SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the registrant [X]
Filed by party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss. 240.14a-11(c) or ss. 240.14a-12
MODERN CONTROLS, 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] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
[ ] $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a6(i)(4) and 0-11.
1 Title of each class of securities to which transaction applies:
.............................................................
2 Aggregate number of securities to which transaction applies:
.............................................................
3 Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11:*
.............................................................
4 Proposed maximum aggregate value of transaction:
.............................................................
5 Total fee paid:
.............................................................
* Set forth the amount on which the filing fee is calculated and
state how it was determined.
[ ] 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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1996 ANNUAL MEETING
MODERN CONTROLS, INC.
7500 BOONE AVENUE NORTH
MINNEAPOLIS, MINNESOTA 55428
TO THE SHAREHOLDERS OF MODERN CONTROLS, INC.:
You are cordially invited to attend our Annual Meeting of Shareholders to be
held on May 21, 1996, at 4:00 p.m., local time, at the Marriott Hotel -- City
Center, 30 South Seventh Street, Minneapolis, Minnesota.
The formal Notice of Meeting, Proxy Statement and form of proxy are enclosed.
Whether or not you plan to attend the meeting, please date, sign and return
the enclosed proxy in the envelope provided as soon as possible so that your
vote will be recorded.
Very truly yours,
/s/ William N. Mayer
William N. Mayer
Chairman of the Board and
Chief Executive Officer
April 3, 1996
PLEASE SIGN, DATE AND RETURN
THE ENCLOSED PROXY PROMPTLY
TO SAVE THE COMPANY THE EXPENSE
OF ADDITIONAL SOLICITATION.
- --------------------------------------------------------------------------------
MODERN CONTROLS, INC.
7500 BOONE AVENUE NORTH
MINNEAPOLIS, MINNESOTA 55428
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 21, 1996
TO THE SHAREHOLDERS OF MODERN CONTROLS, INC.:
Notice is hereby given that the Annual Meeting of Shareholders of Modern
Controls, Inc. will be held on May 21, 1996, at 4:00 p.m., local time, at the
Marriott Hotel -- City Center, 30 South Seventh Street, Minneapolis,
Minnesota for the following purposes:
a. To elect eight directors to serve for the ensuing year or until
their successors are elected and qualified;
b. To consider and act upon such other matters as may properly come
before the meeting or any adjournment thereof.
The close of business on March 22, 1996 has been fixed as the record date for
the determination of shareholders who are entitled to vote at the meeting or
any adjournments thereof.
By Order of the Board of Directors
/s/ Ronald A. Meyer
Ronald A. Meyer
Secretary
Dated: April 3, 1996
YOU ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING. NO ADMISSION TICKET
OR OTHER CREDENTIALS WILL BE NECESSARY. IF YOU DO NOT PLAN TO ATTEND THE
MEETING, PLEASE BE SURE YOU ARE REPRESENTED AT THE MEETING BY MARKING,
SIGNING, DATING AND MAILING YOUR PROXY IN THE REPLY ENVELOPE PROVIDED.
- --------------------------------------------------------------------------------
MODERN CONTROLS, INC.
7500 Boone Avenue North
Minneapolis, Minnesota 55428
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
MAY 21, 1996
INTRODUCTION
The Annual Meeting of Shareholders (the "Annual Meeting") of Modern Controls,
Inc. (the "Company") will be held on May 21, 1996, at 4:00 p.m., local time,
at the Marriott Hotel -- City Center, 30 South Seventh Street, Minneapolis,
Minnesota, or at any adjournment or adjournments thereof, for the purposes
set forth in the Notice of Annual Meeting of Shareholders.
A proxy card is enclosed for your use. You are solicited on behalf of the
Board of Directors to SIGN AND RETURN THE PROXY CARD IN THE ACCOMPANYING
ENVELOPE. No postage is required if mailed within the United States. The cost
of soliciting proxies, including the preparation, assembly and mailing of the
proxies and soliciting material, as well as the cost of forwarding such
material to the beneficial owners of the Company's Common Stock, will be
borne by the Company. Directors, officers and regular employees of the
Company may, without compensation other than their regular compensation,
solicit proxies by telephone, telegraph or personal conversation. The Company
may reimburse brokerage firms and others for expenses in forwarding proxy
materials to the beneficial owners of Common Stock.
Any shareholder giving a proxy may revoke it at any time prior to its use at
the Annual Meeting either by giving written notice of such revocation to the
Secretary of the Company, by filing a duly executed proxy bearing a later
date with the Secretary of the Company, or by appearing at the Annual Meeting
and filing written notice of revocation with the Secretary of the Company
prior to use of the proxy. Proxies will be voted as specified by
shareholders.
THE BOARD RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE APPROVAL OF THE
PROPOSAL SET FORTH IN THE NOTICE OF MEETING.
The Company expects that this proxy material will first be mailed to
shareholders on or about April 3, 1996.
VOTING OF SHARES
Only holders of Common Stock of record at the close of business on March 22,
1996 will be entitled to vote at the Annual Meeting. On March 22, 1996, the
Company had 4,273,027 outstanding shares of Common Stock, each such share
entitling the holder thereof to one vote on each matter to be voted on at the
Annual Meeting.
The presence at the Annual Meeting, in person or by proxy, of the holders of
thirty-three and one-third percent (33-1/3%) of the outstanding shares of
Common Stock entitled to vote at the meeting (1,424,343 shares) is required
for a quorum for the transaction of business. In general, shares of Common
Stock represented by a properly signed and returned proxy card will be
counted as shares present and entitled to vote at the Annual Meeting for
purposes of determining a quorum, without regard to whether the card reflects
abstentions (or is left blank) or reflects a "broker non-vote" on a matter
(i.e., a card returned by a broker on behalf of its beneficial owner customer
that is not voted on a particular matter because voting instructions have not
been received and the broker has no discretionary authority to vote).
The election of a nominee for director and any other proposals that may come
before the Annual Meeting described in this Proxy Statement require the
approval of a majority of the shares present and entitled to vote in person
or by proxy on that matter (and at least a majority of the minimum number of
votes necessary for a quorum to transact business at the meeting). Shares
represented by a proxy card including any broker non-votes on a matter will
be treated as shares not entitled to vote on that matter, and thus will not
be counted in determining whether that matter has been approved. Shares
represented by a proxy card voted as abstaining on any of the other proposals
will be treated as shares present and entitled to vote that were not cast in
favor of a particular matter, and thus will be counted as votes against that
matter.
ELECTION OF DIRECTORS
NOMINATION
The Third Restated Bylaws of the Company provide that the number of directors
shall be the number elected by the shareholders at the last annual meeting of
shareholders or the number set by resolution of the Board. Eight directors
were elected at the 1995 Annual Meeting, and as a result, there will be eight
directors of the Company for the ensuing year. The Board has nominated the
eight individuals below to serve as directors of the Company until the next
annual meeting of the shareholders or until their respective successors have
been elected and qualified. All of the nominees are members of the current
Board.
The Board recommends a vote FOR the election of each of the nominees listed
below. In absence of other instructions, the proxies will be voted FOR the
election of the nominees named below. If prior to the meeting the Board
should learn that any nominee will be unable to serve by reason of death,
incapacity or other unexpected occurrence, the proxies that otherwise would
have been voted for such nominee will be voted for such substitute nominee as
selected by the Board. Alternatively, the proxies, at the Board's discretion,
may be voted for such fewer number of nominees as results from such death,
incapacity or other unexpected occurrence. The Board has no reason to believe
that any of the nominees will be unable to serve.
INFORMATION ABOUT NOMINEES
The following information has been furnished to the Company, as of February
15, 1996, by the persons who have been nominated by the Board to serve as
directors for the ensuing year.
<TABLE>
<CAPTION>
DIRECTOR
NAME OF NOMINEE AGE PRINCIPAL OCCUPATION SINCE
<S> <C> <C> <C>
William N. Mayer 65 Chairman of the Board, Chief Executive Officer of
the Company 1971
Howard L. Demorest 74 Retired Chairman of the Board, Chief Executive Officer 1966
and Treasurer of the Company
Dean B. Chenoweth 74 Vice President of Engineering of Advantek, Inc. 1980
J. Leonard Frame 71 President and Chief Executive Officer of Phoenix Solutions 1983
Co.
Wallace W. Lindemann, Ph.D. 70 Retired Director of the Center for Microelectronic and 1987
Information Sciences and Professor of Electrical
Engineering, University of Minnesota
Paul L. Sjoquist 62 Director and Secretary, Palmatier, Sjoquist & Helget, P.A. 1988
Richard A. Proulx 62 Certified Public Accountant and Independent Consultant 1991
Robert L. Demorest 50 President of the Company 1995
</TABLE>
OTHER INFORMATION ABOUT NOMINEES
Except as indicated below, there has been no change in principal occupations
or employment during the last five years for the directors or nominees for
election as directors.
Mr. Sjoquist has been a patent attorney in the law firm of Palmatier,
Sjoquist & Helget, P.A. for more than five years. Palmatier, Sjoquist &
Helget, P.A. has provided and is expected to continue to provide certain
legal services to the Company.
Mr. Robert L. Demorest has been the President of the Company since January
1995. Prior to that time, Mr. Demorest had been Executive Vice President and
Secretary of the Company.
INFORMATION ABOUT THE BOARD AND ITS COMMITTEES
The business and affairs of the Company are managed by the Board, which met
four times during 1995. Committees established by the Board of Directors
include the Audit Committee, the Compensation Committee and the Nominating
Committee.
The members of the Audit Committee during 1995 were Messrs. H.L. Demorest and
Proulx. The function of the Audit Committee is to review Company financial
statements, oversee the financial reporting and disclosures prepared by
management, make recommendations regarding the Company's financial controls,
and confer with the Company's outside auditors. The Audit Committee met two
times during 1995.
The members of the Compensation Committee during 1995 were Messrs. Frame and
Sjoquist. The function of the Compensation Committee is to set the
compensation for those officers who are also directors, and set the terms of,
and grants of awards under, the Company's Incentive Compensation Plan (the
"Bonus Plan"), the Employee Stock Option Plan (the "Non-Statutory Plan") and
the 1992 Stock Option Plan (the "1992 Plan") and to act on other matters
relating to compensation as it deems appropriate. The Compensation Committee
met six times during 1995.
The members of the Nominating Committee appointed in connection with the
Annual Meeting were Messrs. Chenoweth and Lindemann. The function of the
Nominating Committee is to select nominees for the Board of Directors. The
Nominating Committee will consider director nominations by shareholders.
Shareholders who wish to make recommendations may submit names in writing to
the Company by the deadline for shareholder proposals, together with
biographical information, the address and the telephone number of the
proposed nominee. The Nominating Committee met once during 1995.
All of the Directors attended 75% or more of the aggregate meetings of the
Board and all committees on which they served.
DIRECTOR COMPENSATION
DIRECTORS' FEES. Non-employee directors each received a retainer fee of
$550 per month during 1995 without regard to the number of Board or committee
meetings held or attended by such director.
DIRECTOR RETIREMENT PLAN. On March 23, 1988, the Board adopted a retirement
plan for non-employee directors of the Company (the "Retirement Plan"). Pursuant
to the Retirement Plan, all non-employee directors who have served on the Board
of Directors of the Company for at least five years shall, upon retirement,
receive an amount equal to the annual retainer fee such director would have been
entitled to receive during the fiscal year in which such director's retirement
occurs, provided that such payment shall not be made to a director who,
following retirement, continues to serve the Company in a consulting capacity.
The amount to be received shall be payable in four installments at the end of
each of the four fiscal quarters following retirement. As of December 31, 1995,
all of the Company's current non-employee directors, with the exception of Mr.
Proulx, were eligible to receive payments pursuant to the Retirement Plan upon
their retirement from the Board.
1990 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN. On November 13, 1990, the
Board adopted the 1990 Non-Employee Director Stock Option Plan (the "1990
Director Plan"). Pursuant to the 1990 Director Plan, an initial grant of an
option to purchase 1,000 shares of Common Stock at an exercise price per share
equal to 100% of the fair market value of one share of Common Stock on the date
of grant was made to all non-employee directors who were directors on November
13, 1990, the date the 1990 Director Plan was adopted. The 1990 Director Plan
provides that each non-employee director who is a director of the Company on
November 1 of each second year thereafter shall automatically receive an
additional option to purchase 1,000 shares of Common Stock at an exercise price
per share equal to 100% of the fair market value of a share of Common Stock as
of the date of grant. Each option granted under the 1990 Director Plan is
exercisable commencing on the first anniversary of the date of grant, and
remains exercisable until the fifth anniversary of the date of grant. To
exercise an option, the director must have continuously served as a director of
the Company for the entire year preceding the date on which the option first
becomes exercisable. Once the option becomes exercisable, it will remain
exercisable for the remainder of its term, whether or not such director remains
a director of the Company. During the last fiscal year, no options to purchase
shares of Common Stock were granted under the 1990 Director Plan.
PRINCIPAL SHAREHOLDERS AND BENEFICIAL OWNERSHIP OF MANAGEMENT
The following table sets forth information regarding the beneficial ownership
of the Common Stock of the Company as of February 15, 1996 unless otherwise
noted (a) by each shareholder who is known by the Company to own beneficially
more than 5% of the outstanding Common Stock, (b) by each director and each
executive officer named in the Summary Compensation Table and (c) by all
executive officers and directors of the Company as a group.
<TABLE>
<CAPTION>
SHARES OF COMMON STOCK
BENEFICIALLY OWNED(1)(2)
------------------------
NAME AMOUNT PERCENT OF CLASS
- ---- ------ ----------------
<S> <C> <C>
Fenimore Asset Management, Inc. 821,734 (3) 18.2%
118 North Grand Street
P.O. Box 310
Cobleskill, New York 12043
William N. Mayer 239,397 (4) 5.3%
Howard L. Demorest 53,461 (5) 1.2%
Dean B. Chenoweth 29,167 (5) *
J. Leonard Frame 5,750 (6) *
Wallace W. Lindemann 6,654 (5) *
Paul L. Sjoquist 5,535 (5) *
Richard A. Proulx 9,250 (7) *
Robert L. Demorest 68,440 (8) 1.5%
Ronald A. Meyer 75,128 (9) 1.7%
Daniel W. Mayer 57,054 (10) 1.3%
All current directors and executive officers
as a group (10 persons) 549,836 (11) 12.2%
</TABLE>
* Less than 1%.
(1) Shares not outstanding but deemed beneficially owned by virtue of the
right of a person or member of a group to acquire them within 60 days
are treated as outstanding only when determining the amount and percent
owned by such person or group.
(2) Unless otherwise noted, all of the shares shown are held by individuals
or entities possessing sole voting and investment power with respect to
such shares.
(3) Fenimore Asset Management, Inc. has reported in a Schedule 13G filed
with the Securities and Exchange Commission that, as of January 31,
1996, it was the beneficial owner of all such shares, possessing shared
voting and investment power with respect to all such shares.
(4) Includes 28,000 shares that Mr. W.N. Mayer has the right to acquire
within 60 days upon the exercise of stock options. Also includes
211,397 shares owned beneficially by Mr. W.N. Mayer and his wife
jointly as to which he shares voting and investment power.
(5) Includes 2,000 shares that such directors have the right to acquire
within 60 days upon the exercise of stock options.
(6) Includes 2,000 shares that Mr. Frame has the right to acquire within 60
days upon the exercise of stock options. Also includes 2,250 shares
owned beneficially by Mr. Frame and his wife jointly as to which he
shares voting and investment power and 1,000 shares owned by his wife,
as to which he disclaims any beneficial interest.
(7) Includes 3,500 shares that Mr. Proulx has the right to acquire within
60 days upon the exercise of stock options.
(8) Includes 16,500 shares that Mr. R.L. Demorest has the right to acquire
within 60 days upon the exercise of stock options. Also includes 42,265
shares owned beneficially by Mr. Demorest and his wife jointly as to
which he shares voting and investment power.
(9) Includes 16,500 shares that Mr. Meyer has the right to acquire within
60 days upon the exercise of stock options. Also includes 8,823 shares
owned beneficially by Mr. Meyer and his wife jointly as to which he
shares voting and investment power.
(10) Includes 16,000 shares that Mr. D.W. Mayer has the right to acquire
within 60 days upon the exercise of stock options.
(11) Includes an aggregate of 90,500 shares that certain directors and
executive officers have the right to acquire within 60 days upon the
exercise of stock options. Includes an aggregate of 266,235 shares as
to which voting and investment power are shared or may be deemed to be
shared by certain directors and executive officers.
EXECUTIVE COMPENSATION AND OTHER BENEFITS
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table sets forth the cash and non-cash compensation for each of
the last three fiscal years awarded to or earned by the Chief Executive
Officer of the Company and the three other most highly compensated executive
officers of the Company whose salary and bonus exceeded $100,000 in the last
fiscal year (the "Named Executive Officers"). Other than Messrs. W.N. Mayer,
R.L. Demorest, R.A. Meyer and D.W. Mayer, no other executive officer of the
Company had salary and bonus which exceeded $100,000 in the fiscal year ended
December 31, 1995.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
SECURITIES ALL OTHER
ANNUAL COMPENSATION UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($)(1) OPTIONS (#) ($)(2)
<S> <C> <C> <C> <C> <C>
William N. Mayer 1995 $193,167 $110,066 0 $1,350
Chairman of the Board and 1994 190,000 90,136 25,000 1,350
Chief Executive Officer 1993 181,500 45,674 0 1,349
Robert L. Demorest 1995 $122,134 $ 48,715 5,000 $1,562
President 1994 109,823 36,470 0 1,153
1993 105,050 18,505 5,000 1,215
Ronald A. Meyer 1995 $108,008 $ 43,080 5,000 $1,441
Vice President -- 1994 102,350 33,988 0 1,074
Finance and Administration, 1993 97,900 17,246 5,000 1,132
Treasurer and Secretary
Daniel W. Mayer 1995 $105,063 $ 41,906 5,000 $ 897
Executive Vice President 1994 97,750 32,461 0 840
1993 93,500 16,471 5,000 836
</TABLE>
(1) Cash bonuses for services rendered have been included as compensation
for the year earned, even though such bonuses were actually paid in the
following year. Such bonuses were payable pursuant to the Company's
Bonus Plan. The Bonus Plan is based upon the achievement by the Company
of certain established profit goals and is described below under the
heading "Compensation Committee Report on Executive Compensation."
(2) "All Other Compensation" includes Company contributions to its Salary
Reduction Plan. Under the Salary Reduction Plan, participants may
voluntarily request that the Company reduce his or her pre-tax
compensation by up to 12% (subject to certain special limitations) and
contribute such amounts ("Basic Contributions") to a trust. Each year,
the Company contributes an amount equal to 15% (20% after June 30,
1995) of the first 6% of each participant's Basic Contributions for
that year.
OPTION GRANTS AND EXERCISES
The following tables summarize option grants and exercises during 1995 to or
by the Named Executive Officers and the potential realizable value of the
options held by such persons at December 31, 1995.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
INDIVIDUAL GRANTS ANNUAL
------------------------------------------------------------- RATES OF STOCK PRICE
NUMBER OF PERCENT OF APPRECIATION
SECURITIES TOTAL FOR OPTION TERM(2)
UNDERLYING OPTIONS GRANTED EXERCISE OR --------------------
OPTIONS TO EMPLOYEES BASE PRICE EXPIRATION
NAME GRANTED(#)(1) IN FISCAL YEAR ($/SH) DATE 5% 10%
- ---- ------------- -------------- ------ ---- -- ---
<S> <C> <C> <C> <C> <C> <C>
Robert L. Demorest 5,000(3) 9.0% $6.625 1/5/00 $9,275 $20,869
Ronald A. Meyer 5,000(3) 9.0% $6.625 1/5/00 $9,275 $20,869
Daniel W. Mayer 5,000(3) 9.0% $6.625 1/5/00 $9,275 $20,869
</TABLE>
(1) All the options granted to executives were granted under the 1992 Plan.
Options become exercisable under the plan so long as executives remain
in the employ of the Company or one of its subsidiaries. To the extent
not already exercisable, options granted under the 1992 Plan become
immediately exercisable in full upon certain changes in control of the
Company, provided that, upon such a change in control, the Compensation
Committee may determine that holders of options granted under the 1992
Plan will receive cash in an amount equal to the excess of the fair
market value of such shares immediately prior to the effective date of
such change in control of the Company over the exercise price of such
options. See "Executive Compensation and Other Benefits -- Change in
Control Arrangements."
(2) These amounts represent certain assumed rates of appreciation only.
Actual gains, if any, on stock option exercises are dependent upon the
future performance of the Company's Common Stock, overall market
conditions and the executive's continued employment with the Company.
The amounts represented in this table might not necessarily be
achieved.
(3) These options were granted on January 6, 1995 and vest according to the
following schedule: 25% on the first anniversary of the date of grant
and 25% on each anniversary date thereafter, until fully vested.
AGGREGATED OPTION EXERCISES IN
LAST FISCAL YEAR AND FY-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED IN-THE-MONEY OPTIONS
SHARES OPTIONS AT FISCAL AT FISCAL YEAR-END
ACQUIRED ON VALUE YEAR-END (#) ($)
EXERCISE REALIZED ----------------- ---------------------
NAME (#)(1) ($)(2) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ---- ------ -------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
William N. Mayer 0 0 14,750 13,250 $47,656 $47,656
Robert L. Demorest 8,437 $21,268 14,250 9,750 $15,312 $25,000
Ronald A. Meyer 5,625 $14,531 14,250 9,750 $15,312 $25,000
Daniel W. Mayer 11,250 $29,062 13,875 9,625 $15,312 $25,000
</TABLE>
(1) The exercise price of options granted under the Company's Restated 1982
Incentive Stock Option Plan, the Non-Statutory Plan or the 1992 Plan
may be paid in cash or in shares of the Company's Common Stock valued
at fair market value on the date of exercise. In addition, the exercise
price of options granted under the Non-Statutory Plan or the 1992 Plan
may be paid pursuant to a cashless exercise procedure under which the
executive provides irrevocable instructions to a brokerage firm to sell
the purchased shares and to remit to the Company, out of the sale
proceeds, an amount equal to the exercise price plus all applicable
withholding taxes. Under the 1992 Plan, the Compensation Committee also
has the discretion to grant a supplemental cash bonus to an optionee in
connection with the grant or exercise of an option or both the grant
and exercise of an option. See "Executive Compensation and Other
Benefits -- Change in Control Arrangements."
(2) The "Value Realized" is calculated as the excess of the market value of
the Common Stock on the date of exercise or December 31, 1995, as the
case may be, over the exercise price. The market price of the Common
Stock as of December 31, 1995 was calculated as the average of the high
and low prices as quoted on the Nasdaq National Market System. The
exercise price of outstanding options range from $6.625 to $12.25 per
share.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Composed entirely of outside directors, the Compensation Committee of the
Board of Directors meets two to four times per year and is responsible for
establishing the compensation for executive officers who are also directors
of the Company (Messrs. W.N. Mayer and R.L. Demorest) and for administering
the Company's compensation and stock option plans in which these individuals
and other key employees participate. Mr. W.N. Mayer, the Company's Chief
Executive Officer, establishes the compensation of all other executive
officers who are not also directors of the Company. The members of the
Compensation Committee of the Company during 1995 were J. Leonard Frame and
Paul L. Sjoquist. A more complete description of the functions of the
Compensation Committee is set forth under the caption "Election of Directors
- -- Information About the Board and its Committees."
COMPENSATION PHILOSOPHY AND OBJECTIVES. The Company's executive
compensation philosophy is to link executive compensation directly to earnings
performance and therefore to increases in shareholder value. The objectives of
the Company's executive compensation program are to:
* Reward the achievement of desired Company earnings and individual
performance goals.
* Provide compensation that is competitive with other companies of
comparable size and performance that enables the Company to attract
and retain key executives.
* Link compensation to the performance of the Company's Common Stock
thereby aligning the interests of executives with those of the
Company's shareholders.
The Company's executive compensation program provides a level of compensation
that is competitive for companies of comparable profitability, complexity and
size. In determining compensation levels, competitive compensation data,
including compensation data for some of the companies included in the Peer
Group Index used in the Stock Performance Graph as well as other companies,
is collected by management, analyzed and presented to the Compensation
Committee for review. The Compensation Committee ultimately determines the
proper level of compensation which may be greater or less than competitive
levels in this survey data based upon factors such as annual and long-term
Company performance and individual performance. The compensation of
executives other than Messrs. W.N. Mayer and R.L. Demorest is established by
Mr. W.N. Mayer using a similar philosophy.
EXECUTIVE COMPENSATION PROGRAM COMPONENTS. The Company's executive
compensation program consists of base salary, annual incentive compensation in
the form of cash bonuses and long-term incentive compensation in the form of
stock options. The Compensation Committee uses its discretion to establish
executive compensation at levels which, in its judgment, are warranted by
external and internal factors, as well as an executive's individual
circumstances. As a result, actual compensation levels may be greater or less
than the compensation levels at the companies used in the comparative analysis
based upon annual and long-term Company performance as well as individual
performance. The particular elements of the compensation program are discussed
more fully below.
BASE SALARY. Base salary levels of executives are determined by taking into
account an executive's level of responsibility, prior experience, competitive
market data, the skills and experiences required by the position and the
individual performance. Mr. W.N. Mayer's base salary was increased from
$190,000 to $209,000 on November 1, 1995.
ANNUAL INCENTIVE COMPENSATION. Annual cash bonuses are paid under the
Company's Bonus Plan to the executives and are designed to provide a direct
financial incentive to executives to achieve the Company's annual profit
goals measured by net income before income taxes and incentives. The annual
incentive targets range from 35% to 50% of base salary if the Company's
profit goals are achieved (the "Incentive Target"). To the extent the
Company's profits are less than or greater than established goals, the annual
incentive is proportionally reduced or increased but may not exceed 150% of
the Incentive Target. The Bonus Plan's 1995 profit goals were set in 1993 for
the years 1994, 1995 and 1996. Mr. W.N. Mayer's and Mr. R.L. Demorest's
bonuses for 1995 were $110,066 and $48,715, respectively. The Company
believes that Mr. W.N. Mayer and Mr. R.L. Demorest and the other executives
performed well in a difficult market as shown below in the Stock Performance
Graph.
LONG-TERM INCENTIVE COMPENSATION. Stock options are used to enable key
executives to participate in a meaningful way in the success of the Company
and to link their interests directly with those of the shareholders. The
number of stock options granted to executives is based upon a number of
factors, including base salary level, the number of options previously
granted and individual and Company performance during the year. Based upon
these factors, Mr. R.L. Demorest was granted options to purchase a total of
5,000 shares during 1995. Mr. W.N. Mayer was granted options to purchase a
total of 25,000 shares during fiscal 1994. Because of this grant in 1994 and
because the Compensation Committee believes his current level of outstanding
options is adequate, Mr. W.N. Mayer was not granted any additional options
during 1995.
SECTION 162(m). The Omnibus Reconciliation Act of 1993 added Section 162(m)
to the Internal Revenue Code of 1986, as amended (the "Code") limiting corporate
deductions to $1,000,000 for certain compensation paid to the chief executive
officer and each of the three other most highly compensated executives of
publicly held companies. The Company does not believe it will pay "compensation"
within the meaning of Section 162(m) to such executive officers in excess of
$1,000,000 in the foreseeable future. Therefore, the Company does not have a
policy at this time regarding qualifying compensation paid to its executive
officers for deductibility under Section 162(m), but will formulate a policy if
compensation levels ever approach $1,000,000.
Chief Executive Officer Compensation Committee
William N. Mayer J. Leonard Frame
Paul L. Sjoquist
STOCK PERFORMANCE GRAPH
The following line-graphs provide both a five-year and a ten-year comparison
of the cumulative returns for the Company, the S&P 500 Index and an index of
peer companies selected by the Company. The Peer Group Index consists of
companies that operate in similar industries and with similar market
capitalizations. The total cumulative return (change in the year-end stock
price plus reinvested dividends) for each of the periods is based on the
investment of $100 in the Company's Common Stock, the S&P 500 Index and the
Peer Group Index on December 31, 1990 (for the five-year comparison) and on
December 31, 1985 (for the ten-year comparison). Total cumulative return for
each company in the Peer Group Index is weighted according to market
capitalization at the beginning of each year. Autotrol Corp. and
Fisher-Porter Co. are no longer included in the Company's Peer Group Index as
they were purchased and merged out of existence during 1993 and 1994,
respectively.
FIVE-YEAR COMPARISON
[GRAPH]
Modern Controls, Inc. S&P 500 Peer Group Index*
Graph Plot Points Graph Plot Points Graph Plot Points
1990 100.00 1990 100.00 1990 100.00
1991 204.81 1991 130.47 1991 119.78
1992 150.48 1992 140.41 1992 125.70
1993 110.48 1993 154.56 1993 150.14
1994 79.16 1994 156.61 1994 169.49
1995 138.22 1995 215.45 1995 268.51
TEN-YEAR COMPARISON
[GRAPH]
Modern Controls, Inc. S&P 500 Peer Group Index*
Graph Plot Points Graph Plot Points Graph Plot Points
1985 100.00 1985 100.00 1985 100.00
1986 78.80 1986 118.67 1986 93.62
1987 81.94 1987 124.90 1987 81.62
1988 195.44 1988 145.64 1988 101.14
1989 213.05 1989 191.79 1989 118.78
1990 301.94 1990 185.83 1990 88.76
1991 618.41 1991 242.45 1991 106.32
1992 454.35 1992 260.92 1992 111.57
1993 333.59 1993 287.22 1993 133.26
1994 239.02 1994 291.02 1994 150.44
1995 417.35 1995 400.37 1995 238.33
* Andros Inc., BEI Electronics Inc., CEM Corp., Core Industries Inc., Daniel
Industries, Gelman Sciences Inc., Hurco Companies Inc., Input/Output Inc.,
Instron Corp., K-Tron International, Medar Inc., Media Logic Inc., Moore
Products Co., MTS Systems Corp., Newport Corp., Triconex Corp., TSI Inc. -
MN, Unit Instruments, Inc.
CHANGE IN CONTROL ARRANGEMENTS
Under the Company's 1992 Plan, upon the occurrence of a "change in control"
all outstanding options granted under the 1992 Plan will become and remain
exercisable in full during their remaining terms regardless of whether the
plan participants thereafter remain employees of the Company or a subsidiary.
The acceleration of the exercisability of options under this Plan may be
limited, however, if the acceleration would be subject to an excise tax
imposed upon "excess parachute payments." Under the 1992 Plan, a "change in
control" has occurred if (a) substantially all of the Company's assets are
sold or otherwise disposed of or the shareholders approve a transaction in
which the Company is liquidated or dissolved; (b) a change in control of the
Company of a nature that would be required to be reported pursuant to Section
13 or 15(d) of the Securities Exchange Act of 1934 (the "Exchange Act") has
occurred; (c) any person becomes the beneficial owner of 25% or more of the
combined voting power of the Company's capital stock; or (d) the Company is a
party to a business combination or proxy contest, as a consequence of which
members of the Board in office as of the effective date of the 1992 Plan
constitute less than a majority of the Board after such event (any person
that becomes a director subsequent to the effective date of the 1992 Plan
whose election, or nomination for election by the shareholders, was approved
by at least a majority of the directors on the effective date of the 1992
Plan, is considered a member of the board of directors on the effective date
of the 1992 Plan). In addition, the Compensation Committee, without the
consent of any affected participant, may determine that some or all of the
participants holding outstanding options will receive cash in an amount equal
to the excess of the fair market value immediately before the effective date
of the change in control over the exercise price per share of the options.
CONFIDENTIALITY AGREEMENT
The Company currently has a written agreement with William N. Mayer
prohibiting disclosure of confidential information to anyone outside of the
Company both during and subsequent to employment, prohibiting Mr. Mayer from
engaging in any competitive business activity for a period of two years after
termination of employment with the Company and requiring disclosure to the
Company of ideas, discoveries or inventions relating to or resulting from his
work for the Company and assignment to the Company of all proprietary rights
to such matters. In the event that Mr. Mayer is unable to obtain employment
consistent with his abilities and education as a result of this agreement,
the Company will be required to make payments to Mr. Mayer equal to his
monthly base salary at termination (exclusive of extra compensation, bonus or
employee benefits) for each month of such unemployment, up to a maximum of 24
months.
SHAREHOLDER PROPOSALS FOR 1997 ANNUAL MEETING
Proposals of shareholders intended to be presented in the proxy materials
relating to the next Annual Meeting must be received by the Company at its
principal executive offices on or before December 5, 1996.
OTHER MATTERS
The management of the Company does not intend to present other items of
business and knows of no items of business that are likely to be brought
before the Annual Meeting except those described in this Proxy Statement.
However, if any other matters should properly come before the Annual Meeting,
the persons named in the enclosed proxy will have discretionary authority to
vote such proxy in accordance with their best judgment on such matters.
MISCELLANEOUS
THE COMPANY WILL FURNISH WITHOUT CHARGE A COPY OF ITS ANNUAL REPORT ON FORM
10-K (EXCLUSIVE OF EXHIBITS) FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995 TO
EACH PERSON WHO WAS A SHAREHOLDER OF THE COMPANY AS OF MARCH 22, 1996, UPON
RECEIPT FROM ANY SUCH PERSON OF A WRITTEN REQUEST FOR SUCH AN ANNUAL REPORT.
SUCH REQUEST SHOULD BE SENT TO: 7500 BOONE AVENUE NORTH, MINNEAPOLIS,
MINNESOTA 55428; ATTN: SHAREHOLDER INFORMATION.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Ronald A. Meyer
Ronald A. Meyer
Secretary
Minneapolis, Minnesota
April 3, 1996
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints William N. Mayer and Ronald A. Meyer, and each
of them, as Proxies, each with the power to appoint his substitute, and hereby
authorizes each of them to represent and to vote, as designated below, all the
shares of common stock of Modern Controls, Inc. held of record by the
undersigned on March 22, 1996, at the Annual Meeting of Shareholders to be held
on May 21, 1996 or any adjournment thereof.
MODERN CONTROLS, INC.
7500 BOONE AVENUE NORTH
MINNEAPOLIS, MINNESOTA 55428 PROXY
1. Election of Directors:
[ ] FOR all nominees listed below
(except as marked to the contrary below)
[ ] AGAINST all nominees listed below
WILLIAM N. MAYER HOWARD L. DEMOREST DEAN B. CHENOWETH J. LEONARD FRAME
WALLACE W. LINDEMANN PAUL L. SJOQUIST RICHARD A. PROULX ROBERT L. DEMOREST
(INSTRUCTION: To vote against any individual nominee, print that nominee's
name on the space below.)
2. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL 1 ABOVE.
(Please Sign on Reverse Side)
THIS PROXY WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY
WILL BE VOTED FOR ALL NOMINEES NAMED IN PROPOSAL 1 ABOVE. Please sign exactly
as name appears below. When shares are held by joint tenants, both should
sign. When signing as attorney, executor, administrator, trustee or guardian,
please give full title as such. If a corporation, please sign in full
corporate name by President or other authorized officer. If a partnership,
please sign in partnership name by authorized person.
Date: __________________________, 1996.
______________________________________
Print Name of Shareholder(s)
______________________________________
Signature
______________________________________
Signature if held jointly
PLEASE MARK, SIGN, DATE AND RETURN THE
PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE, WHICH REQUIRES NO POSTAGE IF
MAILED IN THE UNITED STATES.
