<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
T&W FINANCIAL CORPORATION
------------------------------------------------
(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 transaction 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
T&W LOGO
Tacoma, Washington
April 5, 1999
Dear Shareholders:
You are cordially invited to attend the T&W Financial Corporation Annual
Meeting of Shareholders on Thursday, April 29, 1999 at 9:00 a.m. (Pacific
Daylight Time). The meeting will be held at the Tacoma Club, 1201 Pacific
Avenue, 16th Floor, Tacoma, Washington, 98402. Directions to the Tacoma Club
appear on the back cover of this Notice of Annual Meeting and Proxy Statement.
The matters to be acted upon are described in the accompanying Notice of
Annual Meeting and Proxy Statement. At the meeting, we will also report on T&W
Financial Corporation's operations and respond to any questions you may have.
YOUR VOTE IS VERY IMPORTANT. WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING,
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED. PLEASE COMPLETE, SIGN, DATE AND
PROMPTLY RETURN THE ENCLOSED PROXY CARD IN THE ENCLOSED, POSTAGE-PREPAID
ENVELOPE IN ORDER TO ENSURE THAT YOUR VOTE IS COUNTED. IF YOU ATTEND THE
MEETING, YOU WILL, OF COURSE, HAVE THE RIGHT TO REVOKE THE PROXY AND VOTE YOUR
SHARES IN PERSON.
Very truly yours,
/s/ MICHAEL A. PRICE
Michael A. Price
Chairman of the Board and Chief
Executive Officer
<PAGE> 3
T&W FINANCIAL CORPORATION
6416 PACIFIC HIGHWAY EAST
TACOMA, WASHINGTON, 98424
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
ON
APRIL 29, 1999
The Annual Meeting of Shareholders of T&W Financial Corporation, (the
"Company") will be held at the Tacoma Club, 1201 Pacific Avenue, 16th Floor,
Tacoma, Washington on Thursday, April 29, 1999, at 9:00 a.m. (Pacific Daylight
Time) for the following purposes:
1. To elect directors to serve until the next Annual Meeting of
Shareholders and until their successors are elected and qualified;
2. To ratify the selection of BDO Seidman, LLP as the Company's independent
auditors for fiscal year 1999; and
3. To transact such other business as may properly come before the meeting
or any adjournment or postponement thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
Only shareholders of record at the close of business on March 15, 1999 will
be entitled to notice of and to vote at the Annual Meeting of Shareholders and
any adjournments or postponement thereof.
The Company's Proxy Statement is attached hereto. Financial and other
information concerning the Company is contained in the enclosed Annual Report
for the fiscal year ended December 31, 1998.
By Order of the Board of Directors,
/s/ KENNETH W. MCCARTHY, JR.
Kenneth W. McCarthy, Jr.
Senior Vice President, Secretary and
General Counsel
Tacoma, Washington
April 5, 1999
YOUR VOTE IS IMPORTANT
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, YOU ARE URGED TO COMPLETE,
SIGN AND DATE THE ENCLOSED PROXY CARD AND RETURN IT AS PROMPTLY AS POSSIBLE IN
THE ENCLOSED, POSTAGE-PREPAID ENVELOPE TO ENSURE THE PRESENCE OF A QUORUM FOR
THE MEETING. IF YOU ATTEND THE MEETING, YOU MAY, OF COURSE, REVOKE THE PROXY AND
VOTE IN PERSON. PLEASE NOTE, THAT IF YOUR SHARES ARE HELD OF RECORD BY A BROKER,
BANK OR OTHER NOMINEE AND YOU WISH TO VOTE AT THE MEETING, YOU MUST BRING TO THE
MEETING A LETTER FROM YOUR BROKER, BANK OR OTHER NOMINEE CONFIRMING YOUR
BENEFICIAL OWNERSHIP OF THE SHARES. ADDITIONALLY, IN ORDER TO VOTE AT THE
MEETING, YOU MUST OBTAIN FROM THE RECORD HOLDER A PROXY ISSUED IN YOUR NAME.
<PAGE> 4
T&W FINANCIAL CORPORATION
6416 PACIFIC HIGHWAY EAST
TACOMA, WASHINGTON, 98424
PROXY STATEMENT
FOR THE
ANNUAL MEETING OF SHAREHOLDERS
GENERAL
This Proxy Statement is furnished by and on behalf of the Board of
Directors of T&W Financial Corporation, a Washington corporation ("T&W" or the
"Company") in connection with the solicitation of proxies for use at the Annual
Meeting of Shareholders of the Company (the "Annual Meeting") for the fiscal
year ended December 31, 1998 ("fiscal year 1998") to be held at 9:00 a.m.
(Pacific Daylight Time) on Thursday, April 29, 1999 at the Tacoma Club and at
any adjournment thereof. Directions to the Tacoma Club are provided on the back
cover of this Proxy Statement.
VOTING RIGHTS AND OUTSTANDING SHARES
A shareholder who delivers an executed proxy pursuant to this solicitation
may revoke it at any time before it is exercised by (i) executing and delivering
a later dated proxy card to the Secretary of the Company prior to the Annual
Meeting, (ii) delivering written notice of revocation of the proxy to the
Secretary of the Company prior to the Annual Meeting or (iii) attending and
voting in person at the Annual Meeting. Attendance at the Annual Meeting, in and
of itself, will not constitute a revocation of a proxy. Proxies will be voted as
specified by the shareholder or shareholders granting the proxy. Unless contrary
instructions are specified, if the enclosed proxy is executed and returned (and
not revoked) prior to the Annual Meeting, the shares of common stock, par value
$0.01 per share ("Common Stock"), of the Company represented thereby will be
voted for (1) the election of the directors nominated by the Board of Directors;
(2) the ratification of the selection of BDO Seidman, LLP as the Company's
independent auditors for the fiscal year ending December 31, 1999 ("fiscal year
1999"), and (3) in accordance with the best judgment of the named proxies on
other matters properly brought before the Annual Meeting.
The presence in person or by proxy of holders of a majority of the
outstanding shares of Common Stock is required to constitute a quorum for the
transaction of business at the Annual Meeting. Under Washington law and the
Company's Articles of Incorporation, if a quorum is present, a nominee for
election to a position on the Board of Directors will be elected as a director
if the votes cast for the nominee exceed the votes cast against the nominee and
exceed the votes cast for any other nominee for that position. Abstentions and
"broker non-votes" (shares held by a broker or nominee that does not have the
authority, either express or discretionary, to vote on a particular matter) are
counted for purposes of determining the presence or absence of a quorum for the
transaction of business at the Annual Meeting. For the election of directors,
abstentions and broker non-votes will have the effect of neither a vote for nor
a vote against the nominee. Ratification of the selection of BDO Seidman, LLP as
the Company's independent auditors and any other matter that properly comes
before the meeting requires the affirmative vote of a majority of the shares of
Common Stock represented in person or by proxy and entitled to vote on the
matter. Accordingly, abstention and broker non-votes, because they are not
affirmative votes, will have the effect of a vote against the proposal. Proxies
and ballots will be received and tabulated by American Securities Transfer &
Trust, Inc., the Company's transfer agent and the inspector of elections for the
Annual Meeting.
This Proxy Statement and the enclosed proxy card will be first mailed on or
about April 5, 1999 to the Company's shareholders of record on March 15, 1999
(the "Record Date").
<PAGE> 5
SOLICITATION
The expense of preparing, printing and mailing this Proxy Statement and the
proxies solicited hereby will be borne by the Company. Proxies will be solicited
by mail and may also be solicited by directors, officers and other employees of
the Company, without additional remuneration, in person or by telephone or
facsimile transmission. The Company will also request brokerage firms, banks,
nominees, custodians and fiduciaries to forward proxy materials to the
beneficial owners of shares of Common Stock as of the record date and will
reimburse such persons for the cost of forwarding the proxy materials in
accordance with customary practice. The Company has retained American Securities
Transfer & Trust, Inc., to aid in the solicitation of proxies. Your cooperation
in promptly signing and returning the enclosed proxy card will help to avoid
additional expense.
At the close of business on the Record Date, there were 8,396,516 shares of
Common Stock (the "Shares") outstanding and there were no outstanding shares of
any other class of stock. Holders of Shares authorized to vote are entitled to
cast one vote per Share on all matters.
PROPOSAL 1 -- ELECTION OF DIRECTORS
Seven directors are to be elected at the annual meeting, to hold office
until the next annual meeting of shareholders and until their successors are
elected and qualified, or until such director's earlier death, resignation or
removal.
It is possible that additional nominations for the Board of Directors may
be made by shareholders giving notice to the Chief Executive Officer of the
Company not less than fourteen (14) days prior to the annual meeting of
shareholders in accordance with the Articles of Incorporation and Bylaws of the
Company.
Unless otherwise directed, the persons named in the proxy intend to vote
all proxies FOR the election of Messrs. Michael A. Price, Thomas W. Price, Paul
B. Luke, Kenneth W. McCarthy, Jr., Kenneth L. Hatch, David N. Syferd and Robert
E. Kadlec to the Board of Directors. The nominees have consented to serve as
directors of the Company if elected. If at the time of the Annual Meeting,
Messrs. Michael and Thomas Price, Luke, McCarthy, Hatch, Syferd or Kadlec is
unable or declines to serve as a director, the discretionary authority provided
in the enclosed proxy will be exercised to vote for a substitute candidate
designated by the Board of Directors. The Board of Directors has no reason to
believe that any of the nominees will be unable or will decline to serve as a
director. It is intended that the accompanying proxy will be voted in favor of
the following persons to serve as directors unless the shareholder indicates to
the contrary on the proxy. Management expects that each of the nominees will be
available for election, but if any of them is not a candidate at the time the
election occurs, it is intended that such proxy will be voted for the election
of another nominee to be designated by the Board of Directors to fill any such
vacancy.
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<PAGE> 6
Set forth below is certain information furnished to the Company by the
director nominees.
INFORMATION ABOUT THE NOMINEES
The following table sets forth certain information with respect to those
persons nominated by the Board of Directors for election as directors.
<TABLE>
<CAPTION>
NAME AGE POSITION WITH THE COMPANY DIRECTOR SINCE
---- --- ------------------------- --------------
<S> <C> <C> <C>
Michael A. Price 53 Director, Chairman of the Board and 1976
Chief Executive Officer
Thomas W. Price 35 Director and President 1991
Kenneth W. McCarthy, Jr. 58 Director, Senior Vice President, 1996
Secretary and General Counsel
Paul B. Luke 43 Director, Senior Vice President, 1996
Chief Financial Officer, and
Treasurer
Robert E. Kadlec 63 Director 1998
Kenneth L. Hatch 63 Director 1997
David N. Syferd 53 Director 1997
</TABLE>
Michael A. Price is the founder of the Company and has been Chairman of the
Board and Chief Executive Officer of the Company and its predecessors since its
formation in 1976. Prior to 1976, Mr. Price was a Vice President of
International Finance, an independent leasing company. Mr. Price was one of the
founders, and is a director, of the United Association of Equipment Lessors, a
national association of leasing companies.
Thomas W. Price has been a director of the Company since 1991. Mr. Price is
the son of Mr. Michael A. Price and has served as President of the Company and
its predecessors since 1996. He was Vice President, Secretary and Treasurer of
the Company from 1992 through 1995, and has been employed by the Company since
1982. Mr. Price received his B.S. in Finance and Economics from Central
Washington University.
Kenneth W. McCarthy, Jr. has been a director of the Company since July
1996. Mr. McCarthy was appointed Senior Vice President and General Counsel in
July 1996, and Secretary in April 1998. Mr. McCarthy was formerly the managing
principal of a law firm which performed general legal services for the Company
and its predecessors from time to time since 1991. Mr. McCarthy received his
B.S. in Chemistry from Seattle University and his J.D. from Gonzaga University
School of Law.
Paul B. Luke has been a director of the Company since July 1996. Mr. Luke
joined the Company in July 1996 as Senior Vice President, Chief Financial
Officer, Secretary and Treasurer. From 1993 through June 1996, Mr. Luke was with
the accounting firm of BDO Seidman, LLP, where he was most recently a partner
responsible for the structured finance and equipment leasing practice group. Mr.
Luke worked extensively on assisting BDO Seidman, LLP clients in
securitizations. Prior to 1993, Mr. Luke owned an accounting firm, besides being
an associate for a Washington based accounting firm. Mr. Luke received his B.S.
in Accounting and Economics from Nebraska Wesleyan University, his J.D. from the
University of Pittsburgh and his M.B.A. from Pepperdine University.
Kenneth L. Hatch has been a director of the Company since July 1997. Mr.
Hatch has served as the President of The Pacific Institute, a corporate
consulting firm, from February 1996 to December 31, 1997. From February 1995
through February 1996, Mr. Hatch was a Senior Vice President of AH Belo. From
1980 through 1995, Mr. Hatch served as Chairman, President and Chief Executive
Officer of KIRO, Inc., a division of Bonneville International Corporation. From
1980 through 1995, Mr. Hatch also had additional responsibilities as Senior Vice
President of Bonneville International Corporation. Mr. Hatch received his B.S.
in Business and Finance from the University of Utah.
David N. Syferd has been a director of the Company since July 1997. Mr.
Syferd has been a partner in the Seattle based advertising/public relations
agency of KNCF/Dave since its formation in 1995. From 1981 through 1995, Mr.
Syferd was the chairman of Elgin Syferd/DDB Needham. Mr. Syferd received his
B.S. in Political Science in 1967 from Whitworth College.
3
<PAGE> 7
Robert E. Kadlec has been a director of the Company since April 1998. Mr.
Kadlec served as the President of Inland National Gas Company Limited from 1972
to 1995, Chief Executive Officer since 1983 and Chief Executive Officer of BC
Gas from 1988 to 1995. Mr. Kadlec is an Engineering Graduate of the University
of Toronto and is a Director of the Conference Board of Canada, the Bank of
Montreal, Trans Mountain Pipe Line Company and Questar. Mr. Kadlec is a past
Chairman of the Canadian Gas Association, PCGA and Vancouver Board of Trade.
COMMITTEES
The Company's Board of Directors has standing Compensation and Audit
Committees. The Company does not have a standing Nominating Committee. The
members of each Committee and the functions performed thereby are described
below:
Compensation Committee. During fiscal year 1998, the Compensation Committee
was comprised of Messrs. Syferd (Chairman), Hatch and Kadlec. The Compensation
Committee is responsible for reviewing and recommending to the Board the
compensation and benefits to be provided to the Company's officers and key
employees and reviewing general policy matters relating to employee compensation
and benefits.
Audit Committee. During fiscal year 1998, the Audit Committee was comprised
of Messrs. Hatch (Chairman), Syferd and Kadlec. The Audit Committee is
responsible for reviewing the Company's internal accounting procedures and
consulting with and reviewing the services provided by the Company's independent
auditors.
During fiscal year 1998, the Compensation Committee met 3 times, the Audit
Committee met 3 times, and the entire Board of Directors met 4 times. Each
director attended at least 75 percent of all Board meetings and meetings of
Committees on which they served during the periods they served.
BENEFICIAL OWNERSHIP OF COMMON STOCK
The following table sets forth information concerning the beneficial
ownership of Common Stock of the Company of (i) those persons known by
management of the Company to own beneficially more than 5% of the Company's
outstanding Common Stock, (ii) the directors of the Company, (iii) the executive
officers named in the Summary Compensation Table set forth in the "Executive
Compensation" section of this Proxy Statement and (iv) all current directors and
officers of the Company as a group. Such information is provided as of March 15,
1999. According to the rules adopted by the SEC, a person is the "beneficial
owner" of securities if he or she has or shares the power to vote them or to
direct their investment or has the right to acquire beneficial ownership of such
securities within 60 days through the exercise of an option, warrant, right of
conversion of a security or otherwise. Except as otherwise noted, the indicated
owners have sole voting and investment power with respect to shares beneficially
owned. An asterisk in the percent of class column indicates beneficial ownership
of less than 1%, based upon 8,396,516 shares of Common Stock outstanding.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED(2)
BENEFICIAL OWNERS, DIRECTORS, -----------------------
AND EXECUTIVE OFFICERS(1) NUMBER PERCENTAGE
----------------------------- --------- ----------
<S> <C> <C>
Michael A. Price(3)................................... 4,787,780 57.02%
Thomas W. Price(4).................................... 480,420 5.72%
Paul B. Luke.......................................... 91,900 1.09%
Kenneth W. McCarthy, Jr............................... 97,150 1.16%
Kenneth L. Hatch...................................... 13,300 *
David N. Syferd....................................... 3,425 *
Robert E. Kadlec...................................... 1,200 *
Steve R. Warren(5).................................... 300 *
All directors and executive officers as a group (6
persons)............................................ 5,475,475 64.99%
========= =====
</TABLE>
- ---------------
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or
investment power with respect to securities, subject to the
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<PAGE> 8
community property laws, where applicable. The address of each beneficial
owner is c/o T&W Financial Corporation, 6416 Pacific Highway East, Tacoma,
Washington 98424.
(2) Based on an aggregate of 8,396,516 shares of Common Stock.
(3) Includes 1,000,000 shares of Common Stock owned by the Michael A. Price
Grantor Retained Annuity Trust, dated August 1, 1997, and 1,000,000 shares
of Common Stock as Trustee of the Katherine M. Price Grantor Retained
Annuity Trust, dated August 1, 1997, and 1,376,050 shares of Common Stock
owned by Michael A. Price through a limited liability company.
(4) Includes 110,084 shares of Common Stock owned by Thomas W. Price through a
limited liability company.
(5) Steve R. Warren is 50 years old and has been the Senior Vice President of
Operations and Chief Credit Officer of the Company since January 1, 1998.
Mr. Warren was the Vice President of Operations for Colonial Pacific Leasing
Corporation from October 1986 to April 1995 and was the Vice President of
Sales and Marketing for Colonial Pacific Leasing Corporation from April 1995
to August 1996.
EXECUTIVE COMPENSATION
SUMMARY OF COMPENSATION
The following table sets forth all information regarding the annual
compensation during fiscal year 1998 for the Company's Chief Executive Officer
and those officers of the Company who received compensation in excess of
$100,000 (collectively referred to herein as the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION ----------------
------------------------------ NUMBER OF SHARES
NAME AND ALL OTHER UNDERLYING
PRINCIPAL POSITION SALARY COMPENSATION(1)(2) OPTIONS
------------------ -------- ------------------ ----------------
<S> <C> <C> <C>
Michael A. Price....................... $1,133,937 --
Chairman of the Board and Chief
Executive Officer
Thomas W. Price........................ $1,133,937 --
President
Kenneth W. McCarthy, Jr................ $ 566,966 --
Senior Vice President and General
Counsel
Paul B. Luke........................... $ 566,966 --
Senior Vice President, Chief
Financial Officer, Treasurer
Steve R. Warren........................ $238,223 $ 0.00 5,000
Senior Vice President of Operations
and
Chief Credit Officer
</TABLE>
- ---------------
(1) Includes management and consulting fees paid to P.L.M. Consulting Group,
L.L.C. ("PLM"), the members of which are Michael A. Price, Thomas W. Price,
Kenneth W. McCarthy, Jr. and Paul B. Luke. The Company has entered into an
agreement with PLM pursuant to which PLM provides the Company with the
services of Michael A. Price, Thomas W. Price, Paul B. Luke and Kenneth W.
McCarthy, Jr. to act as executive officers of T&W. Under the agreement, PLM
is entitled to an annual base fee of $1,440,000 and an annual bonus equal to
35% of the Company's annual audited after tax return on equity in excess of
20%, with proportionate reductions in the event that any of such individuals
ceases to be an executive officer of the Company. The compensation for each
individual is determined directly by PLM through allocations of amounts paid
by the Company to PLM.
(2) Does not include distributions from pass-through entities.
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<PAGE> 9
STOCK OPTION GRANTS IN FISCAL YEAR 1998
The following table sets forth information regarding options granted to the
Company's Named Executive Officers during fiscal year 1998 to purchase shares of
the Company's Common Stock. The Company has no outstanding stock appreciation
rights. In accordance with the rules of the Securities and Exchange Commission,
the table shows the hypothetical "gains" or "option spreads" that would exist
for the respective options based on assumed rates of annual stock price
appreciation of 5% and 10% from the date the options were granted over the full
option term. 36,055 options were granted to employees of the Company during the
fiscal year 1998.
OPTION GRANTS IN FISCAL YEAR 1998
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-------------------------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS/SARS
UNDERLYING GRANTED TO EXERCISE OR
OPTIONS/SARS EMPLOYEES IN BASE PRICE
NAME GRANTED FISCAL YEAR ($/SH)
---- ------------ ------------ -----------
<S> <C> <C> <C>
*Michael A. Price............................. 0 0
*Thomas W. Price.............................. 0 0
*Kenneth W. McCarthy, Jr...................... 0 0
*Paul B. Luke................................. 0 0
Steve R. Warren............................... 5,000 13.87% $10.50
</TABLE>
- ---------------
* Messrs. Michael and Thomas Price are not eligible to receive options
under the Company's 1997 Stock Option Plan. The Compensation Committee of
the Company's Board of Directors determined that the other two members of
PLM would not receive options in 1998.
EXERCISES OF STOCK OPTIONS
No options were exercised.
COMPENSATION OF DIRECTORS
Each director who is not an officer or employee of the Company receives a
quarterly fee of $3,000 and an additional fee of $250 for each meeting of the
Board or Committee attended other than regular quarterly meetings of the Board
and an annual meeting of each Committee. Each director who is not an officer or
employee of the Company also receives 50 shares of Common Stock for attendance
at each meeting of the Board pursuant to the Company's 1997 Director Stock Grant
Plan. The Company will continue to reimburse all directors for all
travel-related expenses incurred in connection with their activities as
directors.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Company's Compensation Committee are Messrs. Syferd,
Kadlec and Hatch. KNCB/Dave provides certain consulting services to the Company.
The total fees paid by the Company to KNCB/Dave during 1998 were approximately
$154,000. David N. Syferd, a director of the Company, is also a partner of
KNCB/Dave.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION*
The Compensation Committee of the Board of Directors of the Company reviews
and recommends to the Board the compensation and benefits to be provided to the
Company's officers and key employees and reviews
- ---------------
* The report of the Compensation Committee shall not be deemed incorporated by
reference by any general statement incorporating by reference this Proxy
Statement into any filing under either the Securities Act of 1933, as amended,
or the Securities Exchange Act of 1934, as amended (together, the "Acts"),
except to the extent that the Company specifically incorporates such report by
reference; and further, such report shall not otherwise be deemed filed under
the Acts.
6
<PAGE> 10
general policy matters relating to employee compensation and benefits. The
Compensation Committee is made up of the three directors who are not employees
of the Company.
Effective October 1997, the Company entered into an agreement with P.L.M.
Consulting Group, L.L.C. ("PLM"), pursuant to which PLM provides the Company
with the services of Michael A. Price, Thomas W. Price, Paul B. Luke and Kenneth
W. McCarthy, Jr. to serve as executive officers of the Company (the
"Agreement"). The members of PLM are Messrs. Price, Mr. Luke, and Mr. McCarthy.
Under the Agreement, PLM is entitled to an annual base fee of $1,440,000 and an
annual bonus equal to 35% of the Company's annual audited after tax return on
equity in excess of 20%. According to the terms of the Agreement, the Agreement
shall automatically be renewed from year to year unless terminated.
The Compensation Committee does not directly determine the compensation of
the Company's Chief Executive Officer, the President, Senior Vice President,
Secretary and General Counsel, or the Senior Vice President, Chief Financial
Officer and Treasurer (the "Executive Officers"). Such compensation is
determined directly by PLM through allocations of amounts paid under the
Agreement.
Beginning in October 1998, the Compensation Committee reviewed the terms of
the Agreement in light of the Company's performance in 1998. The Compensation
Committee: (i) engaged an outside consultant to present to the Committee its
findings with regard to general industry standards for the compensation of
executives; and (ii) met several times to allow for a thorough exploration of
the compensation structure contained in the Agreement. The Committee concluded
that renewal was fair and reasonable in light of the preexisting contract.
The following is a summary of policies which the Compensation Committee
applied in 1998 for reviewing the amounts to be paid under the Agreement.
COMPENSATION COMPONENTS. The Compensation Committee believes that Executive
Officer compensation should be closely aligned with the financial performance of
the Company, and that such compensation should assist the Company in attracting
and retaining key executives critical to its long-term success. To that end, the
Committee's policy is that the compensation should consist of two components:
(i) an annual base salary; and (ii) the potential to earn substantial incentive
bonuses, the amount of which will depend on the Company's performance during the
prior fiscal year.
BASE FEE. The annual base fee of $1,440,000 to be paid under the Agreement
determines the level of base fee for the Company's Executive Officers as a
group. The Compensation Committee reviews the aggregate amount of the fee on the
basis of the Executive Officers' responsibilities and performance, recognizing
that the Agreement is unique and that PLM provides an extraordinary package of
services to the Company. The weight given to these factors may vary based on the
Committee's understanding of the range of services to the Company and the costs
and availability of comparable talent. The Compensation Committee has no power
to direct how the base fee is allocated among the members of PLM.
INCENTIVE FEE. Under the Agreement, PLM is entitled to an annual incentive
fee equal to 35% of the Company's annual audited after tax return on equity in
excess of 20%. For fiscal year 1998, PLM received an annual incentive fee of
$1,961,806, with the Executive Officers receiving bonuses that ranged from
$326,966 to $653,937. The allocation of the bonuses payable under the Agreement
among the Executive Officers was made by PLM, not by the Compensation Committee.
In addition, under the Agreement Messrs. Luke and McCarthy, have the right to
receive Common Stock of the Company in lieu of a cash payment of the incentive
bonus, in whole or in part, where such election to acquire the Common Stock of
the Company is made within ten (10) days after the final determination of the
amount of the incentive fee.
STOCK OPTIONS. The Company's 1997 Stock Option Plan (the "1997 Plan") was
presented to and approved by the Company's shareholders in fiscal year 1997 and
is designed to reward superior performance. All options granted by the Company
in fiscal year 1998 were granted with an exercise price equal to the market
price of the Company's Common Stock on the date of grant and, accordingly, will
have value only if the Company's Common Stock price increases. The Compensation
Committee believes that stock option awards under the 1997 Plan align the
long-term interests of the Company's Executive Officers with those of its
stockholders and contribute to the recruitment and retention of executive
personnel. In addition, the
7
<PAGE> 11
Compensation Committee anticipates that the Company's long-term incentive
compensation plans will increasingly be linked to the Company's Common Stock.
Under the 1997 Plan, the Company's Executive Officers (other than Michael
Price and Thomas Price) are eligible to receive grants of options to purchase
shares of the Company's Common Stock. The options are generally granted upon
initial employment and annually thereafter with exercise prices generally equal
to the prevailing market price at date of grant. Therefore, stock options will
have value to the executives only to the extent that the market price for the
Company's Common Stock increases. Stock option grants generally become
exercisable or "vested" in increments over four years, so long as service of the
option recipient with the Company continues.
Respectfully submitted,
David N. Syferd, Chairman
Kenneth Hatch
Robert Kadlec
8
<PAGE> 12
PERFORMANCE GRAPH
The following graph depicts the Company's total return to shareholders from
December 31, 1997 through December 31, 1998, relative to the performance of the
Nasdaq Stock Market (U.S. Companies) Index and the Company's industry average
(Frank Russell -- 2000 Index). Five year data is unavailable, as the Company has
only been publicly held since November 1997. The Company has never paid cash
dividends on its Common Stock.
<TABLE>
<CAPTION>
TWFC NASDAQ COMPOSITE FRANK RUSSEL - 2000 INDEX
---- ---------------- -------------------------
<S> <C> <C> <C>
'12/31/97' 100.00 100.00 100.00
'12/31/98' 67.73 131.58 97.05
</TABLE>
CERTAIN
TRANSACTIONS
TRANSACTIONS
WITH
AFFILIATES
OF
CERTAIN
OFFICERS
AND
DIRECTORS
Michael A. Price, Thomas W. Price and PLM own all of the membership
interests of T&W Funding Company VI, L.L.C. ("Funding VI"). The Company owns an
85% membership interest in T&W Financial Services Company L.L.C., (the "LLC")
and Funding VI owns the remaining 15% membership interest in the LLC. Profits
and losses of the LLC are allocated to T&W Financial Corporation and Funding VI
in accordance with their respective ownership of the LLC; however, 99% of the
deductions or losses associated with secured lines of credit or other recourse
liabilities of the LLC are allocated to Funding VI, whose principals guarantee
such liabilities.
The Company entered into an agreement with PLM pursuant to which PLM
provides the Company with the services of Michael A. Price, Thomas W. Price,
Paul B. Luke and Kenneth W. McCarthy, Jr. to act as executive officers of T&W
Financial Corporation. Under the agreement, PLM is entitled to an annual base
fee of $1,440,000 and an annual incentive fee equal to 35% of the Company's
annual audited after tax return on equity in excess of 20%, with proportionate
reductions in the event that any of such individuals ceases to be an executive
officer of T&W. Messrs. M. Price, T. Price, McCarthy and Luke each devote
approximately 100% of their time to the Company's business. The amounts paid by
the Company to PLM were $3,401,806 for
9
<PAGE> 13
fiscal year 1998 and $2.6 million for fiscal year 1997. For the year ended
December 31, 1996, the amount paid by the Company would have been approximately
$797,000.
PLM owns substantially all of the membership interests of Bonney Lake
Supermarket, LLC ("Bonney Lake"). Bonney Lake owns and operates an independent
grocery store located in the Seattle, Washington area. The Company and Bonney
Lake are parties to three lease agreements pursuant to which the Company leases
certain equipment to Bonney Lake on standard market terms. The first lease was
entered into in December 1996 with monthly lease payments of $4,000 for the
first year, $8,000 for the second year, $11,000 for the third year, $15,000 for
the fourth year and $19,000 for the fifth year. The second lease was entered
into in February 1997 with monthly lease payments of $6,500 over a five year
term. The third lease was entered into in May 1997 with monthly lease payments
of $2,000 over a seven year term.
PLM is the beneficial owner of 25% of the membership interests of Universal
Metering L.L.C. ("Universal Metering"). Universal Metering was created for the
purpose of selling water meter installation, reading and maintenance services to
residential and commercial properties. The Company and Universal Metering are
parties to a letter of intent pursuant to which the Company and Universal
Metering would enter into an agreement under which the Company would lease
certain water meter equipment to the owners or operators of such properties on
standard market terms. The Company has approved six leases with lease payments
aggregating approximately $800,000. To date, none of such leases has been
funded.
The Company and PLM are parties to a credit arrangement pursuant to which,
PLM borrows amounts from time to time from third party lenders and advances such
amounts to the Company at the same rate and on the same terms and conditions
offered to PLM by its lenders. At December 31, 1998, the Company had no advances
under this arrangement.
OFFICERS AND DIRECTORS
Michael A. Price and Thomas W. Price own 40% of the membership interests of
NW, L.L.C. ("NW LLC"). NW LLC provides consulting and financial services to
small and medium-sized businesses in the commercial mortgage industry. The
Company and NW LLC are parties to ten lease agreements pursuant to which the
Company leases certain computer and office equipment to NW LLC on standard
market terms. The first lease was entered into in January 1996 with monthly
lease payments of $5,267 over a five year term. The second and third leases were
entered into in February 1996 with monthly lease payments of $526 and $1,384,
respectively, over five year terms. The fourth lease was entered into in March
1996 with monthly lease payments of $833 over a five year term. The fifth lease
was entered into in September 1997 with monthly lease payments of $336 over a
three year term. The sixth lease was entered into in June 1998 with monthly
lease payments of $1,866 over a five year term. The seventh lease was entered
into in July 1998 with monthly lease payments of $1,809 over a three year term.
The eighth, ninth and tenth leases were entered into in August 1998 with monthly
lease payments of $3,602, $5,379 and $847, respectively, over three, five and
three year terms, respectively.
PLM owns 22.58% of the outstanding common stock of Westar Financial
Services Incorporated ("Westar"). Westar is a Washington-based automobile
finance company. The Company and Westar are parties to five lease agreements
pursuant to which the Company leases certain equipment to Westar on standard
market terms. The first lease was entered into in May 1996 with monthly lease
payments of $2,855 over a three year term. The second lease was entered into in
August 1996 with monthly lease payments of $2,047 over a three year term. The
third lease was entered into in March 1997 with monthly lease payments of $2,140
over a three year term. The fourth lease was entered into in February 1998 with
monthly lease payments of $910.05 over a three year term. The fifth lease was
entered into in July 1998 with monthly lease payments of $6,003 over a three
year term. In July 1998, the Company also loaned Westar the principal amount of
$1,651,504, together with interest at the rate of 9.0% per annum. The loan was
paid in full in September 1998.
Presently, the Company's corporate headquarters are located in leased
office space of approximately 7,800 square feet at 6416 Pacific Highway East,
Tacoma, Washington. The landlord is Michael A. Price. The lease terms provided
for termination on May 18, 2003 unless earlier terminated, and required monthly
rental
10
<PAGE> 14
payments of $9,450, which was continued until the current construction of
additional office facilities adjacent to the Company's existing corporate
headquarters was completed. These new facilities were completed in March 1999
and added approximately 26,000 square feet of office space. Michael A. Price is
also the landlord on the new premises, and the Company expects the lease will
extend through March 2003, and that the monthly rental payments will be
approximately $13.00 per square foot.
From time to time throughout the year, the Company leased an aircraft from
R.P.R. Company, L.L.C. ("RPR"), which is principally owned by Thomas W. Price.
The total amount paid by the Company to RPR for the lease of the aircraft during
1998 was $77,851.25.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's directors and executive officers, and
persons who beneficially own more than 10% of the Common Stock, to file with the
Securities and Exchange Commission initial reports of beneficial ownership and
reports of changes in beneficial ownership of Common Stock and other equity
securities of the Company ("Forms 4"). Officers, directors, and greater than 10%
shareholders of the Company are required by Securities and Exchange Commission
regulations to furnish to the Company copies of all Section 16(a) reports that
they file. To the Company's knowledge, based solely on a review of the copies of
such reports furnished to the Company and written representations that no other
reports were required, all Section 16(a) filing requirements applicable to its
officers, directors, and greater than 10% beneficial owners were complied with
for the fiscal year ended December 31, 1998, other than Mr. Warren who had a
late Form 4 filing.
PROPOSAL 2 -- RATIFICATION OF SELECTION OF AUDITORS
The Board of Directors requests that the shareholders ratify its selection
of BDO Seidman, LLP to serve as the Company's independent auditors for the
fiscal year 1999. BDO Seidman, LLP examined the consolidated financial
statements of the Company for the fiscal year 1998. Representatives of BDO
Seidman, LLP will be present at the Annual Meeting to make a statement if they
desire to do so and to respond to questions by shareholders. The affirmative
vote of a majority of the shares represented at the meeting is required for the
ratification of the Board's selection of BDO Seidman, LLP as the Company's
independent auditors for the fiscal year 1999.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF THE SELECTION
OF BDO SEIDMAN, LLP AS INDEPENDENT AUDITORS OF THE COMPANY.
OTHER BUSINESS
The Board of Directors knows of no other matters to be brought before the
Annual Meeting of Shareholders. However, if any other matters are properly
brought before the Annual Meeting, the persons appointed in the accompanying
proxy intend to vote the shares represented thereby in accordance with their
best judgment.
PROPOSALS OF SHAREHOLDERS
Shareholder proposals to be presented at the Company's next Annual Meeting
of Shareholders and included in the Company's Proxy Statement relating to such
meeting must be received by the Company at its executive offices at 6416 Pacific
Highway East, Tacoma, Washington, 98424, Attention: Kenneth W. McCarthy, Jr.,
Secretary, on or prior to April 15, 1999.
11
<PAGE> 15
ANNUAL REPORT TO SHAREHOLDERS AND FORM 10-K
The Company's Annual Report to Shareholders for fiscal year 1998 (which is
not a part of the Company's proxy soliciting materials) is being mailed to the
Company's shareholders with this Proxy Statement. A copy of the Company's Annual
Report on Form 10-K, without exhibits, will be furnished without charge to
shareholders upon request to:
Investor Relations
c/o Kathy Ell
T&W Financial Corporation
6416 Pacific Highway East
Tacoma, Washington, 98424
(253) 922-5164
By Order of the Board of Directors,
/s/ KENNETH W. MCCARTHY, JR.
Kenneth W. McCarthy, Jr.
Senior Vice President, Secretary and
General Counsel
Tacoma, Washington
April 5, 1999
12
<PAGE> 16
DIRECTIONS TO THE T&W FINANCIAL CORPORATION
ANNUAL MEETING OF SHAREHOLDERS
AT
THE TACOMA CLUB
1201 PACIFIC AVE., 16TH FLOOR
TACOMA, WASHINGTON 98424
AT
9:00 A.M. (PACIFIC DAYLIGHT TIME)
ON
APRIL 29, 1999
FROM INTERSTATE 5
Take the "City Center" exit onto I-705. Take the "A Street" exit. The
Tacoma Club is located in the Wells Fargo Plaza office building on the left-hand
side.
Parking is available on the street or in nearby lots and garages, including
Wells Fargo Plaza (entrance is located on A street via the left lane).
13
<PAGE> 17
PROXY
FOR THE ANNUAL MEETING OF SHAREHOLDERS
OF
T&W FINANCIAL CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned appoints Michael A. Price and Thomas W. Price (collectively,
the "Proxies"), and each of them, with full power of substitution, as proxies to
vote the shares which the undersigned is entitled to vote at the Annual Meeting
of Shareholders of T&W Financial Corporation to be held at the Tacoma Club, 1201
Pacific Ave., 16th Floor, Tacoma, Washington on Thursday, April 29, 1999 at 9:00
a.m. Pacific Daylight Time and at any adjournments thereof.
PLEASE MARK YOUR VOTES AS INDICATED IN THIS EXAMPLE [X]
1. ELECTION OF DIRECTORS: MICHAEL A. PRICE, THOMAS W. PRICE, PAUL B. LUKE,
KENNETH W. MCCARTHY, JR., KENNETH L. HATCH, DAVID N. SYFERD AND ROBERT E.
KADLEC
<TABLE>
<S> <C>
[ ] FOR All nominees listed (except as withheld) [ ] WITHHOLD AUTHORITY To vote for nominees listed
</TABLE>
WITHHOLD AUTHORITY to vote for the following Directors:
- --------------------------------------------------------------------------------
2. PROPOSAL TO RATIFY THE SELECTION OF BDO SEIDMAN, LLP AS THE COMPANY'S
INDEPENDENT AUDITORS FOR THE FISCAL YEAR ENDING DECEMBER 31, 1999.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
This proxy when properly signed will be voted in the manner directed herein
by the undersigned shareholder. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR PROPOSALS 1 AND 2.
IMPORTANT -- PLEASE SIGN AND RETURN PROMPTLY.
----------------------------
Signature
----------------------------
Signature, if held jointly
Dated:
----------------------------------------------------------------------------,
1999
When shares are held by
joint tenants, both should
sign. When signing as
attorney, executor,
administrator, trustee, or
guardian, please give full
title as such. If a
corporation, please sign in
full corporate name by
President or other
authorized officer. If a
partnership, please sign in
partnership name by an
authorized person.
