<PAGE> 1
SCHEDULE 14A INFORMATION
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<PAGE> 2
[Logo will appear here]
May 7, 1998
DEAR MORTON INDUSTRIAL GROUP SHAREHOLDER:
You are cordially invited to attend the Annual Meeting of the Shareholders
of Morton Industrial Group, Inc. (formerly MLX Corp.), to be held at 11:00 a.m.
Central Daylight Savings Time on Tuesday, June 30, 1998, at the Company's
offices, 1021 West Birchwood, Morton, Illinois 61550. Directions to the
meeting location appear on the back cover of the accompanying Proxy Statement.
The Notice of Meeting and Proxy Statement on the following pages describe
the matters to be presented at the meeting. Management will report on current
operations and there will be an opportunity for discussion of the Company and
its activities. The 1997 Annual Report on Form 10-K and an Annual Review
accompany this Proxy Statement.
It is important that your shares be represented at the meeting regardless
of the size of your holdings. If you are unable to attend in person, we urge
you to participate by voting your shares by proxy. You may do so by filling
out and returning the enclosed proxy card.
Sincerely,
William D. Morton
Chairman, President and Chief Executive
Officer
<PAGE> 3
MORTON INDUSTRIAL GROUP, INC.
1021 WEST BIRCHWOOD
MORTON, ILLINOIS 61550
----------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
----------------
To The Shareholders of Morton Industrial Group, Inc.:
NOTICE IS HEREBY GIVEN THAT the Annual Meeting of the Shareholders of
Morton Industrial Group, Inc. (the "Company") will be held at the Company's
offices, 1021 West Birchwood, Morton, Illinois 61550, on Tuesday, June 30,
1998, at 11:00 a.m., Central Daylight Savings Time, for the following purposes:
1. To elect five directors to serve for one year terms until the Annual
Meeting of Shareholders in 1999.
2. To consider and act upon a proposal to ratify the selection of Clifton
Gunderson L.L.C. as independent auditors for the Company for 1998.
3. To transact such other business as may properly come before the meeting
in connection with the foregoing or otherwise.
The Board of Directors has fixed the close of business on May 4, 1998, as
the date for the purpose of determining shareholders entitled to notice of and
to vote at said meeting or any adjournment thereof. A complete list of such
shareholders will be open to the examination of any shareholder during regular
business hours for a period of ten days prior to the meeting at the offices of
the Company at 1021 West Birchwood, Morton, Illinois.
If you do not expect to attend the meeting in person, please fill in,
sign, date and return the enclosed proxy in the accompanying envelope.
By Order of the Board of Directors,
Daryl R. Lindemann
Secretary
<PAGE> 4
MORTON INDUSTRIAL GROUP, INC.
1021 WEST BIRCHWOOD
MORTON, ILLINOIS 61550
----------------
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
June 30, 1998
The enclosed proxy is solicited by the Board of Directors of Morton
Industrial Group, Inc., (the "Company") for use at the Annual Meeting of
Shareholders to be held at the Company's offices, 1021 West Birchwood, Morton,
Illinois 61550, on Tuesday, June 30, 1998, at 11:00 a.m., Central Daylight
Savings Time, or at any adjournment thereof. The enclosed proxy, when properly
executed and received by the Company's Secretary prior to the meeting, and not
revoked, will be voted in accordance with the directions thereon, or if no
directions are indicated, the proxy will be voted for each nominee for election
as a director and for the proposal to ratify the selection of Clifton Gunderson
L.L.C. as independent auditors for the Company for the fiscal year ending
December 31, 1998. If any other matter should be presented at the Annual
Meeting upon which a vote may properly be taken, the shares represented by the
proxy will be voted with respect thereto in accordance with the discretion of
the person or persons holding such proxy. Proxies may be revoked by
shareholders at any time prior to the voting of the proxy by written notice to
the Company, by submitting a new proxy, or by personal ballot at the meeting.
The first date on which this proxy statement and enclosed form of proxy are
being sent to the Company's shareholders is on or about May 7, 1998.
CERTAIN BACKGROUND INFORMATION. During the fiscal year ended December 31,
1997, the Company operated under the name "MLX Corp." On January 20, 1998,
Morton Metalcraft Holding Co., a closely held Delaware corporation ("Morton"),
merged with and into MLX Corp. (the "Merger"), with MLX Corp. being the
surviving corporation with its name changed to "Morton Industrial Group, Inc."
On January 19, 1998, the shareholders of MLX Corp. approved an amendment
of its Articles of Incorporation to (i) provide for the reclassification of the
existing common stock of MLX Corp., par value $.01 per share, as Class A Common
Stock (the "Class A Stock"), par value $.01 per share, (ii) establish the
rights of the Class B Common Stock, par value $.01 per share (the "Class B
Stock"). (The Class A Stock and Class B Stock are collectively referred to as
the "Common Stock"). Before the Merger, MLX Corp.'s Board of Directors had six
members. At the closing of the Merger four of the MLX Corp. directors
resigned, the Board was reduced to five members, and three members of the Board
of Directors of Morton became directors of the Company, with two remaining
members from the MLX Corp. Board.
OUTSTANDING SHARES. As of the close of business on May 4, 1998, the
record date for determining shareholders entitled to vote at the annual
meeting, the Company had issued and outstanding 3,801,944 shares of Class A
Stock and 200,000 shares of Class B Stock. Each share of Class A Stock is
entitled to one vote per share on matters to be voted upon at the Annual
<PAGE> 5
Meeting. Each share of Class B Stock is entitled to approximately .4705 votes
per share on the same matters. The shares of Class A Stock and Class B Stock
vote together as a single class on all matters submitted to a vote of the
shareholders. By virtue of his Common Stock ownership set forth below and a
proxy granted him by or on behalf of the entities listed in Notes 2 and 3 to
"Principal Shareholders of the Company," Mr. William D. Morton, the Company's
Chairman, President, and Chief Executive Officer controls approximately 56.5%
of the voting power of the issued and outstanding shares of Common Stock on all
matters requiring the vote of shareholders other than (i) the liquidation of
the Company, (ii) the sale of all or substantially all of the assets of the
Company, or (iii) the merger or consolidation of the Company if immediately
thereafter the Company's shareholders (including Mr. Morton) do not hold the
power to vote at least 60% of the votes entitled to elect directors of the
company surviving the merger or consolidation. In the latter three instances,
the shares of issued and outstanding Common Stock currently held by Mr. Morton
would constitute approximately 32.5% of the voting power of the shares of
Common Stock that are now issued and outstanding. For further information
about the relative voting rights of the Class A Stock and the Class B Stock,
see Appendix A to this Proxy Statement.
ELECTION OF DIRECTORS
(Item 1 on the Proxy Card)
The Board of Directors of the Company consists of five members. At the
Annual Meeting all five directors are to be elected to hold office for a one
year term until the 1999 Annual Meeting and until their successors are selected
and qualified. The enclosed proxy can be used to vote for election of the five
directors named below, whose election has been proposed and recommended by the
Board of Directors. If any nominee shall, before the meeting, become
unavailable for election as a director, the persons named as proxies in the
accompanying form of proxy will vote for such nominee, as may be recommended by
the Board of Directors.
The age, position with the Company, period of service as a director of the
Company, business experience during the past five years, and directorships in
other companies as of May 7, 1998, for each of the nominees for election are
set forth below:
WILLIAM D. MORTON, 50, served as President and Chief Executive Officer of
Morton Metalcraft Co. and its subsequently formed parent, Morton Metalcraft
Holding Co., from 1989 until January 20, 1998, when it was merged with and into
MLX Corp. at which time he became the Chairman, Chief Executive Officer, and
President of the Company. Mr. Morton received a Bachelors Degree in Mechanical
Engineering from the University of Illinois in 1970 and is a member of the
Society of Manufacturing Engineers.
FRED W. BROLING, 62, has served as the Chief Executive Officer and
Chairman of the Board of Plastic Specialties & Technologies, Inc., a
manufacturer of specialty plastic products, since 1984. Mr. Broling is also a
director of Harris Chemical Corp. Mr. Broling became a director of Morton
Metalcraft Co. in 1989 and subsequently became a director of Morton upon its
formation. Upon conclusion of the Merger, Mr. Broling became a director of the
Company and a member of the Compensation and Stock Option Committee of the
Company's Board of Directors.
ALFRED R. GLANCY III, 60, has served as Chairman, President, and Chief
Executive Officer of MCN Energy Group Inc., a diversified global energy holding
company, and its predecessor since 1984. Mr. Glancy became a director
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<PAGE> 6
of MLX Corp. in 1985 and during 1997 served on the MLX Board's Compensation,
Audit, and Special Transaction Committees. Following the Merger, Mr. Glancy
was appointed to the Compensation and Stock Option Committee of the Company's
Board of Directors.
MARK W. MEALY, 41, is the head of the Corporate Finance Group at Bowles
Hollowell Conner & Co., an investment banking firm, where he has been a
Managing Director since 1989. Mr. Mealy became a director of Morton in 1995
and upon conclusion of the Merger became a director of the Company. Following
the Merger, Mr. Mealy was appointed to the Audit Committee of the Company's
Board of Directors.
WILLEM F.P. DE VOGEL, 47, has been the President of Three Cities Research,
Inc., a firm engaged in the investment and management of private capital since
1982. Mr. de Vogel became a Director of MLX Corp. in 1986, and during 1997
served on the MLX Board's Compensation Committee. Following the Merger, Mr. de
Vogel became a member of the Audit Committee of the Company's Board of
Directors. Mr. de Vogel also serves as a director of Computer Associates
International, a computer software company.
The MLX Corp. Board of Directors met seven times during 1997. All
Directors attended 75% or more of the meetings of the Board of Directors and
the Committees of the Board on which they served.
During 1997, the MLX Corp. Board of Directors had an Audit Committee,
Compensation Committee, Funds Committee, and Special Transaction Committee.
The MLX Corp. Board of Directors did not have a standing nominating committee.
The Audit Committee met twice in 1997 to review matters relating to the quality
of financial reporting and internal accounting controls, the appointment of MLX
Corp.'s independent auditors, and the extent and results of their audits. The
duties of the Compensation Committee included review and approval of the
compensation of officers and administration of MLX Corp.'s stock option plans.
The Compensation Committee met once in 1997. (The report of representatives of
the Committee appears on pages 9 and 10 of this Proxy Statement.)
The Funds Committee oversaw the investment of MLX Corp.'s funds and met
three times in 1997. The Special Transaction Committee was formed in September
1997 to consider issues related to several possible acquisition transactions
for MLX Corp., including the transaction with Morton. The Special Transaction
Committee, which met twice, was composed of directors who were not affiliated
with the shareholders identified in Notes 2 and 3 to the table headed
"Principal Shareholders of the Company."
Upon completion of the Merger, the Company established two committees of
the Board of Directors, the Audit Committee and the Compensation and Stock
Option Plan Committee. The members of the Audit Committee are Mr. Mealy and
Mr. de Vogel. The duties of the Audit Committee include recommendation of the
independent auditors to be retained by the Company, oversight of the Company's
financial reporting, internal accounting controls, and the results of audits
conducted by the Company's independent auditors, and maintenance of
communications between the Board of Directors and the Company's independent
auditors. The Compensation and Stock Option Plan Committee will review and
approve the compensation of the Company's executive officers, oversee the
Company's stock option plans, and review significant changes in the Company's
compensation policies. The members of the Compensation and Stock Option Plan
Committee following the Merger are Mr. Glancy and Mr. Broling.
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<PAGE> 7
COMPENSATION OF DIRECTORS. During 1997, MLX Corp. paid each director who
was not an employee of MLX Corp. an annual retainer of $10,000 and a fee of
$400 for each board or committee meeting the director attended.
EXECUTIVE OFFICERS. Since the conclusion of the Merger, the executive
officers of the Company have been Mr. Morton and Daryl R. Lindemann. Mr.
Lindemann, age 43, is Vice President of Finance, Secretary, and Treasurer of
the Company. Mr. Lindemann joined Morton Metalcraft Co. in those positions in
1990 and subsequently held the same positions with Morton following its
formation. Mr. Lindemann received a B.S. in Accounting in 1976 from the
University of Illinois and is a member of the American Institute of Certified
Public Accountants and the Illinois CPA Society.
SHARE OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS. The following table
sets forth information as of May 4, 1998, the number of shares of Common Stock
beneficially owned by all directors and executive officers of the Company
individually and as a group:
<TABLE>
<CAPTION>
PERCENTAGE
STOCK OPERATIONS OF SHARES
EXERCISABLE OUTSTANDING AS OF
NAME OF INDIVIDUAL SHARES OWNED WITHIN 60 DAYS(1) MAY 4, 1998(2)
------------------ ------------ -------------- -----------
<S> <C> <C> <C>
William D. Morton, 1,318,990(3) 64,815 29.6%
Chairman, Chief
Executive Officer,
and President
Fred W. Broling, --- 277,778 5.9%
Director
Alfred R. Glancy 5,100(4) --- (6)
III, Director
Mark W. Mealy, 13,333 --- (6)
Director
Willem F.P. de Vogel 1,950(5) --- (6)
Director
Daryl R. Lindemann, 69,697 1.5%
Vice President
Finance, Secretary,
and Treasurer
All Directors and 1,339,373 412,290 37.5%
Executive Officers
</TABLE>
(1) Options exercisable for shares of Class A Stock.
(2) Based upon the sum of all shares of Class A Stock and Class
B Stock that were issued and outstanding plus all stock
options that were exercisable within sixty days.
(3) Includes 1,218,990 shares of Class A Stock and 100,000
shares of Class B Stock.
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<PAGE> 8
(4) Includes 100 shares of Class A Stock owned by Mr. Glancy's
wife in which he has no voting or investment power.
(5) Mr. de Vogel is the President of Three Cities Research, Inc.,
a wholly owned subsidiary of Three Cities Holdings Limited
and an affiliate of Quilvest, which indirectly owns Quilvest
American Equity (see Note 3 under "Principal Shareholders of
the Company." None of the shares beneficially owned by Three
Cities Holdings Limited or Quilvest American Equity is included
in the beneficial ownership of Mr. de Vogel.
(6) Less than 1%.
PRINCIPAL SHAREHOLDERS OF THE COMPANY
The following table sets forth the ownership by each person other
than its directors and executive officers by the Company to own beneficially
more than 5% of the Common Stock on May 4, 1998.
<TABLE>
<CAPTION>
AMOUNT AND NATURE
NAME AND ADDRESS OF OF BENEFICIAL PERCENT OF
TITLE OF CLASS BENEFICIAL OWNER OWNERSHIP CLASS(1)
- -------------- ---------------- --------- -----
<S> <C> <C> <C>
Common Three Cities Holdings 851,456(2)(3) 18.2%
Limited
135 East 57th Street
New York, NY 10022
</TABLE>
(1) Based upon the sum of all shares of Class A stock and
Class B Stock that were issued and outstanding plus all
stock options that were exercisable within sixty days.
(2) Three Cities Holdings Limited has sole power to vote and
shared power to dispose of 851,456 shares of Common Stock
(including 86,164 shares of Class B Stock) that are owned
of record by the following group of investors (the "Investor
Group"): Terbem Limited (374,244 shares - 8.0%), TCRI
Offshore Partners CV (248,393 Shares - 5.3%), Bobst
Investment Corp. (59,961 shares - 1.3%), and TCR
International Partners, LP (168,858 shares - 3.6%). Each
member of the Investor Group is an investment vehicle
established for the purpose of investing in securities of
other enterprises in various parts of the world, and the
Investor Group acquired the shares of Common Stock as
participants in an equity portfolio fund managed by Three
Cities Holding Limited. Three Cities Holdings Limited is
the parent company of Three Cities Research, Inc.
(3) Does not include 136,722 shares (2.9%) of the Common
Stock (including 13,836 shares of Class B Stock) owned by
Quilvest American Equity an indirectly owned investment
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<PAGE> 9
subsidiary of Quilvest, a Luxembourg holding company whose
shares are traded on the Paris and Luxembourg Stock
Exchanges. Two of the directors of Quilvest and members of
their extended families are significant shareholders of
Three Cities Holdings Limited. In addition, one of the
directors of Quilvest is the chief executive officer of
Three Cities Holdings Limited. Three Cities Holdings
Limited does not have any power to vote and dispose of the
shares of Class A Stock owned and Class B Stock owned by
Quilvest American Equity. Mr. Willem F.P. de Vogel, a
director of the Company, is President of Three Cities
Research, Inc.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table provides certain summary information concerning
compensation paid or accrued by MLX Corp. and its subsidiaries for the last
three fiscal years of MLX Corp. to or on behalf of MLX Corp.'s President and
Chief Executive Officer and its former Chairman and Chief Executive Officer.
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation
------------------- ----------------------
Awards PAYOUTS
------ -------
RESTRICTED SECURITIES
NAME AND STOCK UNDERLYING LTIP ALL OTHER
PRINCIPAL OTHER ANNUAL AWARD(S) OPTIONS/ PAYOUTS COMPENSATION
POSITION YEAR SALARY($) BONUS($) COMPENSATION ($) SARS(#) ($) ($)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Thomas C. Waggoner, 1997 $149,688 0 0 0 0 0 0
President and Chief 1996 $145,000 52,500 0 0 0 0 0
Executive Officer 1995 $131,508 $150,000 0 0 30,000 0 0
(1)
Brian R. Esher, 1997 0 0 0 0 0 0 $2,189,600(2)
former Chairman and 1996 $12,000 0 0 0 0 0 0
Chief Executive 1995 $70,187 $37,500 0 0 0 0 0
Officer
</TABLE>
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<PAGE> 10
(1) Upon the conclusion of the Merger on January 20, 1998,
Mr. Waggoner resigned and received a severance payment of
$350,000.
(2) In February 1997, the MLX Corp. Board of Directors voted
to convert options to purchase 190,400 shares of MLX Corp.
common stock held by Mr. Esher to stock appreciation rights
("SARs"). Mr. Esher exercised the SARs in February 1997 and
received the amount of cash shown based on a closing market
price of $16.50 on February 12, 1997, and an exercise price
of $5.00 per SAR.
OPTION/SAR GRANTS AND LONG TERM INCENTIVE AWARDS IN LAST FISCAL YEAR
MLX Corp. granted no stock options or stock appreciation rights and made
no long term incentive awards during the fiscal year ended December 31, 1997.
AGGREGATED OPTION EXERCISES IN THE LAST FISCAL YEAR AND FISCAL YEAR END
OPTION/SAR VALUES
The following table provides information concerning options exercised
during the fiscal year ended December 31, 1997, by each of the named executive
officers and the value of unexercised options held by such executive officers
on December 31, 1997.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTIONS VALUES
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised in-the-Money Options at
Options/SARs December 31, 1997($)
Shares Acquired on Value Realized
Name Exercise (#) ($) Exercisable Unexercisable Exercisable Unexercisable
<S> <C> <C> <C> <C> <C> <C>
Thomas C. Waggoner 0 0 50,000 0 $587,375(1) 0
Brian R. Esher 0(2) $2,189,600(2) 0(2) 0 0 0
</TABLE>
(1) Based on the $18.9375 average of the bid and ask prices of
on December 31, 1997, and a weighted average exercise price
of $7.19 per share.
(2) See Note 1 to the Summary Compensation Table with respect to
190,400 options that the Company converted to SARs that Mr.
Esher exercised.
EMPLOYMENT AGREEMENT
Effective as of February 11, 1991, MLX Corp. and Brian R. Esher, its
former Chairman and Chief Executive Officer, entered into an employment
agreement under which Mr. Esher agreed to be employed as the Chairman,
President, and Chief Executive Officer of MLX Corp. for a period of three
years, subject to earlier termination for cause as provided in the agreement.
Mr. Esher's employment agreement was amended as of February 11, 1992, as a
result of the substantial change in MLX Corp. resulting from the sale of its
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<PAGE> 11
Refrigeration & Air Conditioning Group (the "RAC Group"). The amendment
acknowledged the other duties that Mr. Esher then had as the Chief Executive
Officer of the new Refrigeration & Air Conditioning Group company, Pameco
Holdings, Inc. See "Compensation Committee Interlocks and Insider
Participation."
Based on a review of Mr. Esher's employment agreement, MLX Corp. and Mr.
Esher amended his employment agreement effective as of January 1, 1994, 1995,
and 1996, in each case to extend the term until the end of the calendar year.
Under the terms of the amended agreement, Mr. Esher received a base salary of
$12,000 in 1996.
Under the terms of his original 1991 employment agreement, Mr. Esher
received an option to purchase 190,400 shares of MLX Corp. Common stock, at a
price of $5.00 per share, exercisable (subject to vesting schedules that were
satisfied) at any time or from time to time prior to February 10, 1998. As
described in Note 1 to the Summary Compensation Table, the Company converted
these options to SAR's that Mr. Esher subsequently exercised.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. de Vogel and Glancy served on the Compensation Committee of the
MLX Corp. Board of Directors during 1997. None of the members of the committee
served as an officer of MLX Corp.
On March 19, 1992, MLX Corp. consummated a sale of its RAC Group and a
restructuring of MLX Corp.'s and its subsidiaries' debt obligations to its
senior lenders (such sale and debt restructuring are referred to collectively
herein as the "1992 Restructuring"). Following its sale of the RAC Group, MLX
Corp. entered into a Management Services Agreement, dated March 19, 1992 (the
"Management Services Agreement"), with Pameco Holdings, Inc., the purchaser of
the RAC Group, pursuant to which MLX Corp. provided management, operational and
administrative services to the RAC group for a fee of $30,000 per month. In
1993, this agreement was amended to provided for the transfer of certain
employees to Pameco Holdings and for MLX Corp. to pay a monthly fee of $5,000
to Pameco Holdings for shared expenses, including the lease of common office
space and for the services of the transferred employees. This amount was
adjusted to $4,500 per month for 1996 and 1997. Under the Management Services
Agreement, Pameco Holdings paid MLX Corp. $81,500 in fees (net of amounts paid
by MLX, Corp. to Pameco Holdings under the post-amendment version of the
Management Services Agreement) during 1993. MLX Corp. paid $69,000 to Pameco
Holdings under this arrangement during 1994. As an integral part of the 1992
Restructuring, Brian R. Esher and Pameco Holdings entered into an employment
agreement providing that in addition to his duties as the Chairman and Chief
Executive Officer of MLX Corp., Mr. Esher would perform other duties as the
Chairman, President, and Chief Executive Officer of Pameco Holdings. Mr.
Esher's agreement with Pameco Holdings also required him to acquire an 8.5%
equity interest in the common stock of Pameco Holdings and to make certain
other investments in Pameco Holdings. See "Employment Agreements."
The investment group that purchased the assets of the RAC Group was led by
Three Cities Research, Inc., a firm engaged in the investment and management of
private capital. Willem F.P. de Vogel, a member of the Board since 1986 and
until the Merger, a member of MLX Corp.'s Compensation Committee, is the
President of Three Cities Research, Inc.
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<PAGE> 12
PERFORMANCE GRAPH
The following performance graph compares the total return to shareholders
of an investment of $100 in each of MLX Corp. Common Stock, all U.S. companies
quoted on Nasdaq, and nonfinancial companies quoted on Nasdaq. "Total Return"
means the increase in value of an investment in a security over a given period
assuming reinvestment in that security of all dividends received thereon during
the period. The stock price performance shown on the graph below is not
necessarily indicative of future price performance.
[ A GRAPH ]
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
12/31/92 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
MLX Common Stock 100.0 105.0 90.0 200.0 265.0 372.5
- -------------------------------------------------------------------------------
Nasdaq Stock Market 100.0 114.8 112.2 158.7 195.2 239.6
- -------------------------------------------------------------------------------
Nasdaq Non-Financial 100.0 115.5 111.0 154.7 188.0 220.7
- -------------------------------------------------------------------------------
</TABLE>
Plot points for Morton Industrial NPS
REPORT ON EXECUTIVE COMPENSATION BY REPRESENTATIVES
OF THE COMPENSATION COMMITTEE OF MLX CORP.
PRESIDENT & CEO COMPENSATION
Decisions on compensation and bonus for the President and Chief Executive
Officer of MLX Corp. were made by the three member Compensation Committee of
the Board of Directors. Each member of the Committee was a non-employee
Director. Upon completion of the Merger, Mr. Glancy and Mr. de Vogel, who
were members of MLX Corp.'s Compensation Committee, continued as directors of
the Company and provided this report for the fiscal year ended December 31,
1997, as the representatives of MLX Corp.'s Compensation Committee.
Mr. Waggoner did not have an employment agreement with MLX Corp.
Mr. Esher's compensation during 1996 was governed by his Employment
Agreement with MLX Corp., which was first entered into in 1991. The initial
Employment Agreement was amended on February 11, 1992, in light of the
decreased size of MLX Corp. following the sale of MLX Corp.'s Refrigeration and
Air Conditioning Group and to reflect the responsibilities Mr. Esher acquired
as Chief Executive Officer of Pameco Holdings, Inc. The Employment Agreement
was again amended, effective January 1, 1994, and January 1, 1995, and January
1, 1996, and extended on terms reflective of MLX Corp.'s then financial
condition and size. Effective with the sale of S.K. Wellman in June 1995, Mr.
Esher's salary was decreased from $125,000 per year to $12,000 per year and all
incentive compensation for the remainder of 1995 was eliminated. In January
1996 Mr. Esher's Employment Agreement was extended through December 31, 1996,
based on a $12,000 annual salary and no incentive compensation.
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<PAGE> 13
GENERAL
MLX Corp.'s compensation programs were designed to enable MLX Corp. to
attract, motivate and retain senior managers and key employees by providing a
total compensation opportunity based upon individual and unit performance. MLX
Corp.'s compensation program provided for competitive base salaries, annual
incentive bonus opportunities, competitive benefits (health, life, disability,
vacation, and defined contribution retirement) with employee contributions and
long term stock options. This compensation program aligned the interest of MLX
Corp.'s management and its shareholders to build long term value and improve
the return to MLX Corp.'s shareholders. It was MLX Corp.'s policy to structure
its compensation programs so that all compensation was deductible by MLX Corp.
pursuant to Section 162(m) of the Internal Revenue Code.
SALARIES
All officers were employed as employees at will. The salary of the
executive officers other than the Chief Executive Officer were determined by
the Chairman and Compensation Committee and were based upon salary grades
assigned to positions and the relative experience and performance of the
individual. Salary grades were reviewed annually and adjusted in accordance
with the individual's performance and assigned responsibilities within MLX
Corp. and the general complexity of MLX Corp.'s operations. MLX Corp.
generally attempted to set its salaries near the midpoint of the salary ranges
of comparably sized employers.
Typically, individual executives were reviewed annually and their
performance evaluated against their objectives for the period of evaluation.
Such objectives included measurements of revenue generation, operating profit,
asset management, cash flows, cost improvements, quality in customer service,
in each case depending upon the responsibilities of the executive. Evaluation
of these factors is subjective, and no fixed, relative weights were assigned to
the criteria considered.
BONUS COMPENSATION
All executive officers were granted bonus opportunities under MLX Corp.'s
Senior Management Discretionary Bonus Plan, which defined the administration
and goal measurements of each key position. This plan was updated annually and
target bonus opportunities assigned to qualifying managers. Payments were
granted annually based upon achievement of goals, which were also established
annually. For Mr. Waggoner, these goals included profitability, lender
matters, common stock and Nasdaq matters, financial reporting and income tax
compliance, and mergers and acquisitions. Each goal was assigned a relative
weight of 10% to 25%. No bonus was paid to Mr. Waggoner pertaining to 1997.
OPTION GRANTS
MLX Corp. used grants of stock options under its 1985 Stock Option Plan
and its 1995 Stock Option and Incentive Award Plan (the "Old Stock Option
Plans") to its key employees and executive officers to closely align the
interests of such employees and officers with the interests of its
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shareholders. MLX Corp.'s Old Stock Option Plans were administered by the
Compensation Committee, which determined the persons eligible, the number of
shares subject to each grant, the exercise price thereof and the other terms
and conditions of the options. Options granted under the Old Stock Option
Plans had an exercise price equal to at least 100% of the market price of MLX
Corp.'s common stock on the date that the option was granted, and the term of
any option granted is from five (5) to ten (10) years. Option grants typically
vested over a three year period, subject to continued employment.
FOR THE MLX CORP. COMPENSATION COMMITTEE
Alfred R. Glancy III, Chairman
Willem F.P. de Vogel
POST-MERGER EXECUTIVE COMPENSATION
Following the Merger, the Company established a Compensation and Stock
Option Plan. Its Committee members are Mr. Glancy and Mr. Broling. The
Compensation and Stock Option Plan Committee will be responsible for setting
the compensation of the executive officers of the Company and administering the
Company's 1997 Stock Option Plan, which was approved by the stockholders of MLX
Corp. on January 19, 1998. The base compensation of Mr. Morton and Mr.
Lindemann, the two executive officers of the Company, is governed by employment
agreements that they entered into with the Company on January 20, 1998, at the
closing of the Merger. Under those agreements, Mr. Morton's base compensation
in 1998 is $280,000 and Mr. Lindemann's is $95,000. The Compensation and Stock
Option Committee will set these officers' bonus and other compensation during
1998.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The Company is not aware of any executive officer, director or ten percent
shareholder who failed to file on a timely basis any report required to be
filed by Section 16(a) of the Securities Exchange Act of 1934.
RATIFICATION OF THE SELECTION OF AUDITORS
(Item 2 on the Proxy Card)
The Board of Directors proposes and recommends that the shareholders
ratifies the selection of the firm of Clifton Gunderson L.L.C. as independent
auditors for the Company for 1998. Unless otherwise directed by the
shareholders, proxies will be voted for approval of the selection of Clifton
Gunderson L.L.C. to audit the books and accounts of the Company for the current
year. In accordance with the Company's practice, a member of the firm will
attend the Annual Meeting, have an opportunity to make a statement if he
desires to do so and to respond to appropriate questions which may be asked by
shareholders.
INFORMATION ABOUT AUDITORS.
On April 14, 1998, the Company's Board of Directors, acting upon the
recommendation of the Audit Committee of the Board, selected Clifton Gunderson
L.L.C. ("Clifton Gunderson") to serve as the Company's independent accountants
for the fiscal year ending December 31, 1998, and dismissed Ernst & Young LLP
("Ernst & Young") as independent accountants for the Company. For the fiscal
year ended December 31, 1997, Ernst & Young served as the
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independent auditors for MLX Corp., and for the fiscal year ended June 30,
1997, and the six months ended December 31, 1997, Clifton Gunderson served as
Morton's independent auditors. Following the Merger, the Company retained both
firms to complete their respective audits for the periods ended December 31,
1997.
During the last two fiscal years, Ernst & Young's reports on the
financial statements of MLX Corp. did not contain an adverse opinion or
disclaimer of opinion, nor were they qualified in any way, and no reports of
Ernst & Young were modified as to uncertainty, audit scope or accounting
principles. During the same period and during the current fiscal year to and
including April 14, 1998, MLX Corp., and the Company had no disagreements
with Ernst & Young on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure. During the last
two fiscal years and during the current fiscal year, to and including April 14,
1998, Ernst & Young has not advised MLX Corp. or the Company (i) that it does
not have internal controls necessary for the development of reliable financial
statements; (ii) that information had come to Ernst & Young's attention that
has led it to no longer be able to rely on management's representations, or
that has made it unwilling to be associated with the financial statements
prepared by management; (iii) that Ernst & Young needed to expand significantly
the scope of its audit, or that information had come to Ernst & Young's
attention that if further investigated may (a) materially impact the fairness
or reliability of either: a previously issued audit report or the underlying
financial statements, or (b) cause it to be unwilling to rely on management's
representations or be associated with MLX Corp.'s financial statements, or (iv)
that information had come to Ernst & Young's attention that it concluded
materially impacted the fairness or reliability of either (a) a previously
issued audit report or the underlying financial statements, or (b) the
financial statements to be issued covering the fiscal period subsequent to the
date of the most recent financial statements covered by an audit report.
During the last two fiscal years of MLX Corp. and during any subsequent
interim period to and including April 13, 1998, of either of MLX Corp. or the
Company, neither MLX Corp. or the Company consulted Clifton Gunderson about (i)
either (a) the application of accounting principles to a specified transaction,
either completed or proposed, or (b) the type of audit opinion that might be
rendered on the Company's financial statements, or (b) any matter that was a
subject of a disagreement between the Company and Ernst & Young or that was a
reportable event of the kind described in clauses (i) through (iv) in the
immediately preceding paragraph.
MISCELLANEOUS
SOLICITATION OF PROXIES. The Company will bear all of the costs of the
solicitation of proxies for use at the Annual Meeting. In addition to the use
of the mails, proxies may be solicited by personal interview, telephone and
telecopy by directors, officers and employees of the Company, who will
undertake such activities without additional compensation. Banks, brokerage
houses and other institutions, nominees and fiduciaries will be requested to
forward the proxy materials to the beneficial owners of the Common Stock held
of record by such persons and entities and will be reimbursed for their
reasonable expenses in forwarding such material.
INCORPORATION BY REFERENCE. The Report on Executive Compensation
appearing on pages 9 and 10 and the Performance Graph on page 8 of this Proxy
Statement shall not be deemed incorporated by reference by any general
statement incorporating by reference this proxy statement into any filing under
the Securities Act of 1933 or the Securities Exchange Act of 1934 except to the
extent that the Company specifically incorporates said report or said
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<PAGE> 16
graph by reference and neither the report nor the graph shall otherwise be
deemed filed under such Acts.
NEXT ANNUAL MEETING. The Bylaws provide that the Annual Meeting of the
Shareholders of the Company will be held on the fourth Thursday of May in each
year unless otherwise determined by the Board of Directors. Appropriate
proposals of security holders intended to be presented at the 1999 Annual
Meeting must be received by the Company for inclusion in the Company's proxy
statement and form of proxy relating to that meeting on or after January 29,
1999, but no later than February 27, 1999.
Shareholders who do not expect to attend in person are urged to sign, date
and return the enclosed proxy in the envelope provided. In order to avoid
unnecessary expense, we ask your cooperation in mailing in your proxy promptly,
no matter how large or how small your holdings may be.
FORM 10-K. Copies of the Company's Annual Report on Form 10-K for the
year ended December 31, 1997, and its exhibits are available without charge
upon request to the Company's Secretary, 1021 West Birchwood, Morton, Illinois
61550.
By Order of the Board of Directors,
DARYL R. LINDEMANN
Secretary
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<PAGE> 17
APPENDIX A
Voting Rights of Class A Common Stock
and Class B Common Stock
Holders of shares of Class A Common Stock and Class B Common Stock will
vote as a single class on all matters submitted to a vote of the shareholders,
with each share of Class A Common Stock entitled to one vote and each share of
Class B Common Stock entitled to the number of votes determined as described
below. Each share of Class B Common Stock will be entitled to such number of
votes, which will fluctuate from time to time, as necessary to ensure that the
aggregate votes available to be cast by each Affiliated Group (as defined at
the end of this paragraph) that is the holder of Class B Common Stock (with
respect to such Affiliated Group's Class B Common Stock together with certain
shares of Class A Common Stock held by such Affiliated Group) will be equal to
24% of the total votes available to be cast by all holders of MLX Common Stock,
regardless of class. The shares of Class B Common Stock is currently held by
two separate Affiliated Groups resulting in a total of 48% of the voting power
of all Common Stock being controlled by these Affiliated Groups by virtue of
the special voting rights of the Class B Common Stock. The shares of Class B
Common Stock are convertible into shares of Class A Common Stock in certain
circumstances. The Affiliated Groups are (i) the TCR Affiliated Group
(composed of the Investor Group, as defined in "Principal Shareholders of the
Company," and Quilvest American Equity), and (ii) William D. Morton and/or
members of his immediate family. The voting power of the individual shares of
Class B Common Stock with respect to each Affiliated Group will be determined
as of the record date for each shareholders meeting. Upon the issuance of the
Class B Common Stock in the Merger, each share of Class B Common Stock
initially had approximately .4705 votes per share.
For purposes of calculating the number of votes per share attributable to
the Class B Common Stock, certain shares of Class A Common Stock (the
"Designated Shares") owned by each Affiliated Group on the Effective Date,
other than approximately 338,990 shares of Class A Common Stock held by Mr.
Morton, will be aggregated with the votes attributable to the Class B Common
Stock in order to ensure that such Affiliated Group has 24% of MLX's
outstanding voting power with respect to such Designated Shares and such Class
B Common Stock. If an Affiliated Group owns Class A Common Stock in addition
to its Designated Shares, the Affiliated Group may also vote such additional
Class A Common Stock, resulting in the Affiliate Group's having voting power in
excess of 24%. Each Affiliated Group currently owns 880,000 Designated Shares.
If any Designated Shares of an Affiliated Group are sold or transferred to
persons outside such Affiliated Group, the votes per share of the Class B
Common Stock will increase for that Affiliated Group. Any shares of Class A
Common Stock that are transferred by a member of an Affiliated Group will
generally be deemed to reduce Designated Shares, thus increasing the votes per
share attributable to the Class B Common Stock by an amount sufficient to
maintain the voting power of the Affiliated Group at 24% of the votes eligible
to be cast at any meeting of shareholders. In general, if an Affiliated Group
acquires additional shares of Class A Common Stock after the Effective Time,
such shares will not be considered Designated Shares, unless Designated Shares
have previously been transferred, in which case such newly acquired shares will
be deemed to be Designated Shares until the Affiliated Group's Designated
Shares equals 888,000.
<PAGE> 18
Conversions of shares of Class B Common Stock into shares of Class A
Common Stock and transfers of Class B Common Stock will reduce, on a pro rata
basis, the guaranteed percentage vote to which the selling Affiliated Group is
entitled by reason of its ownership of its then remaining shares of Class B
Common Stock.
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[MAP TO MEETING LOCATION WILL APPEAR HERE.]
<PAGE> 20
MORTON INDUSTRIAL GROUP, INC.
ANNUAL MEETING OF SHAREHOLDERS
JUNE 30, 1998
The undersigned hereby appoints Daryl R. Lindemann and Brian L. Geiger and
each of them, proxy and attorney-in-fact for the undersigned, with full power
of substitution. to vote on behalf of the undersigned at the 1998 Annual
Meeting of Shareholders (the "Annual Meeting") of Morton Industrial Group,
Inc., to be held at the Company's office 1021 West Birchwood, Morton, Illinois,
on June 30, 1998, at 11:00 a.m., local time and at any adjournment or
postponement of the Morton Industrial Group, Inc. Annual Meeting all of the
shares of Common Stock ($.01 par value) of Morton Industrial Group, Inc.
standing in the name of the undersigned or which the undersigned may be
entitled to vote on the matters described on the reverse side of the card.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF MORTON
INDUSTRIAL GROUP, INC. PLEASE COMPLETE, SIGN, DATE AND MAIL THIS PROXY CARD
PROMPTLY USING THE ENCLOSED ENVELOPE.
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SEE REVERSE
Continued and to be signed on the reverse side) SIDE
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<PAGE> 21
<TABLE>
<CAPTION>
V PLEASE DETACH AND MAIL IN THE ENVELOPE PROVIDED V
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<S> <C>
A [X] PLEASE MARK YOUR
VOTES AS IN THIS
EXAMPLE.
WITHHOLD
FOR all AUTHORITY The Board of Directors recommends a vote FOR each of the items below.
nominees to vote for
listed all nominees
1. To elect five at right listed at right FOR AGAINST ABSTAIN
directors to serve [ ] [ ] Nominees: William D. Morton 2. To ratify the selection of [ ] [ ] [ ]
for one year terms Fred W. Broling Clifton Gunderson L.L.C.
until the Annual Meeting of Shareholders Alfred R. Glancy III as independent auditors
in 1999. Mark W. Mealy for the Company for 1998.
Willem F.P. de Vogel
INSTRUCTION: To withhold authority to vote for
any individual nominee, check the box to vote In their discretion, the proxies are authorized to
"FOR" all nominees and strike a line through vote upon such other business as may properly come
the nominee's name in the list at right. before the Morton Industrial Group, Inc. Annual
Meeting that is incidental to the conduct thereof and
any adjournment or postponement thereof.
The undersigned hereby revokes all proxies heretofore
given by the undersigned to vote at the Morton
Industrial Group, Inc. Annual Meeting and any
adjournment or postponements therefor.
Please Mark, Sign, Date and Return the Proxy Card
Promptly Using the Enclosed Envelope.
Signature________________________________ Signature if held jointly___________________________________ Dated:______________, 1998
NOTE: Please sign exactly as your name appears on this card. Joint owners should each sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title as such. If a corporation, please sign full corporate name and
sign authorized officers name and title. If a partnership, please sign in partnership name and sign authorized person's name
and titles.
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