<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/X/ Preliminary Proxy Statement
/ / Confidential, for Use of the Comission Only (as permitted by Rule
14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
MORTON INDUSTRIAL GROUP, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
-----------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
-----------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
-----------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
-----------------------------------------------------------------------
5) Total fee paid:
-----------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
-----------------------------------------------------------------------
2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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<PAGE>
[LOGO WILL APPEAR HERE]
MORTON INDUSTRIAL GROUP, INC.
1021 WEST BIRCHWOOD
MORTON, ILLINOIS 61550
, 1999
DEAR MORTON INDUSTRIAL GROUP SHAREHOLDER:
You are cordially invited to attend the Annual Meeting of the Shareholders
of Morton Industrial Group, Inc., to be held at 11:00 a.m. Central Daylight
Savings Time on Tuesday, June 8, 1999, at the Bertha Frank Center, 350 N.
Illinois Avenue, 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 1998 Annual Report on Form 10-K accompanies 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>
MORTON INDUSTRIAL GROUP, INC.
1021 WEST BIRCHWOOD
MORTON, ILLINOIS 61550
------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
------------------------
To The Shareholders of Morton Industrial Group, Inc.:
The Annual Meeting of the Shareholders of Morton Industrial Group, Inc. (the
"Company") will be held at the Bertha Frank Center, 350 N. Illinois Avenue,
Morton, Illinois 61550, on Tuesday, June 8, 1999, 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 2000.
2. To approve an amendment to the Company's Articles of Incorporation to fix
the maximum number of votes per share of the Company's Class B common stock
at ten.
3. To consider and act upon a proposal to ratify the selection of KPMG LLP as
independent auditors for the Company for 1999.
4. 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 April 16, 1999, 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 61550.
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>
MORTON INDUSTRIAL GROUP, INC.
1021 WEST BIRCHWOOD
MORTON, ILLINOIS 61550
------------------------
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
JUNE 8, 1999
The Board of Directors of Morton Industrial Group, Inc., (the "Company"), is
soliciting the enclosed proxy for use at the Annual Meeting of Shareholders. The
meeting will convene at the Bertha Frank Center, 350 N. Illinois Avenue, Morton,
Illinois 61550, on Tuesday, June 8, 1999, at 11:00 a.m., Central Daylight
Savings Time, or at any adjournment of the meeting.
When you have properly executed the enclosed proxy and the Company's
Secretary has received it before the meeting, the persons designated as your
proxies will vote the proxy (if you have not revoked it) in accordance with your
directions on it. If you return your proxy without providing directions, the
persons holding your proxy will vote it for each nominee for election as a
director, for the proposed amendment to the Company's Articles of Incorporation,
and for the proposal to ratify the selection of KPMG LLP as independent auditors
for the Company for the fiscal year ending December 31, 1999. If any other
matter comes before the Annual Meeting upon which a vote may properly occur, the
persons holding your proxy will vote your shares in their discretion.
You may revoke your proxy at any time prior to the voting of the proxy by
written notice to the Company, by submitting a new proxy, or by submitting a
personal ballot at the meeting.
The first date on which we are mailing this proxy statement and enclosed
form of proxy to you and the Company's other shareholders is on or about ,
1999.
OUTSTANDING SHARES. As of the close of business on April 16, 1999, the
record date for determining shareholders entitled to vote at the annual meeting,
the Company had issued and outstanding [3,867,573]shares of our Class A common
stock and 200,000 shares of Class B common stock (together, the "Common Stock").
Each share of Class A common stock has one vote per share on matters to be
voted upon at the Annual Meeting. Each share of Class B common stock has .77343
of a vote per share on the same matters. The shares of Class A common stock and
Class B common stock will vote together as a single class on all matters
submitted to a vote of the shareholders other than the amendment of our Articles
of Incorporation.
By virtue of his Common Stock ownership and proxies granted him by or on
behalf of the persons listed in Notes 2 through 6 to "Principal Shareholders of
the Company," Mr. William D. Morton, the Company's Chairman, President, and
Chief Executive Officer controls approximately 58.3% of the voting power of the
issued and outstanding shares of Common Stock on matters requiring the vote of
shareholders other than:
- the liquidation of the Company;
- the sale of all or substantially all of the assets of the Company;
- the merger or consolidation of the Company if immediately thereafter our
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 these three instances, the shares of issued
and outstanding Common Stock currently held by Mr. Morton would constitute
approximately 33.8% of the voting power of the shares of Common Stock that
may now vote.
For further information about the voting rights of the Class A common stock
and the Class B common stock, see "Amendment of Articles of Incorporation" in
this proxy statement and Appendix A to this proxy statement.
<PAGE>
ELECTION OF DIRECTORS
(Item 1 on the Proxy Card)
Our Board of Directors consists of five members, who previously served on
the boards of either the Company or Morton Metalcraft Holding Co. ("Morton"). On
January 20, 1998, the Company and Morton merged (the "Merger"), and the Company
was the surviving company and assumed its present name.
The Board of Directors recommends that shareholders elect all five current
directors hold office for a one year term until the 2000 Annual Meeting or until
their successors are selected and qualified. You can use the enclosed proxy to
vote for election of the five directors named below. If any nominee becomes
unavailable for election as a director, the persons named as proxies in your
proxy will vote your proxy in favor of that original nominee for the substitute
nominee recommended by the Board of Directors.
If shareholders holding at least a majority of the voting power of the
Common Stock are present at the meeting, the vote of a majority of that voting
power will elect the directors. Mr. Morton has advised us that he will vote the
shares he votes in favor of the election of all of the named directors. Mr.
Morton's vote assures the election of the named directors.
The age, any position with us, period of service as a director, business
experience during the past five years, and directorships in other public
companies as of April 16, 1999, for each of the nominees for election are:
WILLIAM D. MORTON, 51, served as President and Chief Executive Officer of
Morton Metalcraft Co. and its subsequently formed parent, Morton, from 1989
until the Merger. At that time he became our Chairman, Chief Executive Officer,
and President.
FRED W. BROLING, 63, has served as the Chief Executive Officer and Chairman
of the Board of U.S. Precision Glass Company since 1998. Mr. Broling served as
Chairman of the Board and Chief Executive Officer of Plastic Specialties &
Technologies, Inc., from 1983 to 1998 and Pure Tec Corporation from 1995 to
1998. 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 one of our directors and a member of the
Compensation and Stock Option Committee of our Board of Directors.
ALFRED R. GLANCY III, 61, has been 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 one of our directors in 1985.
Following the Merger, Mr. Glancy became a member of the Compensation and Stock
Option Committee of our Board of Directors.
MARK W. MEALY, 42, has been a Managing Director at Bowles Hollowell Conner,
an investment banking firm and a division of First Union Capital Markets Corp.
since 1989. Mr. Mealy became a director of Morton in 1995 and upon conclusion of
the Merger became one of our directors. Following the Merger, Mr. Mealy became a
member of the Audit Committee of the Board.
WILLEM F.P. DE VOGEL, 48, 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 one of our directors in 1986. Following the Merger,
Mr. de Vogel became a member of the Audit Committee of our Board of Directors.
Mr. de Vogel also serves as a director of Computer Associates International, a
computer software company.
Our Board of Directors met five times during 1998. All of our Directors
attended 75% or more of the meetings of the Board of Directors and the
Committees of the Board on which they served.
Our Board of Directors has an Audit Committee and Compensation and Stock
Option Plan Committee, but does not have a standing nominating committee. The
Audit Committee reviews matters relating to the quality of financial reporting
and internal accounting controls, the appointment of our independent auditors,
and the extent and results of their audits. The Audit Committee met once in
1998. The duties of
2
<PAGE>
the Compensation and Stock Option Plan Committee include review and approval of
the compensation of officers and administration of our stock option plan. The
Compensation and Stock Option Plan Committee acted by unanimous written consent
four times in 1998. (The report of the members of the Committee begins at page
of this Proxy Statement.)
COMPENSATION OF DIRECTORS. Instead of paying our non-employee directors an
annual cash retainer, we award them a dollar amount of performance units. We
determine the number of units by dividing the dollar amount by the market price
of our Class A common stock on the date of the award. Each non-employee director
has an account that holds his units. Upon a director's retirement or termination
of service as director, he will receive shares of our Class A common stock. The
number of shares will be equal to the market value of his account (the number of
units multiplied by the market price of our Class A common stock) divided by the
market price of our Class A common stock. The maximum number of shares that we
will distribute to all directors under this arrangement totals 25,000.
In 1998, each director received 1,751 performance units having a market
value on the date of issuance of $30,000. At December 31, 1998, the market value
of each director's account was $24,514.
EXECUTIVE OFFICERS. During 1998, our executive officers were Mr. Morton,
Daryl R. Lindemann, and Thomas D. Lauerman.
Since September 1, 1998, Mr. Lindemann, age 44, has been our Vice President
of Business Development and Acquisitions and Secretary. During the rest of 1998
following the Merger, he served as our Vice President of Finance, Treasurer, and
Secretary. He joined Morton Metalcraft Co. in 1990 as Vice President of Finance,
Treasurer, and Secretary and held the same positions in Morton from its
formation until the Merger.
Mr. Lauerman joined us in August 1998 as Vice President of Finance and
Treasurer. Mr. Lauerman has over twenty years experience in finance and
administrative functions in manufacturing. Most recently, he served as Chief
Financial Officer and Vice President, Administration, of Rexworks, Inc., a
manufacturer of environmental and construction equipment, since March 1994. Mr.
Lauerman is a certified public accountant.
PRINCIPAL SHAREHOLDERS OF THE COMPANY
The following sets forth certain information regarding the beneficial
ownership of our Class A common stock, par value $.01 per share, and Class B
common stock, par value $.01 per share (with the Class A common stock and the
Class B common stock being referred to as the "Common Stock"), as of April 16,
1999 by (i) all our shareholders who own more than 5% of our Common Stock, (ii)
each director who is a shareholder, (iii) certain executive officers, and (iv)
all directors and executive officers as a group, as determined in accordance
with Rule 13(d) under the Securities Exchange Act of 1934. William D. Morton,
our Chairman, President and Chief Executive Officer, currently has the ability
to cast 58.3% of our shareholder votes on most matters. (This percentage becomes
64.2% if all options exercisable within 60 days in which Mr. Morton has a
beneficial interest are counted.) See notes (2) through (6) below. The address
for each of our directors and executive officers is 1021 West Birchwood, Morton,
Illinois 61550.
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENTAGE OF
OF COMMON STOCK OUTSTANDING SHARES
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIALLY OWNED(1) OF COMMON STOCK (1)
- -------------------------------------------------- --------------------- -------------------
<S> <C> <C>
William D. Morton................................. 3,050,311(2)(3) 64.5%
Three Cities Holdings Limited..................... 851,456(2)(3)(4) 20.9
650 Madison Avenue, 24th Floor
New York, New York 10022
Fred W. Broling................................... 277,778(5) 6.4
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENTAGE OF
OF COMMON STOCK OUTSTANDING SHARES
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIALLY OWNED(1) OF COMMON STOCK (1)
- -------------------------------------------------- --------------------- -------------------
<S> <C> <C>
Daryl R. Lindemann................................ 80,499(5) 1.9
Mark W. Mealy..................................... 18,333(6) *
Willem F.P. de Vogel.............................. 7,700(7) *
Alfred R. Glancy III.............................. 5,100(8) *
All directors and executive officers as a
Group (7 persons)............................... 3,063,111 64.8
</TABLE>
- ------------------------
* less than 1%.
(1) For the purposes of the computation of percentages of our Common Stock
presented in this table, a holder is deemed to beneficially own all shares
that the holder may acquire upon the exercise of options held by the holder
if the options are exercisable within 60 days. Such shares that the holder
may acquire (but no shares that any other holder may acquire upon the
exercise of options held by such other holder) are deemed to be outstanding.
(2) As described below, Mr. Morton has beneficial ownership of 1,462,299 shares
or 30.9% of the outstanding shares of Common Stock by virtue of certain
proxies granted to him. 100,000 of the shares held by Mr. Morton and 86,164
of the shares held by Three Cities Holdings Limited are shares of Class B
common stock. The remainder are shares of Class A common stock (including
currently exercisable options to purchase 204,022 shares of Class A common
stock held by Mr. Morton). Based on the number of shares outstanding as of
April 16, 1999, each share of Class B common stock will have .77343 votes at
the annual meeting. For a description of how we determine the number of
votes for a share of Class B common stock and amendment to cap the number of
votes a Class B share may have, see "Amendment of Articles of Incorporation"
in this proxy statement and Appendix A to this proxy statement. Three Cities
Holdings Limited and certain of its affiliates have granted Mr. Morton a
proxy to vote the shares of Common Stock, including Class B common stock,
held by them on most matters. The shares of Class A common stock and Class B
common stock held by Mr. Morton and Three Cities Holdings Limited are
subject to certain transferability and conversion restrictions pursuant to a
shareholders agreement. See "Certain Relationships and Related
Transactions-- Shareholders Agreement" for a description of this proxy and
the related shareholders agreement. Certain officers and directors of Morton
have also granted Mr. Morton a proxy to vote on all matters. See "Certain
Relationships and Related Transactions--Voting Agreement" for a description
of this proxy. By virtue of these proxies and his ownership of our Common
Stock, Mr. Morton currently has the ability to cast 58.3% (64.2% if all
options exercisable within 60 days in which Mr. Morton has a beneficial
interest are counted). of our shareholder votes on most matters.
(3) Three Cities Holdings Limited has sole power to vote (subject to the proxy
described in note (2) above) and shared power to dispose of 851,456 shares
of Common Stock that are owned of record by the following group of investors
(the "Investor Group"): Terbem Limited (373,244 shares--9.2%), TCRI Offshore
Partners CV (248,393 Shares--6.1%), Bobst Investment Corp. (59,961
shares--1.5%), and TCR International Partners, LP (168,858 shares--4.1%).
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. Mr. Willem F.P. de Vogel, who is one of our directors, is
President of Three Cities Research, Inc.
(4) Does not include 136,722 shares (3.4%) of the Common Stock owned by Quilvest
American Equity, an indirectly owned investment subsidiary of Quilvest, a
Luxembourg holding company whose shares are traded on the Paris and
Luxembourg Stock Exchanges. The 136,722 shares of Common Stock
4
<PAGE>
consist of 122,886 shares of Class A common stock and 13,836 shares of Class
B common stock. These shares of Common Stock were assigned by members of the
Investor Group to Quilvest American Equity and are subject to Mr. Morton's
proxy granted by Three Cities Holdings Limited and certain restrictions on
transferability and conversion. See "Certain Relationships and Related
Transactions-- Shareholders Agreement" for a description of this proxy and
the related shareholders agreement. 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 or dispose of the shares of
Common Stock owned by Quilvest American Equity.
(5) There are currently exercisable options. Upon exercise, they will be subject
to the proxy described in "Certain Relationships and Related
Transactions--Voting Agreement."
(6) These shares are subject to the proxy described in "Certain Relationships
and Related Transactions-- Voting Agreement."
(7) 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 notes 3 and 4, above.
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 because he does not have the power to vote or dispose of them.
(8) Includes 100 shares of Class A common stock owned by Mr. Glancy's wife.
5
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table provides certain summary information concerning
compensation of the Company's executive officers.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
--------------------------------------------- ------------------------------
AWARDS
------------------------------
SECURITIES PAYOUTS
NAME AND RESTRICTED UNDERLYING -----------------
PRINCIPAL OTHER ANNUAL STOCK OPTIONS/ LTIP
POSITION YEAR SALARY($) BONUS($) COMPENSATION AWARD(S) ($) SARS(#) PAYOUTS ($)
- ----------------------- --------- ---------- ----------- ------------- ----------------- ----------- -----------------
<S> <C> <C> <C> <C> <C> <C> <C>
William D. Morton...... 1998 $ 280,000 0 $ 11,764(1) 0 612,620 0
Chairman, Chief
Executive Officer
And President
Daryl R. Lindemann,.... 1998 95,000 0 $ 12,943(4) 0 32,406 0
Vice President of
Business Development
and Acquisitions and
Secretary (3)
Thomas Lauerman,....... 1998 35,625 0 $ 18,215(7) 0 30,000 0
Vice President of
Finance and Treasurer
(6)
Thomas C. Waggoner,.... 1997 149,688 0 0 0 0 0
Former President and 1996 145,000 52,500 0 0 0 0
Chief Executive
Officer (9)
Brian R. Esher,........ 1997 0 0 0 0 0 0
Former Chairman and 1996 12,000 0 0 0 0 0
Chief Executive
Officer
<CAPTION>
NAME AND
PRINCIPAL ALL OTHER
POSITION COMPENSATION ($)
- ----------------------- ----------------
<S> <C>
William D. Morton...... $ 11,744(2)
Chairman, Chief
Executive Officer
And President
Daryl R. Lindemann,.... 510(5)
Vice President of
Business Development
and Acquisitions and
Secretary (3)
Thomas Lauerman,....... 18,124(8)
Vice President of
Finance and Treasurer
(6)
Thomas C. Waggoner,.... 0
Former President and 0
Chief Executive
Officer (9)
Brian R. Esher,........ 2,189,600(10)
Former Chairman and 0
Chief Executive
Officer
</TABLE>
- ------------------------
(1) Represents: (i) tax gross up in the amount of $8,136 for imputed income
relating to split dollar life and (ii) tax gross up in the amount of $3,628
for imputed income relating to a car allowance.
(2) Represents: (i) life insurance premiums we paid in the amount of $1,440 and
(ii) imputed income in the amount of $10,334 with respect to split dollar
life insurance coverage.
(3) Mr. Lindemann served as our Vice President of Finance, Secretary, and
Treasurer until September 1, 1998, when he began serving in his current
position.
(4) Represents payments under our variable incentive plan.
(5) Represents life insurance premiums we paid.
(6) Mr. Lauerman commenced employment with our company in his current position
on August 31, 1998.
(7) Represents tax gross up of $11,764 for moving expenses and payments of
$6,450 under our variable incentive plan.
6
<PAGE>
(8) Represents: (i) life insurance premiums we paid in the amount of $170 and
(ii) moving expenses in the amount of $17,954.
(9) Upon the conclusion of the Merger on January 20, 1998, Mr. Waggoner resigned
and received a severance payment of $350,000.
(10) In February 1997, the Board of Directors voted to convert options to
purchase 190,400 shares of 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 $5.00 per SAR.
OPTION GRANTS IN LAST FISCAL YEAR
The following table provides information about option grants to our
executive officers in 1998:
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS(1)
----------------------------------------------------------------
NUMBER OF
SHARES GRANT
UNDERLYING % OF TOTAL DATE
OPTIONS OPTIONS EXERCISE PRESENT
GRANTED GRANTED TO PRICE EXPIRATION VALUE (1)
NAME (#) EMPLOYEES ($/SH) DATE ($)
- ---------------------------------------------------- ----------- ------------- --------- ----------- ------------
<S> <C> <C> <C> <C> <C>
William D. Morton (2)............................... 612,620 70.9% $ 17.125 1/20/08 $ 4,680,417
Daryl R. Lindemann(2)............................... 32,406 3.8% $ 17.125 1/20/08 247,582
Thomas D. Lauerman(2)............................... 30,000 3.5% $ 13.125 9/1/08 175,800
</TABLE>
- ------------------------
(1) In accordance with SEC rules, we chose a variant of the Black-Scholes option
pricing model to estimate the grant date present value of the options set
forth in this table. You should not construe our use of this model as an
endorsement of its accuracy at valuing options. All stock option valuation
models, including the Black-Scholes model and its variants, require a
prediction about the future movement of the stock price. The real value of
the options in this table depends upon the actual changes in the market
price of the Class A common stock during the applicable period.
(2) Mr. Morton and Mr. Lindemann received their options in connection with the
Merger. Mr. Lauerman received his options at the time of his employment by
the Company. The options vest after over three years and have a term of ten
years. We made the following assumptions for purposes of calculating the
grant date present value: a duration of ten years, volatility of .10%,
annual dividend yield of 0%, and a discount rate of 6.0%.
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, 1998, by each of the named executive officers
and the value of unexercised options held by such executive officers on December
31, 1998.
7
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTIONS VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED IN-
UNEXERCISED OPTIONS/ SARS THE-MONEY OPTIONS AT
DECEMBER 31, 1998(1)
SHARES ACQUIRED VALUE -------------------------- --------------------------
NAME ON EXERCISE (#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ----------------------------------- --------------- ---------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
William D. Morton.................. 65,000 $ 834,832 204,022 408,413 -- --
Daryl R. Lindemann................. -- -- 80,499 21,604 $ 968,230 --
Thomas D. Lauerman................. -- -- -- 30,000 -- $ 26,250
</TABLE>
- ------------------------
(1) Based upon the per share closing price of the Class A common stock of $14.00
on the Nasdaq Small Cap Market on December 31, 1998, minus the exercise
price of the options.
EMPLOYMENT AGREEMENT
In connection with the Merger of the Company and Morton, on January 20,
1998, we entered into employment agreements with Mr. Morton and Mr. Lindemann.
Mr. Morton's employment agreement provides that he will serve as our Chairman
and Chief Executive Officer for an initial term of ten years and continues
thereafter year to year unless and until either party gives the other six months
advance written notice of termination of the employment agreement. Mr. Morton's
employment agreement provides for an annual base salary in 1998 in the amount of
$280,000, which was Mr. Morton's base salary with Morton as of the date of the
Merger, and it provides for a minimum annual increase thereafter of 5% annually.
Under the terms of his employment agreement, Mr. Morton will:
- participate in our incentive compensation plans as in effect from time to
time;
- be entitled to certain fringe benefits; and
- participate in all employee benefit, retirement and welfare plans that we
maintain and that are applicable generally to our executives;
subject to the generally applicable eligibility and other provisions. Mr.
Morton's employment agreement also contains non-solicitation, confidentiality
and non-supply provisions. In the event of the termination of Mr. Morton's
employment:
- by us for cause, as defined in his employment agreement;
- by him, other than a constructive termination, as defined in his
employment agreement; or
- due to death or disability, as defined in his employment agreement;
Mr. Morton will receive his base salary and benefits through the date of
termination. If we terminate Mr. Morton's employment for any other reason or Mr.
Morton terminates it due to a Constructive Termination, we will pay Mr. Morton's
salary, and Mr. Morton will be eligible to continue participation in all
medical, dental, hospitalization, disability and life insurance plans, through:
- December 31, 2007, if the termination occurs on or prior to June 30, 2007;
or
- six months from the date of termination if the termination occurs after
June 30, 2007;
subject to the terms of his employment agreement, including continued compliance
with any applicable non-solicitation, confidentiality or non-supply provisions.
Mr. Lindemann's employment agreement provides for a three year term and
continues thereafter year to year unless and until either party gives the other
six months advance written notice of termination. Mr. Lindemann's employment
agreement provides for an annual base salary in 1998 of $95,000, annual
8
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raises of not less than $5,000 and an annual bonus in an amount to be
determined, based on the attainment of certain performance targets. Mr.
Lindemann's employment agreement entitles him to participate in all employee
benefit plans, incentive plans and fringe benefits offered to our employees that
are applicable generally to our employees, subject to the generally applicable
eligibility and other provisions. Mr. Lindemann's employment agreement contains
non-solicitation, confidentiality and non-supply provisions. Mr. Lindemann's
employment agreement also provides that if his employment is terminated:
- by us for cause, as defined in his employment agreement;
- by him other than due to a constructive termination, as defined in his
employment agreement; or
- due to death or disability, as defined in his employment agreement;
Mr. Lindemann will receive his base salary and benefits through the date of
termination. If we terminate Mr. Lindemann's employment without cause, as
defined in his employment agreement, or if Mr. Lindemann terminates it due to a
constructive termination, as defined in his employment agreement, Mr. Lindemann
will receive his base salary, and will continue participation in all of our
medical, dental, hospitalization, disability and life insurance plans, for:
- one year from the date of termination if the termination occurs on or
prior to June 30, 2000; or
- six months if such termination occurs after June 30, 2000;
subject to the terms of the employment agreement, including continued compliance
with any applicable non-solicitation, confidentiality or non-supply provisions.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
SHAREHOLDERS' AGREEMENT
In connection with the Merger, Mr. Morton and a group of shareholders
affiliated with Three Cities Holdings Limited and certain of its affiliates (the
"Three Cities Parties") entered into a shareholders' agreement. Under the
shareholders' agreement, Three Cities Parties granted Mr. Morton a proxy to vote
all of the Class A common stock and all of the Class B common stock owned by
them. Mr. Morton's proxy covers all matters to be voted upon by our shareholders
except:
- the liquidation of our company;
- any sale of all, or substantially all, of our assets; or
- any merger or consolidation involving our company if immediately
thereafter, our shareholders (including Mr. Morton) do not hold the power
to vote at least 60% of the votes entitled to elect the directors of the
company surviving such merger or consolidation.
In the event that:
- the Three Cities Parties and certain of their affiliates are entitled to
vote for any such sale, merger or consolidation described immediately
above;
- any member of the Three Cities Parties and certain of their affiliates who
are parties to the shareholders' agreement fails to vote in favor of such
transaction; and
- the transaction is not approved by our shareholders;
Mr. Morton may elect to cause the Three Cities Parties to purchase all (but not
less than all) of the Class A common stock and Class B common stock then owned
by Mr. Morton and his affiliates for a purchase price equal to fair market value
of the assets he would have received in such proposed transaction. If Mr. Morton
would have retained any stock in the proposed transaction, then the purchase
price for such stock will be equal to the fair market value of such stock.
9
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Mr. Morton's proxy will terminate upon the earliest of the following dates
or events:
- January 20, 2008;
- Mr. Morton's death or disability, as defined in his employment agreement;
- termination of Mr. Morton's employment with us, other than a constructive
termination, as defined in his employment agreement;
- termination of Mr. Morton's employment by us for cause, as defined in his
employment agreement; or
- if Mr. Morton's ownership of Class A common stock falls below 1,096,425
shares, including for this purpose shares issuable upon conversion or
exercise, as adjusted to reflect stock splits.
The shareholders' agreement also includes the following restrictions on
transfers of our stock:
- until January 20, 2001, the Three Cities Parties and certain of their
affiliates and Mr. Morton and certain of his affiliates will not transfer
any shares of Class A common stock owned as of January 20, 1998;
- the Three Cities Parties, Mr. Morton and certain of their respective
affiliates will not transfer, or convert into shares of Class A common
stock, any shares of Class B common stock owned as of January 20, 1998,
until the earlier of ten years after January 20, 1998, or the termination
of Mr. Morton's proxy; and
- the Three Cities Parties, Mr. Morton and certain of their respective
affiliates will not purchase additional shares of Class A common stock or
Class B common stock without the approval of both the other party and our
Board of Directors.
This limitation does not apply to the purchase of shares by Mr. Morton and
certain of his affiliates pursuant to options owned by Mr. Morton immediately
after the Merger or issued to Mr. Morton pursuant to our 1997 Stock Option Plan.
The shareholders' agreement also contains the following restrictions on
transfers of Class A common stock: beginning on January 20, 2001, neither the
Three Cities Parties nor Mr. Morton nor certain of their respective affiliates
can transfer any shares of Class A common stock without complying with the
following procedure and requirements:
- prior to making any such transfer, the Three Cities Parties, Mr. Morton
and certain of their respective affiliates must give notice to the other
group of its intention to make such sale and state the amount of shares
proposed to be transferred;
- if the recipient of the transfer notice does not notify the sender of the
transfer notice of its intention to also sell shares of Class A common
stock, the sender of the transfer notice can sell such shares in an amount
up to a number agreed to by the parties pursuant to the shareholders'
agreement;
- if the recipient of the transfer notice notifies the sender of the
transfer notice that it also intends to transfer shares of Class A common
stock, both groups can transfer Class A common stock up to each group's
respective agreed upon number.
Any transfers made pursuant to this provision must be concluded within 60 days
of the date that the transfer notice is provided. The parties to the
shareholders' agreement agreed that the limitation on the number of shares
either group could sell would be calculated as follows:
- if the maximum sale number (which equals the number of shares of Class A
common stock that can be sold without causing a "change in ownership," as
defined in section 283 of the Internal Revenue Code of 1986, as amended)
is less than the number of shares of Class A common stock owned by the
Three Cities Parties and certain of their affiliates and Mr. Morton and
certain of his affiliates,
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each group shall be permitted to sell a number of shares equal to its pro
rata share of the maximum sale number, based upon each group's ownership
of the outstanding number of shares of Class A common stock at the time;
- if the maximum sale number is greater than the number of shares of Class A
common stock owned by the Three Cities Parties and certain of their
affiliates and Mr. Morton and certain of his affiliates;
- in the case of the Three Cities Parties and certain of their
affiliates, the number of shares they can sell equals the number of
shares of Class A common stock owned by them at such time; and
- in the case of Mr. Morton and certain of his affiliates, the number of
shares they can sell equals the maximum sale number minus the number of
shares of Class A common stock owned by them at such time.
For purposes of any calculation made under these provisions, the number of
shares of Class A common stock owned by Mr. Morton and certain of his affiliates
is deemed to be 418,990 shares less any such shares sold by Mr. Morton and
certain of his affiliates after the effectiveness of the Merger but not less
than zero. The permitted number for Mr. Morton and certain of his affiliates may
exceed 418,990 under this calculation.
VOTING AGREEMENT
Effective January 20, 1998, Mr. Morton entered into a voting agreement with
certain directors and officers of our company and our subsidiaries. This group
included Mr. Broling, Mr. Mealy, Mr. Lindemann, and four officers of our
subsidiaries who hold options to purchase Class A common stock. Under the voting
agreement, these individuals granted Mr. Morton an irrevocable proxy to vote
their shares of Class A common stock (including shares subsequently obtained
upon the exercise of options) on all matters presented to our shareholders for a
vote. The proxy terminates upon the earliest of:
- January 20, 2008;
- Mr. Morton's death or disability, as defined in his employment agreement;
- Mr. Morton's terminating his employment with us, other than a constructive
termination, as defined in his employment agreement; or
- our termination of Mr. Morton's employment for cause, as defined in his
employment agreement.
The voting agreement currently applies to 18,333 shares of Class A common stock
and options to purchase 773,628 shares of Class A common stock.
STOCK PERFORMANCE GRAPH
The following graph compares the yearly percentage change in the cumulative
total shareholder return on the Corporation's common stock during the five years
ended December 31, 1998, with the cumulative total return on the Nasdaq Stock
Market and on Nasdaq non-financial stocks. The Comparison assumes $100 was
invested on January 1, 1994, in the Company's publicly traded common stock and
in each of the two indices and assumes the reinvestment of dividends.
[Graph will appear here.]
<TABLE>
<CAPTION>
1994 1995 1996 1997 1998
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Morton Industrial Group, Inc..................................... 85.71 190.48 252.38 354.76 266.67
Nasdaq Stock Market.............................................. 97.80 138.30 170.00 208.30 293.50
Nasdaq Non-Financial Stocks...................................... 100.40 139.90 169.90 199.10 292.20
</TABLE>
11
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COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. Broling and Glancy served on the Compensation Committee of the Board
of Directors during 1998. Neither is or has served as a Company officer.
REPORT ON EXECUTIVE COMPENSATION BY REPRESENTATIVES
OF THE COMPENSATION AND STOCK OPTION COMMITTEE
This Report of the Compensation and Stock Option Committee covers the
following topics:
- The role of the Committee in the Company's executive compensation program
- Executive compensation principles
- Components of the compensation program
- Compensation of the Chief Executive Officer
ROLE OF THE COMPENSATION AND STOCK OPTION COMMITTEE
Two non-employee directors serve on the Committee: Mr. Broling and Mr.
Glancy. The Committee reviews overall compensation principles annually. This
review includes each element described below and an assessment of the overall
effectiveness of the program. The Committee examines, establishes, and modifies
the individual compensation levels of the Company's executive officers. The
Committee also administers the Company's stock option plan and awards options
under it. In 1998, the Committee did not retain an independent outside
consultant to advise it about the appropriateness and level of compensation.
EXECUTIVE COMPENSATION PRINCIPLES
The Company is developing a compensation program that is intended to
motivate and retain the key talent it needs to be a market lender in its
industry. The committee's primary goal is to develop a compensation program that
will support the Company's aggressive strategy of pursuing growth through
manufacturing excellence, customer satisfaction, acquisitions, and internal
growth. Guiding our development of the compensation program is the desire to
obtain superior short term performance from the Company's executive officers by
aligning their cash compensation with the annual performance of the Company. We
also seek to foster the long term development of the Company and growth in
shareholder value through the award of stock options.
COMPONENTS OF THE COMPENSATION PROGRAM
The components of our compensation program are:
- Base salary
- Short term bonus and other incentives
- Long term incentives
1. BASE SALARY
Base salaries for our executive officers other than the Chief Executive
Officer are based upon amounts set in employment agreements or terms of
employment and increase $5,000 each year. The base salary amounts are those that
we, with the advice of the Chief Executive Officer, believe are sufficient to
attract and retain qualified persons.
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2. SHORT TERM BONUS AND OTHER INCENTIVES
We will use the annual bonus component of incentive compensation to align
our executive officers' pay with short term (annual) performance of the Company.
We will also use bonus payments to recognize and encourage outstanding
individual performance. We intend to set Company performance targets and
individual performance goals that will guide us in determining the amount of the
bonuses. We also expect to implement a special compensation program in 1999
under which our executive officers will receive a percentage of the Company's
EBITDA (earnings before interest, taxes, depreciation, and amortization) in
excess of 95% of the Company's EBITDA target for the year.
Our executive officers other that the Chief Executive Officer also
participate in the Company-wide variable incentive plan. Under this plan most of
the Company's employees receive monthly payments based upon the Company's
attaining monthly performance goals.
3. LONG TERM INCENTIVES: STOCK OPTIONS
We will use grants under the Company's stock option plan to strengthen the
linkage between executive compensation and shareholder return, provide
additional incentives to executive officers tied to the growth of the stock
price over time, and encourage continued employment with the Company and its
subsidiaries. The options generally have a term of ten years and become
exercisable over three years and the exercise price is the market price for the
Company's Class A common stock on the date of the option grant. We will base
option awards on the individual executive officer's scope of responsibility, the
Company's performance, and our subjective evaluation of the individual's
performance. We will not attach specific weight to these factors. We may also
assist management in attracting new officers by including options in the
compensation package that the Company offers.
The only options that were granted to our executive officers in 1998 were in
connection with the Merger and the recruitment of one of the executive officers.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
In 1998, the Company's most highly compensated executive officer was William
D. Morton, the Company's Chairman, Chief Executive Officer, and President. Mr.
Morton and the Company entered into an employment agreement on January 20, 1998,
that set his base compensation for 1998 at $280,000. That base amount increases
a minimum 5% per year during the term of the contract. The Committee will review
Mr. Morton's contract annually for potential cost of living and performance
adjustments. We have not made any such adjustments since the inception of the
contract. For additional information about Mr. Morton's employment agreement,
see page of this proxy statement.
Under his Employment Agreement, Mr. Morton may receive annual cash bonuses
awarded by the Committee. We did not award a bonus for 1998.
The Committee may also award Mr. Morton stock options under the Company's
1997 Stock Option Plan. In connection with the Merger, Mr. Morton received a
grant of options to acquire 612,620 shares of Class A common stock. These
options have an exercise price of $17.125 per share. We did not grant any other
options to Mr. Morton in 1998.
Respectfully submitted,
Fred W. Broling
Alfred R. Glancy III
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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.
AMENDMENT OF ARTICLES OF INCORPORATION
ITEM 2 ON THE PROXY CARD
BACKGROUND: VOTES PER SHARE OF CLASS B COMMON STOCK
Our Articles of Incorporation provide that the Company will have two classes
of Common Stock. The Class A common stock, par value $.01 per share, has one
vote per share. Each share of the Class B common stock, par value $.01 per
share, has the number of votes set by our Board of Directors using the formula
contained in the Articles. At present, there is no cap on the maximum number of
votes a share of Class B common stock can have. For this annual meeting, the
Board of Directors has determined that each share of Class B common stock will
have .77343 votes. Shares of Class A and Class B common stock share pro-rata in
any dividends declared on our common stock. (Our lending agreements currently
preclude the payment of dividends.)
Our Articles authorize 200,000 shares of Class B common stock, and all of
those shares are issued and outstanding. Two groups of shareholders (the
"Affiliated Groups") own all of the Class B common stock. One group contains our
Chairman, Mr. William D. Morton, any companies or business entities wholly owned
by him, and his immediate family (the "Morton Affiliated Group"). Mr. Morton
owns 100,000 shares of the Class B common stock and is the only member of his
group to hold Class B shares.
The other Class B Affiliated Group consists of Three Cities Holdings
Limited, certain of its affiliated companies, and Quilvest American Equity (the
"Three Cities Affiliated Group"). See the "Principle Shareholders" Section in
this proxy statement for additional information about these shareholders. The
Three Cities Affiliated Group holds 100,000 shares of Class B common stock. As
described in "Certain Relationships and related Transactions--Shareholders'
Agreement" in this proxy statement, the Three Cities Affiliated Group has
granted Mr. Morton a proxy to vote its shares of Class A and Class B common
stock in most instances. As a result of this proxy, Mr. Morton and his share
ownership, Mr. Morton has voting control of the Company.
Our Articles provide that the aggregate votes per share of the Class B
common stock held by each of the two Affiliated Groups plus the votes of that
Affiliated Group's Designated Shares will constitute 24% of the eligible votes
at a shareholders' meeting. The Designated Shares are certain shares of our
Class A common stock. Under our Articles, each of the Affiliated Groups
currently has 888,000 Designated Shares. (The Three Cities Group actually holds
888,178 shares of Class A common stock and the Morton Affiliated Group holds
1,283,990 shares of Class A common stock. Each Affiliated Group's Designated
Shares and Class A shares in excess of 888,000 have one vote per share.) As the
Affiliated Groups dispose of certain of their Class A shares, the number for the
Designated Shares will fall below 888,000, and the votes per share of Class B
common stock will increase to maintain the 24% level for each Affiliated Group.
For further information about the voting power of the Class B common stock, see
Appendix A to this proxy statement.
AMENDMENT
We are proposing an amendment to Section 2.2(B) of Article II of our
Articles of Incorporation. The amendment would add at the end of Section 2.2(B)
the sentence: "Notwithstanding the foregoing calculation, in no event shall the
number of votes per share of Class B Common Stock exceed 10 (adjusted
proportionately to account for any stock splits, stock dividends or combinations
between the Effective Date of this Amendment and the date of such calculation)."
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<PAGE>
The complete text of Section 2.2(B) with the language to be added by
amendment underscored appears in Appendix B to this proxy statement.
THE EFFECT AND REASONS FOR THE AMENDMENT
The proposed amendment will cap the number of votes per share of Class B
common stock at ten. As the number of Designated Shares for an Affiliated Group
decreases, the votes per share of Class B will increase, but the votes cannot
exceed ten.
Before and immediately after the Merger, our Class A common stock was quoted
only on the over-the-counter market's electronic bulletin board. We believed
that our shareholders could realize better liquidity if Nasdaq listed the
shares. We began discussions with Nasdaq and provided information about our
capital structure, including Article II of our Articles. Nasdaq agreed to list
our Class A common stock on the Nasdaq Small Cap Market if after the listing
occurred we submitted this amendment to you at our 1999 annual meeting.
In connection with the amendment and as a result of our discussions with
Nasdaq, the Three Cities Affiliated Group will agree to vote all of its Class B
common stock pro-rata with the vote of all of the Class A common stock held by
shareholders other than the Morton Affiliated Group in any vote that occurs
after the proxy granted by the Three Cities Affiliated Group to Mr. Morton
terminates. For a description of that proxy, see "Certain Relationships and
Related Transactions--Shareholder Agreement" in this proxy statement.
REQUIRED VOTE AND RECOMMENDATION
Approval of the amendment requires the vote of the holders of a majority of
both the Class A common stock and the Class B common stock. Through his direct
holdings and the proxies described in "Certain Relationships and Related
Transactions" and "Principal Shareholders of the Company" in this proxy
statement, Mr. Morton has the ability to vote all of the shares of the Class B
common stock and a majority of the Class A common stock on the amendment. Mr.
Morton has advised us that he will cast all of these votes in favor of the
amendment. As a result, the amendment will pass. We recommend that you vote your
shares FOR the amendment.
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RATIFICATION OF THE SELECTION OF AUDITORS
(ITEM 3 ON THE PROXY CARD)
The Board of Directors proposes and recommends that the shareholders ratify
its selection of the firm of KPMG LLP as independent auditors for the Company
for 1999. 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. If shareholders holding at least a majority of the voting power of
the Common Stock are present at the meeting, the vote of a majority of that
voting power will ratify the appointment of our auditors. Mr. Morton has advised
us that he will vote the shares he votes in favor of the ratification of the
appointment of KPMG LLP. Mr. Morton's vote assures the ratification of the
appointment of KPMG LLP.
INFORMATION ABOUT THE SELECTION OF OUR AUDITORS
SELECTION OF KPMG LLP (FEBRUARY 17, 1999)
On February 17, 1999, the Company's Board of Directors, acting upon the
recommendation of the Audit Committee of the Board, selected KPMG LLP ("KPMG")
to serve as the Company's independent accountants for the fiscal year ended
December 31, 1998, and the fiscal year ending December 31, 1999, and dismissed
Clifton Gunderson L.L.C. ("Clifton Gunderson") as independent accountants for
the Company. Clifton Gunderson had served as the independent accountants for
Morton (which merged with the Company on January 20, 1998) for the six months
ended December 31, 1997, and the fiscal years ended June 30, 1997 and 1996. On
April 14, 1998, as reported on Form 8-K dated April 16, 1998, and Form 8-K/A
dated April 22, 1998, our Board of Directors, acting upon the recommendation of
the it's Audit Committee selected Clifton Gunderson to serve as the Company's
independent accountants. The action of the Board of Directors on February 17,
1999, dismissing Clifton Gunderson and appointing KPMG reflected the Board's
determination that our recent and anticipated growth merited our selection of a
recognized national accounting firm rather than a smaller, regional firm.
During the period from April 14, 1998, to and including February 17, 1999,
with respect to the Company, and prior thereto with respect to Morton, including
the period from January 1, 1998, to April 14, 1998, the six months ended
December 31, 1997, and the fiscal years ended June 30, 1997 and 1996, Clifton
Gunderson's reports on the financial statements of Holding did not contain an
adverse opinion or disclaimer of opinion, nor were they qualified in any way,
and no reports of Clifton Gunderson were qualified as to uncertainty, audit
scope, or accounting principles. (Clifton Gunderson issued no reports on the
financial statements of the Company during the period that began April 14, 1998,
and ended February 17, 1999.) During the same periods, neither we nor Morton had
any disagreements with Clifton Gunderson on any matter of accounting principles
or practices, financial statement disclosure, or auditing scope or procedure.
During the period from April 14, 1998, to and including February 17, 1999, with
respect to us, and prior thereto with respect to Morton, including the period
from January 1, 1998, to April 14, 1998, the six months ended December 31, 1997,
and the fiscal years ended June 30, 1997 and 1996, Clifton Gunderson did not
advise us or Morton that:
- either did not have internal controls necessary for the development of
reliable financial statements;
- information had come to Clifton Gunderson's attention that led it to no
longer be able to rely on management's representations, or that made it
unwilling to be associated with the financial statements prepared by
management;
- Clifton Gunderson needed to expand significantly the scope of its audit,
or that information had come to Clifton Gunderson'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 the subsequent to the date of the most recent financial
statements covered by an audit
16
<PAGE>
report, or (b) cause it to be unwilling to rely on management's
representations or be associated with our or Morton's financial
statements,
- information had come to Clifton Gunderson'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 period from April 14, 1998, to and including February 17, 1999,
with respect to us, and prior thereto with respect to Morton, including the
period from January 1, 1998 to April 14, 1998, the six months ended December 31,
1997, and the fiscal years ended June 30, 1997, and 1996, neither we nor Morton
consulted KPMG about 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 our or Morton's financial statements, or (b)
any matter that was a subject of a disagreement between us or Morton and Clifton
Gunderson or that was a reportable event of the kind described in four listed
items in the immediately preceding paragraph.
SELECTION OF CLIFTON GUNDERSON (APRIL 14, 1998)
On April 14, 1998, our Board of Directors, acting upon the recommendation of
the Audit Committee of the Board, selected Clifton Gunderson to serve as our
independent accountants for the fiscal year ending December 31, 1998. For the
fiscal year ended December 31, 1997, Ernst & Young LLP ("Ernst & Young") served
as the independent auditors for us, 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, we retained both firms to complete
our and Morton's respective audits for the periods ended December 31, 1997.
During the 1997 and 1996 fiscal years, Ernst & Young's reports on our
financial statements did not contain an adverse opinion or disclaimer of
opinion, nor were they qualified in any way. During the same period, we had no
disagreements with Ernst & Young on any matter of accounting principles or
practices, financial statement disclosure, or auditing scope or procedure.
During the 1997 and 1996 fiscal years and during 1998, Ernst & Young did not
advise us:
- that we did not have internal controls necessary for the development of
reliable financial statements;
- 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;
- 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 our financial statements,
- 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 1997 and 1996 fiscal years of the Company and during any
subsequent interim period of either ourselves or Morton, neither we nor Morton
consulted Clifton Gunderson about 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 our financial statements, or (b)
any matter that was a subject of a disagreement between us and Ernst & Young or
that was a reportable event of the kind described in the four listed items in
the immediately preceding paragraph.
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MISCELLANEOUS
SOLICITATION OF PROXIES. We will bear all of the costs of the solicitation
of proxies for use at the Annual Meeting. Since Mr. Morton controls a majority
of the votes to be cast at the meeting, we do not expect to incur significant
costs for proxy solicitation. We will request that banks, brokerage houses and
other institutions, nominees and fiduciaries 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
at pages to and the Stock Performance Graph on page 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 we specifically incorporate said report or said 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 our
Shareholders 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 2000 Annual Meeting must be
received by the Company for inclusion in our proxy statement and form of proxy
relating to that meeting on or before December 15, 1999.
If you do not expect to attend the Annual Meeting in person, we urge you to
sign, date and return the enclosed proxy in the envelope provided. Please mail
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, 1999, and its exhibits are available without charge upon
request to the Company's Secretary, 1021 West Birchwood, Morton, Illinois 61550.
OTHER INCORPORATION BY REFERENCE. We are incorporating certain information
in this proxy statement by reference to several of our filings with the
Securities and Exchange Commission ("SEC") in 1998 and 1999. Those filings and
the incorporated information are:
1. Report on Form 8-K/A filed with the SEC on June 11, 1998:
(a) Audited Financial Statements and accountant's report thereon of
Carroll George, Inc., for the years ended September 30, 1997, and
1996.
(b) Unaudited Pro Forma Condensed Combined Financial Statements.
2. Report on Form 8-K/A filed with the SEC on June 22, 1998:
(a) Audited Financial Statements and accountant's report thereon of B&W
Metal Fabricators, Inc., for the years ended December 31, 1997, and
1996.
(b) Unaudited Pro Forma Condensed Combined Financial Statements.
3. Report on Form 8-K/A filed with the SEC on August 11, 1998:
(a) Audited Financial Statements and accountant's report thereon of
Mid-Central Plastics, Inc., for the years ended December 31, 1997,
1996, and 1995.
(b) Unaudited Pro Forma Condensed Combined Financial Statements.
4. Annual Report on Form 10-K filed with the SEC on March , 1999.
(a) Supplementary financial information required by Item 302 of SEC
Regulation S-K.
(b) Management's Discussion and Analysis of Financial Condition and
Results of Operations for the year ended December 31, 1998, and
earlier periods.
(c) Quantitative and Qualitative Disclosures About Market Risk.
18
<PAGE>
By Order of the Board of Directors,
DARYL R. LINDEMANN
Secretary
19
<PAGE>
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 generally
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. (In cases where the vote could adversely affect the rights of holders of
the Class A common stock or holders of the Class B common stock, the two classes
vote separately.) Each share of Class B common stock is entitled to the number
of votes, which will fluctuate from time to time, to ensure that the aggregate
votes of the Class A common stock and Class B common stock 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 will be equal to 24% of the total votes available
to be cast by all holders of Common Stock, regardless of class. The shares of
Class B common stock are 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 Affiliated Groups are:
- the TCR Affiliated Group (composed of the shareholders identified in notes
3 and 4 of "Principal Shareholders of the Company;"
- William D. Morton, entities controlled by him, 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 is determined as of the record date for
each shareholders meeting. Currently, each share of Class B common stock has
.77343 votes.
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 (other than approximately
403,990 shares of Class A common stock held by Mr. Morton) will be aggregated
with the votes attributable to the Class B common stock to ensure that such
Affiliated Group has 24% of the Company's outstanding voting power with respect
to its Designated Shares and 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 888,000 Designated Shares plus additional shares of Class A common stock.
If an Affiliated Group sells or transfers any of its Designated Shares to
persons outside that 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 a member of an Affiliated Group transfers 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 date of the Merger, those shares will not be
Designated Shares, unless Designated Shares have previously been transferred, in
which case such newly acquired shares will be Designated Shares until the
Affiliated Group's Designated Shares equals 888,000.
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.
<PAGE>
APPENDIX B
SECTION 2.2(B) OF ARTICLE II OF THE ARTICLES OF INCORPORATION
Set forth below is the text of Section 2.2 of our Articles of Incorporation.
The part that is not underscored is the current text of the Section. The
underscored part is the sentence that would be added by the amendment to our
Articles that we have proposed. The amendment does not delete any words form
Section 2.2(B).
(B) At all times prior to the Final Class B Date (as defined in Section
2.2(E), the number of votes per share of Class B Common Stock at any particular
meeting of the Corporation's shareholders shall be determined by the Board of
directors as of the record date for such meeting, and subject to adjustment as
provided in Section 2.2(C), at each such meeting the Class B Common Stock will
be entitled to a number of votes per share sufficient to permit each Affiliated
Group (as defined below) to cast 24 percent of the votes eligible to be cast at
such meeting when the shares of Class B Common Stock owned by such Affiliated
Group are aggregated with the number of Designated Shares (as defined below)
owned by such Affiliated Group as of such record date. NOTWITHSTANDING THE
FOREGOING CALCULATION, IN NO EVENT SHALL THE NUMBER OF VOTES PER SHARE OF CLASS
B COMMON STOCK EXCEED 10 (ADJUSTED PROPORTIONATELY TO ACCOUNT FOR ANY STOCK
SPLITS, STOCK DIVIDENDS OR COMBINATIONS BETWEEN THE EFFECTIVE DATE OF THIS
AMENDMENT AND THE DATE OF SUCH CALCULATION).
<PAGE>
[MAP TO MEETING LOCATION WILL APPEAR HERE.]
<PAGE>
MORTON INDUSTRIAL GROUP, INC.
ANNUAL MEETING OF SHAREHOLDERS
JUNE 8, 1999
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 1999 Annual
Meeting of Shareholders (the "Annual Meeting") of Morton Industrial Group, Inc.,
to be held at the Bertha Frank Center, 350 N. Illinois Avenue, Morton, Illinois,
on June 8, 1999, 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 this 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.
----------------
(Continued and to be signed on the reverse side) SEE REVERSE SIDE
----------------
<PAGE>
PLEASE DATE, SIGN AND MAIL YOUR
PROXY CARD BACK AS SOON AS
POSSIBLE!
ANNUAL MEETING OF SHAREHOLDERS
MORTON INDUSTRIAL GROUP, INC.
JUNE 8, 1999
| |
| |
v PLEASE DETACH AND MAIL IN THE ENVELOPE PROVIDED v
/X/ PLEASE MARK YOUR
VOTES AS IN THIS
EXAMPLE
<TABLE>
<S> <C> <C> <C>
WITHHOLD
FOR AUTHORITY
ALL NOMINEES TO VOTE FOR ALL THE BOARD OF DIRECTORS RECOMMENDS
LISTED AT NOMINEES LISTED AT A VOTE FOR EACH OF THE ITEMS BELOW.
RIGHT RIGHT
1. To elect five
directs to
serve for one / / / / NOMINEES: WILLIAM D. MORTON
year terms FRED W. BROLING
ALFRED R. GLANCY III
MARK W. MEALY
Until the Annual Meeting of Shareholders in 1999: WILLEM F.P. DE VOGEL
(INSTRUCTION: To withhold authority to vote for any
individual nominee, check the box to vote "FOR" all
nominees and strike a line through the nominee's
name in the list at right.)
2. TO AMEND THE ARTICLES OF INCORPORATION TO FIX FOR AGAINST ABSTAIN
THE MAXIMUM NUMBER OF VOTES PER SHARE OF THE / / / / / /
CLASS B COMMON STOCK AT TEN.
3. TO RATIFY THE SELECTION OF KPMG FOR AGAINST ABSTAIN
LLP AS INDEPENDENT AUDITORS FOR / / / / / /
THE COMPANY FOR 1999.
IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO
VOTE UPON SUCH OTHER BUSINESS AS MAY PROPERLY COME
BEFORE THE MORTON INDUSTRIAL GROUP, INC. ANNUAL
MEETING THAT IS INCIDENTAL TO THE CONDUCT THEREOF
AND ANY ADJOURNMENT OR POSTPONEMENT THEREOF.
ABSTAIN 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: , 1999
----------------------- ---------------------------- -------------
</TABLE>
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 OFFICER'S NAME AND TITLE. IF A
PARTNERSHIP, PLEASE SIGN IN PARTNERSHIP NAME AND SIGN AUTHORIZED PERSON'S
NAME AND TITLE.
