At first, I assumed that "Modern" was short for "Modern Pen Company" and that these pencils were somehow connected to A.A. Waterman & Co. But when I tracked down the patent, I found that this pencil was connected to someone else:
William M. Saunders applied for a patent for this design on October16, 1919, and the patent was granted as number 1,328,300 on January 20, 1920. The assignee of Saunders’ patent, as was the case with his numerous other pencil patents, was the Hoge Manufacturing Company of New York. Hoge is most remembered as manufacturer of the "Pal," an ubiquitous metal pencil that is almost as common a sight at flea markets as a metal Eversharp.
Early Pals had much more embellishment on their crowns than later examples, and a side-by-side comparison of a Pal ringtop and the Modern leaves no doubt that the two were manufactured by the same company.
In fact, these caps were so distinctive that Saunders applied for a design patent for it on October 18, 1921, which was granted on November 18, 1922 as Design patent 61,699.
Did Hoge manufacturing some of A.A. Waterman’s pencils? There was a very narrow window in time for that to have happened; this pencils bears a 1920 patent date and has a cap for which the design patent was applied for in late 1921; in 1921, whatever was left of Modern was reorganized as the "Chicago Safety Pen Company," and pencils were marketed as "EVRDA," or the Everyday pencil.
I think it’s more likely a coincidence. Maybe Hoge quickly dropped the name in light of negative press Modern Pen Company received after the Waterman verdict; maybe the company received a lecture from the Chicago Safety Pen Company, who had recently been so thoroughly educated in the niceties of trade name infringemenet.
But maybe, just maybe, Hoge made pencils for A.A. Waterman & Co. Unfortunately, no Saunders patent matches the profile of yesterday’s A.A. Waterman pencil, so until something more concrete turns up, all I can do is muse.
Update: Nope. Hoge did not make pencils for A.A. Waterman. See http://leadheadpencils.blogspot.com/2015/01/enough-with-musing.html.