LINCOLN LOGS LTD.
Riverside Drive
Chestertown, New York 12817
____________________
NOTICE OF THE ANNUAL MEETING
OF SHAREHOLDERS
June 19, 1996
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
Gideon Putnam Hotel, Saratoga Spa State Park, Saratoga Springs, New York, on
Wednesday, June 19, 1996, at 11:00 a.m., local time, for the following
purposes:
1.To elect a Board of Directors of six directors to serve until the next
Annual Meeting of Shareholders and until their successors are duly elected
and qualified;
2.To approve the appointment of KPMG Peat Marwick LLP as independent
auditors for the Company for the fiscal year ending January 31, 1997; and
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 share-
holders of record at the close of business on May 6, 1996 will be entitled to
notice of and to vote at the Meeting.
By Order of the Board of Directors
Carole P. Hart,
Assistant Secretary
May 16, 1996
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 insure
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.
LINCOLN LOGS LTD.
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 June 19, 1996, 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 May 17, 1996. The expense of
soliciting proxies will be borne by the Company.
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. If no direction is made, executed
proxies will be voted for the election of each of the six management
nominees for election as directors and for the approval of the appointment
of KPMG Peat Marwick LLP as independent auditors for the Company. 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 Assistant 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 May 6, 1996 will be
entitled to vote at the Meeting. On May 6, 1996, there were outstanding
1,039,694 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
Current Board of Directors
The directors of the Company, each of whom was elected by the shareholders
to serve as a director at the Annual Meeting of Shareholders which took
place on June 28, 1995, and is currently serving a term which will expire at
the Annual Meeting of Shareholders which will take place on June 19, 1996,
are as follows:
Year first Position with the
elected a Company (other than
Name of Director Age Director as a Director)
Leslie M. Apple 46 1982 Special Administrative
Assistant to the President
Susan M. Considine 38 1986 Special Administrative
Assistant to the President
Richard C. Farr 67 1982 Chairman of the Board;
President and Chief Executive
Officer; Treasurer
Samuel J. Padula 72 1985 Special Administrative
Assistant to the President
Reginald W. Ray, Jr. 66 1982 Special Administrative
Assistant to the President
John D. Shepherd 50 1982 Special Administrative
Assistant to the President
Business Experience
Leslie M. Apple has been a practicing attorney with the Albany, New York law
firm of Whiteman Osterman & Hanna since January 1995. Prior to joining this
firm, Mr. Apple practiced law with Apple, Honen, Sims & Wood, P.C., Albany,
New York, since founding that firm in August 1985. Since January 1987, Mr.
Apple has been a Special Administrative Assistant to the President.
Susan M. Considine has owned and operated her own retail store since March
1992. Ms. Considine was Executive Vice President of the Company from June
1990 to March 1992 and Assistant Secretary from January 1987 to March 1992,
at which time she resigned from those positions to start her own business.
Prior to her promotion to the position of Executive Vice President, Ms.
Considine was Vice President, Customer and Dealer Service, which position
she held from April 1987 to June 1990. From January 1987 to April 1987, Ms.
Considine was Vice President, Distributor Development. From September 1984,
when she joined the Company, to January 1987, Ms. Considine was employed by
the Company in various administrative capacities. Since March 1992, Ms.
Considine has been a Special Administrative Assistant to the President. Ms.
Considine is the daughter of Richard Considine, formerly a director of the
Company until his resignation from the Board in May 1993 and formerly the
President and Chief Executive Officer of the Company, from which positions
he resigned in December 1991. Ms. Considine is the sister of Barbara J.
Durkish, Vice President, Communications and Assistant Secretary of the
Company.
Richard C. Farr has been Chairman of the Board of the Company since January
1990 and President and Chief Executive Officer and Treasurer of the Company
since December 1991. 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. From January 1987
to December 1991, Mr. Farr was a Special Administrative Assistant to the
President.
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.
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 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, Mr. Shepherd has been a Special Administrative Assistant
to the President.
No director of the Company or nominee for director (see "Nominees for
Election" below) 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
director of the Company or 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 director of the Scottish Widows
International Fund and the Advantage Mutual Bond Fund.
The Board of Directors has established an Audit Committee, a Compensation
Committee and a Strategy Committee. The Audit Committee, whose function is
to oversee the Company's financial reporting systems, consists of Messrs.
Apple and Padula, and Ms. Considine. The Compensation Committee, whose
function is to review and make recommendations to the Board on executive
compensation, consists of Messrs. Padula, Ray and Shepherd. The Strategy
Committee, whose function is to make recommendations to the Board on the
future business direction of the Company, consists of Messrs. Apple, Ray and
Shepherd. No meetings of the above committees were held during the past
fiscal year. The Company does not have a standing nominating committee or
any committee performing a similar function.
Six 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, except for Mr. Apple, who attended four of
the six meetings.
Nominees for Election
Shares represented by the enclosed proxy, unless otherwise directed, will be
voted to elect the six nominees listed below to serve until the 1997 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 and to serve as a director if elected. 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
elected a Company (other than
Name of Director Age Director as a Director)
Leslie M. Apple 46 1982 Special Administrative
Assistant to the President
Susan M. Considine 38 1986 Special Administrative
Assistant to the President
Richard C. Farr 67 1982 Chairman of the Board;
President and Chief Executive
Officer; Treasurer
Samuel J. Padula 72 1985 Special Administrative
Assistant to the President
Reginald W. Ray, Jr. 66 1982 Special Administrative
Assistant to the President
John D. Shepherd 50 1982 Special Administrative
Assistant to the President
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 is currently serving a one-year term, are as
follows:
Name Age Office(s)
Richard C. Farr 67 Chairman of the Board, President
and Chief Executive Officer;
Treasurer
Barbara J. Durkish 35 Vice President, Communications;
Assistant Secretary
Carole P. Hart 54 Assistant Secretary
Peter M. Hart 56 Vice President, Planning, Customer
Satisfaction and Quality Assurance
John W. Naftzger 55 Vice President, Marketing and Sales
John F. Schumaker 49 Vice President, Design and
Engineering
Richard C. Farr has been Chairman of the Board of the Company since January
1990 and President, Chief Executive Officer and Treasurer of the Company
since December 1991. 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.
Barbara J. Durkish has been Vice President, Communications of the Company
since July 1987 and Assistant Secretary since June 1992. Ms. Durkish has
served in several capacities since she joined the Company in 1979, including
Vice President, Consumer Affairs from February 1983 to July 1987, and
Secretary of the Company from February 1983 to June 1992. Ms. Durkish is
the daughter of Richard Considine, formerly a Director of the Company until
his resignation from the Board in May 1993 and formerly the President and
Chief Executive Officer of the Company, from which positions he resigned in
December 1991. Barbara J. Durkish is the sister of Susan M. Considine, a
director of the Company.
Carole P. Hart has been Assistant Secretary of the Company since June, 1995.
Prior to her promotion to her current position, Ms. Hart was Senior Staff
Administrator, a position she held since joining the Company in April 1994.
Prior to joining the Company, Ms. Hart was employed by New England Log
Homes, Inc. as the Senior Staff Administrator from January 1981 to January
1994. Ms. Hart is the wife of Peter M. Hart, Vice President, Planning,
Customer Satisfaction and Quality Assurance of the Company.
Peter M. Hart has been Vice President, Planning, Customer Satisfaction and
Quality Assurance since March 1995. Prior to his promotion to his current
position, Mr. Hart was General Manager, Western Region, a position he held
since joining the Company in April 1994. Prior to joining the Company, Mr.
Hart was employed by New England Log Homes, Inc. from August 1980 to January
1994, where he had served as Senior Vice President and Director of Marketing
since 1986. Mr. Hart is the husband of Carole P. Hart, Assistant Secretary
of the Company.
John W. Naftzger has been Vice President, Marketing and Sales since August
1993. Prior to his promotion to his present position, Mr. Naftzger was
Director of Marketing and Sales, a position he held from May 1992, when he
joined the Company, until his most recent promotion in August 1993. Prior
to joining the Company, Mr. Naftzger was President of J. Naftzger
Communications, a consulting firm, from January 1989 to May 1992.
John F. Schumaker has been Vice President, Design and Engineering since
August 1993. Prior to his promotion to his present position, Mr. Schumaker
was Director of Design and Engineering for the Company from May 1990 to
August 1993. Mr. Schumaker began his career with the Company in November
1983 as a drafter.
Marjory B. Moeller, CPA, Vice President, Finance of the Company since
October 1994, retired from her position at the Company effective as of May
3, 1996. A replacement for Ms. Moeller will be elected at the Annual
Meeting of the Board of Directors of the Company to be held on June 19,
1996.
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 $100,000 for services
rendered in all capacities to the Company and its subsidiaries during the
fiscal year ended January 31, 1996.
Summary Compensation Table
Long Term Compensation
Annual Compensation Awards Payouts
- ---------------------------------------------------------------------------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
All
Other
Other Restric- Op- LTIP Comp-
Name and Annual ted Stock tions/ Pay- ensa-
Principal Salary Bonus Compen- Award(s) SARs outs tion
Position Year ($) ($) sation ($) (#) ($) ($)
- ---------------------------------------------------------------------------
Richard C. 1996 0.00 0.00 98,238.00 0.00 0 0.00 0.00
Farr Chief 1995 0.00 0.00 100,294.00 0.00 0 0.00 0.00
Executive 1994 0.00 0.00 29,840.00 0.00 0 0.00 0.00
Officer
- ---------------------------------------------------------------------------
Since becoming President and Chief Executive Officer in December 1991, Mr.
Farr has not received any base salary or bonus for serving the Company in
those capacities. For the period since January 1990, Mr. Farr has not
received any base salary or bonus for serving as Chairman of the Board. Mr.
Farr did receive compensation for serving as director during the fiscal
years ended January 31, 1996, 1995 and 1994, on the same basis as that
received by other directors (see "EXECUTIVE COMPENSATION - Compensation of
Directors"). During the fiscal year ended January 31, 1996, and for each of
the three previous fiscal years, Mr. Farr has periodically advanced funds to
the Company to assist the Company in meeting operating needs. It is
anticipated that the Company will repay these advances when its cash
position enables it to do so.
No executive officer of the Company received annual salary and bonus
exceeding $100,000 during the fiscal year ended January 31, 1996.
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-seven of the
Company's employees are currently eligible to participate in the Plan,
nineteen of whom have elected to participate. Employees
participating in the Plan may elect to defer compensation up to the maximum
permitted by the Internal Revenue Code. The Company contributes, on behalf
of each participating employee, a percentage amount determined annually by
the Company based upon the profits of the Company. Aggregate annual
additions on behalf of any employee may not exceed the lesser of 25% of such
employee's compensation for any given year or $7,000 (as adjusted for
increases in the cost of living as prescribed by regulation by the Secretary
of the Treasury, $9,500 for the 1996 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 continue to vest at
the rate of an additional 20% over each of the following four years of
employment.
During the fiscal years ended January 31, 1996, 1995 and 1994, $6,972,
$98,685 and $170,115, respectively, were paid to employees of the Company
pursuant to the Plan.
Stock Option Plan
The Company has in effect a Stock Option Plan (the "Option Plan") which
permits the granting of incentive stock options to key employees to purchase
up to 132,840 shares of the Company's Common Stock in accordance with the
requirements imposed by the Internal Revenue Code. The Option 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 eligible to receive incentive stock
options. As required by the applicable provisions of the Internal Revenue
Code, the exercise price of incentive stock options granted under the Option
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.
During the fiscal year ended January 31, 1996, no incentive stock options to
purchase shares of the Company's Common Stock were granted to any key
employees and no incentive stock option previously granted under the Option
Plan have been exercised through the date hereof.
The Option Plan also permits the Board of Directors (or the committee which
administers the Option Plan), in addition to granting options to key
employees intended to qualify as "incentive stock options" under the
Internal Revenue Code, to grant stock options which are not intended to
qualify as "incentive stock options" to key employees of the Company and
directors who are not employees of the Company. 151,000 shares of the
Company's Common Stock are reserved for issuance under 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, the exercise price to be paid by the
optionee for the shares purchasable upon exercise of 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).
During the fiscal year ended January 31, 1996, there were no "non-qualified
stock options" issued to any key employees or directors and no
"non-qualified stock options" previously granted under the Option Plan have
been exercised through the date hereof.
Compensation of Directors
Each director is compensated for his or her services in the amount of $5,000
per year (which amount was reduced during the past fiscal year to $4,438, in
accordance with the Company's compensation "set-aside" program, pursuant to
which directors, officers and certain other employees of the Company have
agreed to forego a percentage of their respective compensation), 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. Those directors who do not require
health insurance are eligible for other benefits (such as tax preparation by
a financial planning service designated by the Company) of comparable value.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Descriptions 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.
In August 1984, the Company granted a below-market mortgage loan to Barbara
J. Durkish, a Vice President and the Assistant Secretary of the Company, in
the amount of $90,000, repayable with interest at the rate of 6% per annum
in equal monthly installments over a 35-year period. The outstanding
balance of said loan as of January 31, 1996 and January 31, 1995 was $77,615
and $79,069, respectively.
The Company paid the law firm of Whiteman Osterman & Hanna, of which Leslie
M. Apple, a director of the Company, is a principal, a total of $14,666 for
legal services rendered during the past fiscal year. The Company also paid
the law firm of Apple, Honen, Sims & Wood, P.C., of which Mr. Apple was a
principal prior to joining Whiteman Osterman & Hanna, a total of $7,107 for
legal services rendered during the past fiscal year. The Company believes
the services provided to it by the law firms of Whiteman Osterman & Hanna
and Apple, Honen, Sims & Wood, P.C. were provided to it at a cost comparable
to that which the Company would have been required to pay for comparable
services from an unaffiliated third party.
Richard Considine, the Company's founder, was a party to a ten-year
employment agreement with the Company dated as of March 12, 1986 (the
"Employment Agreement"). By mutual agreement between Mr. Considine and the
Company, Mr. Considine retired from all positions he held with the Company,
including his directorship, effective May 1, 1993. In settlement of their
mutual obligations under the Employment Agreement, the Company and Mr.
Considine entered into a Stock Purchase, Deferred Compensation, Retirement
and Loan Agreement dated as of May 21, 1993 (the "Retirement Agreement").
Under the terms of the Retirement Agreement, the Company has agreed, among
other things, to repurchase the shares of the Company's Common Stock held by
Mr. Considine and/or members of his family in four installments, to pay Mr.
Considine certain deferred compensation which had accrued under the
Employment Agreement, and to provide Mr. Considine with certain life and
health insurance benefits. In addition to retiring from all positions held
by him on the effective date of the Retirement Agreement, Mr. Considine
agreed to enter into a non-competition agreement with the Company whereby
Mr. Considine agreed not to compete with the Company for a fixed period of
time not to extend beyond March 12, 1996. Mr. Considine and members of his
family who held shares on the effective date of the Retirement Agreement
also entered into a Shareholder Voting Agreement with the Company dated as
of May 21, 1993. Pursuant to the terms of the Shareholder Voting Agreement,
Mr. Considine and the members of his family, who were a party to the
agreemen, agreed to vote their shares of the Company's Common Stock in
accordance with the direction of Mr. Richard C. Farr, the Company's
Chairman, President, Chief Executive Officer and Treasurer, or the
then-current Chairman of the Board. The total liability related to the
Retirement Agreement was $747,689, of which $281,805 related to the
redemption of 375,740 shares of Company Common Stock and $465,884 related to
accrued deferred compensation and other post-employment benefits.
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 Common Stock owned by each such person.
Number of Shares Percent of
of Common Stock Outstanding Common
of the Company Stock of the
Name and Address Beneficially Owned Company Beneficially
of Beneficial Owner as of May 15, 1996 Owned as of May 15, 1995
Richard C. Farr 1,075,802 (1) 22.6%
40 Colony Road
W. Hartford, CT 06117
Austin W. Marxe 1,127,500 (2) 23.7%
153 East 53rd Street
New York, NY 10022
Eleanor Padula 265,703 (3) 5.6%
6 Leeward Court
Oceanport, NJ 07757
Samual J. Padula 275,140 (4) 5.8%
6 Leeward Court
Oceanport, NJ 07757
John D. Shepherd 1,141,961 (5) 24.0%
1020 Sport Hill Road
Easton, CT 06612
Special Situations 912,000 (6) 19.2%
Fund III, L.P.
153 East 53rd Street
New York, NY 10022
(1)Includes (i) 40,000 shares subject to options which are exercisable
within 60 days, and (ii) 1,000,000 shares subject to the Company's
Convertible Subordinated Debentures which are convertible within 60 days.
(2)Includes (i) 162,000 shares owned by Special Situations Fund III, L.P.,
(ii) 750,000 shares subject to the Company's Convertible Subordinated
Debentures held by Special Situations Fund III, L.P. which are convertible
within 60 days, (iii) 5,000 shares owned by Special Situations Cayman Fund,
L.P., and (iv) 200,000 shares subject to the Company's Convertible
Subordinated Debentures which are convertible within 60 days. Certain
information regarding Mr. Marxe, Special Situations Fund III, L.P. and
Special Situations Cayman Fund, L.P. is based on information set forth in
the Schedule 13G for the period ended December 31, 1995, filed with the
Securities and Exchange Commission on behalf of Mr. Marxe and the various
funds with which he is affiliated.
(3)Includes (i) 250,000 shares subject to the Company's Convertible
Subordinated Debentures which are convertible within 60 days, and (ii) 2,100
shares owned jointly by Mrs. Padula with her husband, Mr. Samual J. Padula,
a director of the Company, with whom Mrs. Padula shares voting and
investment power; excludes 23,040 shares, of which 20,000 are subject to
options which are exercisable within 60 days, held by Mr. Padula, as to
which Mrs. Padula disclaims beneficial ownership.
(4)Includes (i) 20,000 shares subject to options which are exercisable
within 60 days, (ii) 2,100 shares owned jointly by Mr. Padula with his wife,
Mrs. Eleanor Padula, with whom Mr. Padula shares voting and investment
power, and (iii) 250,000 shares subject to the Company's Convertible
Subordinated Debentures held by Mrs. Padula which are convertible within 60
days; excludes 13,603 shares held by Mrs. Padula, as to which Mr. Padula
disclaims beneficial ownership.
(5)Includes (i) 20,000 share subject to options which are exercisable
within 60 days, and (ii) 1,000,000 shares subject to the Company's
Convertible Subordinated Debentures which are convertible within 60 days.
(6)Includes 750,000 shares subject to the Company's Convertible Subordinated
Debentures which are convertible within 60 days. Special Situations Fund
III, L.P. is the successor to Special Situations Fund, L.P. Information
regarding Special Situations Fund III, L.P. is based on information set
forth in the Schedule 13G for the period ended December 31, 1995, filed with
the Securities and Exchange Commission on behalf of Special Situations Fund
III, L.P. and other affiliated Reporting Persons.
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
securities.
Number of Shares Percent of
of Common Stock of Outstanding Common
the Company Bene- Stock of the Company
ficially Owned as of Beneficially Owned as of
Name as of May 6, 1996 as of May 6, 1996
Leslie M. Apple 147,104 (1)(2)(3) 3.1%
Susan M. Considine 20,000 (1) 0.4%
Richard C. Farr 1,075,802 (4) 22.6%
Samuel J. Padula 275,140 (1)(5) 5.8%
Reginald W. Ray, Jr. 198,802 (1)(3)(6) 4.2%
John D. Shepherd 1,141,961 (1)(7) 24.0%
All officers and 2,873,809 (8) 60.5%
directors as a group
(11 persons)
(1)Includes 20,000 shares subject to options which are exercisable within 60
days.
(2)Includes 1,000 shares owned by Leslie M. Apple, P.C., a law firm of which
Mr. Apple is principal.
(3)Includes 125,000 shares subject to the Company's Convertible Subordinated
Debentures which are convertible within 60 days.
(4)Includes (i) 40,000 shares subject to options which are exercisable
within 60 days, and (ii) 1,000,000 shares subject to the Company's
Convertible Subordinated Debentures which are convertible within 60 days.
(5)Includes (i) 2,100 owned jointly by Mr. Padula with his wife, Mrs.
Eleanor Padula, with whom Mr. Padula shares voting and investment power, and
(ii) 250,000 shares subject to the Company's Convertible Subordinated
Debentures held by Mrs. Padula which are convertible within 60 days;
excludes 13,603 shares held by Mrs. Padula, as to which Mr. Padula disclaims
beneficial ownership.
(6)Excludes 12,702 shares owned by Mr. Ray's wife, as to which Mr. Ray
disclaims beneficial ownership.
(7)Includes 1,000,000 shares subject to the Company's Convertible
Subordinated Debentures which are convertible within 60 days.
(8)Includes a total of (i) 155,000 shares subject to options which are
exercisable within 60 days, and (ii) 2,500,000 shares subject to the
Company's 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.
SECTION 16(A) REPORTS
Section 16(a) of the Securities Exchange Act of 1934 requires the
Corporation's directors and officers, and the persons who own more than ten
percent of a registered class of the Corporation's equity securities, to
file on Forms 3, 4 and 5, reports of ownership and changes in ownership of
such securities with the Securities and Exchange Commission. Mr. John
Shepard was late in filing one Form 4 and one Form 5 to report a purchase of
11,602 shares of the Company's Common Stock. Mr. Reginald W. Ray, Jr. was
late in filing one Form 4 and one Form 5 to report a purchase of 11,602
shares of the Company's Common Stock.
PROPOSAL NO. 2
APPROVAL OF INDEPENDENT AUDITORS
Subject to approval of the Company's shareholders, the Board of Directors
has decided that KPMG Peat Marwick LLP, which firm has been the independent
certified public accountants of the Company since 1987, be continued as
auditors for the Company. The shareholders are being asked to approve the
Board's decision to retain KPMG Peat Marwick LLP for the fiscal year ending
January 31, 1997.
A representative of KPMG Peat Marwick 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 KPMG PEAT MARWICK LLP AS INDEPENDENT AUDITORS FOR THE COMPANY
FOR THE FISCAL YEAR ENDING JANUARY 31, 1997.
ANNUAL REPORT
A copy of the Company's Annual Report for the fiscal year ended January 31,
1996 accompanies this Proxy Statement, but does not constitute a part of the
proxy solicitation 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,
1996, INCLUDING THE FINANCIAL STATEMENTS THEREIN, BY WRITTEN REQUEST
ADDRESSED TO CAROLE P. HART, ASSISTANT SECRETARY, LINCOLN LOGS LTD.,
RIVERSIDE DRIVE, CHESTERTOWN, NEW YORK 12817. ANY SUCH REQUEST FROM A
BENEFICIAL OWNER OF STOCK NOT REGISTERED IN HIS NAME MUST CONFIRM THAT HE
WAS A BENEFICIAL OWNER OF SUCH STOCK ON MAY 6, 1996.
SHAREHOLDER PROPOSALS
Proposals of shareholders intended to be presented at the next annual
meeting of shareholders to be held in 1997 must be received by the Company
at Riverside Drive, Chestertown, New York 12817 on or before January 17,
1997.