SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/X/ Preliminary Proxy Statement / / Confidential, for Use of the
/ / Definitive Proxy Statement Commission Only (as permitted)
/ / Soliciting Material Pursuant to Section by Rule 14a-6(e)(2))
240.14a-11(c) or Section 240.14a-12
WTD INDUSTRIES, 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)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
---------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
---------------------------------------------------------------
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how it
was determined):
---------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
---------------------------------------------------------------
(5) Total fee paid:
---------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
---------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
WTD INDUSTRIES, INC.
Lincoln Tower, Suite 900
10260 S.W. Greenburg Road
Portland, Oregon 97223
----------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
to be held October 26, 1998
----------
To Our Shareholders:
WTD Industries, Inc. (the "Company") will hold its Annual Meeting of
Shareholders at 10:00 a.m. local time on Monday, October 26, 1998 at the Tigard
Courtyard Marriott, 15686 S.W. Sequoia Parkway, Tigard, Oregon, for the
following purposes:
1. To elect two (2) directors to the Company's Board of Directors.
2. To approve an amendment to the Company's 1996 Stock Option Plan
to increase the number of shares issuable thereunder.
3. To approve an amendment to Article I of the Fourth Restated
Articles of Incorporation of the Company to change the
Company's name to TreeSource Industries, Inc.
4. To ratify the appointment of Moss Adams LLP as the Company's
independent auditors for the fiscal year ending April 30, 1999.
5. To transact such other business as may properly come before the
Annual Meeting or any adjournment or postponement thereof.
The nominees for election as directors are named in the enclosed Proxy
Statement.
The Board of Directors has fixed the close of business on September 18,
1998, as the record date for the determination of shareholders entitled to
notice of and to vote at the Annual Meeting or any adjournments or postponements
thereof.
Whether you expect to attend the annual meeting or not, your vote is
important. Accordingly, we ask that you sign and date the enclosed proxy card
and return it in the enclosed envelope. If you do attend the meeting and wish to
vote in person, you may revoke your proxy at that time.
Very truly yours,
Robert J. Riecke
Secretary
Portland, Oregon
September , 1998
<PAGE>
WTD INDUSTRIES, INC.
Lincoln Tower, Suite 900
10260 S.W. Greenburg Road
Portland, Oregon 97223
----------
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
to be held October 26, 1998
----------
This Proxy Statement is furnished by the Board of Directors of WTD
Industries, Inc., an Oregon corporation (the "Company"), in connection with the
solicitation of proxies by the Board of Directors for use at the Company's 1998
Annual Meeting of Shareholders (the "Annual Meeting"), to be held at 10:00 a.m.
local time, on Monday, October 26, 1998 at Tigard Courtyard Marriott, 15686 S.W.
Sequoia Parkway, Tigard, Oregon. The mailing address of the principal executive
offices of the Company is P.O. Box 5805, Portland, Oregon 97228-5805. The
approximate date this proxy statement and the accompanying proxy form are first
being sent to shareholders is September 7, 1998.
SOLICITATION AND REVOCABILITY OF PROXY
The Company will bear all soliciting costs that it incurs in connection
with the Annual Meeting, including the cost of preparing, printing and mailing
this Proxy Statement and the Proxy solicited hereby. Proxies will be solicited
by use of the mails. Officers and employees of the Company may also solicit
proxies by telephone or personal contact, without additional remuneration. The
Company may retain Allen Nelson & Co. to assist with solicitation of proxies, at
an estimated fee of $5,000 plus reimbursement of expenses. Copies of
solicitation material will be furnished to fiduciaries, custodians, and
brokerage houses for forwarding to beneficial owners of the stock held in their
names. Your cooperation in promptly completing, signing, dating and returning
the enclosed proxy card will help avoid additional expense.
Any person giving a proxy pursuant to this solicitation may revoke it at
any time before its exercise by filing with the Company, attention Robert J.
Riecke, Secretary, an instrument of revocation or a duly executed proxy bearing
a later date. A shareholder may also revoke the proxy by affirmatively electing
to vote in person at the meeting. However, a shareholder who attends the Annual
Meeting need not revoke his proxy and vote in person unless he wishes to do so.
All valid, unrevoked proxies will be voted at the Annual Meeting.
QUORUM AND VOTING
The Common Stock, no par value ("Common Stock"), is the only outstanding
voting security of the Company. The record date for determining holders of
Common Stock entitled to vote at the Annual Meeting is September 18, 1998. On
the date hereof there were shares of Common Stock outstanding, entitled
to one vote per share. The Common Stock does not have cumulative voting rights.
If a quorum is present, the two nominees for election as directors who
receive the greatest number of votes cast for the election of directors by the
shares of Common Stock present in person or represented by proxy at the meeting
and entitled to vote shall be elected directors. With respect to the election of
directors, directors are elected by a plurality of the votes cast and only votes
cast in favor of a nominee will affect the outcome. Therefore, abstention from
voting or nonvoting by brokers will have no effect. Proposal No. 2 to amend the
Company's 1996 Stock Option Plan, Proposal No. 3 to amend the Fourth Restated
Articles of Incorporation of the Company (the "Articles") to change the
Company's name, and Proposal No. 4 to ratify the appointment of Moss Adams LLP
("Moss Adams") as independent auditors for the Company will be approved if the
number of votes cast in favor of each Proposal exceeds the number of votes cast
against it. With respect to voting on Proposals No. 2, 3, and 4, abstention from
voting or nonvoting by brokers will have no effect.
1
<PAGE>
ELECTION OF DIRECTORS
(Proposal No. 1)
Nominees for Director
- ---------------------
The nominees for director are listed below. Information about each
nominee is contained in the section entitled "Directors and Executive Officers."
Name Director Since
---- --------------
Richard W. Detweiler 1995
William H. Wright 1992
Pursuant to the Company's Articles, in the event that there are six or
more directors on the Board, the Board will be divided into three classes with
each class to serve staggered, three-year terms and to be as nearly equal in
number as possible. The terms of office of classes 1, 2 and 3 are scheduled to
expire, respectively, on dates of the Company's Annual Meetings of Shareholders
in 1998, 1999, and 2000. The Company currently has seven Board seats, with one
position vacant because of the retirement on July 1, 1998, of Bruce L. Engel, a
former Class 3 director and Company president. The Company intends to leave the
seat vacant for now, but may elect to fill it in the future.
The two Class 1 directors to be elected at the Annual Meeting will
serve until the Company's 2001 Annual Meeting of Shareholders and until their
respective successors shall have been elected and qualified. Each of the
nominees for director currently serves as a director of the Company. The
remaining directors named herein, Class 2 directors Larry G. Black and Scott
Christie, and Class 3 directors K. Stanley Martin and Robert J. Riecke, will not
be required to stand for election at the Annual Meeting because their present
terms expire in either 1999 or 2000.
In the event the Company fails to make a certain number of scheduled
dividend payments, or if a certain financial ratio covenant violation has
occurred and is continuing on its Series A Preferred Stock, holders of such
preferred stock may, under the circumstances and in the manner provided in the
Company's Articles, elect a majority of the Board of Directors by replacing
incumbent Board members or increasing the size of the Board.
Committees and Meetings of the Board
- ------------------------------------
The Board of Directors has standing Audit and Compensation Committees.
The Audit Committee meets from time to time with management, internal
auditors, and the Company's independent accountants to consider financial and
accounting matters. The Audit Committee reviews the scope, timing, and fees for
the annual audit. It also reviews policies and procedures with respect to the
Company's internal auditing, accounting, and financial controls. The Audit
Committee met six times in fiscal 1998. Directors Detweiler, Riecke, and Wright
constitute the Audit Committee.
The Compensation Committee reviews executive compensation matters and
makes recommendations to the Board. The Compensation Committee did not meet in
fiscal 1998. The Compensation Committee consists of directors Christie and
Wright.
The Board of Directors met eight times during fiscal 1998.
Board Recommendation
Proxies will be voted for election of directors in accordance with the
instructions specified in the proxy form. If no instructions are given, proxies
will be voted for the election of each of the nominees named above. If one or
more of the nominees becomes unavailable for any reason as a candidate for
director, the number of directors constituting the Board of Directors may be
reduced prior to the meeting or the proxies may be voted for such other
2
<PAGE>
candidate or candidates as may be nominated by the Board of Directors, in
accordance with the authority conferred in the proxy.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF ALL NOMINEES.
AMENDMENT TO 1996 STOCK OPTION PLAN TO INCREASE NUMBER OF SHARES
(Proposal No. 2)
Description of Plan
An aggregate of 525,000 shares (subject to adjustment in the event of
any stock dividend or split, recapitalization, reclassification, combination,
exchange of shares, or other similar corporate change) of the Company's Common
Stock was originally reserved for issuance pursuant to awards under the 1996
Option Plan. On August 7, 1998, subject to shareholder approval, the Board of
Directors increased the shares reserved under the 1996 Option Plan by 900,000
shares to a total of 1,425,000 shares. The purpose of the 1996 Option Plan is to
enhance the long-term value of the Company by offering opportunities to those
employees, directors, officers, consultants, agents, advisors, and independent
contractors of the Company and its subsidiaries who are key to 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. The Board of Directors believes that the availability of an adequate
number of shares reserved for issuance under the 1996 Plan is an important
factor in attracting, retaining and motivating qualified officers and employees
essential to the success of the Company. The Board of Directors believes that
900,000 additional shares of Common Stock available for issuance as a result of
the amendment to the 1996 Option Plan should be sufficient to meet the Company's
requirements for approximately five years.
Not more than 50,000 shares of Common Stock, in the aggregate, may be
granted under the 1996 Option Plan to any participant during any fiscal year of
the Company, except that one-time grants of options for up to 100,000 shares may
be made to newly hired participants. As of July 31, 1998, an aggregate of
399,425 shares were subject to outstanding stock options granted under the 1996
Option Plan. The exercise price for currently outstanding stock options under
the 1996 Option Plan is $1.515 per share. No options have been exercised under
the 1996 Option Plan.
Eligibility
Options granted under the 1996 Option Plan will be "nonqualified stock
options" (that is, options that are not designed to qualify as "incentive stock
options," as defined in Section 422 IRC). Any employee or consultant of the
Company or any of its "Affiliates" (as such term is defined in the 1996 Option
Plan) is eligible for awards under the 1996 Option Plan. Since awards under the
1996 Option Plan are discretionary, awards thereunder for the current fiscal
year are not currently determinable. In the fiscal year ended April 30, 1998, no
options were granted.
Administration
The 1996 Option Plan is currently administered by the Company's Board of
Directors, which has the sole authority, subject to the provisions of the 1996
Option Plan, to determine the persons to whom awards will be made, the type,
amount, size and terms of awards and other terms, conditions and restrictions of
the awards. The Board may delegate the responsibility for administering the 1996
Option Plan to a committee or committees consisting of two or more members of
the Board of Directors, subject to such limitations as the Board deems
appropriate. Committee members will serve for such term as the Board may
determine, subject to removal by the Board at any time.
3
<PAGE>
Terms and Conditions of Options
Any shares of Common Stock that cease to be subject to an option (other
than by reason of exercise), including, without limitation, in connection with
the cancellation of an award, will be available for issuance in connection with
future grants of awards under the 1996 Option Plan.
The option price for each option granted under the 1996 Option Plan will
be determined by the plan administrator, but will be not less than 85% of the
Common Stock's fair market value on the date of grant. For purposes of the 1996
Option Plan, "fair market value" means the last reported sales price for the
Common Stock as reported by the NASDAQ National Market for a single trading day.
As of , 1998, the last reported sale price per share of
Common Stock on the NASDAQ National Market was $ .
The option term will be fixed by the plan administrator, but if not so
specified, will be ten years. Each option will be exercisable pursuant to a
vesting schedule determined by the plan administrator. If not so established,
the option will vest over four years from the date of grant, with 20% of the
shares of underlying Common Stock vesting on the six-month anniversary of the
grant date and an additional 20% of the shares vesting after every successive
year of the optionee's continuous employment or relationship with the Company.
The plan administrator will also determine the circumstances under which an
option will be exercisable in the event the optionee ceases to provide services
to the Company or one of its subsidiaries. If not so established, options
generally will be exercisable for one year after termination of services as a
result of disability or death and for one month after all other terminations. An
option will not be exercisable if the optionee's services are terminated for
cause, as defined in the 1996 Option Plan.
Options granted under the 1996 Option Plan are nontransferable except to
the extent that the agreement evidencing such option provides for
transferability, and no option will be transferable by any optionee other than
by will or the laws of descent and distribution.
Termination and Amendment
The 1996 Option Plan will terminate on the date on which the 1996 Option
Plan is terminated by the Board of Directors. The 1996 Option Plan may be
amended at any time by the Board of Directors, subject to approval by
shareholders holding a majority of the voting stock, of any amendment that will
(i) materially increase the benefits accruing to participants under the 1996
Option Plan; (ii) increase the number of shares available for issuance or sale
pursuant to the 1996 Option Plan (other than as permitted in certain
circumstances provided by the 1996 Option Plan); or (iii) materially modify the
requirements as to eligibility for participation in the 1996 Option Plan.
Federal Income Tax Consequences
The following discussion summarizes the material federal income tax
consequences of participation in the 1996 Option Plan. The discussion is general
in nature and does not address issues related to the tax circumstances of any
particular participant in the 1996 Option Plan. The discussion is based on
federal income tax laws in effect on the date hereof and is, therefore, subject
to possible future changes in law. The discussion does not address state, local
or foreign consequences.
There are no tax consequences to the Company or the optionee upon the
grant of a nonqualified stock option under the 1996 Option Plan. Upon the
exercise of a nonqualified stock option, an optionee recognizes ordinary income
equal to the difference between the exercise price for the shares and the fair
market value of the shares on the date of exercise. The Company is entitled to a
corresponding tax deduction equal to the amount of income recognized by the
optionee at the time of recognition by the optionee, provided that the Company
meets its federal income and employment tax withholding obligations and that the
deduction is not otherwise disallowed by the IRC.
4
<PAGE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE AMENDMENT OF THE
1996 STOCK OPTION PLAN TO INCREASE THE NUMBER OF SHARES ISSUABLE THEREUNDER BY
900,000, TO A TOTAL OF 1,425,000 SHARES.
APPROVAL OF AMENDMENT TO THE COMPANY'S FOURTH RESTATED ARTICLES OF
INCORPORATION
(Proposal No. 3)
The Board has unanimously approved an amendment to Article I of the
Company's Articles to change the Company's name to TreeSource Industries, Inc.
and directed that the amendment be submitted to the shareholders at the Annual
Meeting for their approval.
TreeSource(R) is a registered trademark owned by the Company and has
been used by the Company's sales subsidiary as its corporate name and as a brand
name for the wood products it sells. Use of the name TreeSource(R) at the WTD
parent company level will make company identification easier and increase public
and investor awareness of the nature of the Company's business. If the amendment
is approved by the Company's shareholders, the Company's trading symbol on the
Nasdaq Stock Market will be "TRES".
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE AMENDMENT TO THE
COMPANY'S ARTICLES TO CHANGE ITS NAME TO TREESOURCE INDUSTRIES, INC.
INDEPENDENT AUDITORS
(Proposal No. 4)
The Board of Directors requests that the shareholders ratify its
selection of Moss Adams as independent auditors to examine the financial
statements of the Company for the fiscal year ending April 30, 1999.
Moss Adams has audited the Company's financial statements for the 16
years ended April 30, 1998. Representatives of Moss Adams are expected to be
present at the Annual Meeting, will have an opportunity to make a statement if
they so desire, and will be available to respond to appropriate questions from
shareholders.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF THE SELECTION
OF MOSS ADAMS AS INDEPENDENT AUDITORS OF THE COMPANY.
5
<PAGE>
DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The directors and executive officers of the Company are:
Name Age Position
---- --- --------
Larry G. Black.............. 52 Director
Scott Christie.............. 49 Director
Richard W. Detweiler........ 56 Director
David J. Loftus............. 56 Treasurer
K. Stanley Martin........... 56 Director, Vice President-Finance and
Chief Financial Officer
Robert J. Riecke........... 48 Director, Vice President-Administration,
General Counsel and Secretary
John C. Stembridge.......... 39 Interim Chief Operating Officer and
Vice President-Sales and Marketing
James R. Wilson............. 48 Vice President-Timber
William H. Wright........... 63 Director
Larry G. Black has been a director of the Company since June 1997. Mr.
Black is president of Quinault Corporation ("Quinault"), owner of approximately
29% of the Company's common stock. Since its formation in 1985, Mr. Black has
been chief executive officer of Quinault Logging Company, which is in the
business of buying timber and selling logs. Mr. Black has been involved in the
timber industry for more than 30 years. See "Certain Relationships and Related
Transactions."
Scott Christie has been a director of the Company since March 1988. Mr.
Christie is currently general partner of Christie Capital Management. Since 1987
Mr. Christie has been engaged as an investment advisor for his own account and
the account of other individuals. From 1983 until 1987 Mr. Christie was senior
vice president of Kidder, Peabody & Co. Incorporated, an investment banking
firm. Mr. Christie headed Kidder, Peabody's underwriting team for the Company's
initial public offering and 1987 debenture offering.
Richard W. Detweiler has been a director of the Company since December
1995. Mr. Detweiler is currently a partner of Carlisle Enterprises, an
investment partnership. From 1990 to 1996 Mr. Detweiler was chief executive
officer of Precision Aerotech, a diversified manufacturing company. Mr.
Detweiler has 33 years of manufacturing management experience, including 16
years in general management.
David J. Loftus was appointed treasurer of the Company in October 1993
and continues to serve as vice president-finance of TreeSource, the Company's
marketing subsidiary, a position he has held since May 1986. As treasurer, Mr.
Loftus is primarily responsible for cash management matters and credit and
banking relationships. For the eight years prior to joining TreeSource, Mr.
Loftus served as the assistant treasurer for a publicly-traded company with
operations in the forest products industry.
K. Stanley Martin is vice president-finance of the Company, a position
he has held since September 1983, and has been chief financial officer since
April 1991. Mr. Martin has been a director of the Company since January 1994.
Mr. Martin is responsible for all financial affairs of the Company. For the
eleven years prior to 1983, Mr. Martin served as a financial officer for
publicly-traded companies having all or a substantial portion of their
operations in the forest products industry. Mr. Martin is a certified public
accountant.
Robert J. Riecke became vice president-administration of the Company in
May 1989, has been general counsel of the Company since January 1987, assistant
secretary from March 1983 until January 1994, and a director of the Company
since March 1986. Mr. Riecke was named corporate secretary in January 1994. Mr.
Riecke has primary responsibility for the Company's legal, risk management,
environmental compliance, investor relations, and human resource functions. From
1976 through 1986, Mr. Riecke was in private law practice. Since 1983, Mr.
Riecke
6
<PAGE>
has devoted much of his professional endeavors to legal matters relating to the
Company and its subsidiaries. Mr. Riecke is a graduate of the University of
Illinois School of Law.
John C. Stembridge was appointed vice president-sales and marketing of
the Company in February 1995 and was elected interim chief operating officer in
May 1998. Mr. Stembridge joined TreeSource, the Company's marketing subsidiary,
in 1989 and has served as its vice president and general manager since June
1991. Mr. Stembridge has primary responsibility for managing all aspects of the
Company's lumber manufacturing, sales and transportation. For the nine years
prior to joining TreeSource, Mr. Stembridge was involved in domestic and export
lumber sales, primarily with North Pacific Lumber Co.
James R. Wilson was appointed vice president-timber of the Company in
October 1993. Mr. Wilson has primary responsibility for the Company's timber
supply program. Prior to his present position, Mr. Wilson served at both mill
and corporate levels of WTD Industries commencing in February 1992. Prior to
1992, Mr. Wilson served as general manager of Estacada Lumber Company, a
division of RSG Forest Products. From 1973 to 1984, Mr. Wilson was involved in
all phases of the wood products industry with Crown Zellerbach Corporation.
William H. Wright has been a director of the Company since April 1992.
Mr. Wright has held a variety of management positions in the forest products
industry since 1957. He is currently president of Heartwood Consulting Service,
which advises forest products clients. From 1989 until 1994 he was president and
chief executive officer of Dee Forest Products Inc., a manufacturer of hardboard
and related products. From 1984 to 1989 Mr. Wright was general manager of
Stevenson Co-Ply Inc., a manufacturer of veneer and plywood.
Section 16(a) Beneficial Ownership Reporting Compliance
- -------------------------------------------------------
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires that the Company's officers, directors and persons who
own more than 10 percent of the common stock file with the Securities and
Exchange Commission ("SEC") initial reports of beneficial ownership on Form 3
and reports of changes in beneficial ownership of common stock and other equity
securities of the Company on Form 4. Officers, directors, and greater than 10
percent shareholders of the Company are required by SEC regulations to furnish
to the Company copies of all Section 16(a) reports that they file. To the
Company's knowledge, based solely on reviews of such reports furnished to the
Company and written representations that no other reports are required, all
Section 16(a) filing requirements applicable to its officers, directors and
greater than 10 percent beneficial owners were complied with during the fiscal
year ended April 30, 1998.
7
<PAGE>
EXECUTIVE COMPENSATION
Summary Compensation Table
- --------------------------
The following table shows the cash and non-cash compensation paid by
the Company for each of the last three fiscal years to the chief executive
officer and the four other most highly compensated executive officers (the
"Named Executive Officers").
<TABLE>
<CAPTION>
Long Term
Compensation
Awards
--------------------
Annual Compensation(1)
-------------------------------- Number of Securities
Name and Principal Position Year Salary($) Bonus($) Underlying Options
---------------------------------- ---- --------- --------- --------------------
<S> <C> <C> <C> <C>
Bruce L. Engel(2) 1998 $ 300,000 $ 68,300 --
President 1997 $ 300,000 $ 171,122 35,000
1996 $ 300,000 $ 23,142 --
K. Stanley Martin 1998 $ 120,000 $ 27,320 --
Vice President-Finance and 1997 $ 120,000 $ 68,447 35,000
Chief Financial Officer 1996 $ 120,000 $ 9,256 --
Robert J. Riecke 1998 $ 132,000 $ 30,052 --
Vice President- 1997 $ 132,000 $ 75,295 35,000
Administration, General 1996 $ 132,000 $ 10,183 --
Counsel and Secretary
John C. Stembridge 1998 $ 100,000 $ 27,448 --
Interim Chief Operating Officer 1997 $ 100,000 $ 80,238 35,000
and Vice President-Sales and 1996 $ 100,000 $ 12,197 --
Marketing
James R. Wilson 1998 $ 100,000 $ 22,766 --
Vice President-Timber 1997 $ 100,000 $ 57,040 35,000
1996 $ 100,000 $ 7,714 --
</TABLE>
(1) Personal benefits for each executive officer named in the table did not
exceed $50,000 or 10% of such executive officers' total annual salary
and bonus for the fiscal years ended April 30, 1998, 1997 and 1996,
respectively.
(2) Mr. Engel retired effective July 1, 1998.
8
<PAGE>
Option Grants in Last Fiscal Year
- ---------------------------------
No executive officer named above received option grants during the
fiscal year ended April 30, 1998.
<TABLE>
<CAPTION>
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option Values
- ---------------------------------------------------------------------------------
The following table provides information on option exercises for the
last fiscal year by the named executive officers and the value of such officers'
unexercised options as of April 30, 1998:
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options
Shares Options at April 30, 1998 (#) at April 30, 1998 ($)(1)
Acquired on Value ----------------------------- -----------------------------
Name Exercise (#) Realized Exercisable Unexercisable Exercisable Unexercisable
---- ------------ ---------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Bruce L. Engel(2) 68,500 $96,414(3) 332,125 18,375 $ 15,530 $ 873
K. Stanley Martin -- -- 48,425 18,375 $ 9,737 $ 873
Robert J. Riecke -- -- 51,625 18,375 $ 11,677 $ 873
John C. Stembridge -- -- 26,625 18,375 $ 790 $ 873
James R. Wilson -- -- 26,625 18,375 $ 790 $ 873
</TABLE>
(1) Based on the fair market value of the Common Stock at April 30, 1998 of
$1.5625 per share.
(2) Mr. Engel retired effective July 1, 1998.
(3) Options for 38,000 shares were exercised on August 29, 1997. The value
of the shares on said date was $2.97 per share. Options for 7,500
shares were exercised on September 9, 1997, with a stock value of $2.98
per share. Options for 23,000 shares were exercised on September 15,
1997, with a stock value of $2.78 per share. All option exercises were
at $1.50 per share.
Employment Agreements
- ---------------------
On May 27, 1998, the Company entered into Employment Agreements with
each of its executive officers, except Mr. Engel. The Company has agreed to
employ each officer until May 31, 1999. The agreement requires a lump sum
payment equal to 12 times the last monthly base salary plus the total amount of
any bonus compensation awarded in the last 12 months to a terminated officer in
the event that the officer is terminated for reasons other than cause prior to
May 31, 1999.
9
<PAGE>
Benefits
- --------
The Company maintains an Internal Revenue Code ("IRC") Section 401(k)
retirement savings plan under which employees, including executive officers, are
permitted to make salary deferral contributions. Executive officers are not
entitled to employer matching contributions pursuant to this plan.
Compensation of Directors
- -------------------------
Each of the Company's outside directors is paid an annual retainer of
$15,000 for attending up to six Board meetings, plus $750 for each additional
Board meeting or committee meeting attended and $225 for each telephone
conference meeting attended or written consent executed. Directors who are also
employees of the Company do not receive additional compensation for their
services as directors. In fiscal 1998, no outside directors received option
grants.
Executive Bonuses
- -----------------
Monthly discretionary bonuses are paid to the Company's executive
officers, as well as other management and administrative employees, pursuant to
the Company's profit sharing bonus plan. The bonuses are based upon net pretax
profits and are generally allocated according to base salary level. Bonuses paid
to executive officers for services rendered to the Company during the year ended
April 30, 1998 are included in the amounts shown in the "Summary Compensation
Table."
Stock Option Plan
- -----------------
In October 1996 the Company, after receiving shareholder approval,
implemented a Stock Option Plan ("1996 Option Plan") to supersede the 1986
Option Plan, which terminated in July 1996. The 1996 Option Plan permits the
granting of stock options to employees, directors, officers, consultants,
agents, advisors and independent contractors of the Company and its subsidiaries
Stock options granted under the 1996 Option Plan are non-qualified options which
do not meet the requirements of IRC Section 422.
Subject to adjustment from time to time as provided in the 1996 Option
Plan, a total of 525,000 shares of Common Stock has been reserved for issuance
under the 1996 Option Plan. The Board of Directors has reserved, subject to
shareholder approval, an additional 900,000 shares for issuance under the 1996
Option Plan. See Proposal No. 2 "Amendment to 1996 Option Plan to Increase
Number of Shares". As of July 31, 1998, an aggregate of 399,425 shares were
subject to outstanding stock options, and 125,575 shares were available for
grant. No options have been exercised under the 1996 Option Plan.
The 1996 Option Plan is administered by the Company's Board of
Directors. The Board may delegate the responsibility for administering the 1996
Option Plan to a committee or committees consisting of two or more members of
the Board of Directors, subject to such limitations as the Board deems
appropriate. Committee members will serve for such term as the Board may
determine, subject to removal by the Board at any time. The 1996 Option Plan
will terminate on the date determined by the Board of Directors, in its sole
discretion.
Board Compensation Committee Report on Executive Compensation
- -------------------------------------------------------------
The Compensation Committee is composed of two independent non-employee
directors, Mr. Christie and Mr. Wright.
The Compensation Committee is responsible for recommending to the full
Board of Directors, for its approval, the base compensation for all executive
officers. Executive officers who serve on the Company's Board of Directors do
not participate in any deliberations or decisions regarding their own
compensation. The Compensation Committee receives recommendations from the chief
executive officer regarding appropriate levels of base compensation for the
other executive officers, including executive officers who are directors.
10
<PAGE>
The Company's executive officer compensation policies are designed to attract,
motivate, and retain senior management by providing an opportunity for overall
competitive compensation based on an adequate base compensation amount and
participation in a profit-based bonus system in effect for all salaried
employees of the Company.
The profit sharing component of the overall compensation system is
designed to reward all salaried employees, including executive officers, in
relation to the Company's monthly performance and to encourage salaried
employees at all levels of the Company to work together for the common goal of
maximizing profits. Salaried employees at the WTD corporate level (including all
executive officers) receive 10% of monthly consolidated pre-tax profits,
allocated according to base salary level.
It is the Company's practice to participate in and use, as a basis for
comparison, an analysis of executive compensation in the Northwest prepared by
the compensation consulting group of Milliman & Robertson, Inc. This analysis is
useful in establishing base salary levels and monitoring overall compensation
levels as compared to other publicly-traded companies of similar size. Executive
officers' compensation paid during fiscal year 1998, with respect to base
salary, cash bonus, and total cash compensation, was below the median levels
published in the 1997/1998 Milliman & Robertson compensation survey of all
industries.
The Company also uses long-term stock-based incentive opportunities in
the form of options to purchase the Company's Common Stock. The Company's 1996
Option Plan provides for the grant of stock options to employees of the Company.
Stock option awards are determined on a discretionary basis by the Board of
Directors. Executive officers who serve on the Company's Board of Directors do
not participate in any deliberations or decisions regarding option awards to
them. The Committee believes that stock-based performance compensation
arrangements are beneficial in aligning management's and shareholders' interests
in the advancement of shareholder value.
No option grants were made to executive officers during the 1998 fiscal
year.
WTD provides the same group life and health insurance coverage to
executive officers as other employees and requires all employees, including
executive officers, to pay approximately 25% of health insurance premiums by
payroll deduction.
The Company allows its executive officers, and all other employees, to
contribute a percentage of their compensation to the Company-sponsored 401(k)
Retirement Savings Plan. Executive officers and other salaried employees are not
generally entitled to matching contributions.
Neither the executive officers nor other employees are covered by any
other Company-sponsored retirement plans.
All of the policies described above apply to Mr. Engel's compensation.
No additional benefits or requirements specifically apply to the chief executive
officer.
No option grants were made to Mr. Engel during the 1998 fiscal year.
Mr. Engel's base salary for fiscal year 1998 was $300,000. The median
base salary for chief executive officers of comparably sized public companies,
as published by the Milliman & Robertson compensation survey, is $301,634.
Mr. Engel received a cash bonus of $68,300 during fiscal 1998 under the
profit sharing plan described above, reflecting profitable operations during the
first part of the fiscal year. Mr. Engel's cash bonus and total cash
compensation amounts were below the published median levels, which were $143,590
and $400,000, respectively.
11
<PAGE>
Mr. Engel retired effective July 1, 1998.
Compensation Committee Members
Scott Christie
William H. Wright
12
<PAGE>
Stock Performance Graph
- -----------------------
[GRAPH]
<TABLE>
<CAPTION>
Base
Period Return Return Return Return Return
Company/Index Name April 1993 April 1994 April 1995 April 1996 April 1997 April 1998
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
WTD Industries, Inc. 100 108.89 62.23 24.43 64.44 55.55
S&P 500 Index 100 105.32 123.72 161.09 201.58 284.36
Paper & Forest Products-500 100 100.42 120.75 135.81 135.40 172.22
</TABLE>
13
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table shows beneficial ownership as of July 2, 1998 of
the Company's Common Stock by (i) each director, (ii) each beneficial owner of
more than 5 percent of the Common Stock, (iii) the Named Executive Officers, and
(iv) all directors and officers as a group. Except as otherwise specifically
noted, each person noted below has sole investment and voting power with respect
to shares indicated.
<TABLE>
<CAPTION>
Amount and Nature
Name and Address of Beneficial Owner of Beneficial Ownership(1)(2) Percent
------------------------------------------- ----------------------------- -------
<S> <C> <C>
Quinault Corporation
P.O. Box C 3,261,600 29.2%
Aberdeen, WA 98570
Amount and Nature
Name of Directors and Executive Officers of Beneficial Ownership(2)(3) Percent
------------------------------------------- ----------------------------- -------
Larry G. Black(4) 3,261,600 29.2%
Scott Christie 78,750 .7%
Richard W. Detweiler 40,000 .4%
K. Stanley Martin 58,425 .5%
Robert J. Riecke 51,625 .5%
John C. Stembridge 27,925 .2%
James R. Wilson(5) 26,725 .2%
William H. Wright 78,750 .7%
All directors and executive officers as a group (9
persons) 3,644,425 31.6%
=============================================================================================
</TABLE>
(1) As determined by reference to the beneficial owner's most recent Form 4
or 13D filing.
(2) Beneficial Ownership is calculated as of July 2, 1998.
(3) Includes shares reserved for issuance under options exercisable within
60 days of July 2, 1998 as follows: Mr. Christie 78,750; Mr. Detweiler
40,000; Mr. Martin 48,425; Mr. Riecke 51,625; Mr. Stembridge 26,625;
Mr. Wilson 26,625; and Mr. Wright 78,750.
(4) Mr. Black, by virtue of being president and sole director of Quinault,
is deemed to beneficially own the shares owned by Quinault.
(5) Includes 100 shares with respect to which Mr. Wilson shares voting and
investment power with his spouse, Christine R. Wilson.
14
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During fiscal 1998, five of the Company's subsidiaries purchased logs
from Quinault Logging Company in the amount of approximately $2.1 million. Mr.
Larry G. Black, a director of the Company, is chief executive officer and a
director of Quinault Logging Company and is president and sole director of
Quinault which owns of approximately 29% of the Company's common stock.
The Company, Bruce L. Engel, Quinault and Larry G. Black entered into
an agreement dated as of June 10, 1997 (the "Agreement"). Pursuant to the terms
of the Agreement, the Company and Mr. Engel will have the right of first refusal
with respect to any shares of the Company's Common Stock sold by Quinault prior
to June 15, 1999. In addition, Quinault granted Mr. Engel an option to purchase
shares of the Company's Common Stock such that the amount of the Company's
Common Stock owned by Mr. Engel and his affiliates will equal the number of
shares owned by Quinault, Mr. Black and their affiliates. Pursuant to the
Agreement, Quinault, Mr. Black and their affiliates may not, without the prior
written consent of the Company's Board, act in a manner that would result in the
liquidation, sale, merger or other combination of the Company. Pursuant to the
Agreement the Company nominated Mr. Black for election as a director at the
Company's 1997 Annual Meeting of Shareholders. The Agreement restricts the
Company from taking certain actions to dilute Quinault's holdings. Pursuant to
the Agreement, the Company recommended the removal of certain voting
restrictions placed on Quinault pursuant to ORS 60.801--816 (the "Control Share
Restrictions") at the 1997 Annual Meeting of Shareholders.
DISCRETIONARY AUTHORITY
While the Notice of Annual Meeting of Shareholders provides for the
transaction of such other business as may properly come before the meeting, the
Board of Directors has no knowledge of any matters to be presented at the
meeting other than those referred to above. However, the enclosed proxy gives
discretionary authority in the event that any other matters should be presented.
For any shareholder proposal received after August 3, 1998, the enclosed proxy
card gives the proxies discretionary authority with respect to any such
shareholder proposal.
SHAREHOLDER PROPOSALS
Any shareholder proposals to be considered for inclusion in proxy
material for the Company's September 1999 annual meeting must be received at the
principal executive offices of the Company not later than April 11, 1999.
THE COMPANY WILL PROVIDE, WITHOUT CHARGE, ON THE WRITTEN REQUEST OF ANY
BENEFICIAL OWNER OF SHARES OF THE COMPANY'S COMMON STOCK ENTITLED TO VOTE AT THE
ANNUAL MEETING OF SHAREHOLDERS, A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM
10-K AS FILED WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION FOR THE COMPANY'S
FISCAL YEAR ENDED APRIL 30, 1998. WRITTEN REQUESTS SHOULD BE MAILED TO THE
SECRETARY, WTD INDUSTRIES, INC., P.O. BOX 5805, PORTLAND, OREGON 97228.
By Order of the Board of Directors
Robert J. Riecke
Secretary
September , 1998
15
<PAGE>
Appendix A
AMENDMENT DATED AUGUST 7, 1998
TO
WTD INDUSTRIES, INC.
1996 STOCK OPTION PLAN
The WTD Industries, Inc. 1996 Stock Option Plan (the "Plan") is hereby
amended as follows: Section 4.1 of the Plan is amended to read as follows:
4.1 Authorized Number of Shares.
Subject to adjustment as provided in Section 9.1, a
maximum of 1,425,000 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.
The effective date of such amendment shall be August 7, 1998, the date
of the adoption of such amendment by the Board of Directors of the corporation,
unless the shareholders of the corporation fail to approve such amendment.
16
<PAGE>
WTD INDUSTRIES, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS
ANNUAL MEETING
OCTOBER 26, 1998
The undersigned, revoking all prior proxies, hereby appoints Robert J.
Riecke and K. Stanley Martin, and each of them, as proxies, with full power of
substitution, to vote on behalf of the undersigned at the Annual Meeting of
Shareholders of WTD Industries, Inc. (the "Company") to be held on Monday,
October 26, 1998, or at any adjournments thereof, all shares of the undersigned
in the Company. The proxies are instructed to vote as indicated on the reverse
hereof.
The shares represented by this proxy will be voted in accordance with
the instructions given.
This proxy is solicited on behalf of the Company's Board of Directors.
The Board of Directors recommends a vote FOR all the Nominees and FOR the
Proposals.
This proxy when properly executed will be voted as directed or, if no
direction is given, the shares will be voted for the Nominees, for the
Proposals, and on any other business that may properly come before the meeting
or any adjournments thereof in accordance with the recommendations of
management.
(Continued and to be signed on other side)
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
WTD INDUSTRIES, INC.
ANNUAL MEETING OF SHAREHOLDERS
TIGARD COURTYARD MARRIOTT
15686 SW SEQUOIA PARKWAY
TIGARD, OREGON
MONDAY, OCTOBER 26, 1998
10:00 A.M. PACIFIC TIME
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
1. ELECTION OF DIRECTORS Nominees: Richard W. Detweiler 4. PROPOSAL TO RATIFY THE APPOINTMENT
William H. Wright OF MOSS ADAMS LLP AS INDEPENDENT
AUDITORS
FOR all WITHHOLD
the AUTHORITY (To withhold your vote for any individual
nominees to vote nominees, strike a line through the FOR AGAINST ABSTAIN
listed for all nominee's name in the list above.)
(except as nominees
marked to listed ----- ------- -------
the
contrary)
------- -------
2. PROPOSAL TO APPROVE AMENDMENT TO THE COMPANY'S STOCK OPTION I plan to attend
PLAN TO INCREASE NUMBER OF SHARES the meeting
FOR AGAINST ABSTAIN
----- ------- ------- -------
3. PROPOSAL TO APPROVE AMENDMENT TO ARTICLES OF INCORPORATION TO
CHANGE COMPANY NAME TO TREESOURCE INDUSTRIES, INC.
FOR AGAINST ABSTAIN
----- ------- -------
Please sign exactly as your name
appears on this card. Persons signing
as executor, administrator, trustee,
guardian or in any other official or
representative capacity should sign
their full title.
Date:
,1998
--------------------
--------------------------------------
Signature(s)
--------------------------------------
Please mark, date, sign and return the
proxy promptly.
</TABLE>
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
WTD INDUSTRIES, INC.
ANNUAL MEETING OF SHAREHOLDERS
TIGARD COURTYARD MARRIOTT
15686 SW SEQUOIA PARKWAY
TIGARD, OREGON
MONDAY, OCTOBER 26, 1998
10:00 A.M. PACIFIC TIME
