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 14a-11(c) or Rule 14a-12
- -------------------------------------------------------------------------------
WTC Industries, Inc.
- -------------------------------------------------------------------------------
Payment of Filing Fee (Check the appropriate box):
|X| $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2)
or Items 22(a)(2) of Schedule A.
|_| $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transactions applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11. (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:
WTC INDUSTRIES, INC.
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
OCTOBER 29, 1996
-------------------------------------------------------------
Notice is hereby given that the Annual Meeting of Shareholders of WTC
Industries, Inc. will be held at the Crowne Plaza Northstar Hotel, 618 Second
Ave. S., Minneapolis, Minnesota on Tuesday, October 29, 1996 at 3:00 p.m.,
Central Standard Time, for the following purposes:
1. To elect the members of the board of directors to hold office
until the next Annual Meeting of Shareholders or until their
successors are elected.
2. To consider and act upon a proposal to ratify and approve the
WTC Industries, Inc. 1996 Stock Plan.
3. To ratify the appointment of Deloitte & Touche LLP as
independent auditors for the Company for the current fiscal
year.
4. 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 September 23,
1996 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,
Gregory P. Jensen, SECRETARY
Minneapolis, Minnesota
September 30, 1996
ALL SHAREHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON. HOWEVER,
TO ENSURE YOUR REPRESENTATION AT THE MEETING, YOU ARE URGED TO VOTE, SIGN AND
RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE IN THE POSTAGE-PAID ENVELOPE
ENCLOSED FOR THAT PURPOSE, WHETHER OR NOT YOU EXPECT TO ATTEND IN PERSON.
WTC INDUSTRIES, INC.
-----------------------------------
PROXY STATEMENT
-----------------------------------
This Proxy Statement is furnished to the shareholders of WTC
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 October 29, 1996.
The cost of this solicitation will be borne by the Company. In addition
to the 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, 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. If not so revoked, the shares represented by
such proxy will be voted as specified by the shareholder. The shares represented
by proxies that are signed but which lack any such specification will be voted
in favor of the proposals set forth in the Notice of Annual meeting of
Shareholders and in favor of the slate of directors proposed by the Board of
Directors and listed herein.
The Company has outstanding only one class of stock, $.01 par value per
share Common Stock, of which 10,691,698 shares were issued and outstanding and
entitled to vote at the close of business of September 23, 1996. Each share of
Common Stock is entitled to one vote. Cumulative voting in the election of
directors is not permitted. Only shareholders of record at the close of business
on September 23, 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 stock entitled
to vote at the Annual Meeting of Shareholders constitutes a quorum for the
transaction of business.
Under Delaware law and the Bylaws of the Company, 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. 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, although there is no definitive statutory or case
authority in Delaware as to the proper treatment of abstentions, 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.
The Company's corporate offices are located at 14405 - 21st Avenue
North, Minneapolis, Minnesota 55447, and its telephone number is (612) 473-1625.
The mailing of this Proxy Statement to shareholders of the Company commenced on
or about September 30, 1996.
SECURITY OWNERSHIP OF PRINCIPAL SHAREHOLDERS AND MANAGEMENT
The following table includes information as of September 1, 1996
concerning the beneficial ownership of Common Stock of the Company by each
person who is known to the Company to beneficially hold more than five percent
of the Common Stock of the Company, each of the directors of the Company, each
executive officer named in the Summary Compensation Table below, and all
directors and officers of the Company as a group. Unless otherwise indicated,
all shares represent sole voting and investment power.
<TABLE>
<CAPTION>
Name and Address Amount and Nature of Percent
of Beneficial Owner Beneficial Ownership(1) of Class
------------------- ----------------------- --------
<S> <C> <C>
Robert C. Klas, Sr.(2)(3)(4) 9,403,918 71.78 %
150 East Marie Avenue
West St. Paul, MN 55118
Robert C. Klas, Jr.(2)(5) 8,750 * %
150 East Marie Avenue
West St. Paul, MN 55118
John A. Clymer (2)(6) 19,500 * %
839 Third Street
Hudson, WI 54016
Biloine W. Young (2)(6) 17,500 * %
15 Crocus Hill
St. Paul, MN 55102
Jan H. Magnusson (7) 1,594,486 14.91 %
300 S. Owasso Blvd.
St. Paul, MN 55117
David M. Botts (3)(8) 41,975 * %
5936 Ridgewood Road
Mound, MN 55364
Gregory P. Jensen (3) -- * %
3809 Azalea Place
Burnsville, MN 55337
All Directors and Officers 11,086,129 84.28 %
as a Group (6 persons)(9)(10)
</TABLE>
- -----------------------
* Less than 1%
(1) Unless otherwise indicated, each person has sole voting and dispositive
power over such shares.
(2) Serves as a director of the Company and has been nominated for
re-election.
(3) Serves as an executive officer of the Company.
(4) Includes: a) a warrant to purchase 2,400,000 shares of Common Stock on
or before March 22, 2001; b) 25,000 shares of Common Stock and a
warrant to purchase an additional 10,000 shares of Common Stock on or
before May 31, 1997, held by The Tapemark Company Cash or Deferred
Profit Sharing Plan; and c) 200,000 shares of Common Stock held by The
Tapemark Company Cash or Deferred Profit Sharing Plan.
(5) Includes warrants to purchase 2,500 shares of Common Stock.
(6) Includes warrants to purchase 5,000 shares of Common Stock on or before
May 31, 1997.
(7) Mr. Magnusson resigned as Chief Executive Officer of the Company on
April 12, 1996.
(8) Includes 40,000 shares of Common Stock which may be acquired upon the
exercise of stock options which are vested now or within sixty days.
(9) Does not include the shares beneficially owned by Mr. Magnusson, since
he is no longer an executive officer of the Company.
(10) Includes warrants to purchase 2,426,250 shares of Common Stock and
stock options to purchase 40,000 shares of Common Stock.
EXECUTIVE COMPENSATION AND OTHER INFORMATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table shows, for the fiscal years ending December 31,
1995, 1994 and 1993, the cash compensation paid by the Company, as well as
certain other compensation paid or accrued for those years, to Jan H. Magnusson,
the Company's former Chief Executive Officer, who resigned on April 12, 1996,
and Stanley I. Barenbaum, the Company's former President and Chief Operating
Officer, who resigned on July 1, 1995 (the "Named Executives"). None of the
Company's other executive officers received more than $100,000 in cash
compensation during fiscal year 1995.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long Term
Compensation
Annual Compensation Awards
--------------------------------------------------------------------------
Securities
Name and Principal Underlying All Other
Position Year Salary Bonus Other Options/SARs Compensation
- ---------------------- ---- ------ ----- ----- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Jan H. Magnusson 1995 $84,000 -- $6,600 -- --
Former Chief Executive 1994 -- -- -- --
Officer(1) 1993 -- -- -- --
Stanley I. Barenbaum 1995 71,194 -- 98,624 -- --
Former Chief Executive 1994 93,750 -- 45,000 200,000 --
Officer (2) 1993 -- -- -- --
</TABLE>
- ----------------------
(1) Mr. Magnusson served as the Company's Chief Executive Officer from
January 9, 1995 to April 12, 1996. Of the total 1995 salary shown,
$73,350 was accrued as of December 31, 1995. Of this accrued amount,
$37,039 was paid in 1996 and $36,311 will be paid in 1997. Effective as
of April 13, 1996, Robert C. Klas, Sr. was elected as the Company's
Chief Executive Officer.
(2) Mr. Barenbaum served as the Company's President and Chief Operating
Officer from April 1, 1994 to July 1, 1995. Of the $98,624 of other
compensation earned in 1995, $54,812 was paid in 1995 and $43,812 was
paid in 1996.
OPTION HOLDINGS
No stock options were granted to the Named Executive Officers in fiscal
year 1995 and none of the Named Executive Officers exercised any options during
fiscal 1995. The following table sets forth information with respect to the
Named Executives concerning the options held as of December 31, 1995:
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money
Options Options
at FY-End at Fiscal Year-End(1)
---------------------- ---------------------
Shares Acquired Value
Name on Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Jan H. Magnusson -- -- -- -- -- --
Stanley I. Barenbaum -- -- -- 200,000 -- $400,000
</TABLE>
(1) Based on a per share price of $2.875, which was the closing sale price
for the Company's Common Stock on December 29, 1995, the last trading
day of the Company's fiscal year.
DIRECTOR COMPENSATION
The Company does not pay any cash fee or other cash compensation to
directors who are not employed by the Company. Under the Company's 1994
Non-Qualified Stock Option Plan, which was approved by shareholders on July 27,
1994 the members of the Company's Board of Directors who are not employed by the
Company are automatically granted at each annual meeting of stockholders a stock
option covering a number of shares equal to $10,000 divided by the fair market
value of the Company's Common Stock on the date of grant.
Under the proposed 1996 Stock Plan (see Proposal 2 below), in lieu of
any further options under the 1994 Non-Qualified Stock Option Plan, each
director who is not a salaried employee of the Company will be automatically
awarded upon approval of the 1996 Plan by shareholders, and at each re-election
as a director thereafter, a non-qualified stock option covering a number of
shares equal of $10,000 divided by the fair market value on the Company's Common
Stock on the date of grant, provided that no individual option will cover more
than 5,000 shares.
CERTAIN TRANSACTIONS
The Company's largest customer in 1994 and second largest in 1993 was
Water and Air Purification Corporation ("WAPCO"), which was wholly owned and
controlled by Jan Magnusson until certain of its assets and liabilities were
acquired by the Company on December 30, 1994. Net sales by the Company to WAPCO
were $99,364 in 1994. On December 30, 1994, the Company also acquired Ecomaster
Corporation (Ecomaster), an affiliate of WAPCO, through the merger of Ecomaster
into a wholly owned subsidiary of the Company. As a result of these
transactions, Mr. Magnusson became the Company's largest stockholder at that
time and its Chief Executive Officer. Mr. Magnusson resigned as Chief Executive
Officer on April 12, 1996.
During 1994, 1995, and 1996, Mr. Robert C. Klas, Sr., the Company's
Chairman of the Board, advanced funds to the Company under various agreements,
and also assumed certain debt of the Company which had been advanced by others.
The total amount of cash advanced, or committed to be advanced, and debt assumed
during 1994, 1995 and 1996 (to May 15, 1996) was $970,000, $2,900,000, and
$2,200,000, respectively. As of May 15, 1996, $535,000 of such amounts had been
repaid to Mr. Klas and the remaining balance, plus accrued interest of $58,399,
had been converted into equity of the Company. In addition, on March 22, 1996,
Mr. Klas purchased, in a private transaction, 1,600,000 common shares of Company
common stock from Jan H. Magnusson, the Former CEO. As a result of these
transactions, Mr. Klas became the majority owner of the Company's outstanding
common stock.
On August 30, 1995, the Tapemark Company Cash or Deferred Profit
Sharing Plan, an affiliate of Mr. Klas, purchased a promissory note from the
Company for $250,000. The entire principal amount of the note was converted to
common stock of the Company on December 27, 1995.
The Company had available to it a bank line of credit with maximum
available borrowings of up to $500,000. This credit line expired on May 9, 1996
and was personally guaranteed by Mr. Magnusson. Robert C. Klas, Sr. is the
personal guarantor on a new $500,000 line of credit dated June 24, 1996. At
December 31, 1995 and 1994, the outstanding balance on the expired line of
credit was $500,000 and $468,000, respectively.
In the December 1994 merger with Ecomaster, the Company succeeded to
Ecomaster's liability on a demand promissory note in the amount of $100,000
payable to The Sailboard Warehouse, a company affiliated with Mr. Magnusson. On
March 22, 1996, the promissory note plus accrued interest of $13,607 was paid in
full. Also on March 22, 1996, the Company paid Sailboard Warehouse an additional
$30,961 representing net accounts payable.
The Company sells certain of its products to Global HealthShare Corp.,
a company affiliated with Mr. Magnusson. Global HealthShare is a network
marketing organization which sells health related products to customers. Total
sales to Global HealthShare in 1995 were approximately $20,000.
The Company utilizes the services of Tord Nihlen to serve as an
independent sales representative for the Company's products in certain countries
in Europe and the Middle East. During 1995, Mr. Magnusson, on behalf of the
Company, advanced $101,800 to Mr. Nihlen, representing compensation and
reimbursement of expenses. On March 22, 1996, Mr. Magnusson and the Company
entered into an agreement providing for the payment to Mr. Magnusson in March
1997 of $127,647, representing reimbursement of the amounts advanced to Mr.
Nihlen from January 1995 through March 1996. Mr. Nihlen is Mr. Magnusson's
brother-in-law, and has provided services since 1990 under a similar arrangement
to Ecomaster Corporation prior to Ecomaster's merger with the Company on
December 30, 1994.
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 holders of 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
persons 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, the following filings were not made, or
not made on a timely basis, by the persons referred to above: (1) Mr. Klas, Sr.
did not file a Form 3 in 1992 concerning his election as a director, one Form 5
in 1993 to report two transactions, one Form 5 in 1994 to report seven
transactions, and one Form 5 in 1995 to report three transactions (these reports
were filed in 1996); (2) Mr. Magnusson has not filed any Forms 3, 4 or 5 to
report his election as an executive officer or for any transactions; (3) Mr.
Botts did not file a Form 3 in 1991 concerning his election as an officer, one
Form 5 in 1991 to report one transaction, one Form 5 in 1993 to report one
transaction and one Form 5 in 1994 to report one transaction (these reports were
filed in 1996); (4) Mr. Clymer did not file one Form 3 and two Forms 4 report
four transaction occurring in 1994 (these reports were filed in 1996); and (5)
Ms. Young did not file one Form 3 to report her election as a director in 1994
(this report was filed in 1996).
ELECTION OF DIRECTORS
(PROPOSAL 1)
The Board of Directors has nominated for election, to hold office until
the next annual meeting of the shareholders, the four persons named below and
each has consented to being named a nominee. All of the nominees are currently
members of the Board of Directors. Proxies cannot be voted for a greater number
of persons than the number of nominees named below. It is intended that proxies
solicited will be voted for such nominees. The Board of Directors believes that
each nominee named below will be able to serve, but should any nominee be unable
to serve as a director, the persons named in the proxies have been advised that
they will vote for the election of such substitute nominee as the Board of
Directors may propose.
The names, ages and principal occupations of the nominees are set forth
below, based upon information furnished to the Company by the nominees.
<TABLE>
<CAPTION>
Principal Occupation and Director
Name and Age Other Directorships Since
- ------------ ------------------- -----
<S> <C> <C>
Robert C. Klas, Sr. (68) Chairman of the Board, Director and Chief Executive 1994
Officer of the Company; Chairman of the Board of
Tapemark Company
Robert C. Klas, Jr. (43) Director; President of Tapemark Company 1996
John A. Clymer (48) President, Resource Capital Advisors 1994
Biloine W. Young (69) Retired President of Old Mexico Shop, Inc. 1994
</TABLE>
BUSINESS EXPERIENCE
ROBERT C. KLAS, SR. Mr. Klas is a director and the current Chairman of
the Board and Chief Executive Officer of the Company. Mr. Klas became a director
of the Company in 1994 and has served as the Chairman since January 1995.
Effective April 13, 1996, Mr. Klas, Sr. assumed the additional position of Chief
Executive Officer.
For the past 40 years, Mr. Klas has been the owner, Chairman of the
Board and Chief Executive Officer of the Tapemark Company, a $50 million label
converter. Tapemark has twice received the award as the best managed company in
its industry. In 1994, Mr. Klas was given his industry's highest executive
award. Mr. Klas also serves as a director of Signal Bank located in West St.
Paul, Minnesota. Mr. Klas is the father of Robert C. Klas, Jr. who is also a
board nominee.
ROBERT C. KLAS, JR. Mr. Klas became a director of the Company on July
30, 1996. For more than the last five years Mr. Klas, Jr. has been the President
of the Tapemark Company. Mr. Klas, Jr. is the son of Robert C. Klas, Sr. who is
also a board nominee.
JOHN A. CLYMER. Mr. Clymer is the President and Chief Investment
Officer of Resource Capital Advisors, the asset management subsidiary of
Resource Trust Company, a privately-owned Minneapolis-based financial services
provider. Prior to joining Resource Capital Advisors in 1994, Mr. Clymer was
employed by Minnesota Mutual Life Insurance Company for 22 years, and served as
President from 1991 through 1994. Mr. Clymer has served as a director of the
Company since July 1994.
BILOINE W. YOUNG. Ms. Young is retired as President of Old Mexico Shop,
Inc., located in St. Paul, Minnesota, where she had been employed for 22 years.
Ms. Young has served as a director of the Company since July 1994.
DAVID M. BOTTS. Mr. Botts has been with the Company since 1988 and has
served as Executive Vice President, Vice President of Sales, Vice President of
Operations, General Manager, and in his current position as Chief Operating
Officer. Mr. Botts has been certified as a Water Specialist Level 3 by the Water
Quality Association and is considered an expert at engineering practical
applications for iodinated resin. Mr. Botts is 33 years old.
GREGORY P. JENSEN. Mr. Jensen has been with the Company since July 8,
1996 and serves as the Company's Chief Financial Officer, Secretary and
Treasurer. Prior to joining the Company, Mr. Jensen was the Chief Financial
Officer of EnviroStaff, Inc. of Burnsville, Minnesota from 1994 to 1996. From
1988 to 1994 he was employed by ABC Bus Companies, lastly as Vice President of
Finance and Administration. Mr. Jensen is 36 years old.
OTHER INFORMATION REGARDING THE BOARD
MEETINGS. The Board of Directors met five times during fiscal 1995.
Each director attended more than 75% of the meetings of the Board of Directors.
BOARD COMMITTEES. During 1995, the Company had an Audit Committee
composed of Robert C. Klas, Sr. and Robert Martin and that committee did not
meet in 1995. On September 24, 1996, the Board of Directors appointed a new
Audit Committee composed of the two outside directors, John A. Clymer and
Biloine W. Young. The Audit Committee determines audit policies, reviews
external and internal audit reports and reviews recommendations made by the
Company's independent public accountants.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR"
EACH OF THE NOMINATED DIRECTORS.
APPROVAL OF THE 1996 STOCK PLAN
(PROPOSAL TWO)
GENERAL INFORMATION
The WTC Industries, Inc. 1996 Stock Plan (the "1996 Plan") was adopted
by the Company's Board of Directors on September 24, 1996, subject to approval
by shareholders. The purpose of the 1996 Plan is to enable the Company and its
subsidiaries to retain and attract directors, executives, other employees, and
consultants who contribute to the Company's success by their ability, ingenuity
and industry, and to enable such individuals to participate in the long-term
success and growth of the Company by giving them a proprietary interest in the
Company. The 1996 Plan authorizes the granting of incentive stock options,
non-qualified stock options and restricted stock awards.
SHARES AVAILABLE UNDER 1996 PLAN. The maximum number of shares of
common stock reserved and available for stock options and restricted stock
awards under the 1996 Plan is 500,000 shares (subject to possible adjustment in
the event of stock splits or other similar changes in the common stock). Shares
of common stock covered by expired or terminated stock options, or forfeited
shares of restricted stock, may be used for subsequent grants under the 1996
Plan.
ELIGIBILITY AND ADMINISTRATION. Directors, officers and other key
employees of the Company and its subsidiaries who are responsible for or
contribute to the management, growth and/or profitability of the business of the
Company and its subsidiaries, as well as consultants, are eligible to be granted
awards under the 1996 Plan. The number of options or restricted shares granted
and the terms and conditions of such grants need not be uniform among
participants. The 1996 Plan shall be administered by the Board or, in its
discretion, by a Committee, as defined in the 1996 Plan, who shall be appointed
by the Board of Directors. The term "Committee" as used in this proposal refers
to the Board or, if the Board has delegated its authority, the Stock Option
Committee. The Committee will have the power to make grants, determine the
number of shares covered by each grant and other terms and conditions of such
grants, interpret the 1996 Plan, and adopt rules, regulations and procedures
with respect to the administration of the 1996 Plan. The Committee's
recommendations regarding option grants and the terms and conditions of those
grants shall be conclusive.
AWARDS UNDER 1996 PLAN
STOCK OPTIONS. The Committee may grant stock options that either
qualify as "incentive stock options" under Section 422 of the Internal Revenue
Code of 1986, as amended (the "Code"), or are "non-qualified stock options", in
such form and upon such terms as the Board may approve from time to time. Stock
options granted under the 1996 Plan may be exercised during their respective
terms as determined by the Committee. The purchase price may be paid by
tendering cash or, in the Committee's discretion, by tendering other legal
consideration deemed sufficient by the Committee and consistent with the Plan's
purpose and applicable law, including promissory notes. If the terms of an
option so permit, the optionee may elect to pay all or part of the option
exercise price by having the Company withhold, upon exercise of the option, a
number of shares with a fair market value equal to the aggregate option exercise
price for the shares with respect to which such election is made. No option is
transferable by the optionee otherwise than by will or by the laws of descent
and distribution, and all options are exercisable, during the optionee's
lifetime, only by the optionee.
Stock options may be exercised during varying periods of time after a
participant's termination of employment, dependent upon the reason for the
termination. Following a participant's death, the participant's stock options
may be immediately exercised, to the extent they were exercisable at the time of
death, by the legal representative of the optionee's estate or the optionee's
legatee for a period of three years (or such shorter period as the Committee
shall specify at grant) or until the expiration of the stated term of the
option, whichever is shorter. The same time periods apply if the participant is
terminated by reason of disability or retirement; provided, that if termination
of employment is by reason of disability or retirement and an incentive stock
option is exercised after the expiration of the exercise periods that apply for
purposes of Section 422 of the Code, the option will thereafter be treated as a
non-qualified stock option. Unless otherwise determined by the Committee, if an
optionee's employment by the Company, or any subsidiary or parent of the
Company, or the Company terminates optionee for any reason other than death,
disability or retirement, the option shall thereupon terminate, except that the
option may be exercised to the extent it was exercisable at such termination for
the lesser of three months or the balance of the option's term if the optionee
is involuntarily terminated without Cause, as defined in the 1996 Plan, by the
Company, or any subsidiary or parent of the Company.
No incentive stock options may be granted under the 1996 Plan after
September 24, 2006. The term of an incentive stock option may not exceed ten
years (or five years if issued to a participant who owns or is deemed to own
more than 10% of the combined voting power of all classes of stock of the
Company, any subsidiary or affiliate). The aggregate fair market value of the
Common Stock (as determined as of the time the option is granted) with respect
to which an incentive stock option is exercisable for the first time by an
optionee during any calendar year shall not exceed $100,000. The exercise price
under an incentive stock option may not be less than the fair market value of
the Common Stock on the date the option is granted (or, in the event the
participant owns more than 10% of the combined voting power of all classes of
stock of the Company, the option price shall be not less than 110% of the fair
market value of the stock on the date the option is granted). The exercise price
for non-qualified options granted under the 1996 Plan may not be less than 85%
of the fair market value of the Common Stock on the date of grant.
The 1996 Plan has a provision for the annual automatic grant of
non-qualified options under the 1996 Plan to each Board member who is not (i)an
employee of the Company or any subsidiary or parent of the Company, (ii) the
beneficial owner of 20% or more of the Company's outstanding Common Stock, or
(iii) an associate or affiliate of such a beneficial owner (each such Board
member being referred to as an "Outside Director"). If the 1996 Plan is approved
by the Company's shareholders at this Annual Meeting, then at that time and at
each Annual Meeting thereafter each Outside Director will be automatically
granted a non-qualified stock option to purchase a number of shares determined
by dividing $10,000 by the fair market value per share of the Common Stock on
the date of grant, but in no event more than 5,000 shares per Outside Director
per grant. These options will have an exercise price equal to 100% of the fair
market value per share of the Common Stock on the date of grant, will be fully
vested and will expire five years after the date of grant. If the 1996 Plan is
approved by shareholders, the 1996 Plan's provision for automatic grants to
Outside Directors will supercede a similar provision of the Company's 1994
Non-Qualified Stock Option Plan, which did not contain the limitation of no more
than 5,000 shares per Outside Director per grant.
RESTRICTED STOCK. The Committee may grant restricted stock awards that
result in shares of Common Stock being issued to a participant subject to
restrictions against disposition during a restricted period established by the
Committee. The Committee may condition the grant of restricted stock upon the
attainment of specified performance goals or service requirements. The
provisions of restricted stock awards need not be the same with respect to each
recipient. The Committee shall require that the stock certificates evidencing
such shares be held in custody by the Company until the restrictions thereon
shall have lapsed, and that, as a condition of any restricted stock award, the
participant shall have delivered a stock power, endorsed in blank, relating to
the Stock covered by such award. During the period of the restrictions, a
participant has the right to vote the shares of restricted stock and to receive
dividends and distributions unless the Board requires such dividends and
distributions to be held by the Company, subject to the same restrictions as the
restricted stock.
If a participant terminates employment during the period of the
restrictions, all shares still subject to restrictions will be forfeited and
returned to the Company, subject to the right of the Committee to waive such
restrictions in the event of a participant's death, total disability, retirement
or under special circumstances approved by the Board.
FEDERAL INCOME TAX CONSEQUENCES
STOCK OPTIONS. An optionee will not realize taxable compensation income
upon the grant of an incentive stock option. In addition, an optionee generally
will not realize taxable compensation income upon the exercise of an incentive
stock option if the optionee exercises it as an employee or within three months
after termination of employment (or within one year after termination if the
termination results from a permanent and total disability). The amount by which
the fair market value of the shares purchased exceeds the aggregate option price
at the time of exercise shall be treated as alternative minimum taxable income
for purposes of the alternative minimum tax. If stock acquired pursuant to an
incentive stock option is not disposed of prior to the date two years from the
option grant date or prior to one year from the option exercise date, any gain
or loss realized upon the sale of such shares will be characterized as capital
gain or loss. If the applicable holding periods are not satisfied, then any gain
realized in connection with the disposition of such stock will generally be
taxable as compensation income in the year in which the disposition occurs, to
the extent of the difference between the fair market value of such stock on the
date of exercise and the option exercise price. The Company will be entitled to
a tax deduction to the extent, and at the time, that the participant realizes
compensation income. The balance of any gain will be characterized as a capital
gain. Under current law, net long-term capital gains are taxed at a maximum
federal rate of 28% while the maximum federal rate on ordinary income is 39.6%.
An optionee will not realize taxable compensation income upon the grant
of a non-qualified stock option. When an optionee exercises a non-qualified
stock option, the optionee will realize taxable compensation income at that time
equal to the difference between the aggregate option price and the fair market
value of the stock on the date of exercise. The Company is entitled to a tax
deduction to the extent, and at the time, that the participant realizes
compensation income.
RESTRICTED STOCK. The grant of restricted stock will not result in
immediate income for the participant or in a deduction for the Company for
federal income tax purposes, assuming the shares are nontransferable and subject
to restrictions creating a "substantial risk of forfeiture," as intended by the
Company. If the shares are transferable or there are no such restrictions, the
participant will realize compensation income upon receipt of the award.
Otherwise, a participant generally will realize taxable compensation income when
any such restrictions lapse. The amount of such income will be the value of the
Common Stock on that date less any amount paid for the shares. Dividends paid on
the Common Stock and received by the participant during the restricted period
also would be taxable compensation income to the participant. In any event, the
Company will be entitled to a tax deduction to the extent, and at the time, that
the participant realizes compensation income. A participant may elect, under
Section 83(b) of the Code, to be taxed on the value of the stock at the time of
award. If this election is made, the fair market value of the stock at the time
of the award is taxable to the participant as compensation income and the
Company is entitled to a corresponding deduction.
WITHHOLDING. The 1996 Plan requires each participant, no later than the
date as of which any part of the value of an award first becomes includible as
compensation in the gross income of the participant, to pay to the Company any,
federal, state or local taxes required by law to be withheld with respect to the
award. The Company shall, to the extent permitted by law, have the right to
deduct any such taxes from any payment otherwise due to the participant. With
respect to any award under the 1996 Plan, if the terms of the award so permit, a
participant may elect to satisfy part or all of the withholding tax requirements
associated with the award by (i) authorizing the Company to retain from the
number of shares of stock which would otherwise be deliverable to the
participant, or (ii) delivering to the Company from shares of Company Common
Stock already owned by the participant that number of shares having an aggregate
fair market value equal to part or all of the tax payable by the participant. In
that case, the Company would pay the tax liability from its own funds.
REGISTRATION WITH THE SEC
Upon the approval of the 1996 Plan by the shareholders, the Company
intends to file a registration statement covering the offering of the shares of
common stock issuable under the 1996 Plan with the Securities and Exchange
Commission pursuant to the Securities Act of 1933, as amended.
VOTE REQUIRED
Shareholder approval of the 1996 Plan requires the affirmative vote of
the holders of a majority of the shares of common stock represented at the
meeting and entitled to vote.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR"
APPROVAL OF THE 1996 PLAN.
APPROVAL OF INDEPENDENT AUDITORS
(PROPOSAL 3)
On December 19, 1995, the Company dismissed Lurie, Besikof, Lapidus &
Co., P.L.L.P., as its independent auditors and appointed Deloitte & Touche LLP
as the Company's independent auditors. The reports of Lurie, Besikof, Lapidus &
Co., P.L.L.P. on the consolidated financial statements of the Company for the
fiscal years ended December 31, 1994 and 1993 were unqualified and did not
contain an adverse opinion, any disclaimers, qualification or modification as to
uncertainty, audit scope, or accounting principles, except that the reports for
the fiscal years ended December 31, 1994 and 1993 contained an explanatory
paragraph concerning the Company's ability to continue as a going concern. 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 December 31, 1994 and 1993,
and during the period commencing January 1, 1995 through December 19, 1995,
there were no disagreements or reportable events.
Deloitte & Touche LLP, independent certified public accountants, have
been reappointed by the Board of Directors as the Company's auditors for 1996.
Although shareholder approval is not required, the Board of Directors requests
it. In the event the appointment should not be approved by the shareholders, the
Board of Directors will make another appointment to be effective at the earliest
possible time.
A representative of Deloitte & Touche LLP is expected to be present at
the Meeting, will be given the opportunity to make a statement and will be
available to answer appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS
VOTE "FOR" RATIFICATION OF THE SELECTION OF
DELOITTE & TOUCHE LLP.
SHAREHOLDER PROPOSALS
The rules of the Securities and Exchange Commission permit shareholders
of a company, after 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 proxy rules. The
WTC Industries, Inc. 1996 Annual Meeting of Shareholders is expected to be held
on or about May 30, 1997 and proxy materials in connection with that meeting are
expected to be mailed on or about April 30, 1997. Shareholder proposals prepared
in accordance with the proxy rules must be received by the Company on or before
March 1, 1997.
GENERAL
The Board of Directors of the Company knows of no other matters to be
brought before the meeting. However, the enclosed proxy gives discretionary
authority in the event that any additional matters should be presented. Enclosed
herewith is a copy of the Company's Annual Report on Form 10-KSB for the year
ended December 31, 1995 and its Quarterly Report on Form 10-QSB for the six
months ended June 30, 1996.
By Order of the Board of Directors,
Gregory P. Jensen, SECRETARY
WTC INDUSTRIES, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON OCTOBER 29, 1996
The undersigned hereby appoints Robert C. Klas, Sr. or Gregory P.
Jensen, or either of them, as proxies with full power of substitution to vote
all shares of stock of WTC Industries, Inc. of record in the name of the
undersigned at the close of business on September 23, 1996, at the Annual
Meeting of Shareholders to be held in Minneapolis, Minnesota on October 29,
1996, or at any adjournment(s) thereof, hereby revoking all former proxies.
1. ELECTION OF DIRECTORS:
[ ] FOR all nominees listed below [ ] WITHHOLD AUTHORITY
(except as marked to the contrary). to vote for all nominees
listed below
Nominees: Robert C. Klas, Sr.; Robert C. Klas, Jr.; John A. Clymer;
Biloine W. Young
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, STRIKE
A LINE THROUGH THE NOMINEE'S NAME IN THE LIST ABOVE.)
2. PROPOSAL TO RATIFY AND APPROVE THE 1996 STOCK PLAN.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. PROPOSAL TO RATIFY APPOINTMENT OF DELOITTE & TOUCHE LLP AS INDEPENDENT
PUBLIC ACCOUNTANTS.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON ANY OTHER
MATTERS COMING BEFORE THE MEETING.
THIS PROXY WILL BE VOTED ON PROPOSALS (1), (2) AND (3) IN ACCORDANCE
WITH THE SPECIFICATIONS MADE AND "FOR" EACH 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.
