<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
MATERIAL SCIENCES CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-------------------------------------------------------------------------
(3) Filing Party:
-------------------------------------------------------------------------
(4) Date Filed:
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Notes:
<PAGE>
LOGO
May 12, 1998
Dear Shareowner:
The 1998 Annual Meeting of Shareowners will be held on Thursday, June 18,
1998, at 10:00 a.m. CDT in the auditorium of the Company's offices located at
2200 East Pratt Boulevard, Elk Grove Village, Illinois. We hope you will
attend. We will be voting on the election of directors 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,
Gerald G. Nadig
Chairman, 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, June 18, 1998, at 10:00 a.m. CDT in the auditorium of the
Company's offices located at 2200 East Pratt Boulevard, Elk Grove Village,
Illinois, for the following purposes:
1.To elect a Board of eight directors; and
2.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 April 24, 1998, 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
May 12, 1998
<PAGE>
LOGO
---------------------------
PROXY STATEMENT
---------------------------
This proxy statement is furnished to shareowners of Material Sciences
Corporation ("MSC" or the "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, June 18, 1998, 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.
The close of business on April 24, 1998, 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 15,406,106 shares of Common
Stock. The Company first sent this proxy statement and the accompanying form
of proxy to shareowners entitled thereto on or about May 12, 1998.
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 eight
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.
1
<PAGE>
ELECTION OF DIRECTORS
The eight persons listed below are proposed to be elected for a period to
end at the 1999 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 eight nominees listed below. All nominees have indicated a
willingness to serve as directors, but if any of them should decline or be
unable to act as a director, the persons named in the proxy will vote for the
election of another person or persons as the Board recommends. All of the
nominees are presently directors of the Company and were elected at the 1997
Annual Meeting of Shareowners.
Certain information regarding the nominees, as of April 24, 1998, 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
- ------------
- ------------ AGE 65
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. Dr. Cohen also
serves as director of Apogee Enterprises, Inc.
ROXANNE J. DECYK DIRECTOR SINCE 1988
- ------------
- ------------ AGE 45
Ms. Decyk, currently a managing partner of Batlivala & Decyk
(private merchant banking and strategic consulting firm), 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.
- ------------
- ------------ EUGENE W. EMMERICH DIRECTOR SINCE 1979
AGE 67
Dr. Emmerich has served as President and Chief Executive Officer
("CEO") of Cadtrak Corporation, a licensor of patented
technology to the computer industry with emphasis on graphics
related patents, for more than the past five years.
2
<PAGE>
G. ROBERT EVANS DIRECTOR SINCE 1991
- ------------
- ------------ AGE 66
Mr. Evans retired as Chairman of the Company in December 1997.
He served as Chairman of the Board since January 1997, and
Chairman and CEO of the Company since June 1991. Mr. Evans also
serves as a director of Consolidated Freightways Corporation and
Swift Energy Company.
E. F. HEIZER, JR. DIRECTOR SINCE 1976
- ------------
- ------------ AGE 68
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
1995, he served as CEO of Heizer Corporation. Since 1995, he has
served as Chairman of LBL, a Lloyds of London Bermuda-based
insurance company. Mr. Heizer also serves as a director of
Chesapeake Energy Corporation and Needham & Company, Inc.
GERALD G. NADIG DIRECTOR SINCE 1996
- ------------
- ------------ AGE 52
Mr. Nadig has been Chairman, President and CEO of the Company
since January 1998; President and CEO of the Company since
January 1997; and was President and Chief Operating Officer
since 1991.
IRWIN P. POCHTER DIRECTOR SINCE 1982
- ------------
- ------------ AGE 74
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.
- ------------
- ------------ HOWARD B. WITT DIRECTOR SINCE 1997
AGE 57
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.
3
<PAGE>
COMMITTEES AND MEETINGS OF THE BOARD
The Board held ten meetings during fiscal 1998. Included among the
committees of the Board are standing Audit, Compensation and Organization, and
Technology Committees. During fiscal 1998, directors in total attended
approximately 97% 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),
Pochter, and Witt, met four times during fiscal 1998. 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 Witt, met four times during fiscal
1998. The functions of this committee include the following: determining, in
consultation with the Company's Chairman, 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 Dr. Cohen (Chairperson),
Dr. Emmerich, and Mr. Evans, met four times during fiscal 1998. 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. This committee also is evaluating the potential costs, problems
and uncertainties associated with the Year 2000, and analyzing the effect of
these factors on the operations of the Company.
During fiscal 1998, 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, $500 per meeting for
special telephonic 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 ("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 April 24, 1998
(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 executive 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......... 1,000 20,782 21,782 (3)
Roxanne J. Decyk........ 5,570 20,782 26,352 (3)
Eugene W. Emmerich...... 6,525 26,882 33,407 (3)
G. Robert Evans......... 127,156 290,321 417,477 2.7%
E.F. Heizer, Jr......... 159,638 23,282 182,920 1.2%
Gerald G. Nadig......... 67,440 117,032 184,472 1.2%
Irwin P. Pochter........ 69,376 26,882 96,258 (3)
Howard B. Witt.......... -- 3,837 3,837 (3)
Frank D. Graziano....... 66,990 40,500 107,490 (3)
Frank J. Lazowski, Jr... 26,128 36,000 62,128 (3)
Thomas E. Moore......... 10,634 27,550 38,184 (3)
James J. Waclawik, Sr... 10,436 32,500 42,936 (3)
All executive officers
and directors
as a group (19 per-
sons).................. 721,613 832,224 1,553,837 10.1%
</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 April 24, 1998
and options which become exercisable within 60 days thereafter.
(3) Less than 1%.
5
<PAGE>
INFORMATION WITH RESPECT TO CERTAIN SHAREOWNERS
The following table sets forth certain information on the beneficial
ownership of Common Stock by each person known by the Company as of April 24,
1998 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
Dimensional Fund Advisors Inc.(4)....... 786,600 5.1%
1299 Ocean Ave.
11th Floor
Santa Monica, CA 90401
Norwest Corporation(5).................. 1,087,000 7.1%
Norwest Center
Sixth & Marquette
Minneapolis, MN 55479
ICM Asset Management, Inc............... 1,646,430 10.7%
W. 601 Main Ave.
Suite 917
Spokane, WA 99201
</TABLE>
- --------
(1) As reported in Schedule 13G filed with the Securities and Exchange
Commission ("SEC").
(2) Based upon shares outstanding as of April 24, 1998.
(3) Capital Research and Management Company is a 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).
(4) According to Dimensional Fund Advisors, Inc., all such securities are
owned by advisory clients of Dimensional Fund Advisors Inc. Dimensional
Fund Advisors Inc. disclaims beneficial ownership of all such securities.
(5) Includes 1,076,500 shares deemed beneficially owned by Northwest
Bancorporation, of which 835,100 shares are held for the benefit of
ATTIMCO Long-Term Investment Trust.
6
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
I. SUMMARY COMPENSATION TABLE
The following table discloses compensation received by the Company's
Chairman, 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>
LONG-TERM
COMPENSATION AWARDS
-----------------------
ANNUAL
COMPENSATION RESTRICTED SECURITIES
--------------- STOCK UNDERLYING ALL OTHER
NAME AND PRINCIPAL FISCAL SALARY BONUS AWARD(S) OPTIONS/SARS COMPENSATION
POSITION YEAR ($) ($)(1) ($) (#) ($)(2)
- ------------------ ------ ------- ------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
G. G. Nadig............. 1998 365,000 81,468 -- 40,000(5) 11,526
Chairman, President and 1997 287,600 146,790 -- 27,600(4) 11,460
Chief Executive Officer
(CEO) 1996 270,000 48,060 -- 27,600(3) 10,105
T. E. Moore............. 1998 171,000 39,864 -- 28,400(6)(7) 15,333
Executive Vice President
and 1997 130,600 63,037 -- 6,300(4) 9,144
Chief Operating Officer
(COO) 1996 120,800 58,602 -- 7,800(8)(9) 8,933
J. J. Waclawik, Sr...... 1998 154,000 23,654 -- 12,600(5) 12,088
Vice President, Chief
Financial 1997 125,000 61,761 -- 12,600(10)(11) 7,704
Officer and Secretary
(CFO) 1996 111,000 14,608 -- 8,400(3) 8,477
F. D. Graziano.......... 1998 148,000 19,418 -- 8,400(5) 14,674
Senior Vice President, 1997 141,100 45,606 -- 8,400(4) 10,630
Technology 1996 137,000 19,947 -- 8,400(3) 14,410
F. J. Lazowski, Jr...... 1998 131,000 20,541 -- 8,400(5) 14,685
Vice President, 1997 123,600 39,852 -- 8,400(4) 11,879
Human Resources 1996 120,000 17,472 -- 8,400(3) 12,047
</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.
(2) Company matching contribution to the employee's Savings and Investment
Plan contribution and payments for the Defined Contribution Plan.
(3) Granted under the 1995 Stock Option Program under the 1992 Awards Plan
("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 vested on March 1,
1998.
(4) 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 vested on March 1, 1998, and the final third
will vest on March 1, 1999.
(5) Granted under the 1995 Stock Option Program at an option price of $16.375
(market price on the date of grant). One-third of the options vested on
March 1, 1998, one-third will vest on March 1, 1999, and the final third
will vest on March 1, 2000.
(6) 8,400 shares were granted under the 1995 Stock Option Program on March 1,
1997 at an option price of $16.375 (market price on the date of grant).
One-third of the options vested on March 1, 1998, one-third will vest on
March 1, 1999, and the final third will vest on March 1, 2000.
(7) 20,000 shares were granted under the 1992 Awards Plan on May 1, 1997 at
an option price of $15.00 (market price on the date of grant). One-third
of the options vested on May 1, 1998, one-third will vest on May 1, 1999,
and the final third will vest on May 1, 2000.
7
<PAGE>
(8) 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 vested on March 1, 1998.
(9) 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.
(10) 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 vested on
March 1, 1998, and the final third will vest on March 1, 1999.
(11) 4,200 shares were granted under the 1995 Stock Option Program on
September 19, 1996 at an option price of $17.63 (market price on the date
of grant). One-third of the options vested on September 19, 1997, one-
third will vest on September 19, 1998, and the final third will vest on
September 19, 1999.
II. OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
- -----------------------------------------------------------------------
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF
NUMBER OF % OF TOTAL STOCK PRICE
SECURITIES OPTIONS/SARS EXERCISE APPRECIATION FOR
UNDERLYING GRANTED TO OR BASE OPTION TERM
OPTIONS/SARS EMPLOYEES IN PRICE EXPIRATION ---------------------
NAME GRANTED FISCAL YEAR ($/SHARE) DATE 0% 5%(3) 10%(4)
- ---- ------------ ------------ --------- ---------- -- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
G. G. Nadig............. 40,000(1) 8.9% 16.375 03/01/07 -- 411,926 1,043,901
T. E. Moore............. 8,400(1) 1.9% 16.375 03/01/07 -- 86,504 219,219
T. E. Moore............. 20,000(2) 4.5% 15.000 05/01/07 -- 188,668 478,123
J. J. Waclawik, Sr...... 12,600(1) 2.8% 16.375 03/01/07 -- 129,757 328,829
F. D. Graziano.......... 8,400(1) 1.9% 16.375 03/01/07 -- 86,504 219,219
F. J. Lazowski, Jr...... 8,400(1) 1.9% 16.375 03/01/07 -- 86,504 219,219
</TABLE>
- --------
Note--The dollar amount of total shareowner gain during the March 1, 1997 to
May 1, 2007 option period at the expiration date of such options at the
5% and 10% price appreciation rates would be $118,082,461 and
$299,244,139, respectively. The dollar amount of named optionees' gain
after ten years at the 5% and 10% price appreciation rates would be
$989,863 and $2,508,510, respectively. The percentage of named optionees'
gain to shareowner gain at both the 5% and 10% rates would be less than
one percent.
(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, 1997) pursuant to
the 1995 Stock Option Program. One-third of the options vested on March 1,
1998, one-third will vest on March 1, 1999, and the final third will vest
on March 1, 2000.
(2) Options for the named individual were granted at the fair market value of
a share of Common Stock on the date of grant (May 1, 1997) under the 1992
Awards Plan. One-third of the options vested on May 1, 1998, one-third
will vest on May 1, 1999, and the final third will vest on May 1, 2000.
(3) The market price of $16.375 per share at the date of grant of March 1,
1997 would appreciate to $26.673 for the options term. The market price of
$15.00 per share at the date of grant of May 1, 1997 would appreciate to
$24.433 for the options term.
(4) The market price of $16.375 per share at the date of grant of March 1,
1997 would appreciate to $42.473 for the options term. The market price of
$15.00 per share at the date of grant of May 1, 1997 would appreciate to
$38.906 for the options term.
8
<PAGE>
III. AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END
OPTION/SAR VALUES
The following table provides information on option exercises and unexercised
option values for the named executive officers.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS/SARS AT IN-THE-MONEY OPTIONS/SARS
SHARES FISCAL YEAR END (#) AT FISCAL YEAR END ($)(2)
ACQUIRED VALUE ------------------------- -------------------------
NAME ON EXERCISE(#) REALIZED($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- -------------- -------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
G. G. Nadig............. None N/A 52,900 -- 113,074 --
T. E. Moore............. None N/A 13,500 -- 28,856 --
J. J. Waclawik, Sr...... None N/A 12,000 -- 25,650 --
F. D. Graziano.......... None N/A 22,500 -- 48,094 --
F. J. Lazowski, Jr...... None N/A 18,000 -- 38,475 --
</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 $12.1875
(the market price on February 27, 1998), 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 1998.
COMPENSATION PHILOSOPHY
The MSC management compensation program for fiscal 1998 was 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.
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.
9
<PAGE>
. 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 and return on net asset 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, 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 1998 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.
--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 1998 PERFORMANCE
At the beginning of fiscal 1998, the Compensation and Organization Committee
approved performance objectives for Mr. Nadig for fiscal 1998. His performance
relative to these objectives was the basis for determining his 1998 annual
incentive award. Sixty percent of his potential award was based on the
achievement of corporate profitability and return on net asset objectives. The
remaining forty percent of the CEO's annual incentive award was based on
achievement of a combination of specific objectives, including expense
control, company growth, and other objectives. Performance goals for the other
executive officers were approved by Mr. Nadig. 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.
Mr. Nadig earned an annual incentive award of $81,468 in fiscal 1998. The
incentive award reflects a reduction of $137,532 or 63% due to the less than
targeted results in fiscal 1998. The other named executives received annual
incentive awards in fiscal 1998 which reflect a reduction of 61% for the same
reason.
10
<PAGE>
FISCAL 1998 ACTIONS
On May 1, 1998, Thomas E. Moore was elected Executive Vice President and
Chief Operating Officer of the Company. He received a 20% salary increase in
connection with a promotion. On January 1, 1998, Mr. Nadig was elected
Chairman, President and Chief Executive Officer of the Company.
In fiscal 1998, Mr. Nadig was granted options for 40,000 shares. The other
four named executives received options for a total of 57,800 shares. All
options were granted at market price at the time of grant. Salaries were
increased an average of 3% for all named executives in March 1997. In general,
salary increases reflected individual performance, company performance and
changes in the compensation market.
At the conclusion of fiscal 1998, the Compensation and Organization
Committee adopted a new annual incentive plan for executive officers and other
key management personnel. The new plans are based on, and operate in tandem
with, the Economic Value Added (EVA(R)) process that the Company has
implemented for fiscal 1999 and beyond. The EVA(R) process drives increased
value within the Company, thereby, increasing shareowner value.
Finally, because operating results were less than the fiscal 1998 operating
plan, management chose to freeze salaries for fiscal year 1999 beginning March
1, 1998.
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 executive positions.
MATERIAL SCIENCES CORPORATION COMPENSATION AND ORGANIZATION COMMITTEE
Ms. Roxanne J. Decyk, Chairperson
Mr. E. F. Heizer, Jr.
Mr. Howard B. Witt
11
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MSC
PERFORMANCE GRAPH
The following chart shows total shareowner returns, assuming $100 was
invested on February 28, 1993 in Material Sciences Corporation, the S&P 500
Index, and the Comparator Group (as described below), with dividends, if any,
reinvested through February 27, 1998.
LOGO
<TABLE>
<CAPTION>
FEBRUARY 28 OR 29,
-----------------------------
1994 1995 1996 1997 1998
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
MSC............................................... 160.6 144.3 130.7 148.9 110.8
S&P 500........................................... 108.3 116.3 156.6 197.6 266.7
COMPARATOR GROUP.................................. 112.1 114.8 128.0 127.9 123.6
</TABLE>
COMPARATOR GROUP: BRUSH WELLMAN (BW)
CHEMFAB (CFA)
OPTICAL COATING (OCLI)
SOUTHWALL TECHNOLOGIES (SWTX)
STEEL TECHNOLOGIES (STTX)
WORTHINGTON INDUSTRIES (WTHG)
12
<PAGE>
Starting with the fiscal year ending February 28, 1999, the Company will
change both its current equity market index (S&P 500) and its comparator group
to indices that it believes are more representative of its current business.
Since 1992, when the SEC first required public companies to measure their
total return to shareowners against an equity market index, the Company has
been using the S&P 500 Index. In September of 1994, Standard and Poor
established a new index called the S&P SmallCap 600 Index especially for small
capitalization companies. MSC has been a part of this index since it was first
developed. The S&P SmallCap 600 Index consists of companies with market
capitalizations generally between $80 and $600 million. MSC's market
capitalization at February 27, 1998 is approximately $187.2 million. About 75
percent of the companies in the index are classified as industrial with the
remainder in the financial, utility, and transportation areas. The Company
believes that the S&P SmallCap 600 Index is a more representative measure of
its performance.
As a result of the Company's December 1997, acquisition of Colorstrip, Inc.,
approximately 80% of its revenue will now come from some form of metal
processing, i.e. coil coating, electrogalvanizing, or hot-dipped galvanizing.
As a result, the Company plans to make adjustments to its current comparator
group which it believes will be more representative in terms of both line-of-
business and financial characteristics.
NEW COMPARATOR GROUP: COLD METAL PRODUCTS, INC. (CLQ)
GIBRALTOR STEEL CORPORATION (ROCK)
HUNTCO INC. (HCO)
OLYMPIC STEEL (ZEUS)
SHILOH INDUSTRIES, INC. (SHLO)
SOUTHWALL TECHNOLOGIES (SWTX)
STEEL TECHNOLOGIES, INC. (STTX)
WORTHINGTON INDUSTRIES, INC. (WTHG)
EMPLOYMENT AND OTHER AGREEMENTS
In connection with Mr. Evans' retirement from his position from Chairman of
the Board of the Company, Mr. Evans receives a supplemental pension consistent
with an Employment Agreement dated February 27, 1991 between the Company and
Mr. Evans.
The Company has a severance agreement ("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.
EMPLOYEE AND OTHER PLANS
SUPPLEMENTAL PENSION PLAN AGREEMENTS
The Company has entered into Supplemental Pension Plan Agreements
("Supplemental Pension Plan Agreements") with fourteen current employees,
including all executive officers as of April 24, 1998 (except Messrs. Rose and
DeNeve), which provide benefits in the event of termination of employment,
disability, or
13
<PAGE>
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, 1998, $2,148,290 had been accrued under the plans for
current employees, of which $1,692,328 had been accrued to be paid to
executive officers as of April 24, 1998 and $1,117,796 for persons named in
the Summary Compensation Table (such accruals being $367,852, $140,213,
$43,821, $356,771, and $209,139 for Messrs. Nadig, Moore, Waclawik, Graziano,
and Lazowski, respectively).
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 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,
1997 through February 28, 1998, its directors and officers complied with all
applicable filing requirements, except as follows. Edward A. Williams became
Group Vice President and General Manager on May 1, 1997. On that date Mr.
Williams had 17,859 options outstanding and 2,250 shares of restricted stock.
A Form 3 should have been filed by May 11, 1997, but was not filed until April
13, 1998.
MISCELLANEOUS
SHAREOWNER PROPOSALS FOR 1999 ANNUAL MEETING OF SHAREOWNERS
Proposals of shareowners intended to be presented at the 1999 Annual Meeting
of Shareowners must be received by the Company by January 12, 1999, 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.
14
<PAGE>
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 1998 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.
SOLICITATION OF PROXIES
The Company will bear the cost of the solicitation. In addition to
solicitation by mail, the Company will request banks, brokers, and other
custodian nominees and fiduciaries to supply proxy material to the beneficial
owners of the Common Stock of whom they have knowledge, and will reimburse
them for their expenses in so doing. In addition, the Company expects to pay
$3,500, plus expenses, for assistance by Corporate Investor Communications,
Inc. ("CIC") in the solicitation of proxies. Some of the officers and other
employees of the Company and CIC may solicit proxies personally, by telephone,
telegraph, or mail. The officers and employees of the Company will not receive
any additional compensation for such activities.
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
15
<PAGE>
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
May 12, 1998
16
<PAGE>
LOGO
NOTICE OF ANNUAL MEETING
OF SHAREOWNERS
AND PROXY STATEMENT
MEETING DATE
JUNE 18, 1998
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 June 18, 1998
Please mark, date and sign on reverse side
and return in the enclosed envelope
The undersigned hereby appoints Gerald G. Nadig 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 June 18, 1998, at
10:00 a.m. CDT in the Auditorium of the Company's offices located at 2200 East
Pratt Boulevard, Elk Grove Village, Illinois, or at any adjournment thereof.
Your vote for eight directors may be indicated on the reverse side. Jerome
B. Cohen, Roxanne J. Decyk, Eugene W. Emmerich, G. Robert Evans, E. F. Heizer,
Jr., Gerald G. Nadig, Irwin P. Pochter and Howard B. Witt have been nominated
for election of directors.
(Continued and to be marked, dated and signed on the reverse side)
s FOLD AND DETACH HERE s
<PAGE>
Please mark your vote as indicated in this example X
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. Discretionary authority to cumulate votes is being solicited.
FOR all nominees AUTHORITY
(except as listed WITHHELD
to the contrary) for all
1. Election of directors: (duly [_] [_]
nominated and named on the
reverse side of this proxy)
Authority withheld for the following only (write nominee's name
in the space below):
___________________________
___________________________
2. In their discretion, the proxies are authorized to vote
upon such other business as may properly come before
the meeting.
PLEASE MARK, DATE, SIGN AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
Signature Date ,1998
Signature Date ,1998
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.
s FOLD AND DETACH HERE s
