<PAGE>
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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
SEATTLE FILMWORKS
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act 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:
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(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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Notes:
<PAGE>
SEATTLE FILMWORKS, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
WEDNESDAY, FEBRUARY 12, 1997
To the Shareholders of
SEATTLE FILMWORKS, INC.:
Notice is hereby given that the Annual Meeting of Shareholders of SEATTLE
FILMWORKS, INC. (the "Company") will be held at 10:00 a.m. local time on
Wednesday, February 12, 1997, at The Four Seasons Hotel, Metropole Room, 411
University Street, Seattle, Washington 98101, for the following purposes:
1. To consider and act upon a proposal to amend the Company's Restated
Articles of Incorporation to establish a classified Board of Directors and to
provide for removal of directors only for cause, all as more fully described in
the accompanying Proxy Statement.
2. To elect five (5) Directors.
3. To consider and vote upon such other business as may properly come
before the meeting.
Shareholders of record on the books of the Company at the close of business
on December 6, 1996, will be entitled to notice of and to vote at the meeting
and any adjournment thereof.
By Order of the Board of Directors
//s// Mich Kele Earl
Mich Kele Earl
Secretary
1260 - 16th Avenue W.
Seattle, Washington 98119
December 31, 1996
________________________________________________________________________________
YOUR VOTE IS IMPORTANT
======================
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON, PLEASE SIGN,
DATE AND RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED STAMPED ENVELOPE. THE
GIVING OF THE PROXY WILL NOT AFFECT YOUR RIGHT TO VOTE AT THE MEETING IF THE
PROXY IS REVOKED IN THE MANNER SET FORTH IN THE ACCOMPANYING PROXY STATEMENT.
________________________________________________________________________________
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<PAGE>
SEATTLE FILMWORKS, INC.
1260 - 16TH AVENUE WEST
SEATTLE, WASHINGTON 98119
PROXY STATEMENT
INFORMATION REGARDING PROXIES
This proxy statement and the accompanying form of proxy are furnished in
connection with the solicitation of proxies by the Board of Directors of SEATTLE
FILMWORKS, INC. (the "Company") for use at the annual meeting of shareholders to
be held on Wednesday, February 12, 1997, at 10:00 a.m. local time at the Four
Seasons Hotel, Metropole Room, 411 University Street, Seattle, Washington 98101
and at any adjournment or adjournments thereof. Only shareholders of record on
the books of the Company at the close of business on December 6, 1996 (the
"Record Date") are entitled to notice of and to vote at the meeting. It is
anticipated that these proxy solicitation materials and a copy of the Company's
1996 Annual Report to Shareholders will be first sent to shareholders on or
about December 31, 1996.
A proxy in the accompanying form which is properly signed, dated and
returned and not revoked will be voted in accordance with the instructions
contained therein. To vote on the approval to amend the Company's Restated
Articles of Incorporation, check the appropriate box under Item No. 1. You may
(a) vote "FOR" the proposal, (b) vote "AGAINST" the proposal, or (c) "ABSTAIN"
from voting on the proposal. To vote on the election of directors, check the
appropriate boxes under Items No. 2 and No. 3 on your proxy card. You may (a)
vote for all of the director nominees as a group, (b) withhold authority to vote
for all director nominees as a group, or (c) vote for all director nominees as a
group except those nominees indicated to the contrary. Any shareholder executing
a proxy has the power to revoke it at any time prior to the voting thereof on
any matter (without, however, affecting any vote taken prior to such revocation)
by delivering written notice to the Secretary of the Company, by executing and
delivering to the Company another proxy dated as of a later date or by voting in
person at the meeting.
VOTING SECURITIES AND PRINCIPAL HOLDERS
The only voting securities of the Company are shares of Common Stock, $.01
par value (the "Common Stock"), each of which is entitled to one vote. At
December 6, 1996, the Record Date for the annual meeting, there were issued and
outstanding 10,841,580 shares of Common Stock of the Company. Under Washington
law, the Company's Restated Articles of Incorporation (the "Articles") and
Bylaws, (i) the affirmative vote of at least a majority of all outstanding
shares of the Company's Common Stock is required for approval of an amendment to
the Articles and (ii) if a quorum is present, the nominees for election to the
Board of Directors who receive the greatest number of affirmative votes cast for
election of directors shall be elected directors. Abstentions and broker non-
votes will be considered represented at the Annual Meeting for the purpose of
calculating a quorum and will have no effect on the election of directors.
However, abstentions and broker non-votes will have the practical effect of
votes "against" the proposal to amend the Articles because each such abstention
or broker non-vote represents one less vote in favor of such proposal. Proxies
and ballots will be received and tabulated by ChaseMellon Shareholder Services,
an independent business entity not affiliated with the Company.
The Company's Common Stock trades on the NASDAQ National Market tier of the
NASDAQ Stock Market under the symbol FOTO. The last sale price for the Common
Stock of the Company as reported by NASDAQ on December 6, 1996, was $20.50 per
share.
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<PAGE>
The following table sets forth information, as of November 30, 1996, with
respect to all shareholders known by the Company to be the beneficial owners of
more than five percent (5%) of its outstanding Common Stock. Except as noted
below, each person or entity has sole voting and investment powers with respect
to the shares shown.
<TABLE>
<CAPTION>
Amount and Nature Percent of
Name and Address of Beneficial Ownership (4) Class
- ------------------------------------- --------------------------- -----------
<S> <C> <C>
T. Rowe Price Associates, Inc. (1) 975,000 9.0%
T. Rowe Price Small Cap Fund, Inc.
100 East Pratt Street
Baltimore, MD 21202
Robert A. Simms (2) 841,500 7.8%
230 Park Avenue
New York, NY 10169
Gary Christophersen (3) 698,176 6.3%
1260 16th Avenue West
Seattle, WA 98119
</TABLE>
_____________________________________
(1) The holding shown is as of February 14, 1996, as reported by T. Rowe
Price Associates, Inc. ("Price Associates") in a Schedule 13G filed by
Price Associates pursuant to Rule 13d-1 under the Securities Exchange
Act of 1934, as amended (the "Exchange Act"). Price Associates has
indicated that these shares are held by it in its capacity as investment
advisor to various individual and institutional investors. According to
the Schedule 13G filed by Price Associates, it has sole dispositive
power, and T. Rowe Price Small Cap Fund, Inc. has sole voting power,
with respect to the shares.
(2) The holding shown is as of November 1, 1993 as reported by an amendment
to a Schedule 13D filed by Mr. Simms pursuant to Rule 13d-1 under the
Exchange Act.
(3) Includes options to purchase 222,080 shares of Common Stock granted
under the Company's 1987 Stock Option Plan which are presently
exercisable or exercisable within 60 days.
(4) All share data have been retroactively adjusted to reflect a three-for-
two stock split distributed on March 15, 1996.
ELECTION OF DIRECTORS
A Board of Directors, consisting of five directors will be elected at the
Annual Meeting with each director to serve until his successor is elected and
qualified.
If the proposed amendment to the Articles is approved by the Company's
shareholders, the Company's Board of Directors will be classified into three
approximately equal classes serving staggered three-year terms. See "Proposed
Amendment to Classify the Board of Directors."
The Board of Directors has unanimously approved the nominees named below,
all of whom are members of the current Board of Directors. Unless otherwise
instructed, it is the intention of the persons named in the accompanying form of
proxy to vote shares represented by properly executed proxies for the five
nominees of the Board of Directors named below. Although the Board of Directors
anticipates that all of the nominees will be available to serve as Directors of
the Company, should any one or more of them not accept the nomination, or
otherwise be unwilling or unable to serve, it is intended that the proxies will
be voted for the election of a substitute nominee or nominees designated by the
Board of Directors.
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<PAGE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH OF THE NOMINEES NAMED BELOW.
The following chart indicates ownership of the Company's Common Stock by
each director of the Company, each executive officer named in the compensation
tables appearing later in this Proxy Statement, and by all directors and
executive officers as a group, all as of November 30, 1996.
<TABLE>
<CAPTION>
Amount and Nature
of Beneficial Percent of
Nominees: Age Ownership Class
- ----------------------------- --------------------- -------------------- -------------------------
<S> <C> <C> <C>
Gary R. Christophersen (1) 50 698,176 6.3%
Sam Rubinstein (2) 79 339,957 3.1%
Douglas A. Swerland (3) 51 82,875 *
Craig E. Tall (4) 50 125,646 1.2%
Peter H. van Oppen (5) 44 20,563 *
Additional Named Executives:
- ---------------------------
Michael F. Lass (6) 42 252,741 2.3%
Case H. Kuehn (7) 44 9,699 *
Bruce A. Ericson (8) 47 161,071 1.5%
Annette F. Mack (9) 39 42,370 *
All current directors and executive
officers as a group (9 persons) (10) 1,733,098 14.9%
</TABLE>
- ----------------------------
* Percent of class is less than 1%
(1) Includes options to purchase 222,080 shares of Common Stock granted
under the Company's 1987 Stock Option Plan which are presently
exercisable or exercisable within 60 days. Does not include 6,600 shares
of Common Stock held in trust for Mr. Christophersen's minor children,
beneficial ownership of which Mr. Christophersen disclaims.
(2) Includes options to purchase 115,500 shares of Common Stock which are
presently exercisable or exercisable within 60 days.
(3) Includes options to purchase 75,000 shares of Common Stock which are
presently exercisable or exercisable within 60 days.
(4) Includes options to purchase 61,500 shares of Common Stock which are
presently exercisable or exercisable within 60 days.
(5) Includes options to purchase 7,500 shares of Common Stock which are
presently exercisable or exercisable within 60 days.
(6) Includes options to purchase 180,563 shares of Common Stock which are
presently exercisable or exercisable within 60 days.
(7) Includes options to purchase 8,438 shares of Common Stock which are
presently exercisable or exercisable within 60 days.
(8) Includes options to purchase 133,313 shares of Common Stock which are
presently exercisable or exercisable within 60 days.
(9) Includes options to purchase 38,250 shares of Common Stock which are
presently exercisable or exercisable within 60 days.
-4-
<PAGE>
(10) Includes options to purchase 842,144 shares of Common Stock which are
presently exercisable or exercisable within 60 days.
GARY R. CHRISTOPHERSEN, the Company's President and Chief Executive Officer
since August 1988, joined the Company in January 1982 as Vice President-
Operations and has served as a Director of the Company since 1982. From May
1983 to August 1988, Mr. Christophersen was a Senior Vice President of the
Company and its General Manager.
SAM RUBINSTEIN became a Director of the Company in March 1986. From June
1985 to May 1988, he was the Chairman of the Board and Chief Executive Office of
Farwest Fisheries, Inc., a seafood processing and marketing firm. From 1974 to
December 1987, Mr. Rubinstein was the Chairman of the Board and Chief Executive
Officer of Bonanza Stores, Inc., an operator of variety stores and drugstores,
and, from February 1984 to January 1986, the Chairman of the Board and Chief
Executive Officer of Whitney-Fidalgo Seafoods, Inc., a seafood processor.
DOUGLAS A. SWERLAND became a Director of the Company in October 1988. In
December 1993, Mr. Swerland founded and became the President of SAVI, Inc., a
clothing superstore retailer specializing in designer clothing. Mr. Swerland
had been employed by Jay Jacobs, Inc., the operator of a chain of specialty
retail apparel stores, in various capacities beginning in 1969, most recently as
President and a director from 1978 to November 1995. Jay Jacobs, Inc., filed a
voluntary petition for Chapter 11 bankruptcy protection in May 1994 and emerged
therefrom in November 1995.
CRAIG E. TALL became a Director of the Company in October 1988. Since
September 1990, Mr. Tall has been an Executive Vice President of Washington
Mutual, Inc., a bank holding company. In addition, since April 1987, Mr. Tall
has been an Executive Vice President of Washington Mutual Bank.
PETER H. VAN OPPEN became a Director of the Company in October 1988. Since
February 1994, Mr. van Oppen has been Chairman and Chief Executive Officer of
Advanced Digital Information Corporation ("ADIC"), a manufacturer of automated
tape data libraries for network and workstation markets. ADIC was a wholly-
owned subsidiary of Interpoint Corporation, a diversified publicly-traded
manufacturer, until it was spun-off as a separate public company in October
1996. Mr. van Oppen served as a Director of Interpoint since 1984, President
and Chief Executive Officer since 1989 and Chairman and Chief Executive Officer
from 1995 through October 1996. Mr. van Oppen is also a Director of ADIC.
BOARD AND COMMITTEE MEETINGS
The Board of Directors of the Company held a total of fourteen meetings
during the fiscal year ended September 28, 1996. Each of the incumbent
Directors attended at least 75% of the aggregate of the total number of meetings
held by all committees of the Board of Directors on which they served.
The Board of Directors has an Audit Committee which consists of Messrs.
Rubinstein, Swerland, Tall, and van Oppen. The function of the Audit Committee
is to meet with the accounting staff of the Company and the independent
certified public accountants engaged by the Company to review (i) the scope and
findings of the annual audit, (ii) accounting policies and procedures and the
Company's financial reporting and (iii) internal controls employed by the
Company. The Committee's findings and recommendations are reported to
management and the Board of Directors for appropriate action. The Audit
Committee held one meeting during fiscal 1996.
The Board of Directors has a Compensation Committee which consists of
Messrs. Swerland, Tall, and van Oppen. The Committee is responsible for
establishing the policies which govern the compensation of executive officers of
the Company, setting compensation levels for the President and Chief Executive
Officer and reviewing the compensation packages for other executive officers
recommended by the President. The Compensation Committee has been appointed by
the Board of Directors to administer the Company's stock option and stock
purchase plans. The Compensation Committee held one separate meeting and five
joint meetings with the Board during fiscal 1996.
-5-
<PAGE>
The Board of Directors does not have a standing nominating committee. The
Board of Directors will consider written proposals from shareholders for
nominees or directors which are submitted to the Secretary of the Company in
accordance with the procedures described below under the caption, "Shareholder
Proposals for the 1997 Annual Meeting of Shareholders."
DIRECTORS' COMPENSATION
Currently, Directors who are not employees of the Company are each paid
$500 each quarter and $200 for each Board of Directors meeting attended and $100
for each telephonic meeting of the Board. In addition, Directors are entitled
to reimbursement for reasonable travel expenses, including lodging, incurred in
connection with attendance at Board meetings. Pursuant to the terms of the
Company's 1987 Stock Option Plan, each Director who is not an employee of the
Company is automatically granted an option to purchase 7,500 shares of the
Company's Common Stock, annually on the first Wednesday of March. Options
granted to non-employee Directors have an exercise price equal to the fair
market value of the Common Stock on the date of grant and vest at the end of the
fiscal year in which they are granted.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934, as amended, (the
"Exchange Act") requires directors, certain officers and greater-than-10%
shareholders ("Reporting Persons") of all publicly-held companies to file
certain reports ("Section 16 Reports") with respect to beneficial ownership of
such companies' equity securities.
Based solely on its review of the Section 16 Reports furnished to the
Company by its Reporting Persons and, where applicable, any written
representation by them that no Form 5 was required, all section 16(a) filing
requirements applicable to the Company's Reporting Persons during and with
respect to fiscal 1996 have been complied with on a timely basis.
-6-
<PAGE>
REMUNERATION OF EXECUTIVE OFFICERS
The following table sets forth certain information concerning the
compensation paid by the Company for services rendered during fiscal years 1996,
1995 and 1994 to any person who served as Chief Executive Officer during fiscal
1996 and the three most highly compensated executive officers of the Company at
September 28, 1996 whose salary and bonus exceeded $100,000 in fiscal 1996:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term
Compensation
Annual Compensation Awards
Name of Individual and Fiscal -------------------------------------- --------------------- All Other
Principal Position Year Salary Bonus Options Granted Compensation (1)
- ----------------------------- ---------------- ------------------ ----------------- --------------------- ----------------
<S> <C> <C> <C> <C> <C>
Gary R. Christophersen 1996 $150,530 $126,100 22,500 $11,565
President, Chief Executive 1995 150,530 82,850 0 10,569
Officer and Director 1994 150,530 74,301 0 12,508
Michael F. Lass 1996 $118,955 $ 55,023 7,500 $11,565
Vice President - Operations 1995 112,389 43,505 0 10,467
1994 105,934 36,109 0 8,478
Bruce A. Ericson 1996 $103,548 $ 47,638 7,500 $10,902
Vice President - Marketing 1995 97,941 37,601 0 9,121
1994 92,247 30,932 0 7,434
Case H. Kuehn 1996 $105,170 $ 47,015 7,500 $ 8,463
Vice President - Finance, 1995 61,941 23,796 33,750 212
Chief Financial Officer and 1994 0 0 0 0
Treasurer (2)
</TABLE>
- ---------------------------
(1) These amounts represent Company contributions to the Seattle
FilmWorks 401K Plan and payments for term life insurance and long-
term disability insurance.
(2) Mr. Kuehn joined the Company on February 8, 1995.
The Company has stock option plans pursuant to which options to purchase
Common Stock are granted to officers and key employees of the Company. The
following tables show stock option grants and exercises pertaining to the
executive officers of the Company during fiscal year 1996, and the year-end
potential realizable value of all their outstanding options.
-7-
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Individual Options Granted Potential Realizable
----------------------------------------- Value at Assumed
Number of % of Total Annual Rates of Stock
Securities Options Price Appreciation For
Underlying Granted to Option Term (3)
Options Employees in Exercise Expiration ------------------------
Granted (1) Fiscal Year Price (2) Date 5% 10%
------------ ------------ ----------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Gary R. Christophersen 22,500 15.84% $17.58 3/06/2001 $109,303 $241,532
Michael F. Lass 7,500 5.28% $17.58 3/06/2001 $ 36,434 $ 80,510
Case H. Kuehn 7,500 5.28% $17.58 3/06/2001 $ 36,434 $ 80,510
Bruce A. Ericson 7,500 5.28% $17.58 3/06/2001 $ 36,434 $ 80,510
Annette F. Mack 15,750 11.09% $15.58 1/24/2001 $ 67,809 $149,841
</TABLE>
____________________________
(1) The Company's stock option plans are administered by the Compensation
Committee of the Board of Directors, which determines to whom options
are granted, the number of shares subject to each option, the vesting
schedule and the exercise price. The options granted in fiscal year 1996
vest in equal annual installments over four years. All options granted
to officers of the Company may be exercised for a period of 190 days
following termination of employment.
(2) All options are granted with an exercise price equal to the fair market
value of the Company's Common Stock on the date of grant. The exercise
price may be paid by delivery of shares already owned by the option
holder with a market value equal to the aggregate exercise price. With
the permission of the Compensation Committee, the exercise price may
also be paid by withholding shares that would otherwise be received by
the option holder.
(3) Potential realizable value is based on the assumption that the stock
price of the Common Stock appreciates at the annual rate shown
(compounded annually) from the date of grant until the end of the five
year option term. These values are calculated based upon requirements of
the Securities and Exchange Commission and do not reflect the Company's
estimate of future stock price performance.
-8-
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
Number of Value of Unexercised
Unexercised Options In-the-Money Options
at September 28, 1996 (2) at September 28, 1996 (3)
Shares Acquired Value ---------------------------- -------------------------
Upon Exercise Realized (1) Exercisable/ Unexercisable Exercisable/ Unexercisable
--------------- ------------ ------------ ------------- --------------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Gary R. Christophersen 0 $0 222,080 39,375 $4,546,581 $378,750
Michael F. Lass 0 $0 180,563 15,937 $3,664,198 $176,553
Case H. Kuehn 0 $0 8,438 32,812 $ 112,506 $363,117
Bruce A. Ericson 0 $0 133,313 15,937 $2,685,447 $176,553
Annette F. Mack 0 $0 37,688 21,937 $ 737,818 $188,681
- ----------------------------
</TABLE>
(1) Value realized is calculated by subtracting the exercise price of the
option from the market value of a share of the Company's Common Stock on
the date of exercise and multiplying the difference thereof by the
number of shares purchased.
(2) Future exercisability is subject to vesting and the option holder
remaining employed by the Company.
(3) This value is the aggregate number of the outstanding options multiplied
by the difference between the closing price of the Common Stock reported
on the NASDAQ National Market System on September 27, 1996, less the
exercise price of such options. There is no guarantee that if and when
these options are exercised they will generate this value.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors (the "Committee") is
composed entirely of non-employee, outside directors. The Committee is
responsible for establishing the policies which govern the compensation of
executive officers of the Company, setting compensation levels for the President
and Chief Executive Officer and reviewing the compensation packages for other
executive officers recommended by the President. The goal of the Committee in
administering executive compensation is to create a compensation plan which (i)
rewards individual performance, (ii) aligns the interests of the executive with
the immediate and long-term interests of the shareholders of the Company, (iii)
ties a significant portion of compensation to improvements in the Company's
financial performance and (iv) assists the Company in attracting and retaining
key executives critical to the long-term success of the Company.
The compensation package provided to executive officers consists primarily
of (i) base salary, (ii) incentive bonus and (iii) long-term incentive in the
form of stock options.
Base Salary. It is the goal of the Committee that the combination of base
-----------
salary and incentive bonus paid to the Chief Executive Officer be within the
approximate range of cash remuneration paid to executives performing similar
duties for companies of comparable size in the Pacific Northwest. Although
generally available data on the compensation of chief executive officers in the
Pacific Northwest is considered, the experience of the members of
-9-
<PAGE>
the Committee and their knowledge of the community and industry practice is the
primary basis for this determination.
At his request, the base salary of the Chief Executive Officer has been
maintained at the present level since 1993. The Chief Executive Officer has
requested additional benefits each year in lieu of a salary increase. To
achieve the Committee's compensation goal, during fiscal 1996 the Committee
increased the percentage of the CEO's base salary used to compute his Incentive
Bonus, as discussed below, from 43.5% to 60%.
Base salaries for executive officers other than the CEO are determined
annually by the President and reviewed by the Committee. In determining salary
adjustments for executive officers, the CEO considers the individual officer's
historical performance against his or her job responsibilities and personal
compensation packages provided to executives performing similar duties for
companies of comparable size in the Pacific Northwest, the rate of inflation,
salary adjustments to be awarded to other executive officers of the Company, and
other subjective factors.
Incentive Bonus. The Company has an annual incentive compensation plan
---------------
pursuant to which executive officers and other managers and supervisory
personnel (approximately 59 persons during fiscal 1996) are eligible to receive
cash bonuses based on the Company's and their personal performance during the
year (the "Incentive Plan"). The factors used in determining pay outs under the
Incentive Plan are a specified percentage of each participant's base salary
("eligible base salary"), his or her performance against personal performance
goals and the overall difference between the Company's actual operating income
before tax and bonus compared to the targeted growth in such income for the year
("Corporate Performance Percentage"). The Incentive Plan sets eligible base
salary percentages for the CEO and all other executive officers at 60 percent
and 30 percent, respectively. The portion of each participant's eligible base
salary which will be multiplied by the Corporate Performance Percentage for the
year is determined based on points awarded for each participant's actual
performance against his or her personal performance goals. Performance goals
for each executive officer are determined by the CEO at the beginning of the
fiscal year and reviewed by the Committee. Examples of individual performance
goals included net revenue targets, labor costs, administrative and overhead
expenses. The portion of the CEO's eligible base salary which is used for
determining his annual Incentive Plan pay out is based on a weighted average of
the performance scores of the various managers who report to him. The total pay
out pursuant to the Incentive Plan is subject to a maximum of 15% of income
before tax and bonuses and no pay out will occur for any year for which the
Company falls more than 43% short of targeted income before tax and bonuses for
that year. Subjective assessments of performance may result in adjustments in
individual awards.
Stock Option Plans. The Committee administers the Company's stock option
------------------
plans under which options to purchase the Company's Common Stock may be granted
in an effort to align the interest of management with those of shareholders and
provide a reward for long-term performance. Historically, options granted by
the Company have been granted with an exercise price equal to the market price
of the Company's stock on the date of grant. Accordingly, options will have
value to the holder only if the Company's stock price increases. Outstanding
options generally become exercisable at a rate of 25% per year. Options are
granted from time to time to executive officers and other management and
supervisory personnel based on recommendations of the CEO, with the size of
grants generally falling within predetermined ranges tied to job grade. In
administering the Company's stock option plans, the Committee generally has
sought to limit outstanding options to approximately ten percent of outstanding
shares. At the end of fiscal 1996, outstanding options as a percent of the
outstanding shares of common stock was 12.2% due in part to the repurchase of
1,125,000 shares of common stock on July 20, 1994.
Under the Omnibus Budget Reconciliation Act of 1993, the federal income tax
deduction for certain types of compensation paid to the chief executive officer
and four other most highly compensated executive officers of publicly held
companies is limited to $1 million per officer per fiscal year unless such
compensation meets certain requirements. The Committee is aware of this
limitation and believes no compensation paid by the Company during 1997 will
exceed the $1 million limitation.
COMPENSATION COMMITTEE
Peter van Oppen, Chairman
Douglas A. Swerland
Craig E. Tall
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<PAGE>
STOCK PRICE PERFORMANCE GRAPH
Shown on this page is a line-graph comparing cumulative total shareholder
return on Seattle FilmWorks, Inc. Common Stock for each of the last five fiscal
years to the cumulative total return for the Standard & Poor's 500 Composite
Stock Price Index ("S&P 500 Index"), the NASDAQ Composite Index and the NASDAQ
Retail Index. This cumulative return includes the reinvestment of cash
dividends. Management believes the NASDAQ Composite Index provides a better
comparison to the Company's Common Stock performance than the S&P 500, and will
therefore use the NASDAQ Composite Index in future comparisons.
COMPARISON OF 5-YEAR CUMULATIVE RETURN
Among Seattle FilmWorks, Inc.
S&P 500 Index, NASDAQ Composite Index and NASDAQ Retail Index
<TABLE>
<CAPTION>
MEASUREMENT PERIOD SEATTLE NASDAQ S&P500 NASDAQ
(FISCAL YEAR COVERED) FILMWORKS, INC. COMPOSITE INDEX INDEX RETAIL INDEX
<S> <C> <C> <C> <C>
1991 $100 $100 $100 $100
1992 109 112 111 101
1993 189 147 125 115
1994 384 148 130 112
1995 695 204 168 124
1996 995 242 203 149
</TABLE>
PROPOSED AMENDMENT TO CLASSIFY THE BOARD OF DIRECTORS
At the Annual Meeting, the shareholders of the Company will be asked to
approve a proposal to amend the Articles to establish a classified Board of
Directors and to provide for removal of directors only for cause.
THE PROPOSED AMENDMENT
On November 13, 1996, the Company's Board of Directors approved an
amendment to the Articles to classify the Company's Board of Directors into
three classes and to provide for removal of directors only for cause, as more
fully described below (the "Proposed Amendment"). Under Washington law, the
affirmative vote of at least a majority of all outstanding shares of Common
Stock is required for approval of the Proposed Amendment. The Proposed
Amendment may have an impact upon the rights of shareholders and may be
characterized as an anti-takeover measure which, if adopted, may tend to
insulate management and make the accomplishment of certain transactions
involving a potential change of control of the Company more difficult. Each
shareholder should carefully study the description of the Proposed Amendment
contained herein and the text of the Proposed Amendment as set forth in Exhibit
-------
A to this Proxy Statement. See "Proposed Amendment to Classify the Board of
- -
Directors -- Anti-takeover Considerations." The description of the Proposed
Amendment set forth below is qualified in its entirety by reference to the text
of the Proposed Amendment set forth in Exhibit A.
---------
Classified Board. The Company's existing charter documents provide that
directors are to be elected annually for one-year terms. The Proposed Amendment
would change this process by dividing the Board of Directors into three classes,
with each class to be as nearly equal in number as possible. Thus, if the
Proposed Amendment is adopted, one
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<PAGE>
director, Douglas A. Swerland, will be elected for a term expiring at the annual
meeting in 1998; two directors, Peter H. Van Oppen and Craig E. Tall, will be
elected for a term expiring at the annual meeting in 1999; and two directors,
Gary R. Christophersen and Sam Rubinstein, will be elected for a term expiring
at the annual meeting in 2000; and, in each case, until their respective
successors are duly elected and qualified. Starting with the annual meeting of
shareholders in 1998, one class will be elected each year for a three-year term.
The classification of directors will have the effect of making it more
difficult to change the composition of the Board of Directors at every election
of directors, even when the only reason for the change may be the performance of
the present directors. At least two shareholder meetings, instead of one (as
under the current charter provisions), will be required to effect a change in
the majority control of the Board and at least three shareholder meetings will
be required to effect a change in the entire Board of Directors, except in the
event of vacancies resulting from resignation, removal for cause or other
reasons (in which case the remaining directors will fill the vacancies so
created -- see "Removal of Directors Only For Cause; Filling Vacancies on the
Board of Directors" below). The Board of Directors believes that the Proposed
Amendment would help ensure continuity of experience, which is desirable and in
the best interests of the Company and its shareholders generally. The Board
believes that the longer time required to elect a majority of a classified Board
will also help to assure continuity and stability of the Company's management
and policies, since a majority of the directors at any given time will have
prior experience as directors of the Company. It should also be noted that the
classification provisions will apply to every election of directors, whether or
not a change in the Board would be beneficial to the Company and its
shareholders, and whether or not a majority of the Company's shareholders
believe that such a change would be desirable.
Removal of Directors Only for Cause; Filling Vacancies on the Board of
Directors. Under Washington law, unless the articles of incorporation
otherwise provide, a director, or the entire board of directors, may be removed
by the shareholders with or without cause. Article IV, Section 4 of the
Company's present Bylaws provides that the entire Board of Directors, or any
member thereof, may be removed by an affirmative vote of the holders of a
majority of shares entitled to vote.
The Proposed Amendment provides that directors may be removed only by
shareholders holding at least a majority of the outstanding Common Stock acting
at a meeting called for such purpose and only for cause. For purposes of the
Proposed Amendment, "Cause" shall be construed to exist only if the director
whose removal is proposed (i) has been convicted of a felony by a court of
competent jurisdiction or (ii) has been adjudged by a court of competent
jurisdiction to be liable for engaging in an act involving willful malfeasance
which had a material adverse effect on this corporation.
The Proposed Amendment also provides that a majority of the remaining
directors may fill a vacancy on the Board occurring during the course of the
year, and the new director so elected will serve for the remainder of his or her
predecessor's term. In the event that a new directorship is created due to an
increase in the fixed number of directors, a majority of the directors in office
may fill such newly-created directorship, and the new director so elected will
serve for the same terms as that of the other directors of the class of which he
or she is a member.
The provisions of the Proposed Amendment relating to the removal of
directors will preclude a third party from removing incumbent directors without
cause and simultaneously gaining control of the Board by filling the vacancies
created by removal with its own nominees. These provisions will also reduce the
power of shareholders generally, even those with a majority interest in the
Company, to remove incumbent directors and to fill vacancies on the Board
without the support of the incumbent directors.
REASONS FOR THE PROPOSED AMENDMENT
The Board of Directors has unanimously approved and recommends that the
shareholders approve the Proposed Amendment to provide for the classification of
the Company's directors and the removal of directors only for cause.
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<PAGE>
Over the last several years, there has been a trend towards the
accumulation of substantial stock positions in public corporations by outside
parties either with a view toward utilizing a controlling block of stock to
force a merger or consolidation or as a prelude to proposing a restructuring or
sale of all or part of a corporation or other similar extraordinary corporate
action requiring the approval of its board of directors. These actions are
often undertaken without advance notice to or consultation with management of
the corporation. In many cases, such third parties seek representation on the
corporation's board of directors in order to increase the likelihood that their
proposals will be implemented by the corporation. If the corporation resists
the efforts to obtain representation on the corporation's board, the outside
parties may commence proxy contests to have themselves or their nominees elected
to the board in place of certain directors or the entire board.
Although takeovers or changes in management of the Company which are
proposed and effected without prior consultation and negotiation with the
Company's management are not necessarily detrimental to the Company and its
shareholders, it is believed that in many circumstances such efforts may not be
beneficial to the interests of a corporation and its shareholders because they
may deprive management of the time and information necessary to evaluate the
proposals, to study alternative proposals and to help ensure that the best price
is obtained in any transaction which may ultimately be undertaken. Thus, the
Proposed Amendment is designed to protect against rapid shifts in control of the
Board of Directors, to encourage persons seeking to acquire control of the
Company to initiate such an acquisition through arm's-length negotiations with
the Company's management and Board of Directors and assist in assuring
continuity in the management, affairs and business strategies of the Company.
However, as described above, it should be noted that the Proposed Amendment
would make a change in directors and management for any reason more difficult at
each election of directors, even if this would be beneficial to shareholders.
The staggering of terms of directors would have the effect of requiring at least
two shareholder meetings, instead of one, as at present, to effect a change in
majority control of the Board and would prohibit removal of incumbent directors
by a holder of a large block of the Company's shares except for cause. If the
Proposed Amendment is adopted, shareholders will elect directors to longer terms
and existing directors, if re-elected, would be the initial beneficiaries of the
extended terms. In addition, if the Proposed Amendment is approved, it could
have the effect of discouraging a third party from making a tender offer or
otherwise attempting to obtain control of the Company, even if the Company's
shareholders may consider such a change in control to be in their best
interests. See "Proposed Amendment to Classify the Board of Directors -- Anti-
takeover Considerations."
The Proposed Amendment is consistent with Washington corporate law, which
authorizes the classification of a board of directors into two or three classes.
Washington corporate law also provides that a corporation's articles of
incorporation may contain procedures for removal of directors and filling
vacancies on the board. As stated above, shareholders should note that absent
the limitation of the removal of directors contained in the Proposed Amendment,
they would have the right under applicable Washington corporate law to remove
directors, with or without cause, by a majority vote.
The Proposed Amendment is not the result of any specific efforts of which
the Company is aware to accumulate the Company's securities or to obtain control
of the Company. However, for the reasons stated above, the Company's Board of
Directors believes that the benefits of seeking to protect its ability to
negotiate with the proponent of an unfriendly or unsolicited proposal to take
over or restructure the Company by adopting the Proposed Amendment at this time
outweigh the disadvantages of discouraging such proposals. The Board, which has
approved the Proposed Amendment, and has recommended that it be submitted to the
Company's shareholders for approval, has no present intention of soliciting a
shareholder vote on any other proposals relating to a possible takeover of the
Company.
ANTI-TAKEOVER CONSIDERATIONS
As described above, the Proposed Amendment may have an impact upon the
rights of shareholders and may be characterized as an anti-takeover measure
which, if adopted, may tend to insulate management and make the accomplishment
of certain transactions involving a potential change of control of the Company
more difficult, even if the Company's shareholders may consider such a change in
control to be in their best interests. The Company's existing Articles and
Bylaws, as well as the Washington Business Corporation Act (the "Act"),
presently contain certain
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<PAGE>
anti-takeover provisions which could discourage a third party from attempting to
acquire, or make it more difficult for a third party to acquire, control of the
Company without approval of the Company's Board of Directors. Such provisions,
which are described below, could also limit the price that certain investors
might be willing to pay in the future for the Common Stock.
Charter Documents. The Company's Articles provide for authorized but
undesignated shares of Preferred Stock which may be issued by the Board of
Directors from time to time without the approval of shareholders and with rights
and privileges which may adversely affect the voting power of the Common Stock.
In addition, Article 11 of the Articles is designed to prevent "greenmail."
Pursuant to this provision, any purchase by the Company of voting securities
from an "interested shareholder" (defined as any person or group of affiliated
persons who beneficially own twenty percent (20%) or more of the outstanding
shares of the Company's Common Stock) at a price per share in excess of the fair
market value for such voting securities requires the affirmative vote of the
holders of a majority of the Company's outstanding Common Stock (excluding the
shares held by the interested shareholder). Moreover, neither the current
charter documents, nor the Proposed Amendment provide for cumulative voting.
Finally, the Company's Bylaws require shareholders seeking to bring business
before or to nominate directors at any meeting of shareholders to provide notice
thereof to the Company in proper written form well before the date of the
meeting. See "Shareholder Nominations and Proposals for the 1997 Annual Meeting
of Shareholders".
Fair Price Statute. This statute prohibits, with certain exceptions, a
merger, sale of assets or liquidation of a corporation involving an "Interested
Shareholder" (defined as a person who owns beneficially 20% or more of the
corporation's voting securities) unless determined by a majority of
disinterested directors to be at a "fair price" or otherwise approved by a
majority of the corporation's disinterested directors or the holders of two-
thirds of the corporation's outstanding voting securities, other than those of
the Interested Shareholder. A "fair price" is paid if the consideration to be
received by noninterested shareholders for shares is not less than the highest
fair market value of the consideration paid by the Interested Shareholder to
acquire its shares during the 24 months before the proposed transaction.
However, the shareholders of the Company elected to exempt the Company from the
provisions of the Fair Price Statute in connection with the Company's initial
public offering in 1986.
Washington Takeover Act. Washington law imposes restrictions on certain
transactions between a corporation and certain significant shareholders.
Chapter 23B.19 of the Act, which applies to Washington corporations that have a
class of voting stock registered under the Exchange Act of 1934, as amended, or
any successor statute, prohibits a "target corporation," with certain
exceptions, from engaging in certain "significant business transactions" with a
person or group of persons which beneficially owns 10% or more of the voting
securities of the target corporation (an "Acquiror") for a period of five years
after such acquisition, unless the transaction or acquisition of shares is
approved by a majority of the members of the target corporation's board of
directors prior to the time of acquisition. Such prohibited transactions
include, among other things, a merger or consolidation with, disposition of
assets to, or issuance or redemption of stock to or from, the Acquiror,
termination of 5% or more of the employees of the target corporation as a result
of the Acquiror's acquisition of 10% or more of the shares or allowing the
Acquiror to receive any disproportionate benefit as a shareholder. After the
five-year period, a "significant business transaction" may take place as long as
it complies with certain "fair price" provisions of the statute. A corporation
may not "opt out" of this statute.
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<PAGE>
Required Vote for Mergers, Consolidation or Sale of Substantially All
Assets. Under Washington law, holders of at least two-thirds of the outstanding
voting shares of a Washington corporation are generally required to approve
certain statutory acquisition transactions such as mergers, statutory share
exchanges, sales of all or substantially all of the assets of the corporation
and dissolution of the corporation unless the Articles or the Board require a
greater vote or the Articles require a lesser vote (but not less than a
majority). The Company's Articles do not include a provision that reduces the
percentage of votes necessary to approve such a transaction, notwithstanding the
statutory provision allowing such a lower threshold.
The full text of the Proposed Amendment is set forth as Exhibit A to this
Proxy Statement. The affirmative vote of the holders of at least a majority of
all outstanding shares of Common Stock is required to adopt the Proposed
Amendment. THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF THE
PROPOSED AMENDMENT AND ALL PROXIES RECEIVED WILL BE VOTED IN FAVOR THEREOF
UNLESS A CONTRARY SPECIFICATION IS MADE ON THE PROXY BY THE SHAREHOLDER.
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<PAGE>
INDEPENDENT AUDITORS
The Company has selected Ernst & Young LLP to continue as its independent
auditors for the current year. Representatives of Ernst & Young LLP are
expected to be present at the annual meeting and have the opportunity to make a
statement if they so desire and to respond to appropriate questions.
OTHER BUSINESS
As of the date of this Proxy Statement, management knows of no other
business which will be presented for action at the meeting. If any other
business requiring a vote of the shareholders should come before the meeting,
the persons designated as your proxies will vote or refrain from voting in
accordance with their best judgment.
SHAREHOLDER NOMINATIONS AND PROPOSALS FOR THE
1997 ANNUAL MEETING OF SHAREHOLDERS
The Company's Bylaws provide that advance notice of nominations for the
election of directors at a meeting of shareholders must be delivered to or
mailed and received by the Company ninety (90) days prior to the date one year
from the date of the immediately preceding annual meeting of shareholders or, in
the case of a special meeting of shareholders to elect directors, the close of
business on the 10th day following the date on which notice of such meeting is
first given to shareholders. The Bylaws also provide that advance notice of
proposals to be brought before an annual meeting by a shareholder must be
submitted in writing and delivered to or mailed and received by the Company not
later than ninety (90) days prior to the date one year from the date of the
immediately preceding annual meeting of shareholders.
Each notice of a nomination or proposal of business must contain, among
other things, (i) the name and address of the shareholder who intends to make
the nomination or proposal; (ii) a representation that the shareholder is a
holder of record of stock of the Company entitled to vote at such meeting and
intends to appear in person or by proxy at the meeting to nominate the person or
persons specified in the notice or to vote at the meeting for the proposal;
(iii) a description of all arrangements or understandings between the
shareholder in any proposal to be submitted to the meeting; and (iv) such other
information regarding each nominee or proposals as would be required to be
included in a proxy statement filed pursuant to the proxy rules of the
Securities and Exchange Commission.
A copy of the full text of the provisions of the Company's Bylaws dealing
with shareholder nominations and proposals is available to shareholders from the
Secretary of the Company upon written request.
In order to be included in the Company's proxy statement and form of proxy
relating to its Annual Meeting of Shareholders, shareholder proposals or
nominations to be presented at the Annual Meeting of Shareholders held in 1998
must be received by the Secretary at the Company's executive offices by August
31, 1997.
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<PAGE>
SOLICITATION OF PROXIES
The proxy accompanying this Proxy Statement is solicited by the Board of
Directors of the Company. Proxies may be solicited by officers, directors, and
regular supervisory and executive employees of the Company, none of whom will
receive any additional compensation for their services. In addition, the
Company may engage an outside proxy solicitation firm to render proxy
solicitation services and, if so, will pay a fee for such services.
Solicitations of proxies may be made personally, or by mail, telephone,
telecopier or messenger. The Company, if requested, will pay persons holding
shares of Common Stock in their names or in the names of nominees, but not
owning such shares beneficially, such as brokerage houses, banks and other
fiduciaries, for the expense of forwarding materials to their principals. All
of the costs of solicitation of proxies will be paid by the Company.
By Order of the Board of Directors
//s// Mich Kele Earl
Mich Kele Earl
Secretary
December 31, 1996
Seattle, Washington
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<PAGE>
EXHIBIT A
PROPOSED AMENDMENT OF THE COMPANY'S AMENDED AND RESTATED
ARTICLES OF INCORPORATION
ARTICLE XIV
-----------
DIRECTORS
---------
The number of directors which shall constitute the entire Board of
Directors of this corporation shall be not less than three (3) nor more than
fifteen (15). Within these limits, the number of directors shall be fixed from
time to time by resolution of the Board of Directors. The Board shall be
divided into three classes: Class I Directors, Class II Directors and Class III
Directors. Each such class of directors shall be as nearly equal in number of
directors as possible. Each director shall serve for a term ending at the third
annual shareholders' meeting following the annual meeting at which such director
was elected; provided, however, that the directors first elected as Class I
-------- -------
Directors shall serve for a term ending at the annual meeting to be held in the
year following the first election of directors by classes, the directors first
elected as Class II Directors shall serve for a term ending at the annual
meeting to be held in the second year following the first election of directors
by classes and the directors first elected as Class III Directors shall serve
for a term ending at the annual meeting to be held in the third year following
the first election of directors by classes. Notwithstanding the foregoing, each
director shall serve until his successor shall have been elected and qualified
or until his earlier death, resignation or removal.
At each annual election, the directors chosen to succeed those whose terms
then expire shall be identified as being of the same class as the directors they
succeed, unless, by reason of any intervening changes in the authorized number
of directors, the Board shall designate one or more directorships whose terms
then expire as directorships of another class in order more nearly to achieve
equality in the number of directors among the classes. Newly created
directorships resulting from any increase in the number of directors or any
vacancies on the Board of Directors resulting from death, resignation, removal
or other cause shall be filled by the affirmative vote of a majority of the
remaining directors then in office, even though less than a quorum of the Board
of Directors. Any director elected to fill a vacancy in accordance with the
preceding sentence shall be of the same class as the director he succeeds and
shall hold office for the remainder of the full term of such class, unless, by
reason of any previous changes in the authorized number of directors, the Board
shall designate the vacant directorship as a directorship of another class in
order more nearly to achieve equality in the number of directors among the
classes.
Notwithstanding the rule that the three classes shall be as nearly equal in
number of directors as possible, upon any change in the authorized number of
directors, each director then continuing to serve as such will nevertheless
continue as director of the class of which he is a member, until the expiration
of his current term or his earlier death, resignation or removal. If there are
any newly created directorships or vacancies on the Board, the Board shall
allocate any such directorship or vacancy to that of the available classes of
directors whose term of office is due to expire at the earliest dated following
such allocation.
At any meeting of shareholders called expressly for that purpose, the
entire Board of Directors, or any member thereof, may be removed from office at
any time, but only (1) for Cause and (2) by the affirmative vote of the holders
of a majority of shares then entitled to vote at an election of such directors.
For purposes of this Article 14, "Cause" shall be construed to exist only if the
director whose removal is proposed (i) has been convicted of a felony by a court
of competent jurisdiction or (ii) has been adjudged by a court of competent
jurisdiction to be liable for engaging in an act involving willful malfeasance
which had a material adverse effect on this corporation.
Where a question of the removal of a director for Cause is to be presented
for shareholder consideration, an opportunity must be provided such director to
present his or her defense to the shareholders by a statement which must
accompany or precede the notice of the meeting at which removal of such director
for Cause shall be considered. Under such circumstances the director involved
shall be served with notice of the meeting at which such action is
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<PAGE>
proposed to be taken together with a statement of the specific charges and shall
be given an opportunity to be present and to be heard at the meeting at which
his or her removal is considered.
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<PAGE>
SEATTLE FILMWORKS, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR ANNUAL MEETING
OF THE SHAREHOLDERS TO BE HELD FEBRUARY 12, 1997.
The undersigned hereby appoints Gary R. Christophersen
and Case H. Kuehn, and each of them, as Proxies, with
full power of substitution, and hereby authorizes them
to represent and vote, as directed below, all the
shares of Common Stock of SEATTLE FILMWORKS, INC. held
of record by the undersigned on December 6, 1996, at
the Annual Meeting of Shareholders to be held February
12, 1997, or any adjournment thereof.
(Continued, and to be signed on other side)
<PAGE>
Please mark your votes as this [X]
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" IN ITEM 1 AND "FOR ALL
NOMINEES" IN ITEMS 2 AND 3.
1. AMENDMENT TO RESTATED ARTICLES OF INCORPORATION: Approval of an amendment to
the Company's Amended and Restated Articles of Incorporation to establish a
classified Board of Directors and to provide for removal of directors only for
cause, as described in the accompanying proxy statement.
For [_] Against [_] Abstain [_]
2. ELECTION OF DIRECTORS: If the proposed amendment to the Company's Restated
Articles is APPROVED, election of the following nominees for the terms set forth
next to their respective names or until their respective successors are elected
and qualify:
Class I (for a one-year term): Douglas A. Swerland
Class II (for a two-year term): Craig E. Tall and Peter H. van Oppen
Class III (for a three-year term): Gary R. Christophersen and Sam Rubinstein
For [_] Withhold all [_] WITHHOLD AUTHORITY for the following
Nominees only (write name of Nominee(s)
in this space)
-----------------------------------------
3. If the proposed amendment to the Company's Restated Articles is NOT APPROVED,
election of the following nominees to serve as directors for a one-year term or
until their respective successors are elected and qualify: Gary R.
Christophersen, Sam Rubinstein, Douglas A. Swerland, Craig E. Tall, Peter van
Oppen
For [_] Withhold all [_] WITHHOLD AUTHORITY for the following
Nominees only (write name of Nominee(s) in
this space)
-------------------------------------------
"PLEASE MARK INSIDE BOXES SO THAT DATA PROCESSING EQUIPMENT WILL RECORD YOUR
VOTES."
In their discretion, the Proxies are authorized to vote upon such other business
as may properly come before the meeting or any adjournment thereof. This Proxy,
when properly executed, will be voted in the manner directed herein by the
undersigned. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED "FOR" ITEM 1 AND
"FOR ALL NOMINEES" IN ITEMS 2 AND 3.
Signature(s) ___________________________ Dated ________________________, 1997
NOTE: Please sign exactly as your name appears on your stock certificate. When
shares are held jointly, each person sign. When signing as the attorney,
executor, administrator, trustee or guardian, please sign full title as such.
An authorized person should sign on behalf of corporations, partnerships, and
associations and give his or her title.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY.
