<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:
<TABLE>
<S> <C>
/X/ Preliminary Proxy Statement / / Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
</TABLE>
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
LINDAL CEDAR HOMES, INC.
- --------------------------------------------------------------------------------
(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)(4) 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
LINDAL CEDAR HOMES, INC.
4300 SOUTH 104TH PLACE
SEATTLE, WASHINGTON 98178
------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
Notice is hereby given that the Annual Meeting of the Shareholders of
Lindal Cedar Homes, Inc. will be held at the Washington Athletic Club, 1325
Sixth Avenue, Seattle, Washington on May 29, 1997 at 3:00 p.m., pursuant to a
resolution of the Board of Directors for the following purposes:
1. To elect five members of the Board of Directors to hold office for
two years, or until their successors are elected and qualified.
2. To amend the Company's Certificate of Incorporation to eliminate
the right of stockholders to cumulate votes in the election of directors.
3. To approve the Company's 1997 Stock Option Plan.
4. To elect independent auditors to examine the consolidated financial
statements of the Company for the year ending December 31, 1997.
5. To transact such other business as may properly come before the
meeting or any adjournment thereof.
Only shareholders of record at the close of business on April 14, 1997 will
be entitled to vote. For the convenience of the shareholders who do not expect
to attend the meeting in person and desire to have their stock voted, a form of
proxy and an envelope, for which no postage is required, are enclosed. Any
shareholder who later finds that he or she can be present at the meeting, or for
any reason desires to do so, may revoke this proxy at any time before it is
voted.
Please complete, sign, date and mail promptly the accompanying proxy card
in the return envelope furnished for that purpose, whether or not you plan to
attend the meeting. Your cooperation is appreciated since a majority of the
common stock must be represented, either in person or by proxy, to constitute a
quorum for the conduct of business.
By Order of the Board of Directors
SIR WALTER LINDAL
Chairman Emeritus and Secretary
Seattle, Washington
April 29, 1997
<PAGE> 3
LINDAL CEDAR HOMES, INC.
4300 SOUTH 104TH PLACE
SEATTLE, WASHINGTON 98178
------------------------
PROXY STATEMENT
For Annual Meeting of Shareholders To Be Held May 29, 1997.
Proxies in the form enclosed are solicited by and on behalf of the Board of
Directors of the Company. The individuals named as proxies are Sir Walter Lindal
and Robert W. Lindal. Proxies may be solicited by use of the mails, by personal
interview or by telephone and may be solicited by officers and directors and by
other employees of the Company. All costs of solicitation of proxies will be
borne by the Company.
All shares represented by proxies received will be voted in accordance with
instructions contained therein. In the absence of voting instructions, the
shares will be voted in favor of the proposals set forth therein.
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
At the close of business on April 9, 1997 there were 4,091,136 shares of
common stock outstanding, which represent all of the voting securities of the
Company. Each share of common stock is entitled to one vote. Only shareholders
of record at the close of business on April 14, 1997 will be entitled to vote at
the meeting. Shareholders have cumulative voting rights with respect to the
election of directors and may exercise these rights without giving any notice or
taking any other prior action. The existence of cumulative voting rights means
that a shareholder may cast a total number of votes in the election of directors
which is equal to the number of directors to be elected multiplied by the number
of such shareholder's shares. Such votes may be cast entirely for one candidate
or may be distributed equally or disproportionately among as many candidates as
the shareholder may consider appropriate.
A shareholder may vote in person or by proxy. A proxy must be in writing
and dated and signed by the shareholder. A shareholder giving a proxy has the
power to revoke it at any time before it is voted.
The following table sets forth as of April 9, 1997 certain information as
to the number of shares of common stock beneficially owned by each person who is
known to the Company to own beneficially more than 5% of its outstanding common
stock or who is a Company director or nominee for director, and by all officers
and directors of the Company as a group:
BENEFICIAL OWNERSHIP OF COMMON STOCK
<TABLE>
<CAPTION>
NUMBER OF PERCENTAGE OF
NAME SHARES(1)(5) OUTSTANDING SHARES
---- ------------ ------------------
<S> <C> <C>
Sir Walter Lindal(2)................................... 951,133(3) 21.58%
Robert W. Lindal(2).................................... 442,614(4) 10.04
Douglas F. Lindal(2)................................... 371,156(4) 8.87
Bonnie G. McLennaghan(2)............................... 401,168(4)(6) 9.10
Martin J. Lindal(2).................................... 372,088(4) 8.44
Everett G. Martin...................................... 46,664 1.06
Harry A. Pryde......................................... 23,017 *
William F. Lorenz...................................... 40 *
Charles R. Widman...................................... 23,725 *
William M. Weisfield................................... 23,017 *
All officers and directors as a group (13 persons)..... 2,714,864 61.57
</TABLE>
1
<PAGE> 4
- ---------------
* Less than one percent.
(1) Beneficial ownership includes both voting power and investment power.
(2) Robert W. Lindal, Martin J. Lindal and Douglas F. Lindal are sons, and
Bonnie G. McLennaghan is the daughter, of Sir Walter Lindal. The address of
each of the individuals listed is the address of the Company's headquarters
at 4300 South 104th Place, Seattle, Washington 98178.
(3) Includes 772,898 shares held by Lindal, Inc., a private corporation
controlled by Sir Walter Lindal in which all adult members of the Lindal
family have an ownership interest.
(4) Does not include 772,898 shares owned by Lindal, Inc.
(5) With respect to each such individual and to all officers and directors as a
group, the beneficial ownership data includes options to purchase common
stock exercisable within 60 days as follows: (i) options to purchase 40,600
shares held by each of Sir Walter Lindal, Robert W. Lindal, Douglas F.
Lindal, Martin J. Lindal and Bonnie G. McLennaghan, (ii) options to purchase
11,812 shares held by Everett G. Martin, (iii) options to purchase 21,017
shares held by Harry A. Pryde and William M. Weisfield, (iv) options to
purchase 40 shares held by William F. Lorenz, (v) options to purchase 21,725
shares held by Charles R. Widman, (vi) options to purchase 316,486 shares
held by all directors and officers as a group.
(6) Includes options to purchase 10,000 shares held by Robert McLennaghan, the
husband of Bonnie G. McLennaghan.
PROPOSAL 1: ELECTION OF DIRECTORS
The Company's Bylaws provide that the Board is divided into two classes.
Each class is as nearly equal in number as possible. Unless a director has been
appointed to fill a vacancy or to fill a position that was created by increasing
the number of directors, each director serves for a term ending at the second
annual shareholders' meeting following the annual meeting at which elected. Each
director serves until such director's successor is elected and qualified or
until such director's earlier death, resignation or removal. Information as to
the nominees and as to each other director whose term will continue after the
1997 Annual Meeting of Shareholders is provided below.
The Board of Directors presently consists of nine members. Five members of
the Board of Directors will be elected at the meeting: Douglas F. Lindal, Harry
A. Pryde, William F. Lorenz, Sir Walter Lindal, and William M. Weisfield will be
elected for two-year terms expiring at the 1999 Annual Meeting and until their
respective successors have been elected and qualified. The directors will be
elected by a plurality vote of the shares represented, in person or by proxy, at
the meeting.
Each year the Board of Directors has traditionally selected a nominee for
director from among the Company's distributors. The Company believes this
improves relationships with its distributors by giving them a voice in the
decision-making process and provides the Company with an additional source of
information about its markets. The Board of Directors selected Bill Lorenz from
among its distributors as a nominee for election as a director at the 1997
Annual Meeting.
Each of the nominees for director has indicated that he is willing and able
to serve as a director. If any nominee becomes unable or unwilling to serve, the
accompanying proxy may be voted for the election of such other person as shall
be designated by the Board of Directors.
During 1996, there were six meetings of the Board of Directors. No director
attended fewer than 75% of the meetings of the Board of Directors and the
various committees thereof at which he or she was entitled to vote, except that
Harry A. Pryde attended four of the six full Board Meetings.
2
<PAGE> 5
The following table sets forth information regarding each continuing
director, each nominee for election as a director, and each executive officer of
the Company:
<TABLE>
<CAPTION>
NAME(1) AGE DIRECTOR SINCE POSITION WITH COMPANY
- -------------------------- ---- -------------------------- --------------------------------
<S> <C> <C> <C>
Sir Walter Lindal(2)...... 78 1966 - 1975 & 1978 on Chairman Emeritus of the Board
of Directors, Secretary and
Director
Robert W. Lindal(2)....... 49 1969 - 1975 & 1976 on Chairman of the Board of
Directors and Chief Executive
Officer
Douglas F. Lindal(2)...... 46 1971 - 1975 & 1980 on President, Chief Operating
Officer and Director
Bonnie G. McLennaghan(2).. 52 1966 - 1981 & 1984 - 1993 Vice President
Martin J. Lindal(2)....... 43 1981 Vice President Information
Systems & Assistant Secretary
and Director
Everett G. Martin......... 73 1986 Vice President; Midwest &
Eastern Canada and Director
Harry A. Pryde............ 66 1994 Director
William F. Lorenz......... 54 -- Nominee for Director
Charles R. Widman......... 71 1993 Director
William M. Weisfield...... 55 1994 Director
Richard C. Bendix......... 48 Vice President Marketing
Gary D. Kline............. 48 Vice President Operations
</TABLE>
- ---------------
(1) Each of the individuals listed are continuing directors or nominees for
director except Messrs. Bendix and Kline, and Ms. McLennaghan who serve
solely in their capacities as executive officers of the Company. Each
executive officer is elected by the Board of Directors following the Annual
Meeting of Shareholders to serve for a term of one year or until a successor
is elected and qualified. The address of each of the individuals listed is
the address of the Company's headquarters at 4300 South 104th Place,
Seattle, Washington 98178.
(2) Robert W. Lindal, Martin J. Lindal and Douglas F. Lindal are sons, and
Bonnie G. McLennaghan is the daughter of Sir Walter Lindal.
NOMINEES FOR ELECTION (TERMS TO EXPIRE IN 1999)
DOUGLAS F. LINDAL was Executive Vice President from 1981 until January
1995, when he became President and Chief Operating Officer of the Company. Mr.
Lindal continues to have the sales, marketing and administration areas report to
him as well as function as General Manager supervising most Company activities.
He has served as a Director of the Company from 1971 to 1975 and from 1980 to
the present. Prior to 1981, Mr. Lindal also was an independent distributor for
the Company's products in Hawaii.
HARRY A. PRYDE is currently the president of The Pryde Corporation, a full
service property management firm and a builder/developer of single and
multi-family housing. He is also a member of the board of directors of
Enterprise Bank and several non-profit entities. Mr. Pryde is a past president
of the National Association of Home Builders, as well as the Seattle Master
Builders Association and the Washington State Home Builders Association. He was
first elected a Director of the Company in 1994.
SIR WALTER LINDAL was Chairman of the Board from 1981 until January 1995,
when he became Chairman Emeritus of the Company. Mr. Lindal has been Secretary
of the Company since 1981. From 1966 to 1975 he was President of the Company and
Chairman of the Board and actively managed the Company. Mr. Lindal is the
Company's founder.
WILLIAM F. LORENZ has been the President of Southern Wisconsin Cedar Homes,
a dealer of the Company, since 1991. In 1996, Mr. Lorenz was elected to the
Dealer Advisory Council.
WILLIAM M. WEISFIELD has been the chief operating officer of Northern
Capital Company, a privately held investment company in Seattle, Washington
since January 1994. From December 1992 to December 1993,
3
<PAGE> 6
Mr. Weisfield was the chief operating officer of The Robbins Company in Kent,
Washington, a manufacturer of underground tunnel boring machines. From 1988 to
December 1992, Mr. Weisfield was the Chief Executive Officer of Cornerstone
Columbia Development Company, a Seattle, Washington real estate development
firm. From 1978 to 1982, Mr. Weisfield was Chairman of the Board of the Federal
Home Loan Bank of Seattle and he is currently a member of the Board of Regents
of Seattle University. Mr. Weisfield currently is also the Chairman of the Board
of Directors of UTILX Corporation, a NASDAQ traded company, and several
non-public entities.
CONTINUING DIRECTORS (TERMS TO EXPIRE IN 1998)
ROBERT W. LINDAL was President of the Company from 1981 to January 1995,
when he became Chairman of the Board. He has been the Chief Executive Officer of
the Company since 1981. Mr. Lindal continues to have the operations and finance
areas of the Company report to him. Mr. Lindal has been a Director of the
Company from 1969 to 1975 and 1976 to the present. Prior to 1981, Mr. Lindal was
an independent distributor for the Company's products in Hawaii, and the
Canadian Production Facilities Manager for the Company. Mr. Lindal is a
structural engineer.
CHARLES R. WIDMAN has been the President of Widman Associates, Inc., forest
industry analysts, since 1993. From 1991 to 1993, Mr. Widman was an executive
consultant with Sandwell, Inc., a diversified international consulting firm
specializing in engineering and the forest industry. From 1978 to 1991, he was
Chairman and CEO of Widman Management Limited. After being purchased by
Sandwell, Inc. in 1991, Widman Management Limited continues to operate as Widman
Management Consultants. Mr. Widman was first elected a Director in 1993.
MARTIN J. LINDAL has served as a director of the Company since 1981, and
was employed by the Company as Administration Manager in 1982. Mr. Lindal was
elected Assistant Secretary in 1986 and Vice President Information Systems &
Assistant Secretary in 1990.
EVERETT G. MARTIN has been employed by the Company since 1967 in a variety
of key sales and administrative positions. Mr. Martin has been associated with
this Company and its predecessors in a variety of positions since 1951. For the
past twenty-nine years he has been the Supervisor of the Company's midwest U.S.
and eastern Canada operations. Mr. Martin was elected Vice President Midwest &
Eastern Canada in 1986. Mr. Martin has served as a Director since 1986.
EXECUTIVE OFFICERS
RICHARD C. BENDIX joined the Company in 1988 as marketing manager and in
1989 was named Vice President Marketing. Prior to joining the Company, Mr.
Bendix was employed by Monterey Domes Inc. from 1980 to 1988 where he last
served as Executive Vice President.
BONNIE G. MCLENNAGHAN has been active in marketing as Publications Director
since the Company's formation in 1966 and served as an officer and director of
the Company from 1966 to 1981 and as a director from 1984 to February 1993. From
1981 to 1986, Mrs. McLennaghan was Director of Publications. In 1986, she was
elected Vice President Publications and in 1990 was elected Vice President.
GARY D. KLINE joined the Company in 1973 and has worked in several key
positions in the scheduling and production areas. Mr. Kline was elected Vice
President Operations in 1983.
Compensation of Directors
The annual retainer for each director, who was not an employee of the
Company, is $4,000, payable $1,000 per quarter, and 1,000 shares of the
Company's common stock. The chairman of each committee is paid $1,000 a year. A
fee of $500 is paid for each meeting of the Board of Directors or committee of
the Board of Directors attended and for significant non-Board or committee
meetings. A fee of $250 is paid for each meeting of the Board of Directors or
committee of the Board of Directors where the Board member participates by
phone.
4
<PAGE> 7
Pursuant to the standard compensation program, in November 1996 each of
Messrs. Pryde, Widman and Weisfield were granted 1,000 shares of the Company's
stock. As the stock issued was not registered, all certificates bear the
appropriate restrictive legend. The market price of the stock on the date of
issuance was $3.75.
Each Director who is not an employee of the Company is eligible to
participate in the Directors' and Distributors' Stock Option Plan ("Plan"). At
the 1995 Annual Meeting, an Amendment to the Plan was approved by the
shareholders providing that each non-employee Director would receive options to
purchase 10,000 shares upon becoming a Director and options to purchase 5,000
shares as of October 1 of each year he or she continues as a Director. The
nonemployee Directors in office when this amendment was approved were granted,
effective the day the amendment was approved, options to purchase 10,000 shares
of the Company's common stock. The exercise price of options granted under the
Plan is the market price of the Company's stock on the date of grant. In
November 1996, Messrs. Pryde, Widman and Weisfield were each granted options to
purchase 5,000 at a price of $4.13 per share.
Options granted to non-employee Directors are nonassignable except by will
or the laws of dissent and distribution. Options granted are automatically fully
vested and are exercisable six (6) months after the date of grant. Options
granted to non-employee Directors expire at the earlier of ten (10) years from
the grant date, one year after the option holder ceases to be a Director for any
reason other than death, or one (1) year after death. However, options granted
to Directors who are also Company distributors are subject to the vesting and
expiration rules described in the next paragraph for options granted to
distributors.
Non-employee Directors who are also Company distributors, and other members
of the Deufer Advisory Council, are eligible to receive options to purchase
shares of the Company's stock each year in the amount of 100 shares for each
year during which the person was a member of the Council (without regard to
years of service as a Director). Mr. Lorenz is a member of the Council and is
eligible for options granted under the Plan. In 1996, options to purchase 100
shares were granted to Mr. Lorenz for his participation on the Council. Options
granted to distributors under the Plan vest over a period of four (4) years and
expire at the earliest of ten (10) years following the date of grant or ninety
(90) days after the option holder ceases to be a distributor (or one year after
death).
Compliance With Section 16 Of The Securities Exchange Act Of 1934
Section 16 of the Securities Exchange Act of 1934 and rules adopted
thereunder establish requirements for officers, directors and beneficial owners
of ten percent or more of the Company's outstanding common stock to report
transactions and holdings in the Company's securities.
With respect to 1996, the Company believes, based upon copies of reports
furnished to it and written representations that no other reports were required,
that all filings under Section 16 were made in a timely fashion except that Mr.
Rick Stanley, whose term as director expires with the upcoming shareholder
meeting, filed his Form 4 for February 1997 one day late.
COMMITTEES OF THE BOARD OF DIRECTORS
The Company presently has an Executive Committee which exercises all the
powers of the Board of Directors when the Board of Directors is not in session,
except the authority to (1) amend the Certificate of Incorporation; (2) adopt an
agreement of merger or consolidation under Section 251 or 252 of the Delaware
Corporation Law; (3) recommend to the stockholders the sale, lease or exchange
of all or substantially all of the Company's property and assets; (4) recommend
to the stockholders a dissolution of the corporation or a revocation of
dissolution; or (5) amend the bylaws of the Company. The Executive Committee
presently consists of Sir Walter Lindal, Robert W. Lindal and Douglas F. Lindal.
The Executive Committee met four times in 1996.
The Company also has an Audit Committee, a Compensation Committee, and a
Research and Development Committee. The Audit Committee is responsible for
reviewing the results of the audit of the
5
<PAGE> 8
Company performed by its independent public accountants. The Audit Committee met
four times in 1996. Its members were William M. Weisfield and Charles R. Widman.
The Compensation Committee is responsible for determining salary and bonus
compensation to executive officers who also own five percent or more of the
Company's common stock and to report thereon to the Board of Directors. This
Committee also has, effective in 1996, the authority to grant stock options
under the 1988 Combined Incentive Stock Option Plan and Nonqualified Stock
Option Plan and will have the authority to grant stock options under the plan
that is being presented for ratification at the May 29, 1997 Annual Meeting of
Shareholders. The Compensation Committee, which consisted of William M.
Weisfield and Charles R. Widman, met four times in 1996.
The Company has a Research and Development Committee, which consisted of
Sir Walter Lindal, Harry A. Pryde and Charles R. Widman. The committee met once
in 1996.
The Stock Option Committee had the authority to grant stock options under
the Company's 1984 Incentive Stock Option Plan and the 1988 Combined Incentive
Stock Option Plan and Nonqualified Stock Option Plan. The Stock Option Committee
consisted of William M. Weisfield and Charles R. Widman. It met once in 1996.
The Stock Option Committee was eliminated in 1996 and its functions vested in
the Compensation Committee.
RELATED PARTY TRANSACTIONS
WILLIAM F. LORENZ is the President of Southern Wisconsin Cedar Homes, an
independent dealership of the Company. Sales to Southern Wisconsin Cedar Homes
were $732,000 in 1996. All sales were on normal trade terms.
In 1996, the Company made payments aggregating $47,304 to Lindal family
members under a variety of agreements. Of this amount, $34,000 was paid to
Lindal, Inc., in connection with certain royalty agreements, and $6,652 was paid
to each of Robert W. Lindal and Douglas F. Lindal for rental payments on
property owned by them which is leased by the Company.
EXECUTIVE COMPENSATION
The following table shows the compensation for services rendered during
fiscal years 1996, 1995 and 1994 for the Chief Executive Officer and each of the
four highest paid executive officers of the Company whose aggregate salary and
bonus exceeded $100,000 in the most recent fiscal year.
6
<PAGE> 9
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION
COMPENSATION AWARDS
------------------ ------------ OTHER
NAME AND SALARY(1) BONUS OPTIONS COMPENSATION(2)
PRINCIPAL POSITION YEAR ($) ($) (#) ($)
- ------------------------------------ ---- ------- ------ ------------ ---------------
<S> <C> <C> <C> <C> <C>
Robert W. Lindal.................... 1996 177,404 60,537 20,100 7,636
CEO/Chairman 1995 176,532 38,350 0 5,858
1994 153,766 20,350 10,000 5,849
Douglas F. Lindal................... 1996 160,366 60,969 20,100 5,306
President 1995 151,175 38,359 0 3,721
1994 133,424 20,589 10,000 3,721
Sir Walter Lindal................... 1996 159,669 26,000 20,100 3,023
Secretary 1995 161,397 22,000 0 2,945
1994 139,992 14,000 10,000 2,541
Martin J. Lindal.................... 1996 99,223 15,096 20,100 4,212
Vice President Information 1995 97,444 11,566 0 3,157
Systems and Assistant Secretary 1994 79,666 9,066 10,000 2,691
</TABLE>
- ---------------
(1) Includes base salary; taxable life insurance in accordance with the
Company's term life insurance plan; life insurance premiums paid for Mr.
Robert W. Lindal; purchase of a portion of each named executive's unused
accrued paid time off; cash paid for business use of personal automobile for
which there is no accounting to the Company for Mr. Douglas F. Lindal; and
amounts paid for medical expenses not covered by the Company's medical plan
under a program available only to executives for Robert W. Lindal, Sir
Walter Lindal, and Mr. Douglas F. Lindal.
(2) For Messrs. Robert W. Lindal, Douglas F. Lindal, and Martin J. Lindal, Other
Compensation consists of amounts contributed, at the discretion of the Board
of Directors, to the Company's 401(k) Plan and a 25% matching contribution
of such employees' contributions to the Plan. For Mr. Robert W. Lindal, it
also includes the benefit of personal use of a Company automobile. For Sir
Walter Lindal, Other Compensation consists of the benefit of personal use of
a Company automobile.
OPTION GRANTS IN LAST FISCAL YEAR
The Company has two employee stock option plans, an Incentive Stock Option
Plan effective December 21, 1984 ("1984 Plan") and a 1988 Combined Incentive and
Nonqualified Stock Option Plan adopted at the Company's 1988 Annual Meeting of
Shareholders ("1988 Plan"). Options to purchase common stock have been granted
under the plans to officers and key employees of the Company. The 1984 Plan
expired on December 21, 1994. The following tables show stock option grants and
exercises in fiscal year 1996 by the executive officers of the Company and the
year end values of unexercised options.
7
<PAGE> 10
INDIVIDUAL GRANTS
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE
AT ASSUMED ANNUAL
RATES OF
% OF TOTAL STOCK PRICE
OPTIONS APPRECIATION
GRANTED TO EXERCISE FOR OPTION TERM
OPTIONS EMPLOYEES IN OR BASE ---------------------
GRANTED(1) FISCAL YEAR PRICE(2) EXPIRATION 5% 10%
NAME (#) (%) ($) DATE ($) ($)
(A) (B) (C) (D) (E) (F) (G)
- ------------------------ ------------- ------------- ------------- ---------- ------ ------
<S> <C> <C> <C> <C> <C> <C>
Robert W. Lindal........ 10,000 4.48% 3.75 3/27/06 23,584 59,765
10,100 4.52% 3.75 10/31/06 23,819 60,363
Douglas F. Lindal....... 10,000 4.48% 3.75 3/27/06 23,584 59,765
10,100 4.52% 3.75 10/31/06 23,819 60,363
Sir Walter Lindal....... 10,000 4.48% 3.75 3/27/06 23,584 59,765
10,100 4.52% 3.75 10/31/06 23,819 60,363
Martin J. Lindal........ 10,000 4.48% 3.75 3/27/06 23,584 59,765
10,100 4.52% 3.75 10/31/06 23,819 60,363
</TABLE>
- ---------------
(1) The options were granted for a term of 10 years and are immediately
exercisable.
(2) The options have an exercise price equal to the market value on the date of
grant.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
SHARES OPTIONS AT YEAR-END IN THE MONEY OPTIONS,
ACQUIRED ON VALUE --------------------------- AT YEAR-END
EXERCISE(1) REALIZED EXERCISABLE UNEXERCISABLE ---------------------------
NAME (#) ($) (#) (#) EXERCISABLE UNEXERCISABLE
(A) (B) (C) (D) (D) ($)(E) ($)(F)
- ------------------------------ ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Robert W. Lindal.............. 0 0 40,600 0 10,812 0
Douglas F. Lindal............. 0 0 40,600 0 10,812 0
Sir Walter Lindal............. 0 0 40,600 0 10,812 0
Martin J. Lindal.............. 0 0 40,600 0 10,812 0
</TABLE>
- ---------------
(1) Number of securities underlying options exercised.
(2) Based on a fair market value at fiscal year-end of $4.375.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
COMPENSATION COMMITTEE
In 1996, the Compensation Committee (the "Committee") was composed of two
of the Company's outside directors, William M. Weisfield and Charles R. Widman.
The Committee is responsible for the establishing and administering of policies
that govern compensation for the Chief Executive Officer and other executive
officers who own 5% or more of the Company's outstanding common stock
("Owner/Officers") and governs the Company's stock option program. The Committee
is also directly involved with the setting of the compensation of other
executive officers.
8
<PAGE> 11
COMPENSATION POLICIES
The Committee bases executive officer compensation on the same guiding
principals used to determine compensation programs for all employees. The
Company seeks to offer pay and benefits that allow the Company to:
(A) Attract and retain people with the skills critical to achieve long
term success of the Company,
(B) Maintain compensation costs that are competitive, and
(C) Pay for performance to both motivate and reward individual and
team performance in attaining business objectives and maximizing
shareholder value.
FORMS OF COMPENSATION
Compensation for the Owner/Officers is based on the above Policies and
consists of the following components: competitive base pay, bonuses, stock
options and competitive benefits.
Base Salary. The Committee reviews and approves all salary changes for
Owner/Officers. The Committee bases its approval of individual salary levels on
the compensation budget for the Company, performance-based evaluations,
recommendations by the Executive Committee and comparisons to published
compensation levels for manufacturing companies of similar size and
profitability. In 1994, the Committee approved recommended adjustments in the
base salary of the Owner/Officers to a level which would allow for the
implementation of a meaningful bonus program in 1995. Accordingly, the Executive
Committee recommended and the Committee approved that the base salary of the
Owner/Officers, as a group, be increased approximately 25% effective September
1, 1994. The base salary of Mr. Robert Lindal, the Chief Executive Officer,
increased from approximately $142,000 per year to approximately $173,000 per
year, effective September 1, 1994.
Bonus. The Committee has devised a bonus plan that is based on selected
performance criteria, emphasizing the pre-tax profitability of the Company. For
the Chief Executive Officer, the amount of any bonus payment is based solely on
the pre-tax earnings of the Company. The Committee consulted with independent
compensation experts when devising this plan. The plan was implemented for
Owner/Officers and other executive officers in 1995.
The bonus plan, among other things, defines the bonus pool that is to be
available for distribution to the Owner/Officers and other executive officers.
If pre-tax earnings are $500,000 or less there is no bonus. For pre-tax earnings
from $500,000 to $1,000,000, 10% of pre-tax earnings is the bonus pool. For
pretax earnings over $1,000,000 to a maximum of $3,000,000, 20% of pre-tax
earnings is added to the bonus pool. The available bonus pool is then divided
among the Owner/Officers and other executive officers according to a
predetermined percentage.
Stock Options. Nonqualified or incentive options are periodically granted
to all Owner/Officers. Incentive stock options are periodically granted to other
executive officers and certain other employees by the Compensation Committee.
9
<PAGE> 12
1996 COMPENSATION
As part of the process of formulating a revised bonus plan for 1995, in
late 1994 the Committee reviewed the base salaries of the Owner/Officers. It was
determined, through consultations with independent compensation experts, that
the base salary of the Owner/Officers needed to be adjusted to arrive at a level
that allowed a workable bonus plan.
For the 12 months of 1996, the salary of Mr. Robert Lindal increased .5%
over 1995.
It is the opinion of the Committee, based upon input from independent
compensation consultants, that the current base salaries are consistent with
base salaries for manufacturing companies of similar size.
COMPENSATION COMMITTEE
William M. Weisfield, Chairman
Charles R. Widman
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<PAGE> 13
STOCK PRICE PERFORMANCE GRAPH
The graph below compares for each of the last five calendar years ending
December 31, 1996 the cumulative total return of the Company, the NASDAQ Market
Index and the Media General Residential Construction Index. Cumulative total
return assumes $100 invested January 1, 1992 and reinvestment of all dividends.
COMPARE 5-YEAR CUMULATIVE TOTAL RETURN
AMONG LINDAL CEDAR HOMES INC,
NASDAQ MARKET INDEX AND MG GROUP INDEX
<TABLE>
<CAPTION>
MEASUREMENT PERIOD LINDEL CEDAR
(FISCAL YEAR COVERED) HOMES INC. INDUSTRY INDEX BROAD MARKET
<S> <C> <C> <C>
1991 100 100 100
1992 134.26 112.85 100.98
1993 127.33 149.26 121.13
1994 66.21 90.33 127.17
1995 91.68 129.99 164.96
1996 89.13 130.75 204.98
</TABLE>
Assumes $100 invested on January 1, 1992.
Assumes dividend reinvested.
Fiscal year ending December 31, 1996.
11
<PAGE> 14
PROPOSAL 2: AMENDMENT TO THE CERTIFICATE OF INCORPORATION --
ELIMINATION OF CUMULATIVE VOTING
The Board of Directors of the Company has approved, and recommends that the
shareholders adopt, an amendment to the Company's Certificate of Incorporation
that would eliminate the right of shareholders to cumulate votes in the election
of directors. The proposal is as follows:
RESOLVED, that Article V of the Certificate of Incorporation of this
corporation be amended in its entirety to read as follows:
At all elections of directors of this corporation, stockholders shall
not have the right to cumulate votes. Election of directors need not be
by written ballot unless required by the Bylaws of the corporation.
Description of Amendment
The Company's Certificate of Incorporation presently permits shareholders
to cumulate votes in the election of directors. Cumulative voting permits
holders of shares of common stock to cast, for any one or more nominees for the
Board, a number of votes equal to the product of the number of shares such
shareholder owns and the number of nominees proposed for election to the Board.
Thus, by casting all their votes for one nominee, minority shareholders may
succeed in electing one or more nominees to the Board who would not otherwise
have received sufficient votes to be elected.
The Board of Directors believes, however, that the benefit of allowing
minority shareholders the possibility of electing a representative is outweighed
by the risk that an individual may seek to be elected to the Board of Directors
and serve on the Board as a representative of minority interests with a
consequent disruption of the operations of the Board of Directors and management
of the Company. The amendment is intended to encourage continuity in the
management of the business and affairs of the Company.
Effect of Amendment
The amendment would have the effect of assuring that the members of the
Lindal family have the ability to elect all of the members of the Board of
Directors. The amendment is not recommended in response to any effort of which
Company management or the Board of Directors is aware to obtain control of the
Company or to change the Board of Directors. The Board has no present intention
of soliciting shareholder approval of any other proposals that would affect the
ability of third parties to change control of the Board.
The Company's Certificate of Incorporation and Bylaws also contain other
provisions that may limit or prevent a change in control of the Company. Article
IV of the Certificate of Incorporation provides that the authorized capital of
the Company consists of 10,000,000 shares of Common Stock (5,908,864 shares
unissued as of April 10, 1997) and 3,000,000 shares of Preferred Stock
(3,000,000 shares unissued as of April 10, 1997). The Board of Directors may
issue, from time to time, one or more classes or series of preferred with such
designations and preferences, relative voting and other rights as its deems
appropriate without the approval of the Company's shareholders. The Board of
Directors, by issuing such common or preferred stock in one or more classes or
series could adversely affect the voting power of the outstanding shares of
Common Stock and discourage any attempt to gain control of the Company.
Article VI of the Certificate of Incorporation provides that the size of
the Board be set in the Bylaws. As the Bylaws may be amended by the directors
without action by the shareholders, this provision allows the Board, without
action of the shareholders, to alter the size of the Board or add members
sympathetic to it, diluting the influence of directors hostile to current
management. Article IV, Section 4.2 of the Bylaws divides the directors into two
classes, as nearly equal in size as possible, with staggered two-year terms.
This provision may make it more difficult for shareholders to change a majority
of current directors.
As of April 9, 1997, the present members of the Board hold approximately
2,273,414 shares of common stock (including stock options) which is
approximately 51.6% of the outstanding common stock. The members of the Lindal
family (Sir Walter Lindal, Robert W. Lindal, Douglas F. Lindal, Bonnie G.
12
<PAGE> 15
McLennaghan and Martin J. Lindal) hold approximately 58.0% of the outstanding
common stock. See "Voting Securities and Principal Holders Thereof" above. In
view of these ownership percentages, the Board does not believe that third
parties are likely to seek control of the Company by accumulations of the
Company's stock in market transactions or by means of a proxy contest.
The proposed amendment, in combination with the above mentioned provisions
of the Certificate of Incorporation and Bylaws, may have the effect of
encouraging persons seeking to acquire control of the Company or to obtain
representation on the Board of Directors to initiate such action through
arms-length negotiations with the Company's management and Board of Directors
who would then be in a position to negotiate a transaction which is in the best
interests of all stockholders.
THE BOARD HAS UNANIMOUSLY APPROVED THE ADOPTION OF THE AMENDMENT TO THE
CERTIFICATE OF INCORPORATION PROVIDING FOR THE ELIMINATION OF CUMULATIVE VOTING
IN THE ELECTION OF DIRECTORS AND RECOMMENDS THAT SHAREHOLDERS VOTE FOR PROPOSAL
2. THE ADOPTION OF THE AMENDMENT WILL REQUIRE THE AFFIRMATIVE VOTE OF A MAJORITY
OF THE SHARES REPRESENTED AT THE 1997 ANNUAL MEETING.
PROPOSAL 3: APPROVE 1997 STOCK OPTION PLAN
The Board of Directors has unanimously approved the Lindal Cedar Homes,
Inc. 1997 Stock Option Plan (the "Plan") subject to the approval of the
shareholders of the Company. The text of the Plan is attached to this Proxy
Statement as Appendix A.
The Plan will be the successor stock option plan to the Company's 1988
Combined Incentive and Nonqualified Stock Option Plan, which expires in May
1998. If approved by the shareholders, the Plan would enable the Company to
continue its practice of granting stock options as one element of its
compensation program.
DESCRIPTION OF THE PLAN
The purposes of the Plan are to attract and retain the best available
personnel for positions of substantial responsibility, to provide additional
incentive to employees of the Company or any of its subsidiaries, and to promote
the success of the Company's business.
The Plan provides for the granting of incentive stock options as defined in
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), and
nonqualified stock options. 250,000 shares of common stock will be authorized
for issuance under the Plan.
The Compensation Committee of the Board will act as administrator of the
Plan (the "Plan Administrator"). Options may be granted under the Plan to those
employees of the Company and its subsidiaries as the Plan Administrator from
time to time selects. The number of options to be granted to each eligible
person is set by the Plan Administrator at the time of grant. No member of the
Plan Administrator who is or may become eligible to receive an option under the
Plan may participate in the deliberations or actions with respect to the Plan.
The Plan Administrator establishes the time or times at which options may
be exercised and whether all the options will be exercisable at one time or will
vest in increments over time. The exercise price of the options granted under
the Plan is set by the Plan Administrator at the time of grant, but with respect
to incentive stock options may not be less than the fair market value of the
common stock on the date of grant. Generally, options granted to employees
(other than members of the Lindal family) have terms of ten years and vest over
five years: Options may be exercised as to 20% of the shares after one year; an
additional 20% each succeeding year; and all the shares after five years.
In the event of stock dividends, splits, and similar capital changes, the
Plan provides for appropriate adjustments in the number of shares available for
options and the number or option prices of shares subject to outstanding
options. Options granted under the Plan generally expire at the earliest of the
following dates:
13
<PAGE> 16
(i) the date specified in the individual option (not more than ten years after
the grant); (ii) three months after termination of employment for any reason
other than termination due to cause, retirement, early retirement at the
Company's request, death or disability; and (iii) 12 months after the optionee's
retirement, early retirement at the Company's request, death or termination due
to disability. Options automatically terminate immediately upon termination of
the optionee's employment for cause, unless the Plan Administrator determines
otherwise.
Immediately prior to a corporate transaction such as a merger,
consolidation, liquidation, or similar reorganization of the Company in which
the Company is not the surviving corporation, each option granted under the Plan
will automatically accelerate so that each option may be exercised in whole or
in part whether or not the vesting requirements applicable to such option have
been satisfied, except that such acceleration will not occur if, in the opinion
of the Company's outside accountants, it would render unavailable "pooling of
interest" accounting for a corporate transaction that would otherwise qualify
for such accounting treatment. Such options will also not accelerate if and to
the extent that such options are, in connection with a corporate transaction
such as a merger, consolidation, liquidation or similar reorganization of the
Company, either to be assumed by the successor corporation or parent thereof
(the "Successor Corporation") or to be replaced with a comparable award for the
purchase of shares of the capital stock of the Successor Corporation.
The exercise price of option shares may be paid in cash, by check, or by
delivery of shares of common stock held by the optionee having a fair market
value equal to the exercise price of the option. The exercise price may also be
paid through a "cashless" exercise program established at brokerage firms
designated by the Company. For nonqualified options, the optionee must also pay
the Company, at the time of purchase, the amount required to satisfy federal,
state, and local withholding tax obligations.
Options granted under the Plan are nonassignable except by will or by the
laws of descent and distribution.
The Plan may be suspended, amended or terminated by the Board except with
respect to options granted prior to such action. To the extent required for
compliance with Section 422 of the Code or any other applicable law or
regulation, shareholder approval will be required for any amendment that will
(i) increase the number of shares of common stock as to which options may be
granted, (ii) change the class of persons eligible for option grants, or (iii)
otherwise require shareholder approval under any applicable law or regulation.
The Plan has no fixed expiration date; provided, however, that no incentive
stock options may be granted more than 10 years after the earlier of the Plan's
adoption by the Board and approval by the shareholders.
FEDERAL INCOME TAX CONSEQUENCES
The following discussion of the federal income tax consequences of the Plan
is intended to be a summary of applicable federal law. State and local tax
consequences may differ. Because the federal income tax rules governing options
and related payments are complex and subject to frequent change, optionees are
advised to consult their tax advisors prior to exercise of options or
dispositions of stock.
Incentive stock options and nonqualified stock options are treated
differently for federal income tax purposes. Incentive stock options are
intended to comply with the requirements of Section 422 of the Code.
Nonqualified stock options need not comply with such requirements.
Incentive Stock Options
An optionee is not taxed on the grant or exercise of an incentive stock
option. The difference between the exercise price and the fair market value of
the shares on the exercise date will, however, be a preference item for purposes
of the alternative minimum tax. If an optionee holds the shares acquired upon
exercise of an incentive stock option for at least two years following grant and
at least one year following exercise, the optionee's gain, if any, upon
subsequent disposition of such shares is long term capital gain. The measure of
the gain is the difference between the proceeds received on disposition and the
optionee's basis in the shares (which generally equals the exercise price). If
an optionee disposes of stock acquired pursuant to exercise of
14
<PAGE> 17
an incentive stock option before satisfying the one and two-year holding periods
described above, the optionee will recognize both ordinary income and capital
gain in the year of disposition. The amount of the ordinary income will be the
lesser of (i) the amount realized on disposition less the optionee's adjusted
basis in the stock (usually the option price) or (ii) the difference between the
fair market value of the stock on the exercise date and the option price. The
balance of the consideration received on such a disposition will be long term
capital gain if the stock had been held for at least one year following exercise
of the incentive stock option. The Company is not entitled to an income tax
deduction on the grant or exercise of an incentive stock option or on the
optionee's disposition of the shares after satisfying the holding period
requirement described above. If the holding periods are not satisfied, the
Company will be entitled to a deduction in the year the optionee disposes of the
shares, in an amount equal to the ordinary income recognized by the optionee.
Nonqualified Stock Options
An optionee is not taxed on the grant of a nonqualified stock option. On
exercise, however, the optionee recognizes ordinary income equal to the
difference between the option price and the fair market value of the shares on
the date of exercise. The Company is entitled to an income tax deduction in the
year of exercise in the amount recognized by the optionee as ordinary income.
Any gain on subsequent disposition of the shares is long term capital gain if
the shares are held for at least one year following exercise. The Company does
not receive a deduction for this gain.
THE BOARD HAS UNANIMOUSLY APPROVED THE 1997 STOCK OPTION PLAN AND
RECOMMENDS THAT SHAREHOLDERS VOTE FOR PROPOSAL 3. THE APPROVAL OF THE PLAN
REQUIRES THE AFFIRMATIVE VOTE OF A MAJORITY OF THE SHARES REPRESENTED AT THE
1997 ANNUAL MEETING.
PROPOSAL 4: ELECTION OF AUDITORS
KPMG Peat Marwick LLP, certified public accountants, has been nominated by
the Board of Directors for election as independent auditors to examine the
consolidated financial statements of the Company for the year ending December
31, 1997. KPMG Peat Marwick LLP has served as the independent auditor of the
Company's United States operations since 1968 and of the Company's Canadian
operations since 1970. A representative of KPMG Peat Marwick LLP will be present
at the 1997 Annual Meeting to respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE ELECTION OF
THE INDEPENDENT AUDITORS.
15
<PAGE> 18
PROPOSALS BY SHAREHOLDERS
Proposals by shareholders intended to be presented at the 1998 Annual
Meeting and to be included in the Company's Proxy or Information Statement, must
be received by the Company at its principal executive offices no later than
December 31, 1997, and must otherwise comply with the rules issued under the
Securities Exchange Act of 1934.
By Order of the Board of Directors
SIR WALTER LINDAL
Chairman Emeritus and Secretary
For a copy of the Annual Report on Form 10-K to the Securities and Exchange
Commission, please write:
Sir Walter Lindal, Secretary
Lindal Cedar Homes, Inc.
Post Office Box 24426
Seattle, Washington 98124
16
<PAGE> 19
APPENDIX A
LINDAL CEDAR HOMES, INC.
1997 STOCK OPTION PLAN
SECTION 1. Purpose
The purpose of the Lindal Cedar Homes, Inc. 1997 Stock Option Plan (the
"Plan") is to enhance the long-term shareholder value of Lindal Cedar Homes,
Inc., a Delaware corporation (the "Company") by offering opportunities to
employees of the Company and its Subsidiaries (as defined in Section 2) to
participate in the Company's growth and success, and to encourage them to remain
in the service of the Company and its Subsidiaries and to acquire and maintain
stock ownership in the Company.
SECTION 2. Definitions
For purposes of the Plan, the following terms shall be defined as set forth
below:
2.1 "Board" means the Board of Directors of the Company.
2.2 "Cause" means dishonesty, fraud, misconduct, unauthorized use or
disclosure of confidential information or trade secrets, or conviction or
confession of a crime punishable by law (except minor violations), in each case
as determined by the Plan Administrator, and its determination shall be
conclusive and binding.
2.3 "Code" means the Internal Revenue Code of 1986, as amended from time
to time.
2.4 "Common Stock" means the common stock, par value $0.01 per share, of
the Company.
2.5 "Corporate Transaction" means any of the following events:
(a) Consummation of any merger or consolidation of the Company in
which the Company is not the continuing or surviving corporation, or
pursuant to which shares of the Common Stock are converted into cash,
securities or other property, if following such merger or consolidation the
holders of the Company's outstanding voting securities immediately prior to
such merger or consolidation own less than 66 2/3% of the outstanding
voting securities of the surviving corporation;
(b) Consummation of any sale, lease, exchange or other transfer in one
transaction or a series of related transactions of all or substantially all
of the Company's assets other than a transfer of the Company's assets to a
majority-owned subsidiary corporation (as the term "subsidiary corporation"
is defined in Section 8.3) of the Company; or
(c) Approval by the holders of the Common Stock of any plan or
proposal for the liquidation or dissolution of the Company.
Ownership of voting securities shall take into account and shall include
ownership as determined by applying Rule 13d-3(d)(1)(i) (as in effect on the
date of adoption of the Plan) under the Exchange Act.
2.6 "Disability" means "disability" as that term is defined for purposes
of Section 22(e)(3) of the Code.
2.7 "Early Retirement" means early retirement as that term is defined by
the Plan Administrator from time to time for purposes of the Plan.
2.8 "Exchange Act" means the Securities Exchange Act of 1934, as amended.
2.9 The "Fair Market Value" shall be as established in good faith by the
Plan Administrator or (a) if the Common Stock is listed on the Nasdaq National
Market, the average of the high and low per share sales prices for the Common
Stock as reported by the Nasdaq National Market for a single trading day or (b)
if the Common Stock is listed on the New York Stock Exchange or the American
Stock Exchange, the average of the high and low per share sales prices for the
Common Stock as such price is officially quoted in the
17
<PAGE> 20
composite tape of transactions on such exchange for a single trading day. If
there is no such reported price for the Common Stock for the date in question,
then such price on the last preceding date for which such price exists shall be
determinative of the Fair Market Value.
2.10 "Good Reason" means the occurrence of any of the following events or
conditions and the failure of the Successor Corporation to cure such event or
condition within 30 days after receipt of written notice by the Optionee:
(a) a change in the Optionee's status, title, position or
responsibilities (including reporting responsibilities) that, in the
Optionee's reasonable judgment, represents a substantial reduction in the
status, title, position or responsibilities as in effect immediately prior
thereto; the assignment to the Optionee of any duties or responsibilities
that, in the Optionee's reasonable judgment, are materially inconsistent
with such status, title, position or responsibilities; or any removal of
the Optionee from or failure to reappoint or reelect the Optionee to any of
such positions, except in connection with the termination of the Optionee's
employment for Cause, for Disability or as a result of his or her death, or
by the Optionee other than for Good Reason;
(b) a reduction in the Optionee's annual base salary;
(c) the Successor Corporation's requiring the Optionee (without the
Optionee's consent) to be based at any place outside a 35-mile radius of
his or her place of employment prior to a Corporate Transaction, except for
reasonably required travel on the Successor Corporation's business that is
not materially greater than such travel requirements prior to the Corporate
Transaction;
(d) the Successor Corporation's failure to (i) continue in effect any
material compensation or benefit plan (or the substantial equivalent
thereof) in which the Optionee was participating at the time of a Corporate
Transaction, including, but not limited to, the Plan, or (ii) provide the
Optionee with compensation and benefits substantially equivalent (in terms
of benefit levels and/or reward opportunities) to those provided for under
each material employee benefit plan, program and practice as in effect
immediately poor to the Corporate Transaction;
(e) any material breach by the Successor Corporation of its
obligations to the Optionee under the Plan or any substantially equivalent
plan of the Successor Corporation; or
(f) any purported termination of the Optionee's employment or services
for Cause by the Successor Corporation that does not comply with the terms
of the Plan or any substantially equivalent plan of the Successor
Corporation.
2.11 "Grant Date" means the date the Plan Administrator adopted the
granting resolution or a later date designated in a resolution of the Plan
Administrator as the date an Option is to be granted.
2.12 "Incentive Stock Option" means an Option to purchase Common Stock
granted under Section 7 with the intention that it qualify as an "Incentive
stock option" as that term is defined in Section 422 of the Code.
2.13 "Nonqualified Stock Option" means an Option to purchase Common Stock
granted under Section 7 other than an Incentive Stock Option.
2.14 "Option" means the right to purchase Common Stock granted under
Section 7.
2.15 "Optionee" means (i) the person to whom an Option is granted; (ii)
for an Optionee who has died, the personal representative of the Optionee's
estate, the person(s) to whom the Optionee's rights under the Option have passed
by will or by the applicable laws of descent and distribution, or the
beneficiary designated in accordance with Section 9; or (iii) person(s) to whom
an Option has been transferred in accordance with Section 9.
2.16 "Plan Administrator" means the Board or any committee of the Board
designated to administer the Plan under Section 3.1.
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<PAGE> 21
2.17 "Retirement" means retirement as of the individual's normal
retirement as that term is defined by the Plan Administrator from time to time
for purposes of the Plan.
2.18 "Securities Act" means the Securities Act of 1933, as amended.
2.19 "Subsidiary," except as provided in Section 8.3 in connection with
Incentive Stock Options, means any entity that is directly or indirectly
controlled by the Company or in which the Company has a significant ownership
interest, as determined by the Plan Administrator, and any entity that may
become a direct or indirect parent of the Company.
2.20 "Successor Corporation" has the meaning set forth under Section 10.2.
SECTION 3. Administration
3.1 Plan Administrator. The Plan shall be administered by the Board or a
committee or committees (which term includes subcommittees) appointed by, and
consisting of two or more members of, the Board. If and so long as the Common
Stock is registered under Section 12(b) or 12(g) of the Exchange Act, the Board
shall consider in selecting the Plan Administrator and the membership of any
committee acting as Plan Administrator, with respect to any persons subject or
likely to become subject to Section 16 of the Exchange Act, the provisions
regarding "nonemployee directors" as contemplated by Rule 16b-3 under the
Exchange Act. The Board may delegate the responsibility for administering the
Plan with respect to designated classes of eligible persons to different
committees consisting of two or more members of the Board, subject to such
limitations as the Board deems appropriate. Committee members shall serve for
such term as the Board may determine, subject to removal by the Board at any
time.
3.2 Administration and Interpretation by the Plan Administrator. Except for
the terms and conditions explicitly set forth in the Plan, the Plan
Administrator shall have exclusive authority, in its discretion, to determine
all matters relating to Options under the Plan, including the selection of
individuals to be granted Options, the type of Options, the number of shares of
Common Stock subject to an Option, all terms, conditions, restrictions and
limitations, if any, of an Option and the terms of any instrument that evidences
the Option. The Plan Administrator shall also have exclusive authority to
interpret the Plan and may from time to time adopt, and change, rules and
regulations of general application for the Plan's administration. The Plan
Administrator's interpretation of the Plan and its rules and regulations, and
all actions taken and determinations made by the Plan Administrator pursuant to
the Plan, shall be conclusive and binding on all parties involved or affected.
The Plan Administrator may delegate administrative duties to such of the
Company's officers as it so determines.
SECTION 4. Stock Subject to the Plan
4.1 Authorized Number of Shares. Subject to adjustment from time to time as
provided in Section 10.1, a maximum of 250,000 shares of Common Stock shall be
available for issuance under the Plan. Shares issued under the Plan shall be
drawn from authorized and unissued shares or shares now held or subsequently
acquired by the Company: as treasury shares.
4.2 Reuse of Shares. Any shares of Common Stock that have been made subject
to an Option that cease to be subject to the Option (other than by reason of
exercise of the Option to the extent it is exercised for shares) shall again be
available for issuance in connection with future grants of Options under the
Plan.
SECTION 5. Eligibility
Options may be granted under the Plan to those employees of the Company and
its Subsidiaries as the Plan Administrator from time to time selects. Options
may also be made to consultants, agents, advisors and independent contractors
who provide services to the Company and its Subsidiaries.
19
<PAGE> 22
SECTION 6. Awards
6.1 Form and Grant of Options. The Plan Administrator shall have the
authority, in its sole discretion, to determine the type or types of awards to
be made under the Plan. Such awards may consist of Incentive Stock Options
and/or Nonqualified Stock Options. Options may be granted singly or in
combination.
6.2 Acquired Company Option Awards. Notwithstanding anything in the Plan to
the contrary, the Plan Administrator may grant Options under the Plan in
substitution for awards issued under other plans, or assume under the Plan
awards issued under other plans, if the other plans are or were plans of other
acquired entities ("Acquired Entities") (or the parent of the Acquired Entity)
and the new Option is substituted, or the old award is assumed, by reason of a
merger, consolidation, acquisition of property or of stock, reorganization or
liquidation (the "Acquisition Transaction"). In the event that a written
agreement pursuant to which the Acquisition Transaction is completed is approved
by the Board and said agreement sets forth the terms and conditions of the
substitution for or assumption of outstanding awards of the Acquired Entity,
said terms and conditions shall be deemed to be the action of the Plan
Administrator without any further action by the Plan Administrator, except as
may be required for compliance with Rule 16b-3 under the Exchange Act, and the
persons holding such awards shall be deemed to be Optionees.
SECTION 7. Terms and Conditions of Options
7.1 Grant of Options. The Plan Administrator is authorized under the Plan,
in its sole discretion, to issue Options as Incentive Stock Options or as
Nonqualified Stock Options, which shall be appropriately designated.
7.2 Option Exercise Price. The exercise price for shares purchased under an
Option shall be as determined by the Plan Administrator, but shall not be less
than 100% of the Fair Market Value of the Common Stock on the Grant Date with
respect to Incentive Stock Options.
7.3 Term of Options. The term of each Option shall be as established by the
Plan Administrator or, if not so established, shall be 10 years from the Grant
Date.
7.4 Exercise of Options. The Plan Administrator shall establish and set
forth in each instrument that evidences an Option the time at which or the
installments in which the Option shall vest and become exercisable, which
provisions may be waived or modified by the Plan Administrator at any time. If
not so established in the instrument evidencing the Option, the Option will vest
and become exercisable according to the following schedule, which may be waived
or modified by the Plan Administrator at any time:
<TABLE>
<CAPTION>
PERIOD OF OPTIONEE'S CONTINUOUS
EMPLOYMENT WITH THE COMPANY OR PERCENT OF TOTAL OPTIONS
ITS SUBSIDIARIES FROM THE GRANT DATE THAT IS VESTED AND EXERCISABLE
------------------------------------------ ------------------------------
<S> <C>
After 1 year.............................. 20%
After 2 years............................. 40%
After 3 years............................. 60%
After 4 years............................. 80%
After 5 years............................. 100%
</TABLE>
To the extent that the right to purchase shares has accrued thereunder, an
Option may be exercised from time to time by written notice to the Company, in
accordance with procedures established by the Plan Administrator, setting forth
the number of shares with respect to which the Option is being exercised and
accompanied by payment in full as described in Section 7.5. The Plan
Administrator may determine at any time that an Option may not be exercised as
to less than 100 shares at any one time (or the lesser number of remaining
shares covered by the Option).
7.5 Payment of Exercise Price. The exercise price for shares purchased
under an Option shall be paid in full to the Company by delivery of
consideration equal to the product of the Option exercise price and the number
of shares purchased. Such consideration must be paid in cash or by check or,
unless the Plan Administrator in its sole discretion determines otherwise,
either at the time the Option is granted or at any
20
<PAGE> 23
time before it is exercised, a combination of cash and/or check (if any) and one
or both of the following alternative forms: (a) tendering (either actually or,
if and so long as the Common Stock is registered under Section 12(b) or 12(g) of
the Exchange Act, by attestation) Common Stock already owned by the Optionee
having a Fair Market Value on the day prior to the exercise date equal to the
aggregate Option exercise price or (b) if and so long as the Common Stock is
registered under Section 12(b) or 12(g) of the Exchange Act, delivery of a
properly executed exercise notice, together with irrevocable instructions, to
(i) brokerage firms designated by the Company to deliver promptly to the Company
the aggregate amount of sale or loan proceeds to pay the Option exercise price
and any withholding tax obligations that may arise in connection with the
exercise and (ii) the Company to deliver the certificates for such purchased
shares directly to such brokerage firm, all in accordance with the regulations
of the Federal Reserve Board. In addition, the exercise price for shares
purchased under an Option may be paid, either singly or in combination with one
or more of the alternative forms of payment authorized by this Section 7.5, by
such other consideration as the Plan Administrator may permit.
7.6 Post-Termination Exercises. The Plan Administrator shall establish and
set forth in each instrument that evidences an Option whether the Option will
continue to be exercisable, and the terms and conditions of such exercise, if an
Optionee ceases to be employed by, or to provide services to, the Company or its
Subsidiaries, which provisions may be waived or modified by the Plan
Administrator at any time. If not so established in the instrument evidencing
the Option, the Option will be exercisable according to the following terms and
conditions, which may be waived or modified by the Plan Administrator at any
time.
In case of termination of the Optionee's employment or services other than
by reason of death or Cause, the Option shall be exercisable, to the extent of
the number of shares purchasable by the Optionee at the date of such
termination, only (a) within one year if the termination of the Optionee's
employment or services is coincident with Retirement, Early Retirement at the
Company's request or Disability or (b) within three months after the date the
Optionee ceases to be an employee of the Company or a Subsidiary if termination
of the Optionee's employment or services is for any reason other than
Retirement, Early Retirement at the Company's request or Disability, but in no
event later than the remaining term of the Option. Any Option exercisable at the
time of the Optionee's death may be exercised, to the extent of the number of
shares purchasable by the Optionee at the date of the Optionee's death, by the
personal representative of the Optionee's estate, the person(s) to whom the
Optionee's rights under the Option have passed by will or the applicable laws of
descent and distribution or the beneficiary designated pursuant to Section 9 at
any time or from time to time within one year after the date of death, but in no
event later than the remaining term of the Option. Any portion of an Option that
is not exercisable on the date of termination of the Optionee's employment or
services shall terminate on such date, unless the Plan Administrator determines
otherwise. In case of termination of the Optionee's employment or services for
Cause, the Option shall automatically terminate upon first notification to the
Optionee of such termination, unless the Plan Administrator determines
otherwise. If an Optionee's employment or services with the Company are
suspended pending an investigation of whether the Optionee shall be terminated
for Cause, all the Optionee's rights under any Option likewise shall be
suspended during the period of investigation.
A transfer of employment or services between or among the Company and its
Subsidiaries shall not be considered a termination of employment or services.
The effect of a Company-approved leave of absence on the terms and conditions of
an Option shall be determined by the Plan Administrator, in its sole discretion.
SECTION 8. Incentive Stock Option Limitations
To the extent required by Section 422 of the Code, Incentive Stock Options
shall be subject to the following additional terms and conditions --
8.1 Dollar Limitation. To the extent the aggregate Fair Market Value
(determined as of the Grant Date) of Common Stock with respect to which
Incentive Stock Options are exercisable for the first time during any calendar
year (under the Plan and all other stock option plans of the Company) exceeds
$100,000, such portion in excess of $100,000 shall be treated as a Nonqualified
Stock Option. In the event the Optionee
21
<PAGE> 24
holds two or more such Options that become exercisable for the first time in the
same calendar year, such limitation shall be applied on the basis of the order
in which such Options are granted.
8.2 10% Shareholders. If an individual owns more than 10% of the total
voting power of all classes of the Company's stock, then the exercise price per
share of an Incentive Stock Option shall not be less than 110% of the Fair
Market Value of the Common Stock on the Grant Date and the Option term shall not
exceed five years. The determination of 10% ownership shall be made in
accordance with Section 422 of the Code.
8.3 Eligible Employees. Individuals who are not employees of the Company or
one of its parent corporations or subsidiary corporations may not be granted
Incentive Stock Options. For purposes of this Section 8.3, "parent corporation"
and "subsidiary corporation" shall have the meanings attributed to those terms
for purposes of Section 422 of the Code.
8.4 Term. The term of an Incentive Stock Option shall not exceed 10 years.
8.5 Exercisability. To qualify for Incentive Stock Option tax treatment, an
Option designated as an Incentive Stock Option must be exercised within three
months after termination of employment for reasons other than death, except
that, in the case of termination of employment due to total disability, such
Option must be exercised within one year after such termination. Employment
shall not be deemed to continue beyond the first 90 days of a leave of absence
unless the Optionee's reemployment rights are guaranteed by statute or contract.
For purposes of this Section 8.5, "total disability" shall mean a mental or
physical impairment of the Optionee that is expected to result in death or that
has lasted or is expected to last for a continuous period of 12 months or more
and that causes the Optionee to be unable, in the opinion of the Company and two
independent physicians, to perform his or her duties for the Company and to be
engaged in any substantial gainful activity. Total disability shall be deemed to
have occurred on the first day after the Company and the two independent
physicians have furnished their opinion of total disability to the Plan
Administrator.
8.6 Taxation of Incentive Stock Options. In order to obtain certain tax
benefits afforded to Incentive Stock Options under Section 422 of the Code, the
Optionee must hold the shares issued upon the exercise of an Incentive Stock
Option for two years after the Grant Date of the Incentive Stock Option and one
year from the date of exercise. An Optionee may be subject to the alternative
minimum tax at the time of exercise of an Incentive Stock Option. The Plan
Administrator may require an Optionee to give the Company prompt notice of any
disposition of shares acquired by the exercise of an incentive Stock Option
prior to the expiration of such holding periods.
SECTION 9. Assignability
No Option granted under the Plan may be assigned, pledged or transferred by
the Optionee other than by will or by the applicable laws of descent and
distribution, and, during the Optionee's lifetime, such Option may be exercised
only by the Optionee or a permitted assignee or transferee of the Optionee (as
provided below). Notwithstanding the foregoing, and to the extent permitted by
Section 422 of the Code, the Plan Administrator, in its sole discretion, may
permit such assignment, transfer and exercisability and may permit an Optionee
to designate a beneficiary who may exercise the Option after the Optionee's
death; provided, however, that any Option so assigned or transferred shall be
subject to all the same terms and conditions contained in the instrument
evidencing, the Option.
SECTION 10. Adjustments
10.1 Adjustment of Shares. In the event that, at any time or from time to
time, a stock dividend, stock split, spin-off, combination or exchange of
shares, recapitalization, merger, consolidation, distribution to shareholders
other than a normal cash dividend, or other change in the Company's corporate or
capital structure results in (a) the outstanding shares, or any securities
exchanged therefor or received in their place, being exchanged for a different
number or class of securities of the Company or of any other corporation or (b)
new, different or additional securities of the Company or of any other
corporation being received by the holders of shares of Common Stock of the
Company, then the Plan Administrator shall make proportional
22
<PAGE> 25
adjustments in (i) the maximum number and kind of securities subject to the Plan
as set forth in Section 4.1 and (ii) the number and kind of securities that are
subject to any outstanding Option and the per share price of such securities,
without any change in the aggregate price to be paid therefor. The determination
by the Plan Administrator as to the terms of any of the foregoing adjustments
shall be conclusive and binding.
10.2 Corporate Transaction. Except as otherwise provided in the instrument
that evidences the Option in the event of any Corporate Transaction, each Option
that is at the time outstanding shall automatically accelerate so that each such
Option shall, immediately prior to the specified effective date for the
Corporate Transaction, become 100% vested and exercisable, except that such
acceleration will not occur if, in the opinion of the Company's outside
accountants, it would render unavailable "pooling of interest" accounting for a
Corporate Transaction that would otherwise qualify for such accounting
treatment. Such Option shall not so accelerate, however, if and to the extent
that such Option is, in connection with the Corporate Transaction, either to be
assumed by the successor corporation or parent thereof (the "Successor
Corporation") or to be replaced with a comparable award for the purchase of
shares of the capital stock of the Successor Corporation. The determination of
Option comparability shall be made by the Plan Administrator, and its
determination shall be conclusive and binding. All such Options shall terminate
and cease to remain outstanding immediately following the consummation of the
Corporate Transaction, except to the extent assumed by the Successor
Corporation. Any such Options that are assumed or replaced in the Corporate
Transaction and do not otherwise accelerate at that time shall be accelerated in
the event that the Optionee's employment or services should subsequently
terminate within two years following such Corporate Transaction, unless such
employment or services are terminated by the Successor Corporation for Cause or
by the Optionee voluntarily without Good Reason.
10.3 Further Adjustment of Options. Subject to Section 10.2, the Plan
Administrator shall have the discretion, exercisable at any time before a sale,
merger, consolidation, reorganization, liquidation or change in control of the
Company, as defined by the Plan Administrator, to take such further action as it
determines to be necessary or advisable, and fair and equitable to Optionees,
with respect to Options. Such authorized action may include (but shall not be
limited to) establishing, amending or waiving the type, terms, conditions or
duration of, or restrictions on, Options so as to provide for earlier, later,
extended or additional time for exercise and other modifications, and the Plan
Administrator may take such actions with respect to all Optionees, to certain
categories of Optionees or only to individual Optionees. The Plan Administrator
may take such action before or after granting Options to which the action
relates and before or after any public announcement with respect to such sale,
merger, consolidation, reorganization, liquidation or chance in control that is
the reason for such action.
10.4 Limitations. The grant of Options will in no way affect the Company's
right to adjust, reclassify, reorganize or otherwise change its capital or
business structure or to merge, consolidate, dissolve, liquidate or sell or
transfer all or any part of its business or assets.
SECTION 11. Withholding
The Company may require the Optionee to pay to the Company the amount of
any withholding taxes that the Company is required to withhold with respect to
the grant or exercise of any Option. Subject to the Plan and applicable law, the
Plan Administrator may, in its sole discretion, permit the Optionee to satisfy
withholding obligations, in whole or in part, by paying cash, by electing to
have the Company withhold shares of Common Stock or by transferring shares of
Common Stock to the Company, in such amounts as are equivalent to the Fair
Market Value of the withholding obligation. The Company shall have the right to
withhold from any shares of Common Stock issuable pursuant to an Option or from
any cash amounts otherwise due or to become due from the Company to the Optionee
an amount equal to such taxes. The Company may also deduct from any Option any
other amounts due from the Optionee to the Company or a Subsidiary.
23
<PAGE> 26
SECTION 12. Market Standoff
In connection with any underwritten public offering by the Company of its
equity securities pursuant to an effective registration statement filed under
the Securities Act, including the Company's initial public offering, a person
shall not sell, or make any short sale of, loan, hypothecate, pledge, grant any
option for the purchase of, or otherwise dispose or transfer for value or
otherwise agree to engage in any of the foregoing transactions with respect to,
any shares issued pursuant to an Option granted under the Plan without the prior
written consent of the Company or its underwriters. Such limitations shall be in
effect for such period of time as may be requested by the Company or such
underwriters and agreed to by the Company's officers and directors with respect
to their shares; provided, however, that in no event shall such period exceed
180 days. The limitations of this paragraph shall in all events terminate two
years after the effective date of the Company's initial public offering. Holders
of shares issued pursuant to an Option granted under the Plan shall be subject
to the market standoff provisions of this paragraph only if the officers and
directors of the Company are also subject to similar arrangements.
In the event of any stock split, stock dividend, recapitalization,
combination of shares, exchange of shares or other change affecting the
Company's outstanding Common Stock is effected as a class without the Company's
receipt of consideration, then any new, substituted or additional securities
distributed with respect to the purchased shares shall be immediately subject to
the provisions of this Section 12, to the same extent the purchased shares are
at such time covered by such provisions.
In order to enforce the limitations of this Section 12, the Company may
impose stop-transfer instructions with respect to the purchased shares until the
end of the applicable standoff period.
Section 13. Amendment and Termination of Plan
13.1 Amendment of Plan. The Plan may be amended only by the Board in such
respects as it shall deem advisable; however, to the extent required for
compliance with Section 422 of the Code or any applicable law or regulation,
shareholder approval will be required for any amendment that will (a) increase
the total number of shares as to which Options may be granted under the Plan,
(b) modify the class of persons eligible to receive Options, or (c) otherwise
require shareholder approval under any applicable law or regulation.
13.2 Termination of Plan. The Board may suspend or terminate the Plan at
any time. The Plan will have no fixed expiration date; provided, however, that
no Incentive Stock Options may be granted more than 10 years after the earlier
of the Plan's adoption by the Board and approval by the shareholders.
13.3 Consent of Optionee. The amendment or termination of the Plan shall
not, without the consent of the Optionee, impair or diminish any rights or
obligations under any Option theretofore granted under the Plan.
Any change or adjustment to an outstanding Incentive Stock Option shall
not, without the consent of the Optionee, be made in a manner so as to
constitute a "modification" that would cause such Incentive Stock Option to fail
to continue to qualify as an Incentive Stock Option.
SECTION 14. General
14.1 Option Agreements. Options granted under the Plan shall be evidenced
by a written agreement that shall contain such terms, conditions, limitations
and restrictions as the Plan Administrator shall deem advisable and that are not
inconsistent with the Plan.
14.2 Continued Employment or Services; Rights in Options. None of the
Plan, participation in the Plan or any action of the Plan Administrator taken
under the Plan shall be construed as giving any person any right to be retained
in the employ of the Company or limit the Company's right to terminate the
employment or services of any person.
14.3 Registration. The Company shall be under no obligation to any
Optionee to register for offering or resale or to qualify for exemption under
the Securities Act, or to register or qualify under state securities laws, any
shares of Common Stock, security or interest in a security paid or issued under,
or created by, the Plan, or
24
<PAGE> 27
to continue in effect any such registrations or qualifications if made. The
Company may issue certificates for shares with such legends and subject to such
restrictions on transfer and stop-transfer instructions as counsel for the
Company deems necessary or desirable for compliance by the Company with federal
and state securities laws.
Inability of the Company to obtain, from any regulatory body having
jurisdiction, the authority deemed by the Company's counsel to be necessary for
the lawful issuance and sale of any shares hereunder or the unavailability of an
exemption from registration for the issuance and sale of any shares hereunder
shall relieve the Company of any liability in respect of the nonissuance or sale
of such shares as to which such requisite authority shall not have been
obtained.
14.4 No Rights as a Shareholder. No Option shall entitle the Optionee to
any dividend, voting or other right of a shareholder unless and until the date
of issuance under the Plan of the shares that are the subject of such Option,
free of all applicable restrictions.
14.5 Compliance With Laws and Regulations. Notwithstanding anything in the
Plan to the contrary, the Board, in its sole discretion, may bifurcate the Plan
so as to restrict, limit or condition the use of any provision of the Plan to
Optionees who are officers or directors subject to Section 16 of the Exchange
Act without so restricting, limiting or conditioning the Plan with respect to
other Optionees Additionally, in interpreting and applying the provisions of the
Plan, any Option granted as an Incentive Stock Option pursuant to the Plan
shall, to the extent permitted by law, be construed as an "incentive stock
option" within the meaning of Section 422 of the Code.
14.6 No Trust or Fund. The Plan is intended to constitute an "unfunded"
plan. Nothing contained herein shall require the Company to segregate any monies
or other property, or shares of Common Stock, or to create any trusts, or to
make any special deposits for any immediate or deferred amounts payable to any
Optionee, and no Optionee shall have any rights that are greater than those of a
general unsecured creditor of the Company.
14.7 Severability. If any provision of the Plan or any Option is
determined to be invalid, illegal or unenforceable in any jurisdiction, or as to
any person, or would disqualify the Plan or any Option under any law deemed
applicable by the Plan Administrator, such provision shall be construed or
deemed amended to conform to applicable laws, or, if it cannot be so construed
or deemed amended without, in the Plan Administrator's determination, materially
altering the intent of the Plan or the Option, such provision shall be stricken
as to such jurisdiction, person or Option and the remainder of the Plan and any
such Option shall remain in till force and effect.
SECTION 15. Effective Date
The Plan's effective date is the date on which it is adopted by the Board,
so long as it is approved by the Company's shareholders at any time within 12
months of such adoption.
Adopted by the Board on , 1997, and approved by the
Company's shareholders on , 1997.
25
<PAGE> 28
PLAN ADOPTION AND AMENDMENTS/ADJUSTMENTS
<TABLE>
<CAPTION>
DATE OF
ADOPTION DATE OF
AMENDMENT SHAREHOLDER
ADJUSTMENT SECTION EFFECT OF AMENDMENT APPROVAL
------------ ------- ------------------- -----------
<S> <C> <C> <C>
</TABLE>
26
<PAGE> 29
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
LINDAL CEDAR PROXY FOR THE THE UNDERSIGNED HEREBY APPOINTS SIR WALTER
HOMES, INC. ANNUAL MEETING LINDAL AND ROBERT W. LINDAL OR EITHER OF THEM,
OF SHAREHOLDERS ATTORNEYS AND PROXIES WITH FULL POWER OF
MAY 29, 1997 SUBSTITUTION IN EACH OF THEM, IN THE NAME, PLACE
AND STEAD OF THE UNDERSIGNED TO VOTE AS 1997
PROXY ALL THE STOCK OF THE UNDERSIGNED IN LINDAL
CEDAR HOMES, INC.
1. ELECTION OF THE FOLLOWING NOMINEES, AS SET FORTH
IN THE PROXY STATEMENT:
[ ] FOR ALL NOMINEES DOUGLAS F. LINDAL, HARRY A. PRYDE, SIR WALTER
LINDAL, BILL LORENZE, WILLIAM M. WEISFIELD
[ ] WITHHOLD AUTHORITY
TO VOTE FOR ALL INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE
FOR ANY INDIVIDUAL NOMINEE, WRITE THAT
NOMINEE'S NAME IN THE SPACE PROVIDED BELOW.
FOR AGAINST ABSTAIN _______________________________________________
_____ _____ _____ 2. TO AMEND THE COMPANY'S CERTIFICATE OF
INCORPORATION TO ELIMATE THE RIGHT OF
STOCKHOLDERS TO CUMULATE VOTES IN THE ELECTION
OF DIRECTORS
_____ ______ _____ 3. TO APPROVE THE COMPANY'S 1997 STOCK OPTION
PLAN.
_____ _____ _____ 4. TO ELECT KPMG PEAT MARWICK LLP AS AUDITORS TO
EXAMINE THE FINANCIAL STATEMENTS OF THE COMPANY
FOR THE YEAR ENDING DECEMBER 31, 1997.
_____ ______ _____ 5. THE TRANSACTION OF SUCH OTHER BUSINESS AS MAY
PROPERLY COME BEFORE THE MEETING.
THE SHARES REPRESENTED BY THIS PROXY WILL BE
VOTED FOR THE ELECTION OF ALL NOMINEES AND FOR
PROPOSALS 2 THROUGH 5 IF NO INSTRUCTION IS
GIVEN.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY
IN THE ENCLOSED ENVELOPE
DATED: , 1997
________________________________________ L.S.
________________________________________ L.S.
(NOTE: PLEASE SIGN EXACTLY AS YOUR NAME
APPEARS HEREON. EXECUTORS, ADMINISTRATORS,
TRUSTEES, ETC. SHOULD SO INDICATE WHEN
SIGNING, GIVING FULL TITLE AS SUCH. IF
SIGNER IS A CORPORATION, EXECUTE IN FULL
CORPORATE NAME BY AUTHORIZED OFFICER. IF
SHARES HELD IN THE NAME OF TWO OR MORE
PERSONS, ALL SHOULD SIGN.)
