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SCHEDULE 14A INFORMATION
Proxy
Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
| Filed by the Registrant /x/ |
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| Filed by a Party other than the Registrant / / | ||
| Check the appropriate box: |
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| / / | Preliminary Proxy Statement | |
| / / | Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) | |
| /x/ | Definitive Proxy Statement | |
| / / | Definitive Additional Materials | |
| / / | Soliciting Material Pursuant to §240.14a-11(c) or §240.14a-12 |
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| MORTON INDUSTRIAL GROUP, INC. |
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(Name of Registrant as Specified In Its Charter) |
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant) |
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| 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: |
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| (2) | Aggregate number of securities to which transaction applies: |
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| (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): |
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| (4) | Proposed maximum aggregate value of transaction: |
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| (5) | Total fee paid: |
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| / / | 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: |
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| (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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[LOGO]
MORTON INDUSTRIAL GROUP, INC.
1021 WEST BIRCHWOOD
MORTON, ILLINOIS 61550
May 10, 2000
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 13, 2000, 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 Annual 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 1999 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 holding. 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,
[SIGNATURE]
William D. Morton
Chairman, President and Chief Executive Officer
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 13, 2000, at 11:00 a.m., Central Daylight Savings Time, for the following purposes:
The Board of Directors has fixed the close of business on April 21, 2000, as the date for the purpose of determining shareholders entitled to notice of and to vote at the Annual 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,
[SIGNATURE]
Daryl R. Lindemann
Secretary
MORTON INDUSTRIAL GROUP, INC.
1021 WEST BIRCHWOOD
MORTON, ILLINOIS 61550
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
June 13, 2000
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 13, 2000, 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 and for the proposal to ratify the selection of KPMG LLP as independent auditors for the Company for the fiscal year ending December 31, 2000. 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 May 10, 2000.
Outstanding Shares. As of the close of business on April 21, 2000, the record date for determining shareholders entitled to vote at the annual meeting, the Company had issued and outstanding 4,344,745 shares of 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 2.97575 votes 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.
By virtue of his Common Stock ownership and proxies granted him by or on behalf of the persons listed in Notes 2-4 and 7-9 to "Principal Shareholders of the Company" of this proxy statement Mr. William D. Morton, the Company's Chairman, President, and Chief Executive Officer controls approximately 64.4% of the voting power of the issued and outstanding shares of Common Stock on matters requiring the vote of shareholders (other than in the case of the proxies identified in Notes 2 through 4 in "Principal Shareholders of the Company"):
In these three instances, the shares of issued and outstanding Common Stock currently held by Mr. Morton or that he may vote pursuant to the proxies identified in Notes 7-9 of "Principal Shareholders of the Company" would constitute approximately 40.4% of the voting power of the issued and outstanding shares of Common Stock.
For further information about the voting rights of the Class A common stock and the Class B common stock, see Appendix A to this proxy statement.
ELECTION OF DIRECTORS
(Item 1 on the Proxy Card)
Our Board of Directors consists of five members and recommends that shareholders elect all five current directors to hold office for a one year term until the 2001 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 21, 2000, for each of the nominees for election are:
William D. Morton, 52, served as President and Chief Executive Officer of Morton Metalcraft Co. and its subsequently formed parent, Morton Metalcraft Holding Co. ("Morton"), from 1989 until its merger with the Company in January 1998 (the "Merger"). At that time he became our Chairman, Chief Executive Officer, and President.
Fred W. Broling, 64, 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, 62, has been Chairman 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, 43, 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 of Directors.
Willem F.P. de Vogel, 49, 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 four times during 1999 and acted by unanimous written consent six times. 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 and acted by
2
unanimous written consent once in 1999. The duties of 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 1999. (The report of the members of this Committee begins at page 13 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 or she will receive shares of our Class A common stock equal to the number of units in his or her account. The maximum number of shares that we will distribute to all directors under this arrangement totals 25,000.
In 1999, each director received 2,143 performance units having a market value on the date of issuance of $30,000. At December 31, 1999, the market value of those units was $7,029.
We do not compensate employee directors for their service as director.
Executive Officers. During 1999, our executive officers were Mr. Morton, Daryl R. Lindemann, and Thomas D. Lauerman.
Since January 1, 2000, Mr. Lindemann, age 45, has been our Vice President and Secretary and the Chief Financial Officer of our Morton Metalcraft Company operations. Between September 1, 1998, and January 1, 2000, Mr. Lindemann was 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 before the Merger.
Mr. Lauerman, age 45, 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, beginning in March 1994. Mr. Lauerman is a certified public accountant.
3
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 21, 2000, by (i) all our shareholders who own more than 5% of our Common Stock, (ii) each director who is a shareholder, (iii) our 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 64.4% of our shareholder votes on most matters. (This percentage becomes 71.7% if all options exercisable within 60 days in which Mr. Morton has a beneficial interest are counted.) See notes (2) through (4) and (7) through (9) below. The address for each of our directors and executive officers is 1021 West Birchwood, Morton, Illinois 61550.
| Name and Address of Beneficial Owner |
Number of Shares of Common Stock Beneficially Owned(1) |
Percentage of Outstanding Shares Of Common Stock (1) |
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|---|---|---|---|---|---|
| William D. Morton | 3,443,309 | (2)(3) | 66.0 | % | |
| Three Cities Holdings Limited 650 Madison Avenue, 24th Floor New York, New York 10022 |
851,456 |
(2)(3)(4) |
18.7 |
% |
|
| AXA Financial, Inc. 1290 Avenue of the Americas, Suite 1600 New York, New York 10104 |
245,654 |
5.4 |
% |
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| Par Capital Management, Inc. One Financial Center, Suite 1600 Boston, Massachusetts 02111 |
237,000 |
5.2 |
% |
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| Fred W. Broling | 177,778 | (7) | 3.9 | % | |
| Daryl R. Lindemann | 91,301 | (8) | 2.0 | % | |
| Thomas Lauerman | 10,000 | (7) | * | ||
| Mark W. Mealy | 70,333 | (9) | 1.5 | % | |
| Willem F.P. de Vogel | 5,000 | (10) | * | ||
| Alfred R. Glancy III | 5,100 | (11) | * | ||
| All directors and executive officers as a group (7 persons) |
3,465,088 |
66.2 |
% |
4
for a share of Class B common stock and the cap on the number of votes a Class B share may have, see 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 the Company and its Subsidiaries 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 64.4% (71.7% if all options exercisable within 60 days in which Mr. Morton has a beneficial interest are counted) of our shareholder votes on most matters.
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The following table provides certain summary information concerning compensation of the Company's executive officers.
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Annual Compensation |
Long-Term Compensation |
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|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
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|
Awards |
Payouts |
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| Name and Principal Position |
Year |
Salary($) |
Bonus($) |
Other Annual Compensation |
Restricted Stock Award(s) ($) |
Securities Underlying Options/ SARs(#) |
LTIP Payouts ($) |
All Other Compensation ($) |
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| William D. Morton Chairman, Chief Executive Officer And President |
1999 1998 |
$ |
294,000 280,000 |
$ |
150,000 0 |
$ |
11,718 11,764 |
(1) (3) |
0 0 |
0 612,620 |
0 0 |
$ |
10,199 11,744 |
(2) (4) |
|||||||
| Daryl R. Lindemann Vice President and Secretary (5) |
|
1999 1998 |
|
|
100,000 95,000 |
|
|
115,000 0 |
|
|
8,748 12,943 |
(6) (6) |
0 0 |
|
0 32,406 |
|
0 0 |
|
|
450 510 |
(7) (7) |
| Thomas Lauerman Vice President of Finance and Treasurer (8) |
|
1999 1998 |
|
|
100,000 35,625 |
|
|
60,000 0 |
|
|
8,748 18,215 |
(9) (11) |
0 0 |
|
0 30,000 |
|
0 0 |
|
|
450 18,124 |
(10) (12) |
| Thomas C. Waggoner Former President and Chief Executive Officer (13) |
|
1997 |
|
|
149,688 |
|
|
0 |
|
|
0 |
|
0 |
|
0 |
|
0 |
|
|
0 |
|
| Brian R. Esher Former Chairman and Chief Executive Officer |
|
1997 |
|
|
0 |
|
|
0 |
|
|
0 |
|
0 |
|
0 |
|
0 |
|
|
2,189,600 |
(14) |
7
Option Grants in Last Fiscal Year
We did not grant any options to our executive officers in 1999.
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, 1999, by each of the named executive officers and the value of unexercised options held by such executive officers on December 31, 1999.
Aggregated Option Exercises in Last Fiscal Year
and Fiscal Year-end Options Values
| |
|
|
|
|
Value of Unexercised in-the-Money Options at December 31, 1999(1) |
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|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| |
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Number of Securities Underlying Unexercised Options/SARs |
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| Name |
Shares Acquired on Exercise (#) |
Value Realized($) |
||||||||||||
| Exercisable |
Unexercisable |
Exercisable |
Unexercisable |
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| William D. Morton | — | — | 408,228 | 204,207 | — | — | ||||||||
| Daryl R. Lindemann | 10,000 | $ | 29,545 | 81,301 | 10,802 | $ | 275,607 | — | ||||||
| Thomas D. Lauerman | — | — | 10,000 | 20,000 | — | — | ||||||||
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 provided for an annual base salary in 1998 in the amount of $280,000 and a minimum annual increase thereafter of 5% annually.
Under the terms of his employment agreement, Mr. Morton will:
8
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:
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:
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 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:
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:
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
9
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:
In the event that:
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.
Mr. Morton's proxy will terminate upon the earliest of the following dates or events:
The shareholders' agreement also includes the following restrictions on transfers of our stock:
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.
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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:
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:
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
Commencing January 20, 1998, and at later dates Mr. Morton entered into voting agreements with certain directors and officers of our company and our subsidiaries. This group currently includes Mr. Broling, Mr. Mealy, Mr. Lindemann, Mr. Lauerman, and all 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
11
vote. We expect that future options granted to our officers and officers of our subsidiaries will be subject to this voting argeement. The proxy terminates upon the earliest of:
The voting agreement currently applies to 402,505 outstanding shares of Class A common stock and options to purchase 620,816 shares of Class A common stock, of which 260,399 are exercisable within 60 days.
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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, 1999, 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, 1995, in the Company's publicly traded common stock and in each of the two indices and assumes the reinvestment of dividends.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
| |
Morton Industrial Group, Inc. |
Nasdaq Stock Market |
Nasdaq Non-Financial |
|||
|---|---|---|---|---|---|---|
| 12/31/94 | 100.0 | 100.0 | 100.0 | |||
| 12/31/95 | 222.22 | 141.3 | 139.3 | |||
| 12/31/96 | 294.2 | 173.9 | 169.2 | |||
| 12/31/97 | 413.9 | 213.9 | 198.1 | |||
| 12/31/98 | 311.1 | 300.2 | 290.2 | |||
| 12/31/99 | 77.8 | 545.7 | 562.3 |
Compensation Committee Interlocks and Insider Participation
Messrs. Broling and Glancy served on the Compensation Committee of the Board of Directors during 1999. 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:
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 1999, the Committee did not retain an independent outside consultant to advise it about the appropriateness and level of compensation.
13
Executive Compensation Principles
The Company compensation program is intended to motivate and retain the key talent it needs to be a market leader in its industry. The committee's primary goal is to develop and administer 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:
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.
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. In 1998 we implemented a special compensation program 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. The Company did not pay any such bonuses for 1999. We plan to continue this program in 2000. Our executive officers did, however, receive bonuses in recognition of their contributions to the Company's 1999 acquisitions and dispositions, the integration of the Company's 1998 acquisitions, and the Merger.
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 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
14
these factors. We may also assist management in attracting new officers by including options in the compensation package that the Company offers.
We did not authorize the grant of any options to the executive officers in 1999.
Compensation of the Chief Executive Officer
In 1999, 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. We 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 pages 8-9 of this proxy statement.
Unlike all other employees, Mr. Morton does not participate in the Company's variable incentive plan. In 1999 the Company paid Mr. Morton a special bonus of $150,000 in recognition of his efforts in bringing to completion the Company's acquisition of substantially all of the assets and properties of Worthington Custom Plastic Inc.'s plants in North Carolina, South Carolina and Kentucky. The Committee may award Mr. Morton stock options under the Company's 1997 Stock Option Plan. We did not grant any options to Mr. Morton in 1999.
Respectfully submitted,
Fred
W. Broling
Alfred R. Glancy III
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.
15
RATIFICATION OF THE SELECTION OF AUDITORS
(Item 2 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 2000. 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 (i.e., Morton Metalcraft Holding Co., 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 Morton 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:
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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:
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 13 to 15 and the Stock Performance Graph on page 13 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 the report or 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 2001 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, 2000.
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 our Annual Report on Form 10-K for the year ended December 31, 1999, and its exhibits are available without charge upon request to our Secretary, 1021 West Birchwood, Morton, Illinois 61550.
By Order of the Board of Directors,
[SIGNATURE]
Daryl R. Lindemann
Secretary
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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 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 2.97575 votes. The maximum number of votes that a share of Class B Common Stock may have is ten.
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.
[MAP]
MORTON INDUSTRIAL GROUP, INC.
ANNUAL MEETING OF SHAREHOLDERS
JUNE 13, 2000
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 2000 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 13, 2000, 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
| /x/ | Please mark your votes as in this example. |
| FOR all nominees listed at right |
WITHHOLD AUTHORITY to vote for all nominees listed at right |
The Board of Directors recommends a vote FOR each of the items below. | |||||
| FOR | AGAINST | ABSTAIN | |||||
| 1. To elect five directors to serve for one year terms until the Annual Meeting of Shareholders in 2001 | / / | / / | Nominees: William D. Morton Fred W. Broling Alfred R. Glency III Mark W. Mealy William F.P. de Vogel |
2. To ratify the selection of KPMG LLP as Independent auditors for the company for 2000. | / / | / / | / / |
| (INSTRUCTIONS: 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) |
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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. 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 thereof. Please Mark, Sign, Date and Return the Proxy Card Promptly Using the Enclosed Envelope. |
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Signature Signature, if held jointly Date , 2000.
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.
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