SCHEDULE 14C INFORMATION
INFORMATION STATEMENT PURSUANT TO SECTION 14(c)
OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. ______)
CHECK THE APPROPRIATE BOX:
[ ] PRELIMINARY INFORMATION STATEMENT
[ ] CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY (AS PERMITTED BY
RULE 14c-5(d)(2))
[X] DEFINITIVE INFORMATION STATEMENT
WTC INDUSTRIES, INC.
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14c-5(g) and O-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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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 determine):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ ] 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:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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WTC INDUSTRIES, INC.
150 MARIE AVENUE EAST
WEST SAINT PAUL, MINNESOTA 55118-4002
-------------------
NOTICE OF SHAREHOLDER MEETING
Notice is hereby given that a Meeting of Stockholders of WTC
Industries, Inc. will be held at the Southview Country Club at 239 East Mendota
Road in West Saint Paul, Minnesota on Tuesday, May 2, 2000 at 2:00 p.m. local
time, for the following purposes:
1. To elect five directors to hold office until the next regular
Meeting of Stockholders or until their successors are elected.
2. To ratify and approve amendments to the Company's 1996 Stock
Plan.
3. To ratify and approve the selection of independent public
accountants 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 March 6, 2000
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
/s/ Robert C. Klas
Robert C. Klas, Sr.
CHIEF EXECUTIVE OFFICER
Saint Paul, Minnesota
March 20, 2000
<PAGE>
WTC INDUSTRIES, INC.
150 MARIE AVENUE EAST
WEST SAINT PAUL, MINNESOTA 55118-4002
INFORMATION STATEMENT
The Board of Directors of WTC Industries, Inc. (the "Company") has
scheduled a Meeting of Shareholders. The Company has authorized that action be
taken at the meeting on the following items: (i) reelection of the current Board
of Directors, (ii) ratification of amendments to the Company's 1996 Stock Plan
relating to an increase in shares available thereunder and a provision allowing
the award of stock options to directors, (iii) ratification of the selection of
the Company's auditors. Under Delaware law, these actions require shareholder
approval of the holder or holders of a majority of the Company's outstanding
Common Stock. Robert C. Klas, Sr. (the "Majority Shareholder") holds a majority
of the outstanding shares of Common Stock of the Company, and he has indicated
he will vote at the meeting in favor of the proposed actions.
The mailing of this Notice of Meeting and Information Statement is
expected to occur on or about March 20, 2000 to shareholders of record at March
6, 2000 and the effective date of this Information Statement will be twenty days
after the mailing. As of March 6, 2000, the Company had 1,472,698 shares of
Common Stock outstanding.
This Information Statement is being furnished to the Company's
shareholders to inform them of the date and time of the Meeting, the Board's
action and the Majority Shareholder's intent to vote in favor of the action. WE
ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A PROXY.
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INFORMATION REGARDING SECURITY OWNERSHIP
OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table includes information as of March 6, 2000 concerning
the beneficial ownership of Common Stock of the Company by (i) the only
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 of
the most highly compensated officers of the Company in office at the end of
fiscal year 1999 whose total cash compensation exceeded $100,000 during fiscal
year 1999, and (iv) all officers and directors of the Company as a group. Unless
otherwise indicated, all beneficial owners have sole voting and investment power
over the shares held.
PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNER AMOUNT OF CLASS
- ------------------------------------ ------ --------
Robert C. Klas, Sr. (1)(2) 1,827,555(3)(4)(5) 80.3%
892 Marie Avenue
Mendota Heights, Minnesota 55118
Robert C. Klas, Jr. (2) 1,875(3) *
697 Goodrich Avenue
Saint Paul, Minnesota 55105
John A. Clymer (1) 6,298(3) *
839 Third Street
Hudson, Wisconsin 54016
Biloine W. Young (1) 6,098(3) *
15 Crocus Hill
Saint Paul, Minnesota 55102
Dr. Ronald A. Mitsch (1) 0 *
4 Shadow Lane
North Oaks, MN 55127
David M. Botts (2) 21,198(3) 1.4
980 Bayside Lane
Minnetrista, Minnesota 55364
Gregory P. Jensen (2) 14,000(3) 1.0
3809 Azalea Place
Burnsville, Minnesota 55337
James J. Carbonari (2) 40,000(3) 2.6
18515 5th Avenue North
Plymouth, Minnesota 55447
Jan H. Magnusson 173,883 11.8
300 South Owasso Boulevard
St. Paul, Minnesota 55117
All Officers and Directors as
a Group (8 persons) 1,917,024(3)(4)(5) 81.3%
- ------------------
* Less than one percent.
(1) Serves as a director of the Company.
(2) Serves as an executive officer of the Company.
(3) Includes options to purchase the following number of shares, which are
or will become exercisable within 60 days: Mr. Clymer, 2,348 shares;
Ms. Young, 2,348 shares; Mr. Botts, 18,000 shares; Mr. Jensen, 14,000
shares; and Mr. Carbonari, 40,000 shares; and all officers and
directors as a group, 76,696 shares. Also includes warrants to purchase
the following number of shares on or before June 30, 2003: Mr. Robert
Klas, Sr., 176,998 shares; Mr. Robert Klas, Jr., 1,250 shares; Mr.
Clymer, 2,500 shares; Ms. Young, 2,500 shares; and all officers and
directors as a group, 183,248.
3
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(4) Includes a warrant to purchase 240,000 shares of Common Stock on or
before March 22, 2006 and a warrant to purchase 80,000 shares of Common
Stock on or before March 1, 2004. Includes a convertible promissory
note to purchase 250,000 shares of Common Stock on or before March 1,
2001.
(5) Includes 22,500 shares of Common Stock held by The Tapemark Company
Cash or Deferred Profit Sharing Plan; 5,000 shares issuable upon
exercise of a warrant expiring June 30, 2003; 46,667 shares held by The
Tapemark Company; 11,200 shares of Common Stock available under vested
stock options held by The Tapemark Company; and 39,178 shares issuable
upon exercise of a warrant expiring June 30, 2003. The Tapemark Company
is an affiliate of Mr. Klas, Sr. and Mr. Klas, Jr.
ELECTION OF DIRECTORS
Five directors will be re-elected at the Annual Meeting of shareholders
to serve until the next meeting of shareholders, or until their successors are
elected. The Board of Directors has nominated the five persons named below.
Unless otherwise indicated, each nominee has been engaged in his present
occupation as set forth below, or has been an officer with the organization
indicated, for more than the past five years.
The names of the nominees, their principal occupations and other
information is set forth below based upon information furnished to the Company
by the nominees.
Primary Occupation Director
Name and Age and Other Directorships Since
- ------------ --------------------------------------- -----
Robert C. Klas, Sr. (72)* Chairman and Chief Executive Officer of 1994
the Company; Chairman of the Board and
Chief Executive Officer of The Tapemark
Company (printing and manufacturing
company).
Biloine W. Young (73) Writer 1994
John A. Clymer (51) Managing Director of Resource Companies, 1994
Inc.; President and Chief Investment
Officer of Resource Capital Advisors,
Inc.; Director of Hanover Capital Holdings,
Inc. (real estate investment trust).
Robert C. Klas, Jr. (46)* President of The Tapemark Company. 1996
Dr. Ronald A. Mitsch (65) Retired Vice Chairman of the Board and 1999
Executive Vice President of 3M Company;
Director of NCR, Lubrizol, Material
Sciences Corporation, B.F. Goodrich and
Chairman of the Board of Trustees for
Hamline University.
- ----------------------
* Mr. Klas, Sr. is the father of Robert C. Klas, Jr.
The Board of Directors met three times during fiscal year 1999. Each
director attended more than 75% of the meetings of the Board of Directors and
Board committees on which he or she served.
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EXECUTIVE COMPENSATION
The following table shows for the Company's last three fiscal years the
cash compensation paid by the Company, as well as certain other compensation
paid or accrued for those years, to the Chief Executive Officer and each of the
other executive officers whose cash compensation exceeded $100,000 ("Named
Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term
Compensation
------------
Annual Compensation Awards
--------------------------------------- ------------
Other Securities
Name and Annual Underlying All Other
Principal Position Year Salary($) Bonus($) Compensation($) Options Compensation($)(3)
- ----------------------- ---- --------- -------- --------------- ------------ ------------------
<S> <C> <C> <C> <C> <C> <C>
Robert C. Klas, Sr. (1) 1999 0 0 0 0 0
Chief Executive 1998 0 0 0 0 0
Officer 1997 0 0 0 0 0
James J. Carbonari (2) 1999 175,000 0 0 0 6,000
President - Pentapure 1998 69,334 0 0 0 6,000
Incorporated
David M. Botts 1999 142,784 0 0 0 0
Chief Operating Officer 1998 125,000 0 0 0 0
1997 125,000 0 0 0 0
</TABLE>
- ----------------------
(1) Mr. Klas, Sr. was elected as the Company's Chief Financial Officer on
April 13, 1996. The Company has not paid a salary, bonus or other
annual compensation to Mr. Klas, Sr.
(2) Pentapure Incorporated is a subsidiary of the Company. Mr. Carbonari
was appointed its President on August 17, 1998.
(3) Represents an annual car allowance for Mr. Carbonari.
STOCK OPTIONS
The following table contains information concerning the grant of stock
options under the Company's stock option plans to the Named Executive Officers
during the last fiscal year:
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
- --------------------------------------------------------------------------------------------------------
POTENTIAL REALIZABLE
NUMBER VALUE AT ASSUMED
OF % OF TOTAL ANNUAL RATES OF
SECURITIES OPTIONS STOCK PRICE
UNDER- GRANTED TO APPRECIATION
LYING EMPLOYEES EXERCISE FOR OPTION TERM(1)
OPTIONS IN FISCAL PRICE EXPIRATION ---------------------
NAME GRANTED YEAR PER SHARE DATE 5% 10%
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Robert C. Klas, Sr. .... 0 -- -- -- -- --
James J. Carbonari ..... 100,000 38.5% $1.0625 6/30/07 $208,750 $223,750
David M. Botts ......... 45,000 17.3% $1.0625 6/30/07 $93,938 $100,688
</TABLE>
- -----------------------
(1) Gains are reported net of the option exercise price, but before taxes
associated with exercise. These amounts represent certain assumed rates
of appreciation only. Actual gains, if any, on stock option exercises
are dependent on the future performance of the Common Stock, overall
stock market conditions, as well as the optionholder's continued
employment through the vesting period. The amounts reflected in this
table may not necessarily be achieved.
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OPTION EXERCISES AND HOLDINGS
The following table sets forth information with respect to the Named
Executive Officers, concerning the exercise of options during the last fiscal
year and unexercised options held as of the end of fiscal year 1999:
OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying In-the-Money
Unexercised Options at Options at
Shares Fiscal Year-End Fiscal Year-End
Acquired on Value --------------------------- ---------------------------------
Name Exercise Realized($)(1) Exercisable Unexercisable Exercisable(2) Unexercisable(2)
- ---- -------- -------------- ----------- ------------- -------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Robert C. Klas, Sr. 0 0 0 0 $ 0 $ 0
James J. Carbonari 0 0 40,000 60,000 $47,500 $71,250
David M. Botts 0 0 18,000 27,000 $21,375 $32,063
</TABLE>
- -----------------------
(1) Market value on the date of exercise of shares covered by options
exercised, less option exercise price.
(2) Based on a per share price of $2.25 which is the fair market value of
the Company's Common Stock on December 31, 1999. Value is calculated on
the difference between the option exercise price and $2.25 multiplied
by the number of shares of Common Stock underlying the options, but
before taxes associated with exercise.
DIRECTOR COMPENSATION
Effective August 19, 1999, the Board of Directors approved a cash
payment of $500 for each meeting attended for all directors who are not employed
by the Company. Under the 1996 Stock Option Plan, outside directors are entitled
to receive an annual formula grant of non-qualified options to purchase a number
of shares determined by dividing $1,000 by the fair market value per share of
the Common Stock on the date of grant, but in no event more than 500 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, are fully vested on the date of grant and will expire five years after
date of grant. During 1999, options for 3,000 shares of Common Stock were
granted to Outside Directors under this provision for services provided in 1997,
1998 and 1999.
EMPLOYMENT AGREEMENTS
None of the Company's executive officers is party to an employment
agreement with the Company.
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 December 31, 1999, the
Company's insiders complied with all applicable Section 16(a) filing
requirements, with the exception of Jon Magnusson, a shareholder of over 10% of
the Company.
6
<PAGE>
REASONS FOR AMENDMENTS TO THE 1996 STOCK PLAN
(PROPOSAL 2)
The Board of Directors has adopted an amendment to the 1996 Stock
Option Plan (the "Plan").
Prior to the Company's one-for-ten reverse stock split in January 1999,
the Plan authorized the issuance of 500,000 shares of common stock pursuant to
options and awards granted thereunder. After giving effect to the Company's
stock split, the number of shares available under the Plan is 50,000. The Board
of Directors amended the 1996 Plan effective August 19, 1999, subject to
ratification by the shareholders, to increase the total number of shares
available under the Plan by 450,000 shares to a total of 500,000 shares. There
were outstanding on March 6, 2000, options to purchase 260,300 shares granted to
eleven individuals.
GENERAL INFORMATION
On September 24, 1996, the Company's Board of Directors adopted the WTC
Industries, Inc. 1996 Stock Plan (the "1996 Plan"), and the shareholders of the
Company ratified and approved adoption of the 1996 Plan on October 29, 1996. The
purpose of the 1996 Plan is to enable the Company and its subsidiaries to retain
and attract key employees, consultants and non-employee directors who will
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 awards in the form of stock options or
restricted stock. The 1996 Plan currently provides for an authorization of
500,000 shares which may be issued pursuant to options or other awards granted
under the Plan to key employees and outside consultants and also provides for
ongoing automatic grants of stock options to non-employee directors. On March 6,
2000, the last reported sales price of the Company's common stock on the OTC
Bulletin Board was $3.00.
SUMMARY OF THE PLAN
The principal features of the 1996 Plan are summarized below.
SHARES AVAILABLE UNDER 1996 PLAN. The Company's Board of Directors has
approved an increase in the shares available under the 1996 Plan from 50,000 to
500,000 shares subject to shareholder approval. Common shares covered by expired
or terminated stock options and forfeited shares of restricted stock or deferred
stock may be used for subsequent awards under the 1996 Plan.
ELIGIBILITY AND ADMINISTRATION. 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 and non-employee directors, are eligible to
be granted awards under the 1996 Plan. The 1996 Plan is administered by the
Board or, in its discretion, by a committee of not less than three disinterested
persons who are defined in the 1996 Plan (the "Committee") appointed by the
Board of Directors. The term "Board" as used in this section refers to the Board
of Directors or if the Board has delegated its authority, the Committee. The
Board has the power to make awards (other than awards to non-employee
directors), determine the number of shares covered by each award and other terms
and conditions of such awards, interpret the 1996 Plan, and adopt rules,
regulations and procedures with respect to the administration of the 1996 Plan.
The Board may delegate its authority to officers of the Company for the purpose
of selecting key employees who are not officers of the Company to be
participants in the 1996 Plan.
STOCK OPTIONS. The Board may grant stock options that either qualify as
"incentive stock options" under the Internal Revenue Code of 1986, as amended
("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 Board.
The purchase price may be paid by tendering cash or, in the Board's discretion,
by tendering promissory notes or common stock. 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 stock option shall be transferable by the optionee or
exercised by anyone else during the optionee's lifetime.
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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 exercised to the extent they were exercisable at the time of death by the
legal representative of the 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 less. The
same time periods apply if the participant is terminated by reason of
disability. If the participant retires, the participant's stock options may be
exercised to the extent they were exercisable at the time of retirement or for a
period of three years (or such shorter period as determined by the Board at the
time of retirement) from the date of retirement or until the expiration of the
stated term of the option, whichever is less. If the participant is
involuntarily terminated without cause, the participant's options may be
exercised to the extent they were exercisable at the time of termination for the
lesser of three months or the balance of the stated term of the option. If the
participant's employment is terminated for cause, the participant's stock
options immediately terminate. These exercise periods may be reduced by the
Board for particular options. The Board may, in its discretion, accelerate the
exercisability of stock options which would not otherwise be exercisable upon
death, disability or retirement.
No incentive stock options shall be granted under the 1996 Plan after
September 23, 2006. The term of an incentive stock option may not exceed 10
years (or 5 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 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 be less
than 100% of the fair market value of the common stock on the date of grant.
Pursuant to a limitation in the 1996 Plan, no eligible person may be
granted any stock options for more than 100,000 shares of common stock in the
aggregate during any fiscal year. This limitation is included pursuant to
Section 162(m) of the Internal Revenue Code, which provides a $1 million
limitation on the compensation of certain executive officers that is deductible
by the Company for federal income tax purposes. The limitation on stock options
granted to an individual during any fiscal year is intended to preserve the
Company's federal tax deduction for compensation expense related to stock
options that may be granted to executive officers under the 1996 Plan.
AUTOMATIC GRANT OF OPTIONS TO NON-EMPLOYEE DIRECTORS. The 1996 Plan
provides for the automatic granting of options to non-employee directors. Such
options are granted to each person who (i) is not an employee of the Company,
any parent corporation or subsidiary, (ii) is not a beneficial owner of 20% or
more of the Company's outstanding shares of stock and (iii) is elected or
re-elected as a director by vote of the Board or the shareholders. Each such
person automatically receives, as of the date of each such election or
re-election, a non-qualified option to purchase a number of shares of stock
equal to $1,000 divided by the Fair Market Value of a share of stock on the date
of grant, rounded up to the next whole share, provided that no such
Non-Qualified Option granted to any outside Director on a particular date shall
cover more than 500 shares. Each person who is elected to be an Outside Director
between Annual Meetings shall be automatically granted as of the date of such
election a Non-Qualified Option to purchase a number of shares calculated by (1)
directing $1,000 by the Fair Market Value of a share of stock on the date of
grant, (2) multiplying the lesser of that result or 500 shares by a fraction in
which the numerator is 365 minus the number of days that have elapsed from the
date of the most recent Annual Meeting to the date of election of the Outside
Director and the denominator is 365, and (3) rounding that result up to the next
whole share. The options have five-year terms and are fully vested upon the date
of option grant. Any vested portion of these options will not expire upon
termination of service as a director.
RESTRICTED STOCK. The Board 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
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<PAGE>
established by the Board. The Board 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 restricted stock will be held in custody by the Company until the
restrictions thereon have lapsed. 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 Board 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 he or she 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 will be alternative minimum taxable income for purposes
of applying 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 (the
"Applicable Holding Periods"), 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 ordinary compensation
income in the year in which the disposition occurred, 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 is entitled to a tax deduction to the
extent, and at the time, the participant realizes compensation income. The
balance of any gain will be characterized as a capital gain. Under current law,
net capital gains are taxed at a maximum federal rate of 28% while compensation
income may be taxed at higher federal rates.
An optionee generally will not realize taxable compensation income upon
the grant of a non-qualified stock option. As a general matter, when an optionee
exercises a non-qualified stock option, he or she 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, the
participant realizes compensation income.
RESTRICTED STOCK. The grant of restricted stock should 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 which would result in a "substantial risk of forfeiture" as
intended by the Company and as defined in applicable Treasury regulations. 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 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
will 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, 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 the 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
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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 Company common 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.
FURTHER INFORMATION
A copy of the 1996 Plan can be obtained by writing to: Chief Financial
Officer, WTC Industries, Inc., 150 Marie Avenue East, West St. Paul, Minnesota
55118-4002.
APPROVAL OF AUDITORS
(PROPOSAL 3)
McGladrey & Pullen, LLP independent public accountants, have been
auditors for the Company since November 1998. They have been reappointed by the
Board of Directors and approved for election by the Majority Shareholder of the
Company and audit committee. A representative of McGladrey & Pullen, LLP will be
present at the meeting, may make a statement if so desired, and will be
available for questions.
CERTAIN TRANSACTIONS
Tapemark provides labels for the Company's products and office and
manufacturing facilities. Mr. Robert C. Klas, Sr., the Company's Chairman, CEO
and largest stockholder, and is also the CEO, Chairman of the Board and largest
shareholder of Tapemark. During the year ended December 31, 1999 and 1998, the
Company paid Tapemark a total of $60,700 and $76,900, respectively, for these
services.
The Company has borrowed certain sums from Mr. Klas and Tapemark for
working capital purposes. At December 31, 1998, the Company had outstanding
borrowings from Mr. Klas totaling $2,300,000 with accrued interest of $198,807,
and from Tapemark totaling $500,000 with accrued interest of $53,114. All
borrowings from Mr. Klas and Tapemark were evidenced by demand promissory notes.
On April 13, 1999, effective January 1, 1999, the Company entered into
an agreement with Mr. Klas and Tapemark to extend demand notes held by them
totaling $2,300,000 and $500,000, respectively, including all accrued interest
of $198,907 and $53,114, respectively, through May 31, 2002. Interest will
accrue at 1.0% for the seventeen-month period ending May 31, 2000 and then will
increase to 5.18% for the duration of the notes. Interest is due and payable
semi-annually. In exchange for the reduced interest rate from January 1, 1999 to
May 31, 2000, the Company issued Mr. Klas and Tapemark four year warrants to
purchase 176,998 and 39,178, respectively, shares of the Company's Common Stock
at an exercise price of $1.00 per share.
During 1999, Mr. Klas advanced the Company an additional $400,000 in
demand promissory notes and Mr. Klas also purchased a $50,000 promissory note
owed by the Company to another private noteholder. On February 29, 2000, the
Company and Mr. Klas agreed to convert a total of $450,000 of the Company's
existing indebtedness to him for 180,000 shares of the Company's common stock.
In conjunction with the debt conversion, Mr. Klas purchased 100,000 shares of
the Company's common stock for $250,000.
On March 20, 2000, Mr. Klas assumed the existing Company's indebtedness
to its lender and the Company issued Mr. Klas a convertible promissory note in
the amount of the indebtedness. The new promissory note matures in one year and
provides a right to convert the indebtedness to shares of Company common stock,
at the discretion of the holder of the Note, at a conversion price of $3.00 per
share. In addition, Mr. Klas agreed to co-sign a new credit agreement with the
bank under which the bank extends the Company a new term loan of $750,000 and a
new revolving credit facility of $700,000.
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In consideration thereof, the Company issued to Mr. Klas a new stock warrant to
purchase 80,000 shares of the Company's common stock for an exercise price of
$3.125 per share on or before March 1, 2004.
The Company extended the expiration date to May 22, 2006 of an existing
warrant held by Mr. Klas (issued in 1996) to purchase 240,000 shares of Company
common stock at an exercise price of $20.00 per share.
FURTHER INFORMATION
The Company's Annual Report to Shareholders for the year ended December
31, 1999 is being mailed to the shareholders with this Information Statement.
Shareholders may receive, without charge, a copy of the Company's Annual Report
on Form 10-KSB, including financial statements and schedules thereto, as filed
with the Securities and Exchange Commission, by writing to the Company at 150
Marie Avenue East, West St. Paul, MN 55118-4002, or by calling the Company at
(651) 554-3140.
By Order of the Board of Directors
/s/ Robert C. Klas
Robert C. Klas, Sr.
CHIEF EXECUTIVE OFFICER
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