UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
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RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
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[_] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
Material Sciences Corporation
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(Name of Registrant as Specified In Its Charter)
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Notes:
Reg. (S) 240.14a-101.
SEC 1913 (3-99)
[LOGO]
MSC
Material Sciences Corporation
May 21, 2002
Dear Shareowner:
The 2002 Annual Meeting of Shareowners will be held on Thursday, June 20,
2002, at 10:00 a.m. (CDT) in the Auditorium of our principal executive 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 in more detail
the matters upon which the shareowners will vote. It is important that your
shares be represented at the meeting, regardless of the number you own or
whether or not you plan to attend. Accordingly, we urge you to complete the
enclosed proxy so that your shares can be voted at the meeting.
Sincerely,
GERALD G. NADIG
Chairman, President and
Chief Executive Officer
[LOGO]
MSC
Material Sciences Corporation
-----------------
NOTICE OF ANNUAL MEETING OF SHAREOWNERS
-----------------
The Annual Meeting of Shareowners of Material Sciences Corporation will be
held on Thursday, June 20, 2002, at 10:00 a.m. (CDT) in the Auditorium of our
principal executive offices located at 2200 East Pratt Boulevard, Elk Grove
Village, Illinois, for the following purposes:
1. To elect nine directors to the Board; and
2. To authorize proxies to vote upon such other business as may properly
come before the meeting or any adjournment or postponement thereof.
Shareowners of record at the close of business on April 22, 2002, are
entitled to notice of and to vote at this meeting and any adjournment or
postponement thereof.
Shareowners are requested to promptly vote the enclosed proxy whether or not
they expect to be present at the meeting. Any person voting by 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 21, 2002
[LOGO]
MSC
Material Sciences Corporation
-----------------------------
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, June 20, 2002, at the place and for the purposes set forth in the
accompanying notice of the meeting.
You can vote on matters to come before the meeting by completing, dating and
signing the enclosed proxy card and returning it in the enclosed postage-paid
envelope or by written ballot at the meeting. If you hold your shares in
"street name" through a broker, you may be able to also vote using the Internet
or telephone. If your shares are held in your name, you may revoke your proxy
at any time before it is exercised by (1) filing with the Secretary of the
Company a written revocation, (2) duly executing another proxy bearing a later
date, or (3) voting in person at the meeting. If your shares are held in
"street name" through a broker, you must contact your broker to revoke your
proxy. 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 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; and
--"FOR" the approval to authorize proxies to vote upon such other business as
may properly come before the meeting.
The close of business on April 22, 2002, 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 14,749,656 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 24, 2002.
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 (whether
by abstention, broker non-vote or otherwise). 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 (including broker non-votes)
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.
ELECTION OF DIRECTORS
The nine persons listed below are proposed to be elected for a period to end
at the 2003 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. All of the
nominees are presently directors of the Company.
Certain information regarding the nominees, as of April 22, 2002, is set
forth below, including their ages, the period each has served on the Board and
the nominees' business experience.
-----------------
[PHOTO] Michael J. Callahan Director since 1999
Age 63
Mr. Callahan is a business consultant. Mr. Callahan served as Executive Vice President and
Chief Financial Officer of FMC Corporation from 1994 to 1999. Prior to joining FMC, Mr.
Callahan was Executive Vice President and Chief Financial Officer at Whirlpool
Corporation from 1992 to 1994. Mr. Callahan is a member of the board of directors of
Brunswick Corporation and Metropolitan Family Services in Chicago.
[PHOTO] Dr. Eugene W. Emmerich Director since 1979
Age 71
Dr. Emmerich has served as President and Chief Executive Officer 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.
[PHOTO] G. Robert Evans Director since 1991
Age 70
Mr. Evans served as Chairman of the Board of the Company from January 1997 until his
retirement in December 1997. Prior to that time, he served as Chairman and Chief Executive
Officer of the Company from June 1991 to December 1997. Mr. Evans also serves as a
director of Consolidated Freightways Corporation and Swift Energy Company.
2
[PHOTO] E. F. Heizer, Jr. Director since 1976
Age 72
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 1985, he served as Chief Executive Officer 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, Needham & Company,
Inc., as well as several other early stage companies.
[PHOTO] Frank L. Hohmann III Director since 2002
Age 56
Mr. Hohmann, a private investor, has been a director since February 2002. Mr. Hohmann
spent 23 years with Donaldson, Lufkin & Jenrette, which recently was acquired by Credit
Suisse First Boston. Mr. Hohmann was a managing director in the equity derivatives group
at Credit Suisse First Boston until he retired on January 2, 2002. From 1974 to 1978, he was
managing director at WM Sword and Co. He is a member of the board of directors of
Egerton Capital Limited, Mount European Fund, U. Vine Limited and Winterthur Museum.
[PHOTO] Dr. Ronald A. Mitsch Director since 1999
Age 67
Dr. Mitsch retired as Vice Chairman and Executive Vice President, Industrial and Consumer
Markets and Corporate Services of the 3M Company in 1998. Dr. Mitsch had served in
these capacities since 1995. Since joining the 3M Company in 1960, Dr. Mitsch held several
key management positions including Senior Vice President, Research and Development. Dr.
Mitsch is a member of the board of directors of NCR Corporation, Lubrizol, WTC
Industries, GaMra Composites and Dandy Golf Company, and is Chairman of the Board of
Trustees of Hamline University.
[PHOTO] Gerald G. Nadig Director since 1996
Age 56
Mr. Nadig has been Chairman, President and Chief Executive Officer of the Company since
January 1998, President and Chief Executive Officer of the Company since January 1997,
and was President and Chief Operating Officer from 1991 to January 1997. Mr. Nadig is a
member of the board of directors of Tokheim Corporation. He is also a director of the
Chicago chapter of the National Association of Corporate Directors.
3
[PHOTO] Dr. Mary P. Quin Director since 1999
Age 48
Dr. Quin, a consultant, served as Vice President and General Manager, Color Solutions
Business Unit, Office Document Products Group at Xerox Corporation from 1999 until June
2000. Since joining Xerox in 1995 as Director, Corporate Business Strategy, she served as
Vice President and General Manager, External Business Unit, Office Document Products
Group and Vice President, Strategy, Production Systems Group. Dr. Quin is a member of
the board of directors of CEDPA, an international aid organization, and was founder and
Chairman of the One Hundred Heroines project in Rochester, New York.
[PHOTO] Howard B. Witt Director since 1997
Age 61
Mr. Witt has been Chairman, President and Chief Executive Officer of Littelfuse, Inc., an
international and publicly-held company with approximately $300 million in sales, since
1993. Prior to that time, he was President and Chief Executive Officer 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
Alliance Board of Governors and the Board of Governors of the National Electrical
Manufacturers Association and serves as a director of Artisan Mutual Fund and Franklin
Electric Co.
Committees and Meetings of the Board
The Board held seven meetings during fiscal 2002. Included among the
committees of the Board are standing Audit, Compensation and Organization
(which also serves as the nominating committee), and Technology Committees.
During fiscal 2002, each director attended 100% of the aggregate number of
meetings of the Board and the committees on which he or she served, except for
Dr. Mitsch who attended 92% of the meetings.
The Audit Committee, currently consisting of Messrs. Heizer (Chairperson),
Callahan and Evans, met two times during fiscal 2002. 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; reviewing any
non-audit services provided by the independent public accountants; and the
other functions set forth in its written charter attached hereto as Exhibit A.
The Board of Directors has determined that all three members of the Audit
Committee are independent, as defined in Section 303.01(B)(2)(a) and (3) of the
New York Stock Exchange listing standards.
4
The Compensation and Organization Committee, currently consisting of Messrs.
Callahan (Chairperson), Heizer and Witt, met five times during fiscal 2002. The
functions of this committee include the following: determining, in consultation
with compensation consultants and the Company's Chairman, President and Chief
Executive Officer, the compensation, including long-term performance
incentives, of the Company's officers; reviewing and approving cash incentive
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; reviewing corporate practices relating to diversity
and succession planning; and overseeing director affairs, including serving as
the nominating committee. In its capacity as the nominating committee, this
committee will consider nominees proposed by shareowners. Please see
"Miscellaneous--Shareowner Proposals for 2003 Annual Meeting of Shareowners" on
page 18 for the procedures shareowners must follow in order to nominate a
director.
The Technology Committee, currently consisting of Dr. Mitsch (Chairperson),
Dr. Emmerich, Mr. Evans, and Dr. Quin, met four times during fiscal 2002. 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.
Compensation of Directors
Directors who are not executive officers of the Company receive an annual
retainer of $30,000, plus $1,000 per meeting for attendance at Board meetings
or Board committee meetings, $3,000 per year for chairing a Board committee,
$500 per meeting for special telephonic meetings and reimbursement for normal
travel expenses. The retainer is paid in cash, shares of common stock, deferred
stock units entitling such non-employee director to receive common stock at a
future date, or any combination thereof based on the preference of the
director. Each eligible non-employee director also receives an additional stock
option grant under the 2001 Compensation Plan for Non-Employee Directors that
was approved by the shareowners in June 2000 and became effective March 1, 2001.
5
Security Ownership of Management of the Company
The following table provides certain information, as of April 22, 2002, on
the beneficial ownership of Common Stock by each director of the Company, the
executive officers named in 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.
Number of Shares Total
shares under shares
directly exercisable beneficially Percent
Name owned (1) options (2) owned of class
---- --------- ----------- ------------ --------
Michael J. Callahan......................................... 11,910(3) 12,794 24,704 *
Dr. Eugene W. Emmerich...................................... 6,525 30,545 37,070 *
G. Robert Evans............................................. 101,063 67,623 168,686 1.1
E. F. Heizer, Jr............................................ 164,448(3) 30,545 194,993 1.3
Frank L. Hohmann III........................................ 1,744,050(4) -- 1,744,050 11.8
Dr. Ronald A. Mitsch........................................ 6,912(3) 12,794 19,706 *
Gerald G. Nadig............................................. 286,685(5) 130,300 416,985 2.8
Dr. Mary P. Quin............................................ 2,606 12,794 15,400 *
Howard B. Witt.............................................. 8,174 25,963 34,137 *
Frank J. Lazowski, Jr....................................... 25,639 33,600 59,239 *
Ronald L. Millar, Jr........................................ 53,038(6) 31,950 84,988 *
James J. Waclawik, Sr....................................... 65,989 44,700 110,689 *
Edward A. Williams.......................................... 32,582 17,850 50,432 *
All executive officers and directors as a group (19 persons) 2,639,847 532,568 3,172,415 20.8
--------
* Less than 1%
(1) Includes shares held by immediate family members or in trusts. Excludes
shares that may be acquired through the exercise of stock options, which
information is set forth separately.
(2) Includes shares subject to options that are exercisable on April 22, 2002
and options which become exercisable within 60 days thereafter.
(3) Includes 11,732 shares in the aggregate which may be issuable within 60
days pursuant to the director's deferred stock unit account established
under the Company's 2001 Compensation Plan for Non-Employee Directors.
Excludes 1,502 shares related to the unvested portion of such deferred
stock unit account for Dr. Mitsch.
(4) Based on a Schedule 13G/A filed by Mr. Hohmann. Mr. Hohmann has sole voting
and dispositive power with respect to 1,688,350 shares and shared voting
and dispositive power with respect to 55,700 shares. According to the
Schedule 13G/A, the number of shares beneficially owned includes: 5,000
shares held in trust for the daughter of Mr. Hohmann, for which Mr. Hohmann
states that he is not the trustee and for which he disclaims beneficial
ownership; 10,700 shares beneficially owned by Mr. Hohmann's adult son, for
which Mr. Hohmann disclaims beneficial ownership; and 40,000 shares held in
a private charitable foundation, for which Mr. Hohmann serves as trustee
and for which he disclaims beneficial ownership.
(5) Includes 16,749 shares held in a trust for the children of Mr. Nadig, for
which Mr. Nadig states that he is not the trustee and for which he
disclaims beneficial ownership.
(6) Includes 400 shares held in a trust for the grandchildren of Mr. Millar.
6
INFORMATION WITH RESPECT TO CERTAIN SHAREOWNERS
The following table sets forth certain information on the beneficial
ownership of Common Stock by each person, other than a director or executive
officer of the Company, known by the Company as of April 22, 2002, to own
beneficially more than five percent of the Company's outstanding Common Stock.
Number of shares Percent of
Name and address of beneficial owner beneficially owned class (1)
------------------------------------ ------------------ ----------
T. Rowe Price Associates, Inc. (2)....................... 1,906,500 12.9
100 E. Pratt Street
Baltimore, MD 21202
Mario J. Gabelli and Marc J. Gabelli (and affiliates) (3) 1,405,210 9.5
One Corporate Center
Rye, NY 10580-1424
Dimensional Fund Advisors, Inc. (4)...................... 1,269,600 8.6
1299 Ocean Ave.
11th Floor
Santa Monica, CA 90401
Ironwood Capital Management, LLC (and affiliates) (5).... 847,575 5.7
21 Custom House Street
Boston, MA 02110
--------
(1) Based upon the number of shares of our Common Stock outstanding on April
22, 2002.
(2) Based on a Schedule 13G/A filed by T. Rowe Price Associates, Inc., T. Rowe
has sole voting power with respect to 481,900 shares and sole dispositive
power with respect to all such shares.
(3) Based on a Schedule 13D/A filed by Mario J. Gabelli, Marc J. Gabelli and
certain affiliated entities, each of Messrs. Gabelli directly or indirectly
control or act as chief investment officer for the entities listed below
and, therefore, may be deemed to beneficially own all or some of such
shares. According to the Schedule 13G/A, Gabelli Funds, LLC has sole voting
and dispositive power with respect to 431,800 shares, GAMCO Investors, Inc.
has sole voting and dispositive power with respect to 947,000 shares,
Gemini Capital Management, LLC has sole voting and dispositive power with
respect to 13,500 shares, Gabelli Securities, Inc. has sole voting and
dispositive power with respect to 2,810 shares, Gabelli & Company, Inc. has
sole voting and dispositive power with respect to 100 shares, Gabelli
Advisors, Inc. has sole voting and dispositive power with respect to 10,000
shares and each of Gabelli Group Capital Partners, Inc., Gabelli Asset
Management Inc., Marc J. Gabelli and Mario J. Gabelli has no voting or
dispositive power with respect to any shares.
(4) Based on a Schedule 13G/A filed by Dimensional Fund Advisors, Inc.,
Dimensional Funds has sole voting and dispositive power with respect to all
such shares. According to the Schedule 13G/A, all of the shares are owned
by advisory clients of Dimensional Fund and, therefore, Dimensional Fund
disclaims beneficial ownership of all such shares.
(5) Based on a Schedule 13G filed by Ironwood Capital Management, LLC, Warren
J. Isabelle, Richard L. Droster and Donald Collins, Ironwood Capital and
Messrs. Isabelle, Droster and Collins each has shared voting power with
respect to 590,675 shares and shared dispositive power with respect to
847,575 shares.
7
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 four other executive
officers (all of whom, except Mr. Williams, comprise the Company's Policy
Committee).
Long-Term
Annual Compensation Compensation Awards
-------------------------------------------- --------------------
Above
Market
Stock Securities All Other
Names and Fiscal EVA Other Annual Award(s) Underlying Compensation
Principal Position Year Salary ($) Incentive ($) Compensation ($)(1) (#)(2) Options (#) ($)(3)
------------------ ------ ---------- ------------- ------------------- -------- ----------- ------------
G. G. Nadig................ 2002 485,000 -- 12,000 86,800(4) -- 13,197
Chairman, President and 2001 470,000 -- 12,000 52,000(5) -- 12,674
Chief Executive Officer 2000 389,000 280,559 12,000 73,500(9) 11,100(10) 11,896
(CEO)
J. J. Waclawik, Sr......... 2002 211,000 -- 4,000 18,100(4) -- 60,979
Vice President, Chief 2001 192,400 -- 20,000 13,000(6) -- 9,704
Financial Officer 2000 173,070 92,379 12,000 15,700(9) 3,900(10) 24,695
and Secretary (CFO)
F. J. Lazowski, Jr......... 2002 177,000 -- 9,156 10,700(4) -- 43,778
Senior Vice President, 2001 172,000 -- 8,852 6,100(5) -- 25,778
Human Resources 2000 155,000 79,549 8,615 8,900(9) -- 13,528
R. L. Millar, Jr........... 2002 180,375 66,743 28,586 20,700(7) -- 12,025
President of Material 2001 159,256 85,953 11,188 5,000(5) 2,100(8) 54,553
Sciences Corporation, 2000 143,375 106,742 33,028 10,300(11) -- 45,363
Engineered Materials and
Solutions Group, Inc.
E. A. Williams............. 2002 177,959 4,056 12,000 13,300(12) -- 11,020
Executive Vice President,. 2001 167,000 88,938 12,000 4,700(5) -- 12,573
Operations of Material 2000 154,000 86,055 12,000 9,100(9) -- 11,760
Sciences Corporation,
Engineered Materials and
Solutions Group, Inc.
--------
(1) Includes perquisites such as an automobile allowance, cash in lieu of
vacation time per policy and other personal benefits paid to the executive.
(2) If the Company ever pays a dividend on its Common Stock to its shareowners,
the executive officers would receive equivalent dividends on their
restricted stock.
(3) In 2002, includes (a) Company matching contributions to the Savings and
Investment Plan (Mr. Nadig $6,210, Mr. Waclawik $6,304, Mr. Lazowski
$5,057, Mr. Millar $6,483 and Mr. Williams $4,645); (b) payments to the
Defined Contribution Plan (Mr. Nadig $6,987, Mr. Waclawik $4,675, Mr.
Lazowski $8,721, Mr. Millar $5,542 and Mr. Williams $6,375); and (c) an
incentive payment of $50,000 and $30,000 to Messrs. Waclawik and Lazowski,
respectively.
(4) Granted restricted stock under the 2001 Long-Term Incentive/Leveraged Stock
Awards Program at market value ($8.70). The restrictions will be removed on
February 29, 2004, assuming the individual is still employed with the
Company.
8
(5) Granted restricted stock under the 2000 Long-Term Incentive/Leveraged Stock
Awards Program at market value ($14.00). The executive paid $1.40 per share
for the award. The restrictions will be removed on February 28, 2003,
assuming the individual is still employed with the Company.
(6) 11,800 shares of restricted stock were granted under the 2000 Long-Term
Incentive/Leveraged Stock Awards Program at market value ($14.00). The
executive paid $1.40 per share for the award. The restrictions will be
removed on February 28, 2003, assuming the individual is still employed
with the Company. 1,200 shares of restricted stock were granted under the
Company's Merit/Stock Exchange Program at market value ($14.00) in lieu of
all or a portion of the executive's merit increase for fiscal 2001. The
restrictions were removed on February 28, 2001.
(7) 15,400 shares of restricted stock were granted under the 2001 Long-Term
Incentive/Leveraged Stock Awards Program at market value ($8.70). The
restrictions will be removed on February 29, 2004, assuming the individual
is still employed with the Company. 4,500 shares of restricted stock were
granted for compensation related to Mr. Millar's promotion in fiscal 2002
at market value ($10.10). The restrictions will be removed on December 18,
2004, assuming the individual is still employed with the Company. 800
shares of restricted stock were granted under the Company's Merit/Stock
Exchange Program at market value ($8.70) in lieu of all or a portion of the
executive's merit increase for fiscal 2002. The restrictions were removed
on February 28, 2002.
(8) Granted options under the Company's Merit/Stock Exchange Program at market
value ($14.00) in lieu of all or a portion of the executive's merit
increase for fiscal 2001. The options vested immediately.
(9) Granted restricted stock under the 1999 Long-Term Incentive/Leveraged Stock
Awards Program at market value ($7.1875). The executive paid $0.71875 per
share for the award. The performance threshold was achieved during fiscal
2000 and the restrictions were removed on February 28, 2002.
(10) Granted options under the Company's Merit/Stock Exchange Program at market
value ($7.1875) in lieu of all or a portion of the executive's merit
increase for fiscal 2000. The options vested immediately.
(11) 9,500 shares of restricted stock were granted under the 1999 Long-Term
Incentive/Leveraged Stock Awards Program at market value ($7.1875). The
executive paid $0.71875 per share for the award. The restrictions were
removed on February 28, 2002. 800 shares of restricted stock were granted
under the Company's Merit/Stock Exchange Program at market value ($7.1875)
in lieu of all or a portion of the executive's merit increase for fiscal
2000. The restrictions were removed on February 29, 2000.
(12) 11,900 shares of restricted stock were granted under the 2001 Long-Term
Incentive/Leveraged Stock Awards Program at market value ($8.70). The
restrictions will be removed on February 29, 2004, assuming the individual
is still employed with the Company. 1,400 shares of restricted stock were
granted for compensation related to Mr. William's promotion in fiscal 2002
at market value ($10.10). The restrictions will be removed on December 18,
2004, assuming the individual is still employed with the Company.
II. Option Grants in Last Fiscal Year
No options to acquire shares of the Company's Common stock were granted to
the executive officers listed in the Summary Compensation Table above during
fiscal 2002.
9
III. Aggregated Option Exercises in Last Fiscal Year and Fiscal Year End
Option/SAR Values
The following table provides information on option exercises and unexercised
option values for the named executive officers listed in the Summary
Compensation Table above.
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money
Options at Options at
Fiscal Year End (#) Fiscal Year End ($)(1)
------------------------- -------------------------
Shares Value
Acquired on Realized
Name Exercise (#) ($) Exercisable Unexercisable Exercisable Unexercisable
---- ------------ -------- ----------- ------------- ----------- -------------
G. G. Nadig........ -- -- 130,300 -- 31,219 --
J. J. Waclawik, Sr. 12,000 10,200(2) 44,700 -- 10,969 --
F. J. Lazowski, Jr. -- -- 33,600 -- -- --
R. L. Millar, Jr... -- -- 31,950 -- -- --
E. A. Williams..... -- -- 17,850 -- -- --
--------
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 value of unexercised options is based on a market price of $10.00 (the
closing market price on February 28, 2002), less the exercise price.
(2) Mr. Waclawik exercised options to purchase 12,000 shares of Common Stock at
a price of $10.05 per share and sold such shares in a cashless transaction.
IV. Long-Term Incentive Plan Awards in Last Fiscal Year
Performance
Number of or Other
Shares, Units Period Until
or Other Maturation
Name Rights (#) or Payout
---- ------------- ------------
G. G. Nadig........ 86,800(1) 3 Years
J. J. Waclawik, Sr. 18,100(1) 3 Years
F. J. Lazowski, Jr. 10,700(1) 3 Years
R. L. Millar, Jr... 19,900(2) 3 Years
E. A. Williams..... 13,300(3) 3 Years
--------
(1) Granted restricted stock on March 1, 2001, under the 2001 Long-Term
Incentive/Leveraged Stock Awards Program at market value ($8.70). The
time-based restrictions will be removed on February 29, 2004, assuming the
individual is still employed with the Company.
(2) 15,400 shares of restricted stock were granted under the 2001 Long-Term
Incentive/Leveraged Stock Awards Program at market value ($8.70). The
restrictions will be removed on February 29, 2004, assuming the individual
is still employed with the Company. 4,500 shares of restricted stock were
granted for compensation related to Mr. Millar's promotion in fiscal 2002
at market value ($10.10). The restrictions will be removed on December 18,
2004, assuming the individual is still employed with the Company.
(3) 11,900 shares of restricted stock were granted under the 2001 Long-Term
Incentive/Leveraged Stock Awards Program at market value ($8.70). The
restrictions will be removed on February 29, 2004, assuming the individual
is still employed with the Company. 1,400 shares of restricted stock were
granted for compensation related to Mr. William's promotion in fiscal 2002
at market value ($10.10). The restrictions will be removed on December 18,
2004, assuming the individual is still employed with the Company.
10
COMPENSATION AND ORGANIZATION COMMITTEE REPORT
The functions of the Compensation and Organization Committee include
establishing and administering compensation policies and plans for Material
Sciences Corporation's employees, including executive officers, reviewing
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 2002.
Compensation Philosophy
The MSC compensation program is designed to reward employees based on
favorable performance and results. Compensation policies and plans (including
benefits) are designed to attract and retain top quality and experienced
managers by providing the opportunity to earn above median cash compensation
based on 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 three components including: a base salary, a
cash incentive opportunity and a long-term equity award.
. Base salaries are targeted at median competitive levels for similar-size
companies in general industry:
. Salaries are reviewed annually.
. Annual adjustments are based on individual performance, changes in
duties and responsibilities and general movement of salary levels in
similar-size companies in general industry.
. In fiscal 2000, the Company introduced a program to promote greater
stock ownership in the Company by officers. The Merit/Stock Exchange
Program allows an officer to elect to receive a merit increase in stock
or stock options based on fair market value, rather than in cash.
. Cash incentive opportunity for management employees is targeted at
competitive levels between the median and the 60th percentile, based upon
similar-size companies in general industry, determined on an annual basis.
. The Company currently uses Economic Value Added (EVA(R)) to set
performance targets for its business units. EVA is a performance
measurement system that is intended to drive increased economic value
within the Company and increase shareowner value. EVA is calculated
using the following formula: operating profit after the deduction of
all costs including taxes and the cost of capital (debt and equity).
The annual variable compensation target for the employee is calculated
as a percentage of the salary for the employee based on their level of
responsibility, market competitiveness and impact on value creation.
The EVA program for senior executives includes an EVA banking component
to account for overachievement or underachievement of the annual
target. If a business unit overachieves their target, a portion
(one-third) is distributed and the remainder recorded to the EVA bank.
In a year
11
where there is underachievement of the target, the negative amount is
first deducted from the EVA bank before any distribution is made.
Therefore, the incentive pay is at risk, but encourages sustained
economic performance.
The Committee determined that the cash incentive system will be
modified in fiscal 2003 to include two components. The first component
(80% of the incentive target) will be based on EVA performance as
described above subject to the EVA banking requirements. The second
component (20% of the incentive target) will be based on the
achievement of specific qualitative goals and will exclude the EVA
banking requirements.
. Long-term equity awards of either stock options or restricted stock to
management employees at the 75th percentile competitive levels for
similar-size companies in general industry. Such awards are made on an
annual basis.
. In fiscal 1993, stock options were granted to key management employees
for fiscal years 1993, 1994 and 1995 at the 60th percentile competitive
level. In fiscal 1994, a one-time restricted stock award was granted to
key management employees that were intended to encourage and facilitate
increased stock ownership and executive retention. This award vested in
fiscal year 2000 because the market price of Common Stock reached the
plan target level and the time vesting requirements were met.
Furthermore, a matching ISO award was granted--which vested on June 18,
2001 if the underlying restricted stock was still held by the
employee--otherwise the incentive stock option shares do not vest for
nine (9) years and eleven (11) months from the date of grant. This
one-time stock award and incentive stock option grant put the total
long-term equity award for key management employees at the 75th
percentile for similar-size companies in general industry for the
three-year fiscal period, 1993 to 1995.
. Non-qualified stock options were granted at the 75th percentile
competitive levels for similar-size companies in general industry for
fiscal years 1996, 1997 and 1998.
. For fiscal 1999 through 2002, restricted stock and cash awards were
issued to key management employees at the 75th percentile competitive
level.
. The Committee determined that the Company will issue long-term awards
using non-qualified stock options at the 60th percentile competitive
level for fiscal 2003.
Fiscal 2002 Committee Actions and Executive Performance
Base salaries were increased 3.2% for the CEO and an average of 3.9% for the
other four named executives. In general, salary increases reflected individual
performance, company and business unit performance and changes in the external
compensation market. The above increases exclude a portion of the increase
elected by executives under the Company's Merit/Stock Exchange Program. Mr.
Millar received 800 restricted shares at fair market value at the date of grant
under the Merit/Stock Exchange Program.
Under the Company's EVA cash incentive plan, the Compensation and
Organization Committee reviewed the Company's performance relative to approved
EVA target levels. Mr. Nadig and three other named executives did not earn a
cash incentive payout in fiscal 2002. Mr. Millar received an annual incentive
award in fiscal 2002 that reflected an achievement of 41.9% of the EVA target
level. After the fiscal 2002 distribution, Mr. Nadig had an ending EVA bank
balance of negative $493,456 and the other named executives had negative ending
EVA bank balances of $272,830 in the aggregate.
12
Under MSC's long-term incentive plan, Mr. Nadig was awarded a restricted
stock (86,800 shares) and cash award ($406,400) which vests after a three-year
period. The other four named executives received restricted stock awards for a
total of 62,000 shares, and an aggregate cash award of $293,800, which also
vests after a three-year period. The restrictions will be removed at the end of
the vesting period, assuming the individuals are still employed with the
Company on that date with no disqualifying breaks in service during the
three-year period.
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 Board and
executive compensation matters. The Committee also has access to competitive
data on compensation levels for executive positions.
Material Sciences Corporation Compensation and Organization Committee
Mr. Michael J. Callahan, Chairperson
Mr. E. F. Heizer, Jr.
Mr. Howard B. Witt
13
AUDIT COMMITTEE REPORT
The Audit Committee operates under a written charter adopted by the Board of
Directors. A copy of the Audit Committee Charter, as amended by the Board on
April 18, 2002, is attached to this proxy statement as Exhibit A. As set forth
in more detail in the charter, the primary function of the Audit Committee is
to assist the Board in fulfilling its oversight responsibilities with respect
to the financial information which is provided to the shareowners and others,
the systems of internal controls which management has established and the audit
process.
The members of the Audit Committee, however, are not professionally engaged
in the practice of accounting or auditing and are not experts in the fields of
accounting or auditing. The Audit Committee relies, without independent
verification, on the information provided to it and on the representations made
by management and the independent auditors that the Company's financial
statements have been prepared in conformity with accounting principles
generally accepted in the United States.
In overseeing the preparation of the financial statements of the Company,
the Audit Committee met with management to review and discuss the Company's
audited financial statements prior to their issuance and to discuss significant
accounting issues.
The Audit Committee has discussed with its independent auditors the matters
required to be discussed by Statement on Auditing Standards No. 61
(Communications with Audit Committee), as amended.
In addition, the Audit Committee has received the written disclosures and
the letter from its independent auditors required by Independence Standards
Board Standard No. 1 (Independence Discussions with Audit Committees) and has
discussed with the independent auditors their independence. The Audit Committee
has also reviewed the non-audit services provided by the independent auditors,
and considered whether the provision of those services was compatible with
maintaining the independence of the auditors.
Based on the review and discussions referred to above, the Audit Committee
recommended to the Board of Directors that the audited financial statements of
the Company be included in its Annual Report on Form 10-K for the fiscal year
ended February 28, 2002, and be filed with the Securities and Exchange
Commission.
Material Sciences Corporation Audit Committee
Mr. E. F. Heizer, Jr., Chairperson
Mr. Michael J. Callahan
Mr. G. Robert Evans
14
PERFORMANCE GRAPH
The following chart shows total shareowner returns, assuming $100 was
invested on February 28, 1997, in Material Sciences Corporation, the S&P
SmallCap 600 Index and the Comparator Group (as described below) with
dividends, if any, reinvested through February 28, 2002.
MSC 5-YEAR CUMULATIVE TOTAL RETURN VERSUS
THE S&P SMALLCAP 600 INDEX AND COMPARATOR GROUP
[CHART]
February 28 or 29,
-----------------------------------------------
1997 1998 1999 2000 2001 2002
------- ------- ------- ------- ------- -------
MSC................... $100.00 $ 74.42 $ 43.89 $ 88.17 $ 53.74 $ 61.07
S&P SmallCap 600 Index 100.00 134.93 111.85 153.74 153.17 165.21
Comparator Group...... 100.00 91.79 65.08 65.97 49.44 71.10
Comparator Group: Cold Metal Products Inc. (CLQ)
Gibraltar Steel Corp. (ROCK)
Huntco Inc. (HCO)
Olympic Steel Inc. (ZEUS)
Shiloh Industries, Inc. (SHLO)
Southwall Technologies Inc. (SWTX)
Steel Technologies, Inc. (STTX)
Worthington Industries, Inc. (WOR)
15
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.
Change in control arrangements are in effect as of April 22, 2002, for
approximately 33 employees, including Change in Control Agreements for all of
the Company's executive officers. In general, the Change in Control Agreements
with the executive officers provide that in the event a Change in Control
occurs (as defined therein) and employment is terminated by the Company without
"Cause" (as defined therein) or by such executive for "Good Reason" (as defined
therein) or, within 30 days after the first anniversary of a Change in Control,
without Good Reason, the Company will pay to such executive officer a lump sum
payment of one and a half to three times such executive officer's annual base
salary plus bonus plus required defined contribution plan contributions, and
will provide other compensation and benefits. Such Change in Control Agreements
also provide for gross-up payments for certain income tax payments and for, in
some cases, covenants not to compete. In addition, the Company is contingently
liable for banked balances from the Company's EVA incentive program, which
totals $116,000.
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.
The Company has previously loaned money to Mr. Lazowski, an executive
officer of the Company, in order for him to maintain his stock ownership
interest in the Company. During fiscal 2002, Mr. Lazowski owed the Company as
much as $108,405 in outstanding principal. As of February 28, 2002, Mr.
Lazowski owed the Company $94,715 in outstanding principal. The loan is payable
on demand and bears an average interest rate of 6.94% per annum.
16
EMPLOYEE AND OTHER PLANS
Supplemental Pension Plan Agreements
The Company has entered into Supplemental Pension Plan Agreements
("Supplemental Pension Plan Agreements") with 12 current employees, including
all executive officers as of April 22, 2002, 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, 2002, $2,045,244 had been accrued under the plans for
current employees, of which $2,025,445 had been accrued to be paid to executive
officers which includes $1,446,947 for persons named in the Summary
Compensation Table (such accruals being $789,505, $23,434, $251,596, $375,554,
and $6,858 for Messrs. Nadig, Waclawik, Lazowski, Millar and Williams,
respectively).
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's directors, officers
and persons who own more than 10% of the Company's Common Stock to file reports
of ownership and changes in ownership of shares of the Company's Common Stock
with the SEC. Directors, officers and greater than 10% shareowners are required
by SEC regulations to furnish the Company with copies of all Section 16(a)
reports they file. Based solely on the review of the copies of such reports
furnished to the Company, or written representations from certain reporting
persons that no Forms 5 were required for those persons, the Company believes
that, from March 1, 2001 through February 28, 2002, its directors, officers and
greater than 10% shareowners complied with all applicable filing requirements,
except for the failure by Mr. Millar to report a transaction on a timely basis,
which has since been reported on a Form 4.
17
INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP served as our independent public accountants for the
fiscal year ended February 28, 2002. Over the past several months, our Audit
Committee and management have been monitoring and reviewing, in detail, the
events surrounding Arthur Andersen LLP and its role as auditors of Enron Corp.
On May 20, 2002, our Audit Committee determined that it is in the best
interests of the Company and its shareowners to dismiss Arthur Andersen LLP and
engage Deloitte & Touche LLP as the Company's independent public accountants
for the year ending February 28, 2003. Representatives of our independent
public accountants are not expected to be present at the annual meeting and
will not be available to respond to questions or to make a statement. Fees
related to services performed by Arthur Andersen LLP in fiscal 2002 are as
follows:
Audit Fees............................................................... $ 313,000
Financial Information Systems Design and Implementation Fees............. $ --
All Other Fees (consists primarily of income tax consulting, planning and
return preparation and internal audit consulting)...................... $1,638,527
MISCELLANEOUS
Shareowner Proposals for 2003 Annual Meeting of Shareowners
Proposals of shareowners intended to be presented at the 2003 Annual Meeting
of Shareowners must be received by the Company no later than January 21, 2003,
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.
Under the Company's By-Laws, shareowners may nominate directors or bring
other business before the Company's 2003 Annual Meeting of Shareowners by
delivering notice to the Company (containing certain information specified in
the By-Laws) no earlier than March 22, 2003 nor later than April 21, 2003.
Please note that these requirements are separate and apart from, and in
addition to, the SEC's requirements that a shareowner must meet to have a
shareowner proposal included in the Company's proxy statement as discussed
above. A copy of the full text of the By-Law provisions discussed above may be
obtained from the SEC or by writing the Secretary of the Company.
We reserve the right to reject, rule out of order, or take other appropriate
action with respect to any proposal or nomination that does not comply with
these and other applicable requirements.
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 2002 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.
18
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 $4,500
plus expenses, for assistance by Georgeson Shareholder in the solicitation of
proxies. Some of the officers and other employees of the Company and Georgeson
Shareholder may solicit proxies personally, by telephone, by mail, facsimile
transmission or other forms of electronic communication. 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
By Order of the Board of Directors,
James J. Waclawik, Sr.
Vice President,
Chief Financial Officer and Secretary
Elk Grove Village, Illinois
May 21, 2002
19
Exhibit A
MATERIAL SCIENCES CORPORATION
AUDIT COMMITTEE CHARTER
The Audit Committee is a committee of the Board of Directors. The Audit
Committee, including the chairperson, shall be designated by the Board of
Directors and be composed of at least three (3) members of the Board of
Directors, each of whom (i) must be independent of the management of the
Corporation and (ii) must be financially literate or must become financially
literate within a reasonable period of time after appointment to the Audit
Committee. At least one member of the Audit Committee must have accounting or
related financial management expertise. Its primary function is to assist the
Board in fulfilling its oversight responsibilities with respect to the
financial information which is provided to the shareowners and others, the
systems of internal controls which management has established, and the audit
process.
In performing its function, the Audit Committee is expected to:
1. Provide an open avenue of communication between management, the internal
audit function, the independent accountants and the Board of Directors.
2. Review and update the Audit Committee Charter on an annual basis.
3. Nominate to the Board of Directors the independent accountants. Ensure that
the independent accountants are ultimately accountable to the Board of
Directors. Approve the fees and the scope of work of the independent
accountants.
4. Evaluate and where appropriate, recommend replacement of the independent
accountants.
5. Review with management and the internal audit function:
a) The establishment, scope of work and reporting responsibilities of the
internal audit function.
b) The Internal Auditing Mission Statement and Charter on an annual basis.
c) Internal auditing's compliance with the IIA's Standards for the
Professional Practice of Internal Auditing (Standards).
d) That policies and procedures with respect to officers' expense accounts
and perquisites, including their use of corporate assets, and consider
the results of any review of these areas by the internal audit function.
6. Confirm the independence of the internal audit function and the independent
accountants, including a review, if applicable, of management consulting
services, related fees charged by the independent accountants and written
disclosures required by the Independence Standards Board.
7. Inquire of management, the internal audit function and the independent
accountants about significant risks or exposures and assess the steps
management has taken to minimize such risk to the Company.
8. Consider with management and the independent accountants the rationale for
employing audit firms other than the principal independent accountants.
A-1
9. Review with management, the internal audit function and the independent
accountants:
a) The adequacy of the Company's internal controls.
b) Any related significant findings and recommendations of the independent
accountants and the internal audit function together with management's
responses thereto.
10. Review with management and the independent accountants at the completion of
the annual audit:
a) The Company's annual financial statements and related footnotes.
b) The independent accountants' audit of the financial statements and their
report thereon.
c) Any significant changes required in the independent accountant's audit
plan.
d) Judgments about the quality, not just the acceptability, of the
Company's accounting principles and underlying estimates in the
Company's financial statements.
e) Any serious difficulties or disputes with management encountered during
the course of the audit.
f) Other matters related to the conduct of the audit which are to be
communicated to the Audit Committee under generally accepted auditing
standards.
g) Other filings or disclosures required by the Securities and Exchange
Commission or the New York Stock Exchange with regards to the activities
and independence of the Audit Committee.
11. The Audit Committee shall prepare a report to be included in the
Corporation's proxy statement stating whether the Audit Committee has
reviewed and discussed the audited financial statements with management,
including quality of accounting principles with the independent
accountants; received independence disclosures from the independent
accountants and determined accountant independence; and recommended to the
Board the inclusion of the financial statements in the 10-K.
12. Confirm with management that the independent accountants have reviewed and
discussed the interim financial reports before they are filed with the SEC
or other regulators.
13. Discuss with the independent accountants, if deemed necessary by the
independent accountants, the quarterly financial statements prior to filing
of the quarterly report on Form 10-Q.
14. Review with management and the internal audit function, the results of
their review of the Company's compliance with its code of conduct and any
potential conflicts of interest.
15. Review any of the following issues which are raised by management, the
internal audit function or the independent accountants: legal and
regulatory matters that may have a material impact on the financial
statements, related Company compliance policies, and reports received from
regulators.
16. Meet with the internal audit function and the independent accountants in
executive session to discuss any matters that the Audit Committee or these
groups believe should be discussed privately with the Audit Committee.
17. Report Audit Committee actions to the Board of Directors with such
recommendations as the Audit Committee may deem appropriate.
A-2
18. The Audit Committee shall have the power to conduct or authorize
investigations into any matters within the Audit Committee's scope of
responsibilities. The Audit Committee shall be empowered to retain
independent counsel, accountants or others to assist it in the conduct of
any investigation.
19. The Audit Committee shall meet at least two times per year or more
frequently as circumstances require. The Audit Committee may ask members of
management or others to attend the meeting and provide pertinent
information as necessary.
20. The Audit Committee will perform such other functions required by law, the
Company's charter or by-laws, or the Board of Directors.
A-3
[LOGO]
MSC
Material Sciences Corporation
Notice of Annual Meeting of Shareowners and Proxy Statement
Meeting Date
June 20, 2002
YOUR VOTE IS IMPORTANT!
Please promptly vote your proxy.
[GRAPHIC]
Printed on recycled paper
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 20, 2002
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 20, 2002, 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 or
postponement thereof.
Your vote for nine directors may be indicated on the reverse side. Michael
J. Callahan, Dr. Eugene W. Emmerich, G. Robert Evans, E.F. Heizer, Jr., Frank L.
Hohmann III, Dr. Ronald A. Mitsch, Gerald G. Nadig, Dr. Mary P. Quin and Howard
B. Witt have been nominated for election of directors.
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 (1) for the election of all
nominees for director; and (2) in favor of authorizing proxies to vote upon such
other business as may properly come before this meeting. Discretionary authority
to cumulate votes is being solicited.
(Continued and to be marked, dated and signed on the reverse side)
-------------------------------------------------------------------------------
. FOLD AND DETACH HERE .
Please mark
your votes as
indicated in
this example [X]
1. ELECTION OF DIRECTORS: NOMINEES:
(duly nominated and named on the reverse 01 Michael J. Callahan,
side of this proxy and listed to the right) 02 Dr. Eugene W. Emmerich,
03 C. Robert Evans,
FOR WITHHOLD 04 E.F. Heizer, Jr.,
all nominees AUTHORITY 05 Frank L. Hohmann III,
(except as marked to vote for all 06 Dr. Ronald A. Mitsch,
to the contrary) nominees 07 Gerald G. Nadig,
08 Dr. Mary P. Quin, and
[_] [_] 09 Howard B. Witt
Authority withheld for the following only (write name of nominees) in the space
below):
-------------------------------------------------------------------------------
2. Approval to authorize proxies to vote upon such other business as may
properly come before the meeting.
FOR AGAINST ABSTAIN
[_] [_] [_]
Signature Signature Date
----------------------- ------------------------ ----------
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.
-------------------------------------------------------------------------------
. FOLD AND DETACH HERE .