
(3) Less than 1%.
During fiscal 1995, Frank J. Lazowski, Jr., an officer of the Company, was
late in filing with the Securities and Exchange Commission one report relating
to one transaction involving common stock. Also, during fiscal 1995, Roxanne J.
Decyk, a director of the Company, was late in filing with the Securities and
Exchange Commission five reports regarding six transactions relating to the
purchase of common stock of the Company through an institutionally-held
deferred compensation account.
5
<PAGE>
INFORMATION WITH RESPECT TO CERTAIN SHAREHOLDERS
The following table sets forth certain information on the beneficial
ownership of common stock as of April 28, 1995, by each person known by the
Company to own beneficially more than five percent of the Company's outstanding
common stock. To the knowledge of the Company, each shareholder has sole voting
and investment power as to the shares shown.
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIALLY OWNED CLASS(1)
------------------------------------ ------------------ ----------
<S> <C> <C>
The Prudential Insurance Company of Ameri-
ca(2)..................................... 1,200,700 7.9%
Prudential Plaza
Newark, New Jersey 07102-3777
Stephens Capital Management(3)............. 996,494 6.6%
111 Center Street
Little Rock, Arkansas 72201-4401
Neuberger & Berman(4)...................... 809,450 5.3%
605 Third Avenue
New York, New York 10158-3698
</TABLE>
- - --------
(1) Based upon shares outstanding as of April 28, 1995.
(2) As reported in Schedule 13G filed with the Securities and Exchange
Commission for December 1994.
(3) As reported in Schedule 13F filed with the Securities and Exchange
Commission for March 1995.
(4) As reported in Schedule 13G filed with the Securities and Exchange
Commission for December 1994.
6
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
I. SUMMARY COMPENSATION TABLE
The following table discloses compensation received by the Company's chief
executive officer and the four other most highly paid executive officers during
fiscal 1995.
<TABLE>
<CAPTION>
ANNUAL
COMPENSATION LONG-TERM COMPENSATION
--------------- ----------------------------------
AWARDS PAYOUTS
----------------------- ---------
SECURITIES LONG-TERM
RESTRICTED UNDERLYING INCENTIVE
STOCK OPTIONS/ PLAN ALL OTHER
NAME AND PRINCIPAL FISCAL SALARY BONUS AWARD(S) SARS PAYOUTS COMPENSATION
POSITION YEAR ($) ($) ($) (#) ($) ($)(3)
- - ------------------ ------ ------- ------- ---------- ---------- --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
G. R. Evans............. 1995 316,000 200,610 440,000(1) 30,000(2) 0 10,281
Chief Executive 1994 282,200 200,000 513,000(4) 36,000(5) 0 8,718
Officer (CEO) 1993 265,000 132,500 0 0 0 6,378
G. G. Nadig ............ 1995 240,000 140,191 0 0 0 14,502
Chief Operating 1994 213,700 93,914 342,000(6) 24,000(5) 0 4,442
Officer (COO) 1993 203,500 76,232 0 0 326,025(7) 706
W. H. Vrba.............. 1995 174,400 92,627 0 0 0 15,151
Chief Financial 1994 164,500 73,181 149,625(6) 10,500(5) 0 0
Officer (CFO) 1993 158,200 58,756 0 0 0 0
F. D. Graziano.......... 1995 128,600 61,124 0 0 0 14,217
Senior Vice 1994 121,300 47,384 85,500(6) 6,000(5) 0 3,639
President, Technology 1993 116,600 37,893 0 0 108,675(8) 2,640
A. F. Vitzthum.......... 1995 119,000 55,800 0 0 0 13,247
Senior Vice President, 1994 113,600 53,268 53,438(6) 3,750(5) 0 3,429
Manufacturing 1993 108,700 35,094 0 0 144,900(9) 3,283
</TABLE>
- - --------
(1) Restricted shares awarded April 21, 1994 (market price on date of grant was
approximately $14.67) equal in number to 30,000 matching options granted on
the same date. Subject to restrictions on transfer until April 21, 2002
(subject to acceleration if the market price of a share of common stock
achieves certain levels, which may occur within three years). Total
restricted stock holdings as of February 28, 1995 for Mr. Evans were 66,000
shares (the total of the restricted stock awarded on April 21, 1994 and
September 22, 1993). Market value as of February 28, 1995 for such holdings
was $1,047,750. Dividends, if any, are paid on restricted common stock in
the same manner as they are paid on unrestricted common stock.
(2) 30,000 options were granted under the 1993 Restricted Stock/Stock Option
Awards Program at an option price of approximately $14.67 (market price on
the date of grant). Options fully vest on March 21, 2004 (subject to
acceleration under certain conditions).
(3) Company matching contribution to the employee's Savings and Investment Plan
contribution and, starting in fiscal 1995, payments for the Defined
Contribution Plan.
(4) Restricted shares awarded September 22, 1993 (market price on date of grant
was $14.25) equal in number to matching options granted on the same date.
Subject to restrictions on transfer until September 22, 2001 (subject to
acceleration if the market price of a share of common stock achieves
certain levels, which may occur within three years).
(5) Granted under the 1993 Restricted Stock/Stock Option Awards Program at an
option price of $14.25 (market price on the date of grant). Options fully
vest on August 22, 2003 (subject to acceleration under certain conditions).
7
<PAGE>
(6) Restricted shares awarded September 22, 1993 (market price on date of grant
was $14.25) equal in number to matching options granted on the same date.
Subject to restrictions on transfer until September 22, 2001 (subject to
acceleration if the market price of a share of common stock achieves
certain levels, which may occur within three years). Total restricted stock
holdings as of February 28, 1995 for each of Messrs. Nadig, Vrba, Graziano,
and Vitzthum were equal to the number of shares of restricted stock awarded
on September 22, 1993. Market values as of February 28, 1995 for such
holdings were $381,000, $166,688, $95,250, and $59,531, respectively.
Dividends, if any, are paid on restricted common stock in the same manner
as they are paid on unrestricted common stock.
(7) Restrictions lapsed on 27,945 shares of performance based restricted stock
in fiscal 1994 (market price was approximately $11.67 when the restrictions
lapsed). These shares were awarded in fiscal 1991 and relate to performance
goals over the three year period ended February 28, 1993.
(8) Restrictions lapsed on 9,315 shares of performance based restricted stock
in fiscal 1994 (market price was approximately $11.67 when the restrictions
lapsed). These shares were awarded in fiscal 1991 and relate to performance
goals over the three year period ended February 28, 1993.
(9) Restrictions lapsed on 12,420 shares of performance based restricted stock
in fiscal 1994 (market price was approximately $11.67 when the restrictions
lapsed). These shares were awarded in fiscal 1991 and relate to performance
goals over the three year period ended February 28, 1993.
II. OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF STOCK
PRICE APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM
- - ---------------------------------------------------------------------- ---------------------
% OF
NUMBER OF TOTAL
SECURITIES OPTIONS/SARS
UNDERLYING GRANTED TO EXERCISE
OPTIONS/SARS EMPLOYEES OR BASE
GRANTED IN FISCAL PRICE EXPIRATION 5% 10%
NAME (1) YEAR ($/SH) DATE 0% ($23.90) ($38.05)
- - ---- ------------ ------------ -------- ---------- --- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
G. R. Evans............. 30,000 63.1 $14.67 4/21/04 $ 0 $276,900 $701,400
G. G. Nadig............. -- -- -- -- -- -- --
W. H. Vrba.............. -- -- -- -- -- -- --
F. D. Graziano.......... -- -- -- -- -- -- --
A. F. Vitzthum.......... -- -- -- -- -- -- --
</TABLE>
- - --------
Note--The dollar amount of total shareholder gain after ten years at the 5% and
10% price appreciation rates would be $140,306,000 and $355,401,000
respectively. The dollar amount of named optionee gain after ten years at
the 5% and 10% price appreciation rates would be $276,900 and $701,400
respectively. The percentage of named optionee gain to shareholder gain
would be 0.2%.
(1) Options for Mr. Evans on 30,000 shares were granted at market price on date
of grant (April 21, 1994) under the 1993 Restricted Stock/Stock Option
Awards Program. These options, granted simultaneously with an equal amount
of restricted stock, fully vest on March 21, 2004 and may vest earlier if
the market price of common stock achieves certain levels and the matching
restricted stock is held for two years after restrictions lapse on that
restricted stock.
8
<PAGE>
III. AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END
OPTION/SAR VALUES
The following table provides information on option exercises and unexercised
option values for the named executive officers.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS/SARS IN-THE-MONEY OPTIONS/SARS
AT FISCAL YEAR END AT FISCAL YEAR END
SHARES ACQUIRED VALUE ------------------------- -------------------------
NAME ON EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- - ---- --------------- ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
G. R. Evans............. None N/A 116,100 111,000 $1,230,080 $571,425
G. G. Nadig............. 18,000 $195,750 72,900 24,000 $ 424,643 $ 39,000
W. H. Vrba.............. None N/A 50,850 10,500 $ 296,201 $ 17,063
F. D. Graziano.......... None N/A 22,500 6,000 $ 131,063 $ 9,750
A. F. Vitzthum.......... None N/A 19,125 3,750 $ 111,403 $ 6,094
</TABLE>
Note--The reported value realized on exercised options is the market price on
the exercise date less the exercise price; and the value of unexercised
options is based on a market price of $15.875 (the actual market price at
fiscal year end).
The exercise price of all options granted to above named individuals (except
for 18,000 options granted to Mr. Nadig in fiscal 1990 and exercised in fiscal
1995) was the fair market value of a share of common stock on the date of
grant.
IV. LONG-TERM INCENTIVE PLAN AWARDS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
NUMBER OF
SHARES, UNITS, PERFORMANCE OR OTHER
OR PERIOD UNTIL
NAME OTHER RIGHTS (#) MATURATION OR PAYOUT
- - ---- ---------------- --------------------
<S> <C> <C>
G. R. Evans............................... 30,000(1) 8 Years
G. R. Evans............................... 30,000(2) 10 Years
G. G. Nadig............................... None
W. H. Vrba................................ None
F. D. Graziano............................ None
A. F. Vitzthum............................ None
</TABLE>
- - --------
(1) Restricted shares awarded April 21, 1994 under the 1993 Restricted
Stock/Stock Option Awards Program. Subject to restrictions on transfer
until April 21, 2002 (subject to acceleration if the market price of a
share of common stock achieves certain levels).
(2) 30,000 options granted under the 1993 Restricted Stock/Stock Option Awards
Program at an option price of approximately $14.67 (market price on the
date of grant). Options fully vest on March 21, 2004 (subject to
acceleration under certain conditions).
COMPENSATION AND ORGANIZATION COMMITTEE REPORT
One of the functions of the Compensation and Organization Committee is to
establish and administer compensation plans for Material Sciences Corporation
executive officers, review executive officer compensation levels and evaluate
management performance. The Committee is composed of three independent, non-
employee directors. Set forth below is a report submitted by the Compensation
and Organization Committee regarding the Company's compensation policies and
programs for executive officers for fiscal year 1995.
9
<PAGE>
COMPENSATION PHILOSOPHY
The MSC management compensation program is designed to reward outstanding
performance and results. Compensation plans are designed to attract and retain
top quality and experienced managers by providing the opportunity to earn above
median cash compensation for superior corporate, business unit, and individual
performance plus the opportunity to accumulate stock-based wealth commensurate
with the long-term growth and value created for MSC's shareholders.
EXECUTIVE COMPENSATION COMPONENTS
MSC's compensation program has the following components:
. Base salaries at median competitive levels for similar-size companies
in general industry:
--Salaries reviewed annually.
--Annual adjustments based on individual performance, changes in
duties and responsibilities, and general movement in external
salary levels.
. Significant incentive opportunity for management employees:
--Total (salary plus bonus) earnings opportunity between median and
60th percentile competitive levels for superior performance.
--Significant variability based on individual performance.
--Performance defined by a combination of corporate, business unit,
and individual goals that are critical to the Company's success.
Principal corporate and business unit goals are net income,
operating profit, cost reduction, balance sheet management and
quality. Each individual also has several specific financial,
operational or strategic goals based on the individual's
contribution to the achievement of the Company's business strategy.
. Stock options to management employees at median to 75th percentile
competitive levels for similar-size companies in general industry:
--Options were granted in fiscal 1992 to management employees except
the CEO, at the 60th percentile competitive level. These options
have vested as of February 28, 1995. Effective March 1, 1995, a new
option plan was adopted for management employees, including the
CEO.
. Special stock ownership long-term incentive to management employees:
--One-time grant to management employees in fiscal 1994 to encourage
and facilitate increased stock ownership and executive retention.
CEO received two grants, one in fiscal 1994, and one in fiscal
1995.
--Restricted Stock Award that vests after five years--sooner if
aggressive share price targets are achieved--later if the stock
price does not increase.
--A matching Incentive Stock Option (ISO) Grant--which vests if the
underlying restricted stock is held for two years--otherwise the
ISO shares do not vest for nine years and eleven months.
--Together with the "regular" stock options, this one-time grant
puts the total long-term incentive package for management employees
at the 75th percentile for similar-size companies in general
industry.
10
<PAGE>
FISCAL 1995 PERFORMANCE
At the beginning of fiscal 1995, the Compensation and Organization Committee
approved performance objectives for the Chairman and CEO. His performance
relative to these objectives was the basis for determining his 1995 annual
incentive award. Sixty percent of his potential award was based on the
achievement of a corporate profitability objective. Corporate net income for
1995 was $16,740,000, a 41.8% increase over the prior year's earnings. The
remaining forty percent of the CEO's annual incentive award was based on
achievement of a combination of specific objectives, including margin
improvement, company growth, succession planning and other objectives.
Performance goals for the other executive officers were approved by the CEO
at the beginning of the year. Performance measures and goals were similar to
those of the CEO. Their performance for the year was evaluated by the CEO, who
recommended annual incentive awards for each individual. These awards were
reviewed and approved by the Compensation and Organization Committee.
FISCAL 1995 ACTIONS
In fiscal 1995, under the special stock ownership long-term incentive
described above, the CEO was granted 30,000 options and 30,000 restricted
shares. All options were granted at the market price at the time of grant.
Salaries were increased 12% for the CEO and an average of 8% for the other four
named executives. In general, salary increases reflected individual performance
and changes in the external compensation market. Following such action, Mr.
Evans' base salary ranked less than the median for competitive pay in general
industry for similar size companies.
The CEO earned an annual incentive award of $200,610 for performance in
fiscal 1995, based on the factors discussed above. This represents 63% of the
CEO's annual base compensation. The other four named executives received annual
incentive awards which averaged 53% of their annual base compensation.
The Compensation and Organization Committee elected to take no action in
fiscal 1995 with respect to Section 162(m) of the Internal Revenue Code. No MSC
executive had compensation exceeding one million dollars.
COMPENSATION CONSULTANTS AND COMPETITIVE DATA
The Compensation and Organization Committee has access to compensation
consultants who work with the Committee from time-to-time on executive
compensation matters. The Committee also has access to competitive data on
compensation levels for officer positions.
MATERIAL SCIENCES CORPORATION COMPENSATION AND ORGANIZATION COMMITTEE
Ms. Roxanne J. Decyk, Chairperson
Mr. E. F. Heizer, Jr.
Mr. J. Frank Leach
11
<PAGE>
MSC
PERFORMANCE GRAPH
The following chart shows total shareholder returns, assuming $100 was
invested on February 28, 1990 in Material Sciences Corporation, the S&P 500
Index, and the Comparator Group (as described below), with dividends, if any,
reinvested through February 28, 1995.
COMPARISON OF 5-YEAR CUMULATIVE TOTAL RETURNS
VERSUS THE S&P 500 AND COMPARATOR GROUP
LOGO
<TABLE>
<CAPTION>
FEBRUARY 28 OR 29,
------------------------------------------
1990 1991 1992 1993 1994 1995
------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
MSC.................................. $100.00 104.50 203.50 217.70 349.60 336.30
S&P 500.............................. $100.00 110.60 124.30 137.20 148.50 167.70
COMPARATOR GROUP..................... $100.00 127.70 183.80 208.40 183.40 205.80
</TABLE>
COMPARATOR GROUP: BRUSH WELLMAN
OPTICAL COATING LABORATORY
CHEMFAB
LOCTITE
SOUTHWALL TECHNOLOGIES
WORTHINGTON INDUSTRIES
STEEL TECHNOLOGIES
12
<PAGE>
At the conclusion of fiscal 1991, the Company's Board of Directors formed a
new senior management team, including newly hired chief executive and chief
financial officers. The following chart shows total shareholder returns,
assuming $100 was invested on February 28, 1991 (the conclusion of fiscal 1991)
in Material Sciences Corporation, the S&P 500 Index, and the Comparator Group
(as described below), with dividends, if any, reinvested through February 28,
1995. As this chart demonstrates, under direction of new management, the stock
of the Company has outperformed the S&P 500 and the Comparator Group.
COMPARISON OF 4-YEAR CUMULATIVE TOTAL RETURN
VERSUS THE S&P 500 AND COMPARATOR GROUP
LOGO
<TABLE>
<CAPTION>
FEBRUARY 28 OR 29,
-----------------------------------
1991 1992 1993 1994 1995
------- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
MSC......................................... $100.00 194.70 208.30 334.50 321.80
S&P 500..................................... $100.00 112.40 124.10 134.30 151.60
COMPARATOR GROUP............................ $100.00 143.90 163.20 143.60 161.10
</TABLE>
COMPARATOR GROUP: BRUSH WELLMAN
OPTICAL COATING LABORATORY
CHEMFAB
LOCTITE
SOUTHWALL TECHNOLOGIES
WORTHINGTON INDUSTRIES
STEEL TECHNOLOGIES
13
<PAGE>
EMPLOYMENT AND OTHER AGREEMENTS
The Company and Mr. Evans are parties to an Employment Agreement, effective
February 27, 1991 (the "Employment Agreement"), under which Mr. Evans is
serving as Chairman and CEO of the Company. The Employment Agreement was for an
initial term through February 28, 1994 (with successive one-year renewals
thereafter), and initially provided for a minimum base salary of $250,000.
Under the Employment Agreement, Mr. Evans was granted 45,000 shares of common
stock that vested on February 27, 1993.
The Employment Agreement also confirmed the grant to Mr. Evans of options to
purchase 180,000 shares of common stock at an exercise price of $5.28 per share
(the fair market value on the date of the grant). The options granted to Mr.
Evans expire approximately 10 years after grant and become exercisable in
installments of 25% after 2, 3, 4, and 5 years of employment with the Company
(subject to acceleration if the market price of a share of common stock
achieves certain levels). One-half of the options that are not otherwise
exercisable will become exercisable if, following a change in control of the
Company, Mr. Evans' employment is terminated by Mr. Evans for good reason or by
the Company without cause.
In lieu of Mr. Evans' entering into a Supplemental Pension Plan Agreement (as
described below), under the Employment Agreement, the Company has agreed to
provide Mr. Evans with a supplemental pension that, when stated as a single
life annuity commencing at age 65, will provide an annual benefit equal to 6%
of his average base salary over the last 12 consecutive months of his
employment with the Company, multiplied by the number of years (up to a maximum
of five years) that Mr. Evans was employed by the Company, reduced by certain
other benefits payable to Mr. Evans. A partial accrual of 1 1/2% per fiscal
quarter is credited for any partial year of employment after February 27, 1994.
Under the Employment Agreement, if Mr. Evans' employment is terminated by the
Company without cause, he will continue to receive his salary and health
benefits for 24 months after the date of termination. Under the Employment
Agreement, if Mr. Evans' employment is terminated (a) after a change in control
of the Company, (b) by the Company without cause or (c) by Mr. Evans for good
reason, he will receive a lump sum payment equal to 200% of his base salary at
the date of termination (except to the extent that these payments would
constitute "parachute payments" under Section 280G(b)(2) of the Internal
Revenue Code of 1986, as amended) and health benefits for a period of 24 months
following termination. As defined in the Employment Agreement, a "change in
control" occurs (a) when any person or group becomes the owner of more than 35%
of the outstanding common stock, (b) when the non-management directors of the
Company as of February 26, 1991 (or their approved successors), cease to
constitute a majority of the Board, or (c) when the Company undergoes a
combination after which the shareholders of the Company before the combination
hold less than 50% of the voting shares of the entity resulting from the
combination, unless Mr. Evans (i) receives disproportionate payments (other
than payments from employment arrangements or stock and option plans in place
before the change in control) from, (ii) owns equity securities (not including
ownership of less than one percent of a publicly traded company) in, or (iii)
acquires ownership (on different terms than other shareholders) of equity
securities of the entity owning such shares, sponsoring the change in directors
or combining with the Company, or an affiliate thereof.
In lieu of Mr. Vrba's entering into a Supplemental Pension Plan Agreement (as
described below), the Company has agreed to provide Mr. Vrba with a
supplemental pension that, when stated as a single life annuity commencing at
age 65, will provide an annual benefit equal to 4% of his average base
compensation of the two best consecutive calendar years preceding his
retirement multiplied by the number of years (not to exceed five years) that
Mr. Vrba was employed by the Company, payable for a period not to exceed 10
years, reduced by certain other benefits payable to Mr. Vrba.
The Company has certain agreements with other executive officers (including
the named executive officers) which provide for, among other things, severance
benefits in certain circumstances.
14
<PAGE>
EMPLOYEE AND OTHER PLANS
DEFINED BENEFIT PENSION PLAN
On December 31, 1992, the Company froze its defined benefit pension plan and
substituted a defined contribution plan for the benefit of all salaried
employees of the Company, including executive officers, and certain salaried
and hourly employees of its participating subsidiaries. A participant's
benefits under the defined benefit pension plan were based on a percentage of
compensation multiplied by that participant's years of credited service, and
are funded by the Company and the participating subsidiaries. The current
benefit formula, effective since January 1, 1989, is 1% of compensation for
each year of credited service. A participant will be entitled to a benefit upon
retirement at or after age 55 with five or more years of service, or upon
termination with five or more years of service.
All of the individuals named in the Summary Compensation Table were
participants in the pension plan on December 31, 1992. The following table sets
forth the estimated annual pension benefits under the pension plan payable at
retirement at age 65 after selected periods of service. As described herein,
the Company has entered into supplemental pension arrangements with certain
executive officers. See "Supplemental Pension Plan Agreements" and, with
respect to Mr. Evans and Mr. Vrba, see "Employment and Other Agreements."
<TABLE>
<CAPTION>
ESTIMATED ANNUAL PENSION BENEFITS
AT AGE 65(1)
---------------------------------
20
CAREER AVERAGE 5 YEARS 10 YEARS YEARS 30 YEARS
COVERED COMPENSATION SERVICE SERVICE SERVICE SERVICE
-------------------- ------- -------- ------- --------
<S> <C> <C> <C> <C>
$ 50,000........................... $ 2,500 $ 5,000 $10,000 $ 15,000
100,000........................... 5,000 10,000 20,000 30,000
150,000........................... 7,500 15,000 30,000 45,000
200,000........................... 10,000 20,000 40,000 60,000
250,000........................... 12,500 25,000 50,000 75,000
300,000........................... 15,000 30,000 60,000 90,000
350,000........................... 17,500 35,000 70,000 105,000
</TABLE>
- - --------
(1) The amounts set forth in the table are on the basis of a straight life
annuity and are not subject to reduction for Social Security benefits or
other payments.
SUPPLEMENTAL PENSION PLAN AGREEMENTS
The Company has entered into Supplemental Pension Plan Agreements (the
"Supplemental Pension Plan Agreements") with 16 current employees, including
all executive officers as of April 28, 1995 (except for Messrs. Evans and
Vrba), which provide benefits in the event of termination of employment,
disability, or death before retirement. The disability benefit consists of a
monthly payment until death equal to 50% of an individual's average monthly
compensation for the last 12 consecutive months prior to disability, less the
sum of benefits otherwise receivable by an individual (collectively referred to
as the "Other Benefits") from Social Security and any other pension or
retirement programs (whether maintained by the Company or not). The benefit
upon termination of employment consists of a monthly payment, beginning in the
month after termination (but not before the individual's 60th birthday) and
continuing for 120 months or, if earlier, the death of the individual, equal to
a specified percentage of the individual's average monthly compensation for the
last 12 consecutive months prior to retirement, less the sum of the Other
Benefits. The percentage varies depending on the participant's age at
employment termination, ranging from 50% at the age of 60 to 66 2/3% at age 65.
The payments will be made to a surviving spouse in the event of such
individual's death, but in no event will more than 120 payments be made. A
participant becomes eligible to receive the termination benefit upon reaching
age 60 or the completion of 10 years of consecutive employment, whichever comes
first. The
15
<PAGE>
death benefit consists of a monthly payment to the surviving spouse, if any,
beginning after a participant's death while employed by the Company and
continuing for 120 months or, if earlier, until the death of the spouse, equal
to 50% of the participant's average monthly compensation for the 12
consecutive months prior to the participant's death, less the sum of the Other
Benefits.
The Supplemental Pension Plan Agreements also provide that the payments
described above in the event of employment termination will commence to a
participant in the event that (1) any person acquires 25% or more of the
voting power of the Company's capital stock and (2) the participant's
employment is terminated other than for cause, disability, death, or
voluntarily by the employee. For these purposes, termination of employment
shall be deemed to occur after an individual's 65th birthday.
The first Supplemental Pension Plan Agreements were entered into in June
1983. As of February 28, 1995, $1,412,130 had been accrued under the plan for
current employees of which $796,674 had been accrued to be paid to executive
officers as of April 28, 1995 and $549,391 for persons named in the
Compensation Table (such accruals being $0, $138,805, $0, $172,844, and
$237,742 for Messrs. Evans, Nadig, Vrba, Vitzthum, and Dr. Graziano,
respectively).
1992 OMNIBUS STOCK AWARDS PLAN
FOR KEY EMPLOYEES
PROPOSAL TO AMEND THE 1992 OMNIBUS STOCK
AWARDS PLAN FOR KEY EMPLOYEES
The Material Sciences Corporation 1992 Omnibus Stock Awards Plan for Key
Employees (the "1992 Awards Plan") was discussed and adopted by the Board on
February 27, 1992 and April 23, 1992, and was approved and adopted by the
shareholders of the Company at their annual meeting on June 18, 1992.
After reviewing the Company's current compensation programs and incentives
for key employees and consideration of, among other things, incentive programs
established by comparable companies, the Board adopted two amendments to the
1992 Awards Plan (the "Proposed Amendments") on March 2, 1995 (as further
described below). The Board adopted the Proposed Amendments subject to
approval and adoption by the shareholders of the Company and provided that if
not approved, such amendments will terminate and be of no force or effect.
For purposes of the following discussion, the 1992 Awards Plan as it exists
prior to the effectiveness of the Proposed Amendments is referred to as the
"Existing Plan," and as proposed to be amended, is referred to as the "1992
Awards Plan."
The Proposed Amendments will (i) increase the aggregate number of shares of
common stock with respect to which awards may be granted under the 1992 Awards
Plan to an aggregate of 2,287,500 from 1,687,500/1/ shares of common stock and
(ii) require that, consistent with the Company's practice and intentions, all
awards of stock options granted under the 1992 Awards Plan shall be issued at
a per share option price not less than 100% of the fair market value
(determined in accordance with procedures established by the Compensation and
Organization Committee (the "Compensation Committee") of the Company's Board,
the "fair market value") of a share of common stock on the date any such
option is granted.
- - --------
/1/The aggregate number of shares of common stock with respect to which awards
may be granted under the Existing Plan was adjusted pursuant to Section 4 of
the Plan as a consequence of a 3 for 2 stock split effected in the form of a
dividend. Before the Proposed Amendments and the stock split, an aggregate of
1,125,000 shares of common stock were issuable as awards under the Existing
Plan.
16
<PAGE>
The Board believes that the first Proposed Amendment, which increases the
aggregate number of shares of common stock with respect to which awards may be
granted under the 1992 Awards Plan, is necessary for the Company to be able to
provide appropriate incentives to key employees and to encourage greater
teamwork through rewards linked to increases in the price of common stock.
Further, the Board considers such amendment to be an integral part of its
market-competitive compensation program that enhances the Company's ability to
retain a superior management team. The Board expects that it will utilize the
newly available shares under the 1992 Awards Plan available as a result of the
Proposed Amendments beginning on or around March 1, 1996. As of April 28, 1995,
of the 1,687,500 shares of common stock originally available for issuance upon
the exercise or payment of awards granted under the Existing Plan, 42,375
shares of common stock remained available to be granted as awards.
The Existing Plan places no restrictions on the per share option price at
which the Company can issue options ("non-qualified options") that do not
qualify under Section 422 of the Internal Revenue Code of 1986 (as amended, the
"Tax Code"), however it does require that grants of Incentive Stock Options
that qualify under Section 422 of the Tax Code ("ISOs") be issued at not less
than 100% of the fair market value of a share of common stock on the date the
option is granted and that non-qualified options granted to optionees who are
also directors of the Company be issued at not less than 75% of fair market
value. The Company has never issued a non-qualified option under the 1992
Awards Plan with an exercise price less than 100% of the fair market value of a
share of common stock on the date the option was granted and the Company does
not presently intend to do so. The Board believes that it is in the best
interests of the Company and its shareholders that the second Proposed
Amendment be approved and that the Existing Plan be amended to provide that all
options shall be issued at a per share option price not less than 100% of the
fair market value of a share of common stock on the date the option is granted.
Shareholders' approval of the second Proposed Amendment is not required by law,
agreement or the rules of any exchange upon which the common stock is listed
but is being submitted to shareholders as the Board believes it is a matter of
interest to the shareholders.
In the event that the Proposed Amendments are not approved by the Company's
shareholders, the Existing Plan will continue in effect but the Company's
ability to grant new awards under the Existing Plan will be constrained due to
the limited number of shares of common stock that currently remain available
for awards under such Plan.
The complete text of the 1992 Awards Plan reflecting all amendments to date
and the Proposed Amendments is set forth in Exhibit A attached hereto and
should be read in its entirety by shareholders. The following description of
the 1992 Awards Plan is qualified in its entirety by Exhibit A.
Administration Eligibility. The Compensation Committee administers the 1992
Awards Plan, including the determination of employees eligible for
participation and the form and amounts of awards. The Compensation Committee
may, to the extent that any such action will not prevent the 1992 Awards Plan
from complying with Rule 16b-3 ("Rule l6b-3") of the Securities Exchange Act of
1934 (as amended, the "Exchange Act"), delegate any of its authority thereunder
to such persons as it deems appropriate. Under the 1992 Awards Plan, awards may
be made to those employees of the Company and its subsidiaries (including the
Company's executive officers) who are deemed to be key employees. As of April
28, 1995, there were approximately 165 persons (including all executive
officers of the Company) eligible for participation under the 1992 Awards Plan.
Limitations on Shares To Be Issued. After giving effect to the Proposed
Amendments, a maximum of 2,287,500 shares of common stock will be authorized to
be issued under awards granted under the 1992
17
<PAGE>
Awards Plan. Shares covered by any award granted under the 1992 Awards Plan
which subsequently expire unexercised or unpaid or are cancelled, terminated or
forfeited in any manner without the issuance of shares of common stock will
again be available under the 1992 Awards Plan. Based on the closing price of
common stock on April 28, 1995, the aggregate market value of the total of
2,287,500 shares of common stock issuable under the 1992 Awards Plan (which
includes 42,375 shares currently available for issuance under the Existing Plan
and the additional 600,000 shares covered by the Proposed Amendments) is
approximately $41,461,000. The calculation of the aggregate market value with
respect to shares of common stock underlying options granted under the 1992
Awards Plan includes the exercise price paid to the Company for such common
stock by each optionee (which, in accordance with the Proposed Amendments and
the Company's past practice, is not less than 100% of the fair market value of
a share of common stock on the date of grant of any such option).
Awards. Awards may be in the form of stock options, stock appreciation rights
("SARs"), restricted stock or other awards.
Options. Options granted under the 1992 Awards Plan may be either ISOs or
non-qualified options or such other form of option as the Compensation
Committee may determine. Each option will be exercisable immediately in full or
will become exercisable in installments (based on the passage of time,
achievement of performance targets or both as determined by the Compensation
Committee) over the option period as determined by the Compensation Committee.
The expiration dates and the per share option price shall be determined by the
Compensation Committee and specified in the option agreement, provided that the
per share option price with respect to any options granted under the 1992
Awards Plan (including, without limitation, any ISOs) shall not be less than
100% of the fair market value of a share of common stock on the date the option
is granted. Options may be exercised in whole or in part. Shares acquired by
exercise of an option may be paid for, at the discretion of the Compensation
Committee, either in cash, in common stock (valued at the fair market value
thereof on the date of exercise), by a combination thereof or with any other
consideration.
SARs. The 1992 Awards Plan allows the Compensation Committee to grant awards
in the form of SARs. An SAR entitles the holder to receive from the Company
upon exercise an amount equal to the excess of the fair market value (at the
date of exercise) of a share of common stock over a specified price multiplied
by the number of shares of common stock as to which the holder is exercising
the SAR. SARs may be awarded in tandem with any previously or contemporaneously
granted option or independent of any option. To the extent a tandem SAR is
exercised, the related option will be cancelled and, to the extent the related
option is exercised, the tandem SAR will be cancelled. The amount payable upon
exercise of a SAR may be paid by the Company in common stock (valued at its
fair market value on the date of exercise), cash or a combination thereof, as
the Compensation Committee may determine.
Incentive Awards of Restricted Stock. The 1992 Awards Plan allows the
Compensation Committee to award shares of common stock to participants
("restricted stock"). The Compensation Committee will establish a restriction
period (the "restriction period") for each restricted stock award. During this
restriction period, shares of restricted stock may not be sold, assigned,
transferred, pledged or otherwise encumbered. Except for such restrictions, the
participant will have all the rights of a holder of common stock as to such
restricted stock. The Compensation Committee may permit or require the payment
of cash dividends to be deferred and, if the Compensation Committee so
determines, reinvested in additional restricted stock or otherwise invested.
Except as provided by the Compensation Committee, the participant will forfeit
all shares of common stock still subject to restriction upon termination of
such participant's employment for any reason during the restriction period.
18
<PAGE>
Other Awards. The 1992 Awards Plan allows the Compensation Committee to grant
other awards, including, without limitation, performance shares, convertible
debentures, other convertible securities and other forms of awards measured in
whole or in part by the value of common stock, the performance of the
participant or the performance of the Company. Such awards may be payable in
common stock, cash or both. At the time of any such award, the Compensation
Committee will, if applicable, determine a performance period and performance
goals to be achieved during the performance period, subject to such later
revisions as the Compensation Committee will deem appropriate to reflect
significant unforeseen events such as changes in laws, regulations or
accounting practices, unusual or non-recurring items or occurrences. Following
the conclusion of each performance period, the Compensation Committee will
determine the extent to which performance goals have been attained or a degree
of achievement between maximum and minimum levels during the performance period
in order to evaluate the level of payment to be made, if any.
Amendment. The Board or the Compensation Committee may amend, suspend or
terminate the 1992 Awards Plan; provided, however, that no such amendment will
be made without shareholder approval to the extent such approval is required by
law, agreement or the rules of any exchange upon which the common stock is
listed. No such amendment, suspension or termination will impair the rights of
participants under outstanding awards without the consent of such participants
or make any change that would disqualify the 1992 Awards Plan from the
exemption provided by Rule 16b-3. Present regulations of the Commission require
shareholder approval to effect certain amendments that would materially
increase the benefits accruing to participants, materially increase the number
of shares that may be issued, or materially modify the requirements for
eligibility for participation under the 1992 Awards Plan. The Compensation
Committee may amend or modify any award to the extent that the Compensation
Committee would have had the authority under the 1992 Awards Plan to initially
grant such award.
Adjustments; Sale of the Company. Appropriate adjustments will be made by the
Compensation Committee in the maximum number and kind of shares of common stock
to be issued under the 1992 Awards Plan and awards granted thereunder to give
effect to any stock splits, stock dividends and other relevant changes in the
Company's capitalization. If the Company will effect a merger, consolidation or
other reorganization pursuant to which the outstanding shares of common stock
will be exchanged for shares or other securities of the Company or any other
corporation, the Company will use its best efforts to provide in any related
agreement or plan that any holder of an award under the 1992 Awards Plan will
receive in such transaction, as further described in the 1992 Awards Plan, such
kind and number of shares or other securities of the Company or such other
corporation as the Compensation Committee deems equitable and appropriate. For
example, an optionee would have the right to purchase, at the aggregate option
price provided for in his option agreement and on the same terms and
conditions, the kind and number of shares or other securities of the Company or
other such corporation which would have been issuable to him in respect of the
number of shares of common stock which were subject to such option immediately
prior to the effective date of such transaction if such shares had been then
owned by him. Any such adjustment would be effected so that the difference
between the aggregate fair market value of the shares or other securities
subject to the options immediately after given effect to such adjustment and
the aggregate option price of such shares or other securities will be
substantially equal to (but will not be more than) the difference between the
aggregate fair market value of the shares subject to such options immediately
prior to such adjustment and the aggregate option price of such shares. If the
adjustments described above have not been made with respect to any options,
SARs or restricted stock issued pursuant to the 1992 Awards Plan by the date
ten days prior to the scheduled effective date of any such merger,
consolidation or other reorganization, then such options and SARs will become
exercisable in full and the restrictions on the transfer, assignment, pledge or
other encumbrance of such restricted stock will lapse as of such date.
19
<PAGE>
Upon the approval of the Company's shareholders of a merger, consolidation or
other reorganization pursuant to which the outstanding shares of the Company's
common stock are to be exchanged for cash, or upon the adoption by shareholders
of a plan of complete liquidation, the restrictions on the transfer,
assignment, pledge or other encumbrance of restricted stock issued pursuant to
the 1992 Awards Plan will lapse and all options outstanding under the 1992
Awards Plan will become exercisable in full.
Federal Income Tax Consequences. The following discussion is a brief summary
of the current federal income tax rules (including proposed regulations)
relevant to stock options, SARs, restricted stock awards and other awards
granted to individuals who are U.S. citizens or residents. The rules governing
the tax aspects of these items are highly technical and subject to change.
Non-Qualified Options and SARs. The grant of a non-qualified option or SAR
with an exercise price per share not less than the fair market value of a share
of common stock on the date of grant does not result in any taxable income to
the recipient or deduction for the Company. However, when any such option is
exercised (assuming the common stock acquired is not restricted stock for
purposes of Section 83 of the Tax Code) the excess of the fair market value on
the exercise date of the shares acquired over the aggregate exercise price (the
"spread") will be taxable to the holder as ordinary compensation income.
Similarly, when an SAR is exercised, the amount paid to the holder will be
taxable as ordinary compensation income. In both cases, the Company will
generally be entitled to a tax deduction in an amount equal to the income
taxable to the holder.
The optionee's tax basis in shares acquired upon exercise of a non-qualified
option will equal the optionee's fair market value on the exercise date and the
optionee's holding period for such shares will begin on the day after the
exercise date.
ISOs. An optionee will not be required to report taxable income on the grant
or exercise of an ISO. The spread at exercise will, however, constitute an item
includible in alternative minimum taxable income and may thereby subject the
optionee to the alternative minimum tax.
Upon the disposition of shares acquired pursuant to the exercise of an ISO
("ISO shares") after the later of (a) two years from the date of the grant of
such ISO and (b) one year from the date such ISO was exercised (the "ISO
Holding Period"), the optionee will have a long-term capital gain or loss, as
the case may be, measured by the difference between the selling price and the
exercise price. In such case, the Company is not entitled to any tax deduction.
In general, if an optionee disposes of ISO shares before the expiration of
the ISO Holding Period (i.e., makes a "disqualifying disposition"), an amount
equal to the spread at exercise will be taxable as ordinary income to the
optionee at the time of the disposition. If the selling price is greater than
the fair market value of the shares on the date of exercise, the excess will be
taxable to the optionee as capital gain (long-term or short-term, depending
upon whether the optionee held the ISO shares for more than 12 months). Except
in certain limited circumstances (such as a disposition by gift or by sale to a
related person), if the selling price is less than the fair market value of the
shares on the date of exercise, the difference will ordinarily reduce the
amount of ordinary income taxable to the optionee.
In the case of a disqualifying disposition, the Company generally is entitled
a tax deduction in the same amount as the optionee's ordinary income. The
Company is not entitled to any deduction with respect to an optionee's capital
gains.
20
<PAGE>
Use of Stock to Pay Exercise Price. If an optionee delivers shares of
previously-acquired common stock ("old shares"), however acquired, in payment
of all or part of the exercise price of a non-qualified option, any
appreciation or depreciation in the value of the old shares after their
acquisition dates is not taxable as a result of such delivery. The optionee's
tax basis in, and holding period for, the old shares will carry over to the
same number of shares received at exercise on a share-for-share basis. Assuming
any additional shares received ("new shares") are not subject to restrictions,
their fair market value at the exercise date will be taxable to the optionee as
ordinary compensation income. The tax basis for the new shares will equal their
fair market value on the exercise date and the holding period for such shares
will begin on the day after the exercise date. The Company will generally be
entitled to a tax deduction equal to the optionee's ordinary income.
If an optionee delivers old shares (other than old shares acquired upon
exercise of an ISO and not held for the ISO Holding Period) in payment of all
or part of the exercise price of an ISO, any appreciation or depreciation in
the value of the old shares after their acquisition dates is not taxable as a
result of such delivery. The optionee's tax basis in, and holding period for,
the old shares will carry over to the same number of shares received (the
"replacement shares") on a share-for-share basis. However, under proposed
regulations, if there is a later disposition of the replacement shares,
satisfaction of the ISO Holding Period will be measured from the date those
shares were actually received (and not their holding period for other
purposes), and, if the result is a disqualifying disposition of the replacement
shares, the consequences will be computed as if the optionee had paid fair
value for the replacement shares at the time they were actually received (even
though that may be different than their tax basis for other purposes). With
respect to any new shares received, the optionee will have a tax basis equal to
the amount of the exercise price paid in cash (if any), and the holding period
will begin on the day after the exercise date. If there is a later disposition
of the new shares, satisfaction of the ISO Holding Period will be measured from
the date those shares were actually received, and the federal tax consequences
will be based on the amount actually paid for the new shares (which should be
the same as their tax basis for other purposes). Proposed regulations provide
that when an ISO is exercised using old shares, a later disqualifying
disposition of the shares received will be deemed to be a disposition of the
shares having the lowest tax basis first.
If an optionee pays the exercise price of an ISO in whole or in part with old
shares that were acquired upon exercise of an ISO and that have not been held
for the ISO Holding Period, the optionee incurs ordinary compensation income
(but not capital gain) under the rules applicable to disqualifying
dispositions, and the Company will generally be entitled to a corresponding
compensation expense deduction. An optionee's basis in the replacement shares
received is increased by the amount of the ordinary income recognized. Other
than this recognition of ordinary income and the corresponding increase in
basis, the rules described in the previous paragraph apply.
Restricted Stock. Unless the Compensation Committee specifies otherwise in
making a restricted stock award, a recipient of restricted stock may make an
election under Section 83(b) of the Tax Code ("Section 83(b)") to have the
value of such restricted stock (without any reduction for restrictions which
will lapse at some point in time) taxed as ordinary compensation income at the
date of receipt. In that case, any future appreciation or depreciation in the
value of the restricted stock will be taxed as capital gain or loss upon a
subsequent sale of the shares. If no such Section 83(b) election is made, the
recipient will not be taxed at the time of receipt, but will be taxed on
ordinary compensation income equal to the value of the restricted stock on the
date the restrictions expire. In either case, the Company is generally entitled
to a corresponding tax deduction equal to the amount of ordinary compensation
income recognized by the recipient. If no Section 83(b) election is made,
dividends paid on restricted stock are treated as compensation income to the
recipient and are generally deductible by the Company until the restrictions
expire.
21
<PAGE>
Other Awards. Because other awards can take many forms, it is not possible to
describe in general terms what the tax treatment will be.
Tax Withholding. The Company will withhold applicable federal and state
income taxes and will require, when applicable, that participants pay to the
Company, in addition to any exercise price, amounts required for any such
withholding. The Compensation Committee has other rights and powers which it
may exercise to satisfy any withholding or tax due with respect to any amount
payable or shares issuable under the 1992 Awards Plan. If the Compensation
Committee consent and other required conditions are met, participants may
satisfy all or part of such tax obligation by having the Company withhold
shares of common stock otherwise issuable under awards or by delivering
previously owned shares to the Company.
Section 16(b) Consequences. If a participant receives restricted stock or
acquires shares on exercising an option and an immediate sale of such shares
could subject such participant to liability under Section 16(b) of the Exchange
Act ("Section 16(b)"), such risk of liability may cause the date for
determining the fair value and the acquisition date of the shares to be
delayed. Due to recent revisions in the regulations adopted by the Commission
under Section 16(b), the application of this rule for delaying the
determination date is uncertain. However, the IRS will almost certainly limit
the delay to no more than six months from the date of receipt or acquisition.
This issue may be avoided (so that the actual acquisition date and fair value
on that date are used) by filing an election under Section 83(b) of the Tax
Code.
VOTE REQUIRED
The Proposed Amendments require approval by the affirmative vote of the
holders of a majority of the shares of common stock represented at the meeting,
in person or by proxy. If vote is made by proxy and if no contrary
specification is indicated on the proxy card, the shares represented thereby
will be voted for approval of the Proposed Amendments. If approval of the
Proposed Amendments is not received within the time period specified in the
1992 Awards Plan, the Proposed Amendments will terminate and be of no force or
effect. In this event, the Existing Plan will continue in effect but the
Company's ability to grant new awards under the Existing Plan will be
constrained due to the limited number of shares of common stock that currently
remain available for awards under such Plan.
THE BOARD RECOMMENDS A VOTE FOR APPROVAL OF
THE PROPOSED AMENDMENTS TO
THE 1992 OMNIBUS STOCK AWARDS PLAN FOR KEY EMPLOYEES
1995 OPTION PROGRAM
UNDER THE EXISTING PLAN
On March 2, 1995, the Board approved the 1995 Option Program (the "1995
Option Program") under the Existing Plan for the purpose of providing incentive
awards to the key employees of the Company and its subsidiaries.
Stock Option Grants. Under the 1995 Option Program, the Compensation
Committee approved the grant of stock options to purchase an aggregate of
approximately 330,375 shares of common stock of the Company to persons selected
by the Compensation Committee. Approximately 165 key employees of the Company
and its subsidiaries were granted a stock option under the 1995 Option Program.
No other grants were approved under the 1995 Option Program. The grant under
the 1995 Option Program was based on shares of common stock available under the
Existing Plan and before the adoption of the Proposed Amendments by the Board,
and as a result the 1995 Option Program is not subject to shareholder approval
of the Proposed Amendments.
22
<PAGE>
The options granted under the 1995 Option Program (the "1995 Options") are
subject to time vesting, and vest in three equal installments on the first,
second and third anniversary of grant if the optionee is employed by the
Company on such anniversary date and has served continuously and without
interruption in the employment of the Company from the date of grant until such
anniversary date. The per share exercise price for each 1995 Option granted is
$16.25, which is 100% of the fair market value of a share of common stock on
March 1, 1995, the date the options were granted. The 1995 Options expire on
the tenth anniversary of grant, but if an optionee ceases to be employed by the
Company for any reason, the option expires three or twelve months (depending on
the reason for cessation) following cessation of employment. Any leave of
absence for periods and purposes conforming to the personnel policies of the
Company and approved by the Compensation Committee shall not be deemed
cessation or interruption of employment. The 1995 Options and any rights
thereunder may not be transferred except by will or the laws of descent and
distribution, and during the lifetime of each optionee the option shall be
exercisable only by the optionee or his or her legal representative. All of the
1995 Options are non-qualified options.
MISCELLANEOUS
SHAREHOLDER PROPOSALS FOR 1996 ANNUAL MEETING
Proposals of shareholders intended to be presented at the 1996 Annual Meeting
must be received by the Company by January 17, 1996, to be considered for
inclusion in the Company's proxy statement and form of proxy relating to that
meeting. Such proposals should be addressed to Secretary, Material Sciences
Corporation, 2300 East Pratt Boulevard, Elk Grove Village, Illinois 60007.
DISCRETIONARY VOTING OF PROXIES ON OTHER MATTERS
The Board and management do not now intend to present, nor do they know of
any others who intend to present, any matters at the Annual Meeting of
Shareholders other than those disclosed in the notice of the meeting. Should
any other matter requiring a vote of the shareholders arise, however, the
proxies in the enclosed form confer upon the person or persons entitled to vote
the shares represented by such proxies discretionary authority to vote such
shares on any such other matter in accordance with their best judgment.
SOLICITATION OF PROXIES
The Company will bear the cost of the solicitation. In addition to
solicitation by mail, the Company will request banks, brokers, and other
custodian nominees and fiduciaries to supply proxy material to the beneficial
owners of the common stock of whom they have knowledge, and will reimburse them
for their expenses in so doing. In addition, the Company expects to pay $3,500,
plus expenses, for assistance by Corporate Investor Communications, Inc.
("CIC") in the solicitation of proxies. Some of the officers and other
employees of the Company and CIC may solicit proxies personally, by telephone,
telegraph, or mail. The officers and employees of the Company will not receive
any additional compensation for such activities.
23
<PAGE>
AUDITORS
Representatives of Arthur Andersen LLP, the Company's auditors, are expected
to be present at the annual meeting and will be available to respond to
questions and may make a statement if they so desire.
By Order of the Board of Directors,
William H. Vrba
Senior Vice President,
Chief Financial Officer, and
Secretary
Material Sciences Corporation
Elk Grove Village, Illinois
May 17, 1995
24
<PAGE>
EXHIBIT A
MATERIAL SCIENCES CORPORATION
1992 OMNIBUS STOCK AWARDS PLAN
FOR KEY EMPLOYEES
(As Proposed to Be Amended Effective March 2, 1995)
1. Purpose. The purpose of this 1992 Omnibus Stock Awards Plan for Key
Employees (this "Plan") is to provide incentives to management and other key
employees of Material Sciences Corporation (the "Company") and its subsidiaries
through rewards based upon the ownership and performance of the common stock of
the Company, $.02 par value per share ("common stock").
2. Limitations on Shares To Be Issued. The number of shares of common stock
with respect to which awards may be granted under this Plan and which may be
issued upon the exercise or payment thereof shall not exceed, in the aggregate,
2,287,500 shares, provided, however, that to the extent any awards hereunder
expire unexercised or unpaid or are cancelled, terminated or forfeited in any
manner without the issuance of shares of common stock thereunder, such shares
shall again be available under this Plan. Shares of common stock issued under
this Plan may be authorized and unissued shares of common stock, treasury
stock, or a combination thereof, as the Compensation Committee (the
"Compensation Committee") of the Board of Directors of the Company (the
"Board") shall determine.
3. Awards. The Compensation Committee may grant to those persons who it deems
to be key employees of the Company or any subsidiary of the Company
(collectively, the "participants"), in accordance with this Section 3 and the
other provisions of this Plan, stock options, stock appreciation rights
("SARs"), restricted stock and other awards.
(a) Options.
(i) Options granted under this Plan may be either incentive stock options
("ISOs") which qualify under Section 422 of the Internal Revenue Code of 1986,
as amended, or options which do not qualify under such Section ("non-qualified
options"), or in such other form, consistent with this Plan, as the
Compensation Committee may determine. Each option granted under this Plan shall
be evidenced by a written agreement between the Company and the optionee, and
such written agreement shall specify whether such option is intended to be an
ISO or a non-qualified option. Each option shall be exercisable immediately in
full or shall become exercisable in installments (based on the passage of time,
achievement of performance targets or both as determined by the Compensation
Committee) over the option period in such percentages of the total number of
shares covered by the option as shall be determined by the Compensation
Committee and stated in the agreement evidencing such option.
(ii) The per share option price shall be a price determined by the
Compensation Committee and specified in the option agreement, provided that the
per share option price with respect to any options granted under this Plan
(including, without limitation, any ISO's) shall not be less than 100% of the
fair market value (determined in accordance with procedures established by the
Compensation Committee, the "fair market value") of a share of common stock on
the date the option is granted.
(iii) Options shall be exercised in whole or in part by written notice to the
Company (to the attention of the Secretary of the Company) and payment in full
of the option price. Payment of the option price may be made, at the discretion
of the optionee, and to the extent permitted by the Compensation Committee, (A)
in
A-1
<PAGE>
cash (including check, bank draft, or money order), (B) in common stock (valued
at the fair market value thereof on the date of exercise), (C) by a combination
of cash and common stock or (D) with any other consideration.
(b) SAR
(i) An SAR shall entitle its holder to receive from the Company, at the time
of exercise of such right, an amount equal to the excess of the fair market
value (at the date of exercise) of a share of common stock over a specified
price fixed by the Compensation Committee multiplied by the number of shares of
common stock as to which the holder is exercising the SAR. SARs may be in
tandem with any previously or contemporaneously granted option or independent
of any option. The specified price of a tandem SAR shall be the option price of
the related option. The amount payable may be paid by the Company in common
stock (valued at its fair market value on the date of exercise), cash or a
combination thereof, as the Compensation Committee may determine, which
determination shall be made after considering any preference expressed by the
holder.
(ii) An SAR shall be exercised by written notice to the Company (to the
attention of the Secretary of the Company) at any time prior to its stated
expiration. To the extent a tandem SAR is exercised, the related option will be
cancelled and, to the extent the related option is exercised, the tandem SAR
will be cancelled.
(c) Incentive Awards of Restricted Stock.
(i) Shares of common stock may be awarded to participants, subject to this
paragraph 3(c) and such other terms and conditions as the Compensation
Committee may prescribe (such shares being called "restricted stock"). Each
certificate for restricted stock shall be registered in the name of the
participant and deposited, together with a stock power endorsed in blank, with
the Company.
(ii) There shall be established for each restricted stock award a restriction
period (the "restriction period") of such length as shall be determined by the
Compensation Committee. Shares of restricted stock may not be sold, assigned,
transferred, pledged or otherwise encumbered, except as hereinafter provided,
during the restriction period. Except for such restrictions on transfer and
such other restrictions as the Compensation Committee may impose, the
participant shall have all the rights of a holder of common stock as to such
restricted stock. The Compensation Committee, in its sole discretion, may
permit or require the payment of cash dividends to be deferred and, if the
Compensation Committee so determines, reinvested in additional restricted stock
or otherwise invested. At the expiration of the restriction period, the
Corporation shall redeliver to the participant (or the participant's legal
representative or designated beneficiary) the certificates deposited pursuant
to paragraph 3(c)i).
(iii) Except as provided by the Compensation Committee at the time of grant
or otherwise, upon a termination of employment for any reason during the
restriction period all shares of common stock still subject to restriction
shall be forfeited by the participant.
(d) Other Awards.
(i) Other awards, including, without limitation, performance shares,
convertible debentures, other convertible securities and other forms of awards
measured in whole or in part by the value of common stock, the performance of
the participant or the performance of the Company, may be granted under this
Plan. Such awards may be payable in common stock, cash or both, and shall be
subject to such restrictions and
A-2
<PAGE>
conditions, as the Compensation Committee shall determine. At the time of any
such award, the Compensation Committee shall, if applicable, determine a
performance period and performance goals to be achieved during the performance
period, subject to such later revisions as the Compensation Committee shall
deem appropriate to reflect significant unforeseen events such as changes in
laws, regulations or accounting practices, unusual or non-recurring items or
occurrences. Following the conclusion of each performance period, the
Compensation Committee shall determine the extent to which performance goals
have been attained or a degree of achievement between maximum and minimum
levels during the performance period in order to evaluate the level of payment
to be made, if any.
(ii) A participant may elect to defer all or a portion of any such award in
accordance with procedures established by the Compensation Committee. Deferred
amounts will be subject to such terms and conditions and shall accrue such
yield thereon (which may be measured by the fair market value of the common
stock and dividends thereon) as the Compensation Committee may determine.
Payment of deferred amounts may be in cash, common stock or a combination
thereof, as the Compensation Committee may determine. Deferred amounts shall be
considered an award under this Plan. The Compensation Committee may establish a
trust to hold deferred amounts or any portion thereof for the benefit of
participants.
4. Adjustments for Changes in Capitalization or Corporate Reorganizations.
Appropriate adjustments shall be made by the Compensation Committee in the
maximum number and kind of shares of common stock to be issued under this Plan,
and in the number and kind of shares of common stock that are the subject of
any option, SAR, restricted stock or other award under this Plan, to give
effect to any stock splits, stock dividends and other relevant changes in
capitalization occurring after the effective date of this Plan. If the Company
shall effect a merger, consolidation or other reorganization, pursuant to which
the outstanding shares of common stock shall be exchanged for other shares or
securities of the Company or of another corporation which is a party to such
merger, consolidation or other reorganization, the Company shall use its best
efforts to provide in any agreement or plan which it enters into or adopts to
effect any such merger, consolidation or other reorganization that: (1) any
holder of restricted stock issued pursuant to this Plan shall receive in such
transaction, subject to substantially the same restrictions in transferability
as apply to such restricted stock, the kind and number of shares or other
securities of the Company or such other corporation which is issuable to the
owner of a like number of unrestricted shares of common stock; (2) any optionee
under this Plan shall have the right (a) to purchase, at the aggregate option
price provided for in his option agreement and on the same terms and
conditions, the kind and number of shares or other securities of the Company or
such other corporation which would have been issuable to him in respect of the
number of shares of common stock which were subject to such option immediately
prior to the effective date of such merger, consolidation or other
reorganization if such shares had been then owned by him, and (b) to exercise
SARs with respect to such shares in lieu of such purchase to the extent such
optionee had such rights with respect to the options outstanding immediately
prior to the effective date of such merger, consolidation or other
reorganization; and (3) any holder of any other award under this Plan shall
receive in such transaction such kind and number of shares or other securities
of the Company or such other corporation as the Compensation Committee deems
equitable and appropriate. Any adjustment with respect to options required by
this Section 4 shall be effected in such manner that the difference between the
aggregate fair market value of the shares or other securities subject to the
options immediately after giving effect to such adjustment and the aggregate
option price of such shares or other securities shall be substantially equal to
(but shall not be more than) the difference between the aggregate fair market
value of the shares subject to such options immediately prior to such
adjustment and the aggregate option price of such shares. Any adjustments made
under this Section 4 shall be determined by the Compensation Committee.
A-3
<PAGE>
If the provision in the first paragraph above, insofar as it related to
options or SARs, has not been made with respect to any of the options or SARs
issued pursuant to this Plan by the date ten days prior to the scheduled
effective date of such merger, consolidation or other reorganization, then the
options and SARs outstanding under this Plan shall thereupon become exercisable
in full. If the provision for restricted stock described in the first paragraph
above has not been made with respect to any of the restricted stock issued
pursuant to this Plan by the date ten days prior to the scheduled effective
date of such merger, consolidation or other reorganization, then the
restrictions on the transfer, assignment, pledge or other encumbrance of such
restricted stock as to which such provision has not been made shall thereupon
lapse as of such date.
Upon the approval by the shareholders of the Company of a merger,
consolidation or other reorganization pursuant to which the outstanding shares
of common stock are to be exchanged for cash, or upon the adoption by the
shareholders of the Company of a plan of complete liquidation, the restrictions
on the transfer, assignment, pledge or other encumbrance of restricted stock
issued pursuant to this Plan shall thereupon lapse, and all options outstanding
under this Plan shall thereupon become exercisable in full.
5. Miscellaneous Provisions.
(a) Administration. This Plan shall be administered by the Compensation
Committee. Subject to the limitations of this Plan, the Compensation Committee
shall have the sole and complete authority: (i) to select participants in this
Plan, (ii) to make awards in such forms and amounts as it shall determine,
(iii) to impose such limitations, restrictions and conditions upon such awards
as it shall deem appropriate, (iv) to interpret this Plan and to adopt, amend
and rescind administrative guidelines and other rules and regulations relating
to this Plan, (v) to correct any defect or omission or to reconcile any
inconsistency in this Plan or in any award granted hereunder and (vi) to make
all other determinations and to take all other actions necessary or advisable
for the implementation and administration of this Plan. The Compensation
Committee's determinations on matters within its authority shall be conclusive
and binding upon the Company and all other persons. All expenses associated
with this Plan shall be borne by the Company, subject to such allocation to its
subsidiaries and operating units as it deems appropriate. The Compensation
Committee may, to the extent that any such action will not prevent this Plan
from complying with Rule 16b-3 of the Securities and Exchange Act of 1934, as
amended ("Rule 16b-3"), delegate any of its authority hereunder to such person
as it deems appropriate. The Compensation Committee may also establish a
"cashless exercise" program with a third party brokerage firm pursuant to
which, at the discretion of the Compensation Committee, options hereunder may
be exercised, subject to any restrictions imposed by the Compensation
Committee.
(b) Non-Transferability. Subject to the provisions of paragraph 5(e), no
award under this Plan, and no interest therein, shall be transferable by the
participant otherwise than by will or the laws of descent and distribution. All
awards shall be exercisable or received during the participant's lifetime only
by the participant or the participant's legal representative. Any purported
transfer contrary to this provision will nullify the award. Awards under this
Plan shall not be subject to execution, attachment or other process, and no
person shall be entitled to exercise any rights of a participant or possess any
rights of a participant by virtue of any attempted execution, attachment or
other process.
(c) Tax Withholding. The Compensation Committee shall have the power to
withhold, or require a participant to remit to the Company, an amount
sufficient to satisfy any withholding or other tax due with respect to any
amount payable and/or shares of common stock issuable under this Plan, and the
Compensation Committee may defer such payment or issuance unless indemnified to
its satisfaction. Subject to the consent of the Compensation Committee, a
participant may make an irrevocable election to have shares of common stock
otherwise issuable under an award withheld, tender back to the Company shares
of common
A-4
<PAGE>
stock received pursuant to an award or deliver to the Company previously-
acquired shares of common stock having a fair market value sufficient to
satisfy all or part of the participant's estimated tax obligations associated
with the transaction. Such election must be made by a participant prior to the
date on which the relevant tax obligation arises. The Compensation Committee
may disapprove of any election and may limit, suspend or terminate the right to
make such elections.
(d) Listing and Legal Compliance. The Compensation Committee may suspend the
exercise or payment of any award so long as it determines that securities
exchange listing or registration or qualification under any securities laws is
required in connection therewith and has not been completed on terms acceptable
to the Compensation Committee.
(e) Beneficiary Designation. Subject to paragraph 5(b), participants may
name, from time to time, beneficiaries (who may be named contingently or
successively) to whom benefits under this Plan are to be paid in the event of
their death before they receive any or all of such benefit. Each designation
will revoke all prior designations by the same participant, shall be in a form
prescribed by the Compensation Committee, and will be effective only when filed
by the participant in writing with the Compensation Committee during the
participant's lifetime. In the absence of any such designation, benefits
remaining unpaid or unexercised at the participant's death shall be paid to or
exercised by the participant's estate.
(f) Rights of Participants. Nothing in this Plan shall interfere with or
limit in any way the right of the Company to terminate any participant's
employment at any time, nor confer upon any participant any right to continue
in the employ of the Company for any period of time or to continue his or her
present or any other rate of compensation. No employee shall have a right to be
selected as a participant, or, having been so selected, to be selected again as
a participant.
(g) Effective Date and Term of Plan. This Plan as amended shall be effective
as of March 2, 1995, provided, however, that this Plan as amended shall cease
to be effective and any awards granted hereunder and permitted only as a
consequence of the amendments hereto shall become null and void if this Plan as
amended is not approved by the Company's shareholders before February 28, 1996.
(h) Amendment, Suspension and Termination of Plan. The Board or the
Compensation Committee may suspend or terminate this Plan or any portion hereof
at any time and may amend it from time to time in such respects as the Board or
the Compensation Committee may deem advisable; provided, however, that no such
amendment shall be made, without shareholder approval to the extent such
approval is required by law, agreement or the rules of any exchange upon which
the common stock is listed. No such amendment, suspension or termination shall
impair the rights of participants under outstanding awards without the consent
of the participants affected thereby or make any change that would disqualify
this Plan, or any other plan of the Company intended to be so qualified, from
the exemption provided by Rule 16b-3. The Compensation Committee may amend or
modify any award in any manner to the extent that the Compensation Committee
would have had the authority under this Plan to initially grant such award. No
such amendment or modification shall impair the rights of any participant under
any award without the consent of such participant.
(i) Compliance with 16b-3. It is the intent of the Company that this Plan
comply in all respects with Rule 16b-3, that any ambiguities or inconsistencies
in the construction of this Plan be interpreted to give effect to such
intention and that if any provision of the Plan is found not to be in
compliance with Rule 16b-3, that such provision shall be deemed null and void
to the extent required to permit this Plan to comply with Rule 16b-3.
A-5
<PAGE>
LOGOMATERIAL SCIENCES CORPORATION
2300 EAST PRATT BOULEVARD
ELK GROVE VILLAGE, ILLINOIS 60007
NOTICE OF ANNUAL MEETING
OF SHAREHOLDERS
AND PROXY STATEMENT
MEETING DATE
JUNE 22, 1995
YOUR VOTE IS IMPORTANT!
Please sign and promptly return your
proxy in the enclosed envelope.
LOGO
Printed on recycled paper
<PAGE>
MATERIAL SCIENCES CORPORATION
2300 EAST PRATT BOULEVARD
ELK GROVE VILLAGE, ILLINOIS 60007
PROXY--SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS--PROXY
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JUNE 22, 1995
PLEASE MARK, SIGN ON REVERSE SIDE, DATE
AND RETURN IN THE ENCLOSED ENVELOPE.
The undersigned hereby appoints G. Robert Evans and E.F. Heizer, Jr., as
proxies, each with full power of substitution, to represent and to vote, as
designated hereon, all the shares of common stock of Material Sciences
Corporation held of record by the undersigned, at the Annual Meeting of
Shareholders to be held on June 22, 1995, at 10:00 a.m., CDT in the Shareholders
Room on the 21st floor of Bank of America Illinois, 231 South LaSalle Street,
Chicago, Illinois, or at any adjournment thereof as follows:
Your vote for seven directors may be indicated on the reverse side. Jerome B.
Cohen, Roxanne J. Decyk, Eugene W. Emmerich, G. Robert Evans, E.F. Heizer, Jr.,
J. Frank Leach and Irwin P. Pochter have been nominated for election as
directors.
(Continued and to be signed on the reverse side)
<PAGE>
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED SHAREHOLDER. IF NO CONTRARY SPECIFICATION IS INDICATED, THE
SHARES REPRESENTED BY THIS PROXY WILL BE VOTED FOR THE ELECTION OF ALL NOMINEES
FOR DIRECTOR AND "FOR" ITEM 2 BELOW. PLEASE MARK BOX [/] OR [X]. DISCRETIONARY
AUTHORITY TO CUMULATE VOTES IS BEING SOLICITED.
1. Election of directors: (duly nominated and named on the reverse side of
this proxy)
FOR ALL NOMINEES AUTHORITY
(except as listed to WITHHELD
the contrary) FOR ALL
[_] [_]
AUTHORITY WITHHELD FOR THE FOLLOWING ONLY (write each nominee's name in the
space below).
- - -------------------------------------------------------------------------------
Name(s)
2. Approval of the proposed amendments to the Material Sciences Corporation
1992 Omnibus Stock Awards Plan for Key Employees regarding an increase in
the aggregate number of shares of common stock that may be awarded, and
requiring that all stock option awards be made at not less than 100% of fair
market value: (mark one)
FOR AGAINST ABSTAIN
[_] [_] [_]
3. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting.
Please sign exactly as name appears. For joint
accounts, all tenants should sign. Executors,
administrators, trustees, etc. should so
indicate when signing. If a corporation,
please sign in full corporate name by president
or other authorized officer. If a partnership,
please sign in partnership name by authorized
person.
Dated:____________________________________, 1995
------------------------------------------------
Signature
------------------------------------------------
Signature, if held jointly
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
- - --------------------------------------------
PLEASE MARK INSIDE BLUE BOXES SO THAT DATA
PROCESSING EQUIPMENT WILL RECORD YOUR VOTES
- - --------------------------------------------
