<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 240.14a-11(c) or 240.14a-12
LINDAL CEDAR HOMES, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
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previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
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<PAGE> 2
LINDAL LOGO
4300 SOUTH 104TH PLACE
SEATTLE, WASHINGTON 98178
------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
Notice is hereby given that the Annual Meeting of Shareholders of Lindal
Cedar Homes, Inc., a Delaware corporation (the "Company"), will be held at the
Washington Athletic Club, 1325 Sixth Avenue, Seattle, Washington on June 3, 1999
at 3:00 p.m., for the following purposes:
1. To elect four members of the Board of Directors to hold office for
two years, or until their successors are elected and qualified.
2. To ratify the appointment of KPMG LLP as the Company's independent
auditors for the year ending December 31, 1999.
3. To transact such other business as may properly come before the
meeting or any adjournment thereof.
So as far as management is aware, as of this date, no business will
properly come before the meeting other than the matters set forth above.
Only shareholders of record at the close of business on April 12, 1999 will
be entitled to notice of and to vote at the Annual Meeting and any adjournment
thereof. 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. A shareholder may
later revoke this proxy at any time before it is voted in the manner set forth
in the accompanying proxy statement.
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
May 10, 1999
<PAGE> 3
LINDAL CEDAR HOMES, INC.
4300 SOUTH 104TH PLACE
SEATTLE, WASHINGTON 98178
------------------------
PROXY STATEMENT
This proxy statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Lindal Cedar Homes, Inc., (the "Company")
for use at the Annual Meeting of Shareholders to be held June 3, 1999, at 3:00
p.m., and at any adjournment thereof (the "Annual Meeting"), for the purposes
set forth herein and in the accompanying Notice of Annual Meeting of
Shareholders. The Annual Meeting will be held at the Washington Athletic Club,
1325 Sixth Avenue, Seattle, Washington.
The approximate date on which this proxy material is first to be sent to
shareholders is May 10, 1999. 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, directors
and other employees of the Company. All costs of solicitation of proxies will be
borne by the Company.
A shareholder may vote in person or by proxy. A proxy must be in writing
and dated and signed by the shareholder. 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. Any shareholder granting a proxy has the power to
revoke it at any time before it is exercised by (i) delivering written notice to
the Company's Secretary prior to the Annual Meeting, (ii) executing another
proxy dated as of a later date, or (iii) voting in person at the Annual Meeting.
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
At the close of business on April 12, 1999, there were 4,126,011 shares of
common stock outstanding, which represent all of the voting securities of the
Company. Only shareholders of record at the close of business on April 12, 1999
will be entitled to vote at the meeting. Under Delaware law and the Company's
Bylaws, the presence at the meeting, in person or by duly authorized proxy, of
the holders of a majority of the outstanding shares of stock entitled to vote
constitutes a quorum for the transaction of business. Each share of common stock
is entitled to one vote.
Shareholders do not have the right to cumulate their votes in the election
of directors. The four nominees who receive the greatest number of votes cast
for the election of directors by shares entitled to vote and present in person
or by proxy at the Annual Meeting will be elected directors. In an uncontested
plurality election such as this, abstentions will have no effect, since approval
by a specified percentage of shares present or outstanding is not required.
Because brokers have discretion to vote shares of common stock held on behalf of
beneficial owners if no instructions are received about how to vote such shares,
there will be no "broker nonvotes" in the election of directors.
<PAGE> 4
BENEFICIAL OWNERSHIP OF COMMON STOCK
The following table sets forth as of March 31, 1999 certain information as
to the number of shares of common stock beneficially owned by (i) each person
who is known to the Company to own beneficially more than 5% of its outstanding
common stock, (ii) each director or nominee for director, (iii) each executive
officer of the Company for whom information is given in the Summary Compensation
Table in this proxy statement, and (iv) all executive officers and directors of
the Company as a group:
<TABLE>
<CAPTION>
NUMBER OF PERCENTAGE OF
NAME SHARES(1)(2) OUTSTANDING SHARES
---- ------------ ------------------
<S> <C> <C>
Sir Walter Lindal(3)............................ 945,633(4) 21.39%
Heartland Advisors, Inc......................... 461,400 10.43%
Robert W. Lindal(3)............................. 437,114(5) 9.89%
Bonnie G. McLennaghan(3)........................ 395,668(5) 8.95%
Douglas F. Lindal(3)............................ 385,656(5) 8.72%
Martin J. Lindal(3)............................. 366,588(5) 8.29%
Charles R. Widman............................... 35,725 *
William M. Weisfield............................ 35,017 *
Charles T. Collins.............................. 16,000 *
Steven G. Conley................................ 920 *
All executive officers and directors as a group
(11 persons).................................. 2,298,526 51.98%
</TABLE>
- ---------------
* Less than one percent
(1) Beneficial ownership includes both voting and investment power.
(2) With respect to the following individuals and to all executive officers and
directors as a group, the beneficial ownership data includes options to
purchase common stock exercisable within 60 days of March 31, 1999 as
follows: (i) options to purchase 35,100 shares held each by Sir Walter
Lindal, Robert W. Lindal, Douglas F. Lindal, and Martin J. Lindal; (ii)
options to purchase 31,725 shares held by Charles R. Widman; (iii) options
to purchase 31,017 shares held by William M. Weisfield; (iv) options to
purchase 15,000 shares held by Charles T. Collins; (v) options to purchase
320 shares held by Steven G. Conley and (vi) options to purchase 250,751
shares held by all directors and executive officers as a group. With respect
to Bonnie G. McLennaghan, the beneficial ownership data includes options to
purchase common stock as follows: (i) options to purchase 35,1000 shares
held directly and (ii) options to purchase 10,000 shares held by Robert
McLennaghan, the husband of Bonnie McLennaghan.
(3) Robert W. Lindal, Martin J. Lindal and Douglas F. Lindal are sons, and
Bonnie 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.
(4) 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.
(5) Does not include any portion of the 772,898 shares owned by Lindal, Inc.
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<PAGE> 5
PROPOSAL 1: ELECTION OF DIRECTORS
The Company's Amended Bylaws (the "Bylaws") divide the Board of Directors
into two classes. Each class consists of four directors, but such number may be
increased or decreased by resolution of the Board or by the shareholders
amending the Bylaws. Classes are to be 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 Annual Meeting is provided below.
The Board of Directors presently consists of eight members. Four members of
the Board of Directors will be elected at the meeting: Sir Walter Lindal,
Douglas F. Lindal, William M. Weisfield, and Steven G. Conley will be elected
for two-year terms expiring at the annual meeting in 2001 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 Steven G. Conley
from among its distributors as a nominee for election as a director. Mr. Conley
was first appointed as a director of the Company in February 1999 to fill a
vacancy created by the resignation of William F. Lorenz III.
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.
NOMINEES FOR ELECTION
(TERMS TO EXPIRE IN 2001)
DOUGLAS F. LINDAL, age 48, was Executive Vice President of the Company from
1981 until January 1995, when he became President and Chief Operating Officer.
Mr. Lindal continues to have the Sales, Marketing and Administration areas
report to him as well as functioning as General Manager supervising most Company
activities. He has served as a director of the Company from 1971 to 1975 and
from 1980 to present. Prior to 1981, Mr. Lindal also was an independent
distributor for the Company's products in Hawaii.
SIR WALTER LINDAL, age 80, was Chairman of the Board from 1981 until 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 managed the Company. Mr. Lindal is the Company's
founder.
WILLIAM M. WEISFIELD, age 57, has been the Chief Executive Officer of UTILX
Corporation, a NASDAQ traded company, since November 1998 and Chairman of the
Board of Directors of UTILX Corporation since January 1997. From 1994 to
November 1998, Mr. Weisfield was the Chief Operating Officer of Northern Capital
Company, a privately held investment company in Seattle, Washington. From
December 1992 to December 1993, Mr. Weisfield was 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 is a past member of the Board
of Regents of Seattle University.
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<PAGE> 6
Mr. Weisfield also serves as a director on the boards of several non-public
entities. Mr. Weisfield has been a director of the Company since 1994.
STEVEN G. CONLEY, age 36, has been the President of CedarCraft Northwest,
an independent dealer of the Company, since 1991. In 1995, Mr. Conley was
elected to the Dealer Advisory Council. Mr. Conley has been a director of the
Company since February 1999.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE NOMINEES
CONTINUING DIRECTORS
(TERMS TO EXPIRE IN 2000)
ROBERT W. LINDAL, age 51, 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 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 T. COLLINS, age 57, served as President of Colsper Corporation, a
diversified holding company focused primarily in waste management, from 1981 to
1998. Mr. Collins' diversified experience in both government and business
includes currently serving as Chair of the Washington State Commission on
Student Learning, and member of the Washington Dental Service Board of
Directors. Earlier Mr. Collins served as member, 1981 to 1985, and chair, 1984
to 1985, of the Northwest Power Council; chairman of the State Higher Education
Coordinating Board, 1985 to 1991; Transit Director of Seattle Metro, 1976 to
1979, and County Administrator of King County, 1973 to 1976. Mr. Collins has
been director of the Company since 1998.
MARTIN J. LINDAL, age 45, has served as a director of the Company since
1981, and was employed by the Company as Administration Manager from 1982 to
1990. Mr. Lindal was elected Assistant Secretary in 1986 and has been the Vice
President Information Systems & Assistant Secretary since 1990.
CHARLES R. WIDMAN, age 73, 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 Ltd., a forest industry consulting
firm. Mr. Widman has been a director of the Company since 1993.
Messrs. William F. Lorenz III and William R. Monkman resigned from the
Board of Directors on December 22, 1998 and March 29, 1999, respectively. Mr.
Everett G. Martin did not stand for reelection as a director in 1998. On
February 1, 1999 Mr. Steven G. Conley was appointed by the Board of Directors to
fill the vacancy created by the resignation of Mr. Lorenz.
COMPENSATION OF DIRECTORS
The annual retainer for each director who is 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 an additional
$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 policy on compensation of directors, in October
1998, each of Messrs. Collins, Lorenz, Monkman, 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 $2.25.
Each director who is not an employee of the Company is eligible to
participate in the Directors' and Distributors' Stock Option Plan (the "Plan").
Under the Plan, each non-employee director receives an option to purchase 10,000
shares upon becoming a director and an option to purchase 5,000 shares as of
October 1 of each year he or she continues as a director. The exercise price of
options granted under the Plan is the market price of the Company's stock on the
date of grant. In October 1998, Messrs. Collins, Lorenz, Monkman, Widman and
Weisfield were each granted options to purchase 5,000 shares at a price of $2.25
per share. On February 1, 1999, upon appointment to the Board of Directors, Mr.
Conley was granted options to purchase 10,000 shares of the Company's common
stock at a price of $1.563. Upon their appointment to the Board of Directors, in
January 1998, each of Messrs. Collins and Monkman were granted options to
purchase 10,000 shares of the Company's common stock at a price of $3.563.
Options granted to non-employee directors are non-assignable except by will
or the laws of descent and distribution. Options granted are automatically fully
vested and are exercisable six months after the date of grant. Options granted
to non-employee directors expire at the earliest of ten years from the grant
date, one year after the option holder ceases to be a director for any reason
other than death, or one 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.
Non-employee directors who are also Company distributors, and other members
of the Dealer Advisory Council (the "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). Until his termination as an
independent dealer of the Company, Mr. Lorenz was a member of the Council. Mr.
Conley is a member of the Council. In February 1998, options to purchase 300
shares were granted to Mr. Lorenz for his participation on the Council. In
February 1999 and 1998, options to purchase 400 and 300 shares, respectively,
were granted to Mr. Conley for his participation on the Council. Until his
resignation, Mr. Lorenz was also eligible for options granted under the Plan.
Mr. Conley is also eligible for options granted under the Plan. Options granted
to distributors under the Plan vest over a period of four years and expire at
the earliest of ten years following the date of grant or ninety days after the
option holder ceases to be a distributor (or one year after death).
COMMITTEES OF THE BOARD OF DIRECTORS
The Company presently has an Executive Committee which, within certain
prescribed limits, exercises all the powers of the Board of Directors when the
Board of Directors is not in session. The Executive Committee presently consists
of Sir Walter Lindal, Robert W. Lindal and Douglas F. Lindal. The Executive
Committee met four times in 1998.
The Company also has an Audit Committee and a Compensation Committee. The
Audit Committee is responsible for reviewing the results of the audit of the
Company performed by its independent certified public accountants. The Audit
Committee met three times in 1998. Its members currently are Messrs. Weisfield
(Chairman) and 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 the authority to administer the Company's employee stock
option plans.
5
<PAGE> 8
The Compensation Committee consists of Messrs. Collins, Weisfield (chairman) and
Widman. The Compensation Committee decisions regarding executive compensation
for 1998 were made at a committee meeting held in December 1997.
During 1998, there were five meetings of the Board of Directors. No
director attended fewer than 75% of the meetings of the Board of Directors or
the committees of which he or she was a member. Mr. Monkman was unable to attend
the one meeting of the Board committee at which he was a member.
RELATED PARTY TRANSACTIONS
William F. Lorenz III, a former director of the Company, is the President
of Southern Wisconsin Custom Homes, a former independent dealership of the
Company. Sales to Southern Wisconsin Custom homes were $295,752 in 1998. Steven
G. Conley, a director of the Company, is the President of CedarCraft Northwest,
an independent dealership of the Company. Sales to CedarCraft Northwest were
$248,586 in 1998. All sales were on normal trade terms.
In 1998, the Company made payments aggregating $34,000 to Lindal, Inc., in
connection with certain royalty agreements. Lindal, Inc. is a private company
controlled by Sir Walter Lindal.
EXECUTIVE OFFICERS
Each executive officer is elected by the Board of Directors following each
annual meeting of shareholders to serve for a term of one year or until a
successor is elected and qualified.
For the biographical summaries of Robert W. Lindal, Douglas F. Lindal,
Martin J. Lindal and Sir Walter Lindal, see "Election of Directors."
DENNIS L. GREGG, age 47, joined the Company in 1997 as Chief Financial
Officer. Mr. Gregg's previous experience includes Chief Financial Officer, 1996
to 1997, for Abacus Software Inc., a public software development company and
Microrim, Inc. its wholly owned subsidiary, Chief Financial Officer, 1995 to
1996, for Media Technologies, Inc., a software manufacturing company, and Chief
Financial Officer, 1982 to 1995, for Evans Group Seattle (formerly Evans/Kraft,
Inc.), a marketing/public relations firm.
GARY D. KLINE, age 50, joined the Company in 1973 and has worked in several
key positions in the Scheduling and Production areas. Mr. Kline has been the
Vice President Operations since 1983.
EVERETT G. MARTIN, age 75, has been employed by the Company since 1967 in a
variety of key sales and administrative positions. Mr. Martin has been
associated with the Company and its predecessors in a variety of positions since
1951. For the past thirty-one years he has been the Supervisor of the Company's
midwest U.S. and eastern Canada operations. Mr. Martin was elected Vice
President Midwest and Eastern Canada in 1986. Mr. Martin served as a director of
the Company from 1986 to 1998.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
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 to the Securities and
Exchange Commission and the NASD.
With respect to 1998, the Company believes, based on copies of reports
furnished to it and written representations that no other reports were required
to be filed, that all filings under Section 16 were made in a timely fashion
except that: Mr. Gary D. Kline did not file a Form 4, reporting one transaction,
for August
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<PAGE> 9
1998, but instead reported the transaction on his 1998 Form 5; Ms. Bonnie G.
McLennaghan filed her 1998 Form 5 approximately 11 days late; and Mr. Steven G.
Conley filed his Form 3 approximately two months late.
EXECUTIVE COMPENSATION
The following table shows the compensation for the services rendered during
fiscal years 1998, 1997 and 1996 for the Chief Executive Officer. No other
executive officers of the Company had an aggregate salary and bonus exceeding
$100,000 in the most recent fiscal year.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION ALL
-------------------- AWARDS OTHER
NAME AND SALARY(1) BONUS OPTIONS COMPENSATION(2)
PRINCIPAL POSITION YEAR ($) ($) (#) ($)
------------------ ---- ---------- ------ ------------ ---------------
<S> <C> <C> <C> <C> <C>
Robert W. Lindal................... 1998 89,091 -- -- 6,128
CEO/Chairman 1997 165,619 -- -- 3,109
1996 174,782 60,537 20,100 6,460
</TABLE>
- ---------------
(1) Includes base salary.
(2) Other compensation in 1998 consists of matching contributions to Mr.
Lindal's contributions to the Company's 401(k) Plan of $2,375, group term
life insurance premiums of $453 and payment in lieu of time off of $3,300.
FISCAL YEAR-END OPTION VALUES
The following table shows the year-end values of unexercised options held
by Mr. Robert W. Lindal. No options were granted in 1998 to Mr. Lindal and he
did not acquire any shares on exercise of options in 1998.
<TABLE>
<CAPTION>
NUMBER OF SHARES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED IN THE
OPTIONS AT YEAR-END MONEY OPTIONS AT YEAR-END(1)
---------------------------- ----------------------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
NAME (#) (#) ($) ($)
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Robert W. Lindal............................. 35,100 -- -- --
</TABLE>
- ---------------
(1) Values are based on the difference between the option exercise price and the
fair market value at fiscal year-end of $1.625, which was less then the
exercise price of Mr. Lindal's options. There is no assurance that any value
will be realized from the unexercised options.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
COMPENSATION COMMITTEE
The Compensation Committee (the "Committee") is composed of three of the
Company's non-employee directors, William M. Weisfield, Charles R. Widman and
Charles T. Collins. The Committee is responsible for establishing and
administering 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
7
<PAGE> 10
("Owner/Officers") and reporting thereon to the Board of Directors. The
Committee also administers the Company's stock option plans and reviews the
compensation of other executive officers that is set by the Executive Committee.
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 the
long-term success of the Company,
(b) Maintain compensation that is 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 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. The Committee does not set executive compensation at specific
target ranges of any particular survey.
Bonus. The Committee has devised a bonus plan for Owner/Officers and other
executive officers 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 bonus plan, among other things, defines the bonus pool that is to be
available for distribution to the Owner/Officers and other executive officers.
For pre-tax earnings up to $1,000,000, 8.25% of pre-tax earnings is the bonus
pool. For pre-tax earnings from $1,000,000 to a maximum of $3,000,000, 16.5% 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. Based on the Company's performance in 1998 no bonuses
were paid or accrued for Owner/Officers.
Stock Options. Non-qualified 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.
Based on the Company's performance in 1998, no stock options were granted to
Owner/Officers.
Chief Executive Officer Compensation
In establishing the Chief Executive Officer's compensation package, the
Committee pursues the same objectives and policies applicable for the Company's
other executive officers. For 1998, the salary of Mr. Robert Lindal decreased
46.2% from 1997. On November 29, 1997, due to the performance of the Company in
1997, all Owner/Officers voluntarily reduced their base salary by 50%. This
reduction continued throughout 1998. The amount of the reduction in base salary
was discretionary by the Owner/Officers. On January 22, 1999 the Compensation
Committee approved increases in the salaries of Robert W. Lindal and
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<PAGE> 11
Douglas F. Lindal to 75% and 88%, respectively, of their pre November 29, 1997
levels. These increases were effective February 1, 1999.
Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code"), includes potential limitations on the deductibility for federal income
tax purposes of compensation in excess of $1 million paid or accrued with
respect to any of the executive officers whose compensation is required to be
reported in the Company's proxy statement. Certain performance-based
compensation that has been approved by shareholders is not subject to the
deduction limit. The Company's stock option plans are structured to qualify
options granted thereunder as performance-based compensation under Section
162(m). For 1999, the Committee does not contemplate that there will be any
nondeductible compensation.
COMPENSATION COMMITTEE
William M. Weisfield, Chairman
Charles R. Widman
Charles T. Collins
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<PAGE> 12
STOCK PRICE PERFORMANCE GRAPH
The graph below compares for each of the last five calendar years ended
December 31, 1998 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, 1993 and re-investment of all dividends.
COMPARE 5-YEAR CUMULATIVE TOTAL RETURN
AMONG LINDAL CEDAR HOMES, INC.,
NASDAQ MARKET INDEX AND MG GROUP INDEX
<TABLE>
<CAPTION>
LINDAL CEDAR HOMES, INC. INDUSTRY INDEX BROAD MARKET
------------------------ -------------- ------------
<S> <C> <C> <C>
'1993' 100.00 100.00 100.00
'1994' 52.00 60.52 104.99
'1995' 72.00 87.09 136.18
'1996' 70.00 87.60 169.23
'1997' 58.00 129.17 207.00
'1998' 26.00 139.26 291.96
</TABLE>
Assumes $100 invested on January 1, 1993
Assumes dividends reinvested
Fiscal year ended December 31, 1998
Note: Stock price performance shown in the Stock Price Performance Graph for the
Common Stock is historical and not necessarily indicative of future price
performance.
CHANGE OF CONTROL ARRANGEMENTS
Under the Company's 1997 Stock Option Plan, in the event of (a) the merger
or consolidation of the Company in which it is not the surviving corporation or
pursuant to which shares of Common Stock are converted into cash, securities or
other property and the holders of the Company's stock own less than 66 2/3% of
the outstanding voting securities of the Company, (b) the sale, lease, exchange
or other transfer of all or substantially all of the Company's assets (other
than transfer to a majority-owned subsidiary); or (c) the approval by the
holders of Common Stock of any plan or proposal for the Company's liquidation or
dissolution
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<PAGE> 13
(each, a "Corporate Transaction"), each outstanding option under the Company's
stock option plans will automatically accelerate so that it will become 100%
vested and exercisable immediately before the Corporate Transaction, except to
the extent that options are assumed by the successor corporation. The vesting of
such assumed options accelerates at the time an optionee's employment is
terminated by the Company for reasons other than "cause" or by the optionee for
"good reason" within two years after a Corporate Transaction.
Under the Company's 1988 Combined Incentive and Nonqualified Stock Option
Plan (the "1988 Plan"), the Board has the discretion to accelerate the
exercisability of options in the event of certain events described in the 1988
Plan, such as the dissolution or liquidation of the Company or a reorganization,
merger or consolidation with one or more corporations.
PROPOSAL 2:
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has selected KPMG LLP, certified public accountants,
to continue as independent auditors to examine the consolidated financial
statements of the Company for the year ending December 31, 1999. KPMG 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 LLP will be present at the 1999 Annual Meeting to respond to appropriate
questions and to make a statement if he or she so desires.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION
OF THE INDEPENDENT AUDITORS.
PROPOSALS BY SHAREHOLDERS
Proposals by shareholders intended to be presented at the 2000 Annual
Meeting and to be included in the Company's proxy statement must be received by
the Company at its principal executive offices no later than December 30, 1999,
and must otherwise comply with the rules issued under the Securities Exchange
Act of 1934.
Pursuant to Rule 14a-4(c) under the Securities and Exchange Act of 1934, as
amended, the Company intends to retain discretionary authority to vote proxies
with respect to stockholder proposals for which the proponent does not seek
inclusion of the proposed matter in the Company's proxy statement for the
Company's 2000 Annual Meeting, except in circumstances where (i) the Company
receives notice of the proposed matter no later than March 17, 2000, and (ii)
the proponent complies with the other requirements set forth in Rule 14a-4.
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<PAGE> 14
ANNUAL REPORT AND FORM 10-K
The 1998 Annual Report of the Company was mailed to shareholders with this
proxy statement. Upon request, the Company will furnish without charge a copy of
the Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1998, including financial statements and schedules. The Form 10-K has been filed
with the Securities and Exchange Commission. It may be obtained by writing to:
Sir Walter Lindal, Secretary
Lindal Cedar Homes, Inc.
Post Office Box 24426
Seattle, Washington 98124
By Order of the Board of
Directors
SIR WALTER LINDAL
Chairman Emeritus and Secretary
Seattle, Washington
May 10, 1999
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