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: [ ] Confidential, for Use of the
[ ] Preliminary Proxy Statement Commission Only (as permitted
[X] Definitive Proxy Statement by Rule 14a-6(e)(2))
[ ] 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
[ ] $125 per Exchange Act Rule o-11(c)(1)(ii), 14a-6(i)(1) or Item
22(a)(2) of Schedule 14A
[ ] 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:
<PAGE>
[WSI LOGO]
WASHINGTON SCIENTIFIC INDUSTRIES, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
JANUARY 8, 1998
Notice is hereby given that the Annual Meeting of Stockholders of
Washington Scientific Industries, Inc. (the "Company") will be held at the
Radisson Plaza Hotel located at 35 South Seventh Street, Minneapolis, Minnesota,
on Thursday, January 8, 1998, at 3:30 p.m., Central Standard Time, for the
following purposes:
1. To approve a proposal to amend the Company's Bylaws to reduce
the number of directors to six.
2. To elect six directors to hold office until the next Annual
Meeting of Stockholders or until their successors are elected.
3. 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 10,
1997, 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 2, 1997
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.
<PAGE>
[WSI 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 8, 1998, 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 2, 1997.
The Company currently has only one class of securities, Common Stock,
of which 2,428,980 shares were issued and outstanding and entitled to vote at
the close of business on November 10, 1997. 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 six (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
10, 1997, 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.
<PAGE>
SECURITY OWNERSHIP OF PRINCIPAL
STOCKHOLDERS AND MANAGEMENT
The following table includes information as of November 10, 1997,
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.
Name and Address Percent
of Beneficial Owner Amount of Class
------------------- ------ --------
Dimensional Fund Advisors, Inc. 144,600 (1) 5.95%
1299 Ocean Avenue
Suite 1100
Santa Monica, CA 90401
Paul Baszucki(2) 5,250 (3) *
Melvin L. Katten(2) 50,050 (3) 2.06%
T.E. Larsen(2) 4,250 (3) *
Gerald E. Magnuson(2) 9,104 (3) *
George J. Martin(2) 47,300 (3) 1.94%
Eugene J. Mora(2) 5,250 (3) *
Michael J. Pudil(2)(4) 113,334 (3) 4.46%
James J. Valento(4) 6,967 (3) *
All Officers and Directors 241,505 (3) 9.38%
as a Group (8 persons)
- -------------------
* Less than one percent.
(1) Based upon information provided by Dimensional Fund Advisors, Inc. as
of June 30, 1997.
(2) Serves as a director of the Company and, except for Mr. Larsen, 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; 113,334 shares for Mr. Pudil; 6,667 shares for Mr. Valento;
and 145,501 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. REDUCTION OF THE NUMBER OF DIRECTORS
The present size of the Board of Directors is fixed at seven persons.
Mr. T. E. Larsen, a director since 1988, will not stand for re-election.
Consequently, the Board has determined that it would be in the best interests of
the Company to reduce the size of the Board to six persons. Under provisions of
the Company's Bylaws and Minnesota law, the size of the Board may only be
reduced by a vote of the stockholders.
The following resolution will be presented to the stockholders for
approval:
<PAGE>
RESOLVED, that Article III, Section 1 of the Bylaws of this
corporation be amended to read as follows:
"The business and property of the corporation shall be managed
by its Board of Directors, six (6) in number. The term of each
Director shall continue until the next annual meeting of the
corporation and until his successor is elected and qualifies."
Approval of this resolution requires the affirmative vote of a majority
of the stockholders present in person or by proxy at the Annual Meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ADOPTION OF THIS
AMENDMENT TO THE BYLAWS.
2. ELECTION OF DIRECTORS
Six directors will be elected at the Annual Meeting to serve until the
next annual meeting of stockholders or until their successors are elected. The
Board of Directors has nominated for election the six persons named below. All
of the nominees are currently directors of the Company and all were elected by
the stockholders at the 1997 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.
Principal Occupation Director
Name and Age and other Directorships Since
- ------------ ----------------------- --------
Paul Baszucki (57) Chairman of Norstan, Inc., Maple Grove, 1988
Minnesota (telecommunications); Director of
Norstan, Inc. and G&K Services, Inc.
Melvin L. Katten (61) Senior Partner of Katten Muchin & Zavis, 1985
Chicago, Illinois (law firm); Director of Star
Multicare Services, Inc.
Gerald E. Magnuson (67) Of Counsel to Lindquist & Vennum P.L.L.P., 1962
Minneapolis, Minnesota (law firm); Partner of
Lindquist & Vennum P.L.L.P. until December
1994; Secretary of the Company; Director of
PremiumWear, Inc., Research, Incorporated
and Sheldahl, Inc.
<PAGE>
George J. Martin (60) Chairman of the Company; Private 1983
Consultant; Former President, Chief Executive
Officer and Chairman of PowCon
Incorporated from 1987 to October, 1995
(manufacturer of electronic welding systems).
Eugene J. Mora (62) Private Investor; prior to October 4, 1996, 1985
President, Chief Executive Officer and
Director of Amserv Healthcare Inc., LaJolla,
California (provider of homecare services to
individuals).
Michael J. Pudil (49) President and Chief Executive Officer of the 1993
Company; Prior to November 1993, Vice
President and General Manager of Remmele
Engineering, Inc., St. Paul, Minnesota
(contract machining).
- --------------------
The Board of Directors met five times during fiscal 1997. 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
<PAGE>
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 31, 1997,
August 25, 1996 and August 27, 1995, 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 1997, whose total cash compensation exceeded $100,000 during
fiscal year 1997 (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 All Other
Name and Principal Position Year Salary Bonus Options Compensation(1)
- --------------------------- ---- ------ ----- --------- --------------
<S> <C> <C> <C> <C> <C>
Michael J. Pudil 1997 $176,021 $86,350 70,000 $2,459
President and 1996 171,979 0 10,000 2,114
Chief Executive Officer 1995 154,760 31,500 0 1,542
James J. Valento(2) 1997 86,427 42,500 10,000 1,296
Vice President, Chief 1996 68,427 0 5,000 672
Financial Officer, Treasurer, 1995 65,313 9,750 0 13,348(3)
and Assistant Secretary
</TABLE>
- -------------------------
(1) These amounts represent Company's matching contributions to the Company's
401(k) plan on behalf of such employees.
(2) Mr. Valento was elected as an officer on January 9, 1997.
(3) This amount represents a relocation allowance for Mr. Valento.
OPTION GRANTS IN FISCAL YEAR 1997
The following table contains information concerning the grant of stock
options under the Company's 1987 and 1994 Stock Option Plans to the Named
Executive Officers as of the end of fiscal year 1997.
<PAGE>
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Individual Grants
- ---------------------------------------------------------------------------- Potential Realizable Value at
Number of % of Total Assumed Annual Rates of
Securities Options/ SARs Stock Price Appreciation for
Underlying Granted to Exercise or Option Term
Options/ SARs Employees in Base Price Expiration -----------------------------
Name Granted Fiscal Year ($/Sh) Date 5% 10%
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Michael J. Pudil 20,000 21% $ 3.625 1/09/07 $ 45,500 $115,500
50,000 53% 5.625 8/26/07 176,750 448,250
James J. Valento 10,000 11% 3.625 1/09/07 22,750 57,750
</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 1997:
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 -------------------------- --------------------------
Name on Exercise Value Realized Exercisable Unexercisable Exercisable Unexercisable
- ---------------- ----------- -------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Michael J. Pudil 0 0 113,334 66,666 $389,168 $40,832
James J. Valento 0 0 6,667 8,333 13,334 17,291
</TABLE>
- ------------------
(1) Based on a per share price of $5.75, which was the closing sale price of
the Company's Common Stock on August 29, 1997, 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:
<PAGE>
Five-Year Annual Pension Upon Retirement With Years of Service Indicated
Average Basic --------------------------------------------------------------
Compensation 10 15 20 25 30
- -------------------------------------------------------------------------------
$ 50,000 $5,242 $7,863 $10,484 $13,104 $15,725
75,000 8,742 13,113 17,484 21,854 26,225
100,000 12,242 18,363 24,484 30,604 36,725
125,000 15,742 23,613 31,484 39,354 47,225
150,000 19,242 28,863 38,484 48,104 57,725
175,000 20,642 30,963 41,284 51,604 61,925
- -------------------------------------------------------------------------------
* Under the current tax laws, compensation in excess of $160,000 may not be
taken into account under the Company's pension plan. The $160,000 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, Larson 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 1997 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 periods of up to 36 months.
RELATIONSHIP OF PERFORMANCE UNDER THE COMPENSATION PLANS. In fiscal
year 1997, bonuses were paid to officers and key employees equal to 50% of their
current annual salaries, as a result of the Company's financial performance for
the year. In addition, the Company granted stock options to key employees in
order to focus the Company's key employees, including the Named Executives, on
long-term Company
<PAGE>
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. In fiscal 1997, Mr. Pudil
received a bonus of $86,350 and options to purchase 70,000 shares. All of the
options vest in increments over either 30 or 36 months.
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 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 30, 1992 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:
<PAGE>
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
[INSERT PERFORMANCE GRAPH HERE]
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
August 30, August 29, August 28, August 27 August 25 August 31,
1992 1993 1994 1995 1996 1997
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Washington Scientific $100 $78.231 $74.830 $112.245 $91.837 $155.463
Industries, Inc.
Nasdaq Stock Market (U.S.) $100 $131.920 $137.316 $164.926 $208.533 $290.974
Nasdaq Non-Financial $100 $131.378 $133.831 $182.908 $202.088 $277.497
Stocks
- --------------------------------------------------------------------------------------------------
</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.
<PAGE>
EMPLOYMENT AGREEMENTS
On January 9, 1997, the Company amended the employment agreement with
Michael J. Pudil pursuant to which Mr. Pudil is employed as the Company's
President and Chief Executive Officer. The agreement has a two-year term and
automatically renews for successive two-year terms unless either party provides
written notice to the other party of nonrenewal at least six months in advance
of the expiration of any two-year term. The agreement provides that in the event
of the termination of Pudil's employment for good reason or in the event of
termination of Pudil's employment without good cause, payments of Pudil's base
salary and the employer share of benefit premiums shall continue for eighteen
months, provided however that in the event of the termination of Pudil's
employment following a change in control of WSI, Pudil shall be entitled to
receive the compensation and benefits set forth in the change in control
agreement. On October 18, 1995, the Company entered into a change in control
agreement with Mr. Pudil. This agreement provides, among other things, for a
lump-sum cash severance payment equal to approximately three times the 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. This agreement also prohibits disclosure of confidential
information concerning the Company and requires disclosure and assignment of
inventions, discoveries and other works relating to employment. If a change in
control had occurred at the end of fiscal year 1997, Mr. Pudil would have been
entitled to the approximate payment of $492,700.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
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 31, 1997 all Section
16(a) filing requirements applicable to its insiders were complied with.
AUDITORS
On January 11, 1996, the Company appointed Ernst & Young LLP as its
independent auditors and terminated Deloitte & Touche LLP. The reports of
Deloitte & Touche LLP on the consolidated financial statements of the Company
for the fiscal year ended August 27, 1995 were unqualified and did not contain
an adverse opinion, any disclaimers, qualification or modification as to
uncertainty, audit scope, or accounting principles. In connection with the audit
of the consolidated financial statements of the Company for the fiscal year
ended August 27, 1995, and during the period commencing August 27, 1995 through
January 11, 1996,
<PAGE>
there were no disagreements or reportable events. The decision to change firms
was recommended by the Audit Committee of the Board of Directors. 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
1998 is expected to be held on or about January 9, 1999, and proxy materials in
connection with that meeting are expected to be mailed on or about December 1,
1998. Stockholder proposals prepared in accordance with the proxy rules must be
received by the Company on or before August 2, 1998.
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 31, 1997 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: James J. Valento, or by calling the Company at (612) 473-1271.
By Order of the Board of Directors,
Gerald E. Magnuson, SECRETARY
<PAGE>
WASHINGTON SCIENTIFIC INDUSTRIES, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON JANUARY 8, 1998
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 10, 1997 at the
Annual Meeting of Stockholders to be held in Minneapolis, Minnesota on January
8, 1998, or at any adjournment or adjournments, hereby revoking all former
proxies.
1. AMENDMENT OF BYLAWS TO REDUCE THE NUMBER OF DIRECTORS TO SIX.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. ELECTION OF DIRECTORS:
[ ] WITH AUTHORITY to vote for [ ] WITHHOLD AUTHORITY
all nominees listed below to vote for all nominees
(except as marked to the contrary). 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,
Gerald E. Magnuson, George J. Martin, Eugene J. Mora, Michael J. Pudil
3. 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) AND
(2) IN ACCORDANCE WITH THE SPECIFICATIONS MADE AND "FOR" SUCH PROPOSAL IF THERE
IS NO SPECIFICATION.
Dated:
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(Signature)
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(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.
