<PAGE> 1
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
WSI 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:
<PAGE> 2
[WSI LOGO]
WSI INDUSTRIES, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
JANUARY 11, 2001
Notice is hereby given that the Annual Meeting of Shareholders of WSI
Industries, Inc. (the "Company") will be held at the Radisson Plaza Hotel
located at 35 South Seventh Street, Minneapolis, Minnesota, on Thursday, January
11, 2001, at 3:30 p.m., local time, for the following purposes:
1. To approve a proposal to amend the Company's Bylaws to reduce
the number of directors to five.
2. To elect five directors to hold office until the next Annual
Meeting of Shareholders 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 13,
2000, as the record date for the determination of shareholders entitled to
notice of and to vote at the meeting.
By Order of the Board of Directors
Gerald E. Magnuson, Secretary
Minneapolis, Minnesota
December 4, 2000
TO ASSURE YOUR REPRESENTATION AT THE ANNUAL MEETING OF SHAREHOLDERS,
PLEASE SIGN, DATE AND RETURN YOUR PROXY IN THE ENCLOSED ENVELOPE, WHETHER OR NOT
YOU EXPECT TO ATTEND IN PERSON. SHAREHOLDERS 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> 3
[WSI LOGO]
WSI INDUSTRIES, INC.
PROXY STATEMENT
-----------------
This Proxy Statement is furnished to the shareholders of WSI
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
Shareholders to be held on January 11, 2001, 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
15250 Wayzata Boulevard, Wayzata, Minnesota 55391 and its telephone number is
(952) 473-1271. The mailing of this proxy statement to shareholders of the
Company commenced on or about December 4, 2000.
The Company currently has only one class of securities, Common Stock,
of which 2,465,229 shares were issued and outstanding and entitled to vote at
the close of business on November 13, 2000. Each share is entitled to one vote
and shareholders have cumulative voting rights in connection with the election
of directors in the event any shareholder 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 shareholder may cumulate votes for the
election of directors by multiplying the number of votes to which the
shareholder may be entitled by five (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 shareholders of record at the close of business on November
13, 2000, 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 Shareholders constitutes a quorum for the
transaction of business.
Under Minnesota law, each item of business properly presented at a
meeting of shareholders 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 Shareholders 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 shareholders
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.
1
<PAGE> 4
SECURITY OWNERSHIP OF PRINCIPAL
SHAREHOLDERS AND MANAGEMENT
The following table includes information as of November 13, 2000,
concerning the beneficial ownership of Common Stock of the Company by (i)
shareholders 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 4 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. Each of the
persons listed below business address is 15250 Wayzata Boulevard, Wayzata,
Minnesota, 55391.
<TABLE>
<CAPTION>
Name and Address Percent
of Beneficial Owner Amount(1) of Class
------------------- ------ --------
<S> <C> <C>
Paul Baszucki(2) 9,500 *
Melvin L. Katten(2) 55,300 2.24%
Gerald E. Magnuson(3) 11,992 *
George J. Martin(2) 53,227 2.15%
Eugene J. Mora(2) 9,500 *
Michael J. Pudil(2)(4) 208,501 7.82%
Paul D. Sheely(4) 14,334 *
All Officers and Directors 362,354 13.41%
as a Group (7 persons)
</TABLE>
-------------------
* Less than one percent.
(1) Includes shares which may be purchased within sixty days from the date
hereof pursuant to outstanding stock options in the amount of 3,750
shares for each of Messrs. Baszucki and Mora, 5,500 shares for each of
Messr. Magnuson, Martin and Katten; 200,001 shares for Mr. Pudil and
13,334 shares for Mr. Sheely; and 237,335 shares for all officers and
directors as a group.
(2) Serves as a director of the Company and has been nominated for
re-election.
(3) Serves as a director of the Company.
(4) Serves as an executive officer of the Company and appears in the table
on page 4 hereof.
1. REDUCTION OF THE NUMBER OF DIRECTORS
The present size of the Board of Directors is fixed at six persons. Mr.
Gerald E. Magnuson, a director since 1962, is retiring as of January 11, 2001.
Consequently, the Board has determined that it would be in the best interest of
the Company to reduce the size of the Board to five 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 Company's shareholders.
The following resolution will be presented to the shareholders for
approval:
2
<PAGE> 5
RESOLVED, that Article III, Section 1 of the Restated and Amended
Bylaws of this Company be amended to read as follows:
"The business and property of the corporation shall be managed
by its Board of Directors, five (5) 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 the
holders of a majority of the shares.
2. ELECTION OF DIRECTORS
Five directors will be elected at the Annual Meeting to serve until the
next annual meeting of shareholders or until their successors are elected. Mr.
Magnuson is retiring from the Board of Directors. The Board of Directors has
nominated for election the five persons named below. All of the nominees are
currently directors of the Company and all were elected by the shareholders at
the 2000 Annual Meeting of Shareholders. 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>
Principal Occupation Director
Name and Age and other Directorships Since
------------ ----------------------- -------
<S> <C> <C>
Paul Baszucki (60) Chairman of Norstan, Inc., Minnetonka, 1988
Minnesota (technology); Director of
Norstan, Inc. and G&K Services, Inc.
Melvin L. Katten (64) Senior Partner of Katten Muchin & Zavis, 1985
Chicago, Illinois (law firm).
George J. Martin (63) Chairman of the Company; Private 1983
Investor; prior to October 1995,
President, Chief Executive Officer and
Chairman of PowCon Incorporated
(manufacturer of electronic welding
systems).
Eugene J. Mora (65) Private Investor; prior to October 4, 1996, 1985
President, Chief Executive Officer and
Director of Amserv Healthcare Inc., LaJolla,
California (provider of home care services to
individuals).
</TABLE>
3
<PAGE> 6
<TABLE>
<S> <C> <C>
Michael J. Pudil (52) 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).
</TABLE>
--------------------
The Board of Directors met five times during fiscal 2000. 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 three times during
the last fiscal year, is currently comprised of Messrs. Magnuson (Chair),
Baszucki, Katten and Martin. 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 two times during the last fiscal year,
is currently comprised of Messrs. Mora (Chair), Baszucki and Katten. 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 shareholder 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 shareholders to the Secretary of the
Company not less than 45 days nor more than 75 days prior to the date
corresponding to the date of mailing of the proxy materials for the previous
year's Annual Meeting. The notice to the Company from a shareholder who intends
to nominate a person at the meeting for election as a director must contain
certain information about such shareholder and the person(s) nominated by such
shareholder, including, among other things, the name and address of record of
such shareholder, a representation that the shareholder 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
shareholder 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 shareholders 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, 2000,
August 29, 1999 and August 30, 1998, 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 Paul
Sheely, the Company's VP of Finance and Chief Financial Officer.
4
<PAGE> 7
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 2000 $204,282 $71,499 20,000 $5,990
President and 1999 194,602 -- 20,000 2,292
Chief Executive Officer 1998 182,977 91,488 0 2,131
Paul D. Sheely 2000 113,747 39,811 10,000 3,023
Vice President and 1999 97,933 -- 15,000 --
Chief Financial Officer
</TABLE>
(1) These amounts represent Company's matching contributions to the Company's
401(k) plan on behalf of such employee.
OPTION GRANTS IN FISCAL YEAR 1999
The following table contains information concerning the grant of stock
options under the Company's 1987 and 1994 Stock Option Plans to Mr. Pudil and
Mr. Sheely as of the end of fiscal year 2000.
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Individual Grants
---------------------------------------------------------------------------------------------------------------------------
% of Total Potential Realizable Value at
Number of Options/ Assumed Annual Rates of
Securities SARs Stock Price Appreciation for
Underlying Granted to Exercise or Option Term
Options/ SARs Employees in Base Price Expiration ----------------------------
Name Granted Fiscal Year ($/Sh) Date 5% 10%
----------------------- ------------------ --------------- -------------- --------------- -------------------------------
<S> <C> <C> <C> <C> <C> <C>
Michael J. Pudil 20,000 44% $4.125 01/05/10 $51,900 $131,500
Paul D. Sheely 10,000 22% $4.125 01/05/10 $25,900 $ 65,700
</TABLE>
------------------
OPTION EXERCISES AND HOLDINGS
The following table sets forth information with respect to Mr. Pudil and
Mr. Sheely, concerning the exercise of options during the last fiscal year and
unexercised options held as of the end of fiscal year 2000:
5
<PAGE> 8
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 0 200,001 19,999 $246,667 $3,333
Paul D. Sheely 0 0 13,334 6,666 834 1,667
</TABLE>
----------------
(1) Based on a per share price of $4.375, which was the closing sale price
of the Company's Common Stock on August 25, 2000, the last trading day
of the Company's fiscal year.
PENSION PLAN
On October 21, 1999, the Company's Board of Directors voted to
terminate the Company's pension plan for all employees of the Company, including
executive officers, effective January 31, 2000. After January 31, 2000, the
plan's assets were frozen until the Company received the necessary approvals to
distribute such assets to the plan's participants. On August 14 and October 4,
2000 the plan's assets were distributed to the participants according to each
participants individual directions.
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 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 2000 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 and performance objectives 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.
6
<PAGE> 9
Relationship of Performance Under the Compensation Plans. In fiscal
year 2000, $111,310 in bonuses were paid to the Named Executives. In addition,
the Company granted stock options to the Named Executives in order to focus them
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. In fiscal 2000, Mr. Pudil
received a bonus of $71,499.
SUBMITTED BY THE COMPENSATION COMMITTEE OF THE COMPANY'S
BOARD OF DIRECTORS:
Paul Baszucki Melvin L. Katten 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 retired from 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. In
addition, Mr. Magnuson is retiring from the Company's Board of Directors on
January 11, 2001. It is anticipated that Lindquist & Vennum P.L.L.P. will
continue to perform legal services for the Company during the current fiscal
year.
BOARD AUDIT COMMITTEE REPORT
The Audit Committee of the Board of Directors is responsible for
providing independent, objective oversight of the Company's financial reporting
system by overseeing and monitoring management's and the independent auditors'
participation in the financial reporting process. The Audit Committee is
comprised of independent directors, and acts under a written charter first
adopted and approved by the Board of Directors on June 1, 2000, a copy of which
is attached to this Proxy Statement as Appendix A. Each of the members of the
Audit Committee is independent as defined by the Nasdaq listing standards.
The Audit Committee held two meetings during fiscal year 2000. The
meetings were designed to facilitate and encourage private communication between
the Audit Committee and the Company's independent accountants, Ernst & Young
LLP.
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<PAGE> 10
During this meetings, the Audit Committee reviewed and discussed the
audited financial statements with management and Ernst & Young LLP. Management
represented to the Audit Committee that the Company's consolidated financial
statements were prepared in accordance with generally accepted accounting
principles, and the Audit Committee has reviewed and discussed the consolidated
financial statements with management and the independent accountants. The
discussions with Ernst & Young LLP also included the matters required by
Statement on Auditing Standards No. 61 (Communication with Audit Committees).
Ernst & Young LLP provided to the Audit Committee the written
disclosures and the letter regarding its independence as required by
Independence Standards Board Standard No. 1 (Independence Discussions with Audit
Committees). This information was discussed with Ernst & Young LLP.
Based on the discussions with management and Ernst & Young LLP., the
Audit Committee's review of the representations of management and the report of
Ernst & Young LLP., the Audit Committee recommended to the Board that the
audited consolidated financial statements be included in the Company's Annual
Report on Form 10-K for the year ended August 27, 2000 filed with the Securities
and Exchange Commission.
SUBMITTED BY THE AUDIT COMMITTEE OF THE COMPANY'S BOARD OF DIRECTORS:
Eugene J. Mora Paul Baszucki Melvin L. Katten
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.
PERFORMANCE GRAPH
The Securities and Exchange Commission requires that the Company
include in this Proxy Statement a line graph presentation comparing cumulative,
five-year shareholder 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 27, 1995 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:
8
<PAGE> 11
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
[GRAPHIC_OMITTED]
<TABLE>
<CAPTION>
Aug 27, Aug. 25, Aug. 31, Aug. 30, Aug. 29, Aug 27,
1995 1996 1997 1998 1999 2000
----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
WSI Industries Inc. $100 $ 81.818 $139.394 $160.606 $ 83.333 $106.061
----------------------------------------------------------------------------------------------------------------------------
Nasdaq Stock Market (U.S.) $100 $112.793 $157.355 $148.695 $276.250 $421.804
----------------------------------------------------------------------------------------------------------------------------
Nasdaq Non-Financial Stocks $100 $110.476 $151.618 $140.699 $272.616 $430.752
----------------------------------------------------------------------------------------------------------------------------
</TABLE>
Since the Company's fiscal year ends on the last Sunday of August each
year, data in the above table reflects market values for the Company's stock as
of the close of trading on the Friday preceding the Company's fiscal year end
for each year presented but reflects market values for the Nasdaq indices as of
August 31 of each year.
DIRECTOR COMPENSATION
Directors who are not employees of the Company (currently all directors
except Mr. Pudil) were paid an annual retainer of $5,000 for calendar year 1999
and will be paid an annual retainer of $5,000 for calendar year 2000. Each
non-employee director is paid 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 $10,000 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-
9
<PAGE> 12
election to the Board by the shareholders an option to purchase 2,000 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
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 shareholders 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 2000, Mr. Pudil would have been
entitled to the approximate payment of $728,000.
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.
10
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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, 2000 all Section
16(a) filing requirements applicable to its insiders were complied with.
AUDITORS
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.
SHAREHOLDER PROPOSALS FOR 2002 ANNUAL MEETING
The proxy rules of the Securities and Exchange Commission permit
shareholders of the Company, after timely notice to the Company, to present
proposals for shareholder action in the Company's proxy statement where such
proposals are consistent with applicable law, pertain to matters appropriate for
shareholder action and are not properly omitted by Company action in accordance
with the Commission's proxy rules. The next annual meeting of the shareholders
of the Company is expected to be held on or about January 10, 2002 and proxy
materials in connection with that meeting are expected to be mailed on or about
December 1, 2001. Shareholder proposals prepared in accordance with the
Commission's proxy rules must be received at the Company's corporate office on
or before August 4, 2001, in order to be considered for inclusion in the Board
of Directors' Proxy Statement and proxy card for the 2002 Annual Meeting of
Shareholders. Any such proposals must be in writing and signed by the
shareholder.
The Bylaws of the Company establish an advance notice procedure with
regard to (i) certain business to be brought before an annual meeting of
shareholders of the Company and (ii) the nomination by shareholders of
candidates for election as directors.
Properly Brought Business. The Bylaws provide that at the annual
meeting only such business may be conducted as is of a nature that is
appropriate for consideration at an annual meeting and has been either specified
in the notice of the meeting, otherwise properly brought before the meeting by
or at the direction of the Board of Directors, or otherwise properly brought
before the meeting by a shareholder who has given timely written notice to the
Secretary of the Company of such shareholder's intention to bring such business
before the meeting. To be timely, the notice must be given by such shareholder
to the Secretary of the Company not less than 45 days nor more than 75 days
prior to a date corresponding to the date of mailing of the proxy materials for
the previous year's annual meeting. Notice relating to the conduct of such
business at an annual meeting must contain certain information as described in
the Company's Bylaws, which are available for inspection by shareholders at the
Company's principal executive offices pursuant to Section 302A.461, subd. 4 of
the Minnesota Statutes. Nothing in the Bylaws precludes discussion by any
shareholder of any business properly brought before the annual meeting in
accordance with the Company's Bylaws.
Shareholder Nominations. The Bylaws provide that a notice of proposed
shareholder 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 shareholder to
the Secretary of the Company not less than 45 days nor more than 75 days prior
to a date corresponding to the date of mailing of the proxy materials for the
previous year's annual meeting. The notice to the Company from a shareholder who
intends to nominate a person at the meeting for election as a director must
contain certain information as described in the Company's Bylaws, which are
available
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for inspection by shareholders as described above. If the presiding officer of a
meeting of shareholders determines that a person was not nominated in accordance
with the foregoing procedure, such person will not be eligible for election as a
director.
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 Shareholders for the fiscal year ended
August 27, 2000 is being mailed to shareholders with this Proxy Statement.
Shareholders 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: WSI Industries, Inc.,
15250 Wayzata Boulevard, Wayzata, MN 55391, Attention: Paul D. Sheely, or by
calling the Company at (952) 473-1271.
By Order of the Board of Directors,
Gerald E. Magnuson, Secretary
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<PAGE> 15
APPENDIX A
WSI INDUSTRIES, INC.
AUDIT COMMITTEE CHARTER
Responsibilities and Authority
The Audit Committee reports to the Board of Directors. Its primary
focus is to assist the Board in fulfilling its responsibilities to shareholders
related to financial accounting and reporting, the system of internal controls
established by management and the adequacy of auditing relative to these
activities. The Committee is granted the authority to investigate any activity
of the Company and it is empowered to retain persons having special competence
as necessary to assist the Committee in fulfilling its responsibilities. In
addition, the Committee will perform such other functions as assigned by law,
the Company's Bylaws or the Board of Directors.
Membership
The Committee shall be composed of not less than three members,
appointed annually by the Board. The Committee shall be composed of directors
who are independent of the management of the Company and are free of any
relationship that, in the opinion of the Board of Directors, would interfere
with their exercise of independent judgment as a Committee member.
Meetings
The Committee shall meet at least four times a year. The agenda of each
meeting will generally be prepared by the Chief Financial Officer or equivalent
("Finance Officer"), with input from the Committee Chairman and Committee
members, and circulated to each member of the Committee prior to the meeting
date. The Committee may ask members of management or others to attend meetings
and provide pertinent information as necessary.
Specific Duties
Relationship with Independent Accountant
o The outside auditor is accountable to the Board of Directors.
The Audit Committee shall provide for an open avenue of
communications between the independent accountant and the
Board and, at least once annually, meet with the independent
accountants in private session.
o As shareholder representatives, the Board of Directors shall
exercise the ultimate authority and responsibility to select,
evaluate and, where appropriate, replace the independent
accountant upon the recommendation of the Audit Committee. In
connection with this duty, the Committee shall receive on an
annual basis a written statement from the independent
accountant detailing all relationships between the independent
accountant and the Company, consistent with
<PAGE> 16
requirements of the Independence Standards Board. The
Committee shall review services performed by the independent
accountants, including the type and extent of non-audit
services performed and the impact that these services may have
on the public accountant's independence.
o Review with the independent accountants (1) the proposed scope
of their examination with emphasis on accounting and financial
areas where the Committee, the accountants or management
believe special attention should be directed; (2) results of
their audit, including their opinion on the financial
statements and the independent accountant's judgment on the
quality, not just the acceptability, of the Company's
accounting principles as applied in the financial statements;
(3) their evaluation of the adequacy of the system of internal
controls; (4) significant disputes, if any, with management;
and (5) cooperation received from management in the conduct of
the audit.
Relationship with the Accounting Department
o The Finance Officer is accountable to the Chairman of the
Committee. The Audit Committee shall provide for an open
avenue of communication between the Accounting Department and
the Board and, at least once annually, meet with the Finance
Officer in private session.
o Review and concur in the appointment, replacement,
reassignment or dismissal of the Finance Officer and review
his/her independence from management.
o Review the Accounting Department's mission, objectives and
resources and its annual plan, including its coordination with
the independent accountants.
o Review the results of Internal Audit activities and its
evaluation of the system of internal controls and discuss with
the Finance Officer any difficulties encountered in the course
of audits, including any restrictions on the scope of work or
access to required information.
Relationship with Management
o Before publication, review the quarterly and annual financial
statements and related footnotes with both management and the
independent accountant.
o Review any significant changes in accounting principles.
o Review significant accounting, reporting, regulatory or
industry developments affecting the Company.
Other
o Periodically review, with management and the Finance Officer,
programs
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<PAGE> 17
established to monitor compliance with the Company's code of
conduct, including the Foreign Corrupt Practices Act.
o Discuss with management, the independent accountant and the
Finance Officer any issues regarding significant risks or
exposures and assess the steps management has taken to
minimize such risk.
o Review policies and procedures with respect to officers'
expense accounts and perquisites, including their use of
corporate assets, and consider the results of any review of
these areas by the independent accountant or Internal Audit.
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<PAGE> 18
WSI INDUSTRIES, INC.
ANNUAL MEETING OF STOCKHOLDERS
THURSDAY, JANUARY 11, 2001
3:30 P.M.
RADISSON PLAZA HOTEL
35 SOUTH SEVENTH STREET
MINNEAPOLIS, MN 55402
WSI INDUSTRIES, INC.
15250 WAYZATA BOULEVARD, WAYZATA MN, 55391 PROXY
--------------------------------------------------------------------------------
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS FOR USE AT THE ANNUAL MEETING
ON JANUARY 11, 2001.
The shares of stock you hold in your account or in a dividend reinvestment
account will be voted as you specify below.
IF NO CHOICE IS SPECIFIED, THE PROXY WILL BE VOTED "FOR" ITEMS 1 AND 2.
By signing the proxy, you revoke all prior proxies and appoint George J. Martin,
and Michael J. Pudil, and each of them, with full power of substitution, to vote
your shares on the matters shown on the reverse side and any other matters which
may come before the Annual Meeting and all adjournments.
See reverse for voting instructions.
<PAGE> 19
- Please detach here -
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1, 2, 3 AND 4.
1. Election of directors: 01 Paul Baszucki 04 Eugene J. Mora
02 Melvin L. Katten 05 Michael J. Pudil
03 George J. Martin
[ ] Vote For [ ] Vote Withheld
all nominees from all nominees
(except as marked)
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDICATED NOMINEE,
WRITE THE NUMBER(S) OF THE NOMINEE(S) IN THE BOX PROVIDED TO THE RIGHT.)
[ ]
2. AMENDMENT OF BYLAWS TO REDUCE THE NUMBER OF DIRECTORS TO FIVE.
[ ] For [ ] Against [ ] Abstain
3. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON ANY OTHER
MATTERS COMING BEFORE THE MEETING.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED OR, IF NO DIRECTION
IS GIVEN, WILL BE VOTED FOR EACH PROPOSAL.
Address Change? Mark Box [ ]
Indicate changes below:
Date________________________________
____________________________________________
Signature(s) in Box
Please sign exactly as your name(s) appear
on Proxy. If held in joint tenancy, all
persons must sign. Trustees, administrators,
etc., should include title and authority.
Corporations should provide full name of
corporation and title of authorized officer
signing the proxy.
