<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 CORP
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-------------------------------------------------------------------------
(3) Filing Party:
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(4) Date Filed:
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Notes:
<PAGE>
LOGO
June 16, 1997
Dear Shareowner:
The 1997 Annual Meeting of Shareowners will be held on Thursday, July 17,
1997, at 10:00 a.m. CDT in the Shareholders Room on the 21st floor of the Bank
of America building located at 231 South LaSalle Street, Chicago, Illinois. We
hope you will attend. We will be voting on the election of directors, an
increase in authorized shares of common stock, an amendment to the 1992
Omnibus Stock Awards Plan for Key Employees, an amendment to the Employee
Stock Purchase Plan 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 describe the matters upon
which the shareowners will vote. It is important that your shares be
represented, regardless of the number you own. Accordingly, we 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 of the Board
Gerald G. Nadig
President and Chief Executive Officer
<PAGE>
LOGO
----------------
NOTICE OF ANNUAL MEETING OF SHAREOWNERS
----------------
The Annual Meeting of Shareowners of Material Sciences Corporation will be
held on Thursday, July 17, 1997, at 10:00 a.m. CDT, at the Bank of America
building located at 231 South LaSalle Street, Chicago, Illinois, in the
Shareholders Room (21st floor), for the following purposes:
1. To elect a Board of nine directors;
2. To consider and vote upon the proposal to increase the number of
authorized shares of common stock of the Company from 20,000,000 to
40,000,000;
3. To consider and vote upon the proposal to amend the 1992 Omnibus Stock
Awards Plan for Key Employees to increase the number of shares of Common
Stock issuable thereunder by 150,000 shares;
4. To consider and vote upon the proposal to amend the Employee Stock
Purchase Plan to increase the number of shares of Common Stock issuable
thereunder by 600,000 shares; and
5. To act upon such other matters as may properly come before the meeting
or any adjournment thereof.
Shareowners of record at the close of business on May 23, 1997, are entitled
to notice of and to vote at this meeting and any adjournment thereof.
Shareowners 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,
James J. Waclawik, Sr.
Vice President,
Chief Financial Officer, and Secretary
Elk Grove Village, Illinois
June 16, 1997
<PAGE>
LOGO
---------------------------
PROXY STATEMENT
---------------------------
This proxy statement is furnished to shareowners of Material Sciences
Corporation ("MSC" or "Company") in connection with the solicitation, by order
of the Board of Directors of the Company ("Board"), of proxies for use at the
Annual Meeting of Shareowners of the Company to be held at 10:00 a.m. CDT, on
Thursday, July 17, 1997, 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 shareowner 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
("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
shareowners. If no instructions are given, the shares will be voted for the
election to the Board of the nominees indicated in the proxy, for approval of
the proposal to increase the number of authorized shares of common stock of
the Company from 20,000,000 to 40,000,000 shares, for approval of the proposal
to amend the 1992 Omnibus Stock Awards Plan for Key Employees (as amended to
date, the "1992 Awards Plan") to increase the number of shares of Common Stock
issuable thereunder by 150,000 shares and for approval of the proposal to
amend the Employee Stock Purchase Plan (as amended to date, the "Purchase
Plan") to increase the number of shares of Common Stock issuable thereunder by
600,000 shares.
The close of business on May 23, 1997, has been fixed as the record date for
the determination of shareowners entitled to notice of and vote at the
meeting. On that date, there were outstanding 15,324,250 shares of Common
Stock. The Company first sent this proxy statement and the accompanying form
of proxy to shareowners entitled thereto on or about June 16, 1997.
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 shareowners give notice at the meeting before the voting of their
intention to cumulate their votes in the election of directors, all
shareowners 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 nine
persons receiving the greatest number of votes shall be elected as directors.
Discretionary authority to cumulate votes is being solicited. If the vote with
respect to the election of directors 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. Non-voted
shares on the election of directors and shares of Common Stock 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 if cumulative voting
occurs or will not be counted in determining whether a majority vote with
respect to any director has been obtained if cumulative voting is not
utilized.
<PAGE>
ELECTION OF DIRECTORS
The nine persons listed below are proposed to be elected for a period to end
at the 1998 Annual Meeting of Shareowners, 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 the earlier of 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 approval of the election of
the nine 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 as set forth in the proxy. All of the
nominees are presently directors of the Company and, with the exception of Mr.
Howard B. Witt, were elected at the 1996 Annual Meeting of Shareowners.
Certain information regarding the nominees, as of May 23, 1997, is set forth
below, including their ages, the period each has served on the Board and the
business experience of each during the past five years.
----------------
JEROME B. COHEN DIRECTOR SINCE 1988
[PHOTO]
AGE 64
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
[PHOTO]
AGE 44
Ms. Decyk, currently a consultant on strategy and business
development, was Vice President, Planning of Amoco, from June
1994 through April 1997. She was previously Vice President-Sales
& Marketing-Polymers, Amoco Chemical Company from March 1993 and
Vice President-Commercial and Industrial Sales for Amoco from
May 1991 through March 1993. Ms. Decyk also serves as a director
of Snap-On Tools, Inc. and Harris Bankcorp.
EUGENE W. EMMERICH DIRECTOR SINCE 1979
[PHOTO]
AGE 66
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
[PHOTO]
AGE 65
Mr. Evans has served as Chairman of the Board since January
1997, and Chairman and CEO of the Company since June 1991. From
February 1991 until June 1991, he served as Chairman, President,
and CEO of the Company. Mr. Evans also serves as a director of
Consolidated Freightways Corporation, Fiberboard Corporation,
and Swift Energy Company.
E. F. HEIZER, JR. DIRECTOR SINCE 1976
[PHOTO]
AGE 67
Mr. Heizer is a venture capitalist and has been involved in
developing early stage companies since 1962. Since 1985, he has
served as Chairman of Heizer International, and from 1969 until
1989, he served as CEO of Heizer Corporation. Since 1994, he has
served as Chairman of LBL, a Lloyds-related Bermuda-based
insurance company. Mr. Heizer also serves as a director of
Amdahl Corporation, Chesapeake Energy Corporation and Needham &
Company, Inc.
[PHOTO]
J. FRANK LEACH DIRECTOR SINCE 1993
AGE 76
Mr. Leach retired in 1993 as Vice Chairman of the Board of
Consolidated Freightways Inc., a 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. Mr. Leach also serves as
a director of Acme Fixture & Casework, Inc., Basic American
Foods, Inc., Newell Industrial, Inc., Newell Manufacturing,
Inc., Golden Valley Produce, Inc., Clayton Group, Inc., Cascade
Group, Inc., and Consolidated Freightways Corporation.
GERALD G. NADIG DIRECTOR SINCE 1996
[PHOTO]
AGE 52
Mr. Nadig has been President and CEO of the Company since
January 1997, and was President and Chief Operating Officer
("COO") since 1991. From 1989 to 1991, Mr. Nadig was President
and COO of MSC Pre Finish Metals Inc., a subsidiary of the
Company.
IRWIN P. POCHTER DIRECTOR SINCE 1982
[PHOTO]
AGE 73
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 1980. Mr. Pochter also serves as a director of Fort Lewis
College located in Durango, Colorado.
3
<PAGE>
HOWARD B. WITT DIRECTOR SINCE JUNE 1997
AGE 57
[PHOTO]
Mr. Witt has been Chairman, President and CEO of Littelfuse,
Inc. since 1993, was previously President and CEO of Littelfuse
from 1990, and prior to 1990 served in several key management
positions with Littelfuse since joining the company in 1979. Mr.
Witt is currently a member of the Electronic Industries
Association Board of Governors, the Artisan Mutual Fund Board of
Directors and the Board of Directors of Franklin Electric Co.
COMMITTEES AND MEETINGS OF THE BOARD
The Board held four meetings during fiscal 1997. Included among the
committees of the Board are standing Audit, Compensation and Organization and
Technology Committees. During fiscal 1997, directors in total attended
approximately 98% 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 1997. The functions of this
committee include the following: 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 annual report to shareowners 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 1997. The functions of this committee include the following:
determining, in consultation with the Company's Chairman of the Board and
President and CEO, the compensation, including long-term performance
incentives, of the Company's officers; reviewing and approving bonus
compensation paid to the Company's key employees; reviewing and making
recommendations to the Board with respect to the Company's compensation and
benefit plans and policies; and overseeing director affairs, including serving
as the nominating committee.
The Technology Committee, currently consisting of Drs. Cohen (Chairperson)
and Emmerich, met twice during fiscal 1997. 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 1997, directors who are not executive officers of the Company
received an annual retainer of $20,000, plus $1,000 per meeting for attendance
at Board meetings and $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. $10,000 of the annual retainer was paid in cash, with
the remainder paid in the form of stock options under the 1996 Stock Option
Plan for Non-Employee Directors (the "1996 Plan"). Each eligible non-employee
director also received an additional incentive stock option under the 1996
Plan.
4
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT OF THE COMPANY
The following table provides certain information, as of May 23, 1997 (except
as otherwise noted), on the beneficial ownership of Common Stock as to each
director of the Company, the executive officers named on the Summary
Compensation Table below and the directors and officers 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 described below is the address of the Company.
<TABLE>
<CAPTION>
NUMBER OF SHARES SHARES UNDER
NAME BENEFICIALLY OWNED (1) EXERCISABLE OPTIONS (2) TOTAL PERCENT OF CLASS
- ---- --------------------- ---------------------- --------- ----------------
<S> <C> <C> <C> <C>
Jerome B. Cohen......... 1,500 14,720 16,220 (3)
Roxanne J. Decyk........ 5,338 14,720 20,058 (3)
Eugene W. Emmerich...... 6,525 24,420 30,945 (3)
G. Robert Evans......... 126,490 188,400 314,890 2.1%
E.F. Heizer, Jr......... 152,251 20,280 172,531 1.1%
J. Frank Leach.......... 7,500 18,320 25,820 (3)
Gerald G. Nadig......... 65,818 85,300 151,118 (3)
Irwin P. Pochter........ 69,376 24,420 93,796 (3)
Howard B. Witt.......... -- 1,375(4) 1,375 (3)
Frank D. Graziano....... 68,408 32,100 100,508 (3)
Frank J. Lazowski, Jr... 33,850 27,600 61,450 (3)
Thomas E. Moore......... 9,769 20,550 30,319 (3)
James J. Waclawik, Sr... 9,529 21,300 30,829 (3)
All officers and direc-
tors
as a group (20 per-
sons).................. 678,372 649,570 1,325,392 8.6%
</TABLE>
- --------
(1) For purposes of the table, a person generally is deemed to be a beneficial
owner of a security (including restricted stock) 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 May 23, 1997
and options which become exercisable within 60 days thereafter.
(3) Less than 1%.
(4) Represents an annual retainer option granted under the 1996 Plan on June
2, 1997, the date Mr. Witt joined the Board as a non-employee director,
which option is exercisable immediately.
5
<PAGE>
INFORMATION WITH RESPECT TO CERTAIN SHAREOWNERS
The following table sets forth certain information on the beneficial
ownership of Common Stock as of May 23, 1997, 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 shareowner has
sole or shared voting and/or investment power as to the shares shown.
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIALLY OWNED (1) CLASS (2)
------------------------------------ ---------------------- ----------
<S> <C> <C>
Capital Research and Management Compa-
ny(3)................................. 1,000,000 6.5%
333 So. Hope Street
Los Angeles, CA 90071
</TABLE>
- --------
(1)As reported in Schedule 13G filed with the Securities and Exchange
Commission.
(2)Based upon shares outstanding as of May 23, 1997.
(3) Capital Research and Management Company is the wholly-owned subsidiary of
the Capital Group Companies, Inc. and serves as an investment advisor to
SMALLCAP World Fund, Inc. (the registered holder of such shares).
6
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
I. SUMMARY COMPENSATION TABLE
The following table discloses compensation received by the Company's
Chairman of the Board, the President and Chief Executive Officer and the four
other executive officers (all of whom except Dr. Graziano comprise the
Company's Policy Committee).
<TABLE>
<CAPTION>
ANNUAL LONG-TERM
COMPENSATION COMPENSATION AWARDS
--------------- -------------------------
RESTRICTED SECURITIES
STOCK UNDERLYING ALL OTHER
NAME AND PRINCIPAL FISCAL SALARY BONUS AWARD(S) OPTIONS/SARS COMPENSATION
POSITION YEAR ($) ($)(1) ($) (#) ($)(4)
- ------------------ ------ ------ ------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
G. R. Evans............. 1997 376,000 157,658 -- 33,000(6) 12,160
Chairman of the Board 1996 365,000 73,000 -- 33,000(5) 16,120
1995 316,000 200,610 440,100(2) 30,000(3) 10,281
G. G. Nadig............. 1997 287,600 146,790 -- 27,600(6) 11,460
President and Chief 1996 270,000 48,060 -- 27,600(5) 10,105
Executive Officer (CEO) 1995 240,000 140,191 -- -- 14,502
T. E. Moore............. 1997 130,600 63,037 -- 6,300(6) 9,144
Executive Vice President
and 1996 120,800 58,602 -- 7,800(7)(8) 8,933
Chief Operating Officer
(COO) 1995 115,000 46,802 -- -- 8,395
J. J. Waclawik, Sr...... 1997 125,000 61,761 -- 12,600(9)(10) 7,704
Vice President, Chief
Financial 1996 111,000 14,608 -- 8,400(5) 8,477
Officer, and Secretary
(CFO) 1995 101,000 42,005 -- -- 7,709
F. D. Graziano.......... 1997 141,100 45,606 -- 8,400(6) 10,630
Senior Vice President, 1996 137,000 19,947 -- 8,400(5) 14,410
Technology 1995 128,600 61,124 -- -- 14,217
F. J. Lazowski, Jr...... 1997 123,600 39,852 -- 8,400(6) 11,879
Vice President, 1996 120,000 17,472 -- 8,400(5) 12,047
Human Resources 1995 110,000 51,227 -- -- 11,452
</TABLE>
- --------
(1) The 1997 bonus compensation for key corporate and affected business unit
managers included a negative adjustment for prior periods to reflect the
recomputed profit component after taking into account the accounting
irregularities announced on April 7, 1997 (see Compensation and
Organization Committee Report below for more information).
(2) Restricted shares awarded April 21, 1994 (market price on date 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). Total restricted stock holdings as of February
28, 1997 for Mr. Evans were 52,800 shares (the total of the restricted
stock award on April 21, 1994 and September 22, 1993 less 13,200 shares
which became vested on June 2, 1995 when the market price of Common Stock
reached $20 per share). Market value as of February 28, 1997 for such
restricted stock holdings was $864,600. Dividends, if any, are paid on
restricted Common Stock in the same manner as they are paid on
unrestricted Common Stock.
(3) 30,000 options were granted under the 1993 Restricted Stock/Stock Option
Awards Program under the 1992 Awards Plan 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).
(4) Company matching contribution to the employee's Savings and Investment
Plan contribution and, starting in fiscal 1995, payments for the Defined
Contribution Plan.
7
<PAGE>
(5) Granted under the 1995 Stock Option Program under the 1992 Awards Plan
(the "1995 Stock Option Program") at an option price of $16.25 (market
price on the date of grant). One-third of the options vested on March 1,
1996, one-third vested on March 1, 1997, and the final third will vest on
March 1, 1998.
(6) Granted under the 1995 Stock Option Program at an option price of $14.50
(market price on the date of grant). One-third of the options vested on
March 1, 1997, one-third will vest on March 1, 1998, and the final third
will vest on March 1, 1999.
(7) 6,300 shares were granted under the 1995 Stock Option Program on March 1,
1995 at an option price of $16.25 (market price on the date of grant).
One-third of the options vested on March 1, 1996, one-third vested on
March 1, 1997, and the final third will vest on March 1, 1998.
(8) 1,500 shares were granted under the Research and Development Incentive
Program under the 1992 Awards Plan on September 1, 1995 at an option price
of $18.75 (market price on the date of grant). The entire option will vest
on September 1, 1998.
(9) 8,400 shares were granted under the 1995 Stock Option Program on March 1,
1996 at an option price of $14.50 (market price on the date of grant).
One-third of the options vested on March 1, 1997, one-third will vest on
March 1, 1998, and the final third will vest on March 1, 1999.
(10) 4,200 shares were granted under the 1995 Stock Option Program on
September 19, 1996 at an option price of $17.63 (market price on the date
of grant). One-third of the options will vest on September 19, 1997, one-
third will vest on September 19, 1998, and the final third will vest on
September 19, 1999.
II. OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF STOCK
PRICE APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM
- ----------------------------------------------------------------------- ---------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS/SARS EXERCISE
UNDERLYING GRANTED TO OR BASE
OPTIONS/SARS EMPLOYEES IN PRICE EXPIRATION
NAME GRANTED FISCAL YEAR ($/SHARE) DATE 0% 5% (3) 10% (4)
- ---- ------------ ------------ --------- ---------- --- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
G. R. Evans............. 33,000(1) 7.9 14.50 03/01/06 $ 0 $300,960 $762,630
G. G. Nadig............. 27,600(1) 6.6 14.50 03/01/06 0 251,712 637,836
T. E. Moore............. 6,300(1) 1.5 14.50 03/01/06 0 57,456 145,593
J. J. Waclawik, Sr...... 8,400(1) 2.0 14.50 03/01/06 0 76,608 194,124
J. J. Waclawik, Sr...... 4,200(2) 1.0 17.63 09/19/06 0 46,578 118,020
F. D. Graziano.......... 8,400(1) 2.0 14.50 03/01/06 0 76,608 194,124
F. J. Lazowski, Jr...... 8,400(1) 2.0 14.50 03/01/06 0 76,608 194,124
</TABLE>
- --------
Note--The dollar amount of total shareowner gain during the March 1, 1996 to
March 1, 2006 option period at the expiration date of such options at the
5% and 10% price appreciation rates would be $139,391,667 and
$353,213,621, respectively. The dollar amount of named optionees gain
after ten years at the 5% and 10% price appreciation rates would be
$886,530 and $2,246,451, respectively. The percentage of named optionees'
gain to shareowner gain at both the 5% and 10% rates would be 0.6%.
(1) Options for the named individuals were granted at the fair market value of
a share of Common Stock on the date of grant (March 1, 1996) pursuant to
the 1995 Stock Option Program. One-third of the options vested on March 1,
1997, one-third will vest on March 1, 1998, and the final third will vest
on March 1, 1999.
(2) Options for the named individual were granted at the fair market value of
a share of Common Stock on the date of grant (September 19, 1996) under
the 1992 Awards Plan. One-third of the options granted on September 19,
1996 will vest on September 19, 1997, one-third will vest on September 19,
1998 and the final third will vest on September 19, 1999.
8
<PAGE>
(3) The market price of $14.50 per share at the date of grant of March 1, 1996
would appreciate to $23.62 for the options term. The market price $17.63
per share at the date of grant of September 19, 1996 would appreciate to
$28.72 for the options term.
(4) The market price of $14.50 per share at the date of grant of March 1, 1996
would appreciate to $37.61 for the options term. The market price $17.63
per share at the date of grant of September 19, 1996 would appreciate to
$45.73 for the options term.
III. AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END
OPTION/SAR VALUES
The following table provides information on option exercises and unexercised
option values for the named executive officers.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS/SARS AT IN-THE-MONEY OPTIONS/SARS
SHARES FISCAL YEAR END (#) AT FISCAL YEAR END ($)(2)
ACQUIRED VALUE ------------------------- -------------------------
NAME ON EXERCISE(#) REALIZED($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- -------------- -------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
G. R. Evans............. 18,900 214,420 153,200 121,000 1,579,084 192,225
G. G. Nadig............. None N/A 62,100 70,000 335,743 105,050
T. E. Moore............. None N/A 15,600 15,750 85,651 20,306
J. J. Waclawik, Sr...... None N/A 14,800 22,700 76,250 26,013
F. D. Graziano.......... None N/A 25,300 20,000 142,663 29,200
F. J. Lazowski, Jr...... None N/A 20,800 20,000 114,200 29,200
</TABLE>
- --------
Note--The exercise price of all options granted to the above named individuals
was the fair market value of a share of Common Stock on the date of grant.
(1) The reported value realized on the exercised options is the market price on
the exercise date less the exercise price.
(2) The value of unexercised options is based on a market price of $16.38 (the
market price on February 28, 1997), less the exercise price.
COMPENSATION AND ORGANIZATION COMMITTEE REPORT
The functions of the Compensation and Organization Committee include
establishing and administering compensation plans for Material Sciences
Corporation executive officers, reviewing executive officer compensation levels
and evaluating 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 1997.
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 shareowners.
9
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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 similar-sized
companies in general industry salary levels.
.Significant incentive opportunity for management employees:
--Total earnings (salary plus bonus) opportunity between median and
60th percentile competitive levels for superior performance.
--Significant variability based on individual and business unit
profit performance. Sixty percent (60%) of incentive compensation
is based upon profit 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, working capital, safety 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 1997 to all key management
employees at the 60th percentile competitive level, under the 1992
Awards Plan.
. Special stock ownership long-term incentive to senior management
employees:
--One-time grant to management employees in fiscal 1994 to encourage
and facilitate increased stock ownership and executive retention.
The Chairman of the Board (former CEO) received two grants, one in
fiscal 1994, and one in fiscal 1995.
--Restricted Stock Award that vests after five to eight 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 (2) years after the
restricted stock vests--otherwise the ISO shares do not vest for
nine (9) years and eleven (11) months. Together with the "regular"
stock options, this one-time grant puts the total long-term
incentive package for key management employees at the 75th
percentile for similar-size companies in general industry.
FISCAL 1997 PERFORMANCE
At the beginning of fiscal 1997, the Compensation and Organization Committee
approved performance objectives for Mr. Evans, the Chairman and CEO for most
of fiscal 1997. His performance relative to these objectives was the basis for
determining his 1997 annual incentive award. Sixty percent of his potential
award was based on the achievement of a corporate profitability objective. The
remaining forty percent of the CEO's annual incentive award was based on
achievement of a combination of specific objectives, including expense
10
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control, company growth and other objectives. Performance goals for the other
executive officers including Mr. Nadig (the current CEO) were approved by Mr.
Evans (the CEO at the beginning of the year). These 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.
On April 7, 1997, the Company announced that it had discovered accounting
irregularities at one of its operating units. An independent investigation has
confirmed that the controller of that operating unit acted alone and altered
and falsified the unit's financial reports beginning in fiscal 1995. The
Company's Incentive Compensation Program for management has a strong
relationship between earnings (profit) performance and bonus payout.
Management recommended, and the Compensation and Organization Committee
concurred, that the 1997 incentive compensation for key corporate and affected
business unit managers would include an adjustment for prior periods to
reflect the recomputed profit component after taking into account the above-
mentioned accounting irregularities.
Mr. Evans earned an annual incentive award of $157,658 in fiscal 1997. The
incentive award reflects a reduction of $53,443 or 25.3% due to the less than
targeted results in fiscal 1997 and the adjustment for prior periods. The
other named executives (excluding Mr. Moore, promoted to Chief Operating
Officer on May 1, 1997, whose unit was not affected by the irregularities)
received annual incentive awards in fiscal 1997 which reflect a reduction of
21.3% for the same reason. In all, 124 officers, managers and key employees
received lower annual incentive awards in fiscal 1997 due to the accounting
irregularities.
FISCAL 1997 ACTIONS
On January 1, 1997, Mr. Nadig was elected President and Chief Executive
Officer of the Company. Mr. Evans remains as Chairman of the Board. On October
1, 1996, Mr. Waclawik was elected Vice President, Chief Financial Officer, and
Secretary and Mr. Vrba retired from the Company. Mr. Nadig and Mr. Waclawik
received 20.5% and 22.5% promotional salary increases, respectively.
In fiscal 1997, Mr. Evans was granted options for 33,000 shares and Mr.
Nadig was granted options for 27,600 shares. The other four named executives
received options for a total of 35,700 shares. All options were granted at
market price at the time of grant. Salaries were increased 3% for all named
executives in March 1996. In general, salary increases reflected individual
performance, company performance and changes in the compensation market.
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
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MSC
PERFORMANCE GRAPH
The following chart shows total shareowner returns, assuming $100 was
invested on February 29, 1992 in Material Sciences Corporation, the S&P 500
Index, and the Comparator Group (as described below), with dividends, if any,
reinvested through February 28, 1997.
COMPARISON OF 5-YEAR CUMULATIVE TOTAL RETURNS
VERSUS THE S&P 500 AND COMPARATOR GROUP
LOGO
<TABLE>
<CAPTION>
FEBRUARY 28 OR 29,
----------------------------------
1993 1994 1995 1996 1997
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
MSC.......................................... $107.0 $171.9 $154.5 $139.9 $159.3
S&P 500...................................... 110.7 120.0 128.8 173.3 218.7
COMPARATOR GROUP............................. 112.3 125.9 129.0 143.8 143.7
</TABLE>
COMPARATOR GROUP: BRUSH WELLMAN (BW)
OPTICAL COATING (OCLI)
CHEMFAB (CFA)
SOUTHWALL TECHNOLOGIES (SWTX)
WORTHINGTON INDUSTRIES (WTHG)
STEEL TECHNOLOGIES (STTX)
The Comparator Group used in the performance graph covering the period
fiscal 1993 through fiscal 1997 has been adjusted to reflect the elimination
of Loctite which was acquired by another company during fiscal 1997.
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<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 of the Board 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
restricted 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 two, three, four, and five years of employment with
the Company (subject to acceleration if the market price of a share of Common
Stock achieves certain levels). All of such options were vested on July 13,
1995.
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.
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 (the "Code"), 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 shareowners 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
shareowners) of equity securities of the entity owning such shares, sponsoring
the change in directors or combining with the Company, or an affiliate
thereof.
The Company has a severance agreement (the "Severance Agreement") with Mr.
Waclawik which provides for, among other things, severance benefits in certain
circumstances. The Severance Agreement provides for eighteen months of both
health benefits and severance payments equal to Mr. Waclawik's then current
monthly base salary should his employment be terminated by the Company for
reasons other than Good Cause (as defined in the Severance Agreement) or by
Mr. Waclawik for certain specified reasons.
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<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. All of the individuals
named in the Summary Compensation Table were participants in the pension plan
on December 31, 1992. The Company has since terminated the defined benefit
pension plan and in December 1995 made distributions to all participants of
their accrued pension amounts in full satisfaction of all obligations of the
Company under such plan, and participants will not be entitled to any further
payments thereunder.
SUPPLEMENTAL PENSION PLAN AGREEMENTS
The Company has entered into Supplemental Pension Plan Agreements (the
"Supplemental Pension Plan Agreements") with 14 current employees, including
all executive officers as of May 23, 1997 (except Messrs. Evans, DeNeve and
Williams), 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 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 Common Stock or (2) the participant's employment is
terminated other than for cause, disability, death, or voluntarily by the
employee. For these purposes, termination of employment is 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, 1997, $2,305,616 had been accrued under the plans for
current employees, of which $1,061,287 had been accrued to be paid to executive
officers as of May 23, 1997 and $913,379 for persons named in the Summary
Compensation Table (such accruals being $0, $260,622, $95,664, $17,208,
$357,146 and $182,739 for Messrs. Evans, Nadig, Moore, Waclawik, Graziano and
Lazowski, respectively).
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<PAGE>
PROPOSAL TO INCREASE AUTHORIZED SHARES OF COMMON STOCK
On May 23, 1997, the Board unanimously adopted a resolution approving an
amendment ("Share Increase Proposal") to the Company's Certificate of
Incorporation which would increase the number of authorized shares of common
stock of the Company ("Undesignated Common Stock") from 20,000,000 to
40,000,000 shares. The Company intends to designate all of the additional
authorized shares of Undesignated Common Stock as Common Stock, par value $.02
per share, as further described below. As of May 23, 1997, 15,324,250 shares
of Common Stock were issued and outstanding, 2,974,699 shares of Common Stock
were reserved for issuance under outstanding stock options and convertible
notes and 979,648 shares of Common Stock were held in treasury. The Board
resolved that the Share Increase Proposal was advisable and be submitted to
shareowners of the Company for their approval.
The Company does not have any present plan, understanding or agreement to
issue any shares of Undesignated Common Stock or additional shares of Common
Stock other than to meet the requirements of its employee benefit and
incentive plans and its convertible securities. However, the Board believes
that the proposed increase in authorized shares of Undesignated Common Stock
(and consequently the number of shares of Common Stock that may be issued) is
desirable to enhance the Company's flexibility in connection with possible
future actions, such as stock dividends, stock splits, financings, employee
benefit programs, mergers, acquisitions of property and the possible funding
of new businesses or for other corporate purposes. The Board will determine
whether, when and on what terms the issuance of shares may be warranted in
connection with any of the foregoing purposes. It is not anticipated that the
Board will solicit shareowners for further authorization before issuing any
such shares, except to the extent required by the rules of New York Stock
Exchange or applicable law. As with the issuance of any shares of Common Stock
other than on a pro rata basis to all current shareowners, the issuance of
additional shares of Common Stock would reduce the proportionate interests in
the Company held by current shareowners.
The purpose of the Board in adopting the Share Increase Proposal is as
stated above, although the availability for issuance of additional shares of
Common Stock could enable the Board to render more difficult or discourage an
attempt to obtain control of the Company. For example, the issuance of shares
of Common Stock in a public or private sale, merger or similar transaction
would increase the number of outstanding shares, thereby possibly diluting the
interest of a party attempting to obtain control of the Company. The
additional shares could also be used to render more difficult a merger or
similar transaction even if it appears to be desirable to a majority of the
shareowners. The Company is not aware of any pending or threatened efforts to
obtain control of the Company. In addition, the mere existence of authorized
but unissued Common Stock may have a depressive effect on the market price of
the Common Stock.
Because the rights, preferences and limitations of the Undesignated Common
Stock are not provided for or designated in the Company's Certificate of
Incorporation, the Board may direct from time to time, without further action
on the part of shareowners of the Company, the issuance of shares of
Undesignated Common Stock in one of more series and with such rights,
preferences and limitations as the Board may determine with respect to each
series. The Board has designated all currently authorized shares of
Undesignated Common Stock as Common Stock, par value $.02 per share, which
Common Stock is traded on the New York Stock Exchange. The Board intends to
designate as Common Stock all additional authorized shares of Undesignated
Common Stock and, if the Share Increase Proposal is approved by shareowners,
to file a certificate of designation to such effect with the Secretary of
State of Delaware shortly after approval.
The Board may also direct from time to time, without further action on the
part of shareowners of the Company, the issuance of shares of preferred stock
("Undesignated Preferred Stock") in one or more series and
15
<PAGE>
with such rights, preferences and limitations as the Board may determine with
respect to each series because the rights, preferences and limitations of the
Undesignated Preferred Stock are also not provided for or designated in the
Company's Certificate of Incorporation. The Board has designated 1,000,000
shares of Undesignated Preferred Stock as Series B Preferred Stock, par value,
$1.00, in connection with its shareowners rights plan.
If approved, the Share Increase Proposal would become effective upon filing
with the Secretary of State of Delaware a Certificate of Amendment to the
Company's Certificate of Incorporation, which filing the Company anticipates
would take place shortly after approval by shareowners.
Under the provisions of the General Corporation Law of Delaware, a favorable
vote of a majority of the outstanding shares of Common Stock of the Company
entitled to vote on the Share Increase Proposal is required for adoption of the
Share Increase Proposal. 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 Share Increase Proposal. Abstentions and non-
voted shares with respect to the Share Increase Proposal will have the legal
effect of a vote against the Share Increase Proposal.
THE BOARD RECOMMENDS A VOTE FOR
APPROVAL OF THE PROPOSED INCREASE IN THE NUMBER OF
AUTHORIZED SHARES OF COMMON STOCK
16
<PAGE>
PROPOSAL TO AMEND THE 1992 OMNIBUS STOCK
AWARDS PLAN FOR KEY EMPLOYEES
The 1992 Awards Plan was originally adopted by the Board and approved by the
shareowners of the Company in 1992. The 1992 Awards Plan was amended in 1995 to
increase to 2,287,500 from 1,687,500 the aggregate number of shares of Common
Stock with respect to which awards may be granted under the 1992 Awards Plan.
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 an amendment to the 1992
Awards Plan ("1992 Plan Proposal") on May 23, 1997. The 1992 Plan Proposal will
increase the aggregate number of shares of Common Stock with respect to which
awards may be granted under the 1992 Awards Plan to 2,437,500 from 2,287,500
shares of Common Stock. The Board adopted the 1992 Plan Proposal subject to
approval and adoption by the shareowners of the Company and provided that if
not so approved, such amendment will terminate and be of no force or effect.
The Board believes that the 1992 Plan Proposal is necessary for the Company
to be able to continue 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. As of May 23, 1997, of the
2,287,500 shares of Common Stock available for issuance upon the exercise or
payment of awards granted under such plan, 7,793 shares of Common Stock
remained available to be granted as awards. The increase of 150,000 shares and
the currently available shares will be used for new hires, promotions, and
other incentives in line with past practices.
The Company is currently reviewing its stock-based incentive plans. It
expects that the shares currently available for awards under the 1992 Awards
Plan and the additional shares that will be available if the 1992 Plan Proposal
is approved by shareowners will be fully utilized by the end of fiscal 1998 or
early fiscal 1999. Management intends to recommend a stock-based plan to
provide long-term incentives (aligned with increases in shareowner value) to
the Compensation and Organization Committee of the Board during fiscal 1998.
Based on the results of this activity, management expects to propose a stock-
based incentive plan at the 1998 Annual Shareowners meeting.
For purposes of the following discussion, the 1992 Awards Plan as it exists
prior to the effectiveness of the 1992 Plan Proposal is referred to as the
"Existing Plan" and as proposed to be amended is referred to as the "Amended
Awards Plan."
In the event that the 1992 Plan Proposal is not approved by the Company's
shareowners, 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 the Existing Plan.
The complete text of the Amended Awards Plan reflecting all amendments to
date and the 1992 Plan Proposal is set forth in Exhibit A attached hereto and
should be read in its entirety by shareowners. The following description of the
Amended Awards Plan is qualified in its entirety by Exhibit A.
Administration Eligibility. The Compensation and Organization Committee
administers the Amended Awards Plan, including the determination of employees
eligible for participation and the form and amounts of awards. The Compensation
and Organization Committee may, to the extent that any such action will not
prevent the Amended Awards Plan from complying with Rule 16b-3 ("Rule 16b-3")
of the Securities Exchange Act of
17
<PAGE>
1934 (as amended, "Exchange Act"), delegate any of its authority thereunder to
such persons as it deems appropriate. Under the Amended 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
May 23, 1997, there were approximately 230 persons (including all executive
members of the Company) eligible for participation under the Amended Awards
Plan.
Limitations on Shares to be Issued. After giving effect to the 1992 Plan
Proposal, a maximum of 2,437,500 shares of Common Stock will be authorized to
be issued under awards granted under the Amended Awards Plan. Shares covered
by any award granted under the Amended Awards Plan which subsequently expire
unexercised or unpaid or are canceled, terminated or forfeited in any manner
without the issuance of shares of Common Stock will again be available under
the Amended Awards Plan. Based on the closing price of Common Stock on May 23,
1997, the aggregate market value of the total of 2,437,500 shares of Common
Stock issuable under the Amended Awards Plan (which includes 7,793 shares
currently available for issuance under the Existing Plan and the additional
150,000 shares covered by the 1992 Plan Proposal) is approximately
$34,125,000. The calculation of the aggregate market value with respect to
shares of Common Stock underlying options granted under the Amended Awards
Plan is not reduced for prices paid or payable to the Company for such Common
Stock by each optionee upon exercise.
Awards. Awards may be in the form of stock options, stock appreciation
rights ("SARs"), restricted stock or other awards.
Options. Options granted under the Amended Awards Plan may be either ISO's
or non-qualified options or such other form of option as the Compensation and
Organization 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 and Organization Committee) over the option period as
determined by the Compensation and Organization Committee. The expiration
dates and the per share option price shall be determined by the Compensation
and Organization Committee and specified in the option agreement, provided
that the per share option price with respect to any option 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 and Organization 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 Amended Awards Plan allows the Compensation and Organization
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 canceled
and, to the extent the related option is exercised, the tandem SAR will be
canceled. 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 and Organization Committee
may determine.
Incentive Awards of Restricted Stock. The Amended Awards Plan allows the
Compensation and Organization Committee to award shares of Common Stock to
participants ("restricted stock"). The Compensation and Organization Committee
will establish a restriction period ("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
18
<PAGE>
of a holder of Common Stock as to such restricted stock. The Compensation and
Organization Committee may permit or require the payment of cash dividends to
be deferred and, if the Compensation and Organization Committee so determines,
reinvested in additional restricted stock or otherwise invested. Except as
provided by the Compensation and Organization 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.
Other Awards. The Amended Awards Plan allows the Compensation and
Organization 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 and Organization 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 and
Organization Committee may 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 and Organization Committee may 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 and Organization Committee may
suspend or terminate the Amended Awards Plan or any portion thereof at any time
and may amend it from time to time in such respects as the Board or the
Compensation and Organization Committee may deem advisable; provided, however,
that no such amendment shall be made, without shareowner 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. The Compensation and Organization
Committee may amend or modify any award in any manner to the extent that the
Compensation and Organization Committee would have had the authority under the
Amended Awards 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.
Adjustments; Sale of the Company. Appropriate adjustments will be made by the
Compensation and Organization Committee in the maximum number and kind of
shares of Common Stock to be issued under the Amended 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 shall
effect a merger, consolidation or other reorganization pursuant to which the
outstanding shares of Common Stock shall be exchanged for shares or other
securities of the Company or any other corporation, the Company shall use its
best efforts to provide in any related agreement or plan that any holder of an
award under the Amended Awards Plan will receive in such transaction, as
further described in the Amended Awards Plan, such kind and number of shares or
other securities of the Company or such other corporation as the Compensation
and Organization 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 is 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
19
<PAGE>
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 Amended 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.
Upon the approval of the Company's shareowners 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 shareowners
of a plan of complete liquidation, the restrictions on the transfer,
assignment, pledge or other encumbrance of restricted stock issued pursuant to
the Amended Awards Plan will lapse and all options outstanding under the
Amended 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 and SARs 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 Code) the excess of the fair market
value on the exercise date of the shares acquired over the aggregate exercise
price ("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.
ISO's. 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 disposition by gift or by sale to a
related person), if the selling price is less than
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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
gain.
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 replacements 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 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.
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 and Organization 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
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Amended Plan. If the Compensation and Organization 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 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 (which might occur if the
specific option grant is not approved by a requisite vote of the Board or
Compensation and Organization Committee), such risk of liability may cause the
date for determining the fair value and the acquisition date of the shares to
be delayed for six months from the date of acquisition. This issue may be
avoided (so that the actual acquisition date and fair market value on that
date are used) by filing an election under Section 83(b) of the Code.
VOTE REQUIRED
The 1992 Plan Proposal requires 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 1992 Plan Proposal. Abstentions and non-
voted shares with respect to the 1992 Plan Proposal will not be counted in
determining whether the 1992 Plan Proposal receives the affirmative vote of a
majority of the shares present and entitled to vote at the meeting. If the
1992 Plan Proposal is not approved and adopted by the shareowners of the
Company at the upcoming 1997 Annual Meeting, the 1992 Plan Proposal 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 the Existing
Plan.
THE BOARD RECOMMENDS A VOTE FOR APPROVAL OF THE 1992 PLAN PROPOSAL
TO THE 1992 OMNIBUS PLAN FOR KEY EMPLOYEES
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PROPOSAL TO AMEND THE EMPLOYEE STOCK PURCHASE PLAN
The Purchase Plan was originally adopted by the Board and approved by the
shareowners of the Company in 1985. After reviewing the Company's current
compensation programs and incentives for its employees and consideration of,
among other things, the compensation profile of employees at comparable
companies, the Board adopted an amendment to the Purchase Plan ("Purchase Plan
Proposal") on May 23, 1997. The Purchase Plan Proposal will increase by
600,000 the aggregate number of shares of Common Stock that may be issued
under the Purchase Plan.
The purpose of the Purchase Plan Proposal is to enhance the incentives of
participant employees to create value for the Company and its shareowners by
making participants shareowners themselves and thereby giving them a direct
ownership interest in the Company. The Purchase Plan allows participants to
purchase shares of Common Stock at 85% of the fair market value thereof on the
first or last day of specified purchase periods (whichever is less) by
authorizing specified payroll deductions to effect purchases pursuant to the
Purchase Plan.
As of May 23, 1997, a maximum of 86,590 shares of Common Stock remained
available for issuance under the Purchase Plan. Thus, the Board expects that
it will need to begin utilizing the shares newly available under the Purchase
Plan as a result of the Purchase Plan Proposal beginning on or around February
1998.
The Board adopted the Purchase Plan Proposal subject to approval and
adoption by the shareowners of the Company and provided that if not so
approved, such amendment will terminate and be of no force or effect. In the
event that the Purchase Plan Proposal is not approved by the Company's
shareowners, the Company's ability to continue the Purchase Plan will be
constrained due to the limited number of shares of Common Stock that remain
available for issuance under the Purchase Plan.
The complete text of the Purchase Plan reflecting all amendments to date and
the Purchase Plan Proposal is set forth in Exhibit B attached hereto and
should be read in its entirety by shareowners. The following description of
the Purchase Plan is qualified in its entirety by Exhibit B.
Eligibility. Any active employee of the Company and its subsidiaries,
including officers and directors who are employees, may participate in the
Purchase Plan except employees (a) whose customary employment is twenty hours
or less per week or (b) whose customary employment is for not more than five
months in any calendar year. As of May 23, 1997, the Company and its
subsidiaries employed approximately 1,000 persons eligible to participate in
the Purchase Plan. The Company will not grant to any participant any right to
purchase shares of Common Stock if the exercise of such right would permit the
fair market value of all shares of Common Stock purchased by the participant
under all employee stock purchase plans of the Company and its subsidiaries to
exceed $25,000 in any calendar year, or if such exercise would cause such
participant to own five percent or more of the combined voting power or value
of all classes of the Company's stock. The amount of shares to be purchased by
any participant will be determined by the participant, subject to the
limitations set forth below.
Limitations on Shares To Be Issued. After giving effect to the Purchase Plan
Proposal, a maximum of 1,264,536 shares of Common Stock will be authorized for
issuance under the Purchase Plan, of which 577,946 shares have been utilized
since 1985. Appropriate adjustments will be made in the maximum number of
shares of Common Stock that may be issued under the Purchase Plan and awards
granted thereunder to give effect to any stock splits, stock dividends and
other relevant changes in the Company's capitalization. Shares issued under
the Purchase Plan may be authorized and unissued shares or treasury shares.
The Purchase Plan will automatically terminate when the maximum number of
shares of Common Stock issuable in connection with the Purchase Plan has been
purchased. Based on the closing price of Common Stock on May 23, 1997, the
aggregate
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market value of the total of 686,590 additional shares of Common Stock
issuable under the Purchase Plan (which is comprised of the 86,590 shares
currently available for issuance under the Purchase Plan and the additional
600,000 shares contemplated by the Purchase Plan Proposal) is approximately
$9,612,260.
Basis of Participation. Each eligible employee may enroll in the Purchase
Plan during the one-month enrollment period immediately preceding the
commencement of each purchase period. In order to enroll in the Purchase Plan,
an employee must file a payroll deduction authorization card which directs the
employer to deduct not less than two percent nor more than six percent of such
employee's gross earnings during each payroll period. A participant may change
the amount of his payroll deduction during any enrollment period.
Payroll deductions will be credited to a purchase account established for
each participant. Interest will accrue with respect to amounts credited from
time to time to the participant's purchase account. At the end of each six-
month purchase period, the amount in a participant's account will be applied
to purchase the maximum number of whole shares of Common Stock obtainable at a
price equal to 85% of the fair market value of such shares on the first or
last day of such purchase period, whichever is less. A participant may, at his
option and without terminating his participation in the Purchase Plan, elect
to receive in cash the full amount credited to his purchase account, together
with accrued interest thereon, at any time.
A participant may at any time elect to terminate his participation in the
Purchase Plan and receive the entire cash balance (including accrued interest)
in his purchase account by giving the requisite notice to his employer. The
death or termination of employment of any participant shall cause an immediate
termination of such participant's participation in the Purchase Plan, and the
Company shall thereupon return to such employee or his legal representative
the amount of cash remaining in such participant's purchase account (including
accrued interest).
Participants shall have all of the rights and privileges of any shareowner
with respect to such shares. Rights to purchase shares of Common Stock
pursuant to the Stock Purchase Plan are not transferable, except by will and
the laws of descent and distribution, and may be exercised during the lifetime
of the person to whom they were granted only by such person.
Administration. The Purchase Plan will be administered by the Board of
Directors of the Company or, if designated by the Board, a committee of
directors not eligible to participate in the Purchase Plan. Responsibility for
administration of the Purchase Plan has been delegated to the Compensation and
Organization Committee. All expenses of administering the Purchase Plan will
be paid by the Company.
Amendment. The Board may amend the Purchase Plan at any time in such
respects as the Board or the Compensation and Organization Committee may deem
advisable. No amendment so effected may, however, (a) materially adversely
affect any purchase rights outstanding during the purchase period in which
such amendment is to be effected, (b) increase the maximum number of shares of
Common Stock that may be purchased under the Purchase Plan, (c) decrease the
per share purchase price for shares under the plan below 85% of the fair
market value of such shares on the first or last day of the purchase period,
whichever is less, or (d) adversely affect the qualification of the Purchase
Plan under Section 423 of the Code.
Federal Income Tax Consequences. The following discussion is intended only
as a general summary of the federal income tax consequences arising from the
purchase of shares of Common Stock pursuant to the Purchase Plan ("Plan
Shares") and the subsequent disposition of such Plan Shares, as based upon the
Code as currently in effect. Because federal income tax consequences will vary
as a result of individual circumstances, each employee participating in the
Purchase Plan should consult his or her tax advisor with respect to the tax
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consequences of the purchase or disposition of Plan Shares. Moreover, the
following summary relates only to participants' federal income tax treatment,
and state, local and foreign tax consequences may be substantially different.
The Purchase Plan is an "employee stock purchase plan" as defined in Section
423 of the Code and the Company reports the tax consequences of rights to
purchase stock and the exercise of such rights pursuant to the Purchase Plan
accordingly. Except where noted otherwise, the following discussion assumes
that the Purchase Plan is so qualified.
Under applicable provisions of the Code, participants are taxed on all
compensation income, including the amount of payroll deductions used to
purchase Plan Shares. However, assuming the Purchase Plan is qualified as an
employee stock purchase plan pursuant to Code Section 423, participants will
not recognize taxable income, and the Company will not be entitled to a
deduction, upon the grant or exercise of a right to purchase Plan Shares. If
the Purchase Plan is not so qualified for any reason, then the grant of a right
to purchase Plan Shares will not be taxable, but participants will recognize
ordinary income on the date of purchase of Plan Shares (under the Purchase
Plan, the date of purchase of Plan Shares is the last day of the purchase
period) equal to the difference between the price paid and the fair market
value of the Plan Shares on the purchase date, and the Company will be entitled
to a deduction for the same amount. Thereafter, a participant will be taxed
like any other investor in Common Stock, as if the participant had purchased
the Plan Shares at fair market value.
Assuming the Purchase Plan qualifies under Code Section 423, the tax
treatment of a participant who sells Plan Shares (or makes a taxable exchange
of Plan Shares for other property) depends on how long the participant holds
those Plan Shares, measured from the date of grant of the right to purchase
such Plan Shares--that is, the first date of the purchase period ("Grant
Date"). If a participant sells Plan Shares more than two years after the Grant
Date, the gain or loss on such sale is computed as the difference between the
price paid and the sale price. If the Plan Shares are sold at a gain, a portion
of the gain will be treated as ordinary compensation income equal to the lesser
of (a) 15% of the fair market value of the Plan Shares on the Grant Date and
(b) the difference between the fair market value of the Plan Shares on the date
of disposition and the amount the participant paid for such Plan Shares. If
there is any additional gain (in excess of the compensation income amount), the
remaining gain will be long-term capital gain. If the Plan Shares are sold at a
loss, the loss will be a capital loss, and no portion of the loss will be
treated as an ordinary loss or deduction. The Company will not be entitled to
any deduction as a result of any such sale.
If a participant sells Plan Shares within two years after the Grant Date, a
two-step analysis is required. First, the participant will recognize
compensation income in the year of sale equal to 15% of the fair market value
of the Plan Shares on the date of purchase. This amount of compensation income
is then treated as an additional amount paid for the Plan Shares, so that the
participant is deemed to have purchased the Plan Shares at their fair market
value on the Grant Date. Second, capital gain or loss will be computed as the
difference between the actual sale price and the deemed purchase price (that
is, the difference between the actual sale price and the fair market value on
the date of purchase). The capital gain or loss will be long-term or short-term
gain or loss depending on whether the participant held the Plan Shares for more
than one year after the date of purchase. In the case of a sale of Plan Shares
within two years after the date of purchase, the Company will be entitled to a
deduction in the year of sale equal to the amount the participant reports as
compensation income.
If a participant makes a gift or otherwise disposes of Plan Shares other than
in a taxable exchange or sale, the participant may recognize compensation
income in the year of such disposition. In the case of a disposition more than
two years after the Grant Date, if the fair market value of the Plan Shares on
the date of disposition is greater than the amount the participant paid for
such Plan Shares, the amount of compensation income will be
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the lesser of (a) 15% of the fair market value of the Plan Shares on the Grant
Date and (b) the difference between the fair market value of the Plan Shares on
the date of disposition and the amount the participant paid for such Plan
Shares. If the fair market value of the Plan Shares on the date of disposition
is not greater than the amount the participant paid for such Plan Shares, the
participant does not recognize any compensation income. In the case of such a
disposition within two years of the Grant Date, the amount of ordinary
compensation income will be 15% of the fair market value of the Plan Shares on
the date of purchase, regardless of the fair market value at the time of the
disposition. In such case, the Company will be entitled to a deduction for the
amount of the participant's compensation income.
If a participant dies while still holding Plan Shares and the fair market
value of the Plan Shares on the date of death is greater than the amount the
participant paid for such Plan Shares, the tax return for the year of death
must include compensation income equal to the lesser of (a) 15% of the fair
market value of the Plan Shares on the Grant Date and (b) the difference
between the fair market value of the Plan Shares on the date of death and the
amount the participant paid for such Plan Shares. If the fair market value of
the Plan Shares on the date of death is not greater than the amount the
participant paid for such Plan Shares, the tax return for the year of death
will not include any compensation income relating to the Plan Shares.
The above discussion assumes that any participant that is subject to six
month short-swing profit liability under Section 16(b) of the Exchange Act (a
"16(b) Person") (typically, officers and directors of the Company) has made a
proper election pursuant to Section 83(b) of the Code for each purchase of Plan
Shares (which elections must be filed within 30 days of each purchase of Plan
Shares). However, if a 16(b) Person has not made such an election and disposes
of Plan Shares within two years after the Grant Date (other than by reason of
death), the amount of ordinary compensation income (if any) will generally be
equal to the difference between the amount the participant paid for such Plan
Shares and the fair market value of the Plan Shares on the date six months
after the date of purchase (that is, at the time such Plan Shares vest) rather
than equal to 15% of the fair market value of the Plan Shares on the date of
purchase. In the case of such a disposition of Plan Shares within two years
after Grant Date, the holding period for determining whether capital gain is
long-term or short-term may begin on the date six months after the date of
purchase of the Plan Shares (rather than the date of purchase of the Plan
Shares).
Any dividends paid on Plan Shares must be reported as ordinary income in the
year paid, regardless of the fact that such dividends are reinvested in
additional Plan Shares. The sale of Plan Shares purchased through dividend
reinvestment is subject to the income tax rules that normally apply to the sale
of securities.
As discussed above, the compensation to an employee related to the purchase
and disposition of Plan Shares is only deductible by the Company if the
employee disposed of the Plan Shares (other than by death) within two years
after purchase. However, if in any taxable year beginning after December 31,
1993 an employee's total compensation from the Company (including compensation
related to the purchase of Plan Shares) exceeds $1 million, compensation in
excess of $1 million that would otherwise be deductible by the Company may not
be deductible under Code Section 162(m) if such employee is a highly
compensated employee employed by the Company at the end of the taxable year
whose compensation is required to be disclosed under the Exchange Act.
Compensation that is "performance-based" within the meaning of Code Section
162(m) is excluded from the calculation of taxable income subject to the $1
million deduction limit. It is expected that compensation related to the
purchase of Plan Shares will not be "performance-based" and, therefore, such
compensation that would otherwise be deductible by the Company will only be
deductible in accordance with the $1 million deduction limit of Code Section
162(m).
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VOTE REQUIRED
The Purchase Plan Proposal requires 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 Purchase Plan Proposal. Abstentions and non-
voted shares with respect to the Purchase Plan Proposal will not be counted in
determining whether the Purchase Plan Proposal receives the affirmative vote
of a majority of the shares present and entitled to vote at the meeting. If
the Purchase Plan Proposal is not approved and adopted by the shareowners of
the Company at the upcoming 1997 Annual Meeting, the Purchase Plan Proposal
will terminate and be of no force or effect. In this event, the Purchase Plan
will continue in effect but the Company's ability to issue Common Stock in
connection therewith will be constrained due to the limited number of shares
of Common Stock that currently remain available for issuance under the
Purchase Plan.
THE BOARD RECOMMENDS A VOTE FOR APPROVAL OF THE PURCHASE PLAN
PROPOSAL TO THE EMPLOYEE STOCK PURCHASE PLAN
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's directors and
officers to file reports of ownership and changes in ownership of shares of
the Company's Common Stock with the Securities and Exchange Commission
("SEC"). Directors and officers are required by SEC regulations to furnish the
Company with copies of all Section 16(a) reports they file. Based on its
review of the copies of such reports received by it, or written
representations from certain reporting persons that no Forms 5 were required
for those persons, the Company believes that, from March 1, 1996 through
February 28, 1997, its directors and officers complied with all applicable
filing requirements except as noted below. During fiscal 1997, G. Robert
Evans, an officer of the Company, was late in filing with the SEC one report
(Form 4) relating to one transaction involving the exercise of an option. Mr.
Evans retained ownership of the Common Stock received upon exercise of the
option. Gerald G. Nadig, an officer of the Company, filed a Form 4 covering
November 1995 which showed a sale of 1,549 shares of Common Stock, but such
Form 4 did not show that an irrevocable trust established by Mr. Nadig for the
benefit of his children purchased such shares. Mr. Nadig has amended his
November 1995 Form 4 to reflect such acquisition by such trust. Mr. Nadig has
and does disclaim beneficial ownership of the shares of Common Stock held by
such trust.
MISCELLANEOUS
SHAREOWNER PROPOSALS FOR 1998 ANNUAL MEETING OF SHAREOWNERS
Proposals of shareowners intended to be presented at the 1998 Annual Meeting
of Shareowners must be received by the Company by February 16, 1998, 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, 2200 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 1997 Annual Meeting of
Shareowners other than those disclosed in the notice of the meeting. Should
any other matter requiring a vote of the shareowners 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.
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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
$5,000, 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.
ADDITIONAL INFORMATION
The Company will provide without charge to each shareowner upon written
request a copy of the Company's Annual Report on Form 10-K, including the
financial statement schedules, for its most recent fiscal year. Individuals
interested in receiving such Form 10-K should by written request contact:
Shareowner Relations Department
Material Sciences Corporation
2200 East Pratt Boulevard
Elk Grove Village, IL 60007
INDEPENDENT PUBLIC ACCOUNTANTS
Representatives of Arthur Andersen LLP, the Company's independent public
accountants, 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,
James J. Waclawik, Sr.
Vice President, Chief Financial
Officer, and Secretary
Material Sciences Corporation
Elk Grove Village, Illinois
June 16, 1997
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EXHIBIT A
MATERIAL SCIENCES CORPORATION
1992 OMNIBUS STOCK AWARDS PLAN
FOR KEY EMPLOYEES
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, 2,437,500 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 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.
A-1
<PAGE>
(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 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
A-2
<PAGE>
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.
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
A-3
<PAGE>
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 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
A-4
<PAGE>
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 stockholders
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 stockholder 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>
EXHIBIT B
MATERIAL SCIENCES CORPORATION
EMPLOYEE STOCK PURCHASE PLAN
----------------
1. Purpose: The Purpose of this Employee Stock Purchase Plan (the "Plan") is
to provide employees of Material Sciences Corporation (the "Company") and its
subsidiaries (as defined in Section 14 hereof) (collectively, the
"Participating Companies") with added incentive to continue in the employment
of the Participating Companies and to encourage increased efforts to promote
the best interests of the Participating Companies by permitting eligible
employees to purchase shares of common stock of the Company (the "Stock"),
having a par value of $.02 per share, at a price less than the then current
market price thereof. The Plan is intended to qualify as an "employee stock
purchase plan" under Section 423 of the Internal Revenue Code of 1986, as
amended (the "Code").
2. Eligibility: Participation under the Plan shall be open to all active
employees of the Participating Companies except (a) employees whose customary
employment by the Participating Companies is 20 hours or less per week, and
(b) employees whose customary employment by the Participating Companies is for
not more than five months in any calendar year. No right to purchase Stock
shall accrue under the Plan in favor of any person who is not an eligible
employee, and no eligible employee shall acquire such right to purchase Stock
(i) if, immediately after receiving such right, such employee would own 5% or
more of the total combined voting power or value of all classes of stock of
the Company or any subsidiary corporation (as defined in Section 424 of the
Code), taking into account in determining stock ownership any stock
attributable to such employee under Section 424 of the Code; or (ii) if such
purchase would permit such employee's rights to purchase stock under all
employee stock purchase plans from time to time in effect of the Company and
its subsidiary corporations (as so defined) to accrue at a rate which exceeds
$25,000 of fair market value of such stock for each calendar year, all
determined in the manner provided by Section 423 of the Code.
3. Effective date of Plan: The Plan shall become effective on such date as
may be specified by the Board of Directors of the Company (the "Board"),
provided that in no event shall the Plan become effective unless within 12
months of the date of its adoption by the Board it has been approved at a duly
called meeting of the shareholders of the Company.
4. Participation and Purchase of Shares: Each eligible employee shall be
entitled to become a participant in the Plan (a "participant") during either
of two one-month enrollment periods in each fiscal year of the Company. Unless
otherwise determined by the Board or a committee of directors not eligible to
participate in the Plan (the "Committee") designated by the Board to
administer the Plan, such enrollment periods shall be the months of February
and August. To become a participant, an eligible employee shall execute and
deliver to his employer a payroll deduction authorization form (the
"Authorization") which shall become effective on the first day following the
end of the enrollment period. Each Authorization shall direct that payroll
deductions be made by the employee's employer for each payroll period ending
during the period of such employee's participation in the Plan and shall
specify the amount of such payroll deduction as a percentage of the
participant's gross earnings from the Participating Companies for such period
(before withholding or other deductions) that is not less than two percent or
greater than six percent.
Payroll deductions shall be made for each participant in accordance with his
Authorization until his participation in the Plan terminates, his
Authorization is revised or the Plan terminates, all as hereinafter provided.
B-1
<PAGE>
During any enrollment period, a participant may change the amount of his
payroll deductions. No other changes shall be permitted except that a
participant may elect to terminate his participation in the Plan as hereinafter
provided. All such permitted changes shall be effected by filing a new
Authorization in the manner described in the first paragraph of Section 4.
Payroll deductions made pursuant to the Plan shall be credited to the
purchase account of the participant in question. At the end of each purchase
period (as hereinafter defined), the amount in each participant's account,
including any interest thereon as provided in Section 7 hereof, shall be
applied to the purchase of the maximum number of whole shares of Stock, which
can be purchased with such amount, determined by dividing such amount by the
Purchase Price (as hereinafter defined) for such purchase period. Any amount
remaining in the purchase account after the purchase of such shares shall
remain credited to such account and shall be carried over to the following
purchase period.
The first purchase period under the Plan shall commence on March 1, 1985 and
shall end on August 31, 1985. So long as the Plan remains in effect, new 6
month purchase periods shall commence on each succeeding September 1 and March
1.
5. Purchase Price: The purchase price (the "Purchase Price") per share of
Stock hereunder for any purchase period shall be 85% of the lesser of (a) the
fair market value of a share of Stock on the first day of such a purchase
period, and (b) the fair market value of a share of Stock on the last day of
such purchase period, provided that if such percentage results in a fraction of
one cent, the Purchase Price shall be increased to the next higher full cent.
6. Issuance of Shares and Delivery of Certificates: To the extent that the
Company's obligations hereunder are to be satisfied by the issuance of Stock,
shares which each participant has purchased for each purchase period shall be
issued at the time they are purchased. Certificates representing the shares
purchased shall be delivered to the participant within a reasonable time after
the end of each purchase period. Notwithstanding any other provision of the
Plan, each participant who is an "officer" or "director" of the Company (as
such terms are used in Rule 16b-3 promulgated under the Securities Exchange Act
of 1934, as amended (the "1934 Act")) shall, prior to such participant's
receipt of any certificates representing shares, either (i) provide a written
representation to the Company that the shares so distributed will be held by
such participant for at least six months prior to sale or other disposition or
(ii) terminate his participation in the Plan for a period of at least six
months in accordance with Section 8 hereof. Notwithstanding the foregoing or
any other provision of the Plan, each participant who is an officer or director
of the Company (as such terms are used in Rule 16b-3 promulgated under the 1934
Act) may not sell or dispose of any shares of Stock until at least six months
after the last day of the purchase period with respect to such shares.
7. Interest on Purchase Accounts: Interest shall accrue during each purchase
period with respect to amounts credited from time to time to a purchase account
of a participant at a rate equal to the rate paid on the first business day of
such purchase period on Certificate of Deposits having ninety-day maturities.
After the close of each purchase period, a report will be made to each
participant stating the entries made to his purchase account, including the
interest accrued and the number of shares purchased and the applicable Purchase
Price.
8. Termination of Participation: A participant may at any time elect to
terminate his participation in the Plan, except that no such termination shall
be effective as to any purchase period unless such election is received by one
of the Participating Companies in writing prior to the last business day of
such period. A participant may also at any time request in writing payment to
him of the full amount to his credit in his purchase account, including any
interest thereon as provided in Section 7 hereof, without thereby terminating
his participation of
B-2
<PAGE>
the Plan, provided that no such request shall be effective as to any purchase
period unless received prior to the last business day of such period. Upon any
such termination or request, the employer of such participant shall promptly
refund to him the amount to his credit in his purchase account.
Notwithstanding any other provision of the Plan, if an officer or director of
the Company (as such terms are used in Rule 16b-3 promulgated under the 1934
Act) terminates his participation in the Plan, he shall not be entitled to
again become a participant in the Plan until the first enrollment period which
ends on or after six months after such termination becomes effective.
In the event any participant shall die, terminate his employment with the
Participating Companies for any reason or otherwise cease to be eligible to
participate in the Plan, his participation in the Plan shall immediately
terminate, and the amount to his credit in his purchase account, including any
interest thereon as provided in Section 7 hereof, on the date of such
termination, together with certificate(s) for the full shares of stock held
for his benefit and a cash payment in lieu of any fractional share, shall be
returned to him or his legal representatives promptly.
9. Termination or Amendment of the Plan: The Company, by action of the
Board, may terminate the Plan as of the beginning of any purchase period.
Notice of termination shall be given to all participants, but any failure to
give such notice shall not impair the effectiveness of the termination.
Without any action being required, the Plan will terminate whenever the
maximum number of shares of Stock to be sold under the Plan (as hereinafter
provided in Section 13) has been purchased, but such termination shall not
impair the rights of the participants to shares purchased pursuant to the Plan
on or prior to the date of such termination. If at any time, the number of
shares remaining available for purchase under the Plan is not sufficient to
satisfy all then outstanding purchase rights, the Board or the Committee may
determine an equitable basis of apportioning available shares among all
participants.
The Board may amend the Plan from time to time in any respect in order to
meet changes in legal requirements or for any other reason; provided, however,
that no such amendment shall (a) materially adversely affect any purchase
rights outstanding under the Plan during the purchase period in which such
amendment is to be effected, (b) increase the maximum number of shares of
Stock which may be purchased under the Plan, (c) decrease the Purchase Price
of the Stock for any purchase period below the amounts set forth in paragraph
5 of this Plan, or (d) adversely affect the qualification of the Plan under
Section 423 of the Code.
Upon termination of the Plan, the respective amounts to the credit of the
participants in their purchase accounts shall be returned to them promptly.
10. Non-Transferability: Rights acquired under the Plan are not transferable
and may be exercised only by a participant.
11. Shareholder's Rights: No eligible employee or participant shall by
reason of the Plan have any rights of a shareholder of the Company until and
to the extent he shall acquire shares of Stock as herein provided.
12. Administration of the Plan: The Plan shall be administered so as to
ensure that all participants have the same rights and privileges as are
provided by Section 423 (b)(5) of the Code.
Members of the Committee may be appointed from time to time by the Board and
shall be subject to removal by the Board. The decision of a majority in number
of the members of the Committee in office at the time shall be deemed to be
the decision of the Committee.
B-3
<PAGE>
The Board or the Committee, from time to time, may approve the forms of any
documents or writings provided for in the Plan, may adopt, amend and rescind
rules and regulations not inconsistent with the Plan for carrying out the Plan
and may construe the Plan. The Board or the Committee may delegate the
responsibility for maintaining all or a portion of the records pertaining to
participants' accounts to persons not affiliated with the Participating
Companies. All expenses of administering the Plan shall be paid by the
Participating Companies.
13. Maximum Number of Shares: Subject to adjustment as hereinafter set forth,
the total number of shares of Stock which are purchased under the Plan may not
exceed 1,264,536. Stock sold hereunder may be treasury shares or authorized but
unissued shares. In the event the Company shall at any time after the effective
date of the Plan change its issued Stock into an increased number of shares,
with or without par value, through a stock dividend or split-up of shares, or
into a decreased number of shares, with or without par value, through a
combination of shares, then, effective with the record date for such change,
the maximum number of shares of Stock which thereafter may be purchased under
the Plan shall be the maximum number of shares which, immediately prior to such
record date, remained available for purchase under the Plan, proportionately
increased, in the case of such stock dividend or split-up, or proportionately
decreased, in the case of such combination of shares.
14. Miscellaneous: Except as otherwise expressly provided herein, any
Authorization, election, notice or document to be submitted by an eligible
employee or participant pursuant to the Plan shall be delivered to his employer
corporation and, subject to any limitations specified in the Plan, shall be
effective when so delivered.
The term "business day" shall mean any day other than Saturday, Sunday or
a legal holiday in Illinois.
The term "subsidiaries" shall mean all corporations which are subsidiary
corporations (within the definition of Section 425 (f) of the Code) in
respect of the Company.
The masculine pronoun shall include the feminine.
The Plan, and the Company's obligation to sell and deliver shares of
Stock hereunder, shall be subject to all applicable federal, state and
foreign laws, rules and regulations, and to such approval by any regulatory
or governmental agency as may, in the opinion of counsel for the Company,
be required.
B-4
<PAGE>
LOGO
NOTICE OF ANNUAL MEETING
OF SHAREOWNERS
AND PROXY STATEMENT
MEETING DATE
JULY 17, 1997
YOUR VOTE IS IMPORTANT!
Please sign and promptly return your
proxy in the enclosed envelope.
LOGO
Printed on recycled paper
<PAGE>
MATERIAL SCIENCES CORPORATION
2200 East Pratt Boulevard
Elk Grove Village, Illinois 60007
PROXY--Solicited on Behalf of the Board of Directors--PROXY
Annual Meeting of Shareowners
To be Held on July 17, 1997
Please mark, date and sign on reverse side
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 on the reverse side, all the shares of Common Stock of Material
Sciences Corporation held of record by the undersigned, at the Annual Meeting of
Shareowners of Material Sciences Corporation to be held on July 17, 1997, at
10:00 a.m. CDT in the Shareholders Room on the 21st floor of Bank of America
building located at 231 South LaSalle Street, Chicago, Illinois, or at any
adjournment thereof.
Your vote for nine 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, Gerald G. Nadig, Irwin P. Pochter and
Howard B. Witt have been nominated for election as directors.
(Continued and to be marked, dated and signed on the reverse side)
<PAGE>
This proxy, when properly executed, will be voted in the manner directed herein
by the undersigned shareowner. 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 Items 2, 3 and 4 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)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
FOR all nominees AUTHORITY Authority withheld for the following only (write each nominee's name in the space below):
(except as listed to WITHHELD
the contrary) for all
[_] [_] ------------------------------------------------------------------------------------------
Name(s)
2. Approval of the 3. Approval of the proposed amendment to the 1992 4. Approval of the proposed
proposed increase in the Omnibus Stock Awards Plan for Key Employees to amendment to the Employee Stock
number of authorized increase the aggregate number of shares of Common Purchase Plan to increase the
shares of common stock: Stock that may be awarded thereunder: (mark one) aggregate number of shares of
(mark one) Common Stock that may be awarded
FOR AGAINST ABSTAIN thereunder: (mark one)
FOR AGAINST ABSTAIN [_] [_] [_]
[_] [_] [_] FOR AGAINST ABSTAIN
[_] [_] [_]
5. In their discretion, the proxies
are authorized to vote upon such
other business as may properly come
before the meeting.
_________________________________________________________________________________________ Date: _____________________, 1997
Signature(s)
Please sign exactly as name appears. Joint owners should each 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.
PLEASE MARK, DATE, SIGN AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE
</TABLE>
