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
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to [ ] Rule 240.14a-11(c)
or [ ] Rule 240.14a-12
WASHINGTON SCIENTIFIC INDUSTRIES, INC.
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transactions applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
[LOGO]
WSI
WASHINGTON SCIENTIFIC INDUSTRIES, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
JANUARY 9, 1997
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 9, 1997, 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 11,
1996, 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
November 27, 1996
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 COMPANY.
[LOGO]
WSI
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 9, 1997, 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 November 27, 1996.
The Company currently has only one class of securities, Common Stock, of
which 2,420,850 shares were issued and outstanding and entitled to vote at the
close of business on November 11, 1996. 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
11, 1996, 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 11, 1996,
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.
<TABLE>
<CAPTION>
PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNER AMOUNT OF CLASS
- ------------------------------------ ------ --------
<S> <C> <C>
Dimensional Fund Advisors, Inc. 144,600(1) 5.97%
1299 Ocean Avenue
Suite 1100
Santa Monica, CA 90401
Paul Baszucki(2) 13,250(3) *
Melvin L. Katten(2) 49,050(3) 2.02%
T.E. Larsen(2) 4,250(3) *
Gerald E. Magnuson(2) 8,974(3) *
George J. Martin(2) 39,300(3) 1.62%
Eugene J. Mora(2) 5,250(3) *
Michael J. Pudil(2)(4) 103,334(3) 4.09%
William J. Lucke(4) 17,542(3) *
All Officers and Directors as a Group (8 persons) 240,950(3) 9.42%
</TABLE>
- ------------------------------
* 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, Martin and Mora;
103,334 shares for Mr. Pudil; 7,667 shares for Mr. Lucke; and 136,501
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.
1. 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 1996 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 (56) 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 (60) Senior Partner of Katten Muchin & Zavis, Chicago, Illinois (law firm). 1985
T.E. Larsen (69) President of Advanced Innovation, Inc., Edina, Minnesota (research 1988
and development enterprise).
Gerald E. Magnuson (66) Of Counsel to Lindquist & Vennum P.L.L.P., Minneapolis, Minnesota 1962
(law firm); Partner of Lindquist & Vennum P.L.L.P. until December
1994; Secretary of the Company; Director of PremiumWear, Inc. (f/k/a
Munsingwear, Inc.), Research, Incorporated and Sheldahl, Inc.
George J. Martin (59) 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 (61) Private Consultant; prior to October 4, 1996, President, Chief Executive 1985
Officer and Director of AMSERV HEALTHCARE INC., LaJolla, California
(provider of homecare services to individuals).
Michael J. Pudil (48) 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 five times during fiscal 1996. Each current
director 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 two times 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 25, 1996,
August 27, 1995, and August 28, 1994, the cash compensation paid by the Company,
as well as certain other compensation paid or accrued for those years, to
Michael 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 1996, whose total cash compensation exceeded $100,000 during
fiscal year 1996 (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 1996 $171,979 $0 10,000 $2,114
President and 1995 154,760 31,500 0 1,542
Chief Executive Officer 1994 119,423(2) 100,000 100,000 0
William J. Lucke 1996 122,151 0 5,000 1,587
Vice President, Treasurer 1995 116,153 34,352(3) 0 1,703
and Assistant Secretary 1994 103,900 0 4,000 1,538
</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.
(3) Includes a bonus payment of $10,390 to Mr. Lucke which was paid in fiscal
year 1995 and the remaining amounts were paid subsequent to fiscal year 1995 for
performance in that fiscal year.
OPTION GRANTS IN FISCAL YEAR 1996
The following table contains information concerning the grant of stock
options under the Company's 1987 and 1994 Stock Option Plans to the Named
Executive Officers as of the end of fiscal year 1996.
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF STOCK
NUMBER OF % OF TOTAL PRICE APPRECIATION
SECURITIES OPTIONS/ SARS EXERCISE FOR
UNDERLYING GRANTED TO OR BASE OPTION TERM
OPTIONS/ EMPLOYEES PRICE EXPIRATION ---------------------
NAME SARS GRANTED IN FISCAL YEAR ($/SH) DATE 5% 10%
- ---- ------------ -------------- -------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Michael J. Pudil 10,000 29% $3.875 1/11/06 $24,370 $61,760
William J. Lucke 5,000 14% 3.875 1/11/06 12,185 30,880
</TABLE>
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 1996:
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED IN-THE-
UNDERLYING UNEXERCISED MONEY OPTIONS/SARS
OPTIONS/SARS AT FY-END AT FY-END(1)
---------------------------- -----------------------------
SHARES
ACQUIRED VALUE
NAME ON EXERCISE REALIZED(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Michael J. Pudil 0 $ 0 103,334 6,666 $125,000 $0
William J. Lucke 4,250 531 7,667 3,333 7,250 0
</TABLE>
- --------------------------
(1) Based on a per share price of $3.375, which was the closing sale price of
the Company's Common Stock on August 23, 1996, 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:
<TABLE>
<CAPTION>
FIVE-YEAR ANNUAL PENSION UPON RETIREMENT WITH YEARS OF SERVICE INDICATED
AVERAGE BASIC --------------------------------------------------------------
COMPENSATION 10 15 20 25 30
------------- -- -- -- -- --
<S> <C> <C> <C> <C> <C>
$ 50,000 $ 5,345 $ 8,018 $10,691 $13,364 $16,036
75,000 8,845 13,268 17,691 22,114 26,536
100,000 12,345 18,518 24,691 30,864 37,036
125,000 15,845 23,768 31,691 39,614 47,536
150,000 19,345 29,018 38,691 48,364 58,036
175,000 19,345 29,018 38,691 48,364 58,036
</TABLE>
* Under the current tax laws, compensation in excess of $150,000 may not be
taken into account under the Company's pension plan. The$150,000 amount is
subject to adjustment by the Secretary of the Treasury in $10,000 increments for
increases in the cost of living.
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 1996 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 period of either 24 months or 30 months.
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 a now-expired 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 options were granted to any executive officer in fiscal 1995. In
fiscal 1996, no cash bonuses were earned but there were cash bonuses paid in
1996 which were earned in 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 compensation for Mr. Pudil was determined by using a process
and philosophy similar to that used for all executives.
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. Mr. Magnuson receives no financial benefit on account of
amounts paid by the Company to Lindquist & Vennum P.L.L.P. for such legal
services. 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 25, 1991 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 PLOT POINTS}
<TABLE>
<CAPTION>
AUGUST 25, AUGUST 30, AUGUST 29, AUGUST 28, AUGUST 27, AUGUST 25,
1991 1992 1993 1994 1995 1996
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Washington Scientific Industries,
Inc. $100 $ 87.50 $ 68.45 $ 65.48 $ 98.21 $ 80.36
NASDAQ Stock Market (U.S.) $100 $108.45 $143.07 $148.91 $200.55 $226.17
NASDAQ Non-Financial Stocks $100 $103.19 $135.36 $138.09 $188.69 $208.36
</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, except that no
payments are made for Committee meetings which immediately precede or follow a
Board meeting. 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.
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 10 years.
EMPLOYMENT AGREEMENTS
The Company entered into employment agreements with Mr. Pudil on October
18, 1995 and Mr. Lucke on April 24, 1986, as amended on June 29, 1989. 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 of 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 1996, Mr. Pudil and Mr. Lucke would have been entitled to the
approximate payment indicated pursuant to the employment agreements: Mr. Pudil,
$666,278, Mr. Lucke, $365,976; all current executive officers as a group,
$1,032,254.
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 25, 1996 all Section
16(a) filing requirements applicable to its insiders were complied with.
AUDITORS
On January 11, 1996, the Company terminated Deloitte & Touche LLP as its
independent auditors and appointed Ernst & Young LLP as the Company's
independent auditors. The reports of Deloitte & Touche LLP on the consolidated
financial statements of the Company for the fiscal years ended August 27, 1995
and August 28, 1994 were unqualified and did not contain an adverse opinion, any
disclaimers, qualification or modification as to uncertainty, audit scope, or
accounting principles. The decision to change firms was recommended by the Audit
Committee of the Board of Directors. In connection with the audits of the
consolidated financial statements of the Company for the fiscal years ended
August 27, 1995 and August 28, 1994, and during the period commencing August 27,
1995 through January 11, 1996, there were no disagreements or reportable events.
A representative of Ernst & Young LLP is expected to be present at the Meeting,
will be given an opportunity to make a statement and will be available to answer
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
1997 is expected to be held on or about January 8, 1998, and proxy materials in
connection with that meeting are expected to be mailed on or about December 1,
1997. Stockholder proposals prepared in accordance with the proxy rules must be
received by the Company on or before August 3, 1997.
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 25, 1996 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 9, 1997
The undersigned hereby appoints George J. Martin, Gerald E. Magnuson,
Michael J. Pudil, or any 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 11, 1996 at the
Annual Meeting of Stockholders to be held in Minneapolis, Minnesota on January
9, 1997, or at any adjournment or adjournments, hereby revoking all former
proxies.
1. ELECTION OF DIRECTORS:
[ ] WITH AUTHORITY to vote for all [ ] WITHHOLD AUTHORITY to vote
nominees listed below (except as for all nominees listed below.
marked to the contrary).
(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.
