SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
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
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
Washington Scientific Industries, Inc.
(Name of Registrant as Specified in Its Charter)
Washington Scientific Industries, Inc.
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
[X] $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transactions applies:
(3) Per unit price or other underlying value of transaction computed pursuant
to exchange Act Rule 0-11:1
(4) Proposed maximum aggregate value of transaction:
[ ] 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:
1 Set forth the amount on which the filing fee is calculated and state how it
was determined.
WASHINGTON SCIENTIFIC INDUSTRIES, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
JANUARY 11, 1996
Notice is hereby given that the Annual Meeting of Stockholders of Washington
Scientific Industries, Inc. (the "Company") will be held in the New Sweden Room
at the Radisson Plaza Hotel located at 35 South Seventh Street, Minneapolis,
Minnesota, on Thursday, January 11, 1996, at 3:30 p.m., Central Standard Time,
for the following purposes:
1. To elect seven directors to hold office until the next Annual Meeting
of Stockholders or until their successors are elected.
2. To transact such other business as may properly come before the
meeting or any adjournment or adjournments thereof.
The Board of Directors has fixed the close of business on November 13, 1995, as
the record date for the determination of stockholders entitled to notice of and
to vote at the meeting.
By Order of the Board of Directors
Gerald E. Magnuson, Secretary
Minneapolis, Minnesota
December 1, 1995
TO ASSURE YOUR REPRESENTATION AT THE ANNUAL MEETING OF STOCKHOLDERS, PLEASE
SIGN, DATE AND RETURN YOUR PROXY IN THE ENCLOSED ENVELOPE, WHETHER OR NOT YOU
EXPECT TO ATTEND IN PERSON. STOCKHOLDERS WHO ATTEND THE MEETING MAY REVOKE THEIR
PROXIES AND VOTE IN PERSON IF THEY SO DESIRE. THIS PROXY IS SOLICITED ON BEHALF
OF THE BOARD OF DIRECTORS OF THE COMPANY.
[LOGO]
WASHINGTON SCIENTIFIC INDUSTRIES, INC.
PROXY STATEMENT
This Proxy Statement is furnished to the stockholders of Washington Scientific
Industries, Inc. (the "Company") in connection with the solicitation of proxies
by the Board of Directors of the Company to be voted at the Annual Meeting of
Stockholders to be held on January 11, 1996, or any adjournment or adjournments
thereof. The cost of this solicitation will be borne by the Company. In addition
to solicitation by mail, officers, directors and employees of the Company may
solicit proxies by telephone, telegraph or in person. The Company may also
request banks and brokers to solicit their customers who have a beneficial
interest in the Company's Common Stock registered in the names of nominees and
will reimburse such banks and brokers for their reasonable out-of-pocket
expenses.
Any proxy may be revoked at any time before it is voted by written notice to the
Secretary of the Company, by receipt of a proxy properly signed and dated
subsequent to an earlier proxy, or by revocation of a written proxy by request
in person at the Annual Meeting; but if not revoked, the shares represented by
such proxy will be voted. The Company's offices are located at 2605 W. Wayzata
Boulevard, Long Lake, Minnesota 55356, and its telephone number is (612)
473-1271. The mailing of this proxy statement to stockholders of the Company
commenced on or about December 1, 1995.
The Company currently has only one class of securities, Common Stock, of which
2,391,326 shares were issued and outstanding and entitled to vote at the close
of business on November 13, 1995. Each share is entitled to one vote and
stockholders have cumulative voting rights in connection with the election of
directors in the event any stockholder gives written notice of intent to
cumulate votes to any officer of the Company before the meeting or to the
presiding officer at the meeting. A stockholder may cumulate votes for the
election of directors by multiplying the number of votes to which the
stockholder may be entitled by seven (the number of directors to be elected) and
casting all such votes for one nominee or distributing them among any two or
more nominees. Only stockholders of record at the close of business on November
13, 1995, will be entitled to vote at the meeting. The presence, in person or by
proxy, of the holders of a majority of the shares of Common Stock entitled to
vote at the Annual Meeting of Stockholders constitutes a quorum for the
transaction of business.
Under Minnesota law, each item of business properly presented at a meeting of
stockholders generally must be approved by the affirmative vote of the holders
of a majority of the voting power of the shares present, in person or by proxy,
and entitled to vote on that item of business. However, if the shares present
and entitled to vote on that item of business would not constitute a quorum for
the transaction of business at the meeting, then the item must be approved by a
majority of the voting power of the minimum number of shares that would
constitute such a quorum. Votes cast by proxy or in person at the Annual Meeting
of Stockholders will determine whether or not a quorum is present. Abstentions
will be treated as shares that are present and entitled to vote for purposes of
determining the presence of a quorum, but as unvoted for purposes of determining
the approval of the matter submitted to the stockholders for a vote. If a broker
indicates on the proxy that it does not have discretionary authority as to
certain shares to vote on a particular matter, those shares will not be
considered as present and entitled to vote with respect to that matter.
SECURITY OWNERSHIP OF PRINCIPAL STOCKHOLDERS AND MANAGEMENT
The following table includes information as of November 13, 1995, concerning the
beneficial ownership of Common Stock of the Company by (i) stockholders known to
the Company to hold more than five percent of the Common Stock of the Company,
(ii) each of the directors of the Company, (iii) each executive officer named in
the table on page 5 and (iv) all officers and directors of the Company as a
group. Unless otherwise indicated, all beneficial owners have sole voting and
investment power over the shares held.
PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNER AMOUNT OF CLASS
Dimensional Fund Advisors, Inc. 144,600(1) 6.05%
1299 Ocean Avenue
Suite 1100
Santa Monica, CA 90401
Paul Baszucki(2) 14,250(3) *
Melvin L. Katten(2) 48,050(3) 2.01%
T.E. Larsen(2) 4,250(3) *
Gerald E. Magnuson(2) 8,750(3) *
George J. Martin(2) 32,300(3) 1.35%
Eugene J. Mora(2) 4,250(3) *
Michael J. Pudil(2)(4) 100,000(3) 4.01%
Terry J. Blount(4) 14,567(3) *
William J. Lucke(4) 25,342(3) 1.06%
All Officers and Directors as a Group 251,759(3) 9.94%
(9 persons)
* Less than one percent.
(1) Based upon information provided by Dimensional Fund Advisors, Inc.
(2) Serves as a director of the Company and has been nominated for re-election.
(3) Includes shares which may be purchased within sixty days from the date
hereof pursuant to outstanding stock options in the amount of 4,250 shares
for each of Messrs. Baszucki, Katten, Larsen, Magnuson and Martin; 3,250
shares for Mr. Mora; 100,000 shares for Mr. Pudil; 8,067 shares for Mr.
Blount; 8,917 shares for Mr. Lucke; and 141,484 shares for all officers and
directors as a group.
(4) Serves as an executive officer of the Company and appears in the table on
page 5 hereof.
ELECTION OF DIRECTORS
The Company has a Board of Directors consisting of seven persons elected
annually to serve until the next annual meeting of stockholders or until their
successors are elected. The Board of Directors has nominated for election at the
annual meeting of stockholders the seven persons named below, to serve until the
next annual meeting of stockholders or until their successors are elected, and
each has consented to being named as a nominee. All of the nominees are
currently directors of the Company and all were elected by the stockholders at
the 1995 Annual Meeting of Stockholders. It is anticipated that proxies will be
voted for such nominees, and the Board of Directors has no reason to believe any
nominee will not continue to be a candidate or will not be able to serve as a
director if elected. In the event that any nominee named below is unable to
serve as a director, the persons named in the proxies have advised that they
will vote for the election of such substitute or additional nominees as the
Board of Directors may propose.
The names and ages of the nominees, their principal occupations and other
information is set forth below, based upon information furnished to the Company
by the nominees.
<TABLE>
<CAPTION>
DIRECTOR
NAME AND AGE PRINCIPAL OCCUPATION AND OTHER DIRECTORSHIPS SINCE
<S> <C> <C>
Paul Baszucki (55) Co-Chairman and Chief Executive Officer of Norstan, Inc., Maple Grove, 1988
Minnesota (telecommunications); Director of Norstan, Inc. and G&K
Services, Inc.
Melvin L. Katten (59) Senior Partner of Katten Muchin & Zavis, Chicago, Illinois (law firm); 1985
Director of AMSERV HEALTHCARE INC.
T.E. Larsen (68) President of Advanced Innovation, Inc., Edina, Minnesota (research 1988
and development enterprise).
Gerald E. Magnuson (65) Of Counsel to Lindquist & Vennum P.L.L.P., Minneapolis, Minnesota 1962
(law firm); Secretary of the Company; Director of Munsingwear, Inc.,
Research, Incorporated and Sheldahl, Inc.
George J. Martin (58) Consultant to PowCon Incorporated, San Diego, California (manufacturer 1983
of electronic welding products); Former President, Chief Executive
Officer and Chairman of PowCon Incorporated from 1987 to October
1995.
Eugene J. Mora (60) President, Chief Executive Officer and Director of AMSERV HEALTHCARE 1985
INC., LaJolla, California (provider of homecare services to
individuals).
Michael J. Pudil (47) President and Chief Executive Officer of the Company; Prior to November 1993
1993, Vice President and General Manager of Remmele Engineering,
Inc., St. Paul, Minnesota (contract machining).
</TABLE>
The Board of Directors met nine times during fiscal 1995. Each current director,
except Mr. Baszucki, attended 75% or more of the meetings of the Board of
Directors and any committee on which he served.
The Company has two standing committees, the Compensation Committee and the
Audit Committee. The Compensation Committee, which met once during the last
fiscal year, is currently comprised of Messrs. Magnuson (Chair), Baszucki,
Katten and Larsen. The Compensation Committee reviews and makes recommendations
to the Board of Directors regarding salaries, compensation and benefits of
officers and key employees.
The Audit Committee, which met once during the last fiscal year, is currently
comprised of Messrs. Mora (Chair), Magnuson and Martin. Among other duties, the
Audit Committee reviews the internal and external financial reporting of the
Company, reviews the scope of the independent audit and considers comments by
the auditors regarding internal controls and accounting procedures and
management's response to those comments.
The Company does not have a nominating committee. However, the Company's Bylaws
provide that a notice of proposed stockholder nominations for the election of
directors must be timely given in writing to the Secretary of the Company prior
to the meeting at which directors are to be elected. To be timely, the notice
must be given by such stockholders to the Secretary of the Company not less than
45 days nor more than 75 days prior to a meeting date corresponding to the
previous year's Annual Meeting. The notice to the Company from a stockholder who
intends to nominate a person at the meeting for election as a director must
contain certain information about such stockholder and the person(s) nominated
by such stockholder, including, among other things, the name and address of
record of such stockholder, a representation that the stockholder is entitled to
vote at such meeting and intends to appear in person or by proxy at the meeting,
the name, age, business and residence addresses and principal occupation of each
nominee, a description of all arrangements or understandings between the
stockholder and each nominee, such other information as would be required to be
included in a proxy statement soliciting proxies for the election of the
proposed nominee(s), and the consent of each nominee to serve as a director if
so elected. The Company may also require any proposed nominee to furnish other
information reasonably required by the Company to determine the proposed
nominee's eligibility to serve as director. If the presiding officer of a
meeting of stockholders determines that a person was not nominated in accordance
with the foregoing procedure, such person will not be eligible for election as a
director.
EXECUTIVE COMPENSATION AND OTHER INFORMATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table shows, for the fiscal years ending August 27, 1995, August
28, 1994, and August 29, 1993, the cash compensation paid by the Company, as
well as certain other compensation paid or accrued for those years, to Michael
J. Pudil, the Company's President and Chief Executive Officer and to each of the
other most highly compensated officers of the Company in office at the end of
fiscal year 1995, whose total cash compensation exceeded $100,000 during fiscal
year 1995 (together with Mr. Pudil, the "Named Executive Officers") in all
capacities in which they served:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
SECURITIES
UNDERLYING
OPTIONS/ ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS SARS COMPENSATION(1)
<S> <C> <C> <C> <C> <C>
Michael J. Pudil 1995 $154,760 $31,500 0 $1,542
President and 1994 119,423(2) 100,000 100,000 0
Chief Executive Officer 1993 0 0 0 0
William J. Lucke 1995 116,153 34,352(3) 0 1,703
Vice President, Treasurer 1994 103,900 0 4,000 1,538
and Assistant Secretary 1993 97,906 0 0 1,468
Terry J. Blount 1995 88,058 26,322(3) 0 1,252
Vice President 1994 78,000 0 4,000 859
1993 73,500 0 0 472
</TABLE>
(1) These amounts represent Company basic and matching contributions to the
Company s 401(k) plan on behalf of such employees.
(2) Mr. Pudil joined the Company during fiscal year 1994. See " -- Employment
Agreements."
(3) Includes bonus payments of $10,390 and $7,800 to Mr. Lucke and Mr. Blount,
respectively, which were paid in fiscal 1995. The remaining amounts were
paid subsequent to fiscal 1995 for performance in that fiscal year.
OPTION GRANTS IN FISCAL YEAR 1995
No stock options were granted to the Named Executive Officers during fiscal year
1995.
OPTION EXERCISES AND HOLDINGS
The following table sets forth information with respect to the Named Executive
Officers, concerning the exercise of options during the last fiscal year and
unexercised options held as of the end of fiscal year 1995:
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED IN-THE-
SHARES UNDERLYING UNEXERCISED MONEY OPTIONS/SARS
ACQUIRED OPTIONS/SARS AT FY-END AT FY-END(1)
NAME ON EXERCISE VALUE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
<S> <C> <C> <C> <C> <C> <C>
Michael J. Pudil 0 $0 66,667 33,333 $133,334 $66,666
Terry J. Blount 0 0 8,067 1,333 11,892 2,833
William J. Lucke 0 0 8,917 1,333 12,636 2,833
</TABLE>
(1) Based on a per share price of $4.125, which was the closing sale price of
the Company's Common Stock on August 25, 1995, the last trading day of the
Company's fiscal year.
PENSION PLAN
The Company has a pension plan for non-union employees of the Company, including
executive officers. The plan provides benefits to all eligible employees and is
applicable to executive officers on the same basis as other employees. Employees
must not be eligible for benefits under that part of the Company's pension plan
covering union employees and must have completed five years of service to be
eligible for retirement benefits. Retirement benefits are calculated based upon
a five-year average of annual salary rates being paid prior to retirement, all
as defined in the plan. The following table shows the payments that will be
made, after deduction of Social Security benefits, under the Company's pension
plan for non-union employees, given the years of service and compensation set
forth below based on a retirement age of 65:
PENSION PLAN TABLE
FIVE-YEAR ANNUAL PENSION UPON RETIREMENT WITH YEARS OF SERVICE
AVERAGE BASIC INDICATED
COMPENSATION 10 15 20 25 30
$ 50,000 $ 5,445 $ 8,167 $10,890 $13,612 $16,334
75,000 8,945 13,417 17,890 22,362 26,834
100,000 12,445 18,667 24,890 31,112 37,334
125,000 15,945 23,917 31,890 39,862 47,834
150,000 19,445 29,167 38,890 48,612 58,334
175,000 22,945 34,417 45,890 57,362 68,834
BOARD COMPENSATION COMMITTEE REPORT
Decisions on compensation of the Company's executives are generally made by the
Compensation Committee of the Board consisting of Messrs. Baszucki, Katten,
Larsen and Magnuson (Chair). All decisions by the Compensation Committee
relating to the compensation of the Company's executive officers are reviewed by
the full Board. Pursuant to rules designed to enhance disclosure of companies'
policies toward executive compensation, set forth below is a report submitted by
the Compensation Committee addressing the Company's compensation policies for
fiscal year 1995 as they affected Mr. Pudil, the Company's President and Chief
Executive Officer and the other executive officers.
Compensation Policies Toward Executive Officers. The Compensation Committee's
executive compensation policies are designed to provide competitive levels of
compensation that integrate pay with the Company's annual and long-term
performance goals, reward above-average corporate performance, recognize
individual initiative and achievements and assist the Company in attracting and
retaining qualified executives. The Company's executive compensation has
historically consisted of three components: (i) base salaries, (ii) stock
options and (iii) cash bonuses paid out pursuant to annual profitability-based
plans. The Compensation Committee has historically established the base salaries
of each executive officer utilizing compensation surveys, performance against
defined goals and longevity with the Company. With respect to cash bonuses, the
Compensation Committee has historically established on an annual basis certain
profitability targets at the beginning of each fiscal year, pursuant to which
cash performance bonuses of up to 50% of an executive officer's base salary can
be paid. The Company has also used stock option grants as a key ingredient of
its executive compensation plans, reflecting the Compensation Committee's
position that stock ownership by management and stock-based performance
compensation arrangements are beneficial in aligning management's and
shareholders' interests in the enhancement of shareholder value. In order to
direct the Company's executives toward steady growth and to retain the
executive's services, the stock options granted are exercisable over a ten-year
period and vest over a two-year period.
Relationship of Performance Under the Compensation Plans. Due to the Company's
financial performance over the past several years, no salary increases were
granted to the Company's executive officers during the three fiscal years ended
August 28, 1994, and no cash bonuses were paid to the executive officers during
that same period except pursuant to the terms of an Employment Agreement with
Mr. Pudil. In fiscal year 1995, bonuses were paid to certain executive officers
equal to 10% of their current annual salaries. Bonuses were also paid subsequent
to the end of fiscal 1995 for performance in that fiscal year. No stock option
grants were granted to any executive officer in fiscal year 1995. Stock options
are intended to focus the Company's key employees, including the Named
Executives, on long-term Company performance which results in improvement in
shareholder value and provides earning potential to the executives.
At various times in the past the Company has adopted certain broad-based
employee benefit plans in which the Company's executive officers have been
permitted to participate. Benefits under these plans are not directly or
indirectly tied to Company performance.
Chief Executive Officer Compensation. The compensation package for Michael J.
Pudil, the Company's Chief Executive Officer, was set by the Board of
Directors. The terms of Mr. Pudil's employment agreement are set forth below
in the section entitled "Employment Agreements."
SUBMITTED BY THE COMPENSATION COMMITTEE OF THE COMPANY'S BOARD OF DIRECTORS:
Paul Baszucki Melvin L. Katten T.E. Larsen Gerald E. Magnuson
The preceding report shall not be deemed incorporated by reference by any
general statement incorporating by reference this proxy statement into any
filing under the Securities Act of 1933 (the "1933 Act") or the Securities
Exchange Act of 1934 (the "1934 Act"), except to the extent the Company
specifically incorporates this information by reference, and shall not otherwise
be deemed filed under the 1933 Act or the 1934 Act.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Magnuson, a Director and a member of the Compensation Committee and the
Company's Secretary, is Of Counsel to the law firm of Lindquist & Vennum
P.L.L.P. which was paid for legal services rendered to the Company during the
last fiscal year. It is anticipated that Lindquist & Vennum P.L.L.P. will
continue to perform legal services for the Company during the current fiscal
year.
PERFORMANCE GRAPH
The Securities and Exchange Commission requires that the Company include in this
Proxy Statement a line graph presentation comparing cumulative, five-year
stockholder returns on an indexed basis with a broad market index and either a
nationally-recognized industry standard or an index of peer companies selected
by the Company. The Company has chosen to use the NASDAQ Stock Market (U.S.
Companies) Index as its broad market index and the NASDAQ Non-Financial Stock
Index as its peer group index. The table below compares the cumulative total
return as of the end of each of the Company's last five fiscal years on $100
invested as of August 26, 1990 in the common stock of the Company, the NASDAQ
Stock Market Index and the NASDAQ Non-Financial Stock Index, assuming the
reinvestment of all dividends:
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
[GRAPH]
<TABLE>
<CAPTION>
AUGUST 26, AUGUST 25, AUGUST 30, AUGUST 29, AUGUST 28, AUGUST 27,
1990 1991 1992 1993 1994 1995
<S> <C> <C> <C> <C> <C> <C>
Washington Scientific Industries, Inc. $100 $ 85.02 $ 74.39 $ 58.20 $ 55.67 $ 83.50
NASDAQ Stock Market (U.S.) 100 141.88 153.88 203.00 211.36 284.00
NASDAQ Non- Financial Stocks 100 141.09 145.56 191.25 194.90 261.07
</TABLE>
Since the Company's fiscal year ends on the last Sunday of August each year,
data in the above table reflects market values as of the close of trading on the
Friday preceding the Company's fiscal year end for each year presented.
DIRECTOR COMPENSATION
Directors who are not employees of the Company (currently all directors
except Mr. Pudil) are paid an annual retainer of $4,500 and a fee of $500 for
each meeting of the Board of Directors or any Committee attended. Mr. Martin
receives an additional annual retainer of $25,000 for serving as the
Company's Chairman. Mr. Magnuson receives an additional annual retainer of
$4,000 for serving as the Company's Secretary, $2,000 of which was paid in
fiscal year 1995.
Each non-employee member of the Board of Directors receives at the time of
election or re-election to the Board by the stockholders an option to purchase
1,000 shares of the Company's Common Stock at a purchase price equal to the fair
market value of the Company's Common Stock on the date of such election or
reelection. The term of each director option is five years, unless the director
leaves the Board, in which event his option expires within 30 days of leaving
the Board. Each director option is exercisable in installments of 25% per year
beginning six months after the date of grant.
The Company established a retirement program in 1982 for directors not covered
by any other retirement plan of the Company which provides for the payment of an
annual benefit equal to the annual retainer paid to directors during the full
fiscal year preceding retirement. The retirement benefit, which is payable to
directors who have served five years or more, commences at the time the retired
director becomes 65 years old or later retires, and is subject to proportionate
reduction if the director has served the Company less than 15 years. The maximum
number of years that the benefit is payable is ten years.
EMPLOYMENT AGREEMENTS
On October 22, 1993, the Company entered into an employment agreement with
Michael J. Pudil, pursuant to which Mr. Pudil was employed as the Company's
President and Chief Executive Officer, effective November 4, 1993. This
Agreement provides for an initial base annual salary of $150,000, subject to
annual review. Under the terms of the Agreement, Mr. Pudil received a cash bonus
of $30,000 which was paid within 30 days of his first day of employment at the
Company, and a cash bonus of $30,000 which was paid within 90 days of his first
day of employment at the Company. Mr. Pudil also earned an additional $40,000
bonus based on achieving and exceeding certain financial projections in fiscal
year 1994. Since fiscal year 1994, Mr. Pudil has had the opportunity to earn
cash bonuses of 50% or more of his base salary based on a formula established by
the Board of Directors. Mr. Pudil was also granted a stock option under the
Company's 1987 Stock Option Plan to purchase 100,000 shares of the Company's
common stock at an exercise price of $2.125 per share. The term of the option is
ten years, with one-third of the shares exercisable six months after the date of
grant, one-third exercisable beginning one year from the date of grant and the
additional third exercisable beginning one year after that. The Company has the
right to terminate the Employment Agreement with or without "good cause" (as
defined in the contract) at any time, provided that if the Company terminates
the Agreement without good cause it would be obligated to continue to pay Mr.
Pudil's base salary and the employer portion of his benefit premiums until the
earlier of (i ) his full-time re-employment or self-employment or (ii) the
expiration of the three-year term of the Employment Agreement. The Company would
have similar obligations to pay such amounts if Mr. Pudil terminates his
employment for "good reason" (as defined in the contract).
In April 1986 and, in the case of Mr. Pudil, on October 18, 1995, the Company
entered into employment agreements with certain of its executive officers. The
employment agreements provide, among other things, for a lump-sum cash severance
payment to such individuals equal to approximately three times the individual's
average annual compensation over the preceding five years plus certain fringe
benefits under certain circumstances following a "change in control" of the
Company. In general, a change in control would occur when there has been any
change in the controlling persons reported in the Company's proxy statements,
when 20% or more of the Company's outstanding voting stock is acquired by any
person, when current members of the Board of Directors or their successors
elected or nominated by such members cease to constitute at least 75% of the
Board of Directors, when the Company merges or consolidates with or sells
substantially all its assets to any person or entity, or when the Company's
stockholders vote to liquidate or dissolve the Company. However, a "change in
control" would not occur if any of these events is authorized, approved or
recommended by the Board of Directors. The employment agreements also prohibit
disclosure of confidential information concerning the Company and require
disclosure and assignment of inventions, discoveries and other works relating to
the individual's employment. If a change in control had occurred at the end of
fiscal year 1995, the following individuals would have been entitled to the
approximate payment indicated pursuant to the employment agreements: Mr. Pudil,
$701,319, Mr. Lucke, $355,956; Mr. Blount, $272,184; all current executive
officers as a group, $1,329,459.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers, and persons who own more than 10% of a
registered class of the Company's equity securities, to file with the Securities
and Exchange Commission initial reports of ownership and reports of changes in
ownership of common stock and other equity securities of the Company. These
insiders are required by Securities and Exchange Commission regulations to
furnish the Company with copies of all Section 16(a) forms they file, including
Forms 3, 4 and 5.
To the Company's knowledge, based solely on review of the copies of such reports
furnished to the Company and written representations that no other reports were
required, during the fiscal year ended August 27, 1995 all Section 16(a) filing
requirements applicable to its insiders were complied with.
AUDITORS
The Board of Directors and its Audit Committee will act on the appointment of
auditors for the next year in the near future after having an opportunity to
consider all applicable information. Deloitte & Touche, certified public
accountants, have been the auditors for the Company since 1957. A representative
of Deloitte & Touche is expected to be present at the Annual Meeting of
Shareholders, will have an opportunity to make a statement if he or she desires
to do so and will be available to respond to appropriate questions.
STOCKHOLDER PROPOSALS
The rules of the Securities and Exchange Commission permit stockholders of a
company to present proposals for stockholder action in the company's proxy
statement where such proposals are consistent with applicable law, pertain to
matters appropriate for stockholder action and are not properly omitted by
company action in accordance with the proxy rules. The Washington Scientific
Industries, Inc. Annual Meeting of Stockholders following the end of fiscal year
1996 is expected to be held on or about January 9, 1997, and proxy materials in
connection with that meeting are expected to be mailed on or about December 2,
1996. Stockholder proposals prepared in accordance with the proxy rules must be
received by the Company on or before August 4, 1996.
GENERAL
The Board of Directors of the Company knows of no matters other than the
foregoing to be brought before the meeting. However, the enclosed proxy gives
discretionary authority in the event that any additional matters should be
presented.
The Company's Annual Report to Stockholders for the fiscal year ended August 27,
1995 is being mailed to stockholders with this Proxy Statement. Stockholders may
receive without charge a copy of the Company's Annual Report on Form 10-K,
including financial statements and schedules thereto, as filed with the
Securities and Exchange Commission, by writing to: Washington Scientific
Industries, Inc., 2605 West Wayzata Boulevard, Long Lake, Minnesota 55356,
Attention: William J. Lucke, or by calling the Company at (612)473-1271.
By Order of the Board of Directors,
Gerald E. Magnuson, Secretary
WASHINGTON SCIENTIFIC INDUSTRIES, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON JANUARY 11, 1996
The undersigned hereby appoints Michael J. Pudil, George J. Martin and
Gerald E. Magnuson, or any one or more of them, as proxies with full power of
substitution to vote all shares of stock of Washington Scientific Industries,
Inc. of record in the name of the undersigned at the close of business on
November 13, 1995 at the Annual Meeting of Stockholders to be held in
Minneapolis, Minnesota on January 11, 1996, or at any adjournment or
adjournments, hereby revoking all former proxies.
1. ELECTION OF DIRECTORS:
[ ] WITH AUTHORITY to vote for all nominees listed below
(except as marked to the contrary).
[ ] WITHHOLD AUTHORITY to vote for all nominees listed below.
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE,
STRIKE A LINE THROUGH THE NOMINEE'S NAME IN THE LIST BELOW.)
Paul Baszucki, Melvin L. Katten, T.E. Larsen,
Gerald E. Magnuson, George J. Martin, Eugene J. Mora, Michael J. Pudil
(Continued on reverse side)
(continued from other side)
2. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON ANY OTHER
MATTERS COMING BEFORE THE MEETING.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED ON PROPOSAL (1) IN
ACCORDANCE WITH THE SPECIFICATIONS MADE AND "FOR" SUCH PROPOSAL IF THERE IS NO
SPECIFICATION.
Dated ____________________________________
__________________________________________
(Signature)
__________________________________________
(Signature)
Please sign name(s) exactly as shown at
left. When signing as executor,
administrator, trustee or guardian, give
full title as such; when shares have been
issued in names of two or more persons,
all should sign.
