UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
SCHEDULE
14A
Proxy
Statement Pursuant to Section 14(a) of the Securities
Exchange
Act of 1934
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Filed
by the Registrant
x
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Filed
by a Party other than the Registrant ¨
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Check
the appropriate box:
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o
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Preliminary
Proxy Statement
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¨
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Confidential,
for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
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x
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Definitive
Proxy Statement
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¨
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Definitive
Additional Materials
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¨
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Soliciting
Material Pursuant to §240.14a-12
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WINLAND
ELECTRONICS, INC.
(Name of Registrant as Specified
In Its Charter)
(Name of Person(s) Filing Proxy
Statement, if other than the Registrant)
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Payment
of Filing Fee (Check the appropriate
box):
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¨
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Fee
computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
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(1)
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Title
of each class of securities to which transaction
applies:
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(2)
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Aggregate
number of securities to which transaction
applies:
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(3)
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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)
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Proposed
maximum aggregate value of
transaction:
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¨
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Fee
paid previously with preliminary
materials.
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¨
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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.
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(1)
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Amount
Previously Paid:
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(2)
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Form,
Schedule or Registration Statement
No.:
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WINLAND
ELECTRONICS, INC.
_______________________
to
be held
May
6, 2008
_______________________
The 2008 Annual Meeting of Shareholders
of Winland Electronics, Inc. will be held at the offices of Fredrikson &
Byron, 200 South Sixth Street, Suite 4000, Minneapolis, Minnesota, at
10:00 a.m. on Tuesday, May 6, 2008, for the following
purposes:
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1.
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To
set the number of members of the Board of Directors at five
(5).
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3.
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To
approve the increase from 100,000 shares to 300,000 shares authorized for
Winland’s Employee Stock Purchase Program
(ESPP).
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4.
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To
approve the 2008 Equity Incentive
Plan.
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5.
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To
take action on any other business that may properly come before the
meeting or any adjournment thereof.
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Accompanying this Notice of Annual
Meeting is a Proxy Statement and form of Proxy.
Only shareholders of record as shown on
the books of Winland Electronics at the close of business on March 10, 2008 will
be entitled to vote at the 2008 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
2008 Annual Meeting. Whether or not you plan to attend the 2008
Annual Meeting, please sign, date and mail the enclosed form of Proxy in the
return envelope provided. 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 us avoid the unnecessary expense of further
requests for proxies.
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BY
ORDER OF THE BOARD OF DIRECTORS, |
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Date:
March 31, 2008
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Thomas
J. de Petra |
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Mankato,
Minnesota
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Interim
President, Interim Chief Executive Officer and |
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Chairman
of the Board |
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WINLAND
ELECTRONICS, INC.
_______________________
ANNUAL
MEETING OF SHAREHOLDERS
to
be held
May
6, 2008
_______________________
The accompanying
Proxy is solicited by the Board of Directors of Winland Electronics, Inc.
for use at our 2008 Annual Meeting of Shareholders to be held on Tuesday, May 6,
2008, at the location/time 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 us. Our directors, officers and
employees may, without compensation other than their regular remuneration,
solicit proxies personally or by telephone.
You may vote your shares by mail as
follows:
§
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Sign
and date the enclosed proxy card.
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§
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Mail
the proxy card in the enclosed postage-paid
envelope.
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Any shareholder giving a Proxy may
revoke it any time prior to its use at the 2008 Annual Meeting by giving written
notice of such revocation to the Secretary or any other officer of Winland
Electronics or by filing a later dated written Proxy with one of our
officers. Personal attendance at the 2008 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 2008 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
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 our
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 Winland Electronics is 1950 Excel Drive, Mankato, Minnesota
56001. We expect that this Proxy Statement, the related Proxy and
Notice of Meeting will first be mailed to shareholders on or about March 31,
2008.
The Board of Directors has fixed March
10, 2008 as the record date for determining shareholders entitled to vote at the
2008 Annual Meeting. Persons who were not shareholders on such date
will not be allowed to vote at the 2008 Annual Meeting. At the close
of business on March 10, 2008, there were 3,640,741 shares of our Common Stock,
par value $.01 per share, issued and outstanding. The Common Stock is
our only outstanding class of capital stock. Each share of Common
Stock is entitled to one vote on each matter to be voted upon at the 2008 Annual
Meeting. Holders of Common Stock are not entitled to cumulative
voting rights.
The following table provides
information as of March 10, 2008 concerning the beneficial ownership of our
Common Stock by (i) the persons known by us to own more than 5% of our
outstanding Common Stock, (ii) each of our directors, (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%
Owner) or Identity of Group
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Number
of Shares
Beneficially
Owned(1)
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Percent
of Class (1)
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Lorin
E. Krueger
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232,656 (2)
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6.4%
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Dale
A. Nordquist
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54,288
(3)
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1.5%
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Thomas
J. de Petra
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29,720
(4)
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*
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Richard
T. Speckmann
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30,700
(5)
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*
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Glenn
A. Kermes
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11,200
(6)
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*
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Thomas
J. Goodmanson
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7,500
(7)
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*
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Thomas
J. Brady
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5,500
(8)
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*
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FMR
Corp.
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356,100 (9)
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9.8%
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All
Executive Officers and
Directors
as a Group (8 Individuals)
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334,163 (10)
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9.2%
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* Less
than 1% of the outstanding shares of Common Stock.
(1)
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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.
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(2)
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Includes
880 shares held by Mr. Krueger’s spouse and 22,000 shares which may
be purchased by Mr. Krueger upon exercise of currently exercisable
options. Mr. Krueger’s address is 517 River Hills Road, Mankato
MN 56001.
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(3)
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Includes
8,800 shares which may be purchased by Mr. Nordquist upon exercise of
currently exercisable options.
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(4)
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Includes
27,000 shares which may be purchased by Mr. de Petra upon exercise of
currently exercisable options.
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(5)
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Includes
27,000 shares which may be purchased by Mr. Speckmann upon exercise of
currently exercisable options.
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(6)
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Includes
7,200 shares which may be purchased by Mr. Kermes upon exercise of
currently exercisable options.
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(7)
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Includes
5,500 shares which may be purchased by Mr. Goodmanson upon exercise of
currently exercisable options.
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(8)
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Includes
5,500 shares which may be purchased by Mr. Brady upon exercise of
currently exercisable options.
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(9)
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According
to a Schedule 13G filed with the Securities and Exchange Commission on
February 14, 2007 by FMR Corp. (“FMR”) and Edward C. Johnson 3d, Chairman
and principal shareholder of FMR, the shares are beneficially owned by
Fidelity Management & Research Company (“Fidelity Research”) as an
investment adviser to various investment companies (the “Funds”),
including Fidelity Low Priced Stock Fund (“Fidelity Fund”), with Mr.
Johnson, FMR and the Funds each having the sole power to dispose of such
shares and the Funds’ Boards of Trustees having the sole power to vote or
direct the vote of such shares. Fidelity Research and Fidelity
Fund are wholly-owned subsidiaries of FMR. The address for FMR
is 82 Devonshire Street, Boston, Massachusetts
02109.
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(10)
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Includes
103,000 shares which may be purchased by executive officers and directors
upon exercise of currently exercisable
options.
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Our business affairs are conducted
under the direction of the Board of Directors in accordance with the Minnesota
Business Corporation Act and our Articles of Incorporation and
Bylaws. Members of the Board of Directors are informed of our
business through discussions with management, by reviewing materials provided to
them and by participating in meetings of the Board of Directors and its
committees. The corporate governance practices that we follow are
summarized below.
Independence
The Board has determined that a
majority of its members are “independent” as defined by the listing standards of
the American Stock Exchange. Our independent directors are Richard T.
Speckmann, Thomas J. Goodmanson and Thomas J. Brady. In the last
three years, there have been no transactions, relationships or arrangements,
other than in connection with service on our Board, between the independent
directors and Winland Electronics. Because Thomas J. de Petra is
currently acting as our interim Chief Executive Officer and President, he is not
currently “independent”. If a permanent Chief Executive Officer and
President is hired on or before January 1, 2009, Mr. de Petra will thereafter be
considered “independent”.
Code
of Ethics and Business Conduct
The Board has approved a Code of Ethics
and Business Conduct that applies to all of our employees, directors and
officers, including our principal executive officer, principal financial
officer, principal accounting officer and controller. The Code of
Ethics and Business Conduct addresses such topics as protection and proper use
of our assets, compliance with applicable laws and regulations, accuracy and
preservation of records, accounting and financial reporting, conflicts of
interest and insider trading. The Code of Ethics and Business Conduct
is available free of charge to any shareholder who sends a request for a copy to
Winland Electronics, Inc., Attn. Chief Financial Officer, 1950 Excel Drive,
Mankato, Minnesota 56001, and it is also available on our website at
www.winland.com. We intend to disclose on our website any amendment
to, or waiver from, a provision of its Code of Ethics that applies to our
principal executive officer, principal financial officer, principal accounting
officer and controller relating to any element of the code of ethics definition
enumerated in Item 406(b) of Regulation S-K. Late in 2003, we
contracted with an independent professional organization to provide anonymous
hotline services that permit our employees to communicate any concerns about
behavior or practices of Winland Electronics, its employees, officers or
directors. This service began January 1, 2004 and was established to
assist the Board of Directors in effective internal control.
Meeting
Attendance
Board and
Committee Meetings. Directors are required to attend a minimum
of 75% of Board and committee meetings. During fiscal 2007, the Board
held six (6) meetings of which two (2) were telephonic meetings. Each
director attended 100% of the meetings of the Board and the committees on
which
such director served. On August 22, 2007, Director Reissner resigned
from the Board to devote more time to his business. Director Reissner
attended two (2) director meetings in 2007.
Annual Meeting of
Shareholders. Directors are encouraged to attend our annual
meetings of shareholders; however, there is no formal policy regarding
attendance at annual meetings. Thomas J. de Petra and Richard T.
Speckmann attended our 2007 annual meeting of shareholders. James L.
Reissner did not attend the 2007 annual meeting of shareholders.
Executive
Sessions of the Board
An executive session of non-management
directors is held at least once a year. In 2007, the Board did not
hold an executive session, however, the Audit committee held three (3) executive
sessions.
Committees
of the Board
Our Board of Directors has three
standing committees, the Audit Committee, the Compensation Committee and the
Nominating/Governance Committee. Each of the current members of these
committees is a non-employee independent director.
Audit
Committee. The Audit Committee is comprised of Thomas J.
Goodmanson (Chairman), Thomas J. Brady (effective January 2, 2008) and Richard
T. Speckmann (Mr. Reissner served as Audit committee chairman until his
resignation in August and Mr. de Petra was a member of the Audit Committee until
he was appointed interim Chief Executive Officer and President on January 2,
2008). Mr. Goodmanson is an "audit committee financial expert" as
defined by Item 401(e) of Regulation S-K under the Securities Act of
1933. Mr. Goodmanson has a degree in accounting and is an inactive
CPA in the state of Minnesota. He currently serves as Chief Financial
officer of Calabrio, Inc., a leading provider of workforce optimization and
unified desktop software for IP-based contact centers. We acknowledge
that the designation of Mr. Goodmanson as the audit committee financial expert
does not impose on Mr. Goodmanson any duties, obligations or liability that are
greater than the duties, obligations and liability imposed on Mr. Goodmanson as
a member of the audit committee and the Board of Directors in the absence of
such designation or identification. The Audit Committee reviews the
selection and work of our independent registered public accounting firm and the
adequacy of internal controls for compliance with corporate policies and
directives. The Audit Committee's Report is included on page
18. During 2007, the Audit Committee met five (5) times of which two
(2) were telephonic meetings.
Our
independent registered public accounting firm was present at all of these
meetings.
Compensation
Committee. The Compensation Committee is comprised of Richard
T. Speckmann (Chairman) and Thomas J. Goodmanson (Mr. de Petra was a member of
the Compensation Committee until he was appointed interim Chief Executive
Officer and President on January 2, 2008). Mr. Goodmanson was
appointed to the committee on September 10, 2007. This committee
determines the compensation of the Chief Executive Officer; and, taking into
consideration any recommendations by the Chief Executive Officer, it also
determines the compensation for our other executive
officers. The committee makes recommendations to the Board of
Directors with respect to incentive compensation plans. This
committee is vested with the same authority as the Board of Directors with
respect to the administration of our equity plans. During 2007, the
Compensation Committee met twice.
Nominating/Governance
Committee. The Nominating/Governance Committee is comprised of
Richard T. Speckmann, Thomas J. Brady (effective January 2, 2008) and Thomas J.
Goodmanson (Chairman). Mr. Goodmanson was appointed to the committee
on June 2, 2007 and Mr. Goodmanson was appointed Chairman on January 2, 2008
(Mr. de Petra served as Nominating/Governance Committee Chairman until he was
appointed interim Chief Executive Officer and President on January 2,
2008). This committee recommends to the Board of Directors nominees
for vacant positions on the Board, sets goals for the Board and monitors the
achievement of such goals. This committee will consider a candidate
for director proposed by a shareholder. Candidates must have broad training and
experience in their chosen fields and must have achieved distinction in their
activities. The committee considers the particular expertise of each
nominee and strives to achieve an appropriate breadth of skills among the Board
members. A shareholder who wants to propose a candidate must comply
with the provisions of our Bylaws regarding nominations for the election of
directors. The policies of the committee are
described
more fully in the Nominating/Governance Committee’s Report on page
7. The Nominating/Governance Committee met five (5) times during
2007.
Communications
with the Board
Shareholders may communicate directly
with the Board of Directors. All communications, other than
shareholder proposals and director nominations which must comply with certain
other requirements as discussed under “Shareholder Proposals and Nominations of
Director Candidates” on page 19, should be directed to our Chief Financial
Officer at the address below and should prominently indicate on the outside of
the envelope that it is intended for the Board of Directors or for
non-management directors. If no director is specified, the
communication will be forwarded to the entire Board. The
communication will not be opened before being forwarded to the intended
recipient, but it will go through normal security
procedures. Shareholder communications to the Board should be sent
to:
Glenn A.
Kermes, Chief Financial Officer
Winland
Electronics, Inc.
1950
Excel Drive
Mankato,
MN 56001
Compensation
to Non-Employee Directors
Cash
Compensation. In addition to being reimbursed for
out-of-pocket expenses incurred in connection with attendance at Board or
Committee meetings, the non-employee directors receive the following
fees:
Retainer:
·
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$1,200
per month for service on the Board, with the Chairman receiving an
additional $22,000 per year.
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Meeting Fees:
·
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$1,200
for Board meeting attendance.
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·
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$1,200
for Audit Committee meeting attendance, with the Chairman receiving an
additional $1,200 per meeting.
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·
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$800
for Compensation Committee or Nominating/Governance Committee meeting
attendance, with the chairmen receiving an additional $750 per
meeting.
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Effective
January 2, 2008, Thomas J. de Petra became our interim Chief Executive Officer
and President. In connection with this position, Mr. de Petra is paid
a salary of $10,000 per month and does not receive the cash compensation paid to
non-employee directors.
Equity
Compensation. Our 2005 Equity Incentive Plan provides for
automatic option grants to each non-employee director. Each
non-employee director who is elected for the first time as a director is granted
a nonqualified option to purchase 5,500 shares of Common Stock. Each
non-employee director who is re-elected as a director 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 five-year nonqualified option to purchase 5,500 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. On May 8, 2007, each of our
non-employee directors received an option to purchase 5,500 shares at $3.28 per
share. On June 1, 2007, Mr. Goodmanson was elected to the Board and
received an option to purchase 5,500 shares at $3.25 per share.
Name
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Fees
Earned or Paid in Cash ($)(1)
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Option
Awards ($)(2)
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Total
($)
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Options
to purchase shares of stock (#) (3)
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Thomas
J. de Petra
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$50,167
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$9,628
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$59,795
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27,000
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Richard
T. Speckmann
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$31,900
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$13,556
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$45,456
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27,000
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Thomas
J. Goodmanson
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$18,400
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$15,353
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$33,753
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5,500
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James
L. Reissner (4)
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$18,000
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$13,386
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$31,386
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27,000
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(1)
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The
amounts consist of the cash fees paid to the non-employee directors as
described in “Cash Compensation”
above.
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(2)
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The
amounts reflect the amount recognized for financial statement reporting
purposes for the fiscal year ended December 31, 2007 in accordance with
FAS 123R for stock option awards automatically granted to non-employee
directors in fiscal year 2007 pursuant to our 2005 Equity Incentive
Plan. Assumptions used in the calculation of these amounts are
included in footnote 7 to our financial statements included in our Annual
Report on Form 10-K for the year ended December 31, 2007 filed with the
Securities and Exchange Commission
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(3)
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The
amounts reflect the number of options held by each director to purchase
shares of the Company’s common
stock.
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(4)
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Mr.
Reissner served as director and Chairman of the Audit committee until his
resignation on August 22, 2007.
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The Nominating/Governance Committee is
comprised of independent directors. In accordance with its written
charter, the Nominating/Governance Committee assists the Board of Directors with
fulfilling its responsibility regarding any matters relating to corporate
governance including selection of candidates for our Board of
Directors. Its duties shall include oversight of the principles of
corporate governance by which Winland Electronics and the Board shall be
governed; the codes of ethical conduct and legal compliance by which Winland
Electronics and its directors, executive officers, employees and agents will be
governed; policies for evaluation of the Board and the chairperson; policies for
election and reelection of Board members; and policies for succession planning
for the Chief Executive Officer, Board chairperson and other Board
leaders. In addition, the Committee is responsible for annually
reviewing the composition of the Board, focusing on the governance and business
needs and requirements of Winland Electronics, nominating and screening of Board
member candidates, evaluating the performance of Board members and recommending
the reelection of Board members who are performing effectively and who continue
to provide a competency needed on the Board. When a director’s
principal occupation or business association changes substantially, such
director shall tender a letter of resignation to the Board through the
Nominating/Governance Committee, which resignation will be considered and acted
upon in a manner that is best for the Board and Winland
Electronics.
The
Nominating/Governance Committee will consider candidates for nomination as a
director recommended by shareholders. In evaluating director
nominees, the Nominating/Governance Committee requires certain minimum
qualifications, including high moral character and mature judgment and the
ability to work collegially with others. In addition, factors such as
the following shall be considered:
·
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appropriate
size and diversity of the Board;
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·
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needs
of the Board with respect to particular talent and
experience;
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·
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knowledge,
skills and experience of nominee;
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·
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familiarity
with our business and industry;
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·
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appreciation
of the relationship of our business to the changing needs of society;
and
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·
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desire
to balance the benefit of continuity with the periodic injection of the
fresh perspective provided by a new
member.
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Shareholders who wish to recommend one
or more candidates for director to the Nominating/Governance Committee must
provide written recommendation to the Chief Financial Officer. Notice
of a recommendation must include the shareholder’s name, address and the number
of shares owned, along with information with respect to the person being
recommended, i.e. name, age, business address, residence address, current
principal occupation, five-year employment history with employer names and a
description of the employer’s business, the number of shares beneficially owned
by the prospective nominee, whether such person can read and understand basic
financial statements and other board memberships, if any. The
recommendation must be accompanied by a written consent of the prospective
nominee to stand for election if nominated by the Board of Directors and to
serve if elected by the shareholders. Winland Electronics may require
any nominee to furnish additional information that may be needed to determine
the eligibility of the nominee. In addition, the Bylaws permit
shareholders to nominate directors for consideration at a meeting of
shareholders at which one or more directors are to be elected. For a
description of the process for nominating directors in accordance with the
Bylaws, see “Shareholder Proposals and Nominations of Director Candidates” on
page 19.
A copy of the current
Nominating/Governance Committee Charter is available on our website at
www.winland.com.
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Members
of the Nominating/Governance Committee |
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Thomas
J. Goodmanson, Chairman |
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Richard
T. Speckmann |
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Thomas
J. Brady |
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(Proposals
#1 and #2)
Our Bylaws provide that the number of
directors shall be the number set by the shareholders, which shall be not less
than one. The Nominating/Governance Committee recommended to the
Board of Directors that the number of directors be set at five and that the
persons currently serving on the Board be nominated for election. The
Board of Directors unanimously recommends that the number of directors be set at
five and that the five persons nominated 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 five requires the
affirmative vote of the holders of the greater of 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, and the election of directors requires the
affirmative vote of the holders of a plurality of the voting power of the shares
represented in person or by proxy at the Annual Meeting with authority to vote
on such matter.
In the absence of other instruction,
the Proxies will be voted for setting the number of directors at five and 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 of Directors. If, prior to
the 2008 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 2008
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
Nominating/Governance Committee. 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
Director/Nominee
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Age
|
Current
Position With Winland Electronics,
Inc.
|
Director
Since
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Thomas
J. de Petra
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61
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Interim
President, Interim Chief Executive Officer and Director
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1994
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Lorin
E Krueger
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52
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Director
|
1978
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Richard
T. Speckmann
|
57
|
Director
|
2002
|
Thomas
J. Goodmanson
|
38
|
Director
|
2007
|
Thomas
J. Brady
|
43
|
Director
|
2008
|
Thomas de Petra has been
Chairman of Winland’s Board of Directors since October 2006 and a Director of
the company since 1994. He is the founder and president of Vantage Advisory
Services LLC, providing management consulting and business advisory services.
While serving as a self-employed management consultant during the past 12 years,
Mr. de Petra has served in various interim executive officer roles. He also
served as Chief Executive Officer of Nortech Forest Technologies, Inc., a
publicly traded company, from February 1996 to June 1997.
Lorin E. Krueger serves as a
Director. He served as President and Chief Executive Officer of the
Company from June 1, 2001 until January 2, 2008 and as President of the Company
from January 1999 until June of 2001 when he assumed the additional role of
CEO. Mr. Krueger has served as a Director and Secretary of the Company
since 1983 and continues to serve the Company in these positions. Mr. Krueger
served as the Company’s Chief Operating Officer, and other executive officer
positions in the company, from 1983 until January of 1999. Mr. Krueger was
one of the founding partners of the company.
Richard T. Speckmann serves
as a Director and Chairman of the Compensation Committee. He is the Chief
Executive Officer and President of EmPerform, Inc., a company that evaluates
employee performance and productivity, since March 2004. He served as
Chief Executive Officer of Outside the
Box, Inc.
and as President of Amcon Construction Company, LLC April 2001 to November
2002. From January 1997 to March 2001, Mr. Speckmann, a partner of Art
Holdings Corporation, served as its President. Prior to 1997, Mr.
Speckmann served in various capacities with several Twin Cities companies,
including Andcor Companies, Inc., InforMark Resources, Inc., Ehlert Publishing
Group and Signdesign, Inc.
Thomas J. Goodmanson serves
as a Director and Chairs the Audit and the Nominating/Governance
Committees. He is the Chief Financial Officer, of Calabrio, Inc., a
leading provider of workforce optimization and unified desktop software for
IP-based contact centers. From March 2006 to January 2008, Mr. Goodmanson
served as the Chief Financial and Administrative Officer of Gelco Information
Network, Inc., a leading provider of global software-as-a-service and other
on-demand business services. From September 1999 to March 2006, Mr. Goodmanson
was Chief Financial Officer of Magenic Technologies. From August 1992 to
September 1999, he was a senior manager at KPMG, LLP and is a CPA, inactive, in
the state of Minnesota.
Thomas J. Brady serves as a
Director. He is the Chief Financial Officer of Digineer, Inc., a growing
IT consulting firm based in suburban Minneapolis, which he joined in October
2006. At Digineer, he is responsible for all aspects of internal and
external financial reporting, as well as information technology, legal,
operations and general administration. Previously, Mr. Brady spent 19years with
KPMG LLP, most recently as Audit Partner, where he was responsible for corporate
audits in a wide range of companies and industries with revenues ranging from
under $10 million to over $1 billion.
(Proposal
#3)
General
On November 8, 2007, the Board of
Directors amended, subject to shareholder approval, the Company's 1997 Employee
Stock Purchase Plan (the "Stock Purchase Plan") to increase the reserved shares
of Common Stock under the Stock Purchase Plan from 100,000 to
300,000. A general description of the basic features of the Stock
Purchase Plan is presented below, but such description is qualified in its
entirety by reference to the full text of the Stock Purchase Plan, a copy of
which may be obtained without charge upon written request to Brian Lawrence, the
Company’s Controller.
Description
of the 1997 Employee Stock Purchase Plan
Purpose. The
purpose of the Stock Purchase Plan is to encourage stock ownership by the
Company's employees and in so doing to provide an incentive to remain in the
Company's employ, to improve operations, to increase profits and to contribute
more significantly to the Company's success.
Eligibility;
Term. The Stock Purchase Plan permits employees to purchase
stock of the Company at a favorable price and possibly with favorable tax
consequences to the employees. All regular employees (including
officers) of the Company (or of those subsidiaries authorized by the Board from
time to time) who are full-time or part-time employees are eligible to
participate in any of the ten phases of the Stock Purchase
Plan. However, any employee who would own (as determined under the
Internal Revenue Code), immediately after the grant of an option, stock
possessing 5% or more of the total combined voting power or value of all classes
of the stock of the Company cannot purchase stock through the Stock Purchase
Plan. As of November 8, 2007, the Company had 116 full-time employees
eligible to participate.
Administration. The
Stock Purchase Plan is administered by the Board of Directors or a Committee
appointed by the Board. The Stock Purchase Plan gives broad powers to
the Board or the Committee to administer and interpret the Stock Purchase Plan,
including the authority to limit the number of shares that may be optioned under
the Stock Purchase Plan during a phase.
Options. Phases of
the Stock Purchase Plan commence on January 1 and July 1 of each calendar year
or the first day of such other months as the Board may
determine. Before the commencement date of
the
phase, each participating employee must elect to have a certain dollar amount
deducted from his or her compensation during each pay period in such phase;
provided, however, that the payroll deduction must equal or exceed $10 per
paycheck and the payroll deductions during a phase must not exceed 15% of the
participant's base compensation. The designated amount may not be
increased or decreased during a phase, but it may be withdrawn
entirely. If the employee dies or terminates employment for any
reason before the end of the phase, the employee's payroll deductions will be
refunded, without interest, after the end of the phase. Based on the
amount of salary withheld at the end of the phase, shares will be purchased by
each employee at the termination date of such phase (generally six months after
the commencement date). In no event, however, may a participant
receive a grant of shares which would cause the employee to own 5% or more of
the Common Stock of the Company. The purchase price to be paid by the
employees will be the lower of the amount determined under Paragraphs A and B
below:
|
A.
|
85%
of the closing price of the Company's Common Stock quoted
by the American Stock Exchange as of the commencement date of
the phase; or
|
|
B.
|
85%
of the closing price of the Company's Common Stock quoted by the American
Stock Exchange as of the termination date of the
phase.
|
The closing price of one share of the
Company's Common Stock on November 8, 2007 was $2.55 per share.
As required by tax law, an employee may
not, during any calendar year, receive options under the Stock Purchase Plan for
shares which have a total fair market value in excess of $25,000 determined at
the time such options are granted. Any funds not used to purchase
shares will be returned to the employee. No interest is paid by the
Company on funds withheld, and such funds are used by the Company for general
operating purposes.
Amendment. The
Board of Directors may, from time to time, revise or amend the Stock Purchase
Plan as of the Board may deem proper and in the best interest of the Company or
as may be necessary to comply with Section 423 of the Internal Revenue Code (the
"Code"); provided, that no such revision or amendment may (i) increase the total
number of shares for which options may be granted under the Stock Purchase Plan
except as provided in the case of stock splits, consolidations, stock dividends
or similar events, (ii) modify requirements as to eligibility for participation
in the Stock Purchase Plan, or (iii) materially increase the benefits accruing
to participants under the Stock Purchase Plan, without prior approval of the
Company's stockholders, if such approval is required to comply with Code Section
423 or the requirements of Section 16(b) of the Securities Exchange Act of 1934
(the "Act").
Shares
Reserved. Currently under the Stock Purchase Plan, 100,000
shares of the Company's Common Stock are reserved for issuance during the
five-year duration of the Stock Purchase Plan. The Board of Directors
shall equitably adjust the number of shares remaining reserved for grant, the
number of shares of stock subject to outstanding options and the price per share
of stock subject to an option in the event of certain increases or decreases in
the number of outstanding shares of Common Stock of the Company effected as a
result of stock splits or consolidations, stock dividends or other transactions
in which the Company receives no consideration.
Federal Income Tax Consequences of
the Stock Purchase Plan. Options granted under the Stock
Purchase Plan are intended to qualify for favorable tax treatment to the
employees under Code Sections 421 and 423. Employee contributions are
made on an after-tax basis. Under existing federal income tax
provisions, no income is taxable to the optionee upon the grant or exercise of
an option if the optionee remains an employee of the Company or one of its
subsidiaries at all times from the date of grant until three months before the
date of exercise. In addition, certain favorable tax consequences may
be available to the optionee if shares purchased pursuant to the Stock Purchase
Plan are not disposed of by the optionee within two years after the date the
option was granted or within one year after the date of transfer of purchased
shares to the optionee. The Company generally will not receive an
income tax deduction upon either the grant or exercise of the
option.
Plan
Benefits. Because participation in the Stock Purchase Plan is
voluntary, the future benefits that may be received by participating individuals
or groups under the Stock Purchase Plan cannot be determined at this
time.
Vote
Required
The Board of Directors recommends that
the shareholders approve the proposal to increase the number of shares available
under the Stock Purchase Plan. Approval of the amendment to the Stock
Purchase Plan requires the affirmative vote of the holders of the greater of 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, provided that such
majority must be greater than 25% of the Company’s outstanding
shares.
(Proposal
#4)
General
On March 17, 2008, the Board of
Directors adopted the Winland Electronics, Inc. 2008 Equity Incentive Plan (the
“2008 Plan”), subject to approval by our shareholders. The Board
believes that granting equity incentives to employees, officers, consultants,
advisors and directors is an effective means to promote the future growth and
development of Winland. Such Awards, among other things, increase
these individuals’ proprietary interest in our success and enables Winland to
attract and retain qualified personnel. The Board therefore
recommends that all shareholders vote in favor of the 2008 Plan. Upon
shareholder approval of the 2008 Plan, no further options will be granted under
Winland’s 2005 Equity Incentive Plan.
Description
of the 2008 Equity Incentive Plan
A general description of the material
features of the 2008 Plan follows, but this description is qualified in its
entirety by reference to the full text of the Plan, a copy of which may be
obtained without charge upon request to the Company’s Chief Financial
Officer.
General. Under
the 2008 Plan, the Compensation Committee may award incentive or nonqualified
stock options, restricted stock, stock appreciation rights, performance shares
and performance units to those officers and employees of the Company (including
any subsidiaries and affiliates), or to directors of or consultants or advisors
to the Company, whose performance, in the judgment of the Board or Committee,
can have a significant effect on the success of the Company. As of
March 17, 2008, the Company had 109 employees, of whom three are officers, and
five directors who are not employees.
Shares
Available. The 2008 Plan
provides for the issuance of up to 300,000 shares of Common Stock of the
Company, subject to adjustment of such number in the event of certain increases
or decreases in the number of outstanding shares of Common Stock of the Company
effected as a result of stock splits, stock dividends, combinations of shares or
similar transactions in which the Company receives no
consideration. If any options or stock awards granted under the 2008
Plan expire or terminate prior to exercise, the shares subject to that portion
of the option or stock award are available for subsequent grants.
The total number of shares and the
exercise price per share of Common Stock that may be issued pursuant to
outstanding Awards are subject to adjustment by the Board of Directors upon the
occurrence of stock dividends, stock splits or other recapitalizations, or
because of mergers, consolidations, reorganizations or similar transactions in
which we receive no consideration. The Board may also provide for the
protection of Participants in the event of a merger, liquidation,
reorganization, divestiture (including a spin-off) or similar
transaction.
Administration
and Types of Awards. As permitted in
the 2008 Plan, the Board of Directors has designated the Compensation Committee
(hereinafter referred to as the “Administrator”) to administer the 2008
Plan. The Administrator has broad powers to administer and interpret
the 2008 Plan, including the authority to (i) establish rules for the
administration of the 2008 Plan, (ii) select the participants in the 2008 Plan,
(iii) determine the types of awards to be granted and the number of shares
covered by such awards, and (iv) set the terms and conditions of such
awards. All determinations and interpretations of the Administrator
are binding on all interested parties.
Options. Options
granted under the 2008 Plan may be either “incentive” stock options within the
meaning of Section 422 of the Internal Revenue Code (“IRC”) or “nonqualified “
stock options that do not qualify for special tax treatment under the
IRC. No incentive stock option may be granted with a per share
exercise price less than the fair market value of a share of the Company’s
Common Stock on the date the option is granted. The closing sale
price of a share of the Company’s Common Stock was $2.20 on March 17,
2008.
The period during which an option may
be exercised and whether the option will be exercisable immediately, in stages,
or otherwise is set by the Administrator. An incentive stock option
may not be exercisable more than ten (10) years from the date of
grant. Participants generally must pay for shares upon exercise of
options with cash, certified check or Common Stock of Winland valued at the
stock’s then “fair market value” as defined in the 2008
Plan. Each incentive option granted under the 2008 Plan is
nontransferable during the lifetime of the Participant. A
nonqualified stock option may, if permitted by the Administrator, be transferred
to certain family members, family limited partnerships and family
trusts.
The Administrator may, in its
discretion, modify or impose additional restrictions on the term or
exercisability of an option. The Administrator may also determine the
effect a Participant’s termination of employment with Winland or a subsidiary
may have on the exercisability of such option. The grants of stock
options under the 2008 Plan are subject to the Administrator’s
discretion.
Restricted Stock
Award, Performance Share Awards and Performance Units. The Administrator is also
authorized to grant awards of restricted stock, performance shares and
performance units. Each restricted stock award granted under the 2008
Plan shall be for a number of shares as determined by the Administrator, and the
Administrator, in its discretion, may also establish continued employment,
vesting or other conditions that must be satisfied for the restrictions on the
transferability of the shares and the risks of forfeiture to
lapse. Performance share awards generally provide the recipient
with the opportunity to receive shares of the Company’s Common Stock and
performance units generally provide recipients with the opportunity to receive
cash awards, but only if the Company’s financial goals or other business
objectives are achieved over specified performance periods.
Stock
Appreciation Rights. A stock appreciation right may be granted
independent of or in tandem with a previously or contemporaneously granted stock
option, as determined by the Administrator. Generally, upon the
exercise of a stock appreciation right, the recipient will receive cash, shares
of Common Stock or some combination of cash and shares having a value equal to
the excess of (i) the fair market value of a specified number of shares of the
Company’s Common Stock, over (ii) a specified exercise price. If the
stock appreciation right is granted in tandem with a stock option, the exercise
of the stock appreciation right will generally cancel a corresponding portion of
the option, and, conversely, the exercise of the stock option will cancel a
corresponding portion of the stock appreciation right. The
Administrator will determine the term of the stock appreciation right and how it
will become exercisable. A stock appreciation right may not be
transferred by an optionee except by will or the laws of descent and
distribution.
Amendment.
The Board of Directors may, from time to time, suspend or discontinue the 2008
Plan or revise or amend it in any respect; provided, (i) no such revision or
amendment may impair the terms and conditions of any outstanding option or stock
award to the material detriment of the participant without the consent of the
participant except as authorized in the event of merger, consolidation or
liquidation of the Company, (ii) the 2008 Plan may not be amended in any manner
that will (a) materially increase the number of shares subject to the 2008 Plan
except as provided in the case of stock splits, consolidations, stock dividends
or similar events, (b) change the designation of the class of employees eligible
to receive awards; (c) decrease the price at which options will be granted; or
(d) materially increase the benefits accruing to participants under the 2008
Plan without the approval of the shareholders, to the extent such approval is
required by applicable law or regulation.
Federal
Income Tax Matters
Options. Under
present law, an optionee will not realize any taxable income on the date a
nonqualified option is granted pursuant to the 2008 Plan. Upon
exercise of the option, however, the optionee must recognize, in the year of
exercise, ordinary income equal to the difference between the option price and
the fair market value of the Company’s Common Stock on the date of
exercise. Upon the sale of the shares, any resulting gain or loss
will be treated as capital gain or loss. The Company will receive an
income tax deduction in its fiscal year in which nonqualified options are
exercised equal to the
amount of
ordinary income recognized by those optionees exercising options, and must
withhold income and other employment related taxes on such ordinary
income.
Incentive stock options granted under the 2008 Plan are intended to qualify for
favorable tax treatment under Section 422 of the Internal Revenue Code of 1986,
as amended. Under Section 422, an optionee recognizes no taxable
income when the option is granted. Further, the optionee generally
will not recognize any taxable income when the option is exercised if he or she
has at all times from the date of the option’s grant until three months before
the date of exercise been an employee of the Company. The Company
ordinarily is not entitled to any income tax deduction upon the grant or
exercise of an incentive stock option. Certain other favorable tax
consequences may be available to the optionee if he or she does not dispose of
the shares acquired upon the exercise of an incentive stock option for a period
of two years from the granting of the option and one year from the receipt of
the shares.
Restricted Stock
Awards. Generally, no income is taxable to the recipient of a
restricted stock award in the year that the award is
granted. Instead, the recipient will recognize compensation taxable
as ordinary income equal to the fair market value of the shares in the year in
which the transfer restrictions lapse. Alternatively, if a recipient
makes a “Section 83(b)” election, the recipient will, in the year that the
restricted stock award is granted, recognize compensation taxable as ordinary
income equal to the fair market value of the shares on the date of the
award. The Company normally will receive a deduction equal to the
amount of compensation the recipient is required to recognize as ordinary
taxable income, and must comply with applicable tax withholding
requirements.
Performance Share
and Performance Unit Awards. A recipient of performance shares
or performance units will recognize compensation taxable as ordinary income
equal to the value of the shares of Common Stock or the cash received, as the
case may be, in the year that the recipient receives payment. The
Company normally will receive a deduction equal to the amount of compensation
the recipient is required to recognize as ordinary taxable income, and must
comply with applicable tax withholding requirements.
Stock
Appreciation Rights.
Generally, a recipient of a stock appreciation right will recognize compensation
taxable as ordinary income equal to the value of the shares of Common Stock or
the cash received in the year that the stock appreciation right is
exercised. The Company normally will receive a deduction equal to the
amount of compensation the recipient is required to recognize as ordinary
taxable income, and must comply with applicable tax withholding
requirements.
New
Plan Benefits
No options or other stock awards have
been granted to date under the 2008 Plan. Except for the automatic
grants to Non-Employee Directors, future grants and awards under the 2008 Plan
cannot be determined at this time.
Equity
Compensation Plan Information
The following table summarizes our
equity compensation plan information as of December 31, 2007.
Plan
category
|
Number
of securities to be issued upon exercise of outstanding options, warrants
and rights
|
Weighted
average exercise price of outstanding options, warrants and
rights
|
Number
of securities remaining available for future issuance under equity
compensation plans (excluding securities reflected in column
(a))
|
|
(a)
|
(b)
|
(c)
|
Equity
compensation plans approved by security holders
|
371,100
|
$3.10
|
142,809(1)
|
Equity
compensation plans not approved by security holders (2)
|
45,000
|
$3.72
|
0
|
TOTAL
|
416,100
|
$3.17
|
142,809
|
(1)
|
Includes
9,809 shares available for issuance under the Company’s 1997 Employee
Stock Purchase Plan.
|
(2)
|
The
plan consists of four warrant agreements to purchase shares of Winland’s
Common Stock issued in 2005 and 2006 as partial consideration for
consulting services to the following: (i) Hayden
Communications, Inc., a warrant to purchase 20,000 of Common Stock (10,000
shares exercisable until August 1, 2008 and 10,000 shares exercisable
until February 1, 2009); (ii) Board Assets, Inc., a warrant to purchase
5,000 shares of Common Stock, which warrant vests upon performance of
certain services and expires on February 16, 2016 (2,500 shares vested on
July 17, 2006, and the remaining shares did not vest because the
consulting agreement has been terminated); and (iii) each of two
principals of Genoa Business Advisors, LLC, a warrant to purchase 10,000
shares, which vest in 5,000-share increments upon performance of certain
services and expire on September 6, 2011 (10,000 shares vested on January
19, 2007, and the remaining shares did not vest because the consulting
arrangement has been terminated).
|
Vote
Required; Recommendation
The Board recommends adoption of the 2008 Equity Incentive
Plan. Approval of the 2008 Equity Incentive Plan requires the
affirmative vote of the holders of the greater of 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, provided that such majority must be greater
than 25% of the Company’s outstanding shares.
Summary
Compensation Table
The following table sets forth certain
information regarding compensation paid or accrued for our last fiscal year to
the Chief Executive Officer, Chief Financial Officer and the two highest paid
executive officers whose total compensation earned or accrued for fiscal year
2007 exceeded $100,000.
We have entered into employment
agreements with each of the named executive officers, which agreements are
described below.
No bonus was paid to any named
executive officer except as provided for pursuant to the 2007 Incentive Bonus
Plan, a non-equity incentive plan.
Name
and Principal Position
|
Year
|
|
Salary
($)
|
|
|
Option
Awards ($)(1)
|
|
Non-Equity
Incentive Plan Compensation ($)(2)
|
|
All
Other Compensation ($)(3)
|
|
Total
($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lorin
E. Krueger
|
2007
|
|
$ |
378,823 |
(4) |
|
$ |
- |
|
$ |
- |
|
$ |
4,895 |
|
$ |
383,718 |
Chief
Executive
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Officer
and President
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Glenn
Kermes
|
2007
|
|
$ |
145,673 |
|
|
$ |
36,105 |
|
$ |
5,213 |
|
$ |
- |
|
$ |
186,991 |
Chief
Financial Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dale
A. Nordquist
|
2007
|
|
$ |
164,134 |
(5) |
|
$ |
- |
|
$ |
711 |
|
$ |
4,762 |
|
$ |
169,607 |
Senior
VP of Sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
&
Marketing
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Terry
E. Treanor
|
2007
|
|
$ |
125,567 |
|
|
$ |
26,975 |
|
$ |
217 |
|
$ |
4,425 |
|
$ |
157,184 |
VP
of Manufacturing
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
The
amounts reflect the amount recognized for financial statement reporting
purposes for the fiscal year ended December 31, 2007 in accordance with
FAS 123R of stock option awards pursuant to our 2005 Equity Incentive Plan
and represents amounts from options granted prior to fiscal year
2006. Assumptions used in the calculation of these amounts are
included in footnote 7 to our financial statements included in our Annual
Report on Form 10-K for the year ended December 31, 2007 filed with the
Securities and Exchange Commission.
|
(2)
|
The
amounts represent cash incentive awards made pursuant to our 2007
Incentive Bonus Plan, which provides for cash and other awards to
employees, including the named executive officers. The amount
of the bonus pool is based on a percentage of net income before tax and
before the plan. Bonuses equal to 80% of the total plan amount
are disbursed to employees, including the named executive officers other
than the Chief Executive Officer, based on certain criteria determined in
the discretion of the Chief Executive Officer. The remaining
20% is available for the Chief Executive Officer based on achievement of
certain criteria established by the Compensation
Committee.
|
(3)
|
Other
Annual compensation for fiscal year 2007 consists of contributions to our
401(k) plan for the named executive officer’s
benefit.
|
(4)
|
Includes
severance pay of $196,625 per separation
agreement.
|
(5)
|
Includes
commissions of $39,874.
|
Employment
Agreements and Termination of Employment Arrangements
Lorin E.
Krueger. Effective October 29, 2007, the Company entered
into a Separation Agreement with Mr. Krueger pursuant to which Mr. Krueger’s
employment will terminate as of the close of business on January 2,
2008. Mr. Krueger will continue as a director of the Company until
the end of his term at the next annual meeting of the shareholders of the
Company on May 6, 2008. Pursuant to the Separation Agreement, on
January 2, 2008, the Company paid Mr. Krueger a lump sum of $143,716, equal to
13 months of Mr. Krueger’s then current base salary net required and authorized
deductions and withholdings. In addition, the Separation Agreement
provides that the Company shall pay (i) the
Company’s
share of COBRA coverage for Mr. Krueger for six months, (ii) the Company’s
regular Health Savings Account contribution for 2008 of approximately $2,500;
(iii) the cash equivalent of all accrued, unused
paid time off to which Mr. Krueger is entitled, permitting contributions
therefrom to the Company’s Health Savings Account and 401(k) plans to the extent
allowed by the plans; (iv) the Company’s matching contribution to the 401(k)
plan for 2008 for Mr. Krueger according to the plan terms; (v) reasonable legal
fees up to $1,000 as needed to facilitate the sale of Mr. Krueger’s stock in the
Company; (vi) reasonable professional fees of up to $1,000 to reimburse Mr.
Krueger for fees incurred in the preparation of his 2007 tax return; and (vii)
up to $5,000 to reimburse Mr. Krueger for career transition services as well as
club dues and sporting event tickets. The Separation Agreement also
includes a release by Mr. Krueger of any claims that he may have against the
Company as of the date of the Agreement.
Glenn A.
Kermes. On December 31, 2007, the Company entered into an
Amendment to Employment Agreement with Glenn Kermes, Chief Financial Officer,
dated January 23, 2007, which agreement continues until either party
terminates such agreement as provided in the agreement. Pursuant to the terms of
the amendment, Mr. Kermes’ base salary beginning January 1, 2008 is
$150,000 and is subject to review at least annually. Pursuant to the employment
agreement, as amended, if the Mr. Kermes’ employment is terminated by the
Company without cause or by Mr. Kermes for good reason, Mr. Kermes is
entitled to his base salary for six months and health care benefits for three
months; provided, however, if such termination occurs within two years after a
change of control, Mr. Kermes will be entitled to an amount equal to his
salary and bonus payments for the one completed fiscal year immediately
preceding termination payable over the 12 months following the termination.
During employment with the Company and for one year following termination of
such employment, pursuant to the amendment, Mr. Kermes has agreed that he
will not compete with the Company or solicit any of its employees, customers or
contractors for employment or business purposes.
Dale A.
Nordquist. On December 31, 2007, the Company and Mr. Nordquist
agreed to a base salary of $128,750 for 2008 pursuant to the employment
agreement dated February 14, 2007 which calls for annual review of Mr.
Nordquist’s base salary. In addition, Mr. Nordquist is entitled to
commissions on the sales of certain products. If Mr. Nordquist’s
employment is terminated by us without cause or by Mr. Nordquist for good
reason, Mr. Nordquist is entitled to his base salary for six months and health
care benefits for three months; provided, however, if such termination occurs
within two years after a change of control, Mr. Nordquist will be entitled to an
amount equal to his salary and bonus payments for the two completed fiscal years
immediately preceding termination payable over the 24 months following the
termination. During employment and for two years following
termination of such employment, Mr. Nordquist has agreed that he will not
compete with us or solicit any of our employees, customers or contractors for
employment or business purposes.
Terry E.
Treanor. On December 31, 2007, the Company and Mr. Treanor
agreed to a base salary of $128,750 for 2008 pursuant to the employment
agreement dated February 5, 2007 which calls for annual review of Mr. Treanor’s
base salary. On February 13, 2008, the Company and Terry E.
Treanor, the Company’s Vice President of Manufacturing, agreed to terminate
Mr. Treanor’s employment relationship with the Company, effective as of the
close of the Company’s business day on February 13,
2008. Pursuant to a Separation Agreement which was presented to
Mr. Treanor on February 13, 2008, in exchange for the promises,
releases, and agreements made by Mr. Treanor in the Separation Agreement
and in full satisfaction of the Company’s obligations under an Employment
Agreement between the Company and Mr. Treanor dated January 5, 2007,
the Company has agreed to pay Mr. Treanor (i) at regular payroll
intervals, an amount equal to nine months of Mr. Treanor’s current base
salary, subject to required and authorized deductions and withholdings, and
(ii) the Company’s share of COBRA continuation coverage in the Company’s
group medical, dental and life insurance plans, for six months. The Separation
Agreement also includes a release by Mr. Treanor of any claims that he may
have against the Company.
Outstanding
Equity Awards at Fiscal Year-End
Name
|
Number
of Securities Underlying Unexercised Options (#)
Exercisable
|
Number
of Securities Underlying Unexercised Options (#)
Unexercisable
|
Option
Exercise Price ($)
|
Option
Expiration Date
|
|
|
|
|
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Lorin
E. Krueger
|
11,000
|
--
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$ 2.87
|
10/24/2008
|
|
11,000
|
--
|
$ 4.14
|
1/3/2010
|
|
|
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|
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Glenn
A. Kermes
|
7,200
|
28800
(1)
|
$ 3.33
|
10/2/2012
|
|
--
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18000
(2)
|
$ 2.55
|
11/8/2013
|
|
|
|
|
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Dale
A. Nordquist
|
8,800
|
--
|
$ 1.27
|
12/20/2008
|
|
|
|
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Terry
E. Treanor
|
--
|
36000
(3)
|
$ 3.56
|
5/13/2008
(4)
|
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|
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(1)
|
The
stock option was granted on October 2, 2006. The option vests
to the extent of 7,200 shares annually on the first five anniversary dates
of the date of grant.
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(2)
|
The
stock option was granted on November 8, 2007. The option vests
to the extent of 3,600 shares annually on the first five anniversary dates
of the date of grant.
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(3)
|
The
stock option was granted on January 11, 2007. The option vests
to the extent of 3,600 shares annually on the first five anniversary dates
of the date of grant.
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(4)
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On
January 11, 2008, 7,200 options vested per the stock option
agreement. These options will expire on May 13, 2008 per the
acceleration clause in the stock option agreement due to the separation
agreement between the Company and Mr.
Treanor.
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During the two most recent fiscal
years, we have not had any transactions in which any director or executive
officer, or any other member of their immediate family of any director or
executive officer, had a material direct or indirect interest reportable under
applicable Securities and Exchange Commission rules, and there are no such
transactions proposed.
Section 16(a) of the Securities
Exchange Act of 1934 requires our executive officers and directors, and persons
who own more than ten percent of a registered class of our 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 10% shareholders are required by SEC regulation to furnish us with
copies of all Section 16(a) forms they file. Based solely on its
review of the copies of such forms received, we believe that, during fiscal year
2007, all of our executive officers, directors and greater than ten-percent
beneficial owners complied with the applicable filing requirements, except that
Messrs. Speckmann and Reissner each reported one transaction on a Form 4 that
was not timely filed.
McGladrey & Pullen, LLP has served
as our independent registered public accounting firm since May
1998. Representatives of McGladrey & Pullen, LLP are expected to
be present at the Annual Meeting, will be given an opportunity to make a
statement regarding financial and accounting matters if they so desire, and will
be available to respond to appropriate questions from our
shareholders.
Audit
Fees
We paid the following fees to McGladrey
& Pullen, LLP or its affiliated entity RSM McGladrey, Inc. for fiscal years
2006 and 2007:
|
|
2006
|
|
|
2007
|
|
Audit
Fees
|
|
$ |
211,000
|
|
|
$ |
222,000
|
|
Audit-Related
Fees
|
|
|
0
|
|
|
|
0
|
|
Tax
Fees
|
|
|
16,000
|
|
|
|
90,000
|
|
All
Other Fees
|
|
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0
|
|
|
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0
|
|
|
|
$ |
227,000
|
|
|
$ |
312,000
|
|
Audit fees are professional services
rendered for the audit of our annual financial statements and review of
financial statements included in our Forms 10-K and 10-Q. Tax fees
include fees for services provided in connection with tax planning and tax
compliance. Tax fees for 2007 included fees paid to RSM McGladrey,
Inc. to perform a Research and Development Tax Credit Study for tax years 2003
thru 2006.
The Audit Committee has considered
whether provision of the above non-audit services is compatible with maintaining
accountants’ independence and has determined that such services are compatible
with maintaining accountants’ independence.
Pre-Approval
Policy
The Audit Committee has not formally
adopted a policy for pre-approval of all audit and non-audit services by its
independent auditors, but it has routinely approved all audit and permitted
non-audit services to be performed for Winland Electronics by its independent
auditors.
The Board of Directors maintains an
Audit Committee comprised of the three outside directors. The Board
of Directors and the Audit Committee believe that the Audit Committee’s current
member composition satisfies the Listing Standards of the American Stock
Exchange (“AMEX”) that governs audit committees, Section 121(B), including the
requirement that audit committee members all be “independent directors” as that
term is defined by AMEX Listing Standards Section 121(A).
In
accordance with its written charter adopted by the Board of Directors (available
on our website), the Audit Committee assists the Board of Directors with
fulfilling its oversight responsibility regarding the quality and integrity of
the accounting, auditing and financial reporting practices of Winland
Electronics. In discharging its oversight responsibilities regarding
the audit process, the Audit Committee:
(1) reviewed
and discussed the audited financial statements with management;
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(2)
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discussed
with the independent registered public accounting firm the material
required to be discussed by Statement on Auditing Standards No. 61, as
amended; and
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(3)
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reviewed
the written disclosures and the letter from the independent registered
public accounting firm required by the Independence Standards Board
Standard No.1 and discussed with the independent registered public
accounting firm any relationships that may impact their objectivity and
independence.
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Based
upon the review and discussions referred to above, the Audit Committee
recommended to the Board of Directors that the audited financial statements be
included in the Annual Report on Form 10-K for the fiscal year ended December
31, 2007, as filed with the Securities and Exchange Commission.
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Members
of the Audit Committee |
|
|
|
|
|
|
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Thomas
J. Goodmanson, Chairman |
|
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Thomas
J. Brady |
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Richard
T. Speckmann |
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Management knows of no other matters to
be presented at the 2008 Annual Meeting. If any other matter properly
comes before the 2008 Annual Meeting, the appointees named in the proxies will
vote the proxies in accordance with their best judgment.
Under the SEC Rules, we are required to
provide the following information to you based on the assumption that the date
for our annual meeting in 2009 will not deviate more than thirty (30) days from
the date for this Annual Meeting: Any appropriate proposal submitted
by a shareholder of Winland Electronics and intended to be presented at the 2009
Annual meeting of shareholders must be received by us by December 2,2008 to be
considered for inclusion in our proxy statement and related proxy for the 2009
annual meeting. Also, our Bylaws permit shareholders to make
nominations for the election of directors and propose business to be brought
before any regular meeting of shareholders, provided advance written notice of
such nomination or proposal is received by us after February 6, 2009, but on or
before March 2, 2009. According to our Bylaws, a shareholder
nomination or proposal received outside of this time period will be considered
untimely and the chairman of the meeting shall refuse to acknowledge such
untimely nomination or proposal.
We will inform you of any changes of
the aforesaid dates in a timely manner and will provide notice of the new dates
in our earliest possible quarterly report on Form 10-Q.
Any shareholder nomination or proposal
must provide the information required by our Bylaws and comply with any
applicable laws and regulations. All submissions should be made to
the Secretary of Winland Electronics at our principal offices at 1950 Excel
Drive, Mankato, Minnesota 56001.
A copy of our Annual Report to
Shareholders for the fiscal year ended December 31, 2007, 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.
WE WILL FURNISH WITHOUT CHARGE TO EACH
PERSON WHOSE PROXY IS BEING SOLICITED, UPON WRITTEN REQUEST OF ANY SUCH PERSON,
A COPY OF OUR ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31,
2007, AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, INCLUDING THE
FINANCIAL STATEMENTS AND A LIST OF EXHIBITS TO SUCH FORM 10-K. WE
WILL FURNISH TO ANY SUCH PERSON ANY EXHIBIT DESCRIBED IN THE LIST ACCOMPANYING
THE FORM 10-K UPON THE ADVANCE PAYMENT OF REASONABLE FEES. REQUESTS
FOR A COPY OF THE FORM 10-K AND/OR ANY EXHIBIT(S) SHOULD BE DIRECTED TO THE
CHIEF FINANCIAL OFFICER OF WINLAND ELECTRONICS, INC., 1950 EXCEL DRIVE, MANKATO,
MINNESOTA 56001. YOUR REQUEST MUST CONTAIN A REPRESENTATION THAT, AS
OF MARCH 10, 2008, YOU WERE A BENEFICIAL OWNER OF SHARES ENTITLED TO VOTE AT THE
2008 ANNUAL MEETING OF SHAREHOLDERS.
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BY
ORDER OF THE BOARD OF DIRECTORS,
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Date:
March 31, 2008
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Thomas
J. de Petra |
|
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Interim
President, Interim Chief Executive Officer and |
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|
Chairman
of the Board |
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PLEASE
MARK VOTES
|
REVOCABLE
PROXY
|
|
AS IN
THIS EXAMPLE
|
WINLAND
ELECTRONICS, INC.
|
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|
For
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Against
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Abstain
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ANNUAL
MEETING OF SHAREHOLDERS
|
1
|
To set
the number of members of the Board of Directors at five
(5).
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TUESDAY,
MAY 6, 2008
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The 2008
Annual Meeting of Shareholders of Winland Electronics, Inc. will be held
at the offices of Fredrikson & Byron, 200 South Sixth Street, Suite
4000, Minneapolis, Minnesota, at 10:00 a.m. on Tuesday, May 6, 2008, for
the following purposes:
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2
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To elect
directors:
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For
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Withheld
|
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For
All
|
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Except
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Lorin E.
Krueger
|
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Thomas J.
de Petra
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Thomas J.
Goodmanson
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Richard
T. Speckmann
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Thomas J.
Brady
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INSTRUCTION: To
withhold authority to vote for any individual nominee, mark “For All
Except” and write that nominee’s name in the space provided
below.
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3
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To
approve an increase of shares available under the Company’s 1997 Employee
Stock Purchase Plan from 100,000 to 300,000.
|
For
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Withheld
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Abstain
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4
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To approve the
Company’s 2008 Equity Incentive Plan
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For
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Withheld
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Abstain
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Please be
sure to sign and date this Proxy in the box below.
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Date
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5
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To take
action on any other business that may properly come before the meeting or
any adjournment thereof.
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Shareholder sign
above
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Co-holder
(if any) sign above
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- - - - - - - - - - |
Detach
above card, sign, date and mail in postage paid envelope
provided.
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WINLAND
ELECTRONICS, INC.
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Please sign exactly
as your name appears hereon, date and return promptly. When shares are
held by joint tenants, both should sign. Executors, administrators,
trustees and other fiduciaries should indicate their capacity when
signing.
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The above signed
acknowledges receipt from Winland Electronics, Inc. prior to the execution
of this proxy, of a Notice of the Annual Meeting of Shareholders, a Proxy
Statement and an Annual Report to Shareholders.
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PLEASE
ACT PROMPTLY
|
SIGN,
DATE & MAIL YOUR PROXY CARD TODAY
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IF YOUR ADDRESS HAS
CHANGED, PLEASE CORRECT THE ADDRESS IN THE SPACE PROVIDED BELOW AND RETURN
THIS PORTION WITH THE PROXY IN THE ENVELOPE PROVIDED.
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