UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box;
[ ] Prelimenary proxy Statement
[ ] Confidential, for use of the Commission Only (as permitteed by
Rule 14a-6(e)(21))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 140.14a-11(c) or 140.14a-12
LINCOLN LOGS LTD.
________________
(Name of Registrant as Specified In Its Charter)
_____________________________________________________
(Name of Persons(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 140-6(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 No.:
_______________________________________________________________
(3) Filing party:
______________________________________________________________
(4) Date Filed:
______________________________________________________________
<PAGE>
LINCOLN LOGS LTD.
5 Riverside Drive
Chestertown, New York 12817
_____________________
NOTICE OF THE ANNUAL MEETING
OF SHAREHOLDERS
January 22, 2001
Notice is hereby given that the Annual Meeting of Shareholders of Lincoln
Logs Ltd., a New York corporation (the "Company"), will be held at the
Sagamore Hotel, 110 Sagamore Road, Bolton Landing, New York, on Thursday,
February 8, 2001, at 10:30 a.m., local time, for the following purposes:
1. To elect a Board of Directors to serve until the next Annual Meeting
of Shareholders and until their successors are duly elected and
qualify;
2. To approve the appointment of PricewaterhouseCoopers LLP as
independent accountants for the Company for the fiscal year ending
January 31, 2001;
3. To transact such other business as may properly come before the
Meeting or any adjournment thereof.
The stock transfer books of the Company will not be closed, but only
shareholders of record at the close of business on January 5, 2001, will be
entitled to notice of and to vote at the Meeting.
By Order of the Board of Directors
William J. Thyne
Secretary
January 19, 2001
You are cordially invited to attend the Meeting and vote your shares. In
the event you cannot attend, please fill in, date and sign the enclosed proxy
and mail it promptly in the enclosed self-addressed envelope to ensure that
your shares are represented at the Meeting. A shareholder who executes and
returns a proxy in the accompanying form has the power to revoke such proxy
at any time prior to the exercise thereof.
<PAGE>
LINCOLN LOGS LTD.
5 Riverside Drive
Chestertown, New York 12817
___________________
PROXY STATEMENT
___________________
The accompanying proxy is solicited by the Board of Directors of Lincoln
Logs Ltd., a New York corporation (the "Company"), for use at the Annual
Meeting of Shareholders to be held on February 8, 2001, or any adjournment or
adjournments thereof, for the purposes set forth in the attached Notice of
Meeting. It is expected that proxy solicitation materials will be first
mailed or given to shareholders on or about January 22, 2001. The Company
will pay the expense of soliciting proxies.
Proxies in the accompanying form, properly executed and received prior to
the Meeting and not revoked, will be voted in the manner directed by the
shareholders executing such proxies. Shares represented by the enclosed proxy
will be voted in accordance with the indicated direction, or, if not directed,
in accordance with the best judgement of the persons named in the enclosed
proxy. A shareholder who executes and returns a proxy in the accompanying
form has the power to revoke such proxy at any time prior to the exercise
thereof either by (i)notice in writing received by the Secretary of the
Company, (ii) signing and delivering a new proxy card bearing a later date,
or (iii) attendance at the Meeting and voting in person.
The Board of Directors does not intend to present at the Meeting any
matters other than those set forth in this Proxy Statement, nor does the
Board of Directors know of any other matters which may come before the
Meeting. If any other matters should properly come before the Meeting,
however, it is the intention of the persons named in the enclosed proxy to
vote all proxies in accordance with their best judgment on such matters.
Only shareholders of record at the close of business on January 5, 2001,
will be entitled to vote at the Meeting. On January 3, 2001, there were
outstanding 7,255,059 shares of the Company's Common Stock, which is the only
outstanding class of voting securities of the Company. Each outstanding
share of Common Stock is entitled to one vote on each matter to be voted upon
at the Meeting.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
The Company's directors are to be elected at each Annual Meeting of
Shareholders. At this Meeting, seven directors are to be elected to serve
until the next Annual Meeting of Shareholders and until their successors are
elected and qualify. The nominees for election as directors at this Meeting
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set forth in the table below are all recommended by the Board of Directors of
the Company.
Three meetings of the Board of Directors were held during the past fiscal
year. Each of the incumbent directors of the Company attended at least
seventy-five percent of the meetings of the Board of Directors that were held
during the past fiscal year.
Nominees for Election
Shares represented by the enclosed proxy, unless otherwise directed,
will be voted to elect the seven nominees listed below to serve until the 2001
Annual Meeting of Shareholders and until their successors are duly elected
and qualified. Each of the nominees has consented to being named a nominee
in this Proxy Statement. In the event any nominee should become unable or
unwilling to accept a nomination or election, the persons named in the
enclosed proxy will vote for the election of a nominee designated by the
remaining nominees.
Year first Position with the Company
elected a (other than as a
Nmae of Director Age Director director)
________________ ____ __________ _________________________
Richard C. Farr 72 1982 Retired Chairman & CEO,
Senior Advisor
Samuel J. Padula 77 1985 Special Administrative
Assistant to the
President
Steven Patlin 60 2000 Special Administrative
Assistant to the
President
Reginald W. Ray, Jr. 71 1982 Special Administrative
Assistant to the
President
John D. Shepherd 55 1982 Chairman of the Board,
President and Chief
Executive Officer,
Treasurer
William J. Thyne 50 1999 Executive Vice President,
Chief Financial Officer,
Secretary
Leslie M. Apple 50 2000 Special Administrative
Assistant to the
President
Business Experience
___________________
Richard Farr was, until his resignation from those offices on
July 8, 1997, Chairman of the Board of the Company since January 1990 and
President and Treasurer of the Company since December 1991. Mr. Farr was
the Company's Chief Executive Officer from December 1991 to May 1997, at
which time he became a Member of the Office of Chief Executive, which
position he resigned on July 8, 1997. Mr. Farr has also been Chairman and
Chief Executive Officer of Farr Investment Company, a private investment
firm in West Hartford, Connecticut, for more than the past five years.
Mr. Farr is a Director of H. L. Bouton Co., Inc. and several privately owned
companies. From January 1987 to December 1991, Mr. Farr was a Special
Administrative Assistant to the President, a position he has resumed
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since his resignation in July 1997.
Samuel J. Padula has been President and Chief Executive Officer of Padula
Construction Corp., a real estate development and construction firm in
Oceanport, New Jersey, for more than the past five years. Since January 1987,
Mr. Padula has been a Special Administrative Assistant to the President. Mr.
Padula was, until his resignation from that office in December 1997, a member
of the Company's Office of the Chief Executive since May 1997.
Steven Patlin has been and continues to be an independent dealer of
Lincoln Logs Ltd. since June 1985. Mr Patlin served as an independent
consultant to the Company on sales and marketing matters from January
1998 through February 1999. From March 1999 through February 2000 Mr.
Patlin served as Vice President of Sales for Lincoln Logs Ltd. at which
time he resigned that position. Mr. Patlin has been Vice President and
Treasurer of Patlin Enterprises Inc. a distributor of home maintenance
products, for more than the past five years. Mr. Patlin was appointed to
a vacant seat on the Board of Directors on February 4, 2000.
Reginald W. Ray, Jr. has been President of The Hunter Corporation, a
commercial construction firm in Westport, Connecticut, for more than the past
five years. Since January 1987, Mr. Ray has been a Special Administrative
Assistant to the President.
John D. Shepherd has been Chairman of the Board, President and Chief
Executive Officer and Treasurer of the Company since December 1997. Mr.
Shepherd has been President of Sweetbrier Ltd., an equestrian facility, since
June 1992 and a private investor since May 1991. Mr. Shepherd was Co-Chairman
and Treasurer of Aquatherm Products Corporation, a manufacturer and
distributor of health care products for home and institutional use, in Rahway,
New Jersey, from January 1986 to May 1991. From January 1987 until December
1997, Mr. Shepherd has been a Special Administrative Assistant to the
President, and from May 1997 until December 1997 Mr. Shepherd was a member of
the Company's Office of the Chief Executive.
William J. Thyne, CPA, has been Chief Financial Officer and Secretary
since January 1998. Mr. Thyne was also elected to the additional position of
Executive Vice President in September 1999. Prior to joining the Company Mr.
Thyne was Chief Financial Officer of John B. Garret, Inc., a distributor of
medical supplies and equipment and a provider of Medicare Part B services in
Guilderland, New York from August 1996 to January 1998. Prior to that
position, Mr. Thyne was Vice President, Finance and Chief Financial Officer
of Reliable Racing Supply, Inc., a wholesale and retail distributor of
specialized ski equipment and mail order catalog retailer of ski equipment
and apparel in Glens Falls, New York from July 1995 to August 1996. Prior to
that position, Mr. Thyne was Controller and Chief Financial Officer of
Lifeworks International, a wholesale distributor of health food, dietary
supplements and health education materials in Clifton Park, New York from
April 1994 to July 1995. Prior to that position, Mr. Thyne was Controller
of Capital Spouts, Inc., a manufacturer of plastic spouts to be used with
disposable milk and juice cartons, and the related installation equipment,
in Albany, New York from September 1993 to January 1994. Prior to that
position, and for more than five years, Mr. Thyne was the Vice President,
Finance, Chief Financial Officer and Secretary of Lincoln Logs, Ltd.
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in Chestertown, New York. Mr. Thyne was appointed to a vacant seat on the
Board of Directors on November 30, 1999.
Leslie M. Apple has since January 1995 been a Partner and practicing
attorney with the Albany, New York, law firm of Whiteman Osterman & Hanna.
From 1982 through December 1997 Mr. Apple was a Director of the Company.
From January 1987 through December 1997 Mr. Apple has been a Special
Administrative Assistant to the President, and from may 1997 until December
1997 Mr. Apple was a member of the Company's Office of the Chief Executive.
Mr. Apple resigned from all positions with the Company in December 1997 and
has had no affiliation with the Company until he was appointed to a vacant
seat on the Board of Directors on November 30, 2000.
No nominee for director holds any directorship in a company with a class
of securities registered pursuant to Section 12 of the Securities Exchange
Act of 1934 or subject to the requirements of Section 15(d) of such Act.
No nominee for director holds any directorship in a company registered as an
investment company under the Investment Company Act of 1940 other than Mr.
Farr who is a Trustee of the Scottish Widows International Fund.
The Board of Directors has established an Audit Committee, a Compensation
Committee and a Strategy Committee. The Audit Committee during the fiscal
year ended January 31, 2000, whose function is to oversee the Company's
financial reporting systems, consisted of Mr. Padula. The Compensation
Committee during the fiscal year ended January 31, 2000, whose function is to
review and make recommendations to the Board on executive compensation,
consisted of Messrs. Ray, Padula and Shepherd. The Strategy Committee during
the fiscal year ended January 31, 2000, whose function is to make
recommendations to the Board on the future business direction of the Company,
consisted of Messrs. Ray and Shepherd. No formal meeting of each of the above
committees was held during the past fiscal year ended January 31, 2000. The
Board of Directors, at a meeting held in November 2000, made new appointments
to the respective committees. Currently, the Audit Committee consists of
Messrs. Apple, Padula and RAy; the Compensation Committee consists of Messrs.
Ray, Padula and Farr; and the Strategy Committee consists of Messrs. Farr,
Apple and Patlin. During the fiscal year ended January 31, 2001 there were
three meetings of the Audit Committee. The Company does not have a standing
nominating committee or any committee performing a similar function.
The Board of Directors has approved and adopted a formal written Audit
Committee Charter. This Charter, attached hereto as EXHIBIT A, was adopted
in accordance with listing standards promulgated by the National Association
of Security Dealers ("NASD").
REPORT OF THE AUDIT COMMITTEE ON LINCOLN LOGS LTD.
__________________________________________________
June 14, 2000
To the Board of Directors of Lincoln Logs Ltd:
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I have reviewed and discussed with management the Company's audited
consolidated financial statements as of and for the fiscal year ended
January 31, 2000.
I have discussed with the independent accountants the matters required
to be discussed by Statements on Auditing Standards No. 61, Communications
with Audit Committees, as amended, of the Auditing Standards Board of the
American Institute of Certified Public Accountants.
I have recieved and reviewed the written disclosures and the letter
from the independent accountants required by Independence Standard No.1,
Independence Discussions with Audit Committees, as amended, of the
Independence Standards Board, and have discussed with the accountants the
accountants' independence.
Based on the reviews and discussions referred to above, I recommend to
the Board of Directors that the consolidated financial statements referred
to above be included in the Company's Annual Report on Form 10-KSB for
the fiscal year ended January 31, 2000.
By: /s/ Samuel J. Padula
_____________________
Samuel J. Padula
Chairman
THE BOARD OF DIRECTORS DEEMS PROPOSAL NO. 1 TO BE IN THE BEST
INTERESTS OF THE COMPANY AND ITS SHAREHOLDERS AND RECOMMENDS
A VOTE "FOR" THE ELECTION OF THE NOMINEES NAMED ABOVE.
EXECUTIVE OFFICERS
The executive officers of the Company, each of whom was elected by the
Board of Directors of the Company to serve in the capacities set forth below
opposite their names, and, except as otherwise noted, are currently serving a
one-year term to expire on the date of the 2000 Annual Meeting of Shareholders,
are as follows:
Name Age Office(s)
_____ ___ __________
John D. Shepherd 1 55 Chairman of the Board; President and Chief Executive
Officer; Treasurer
______________________
1 Mr. Shepherd was elected to these current positions by the Board of
Directors effective December 1997 to serve in these capacities until the
next Annual Meeting of Shareholders. In May 1997, the Board of Directors
created The Office of Chief Executive to replace the position of Chief
Executive Officer. Messrs. Apple, Farr, Padula and Shepherd were elected
by the Board of Directors to fill The Office of Chief Executive, to serve
until the 1997 Annual Meeting of the Board of Directors, at which time they
would be nominated to serve in that capacity for the upcoming year. Mr.
Farr resigned from The Office of Chief Executive in July 1997. Mr. Apple
resigned from the Board of Directors and The office of the Chief Executive
in December 1997. Mr. Padula resigned from The Office of Chief Executive
in December 1997.
5
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Jaffry J. LaPell 2 40 Vice President - Sales
William J. Thyne 3 50 Executive Vice President:Chief Financial Officer;
Secretary
David M. Patton 4 52 Vice President - Operations
John D. Shepherd has been Chairman of the Board, President and Chief
Executive Officer and Treasurer since his election to those offices in
December 1997. Mr. Shepherd has been President of Sweetbrier Ltd., an
equestrian facility, since June 1992 and a private investor since May 1991.
Mr. Shepherd was Co-Chairman and Treasurer of Aquatherm Products Corporation,
a manufacturer and distributor of health care products for home and
institutional use in Rahway, New Jersey, from January 1986 to May 1991.
Since January 1987 until his election to his present offices with the Company
Mr. Shepherd had been a Special Administrative Assistant to the President, and
from May 1997 until December 1997 a member of the Company's Office of the
Chief Executive.
Jeffry J. LaPell has been Vice President - Sales since re-joining the
Company in December 1999. Prior to re-joining the Company Mr. LaPell was
Director of Sales for Asperline Log Homes, Inc., a wholly owned subsidiary
of Imagineering Services, Inc., in Lock Haven, Pennsylvania from December
1998 to December 1999. Prior to that position, and for more than five years,
Mr. LaPell was employed by Lincoln Logs Ltd, in various sales positions the
most recent of which was National Sales Manager.
William J. Thyne, CPA, has been Chief Financial Officer and Secretary
since January 1998. Mr. Thyne was also elected to the additional position of
Executive Vice President in September 1999. Prior to joining the Company Mr.
Thyne was Chief Financial Officer of John B. Garret, Inc., a distributor of
medical supplies and equipment and a provider of Medicare Part B services in
Guilderland, New York from August 1996 to January 1998. Prior to that
position, Mr. Thyne was Vice President, Finance and Chief Financial Officer
of Reliable Racing Supply, Inc., a wholesale and retail distributor of
specialized ski equipment and mail order catalog retailer of ski equipment
and apparel in Glens Falls, New York from July 1995 to August 1996. Prior
to that position, Mr. Thyne was Controller and Chief Financial Officer of
Lifeworks International, a wholesale distributor of health food, dietary
supplements and health education materials in Clifton Park, New York from
April 1994 to July 1995. Prior to that position, Mr. Thyne was Controller
of Capital Spouts, Inc., a manufacturer of plastic spouts to be used with
disposable milk and juice cartons, and the related installation equipment,
in Albany, New York from September 1993 to January 1994. Prior to that
position, and for more than five years, Mr. Thyne was the Vice President,
_______________________________
2 Mr. LaPell was elected to his current position by the Board of Directors
effective December 1999, to serve in that capacity until the next Annual
Meeting of Shareholders.
3 Mr. Thyne was elected to the position of Chief Financial Officer and
Secretary by the Board of Directors effective January 13, 1998, to serve in
these capacities until the next Annual Meeting of Shareholders. Mr. Thyne
was elected to the additional position of Executive Vice president by the
Board of Directors effective September 17, 1999, to serve in this
additional capacity until the next Annual Meeting of Shareholders.
4 Mr. Patton was elected to his current position by the Board of Directors
effective December 1999, to serve in this capacity until the next Annual
Meeting of Shareholders.
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Finance, Chief Financial Officer and Secretary of Lincoln Logs Ltd. in
Chestertown, New York.
David M. Patton has been Vice President - Operations since December 1999.
Prior to becoming Vice President - Operations, Mr. Patton was Product Manager,
a position he held since joining the Company in April 1996. Prior to joining
the Company, Mr. Patton was a self-employed general contractor specializing
in the construction of log homes.
COMPLIANCE WITH SECTION 16(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires executive
officers and directors and persons who beneficially own more than ten
percent (10%) of the Company's Common Stock to file initial reports of
ownership and reports of changes in ownership with the Securities and
Exchange Commission. Executive officers, directors and greater than
ten percent (10%) beneficial owners are required by Commission regulations
to furnish the Company with copies of all Section 16(a) forms they file.
The Company believes that its executive officers and directors complied
with all applicable Section 16(a) filing requirements during and with respect
to the fiscal year ended January 31, 2000.
EXECUTIVE COMPENSATION
The following table sets forth all annual and long-term compensation paid
by the Company through the latest practicable date to the Chief Executive
Officer of the Company and to all executive officers of the Company who
received total annual salary and bonus in excess of $100,000 for services
rendered in all capacities to the Company and its subsidiaries during the
fiscal years ended January 31, 2000, January 31, 1999 and January 31, 1998.
<TABLE>
SUMMARY COMPENSATION TABLE
LONG-TERM COMPENSATION - ANNUAL COMPENSATION AWARDS
Long-term Compensation
Annual Compensation Awards
____________________ _______________________
<S> <S> <S> <S> <S> <S> <S> <S> <S>
(a) (b) (c) (d) (e) (f) (g) (h) (i)
All
Other Restricted Other
Name and Annual Stock Options/ LTIP Compen-
Principal Year Salary Bonus Compensation Award(s) SAR's Payouts Sation
Position ($) ($) ($) ($) (#) ($) ($)
---------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C> <C> <C>
John D. Shepherd, 2000 78,000.00 0.00 5,000.00(3) 0.00 0 0.00 7,501.00 (5)
Chief Executive 1999 78,000.00 0.00 5,000.00(3) 0.00 0 0.00 3,943.00 (2)
Officer (1)(6) 1998 0.00 0.00 5,000.00(3) 0.00 0 0.00 9,300.00 (4)
Leslie M. Apple, 2000 0.00 0.00 0.00 0.00 0 0.00 0.00
Office of Chief 1999 0.00 0.00 0.00 0.00 0 0.00 0.00
Executive (6) 1998 0.00 0.00 3,750.00(3) 0.00 0 0.00 9,750.00 (7)
Samuel J. Padula, 2000 0.00 0.00 5,000.00(3) 0.00 0 0.00 0.00
Office of Chief 1999 0.00 0.00 5,000.00(3) 0.00 0 0.00 0.00
Executive (6) 1998 0.00 0.00 5,000.00(3) 0.00 0 0.00 9,750.00 (7)
Richard C. Farr, 2000 0.00 0.00 5,000.00(3) 0.00 0 0.00 0.00
Former Chief 1999 0.00 0.00 5,000.00(3) 0.00 0 0.00 0.00
Executive 1998 0.00 0.00 48,750.00(9) 0.00 0 0.00 31,804.00 (10)
Officer (6)(8)
</TABLE>
________________________________
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(1) Mr. Shepherd was elected Chief Executive Officer in December 1997. From
May 1997 until December 1997, Mr. Shepherd was a member of the Office of
Chief Executive. Prior to May 1997, and since June 1982, Mr. Shepherd
has been a director of the Company.
(2) This amount consists of $2,500 paid for directors' meetings fees, $243
paid for term life insurance and $1,200 paid for interest on an amount
advanced to the Company.
(3) These amounts represent an annual salary of $5,000 paid to the directors
of the Company. Mr. Apple, who resigned from the Company in December
1997, was paid the pro rata amount of $3,750.
(4) This amount consists of $7,500 paid for directors' meetings fees and
$1,800 for interest paid on an amount advanced to the Company.
(5) This amount consists of $7,500 paid for directors' meeting fees, $3,480
of matching funds contributed to the Company's 401(k) Plan and $271 paid
for term life insurance.
(6) In May 1997, the Company's board of directors established the Office of
Chief Executive. Its members consisted of Leslie M. Apple, Richard C.
Farr, Samuel J. Padula and John D. Shepherd, then current directors of
the Company. The Office of Chief Executive terminated in December 1997,
with the election of John D. Shepherd as Chief Executive Officer.
(7) These amounts represent $9,750 paid for directors' meetings fees.
(8) Mr. Farr was the Company's Chief Executive Officer from December 1991
to May 1997, at which time he became a member of the Office of Chief
Executive. Mr. Farr resigned from his positions with the Company,
except that of Director, on July 8, 1997.
(9) This amount consists of an annual salary of $5,000 paid to directors
and $43,750 paid to Mr. Farr for executive services.
(10) This amount consists of $7,500 paid for directors' meetings fees, $9,942
for interest paid on advances made to the Company, and $14,362, which
represents the value attributed to personal use of Company automobiles.
Employee Savings Plan
_____________________
The Company maintains a defined contribution salary reduction plan (the
"Plan") pursuant to Section 401(k) of the Internal Revenue Code of 1986 (as
amended from time to time, the "Internal Revenue Code") for all employees who
have completed one year of service with the Company. Thirty-nine of the
Company's employees are currently eligible to participate in the Plan, twenty-
eight of whom have elected to participate. Employees participating in the
Plan may elect to defer compensation up to a maximum permitted by the Internal
Revenue Code. The Company contributes on behalf of each participating
employee a percentage, determined annually by the Company based upon the
profits of the Company, of compensation (as defined by the Plan) to the Plan.
Aggregate annual additions on behalf of any employee may not exceed the
lesser of 25% or such employee's compensation for any given year or $7,000
(as adjusted for increases in the cost of living as prescribed by regulations
by the Secretary of the Treasury, $10,500 for the 2000 calendar year).
Contributions to the Plan made by the Company are 20% vested after a
participating employee completes three years of service with the Company
and continues to vest at the rate of an additional 20% over each of the
following four years of employment.
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During the fiscal years ended January 31, 2000, 1999 and 1998, $112,213,
$120,314 and $4,395, respectively, were paid to employees of the Company upon
their separation from service to the Company pursuant to the Plan.
Stock Option Plan
_________________
The Company has in effect a Stock Option Plan (the "Plan") which permits
the granting of incentive stock options to key employees to purchase up to
235,000 shares of the Company's Common Stock in accordance with the
requirements imposed by the Internal Revenu Code. The Plan permits the
Board of Directors of the Company, or a committee of the Board of Directors
consisting of at least three directors, to grant incentive stock options to
key employees of the Company. All of the Company's Directors, as key
employees of the Company, are elligible to receive incentive stock options
as are all such officers, division managers, department heads, and any other
management or supervisory employees or others who are designated as key
employees. As required by the applicable provisions of the Internal Revenue
Code, the exercise price of incentive stock options granted under the Plan
must be equal to or greater than the fair market value of the shares which
are subject to an option on the date the option is granted.
Since all employees are considered "key employees" of the Company, there
are currently approximately fifty persons elligible to receive incentive stock
options under the Plan. During fiscal year ended January 31, 2000, incentive
stock options to purchase a total of 186,000 shares of the Company's Common
Stock were granted to forty-two key employees. The newly granted incentive
stock options entitle the forty-two holders thereof to purchase Common
Stock of the Company at a purchase price of $0.16 per share. During the
fiscal year ended January 31, 2000 and through the date of this Proxy
Statement, 500 shares of the Company's Common Stock have been issued
pursuant to the exercise of incentive stock options.
In addition to granting options to key employees intended to qualify
as incentive stock options under the Internal Revenue Code, the Option Plan
also permits the Board of Directors (or the commitee which administers the
Option Plan) to grant stock options (the "Non-qualified Stock Options")
which do not qualify as incentive stock options to key employees of the
Company and directors who are not employees of the Company. Up to
250,000 options are currently designated by the Option Plan for issuance
as non-qualified stock options. The Board, or the committee that administers
the Option Plan, has the authority to decide to whom non-qualified stock
options are granted, as well as the number of shares of the Company's
Common Stock that may be purchased under each such option, and the other
terms, conditions and restrictions (if any) of such options (which need
not be the same for each non-qualified stock option granted).
There are currently approximately fifty persons elligible to receive
non-qualified stock options under the Plan. During the fiscal year
ended January 31, 2000, there were no non-qualified stock options
issued to any key employees or directors and no non-qualified stock options
previously granted under the Plan have been exercised through the date
hereof.
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Compensation of Directors
_________________________
Each director is compensated for his services in the amount of
$5,000 per year, plus $1,250 for each meeting of the Board of Directors
attended. Each member of the Audit, Compensation and Strategy Committees
is compensated in the amount of $500 for each Committee meeting attended.
Health insurance is available to the directors at the Company's expense.
Long-Term Incentive Plan Awards
_______________________________
Other than its Stock Option Plan, the Company does not maintain any
long-term incentive plan.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Description of certain transactions and agreements to which the Company
and certain of the officers and directors of the Company are parties are set
forth below.
During the fiscal years ended January 31, 2000 and 1999, the following
transcations with officers, directors and shareholders occurred:
During March and April 1998, John D. Shepherd and William J. Thyne
purchased $210,000(5) and $20,000(5), respectively, Series B Convertible
Subordinated Debentures (the "B Debentures") at 100% par value. In May
1998, Mr. Shepherd purchased $30,000 of B Debentures held by Samuel J. Padula.
On April 20, 1998, John D. Shepherd converted $275,000 of B
Debentures into 1,375,000 shares of the Company's common stock. On that date,
Mr. Shepherd also exercised warrants related to his B Debentures and purchased
687,500 shares of the Company's common stock for $.375 per share, or a total
of $257,812.
On June 30, 1998 Reginald W. Ray, Jr., a director, converted $25,000
of A Debentures held by him into 125,000 shares of the Company's common stock.
In June 1998, Leslie M. Apple, a director, sold $15,000 of A
Debentures to John D. Shepherd, President, CEO and a director of the
Company. On June 30, 1998, Mr. Apple converted $10,000 of A Debentures held
by him into 50,000 shares of the Company's Common Stock.
In June 1998, John D. Shepherd purchased $15,000 of A Debentures
held by Leslie M. Apple, a director of the Company. On June 30, 1998, Mr.
Shepherd converted the $15,000 of A Debentures into 75,000 shares of the
Company's common stock.
In February 1999, John D. Shepherd purchased $300,000(5) of Series C
Convertible Subordinated Debentures (the "C Debentures") at 100% par value.
___________________________________
5 Includes debentures held by family members of the named
officer/director/shareholder.
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In April 1999, William J. Thyne purchased $10,000 of B Debentures at
100% par value.
On July 29, 1999, John D. Shepherd converted $30,000 of B Debentures
into 150,000 shares of the Company's common stock and $250,000 of C Debentures
into 1,562,500 shares of the Company's common stock.
On December 27, 1999 the Company repaid Mr. Richard C. Farr $125,000
for the B Debenture held by him. On January 21, 2000 the Company paid $9,860
to Mr. Farr, which represented all accrued interest related to the B Debenture
repaid to him on December 27, 1999.
On December 31, 1999 the Company sold an automobile with a book value
of $5,660 to Mr. Richard C. Farr for $18,042.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
Security Ownership of Certain Beneficial Owners
_______________________________________________
The following table identifies each person known to the Company to be the
beneficial owner of more than five percent of the Company's Common Stock and
sets forth the number of shares of the Company's Common Stock beneficially
owned by each such person and the percentage of the shares of the Company's
outstanding Ccommon Stock owned by each such person.
Number of Shares Percent of Out-
of common Stock standing Common
of the Company Stock of the Company
Name and Address Beneficially Owned Beneficially Owned
Of Beneficial Owner as of January 12, 2001 as of January 12, 2001
___________________ _______________________ _____________________
Richard C. Farr 1,423,302 (1) 14.87%
40 Colony Road
W. Hartford CT 06117
John D. Shepherd 6,153,961 (2) 64.29%
1020 Sport Hill Road
Easton, CT 06612
(1) Includes (i) 75,000 shares subject to options which are exercisable
within 60 days and (ii) 312,500 shares subject to warrants which are
exercisable within 60 days.
(2) Includes (i) 250,000 shares of the Company's Series B Convertible
Subordinated Debentures owned by Mrs. Susan Shepherd, his wife,which
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are convertible within 60 days, as to which Mr. Shepherd disclaims
beneficial ownership, (ii) 125,000 shares subject to warrants owned by
Mrs. Susan Shepherd which are exercisable within 60 days, as to which
Mr. Shepherd disclaims beneficial ownership, (iii) 125,000 shares
subject to the Company's Series B Convertible Subordinated Debentures
owned jointly by Mr. Herman R. Shepherd and Mrs. Carol R. Shepherd,
his father and mother, which are convertible within 60 days, as to
which Mr. Shepherd disclaims beneficial ownership, (iv) 62,500 shares
subject to warrants owned jointly by Mr. Herman R. Shepherd and Mrs.
Carol R. Shepherd which are exercisable within 60 days, as to which
Mr. Shepherd disclaims beneficial ownership, (v) 125,000 shares
subject to the Company's Series B Convertible Subordinated Debentures
owned by Mrs. Carol R. Shepherd, his mother, which are convertible
within 60 days, as to which Mr. Shepherd disclaims beneficial
ownership, (vi) 62,500 shares subject to warrants owned by Mrs. Carol
R. Shepherd which are exercisable within 60 days, as to which Mr.
Shepherd disclaims beneficial ownership, (vii) 50,000 shares subject
to the Company's Series B Convertible Subordinated Debentures owned
by Mr. Jason Tunik, his son, which are convertible within 60 days, as
to which Mr. Shepherd disclaims beneficial ownership, (viii) 25,000
shares subject to warrants owned by Mr. Jason Tunik which are
exercisable within 60 days, as to which Mr. Shepherd disclaims
beneficial ownership, (ix) 312,500 shares subject to the Company's
Series C Convertible Subordinated Debentures owned by Mr. Herman R.
Shepherd and Mrs. Carol R. Shepherd, his father and mother, which
are convertible within 60 days, as to which Mr. Shepherd discliams
beneficial ownership.
Security Ownership of Management
________________________________
The following table sets forth the number of shares of the Company's
Common Stock beneficially owned by each director of the Company and all
directors and officers of the Company as a group and the percentage of
the shares of the Company's outstanding Common Stock owned by each director
of the Company and all directors and officers of the Company as a group.
Except as otherwise noted, the named individual has sole voting power and
sole investment power over the securities.
Number of Shares Percent of Out-
of Common Stock standing Common
of the Company Stock of the Company
Beneficialy Owned Beneficially Owned
Name as of January 12, 2001 as of January 12, 2001
______________ ________________________ ________________________
Richard C. Farr 1,423,302 (4) 14.87%
Samuel J. Padula 373,743 (1)(2) 3.90%
Reginald W. Ray, Jr. 219,304 (1)(3) 2.29%
John D. Shepherd 6,153,961 (5) 64.29%
William J. Thyne 296,085 (6) 3.09%
David Patton 34,400 (7) .36%
Steven Patlin 85,100 (8) .89%
Jeffry LaPell 30,400 .32%
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Leslie M. Apple 77,104 (9) .81%
All officers and
directors as a group
(9 persons) 8,693,399 (10) 90.83%
(1) Includes 30,000 shares subject to options which are exercisable within
60 days.
(2) Includes (i) 2,100 shares owned jointly by Mr. Padula with his wife,
Mrs. Eleanor Padula, with whom Mr. Padula shares voting and investment
power, (ii) 263,603 shares held by Mrs. Padula as to which
Mr. Padula disclaims beneficial ownership, and (iii)75,000 shares
subject to warrants owned by Mrs. Padula which are exercisable within
60 days as to which Mr. Padula disclaims beneficial ownership.
(3) includes 11,602 shares owned by Mr. Ray's wife as to which Mr. Ray
disclaims beneficial ownership.
(4) Includes (i) 75,000 shares subject to options which are exercisable
within 60 days and (iii) 312,500 shares subject to warrants which are
exercisable within 60 days.
(5) Includes (i) 250,000 shares of the Company's Series B Convertible
Subordinated Debentures owned by Mrs. Susan Shepherd, his wife,which
are convertible within 60 days, as to which Mr. Shepherd disclaims
beneficial ownership, (ii) 125,000 shares subject to warrants owned by
Mrs. Susan Shepherd which are exercisable within 60 days, as to which
Mr. Shepherd disclaims beneficial ownership, (iii) 125,000 shares
subject to the Company's Series B Convertible Subordinated Debentures
owned jointly by Mr. Herman R. Shepherd and Mrs. Carol R. Shepherd,
his father and mother, which are convertible within 60 days, as to
which Mr. Shepherd disclaims beneficial ownership, (iv) 62,500 shares
subject to warrants owned jointly by Mr. Herman R. Shepherd and Mrs.
Carol R. Shepherd which are exercisable within 60 days, as to which
Mr. Shepherd disclaims beneficial ownership, (v) 125,000 shares
subject to the Company's Series B Convertible Subordinated Debentures
owned by Mrs. Carol R. Shepherd, his mother, which are convertible
within 60 days, as to which Mr. Shepherd discliams beneficial ownership,
(vi) 62,500 shares subject to warrants owned by Mrs. Carol R. Shepherd
which are exercisable within 60 days, as to which Mr. Shepherd
disclaims beneficial ownership, (vii) 50,000 shares subject to the
Company's Series B Convertible Subordinated Debentures owned by Mr.
Jason Tunik, his son, which are convertible within 60 days, as to
which Mr. Shepherd disclaims beneficial ownership, (viii) 25,000
shares subject to warrants owned by Mr. Jason Tunik which are
exercisable within 60 days, as to which Mr. Shepherd disclaims
beneficial ownership, (ix) 312,500 shares subject to the Company's
Series C Convertible Subordinated Debentures owned by Mr. Herman R.
Shepherd and Mrs. Carol R. Shepherd, his father and mother, which
are convertible within 60 days, as to which Mr. Shepherd discliams
beneficial ownership.
(6) Includes (i) 10,000 shares subject to options which are exercisable
within 60 days, (ii) 100,000 shares subject to the Company's Series
B Convertible Subordinated Debentures which are convertible within 60
days, and (iii) 50,000 shares subject to warrants which are exercisable
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<PAGE>
within 60 days, (iv) 50,000 shares subject to the Company's
Series B Convertible Subordinated Debentures owned by Mrs. Glenn E.
Thyne, his wife, which are convertible within 60 days, as to which
Mr. Thyne disclaims beneficial ownership, and (v) 25,000 shares subject
to warrants owned by Mrs. Glenn E. Thyne which are exercisable within
60 days, as to which Mr. Thyne disclaims beneficial ownership.
(7) Includes 4,000 shares subject to options which are exercisable
within 60 days.
(8) Includes (i) 10,000 shares subject to options which are exercisable
within 60 days, (ii) 50,000 shares subject to the Company's Series
B Convertible Subordinated Debentures, owned jointly with his
wife, Leslie Patlin, which are convertible within 60 days, and
(111) 25,000 shares subject to warrants which are exercisable
within 60 days.
(9) Includes (i) 25,000 shares subject to options which are exercisable
within 60 days, and (ii) 1,000 shares owned by Leslie M. Apple, P.C.,
a professional corporation of which Mr. Apple is the sole shareholder.
(10) Includes (i) 184,000 shares subject to options which are exercisable
within 60 days, (ii) 750,000 shares subject to the Company's Series
B Convertible Subordinated Debentures which are convertible within
60 days, (iii) 687,500 shares subject to warrants which are exercisable
within 60 days, and (iv) 315,500 shares subject to the Company's
Series C Convertible Subordinated Debentures which are convertible
within 60 days.
There are no arrangements known to the Company the operation of which may at a
subsequent date result in a change in control of the Company.
PROPOSAL NO. 2
APPROVAL OF INDEPENDENT AUDITORS
Subject to approval of the Company's shareholders, the Board of Directors
has decided that PricewaterhouseCoopers LLP, which firm has been the
independent certified public accountants of the Company for the fiscal year
ended January 31, 2000, be continued as independent accountants for the
Company. The shareholders are being asked to approve the Board's decision to
retain PricewaterhouseCoopers LLP for the fiscal year ending January 31, 2001.
A representative of PricewaterhouseCoopers LLP is expected to be present
at the Meeting and will have the opportunity to make a statement if he desires
to do so and to respond to appropriate questions from shareholders.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE
APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS INDEPENDENT ACCOUNTANTS FOR
THE COMPANY FOR THE FISCAL YEAR ENDING JANUARY 31, 2001.
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<PAGE>
ANNUAL REPORT
A copy of the Company's Annual Report for the fiscal year ended
January 31, 2000 was mailed to the Company's shareholders on November
27, 2000 and November 28, 2000, respectively, and does not constitute
a part of the proxy solicittion materials.
ANY PERSON FROM WHOM PROXIES FOR THIS MEETING ARE SOLICITED MAY
OBTAIN FROM THE COMPANY, WITHOUT CHARGE, A COPY OF ITS ANNUAL REPORT
TO THE SECURITIES AND EXCHANGE COMMISSION ON FORM 10-KSB FOR THE
FISCAL YEAR ENDED JANUARY 31, 2000, INCLUDING THE FINANCIAL STATEMENTS
THEREIN, BY WRITTEN REQUEST ADDRESSED TO WILLIAM J. THYNE, SECRETARY,
LINCOLN LOGS LTD., 5 RIVERSIDE DRIVE, CHESTERTOWN, NEW YORK 12817.
ANY SUCH REQUEST FROM A BENEFICIAL OWNER OF STOCK NOT REGISTERED IN HIS
NAME MUST CONFIRM THAT HE/SHE WAS A BENEFICIAL OWNER OF SUCH STOCK ON
JANUARY 5, 2001.
SHAREHOLDER PROPOSALS
Proposals of shareholders intended to be presented at the next annual
meeting of shareholders to be held in 2001 must have been received by the
Company at 5 Riverside Drive, Chestertown, new York 12817 on or before
March 16, 2001.
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EXHIBIT A
CHARTER OF THE AUDIT COMMITTEE
______________________________
OF
__
LINCOLN LOGS LTD.
_________________
Purpose
The primary purpose of the Audit Committee (the "Committee") is to assist
the Board of Directors (the "Board") in fulfilling its responsibility to
oversee management's conduct of the Lincoln Logs Ltd.'s (the "Company")
financial reporting process. This includes the overview of financial
reports and other financial information provided by the Company to any
governmental or regulatory body, the public or other users thereof, the
Company's systems of internal accounting and financial controls, and
the annual independent audit of the Company's financial statements.
In discharging its oversight role, the Committee is empowered to
investigate any matter brought to its attention with full access to
all books, records, facilities and personnel of the Company and the power
to retain outside counsel, auditors or other experts for this purpose.
The Board and the Committee are in place to represent the Company's
shareholders; accordingly, the outside auditor is ultimately accountable
to the Board and the Committee.
The Committee shall review the adequacy of this Charter on an annual basis.
Membership and Meetings
The Committee shall be comprised of not less than three members of the
Board, and the Committee's composition will meet the requirements of
applicable NASD rules and regulations.
Accordingly, all of the members will be directors:
1. Who have no material relationship to the Company that may
interfere with their independence from management and the
Company; and
2. Who are financially literate or who become financially
literate within a reasonalbe period of time after appointment
to the Committee. In addition, at least one member of the
Committee will have accounting or related financial management
experience.
The Committe shall meet at least four times annually, or more frequently
as circumstances dictate. As part of its job to foster open communication,
the Committee should meet at least annually with management, and the
outside auditors seperately to discuss any matters that the Committee
believes should be discussed privately.
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<PAGE>
LINCOLN LOGS LTD.
________________
AUDIT COMMITTEE CHARTER - continued
___________________________________
Key Responsibilities
The Committee's job is one of oversight. It recognizes that the Company's
management is responsible for preparing the Company's financial statements
and that the outside auditors are responsible for auditing those financial
statements. Additionally, the Committee recognizes that financial management,
as well as the outisde auditors, have more time, knowledge and more detailed
information on the Company than do Committe members. Consequently, in
carrying out its oversight responsibilities, the Committee is not
providing any expert or special assurance as to the Company's financial
statements or any professional certification as to the outside auditor's
work.
The following functions shall be common recurring activities of the Committee
in carrying out its oversight function. These foundations are set forth as a
guide with the understanding that the Committee may diverge from this guide
as appropriate given the circumstances.
The Committee shall review with management and the outside auditors
the audited financial statements to be included in the Company's Annual
Report on Form 10-KSB (or the Annual Report to Shareholders if
distributed prior to the filing of Form 10-KSB) and review and consider
with the outside auditors the matters required to be discussed by
Statement of Auditing Standards ("SAS") No. 61.
As a whole, or through the Committee chair, the Committee shall review
with the outside auditors the Company's interim financial results to
be included in the Company's quarterly reports to be filed with the
Securities and Exchange Commission and the matters required to be
discussed by SAS No. 61; this review will occur prior to the Company's
filing of Form 10-QSB.
The Committee shall;
. request from the outside auditors annually, a formal written
statement delineating all relationships between the auditor
and the Company consistent with Independence Standards Board
Standard No. 1
. discuss with the outside auditors any such disclosed
relationships and their impact on the outside auditor's
independence; and
. recommend that the Borad take appropriate action, if necessary,
to oversee the independence of the outside auditors.
The Committee, subject to any action that may be taken by the full Board,
shall have the ultimate authority and responsibility to select (or
nominate for shareholder approval), evaluate and, where appropriate,
replace the outside auditors.
Maintain minutes of meetings of the Committee.
Report to the Board subsequent to meetings of the Committee.
18
