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:
[ ] 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
WINLAND ELECTRONICS, 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.:
3) Filing Party:
4) Date Filed:
<PAGE>
WINLAND ELECTRONICS, INC.
-----------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
to be held
May 13, 1999
-----------------------
TO THE SHAREHOLDERS OF WINLAND ELECTRONICS, INC.:
The 1999 Annual Meeting of Shareholders of Winland Electronics, Inc.
will be held at the Company's corporate offices located at 1950 Excel Drive,
Mankato, Minnesota, at 7:00 p.m. on Thursday, May 13, 1999, for the following
purposes:
1. To set the number of members of the Board of Directors at
seven (7).
2. To elect members of the Board of Directors.
3. To take action on any other business that may properly come
before the meeting or any adjournment thereof.
Accompanying this Notice of Annual Meeting is a Proxy Statement, form
of Proxy and the Company's 1998 Annual Report to Shareholders.
Only shareholders of record as shown on the books of the Company at the
close of business on March 22, 1999 will be entitled to vote at the 1999 Annual
Meeting or any adjournment thereof. Each shareholder is entitled to one vote per
share on all matters to be voted on at the meeting.
You are cordially invited to attend the 1999 Annual Meeting. Whether or
not you plan to attend the 1999 Annual Meeting, please sign, date and mail the
enclosed form of Proxy in the return envelope provided as soon as possible. The
Proxy is revocable and will not affect your right to vote in person in the event
you attend the meeting. The prompt return of proxies will help your Company
avoid the unnecessary expense of further requests for proxies.
BY ORDER OF THE BOARD OF DIRECTORS,
W. Kirk Hankins
Chairman and Chief Executive Officer
Dated: April 2, 1999
Mankato, Minnesota
<PAGE>
WINLAND ELECTRONICS, INC.
-----------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
to be held
May 13, 1999
-----------------------
The accompanying Proxy is solicited by the Board of Directors of
Winland Electronics, Inc. (the "Company") for use at the 1999 Annual Meeting of
Shareholders of the Company to be held on Thursday, May 13, 1999, at the
location and for the purposes set forth in the Notice of Annual Meeting, and at
any adjournment thereof.
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 stock, will be borne by the
Company. Directors, officers and regular employees of the Company may, without
compensation other than their regular remuneration, solicit proxies personally
or by telephone.
Any shareholder giving a Proxy may revoke it any time prior to its use
at the 1999 Annual Meeting by giving written notice of such revocation to the
Secretary or any other officer of the Company or by filing a later dated written
Proxy with an officer of the Company. Personal attendance at the 1999 Annual
Meeting is not, by itself, sufficient to revoke a Proxy unless written notice of
the revocation or a later dated Proxy is delivered to an officer before the
revoked or superseded Proxy is used at the 1999 Annual Meeting. Proxies will be
voted as directed therein. Proxies which are signed by shareholders but which
lack specific instruction with respect to any proposal will be voted in favor of
such proposal as set forth in the Notice of Meeting or, with respect to the
election of directors, in favor of the number and slate of directors proposed by
the Board of Directors and listed herein.
The presence at the Annual Meeting in person or by proxy of the holders
of a majority of the outstanding shares of the Company's Common Stock entitled
to vote shall constitute a quorum for the transaction of business. If a broker
returns a "non-vote" proxy, indicating a lack of voting instructions by the
beneficial holder of the shares and a lack of discretionary authority on the
part of the broker to vote on a particular matter, then the shares covered by
such non-vote shall be deemed present at the meeting for purposes of determining
a quorum but shall not be deemed to be represented at the meeting for purposes
of calculating the vote required for approval of such matter. If a shareholder
abstains from voting as to any matter, then the shares held by such shareholder
shall be deemed present at the meeting for purposes of determining a quorum and
for purposes of calculating the vote with respect to such matter, but shall not
be deemed to have been voted in favor of such matter. An abstention as to any
proposal will therefore have the same effect as a vote against the proposal.
The mailing address of the principal executive office of the Company is
1950 Excel Drive, Mankato, Minnesota 56001. The Company expects that this Proxy
Statement, the related Proxy and Notice of Meeting will first be mailed to
shareholders on or about April 2, 1999.
<PAGE>
OUTSTANDING SHARES AND VOTING RIGHTS
The Board of Directors of the Company has fixed March 22, 1999 as the
record date for determining shareholders entitled to vote at the 1999 Annual
Meeting. Persons who were not shareholders on such date will not be allowed to
vote at the 1999 Annual Meeting. At the close of business on March 22, 1999,
there were 2,891,786 shares of the Company's Common Stock, par value $.01 per
share, issued and outstanding. The Common Stock is the only outstanding class of
capital stock of the Company. Each share of Common Stock is entitled to one vote
on each matter to be voted upon at the 1999 Annual Meeting. Holders of Common
Stock are not entitled to cumulative voting rights.
PRINCIPAL SHAREHOLDERS AND MANAGEMENT SHAREHOLDINGS
The following table provides information as of March 22, 1999
concerning the beneficial ownership of the Company's Common Stock by (i) the
persons known by the Company to own more than 5% of the Company's outstanding
Common Stock, (ii) each director and nominee of the Company, (iii) the named
executive officers in the Summary Compensation Table and (iv) all current
executive officers and directors as a group. Except as otherwise indicated, the
persons named in the table have sole voting and investment power with respect to
all shares of Common Stock owned by them.
Name (and Address of 5% Number of Shares Percent
Owner) or Identity of Group Beneficially Owned(1) of Class (1)
W. Kirk Hankins 293,943 (2) 10.1%
1950 Excel Drive
Mankato, MN 56001
Lorin E. Krueger 246,723 (3) 8.4%
1950 Excel Drive
Mankato, MN 56001
Kirk P. Hankins 51,500 (4) 1.8%
S. Robert Dessalet 19,000 (5) *
Thomas J. dePetra 12,000 (6) *
David L. Ewert 3,000 (6) *
Peter D. Jones 14,000 (7) *
Steven N. Bronson 233,620 (8) 8.0%
16 E. 52nd St., Suite 501
New York, NY 10022
All Current Executive Officers 795,274 (9) 25.8%
and Directors as a Group
(9 Individuals)
- - ---------------------
* Less than 1% of the outstanding shares of Common Stock.
<PAGE>
(1) Under the rules of the SEC, shares not actually outstanding are deemed
to be beneficially owned by an individual if such individual has the
right to acquire the shares within 60 days. Pursuant to such SEC Rules,
shares deemed beneficially owned by virtue of an individual's right to
acquire them are also treated as outstanding when calculating the
percent of the class owned by such individual and when determining the
percent owned by any group in which the individual is included.
(2) Includes 69,842 shares held by Mr. Hankins's spouse, which shares Mr.
Hankins disclaims beneficial ownership of, and 32,000 shares which may
be purchased by Mr. Hankins upon exercise of currently exercisable
options.
(3) Includes 800 shares held by Mr. Krueger's spouse and 32,000 shares
which may be purchased by Mr. Krueger upon exercise of currently
exercisable options.
(4) Includes 26,500 shares which may be purchased by Mr. Hankins upon
exercise of currently exercisable options.
(5) Includes 5,000 shares owned jointly by Mr. Dessalet and his spouse and
14,000 shares which may be purchased by Mr. Dessalet upon exercise of
currently exercisable options.
(6) Represents shares which may be purchased upon exercise of currently
exercisable options.
(7) Includes shares held by Mr. Jones's spouse and 3,000 shares which may
be purchased by Mr. Jones upon exercise of a currently exercisable
option.
(8) Includes 28,212 shares which may be purchased by Mr. Bronson upon
exercise of a currently exercisable warrant.
(9) Includes 91,373 shares held by family members of officers and
directors, and 189,450 shares which may be purchased upon exercise of
currently exercisable options.
ELECTION OF DIRECTORS
(Proposals #1 and #2)
The Bylaws of the Company provide that the number of directors shall be
the number set by the shareholders, which shall be not less than one. The Board
of Directors unanimously recommends that the number of directors be set at seven
and that seven directors be elected. Unless otherwise instructed, the Proxies
will be so voted.
Under applicable Minnesota law, approval of the proposal to set the
number of directors at seven and the election of the nominees to the Board of
Directors require the affirmative vote of the holders of the greater of (i) a
majority of the voting power of the shares represented in person or by proxy at
the Annual Meeting with authority to vote on such matter or (ii) a majority of
the voting power of the minimum number of shares that would constitute a quorum
for the transaction of business at the Annual Meeting.
In the absence of other instruction, the Proxies will be voted for each
of the individuals listed below. If elected, such individuals shall serve until
the next annual meeting of shareholders and until their successors shall be duly
elected and shall qualify. All of the nominees are members of the present Board
<PAGE>
of Directors. If, prior to the 1999 Annual Meeting of Shareholders, it should
become known that any one of the following individuals will be unable to serve
as a director after the 1999 Annual Meeting by reason of death, incapacity or
other unexpected occurrence, the Proxies will be voted for such substitute
nominee(s) as is selected by the Board of Directors. Alternatively, the Proxies
may, at the Board's discretion, be voted for such fewer number of nominees as
results from such death, incapacity or other unexpected occurrence. The Board of
Directors has no reason to believe that any of the following nominees will be
unable to serve.
Name and Age of Current Position Director
Director/Nominee Age with the Company Since
- - --------------------- --- -------------------------------- --------
W. Kirk Hankins 71 Chairman of the Board, 1983
Chief Executive Officer and
Chief Financial Officer
Lorin E Krueger 43 President, Chief Operating Officer, 1978
Secretary and Director
Kirk P. Hankins 37 Vice President of Marketing 1990
and Director
S. Robert Dessalet 66 Director 1985
Thomas J. de Petra 52 Director 1994
David L. Ewert 48 Director 1998
Peter D. Jones 40 Director 1998
W. Kirk Hankins has served as Chairman of the Board, Chief Executive
Officer and Chief Financial Officer of the Company since December 1983. Mr.
Hankins also served as President of the Company from April 1985 until January
1999. Mr. Hankins served as President, Chairman and Chief Financial Officer of
Playtronics Corporation from 1985 until March 1990, when Playtronics merged into
the Company. He was Associate Professor of Accounting at Mankato State
University and owner and operator of a management consulting firm from 1976 to
1984. W. Kirk Hankins is the father of Kirk P. Hankins, a director and Vice
President of Marketing, and Kimberley E. Kleinow, Vice President of Procurement
and Materials.
Lorin E. Krueger has served as President and Chief Operating Officer of
the Company since January 1999 and as Secretary of the Company since 1983. Mr.
Krueger served as Senior Vice President of Operations of the Company from March
1987 until January 1999. Mr. Krueger has been an employee of the Company since
1976 and served as its Vice President from January 1977 to March 1987.
Kirk P. Hankins has served as Vice President of Marketing of the
Company since April 1989. Mr. Hankins served as Secretary of Playtronics from
October 1985 until March 1990, when Playtronics merged into the Company, and as
Vice President of Playtronics from October 1985 until April 1989. From 1984 to
1985, Mr. Hankins was the Marketing Manager of the Company. Kirk P. Hankins is
the son of W. Kirk Hankins, Chairman, Chief Executive Officer and Chief
Financial Officer, and the brother of Kimberley E. Kleinow, Vice President of
Procurement and Materials.
<PAGE>
S. Robert Dessalet has been self-employed as a management consultant
since January 1997. From September 1996 to January 1997, he served as Vice
President-Finance and Administration of Rimage Corporation, a manufacturer of
computer software duplication and finishing systems. He served as Vice
President-Finance and Administration of Dunhill Software Services, Inc., a
software duplication company, from May 1994 to September 1995. Mr. Dessalet was
a consultant for Dessalet & Associates, a business consulting firm, from January
1993 to May 1994. He was employed by National Poly Products, Inc., a producer of
polyethylene packaging film in Mankato, Minnesota, from June 1968 to January
1993 in various capacities including Chief Financial Officer.
Thomas J. de Petra has served as Chief Operating Officer of
International Concept Development, Inc., a restaurant and hotel developer, since
August 1998. From October 1997 to August 1998, Mr. de Petra served as Chief
Operating Officer of Illuminated Media Inc., an advertising company. From
February 1996 to June 1997, Mr. de Petra served as Chief Executive Officer of
Nortech Forest Technologies, Inc., a manufacturer of animal repellents, and
continued providing full-time services as a consultant until October 1997. Mr.
de Petra was a management consultant to Minnesota-based manufacturing companies
from June 1993 to February 1996, and he was Chief Information Officer of IDC
Holdings, Ltd. from June 1993 to November 1994. Mr. de Petra was President and
owner of DePetra & Associates, Inc., a financial communications firm, formerly
known as First Financial Investor Relations, Inc., from August 1986 to October
1993.
David L. Ewert has served as President of Jones Metal Products, Inc.
since April 1997, prior to which he served in various capacities, including Vice
President, Treasurer and Controller, since he joined Jones Metal Products in
August 1973. Mr. Ewert has also served as Accounting Manager for Katolight
Corporation since 1991. From 1972 to December 1973, Mr. Ewert was a Staff
Accountant with Frentz, Lieske and Rogers, a public accounting firm.
Peter D. Jones has served as President of Crysteel Mfg., a national
manufacturer of truck bodies and related equipment located in Lake Crystal,
Minnesota, since January 1994. From 1988 through 1993, Mr. Jones served as Vice
President of Sales and Marketing for Crysteel and as its National Sales Manager
from 1986 through 1988.
BOARD AND COMMITTEE MEETINGS
During fiscal 1998, the Board of Directors held three formal meetings
and took action by unanimous written consent twice. Each director attended 100%
of the meetings of the Board and the committees on which such director served
during 1998.
The Company's Board of Directors has three standing committees, the
Audit Committee, Compensation Committee and Stock Option Committee. The Company
does not have a nominating committee.
The Audit Committee members are S. Robert Dessalet, Thomas J. de Petra,
David L. Ewert and Peter D. Jones, with Messrs. Ewert and Jones joining the
committee at the time of their election to the Board on May 14, 1998. This
committee reviews the selection and work of the Company's independent auditors
and the adequacy of internal controls for compliance with corporate policies and
directives. During 1998, the Audit Committee met twice.
<PAGE>
The Compensation Committee members are S. Robert Dessalet, Thomas J. de
Petra, David L. Ewert and Peter D. Jones, with Messrs. Ewert and Jones joining
the committee at the time of their election to the Board on May 14, 1998. This
committee recommends to the Board of Directors from time to time the salaries to
be paid to executive officers of the Company and any plan for additional
compensation it deems appropriate. During 1998, the Compensation Committee did
not meet but took action by unanimous written consent once.
The Stock Option Committee members are S. Robert Dessalet, Thomas J. de
Petra, David L. Ewert and Peter D. Jones, with Messrs. Ewert and Jones joining
the committee at the time of their election to the Board on May 14, 1998. This
committee is vested with the same authority as the Board of Directors with
respect to the granting of options and the administration of the Company's Stock
Option Plans. The Stock Option Committee did not meet during 1998, but it took
action by unanimous written consent five times.
EXECUTIVE OFFICERS OF THE COMPANY
The name and ages of all of the Company's executive officers and the
positions held by them are listed below.
Name Age Position
W. Kirk Hankins 71 Chairman of the Board, Chief
Executive Officer and Chief
Financial Officer
Lorin E. Krueger 43 President, Chief Operating Officer,
Secretary and Director
Kirk P. Hankins 37 Vice President of Marketing and
Director
Terry E. Treanor 36 Vice President of Manufacturing
Kimberley E. Kleinow 31 Vice President of Procurement and
Materials
Steven W. Vogel 42 Vice President of Engineering
The business experience of W. Kirk Hankins, Lorin E. Krueger and Kirk
P. Hankins is set forth in the section of this Proxy Statement entitled Election
of Directors.
Terry E. Treanor joined the Company in July 1994 and was elected as
Vice President of Manufacturing on June 28, 1996, prior to which he served in
various capacities, including Quality Assurance Manager and Operations Manager.
Mr. Treanor was employed by Onan Corp., a power generation company, from January
1985 until July 1994, serving most recently as Supplier Quality Engineer.
<PAGE>
Kimberley E. Kleinow joined the Company in October 1991 and was elected
as Vice President of Procurement and Materials on December 22, 1997, prior to
which she served as Director of Materials from November 1996 to December 1997
and as Purchasing Manager from October 1991 to November 1996. Kimberley Kleinow
is the daughter of W. Kirk Hankins and the sister of Kirk P. Hankins, both of
whom are officers and directors of the Company.
Steven W. Vogel joined the Company in May 1994 and was elected to Vice
President of Engineering on September 7, 1998, prior to which he served as
Manager of Engineering from April 1996 to September 1998 and as Design Engineer
from May 1994 to April 1996. From April 1988 to May 1994, Mr. Vogel served as
Design Engineer for Micro-Trak Systems, Inc., a Minnesota-based agricultural
electronics company.
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth certain information regarding
compensation paid or accrued during each of the Company's last three fiscal
years to the Chief Executive Officer and to the other executive officers whose
total annual salary and bonus earned or accrued exceeded $100,000 during fiscal
year 1998.
<TABLE>
<CAPTION>
Long Term Compensation
------------------------------------
Annual Compensation Awards Payouts
----------------------------------- ------------------------------------
Restricted LTIP All Other
Name and Principal Fiscal Stock Payouts Compensation
Position Year Salary ($) Bonus ($) Other ($) Awards ($) Options ($) ($)(1)
- - ------------------------- ----- ---------- --------- --------- ---------- ------- --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
W. Kirk Hankins, 1998 135,000 126,582 -- -- 32,000(2) -- 3,261
Chief Executive 1997 122,472 75,521 -- -- -- -- 3,167
Officer, President, 1996 113,000 49,105 -- -- -- -- 3,021
and Chief Financial
Officer
Lorin E. Krueger, 1998 102,000 109,591 -- -- 32,000(2) -- 3,261
Senior Vice President 1997 90,979 63,098 -- -- -- -- 3,167
of Operations and 1996 84,240 40,405 -- -- -- -- 3,021
Secretary
Kirk P. Hankins, 1998 76,000 67,763 -- -- 32,000(2) -- 3,353
Vice President of 1997 71,500 26,491 -- -- -- -- 2,988
Marketing 1996 65,880 14,705 -- -- -- -- 2,274
</TABLE>
- - ----------------
(1) Represents contribution to the Company's 401(k) Plan for executive
officer's benefit.
(2) Includes options to purchase 22,000 shares of the Company's Common
Stock which were previously granted but were repriced in 1998. See
Stock Option Repricing and Report on Repricing of Options.
<PAGE>
Option Grants During 1998 Fiscal Year
The following table provides information regarding stock options
granted during fiscal 1998 to the named executive officers in the Summary
Compensation Table. The Company has not granted any stock appreciation rights.
<TABLE>
<CAPTION>
Percent of Total Options
Options Granted to Employees Exercise or Base
Name Granted in Fiscal Year Price Per Share* Expiration Date
---- ------- -------------- --------------- ---------------
<S> <C> <C> <C> <C>
W. Kirk Hankins 10,000 (1) 3.0% $2.819 12/31/03
12,000 (1) 3.6% $1.925 12/21/00
10,000 (2) 3.0% $1.925 12/21/00
Lorin E. Krueger 10,000 (1) 3.0% $2.563 12/31/03
12,000 (1) 3.6% $1.925 12/21/00
10,000 (2) 3.0% $1.925 12/21/00
Kirk P. Hankins 10,000 (1) 3.0% $2.819 12/31/03
12,000 (1) 3.6% $1.925 12/21/00
10,000 (2) 3.0% $1.925 12/21/00
</TABLE>
- - ------------------
(1) Options were previously granted in 1995, but were repriced in 1998. The
options were either exercisable immediately on the date of the original
grant or become exercisable to the extent of one-fourth of the shares
on each anniversary date. See Stock Option Repricing and Report on
Repricing of Options.
(2) Options became exercisable on December 31, 1998, the date of grant.
Option Exercises During 1998 Fiscal Year and Fiscal Year-End Option Values
The following table provides information as to options exercised by the
named executive officers in the Summary Compensation Table during fiscal 1998
and the number and value of options at December 31, 1998. The Company does not
have any outstanding stock appreciation rights.
<TABLE>
<CAPTION>
Value of
Number of Unexercised
Unexercised In-the-Money
Options at Options at
Shares December 31, 1998 December 31, 1998
Acquired Value Exercisable/ Exercisable/
Name on Exercise Realized Unexercisable Unexercisable(1)
<S> <C> <C> <C> <C>
W. Kirk Hankins -- -- 32,000 exercisable $14,036 exercisable
0 unexercisable $0 unexercisable
Lorin E. Krueger -- -- 32,000 exercisable $17,886 exercisable
0 unexercisable $0 unexercisable
Kirk P. Hankins -- -- 26,500 exercisable $10,527 exercisable
5,500 unexercisable $3,509 unexercisable
</TABLE>
- - ------------------
(1) Value is calculated on the basis of the difference between the option
exercise price and $2.563, the closing sale price for the Company's
Common Stock on December 31, 1998 as quoted by the Nasdaq SmallCap
Market, multiplied by the number of shares of Common Stock underlying
the option.
<PAGE>
Stock Option Repricing
The following table provides information related to the repricing of
five-year options originally granted in 1995 to the named executive officers,
which repricing occurred on October 22, 1999.
<TABLE>
<CAPTION>
Shares Underlying Exercise Price at
Name and Position Repriced Options Time of Repricing New Exercise Price
<S> <C> <C> <C>
W. Kirk Hankins 10,000 $3.30 $1.925 (1)
Chairman, Chief Executive Officer 12,000 $2.96 $1.925 (1)
and Chief Financial Officer
Lorin E. Krueger 10,000 $3.00 $1.75 (2)
President and Chief Operating Officer 12,000 $2.69 $1.75 (2)
Kirk P. Hankins 10,000 $3.64 $1.925 (1)
Vice President of Marketing 12,000 $2.96 $1.925 (1)
</TABLE>
(1) Exercise price is equal to 110% of closing price on date of repricing.
(2) Exercise price is equal to 100% of closing price on date of repricing.
Report on Repricing of Options
On October 22, 1998, the Stock Option Committee repriced all
outstanding options held by current employees and directors, that had an
exercise price of more than $1.75 per share, the closing price of the Company's
Common Stock on that date. The three named officers each held options to
purchase 22,000 shares, which had an exercise price above $1.75 per share. The
options held by Messrs. Hankins were repriced to $1.925, and those held by Mr.
Krueger were repriced to $1.75, which prices are equal to 110% and 100%,
respectively, of the closing price of the Company's stock as reported by Nasdaq
SmallCap Market on October 22, 1998. No other terms of the options were amended.
The Stock Option Committee repriced the options in order to preserve an economic
incentive for continued commitment to the Company's success.
Members of the Stock Option Committee:
S. Robert Dessalet Peter D. Jones
David L. Ewert Thomas J. de Petra
Compensation to Directors
The outside directors are paid $500 for attendance at each Board
meeting and $250 for each committee meeting, plus expenses. In addition, the
Company's 1997 Stock Option Plan provides for automatic option grants to each
director who is not an employee of the Company (a "Non-Employee Director"). Each
Non-Employee Director who is elected for the first time as a director is granted
a nonqualified option to purchase 3,000 shares of Common Stock. Each
Non-Employee Director who is re-elected as a director of the Company or whose
term of office continues after a meeting of shareholders at which directors are
elected shall, as of the date of such re-election or shareholder meeting,
automatically be granted a nonqualified option to purchase 3,000 shares of
Common Stock. No director shall receive more than one option pursuant to the
formula plan in any one fiscal year. All options granted pursuant to these
provisions are granted at a per share exercise price equal to 100% of the fair
market value of the Common Stock on the date of grant, and they are immediately
exercisable and expire on the earlier of (i) three months after the optionee
ceases to be a director (except by death) and (ii) five (5) years after the date
of grant. In the event of the death of a Non-Employee Director, any option
<PAGE>
granted to such Non-Employee Director pursuant to this formula plan may be
exercised at any time within six (6) months of the death of such Non-Employee
Director or until the date on which the option, by its terms, expires, whichever
is earlier. All directors received a gift of $500 at the end of the year.
Employment Agreements and Termination of Employment Arrangements
The Company entered into an Employment Agreement effective January 1,
1999 with W. Kirk Hankins, Chief Executive Officer and Chief Financial Officer,
which agreement's initial term expires December 31, 2003, with additional
one-year terms thereafter, unless either party gives notice to the other party
60 days prior to the end of such term that such party wishes to terminate the
agreement. The agreement provides for an annual base salary in an amount
determined by the Compensation Committee, which amount has been determined to be
$142,000 for 1999. Mr. Hankins is entitled to receive an annual bonus consisting
of stock options and/or a cash payment at the sole discretion of the
Compensation Committee. If Mr. Hankins terminates his employment for good reason
during the two years following a change in control of the Company, he is
entitled to an amount equal to the salary and bonus paid to him for the two
fiscal years preceding such termination, which amount shall be paid in 24 equal
monthly installments. Mr. Hankins has agreed that, during the two-year period
following the termination of his employment, except following a change of
control as hereinbefore described, he will not (i) compete with the Company,
(ii) solicit or communicate with the Company's customers or (iii) solicit any of
the Company's employees to leave the Company. Pursuant to the terms of the
agreement, Mr. Hankins received an option to purchase 10,000 shares of the
Company's Common Stock.
The Company also entered into Employment Agreements effective January
1, 1999 with Lorin E. Krueger, President and Chief Operating Officer, and Kirk
P. Hankins, Vice President of Marketing, which agreements are identical to the
terms of the agreement with W. Kirk Hankins described above. The Compensation
Committee has determined that the base salaries for 1999 for Mr. Krueger and Mr.
Hankins are $120,000 and $80,000, respectively.
Compliance with Section 16(a) of the Exchange Act
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's executive officers and directors, and persons who own more than ten
percent of a registered class of the Company's equity securities, to file
reports of ownership and changes in ownership with the Securities and Exchange
Commission (the "SEC"). Executive officers, directors and greater than
ten-percent shareholders are required by SEC regulation to furnish the Company
with copies of all Section 16(a) forms they file.
Based solely on its review of the copies of such forms received by it,
the Company believes that, during fiscal year 1998, all executive officers,
directors and greater than ten-percent beneficial owners complied with the
applicable filing requirements, except that the initial reports on Form 3 for
Messrs. Ewert and Jones were filed late.
INDEPENDENT PUBLIC ACCOUNTANT
On May 1, 1998, Ahern Montag & Vogler, Ltd. ("Ahern") resigned as the
independent public accountants of the Company, and the Company selected
McGladrey & Pullen, LLP ("McGladrey") to serve as its independent public
accountants. In connection with the audits of the two years ended December 31,
1997, and the subsequent interim period preceding the selection of McGladrey,
there were no disagreements with Ahern on any matter of accounting principles or
practices, financial statement disclosure, or auditing scope or procedures,
which disagreements if not resolved to their satisfaction would have caused them
<PAGE>
to make reference in connection with their opinion to the subject matter of the
disagreement. The audit reports of Ahern on the financial statements of the
Company as of and for the years ended December 31, 1997 and December 31, 1996
did not contain any adverse opinion or disclaimer of opinion, nor were they
qualified or modified as to uncertainty, audit scope, or accounting principles.
Representatives of McGladrey are expected to be present at the Annual
Meeting, will be given an opportunity to make a statement regarding financial
and accounting matters of the Company if they so desire, and will be available
to respond to appropriate questions from the Company's shareholders.
OTHER BUSINESS
Management knows of no other matters to be presented at the 1999 Annual
Meeting. If any other matter properly comes before the 1999 Annual Meeting, the
appointees named in the proxies will vote the proxies in accordance with their
best judgment.
SHAREHOLDER PROPOSALS
Any appropriate proposal submitted by a shareholder of the Company and
intended to be presented at the 2000 Annual Meeting must be received by the
Company by December 5, 1999 to be included in the Company's proxy statement and
related proxy for the 2000 Annual Meeting. Shareholder proposals intended to be
presented at the next Annual Meeting but not included in the proxy materials
will be considered timely if received by the Company on or before February 17,
2000.
ANNUAL REPORT
A copy of the Company's Annual Report to Shareholders for the fiscal
year ended December 31, 1998, including financial statements, accompanies this
Notice of Annual Meeting and Proxy Statement. No portion of the Annual Report is
incorporated herein or is to be considered proxy soliciting material.
FORM 10-KSB
THE COMPANY WILL FURNISH WITHOUT CHARGE TO EACH PERSON WHOSE PROXY IS
BEING SOLICITED, UPON WRITTEN REQUEST OF ANY SUCH PERSON, A COPY OF THE
COMPANY'S ANNUAL REPORT ON FORM 10-KSB FOR THE FISCAL YEAR ENDED DECEMBER 31,
1998, AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, INCLUDING THE
FINANCIAL STATEMENTS AND A LIST OF EXHIBITS TO SUCH FORM 10-KSB. THE COMPANY
WILL FURNISH TO ANY SUCH PERSON ANY EXHIBIT DESCRIBED IN THE LIST ACCOMPANYING
THE FORM 10-KSB UPON THE ADVANCE PAYMENT OF REASONABLE FEES. REQUESTS FOR A COPY
OF THE FORM 10-KSB AND/OR ANY EXHIBIT(S) SHOULD BE DIRECTED TO THE PRESIDENT OF
WINLAND ELECTRONICS, INC., 1950 EXCEL DRIVE, MANKATO, MINNESOTA 56001. YOUR
REQUEST MUST CONTAIN A REPRESENTATION THAT, AS OF MARCH 22, 1999, YOU WERE A
BENEFICIAL OWNER OF SHARES ENTITLED TO VOTE AT THE 1999 ANNUAL MEETING OF
SHAREHOLDERS.
BY ORDER OF THE BOARD OF DIRECTORS
W. Kirk Hankins
Dated: April 2, 1999 Chairman and Chief Executive Officer
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WINLAND ELECTRONICS, INC.
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PROXY
for Annual Meeting to be held May 13, 1999
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The undersigned hereby appoints W. KIRK HANKINS and LORIN E. KRUEGER, and each
of them, with full power of substitution, his or her Proxies to represent and
vote, as designated below, all shares of the Common Stock of Winland
Electronics, Inc. registered in the name of the undersigned at the 1999 Annual
Meeting of Shareholders of the Company to be held at the Company's corporate
offices located at 1950 Excel Drive, Mankato, Minnesota at 7:00 p.m., on
Thursday, May 13, 1999, and at any adjournment thereof. The undersigned hereby
revokes all proxies previously granted with respect to such Annual Meeting.
The Board of Directors recommends that you vote "FOR" each proposal.
1. Set the number of directors at seven (7).
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. Elect Directors. Nominees: W. Kirk Hankins Kirk P. Hankins
Lorin E. Krueger Thomas J. de Petra
S. Robert Dessalet David L. Ewert
Peter D. Jones
[ ] FOR all nominees listed above [ ]WITHHOLD AUTHORITY to
(except those whose names have vote for all nominees
been written on the line below) listed above.
________________________________________________
3. Other Matters. In their discretion, the Proxies are authorized to vote
upon such other business as may properly come before the Annual
Meeting.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED OR, IF NO DIRECTION
IS GIVEN, WILL BE VOTED FOR EACH PROPOSAL SPECIFICALLY IDENTIFIED ABOVE.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
Date: ______________________________, 1999
___________________________________________
___________________________________________
PLEASE DATE AND SIGN ABOVE exactly as name
appears at the left, indicating, where
proper, official position or representative
capacity. For stock held in joint tenancy,
each joint owner should sign.
