<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________________ to ___________________
Commission file number 0-18237
-------
VIKING OFFICE PRODUCTS, INC.
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
California 95-2082946
- ------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
13809 South Figueroa Street
Los Angeles, California 90061
---------------------------------------
(Address of Principal Executive Offices)
(Zip Code)
(213) 321-4493
----------------------------------------------------
(Registrant's Telephone Number, including area code)
----------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d)of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES X NO
- --
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date:
CLASS OUTSTANDING AT FEBRUARY 6, 1995
----- -------------------------------
Common Stock 40,521,969
1
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
--------------------
VIKING OFFICE PRODUCTS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
ASSETS
December 31, 1994 June 24, 1994
----------------- -------------
(unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents................................................. $ 19,112 $ 25,609
Short-term investments.................................................... 31,121 22,921
Accounts receivable, net.................................................. 78,239 65,079
Merchandise inventories................................................... 57,977 45,298
Prepaid catalog costs..................................................... 7,804 10,929
Prepaid expenses and other current assets................................. 1,867 2,068
Total current assets .............................................. -------- --------
196,120 171,904
Property, plant, equipment and improvements, net............................. 35,424 23,172
Other assets:
Notes receivable, deposits and other...................................... 1,590 1,350
Intangible assets, net.................................................... 30,336 30,794
-------- --------
Total other assets................................................. 31,926 32,144
-------- --------
Total assets..................................................... $263,470 $227,220
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses..................................... $ 66,302 $ 61,006
Sales and value added taxes payable....................................... 1,233 2,153
Taxes on income........................................................... 21,075 13,522
-------- --------
Total current liabilities.......................................... 88,610 76,681
Deferred income taxes........................................................ 307 307
Stockholders' equity:
Common stock.............................................................. 87,923 84,706
Retained earnings......................................................... 94,702 75,145
Unamortized value of long-term incentive stock grant...................... (8,092) (8,416)
Cumulative foreign currency translation adjustment........................ 20 (1,203)
-------- --------
Total stockholders' equity......................................... 174,553 150,232
-------- --------
Total liabilities and stockholders' equity....................... $263,470 $227,220
======== ========
</TABLE>
2
<PAGE>
VIKING OFFICE PRODUCTS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands except per share data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
December 31, December 31,
------------------------ -----------------------
(unaudited) (unaudited)
1994 1993 1994 1993
------------------------ -----------------------
<S> <C> <C> <C> <C>
Revenues.............................................. $189,160 $133,117 $371,552 $262,953
Cost of goods sold, including delivery................ 126,098 86,729 245,816 171,259
-------- -------- -------- --------
Gross profit.......................................... 63,062 46,388 125,736 91,694
Selling, general and administrative expenses.......... 50,090 36,865 97,712 71,597
-------- -------- -------- --------
Operating income...................................... 12,972 9,523 28,024 20,097
Other income.......................................... 1,794 1,071 3,393 2,179
Interest expense...................................... 59 45 81 77
-------- -------- -------- --------
Income before taxes on income......................... 14,707 10,549 31,336 22,199
Taxes on income....................................... 5,467 4,314 11,779 9,238
-------- -------- -------- --------
Net income............................................ $ 9,240 $ 6,235 $ 19,557 $ 12,961
======== ======== ======== ========
Net income per share.................................. $ .22 $ .15 $ .46 $ .31
======== ======== ======== ========
Common and common equivalent shares outstanding....... 42,705 42,200 42,590 41,920
======== ======== ======== ========
</TABLE>
3
<PAGE>
VIKING OFFICE PRODUCTS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
Six Months Ended
December 31,
--------------------
(unaudited)
1994 1993
---------- ---------
<S> <C> <C>
Cash flows from operating activities:
Cash received from customers............................ $ 354,431 $ 254,217
Cash paid to suppliers and employees.................... (338,383) (237,992)
Interest received ...................................... 1,002 577
Interest paid........................................... (76) (77)
Income taxes paid....................................... (4,158) (3,674)
--------- ---------
Net cash provided by operating activities ........... 12,816 13,051
Cash flows from investing activities:
Capital expenditures.................................... (14,634) (5,406)
Short term investments.................................. (8,200) (10,033)
Proceeds from sale of fixed assets...................... -- 14
Issuance of notes receivable and other ................. (229) (116)
--------- ---------
Net cash used in investing activities ............... (23,063) (15,541)
Cash flows from financing activities:
Proceeds from issuance of stock......................... 3,220 1,468
--------- ---------
Net cash provided by financing activities............. 3,220 1,468
Effect of exchange rate changes on cash................... 530 (329)
--------- ---------
Net decrease in cash and cash equivalents................. (6,497) (1,351)
Cash and cash equivalents, beginning of period............ 25,609 26,089
--------- ---------
Cash and cash equivalents, end of period.................. $ 19,112 $ 24,738
========= =========
Reconciliation of net income to net cash provided by
operating activities:
Net income.............................................. $ 19,557 $ 12,961
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization......................... 3,488 2,342
Loss on sale of fixed assets.......................... 30 395
Provision for doubtful accounts and customer returns.. 5,102 4,195
Deferred taxes on income.............................. 0 450
Increase in accounts receivable....................... (18,046) (7,537)
Increase in inventories............................... (12,249) (9,096)
Decrease in prepaid expenses and other current assets. 3,119 1,609
Increase in accounts payable and accrued expenses..... 11,815 7,732
--------- ---------
Total adjustments.................................. (6,741) 90
--------- ---------
Net cash provided by operating activities.................. $ 12,816 $ 13,051
========= =========
</TABLE>
4
<PAGE>
VIKING OFFICE PRODUCTS, INC.
NOTES TO FINANCIAL STATEMENTS
-----------------------------
(UNAUDITED)
1. FINANCIAL STATEMENTS:
The condensed financial statements included herein have been prepared by
the Company, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission and reflect all adjustments, consisting only
of normal recurring adjustments, which, in the opinion of management, are
necessary for a fair statement of the results of the interim periods presented.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to such rules and regulations, although
the Company believes that disclosures are adequate to make the information
presented not misleading. It is suggested that these condensed financial
statements be read in conjunction with the financial statements and the notes
thereto included in the Company's Annual Report to Shareholders for the year
ended June 24, 1994.
The June 24, 1994 condensed consolidated balance sheet was derived from the
audited consolidated balance sheet at June 24, 1994, which was incorporated by
reference in the Company's Annual Report on Form 10-K.
5
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS
-----------------------------------
The following table shows, for the periods indicated, the percentage
relationships to revenues of items included in the Condensed Consolidated
Statements of Income and the percentage changes in the dollar amounts of such
items from period to period.
<TABLE>
<CAPTION>
Percent Increase
------------------
Three Months Ended Six Months Ended 3 Months 6 Months
December 31, December 31, -------- --------
------------------ ----------------- 1994 vs. 1994 vs.
1994 1993 1994 1993 1993 1993
------------------ ----------------- ------------------
<S> <C> <C> <C> <C> <C> <C>
Revenues............. 100.0% 100.0% 100.0% 100.0% 42.1% 41.3%
Cost of goods
sold, including
delivery .......... 66.7 65.2 66.2 65.1 45.4 43.5
----- ----- ----- -----
Gross profit ........ 33.3 34.8 33.8 34.9 35.9 37.1
Selling, general and
administrative
expenses ......... 26.4 27.7 26.3 27.2 35.9 36.5
----- ----- ----- -----
Operating income.... 6.9 7.1 7.5 7.7 36.2 39.4
Other income........ 0.9 0.8 0.9 0.7 67.5 55.7
Interest expense.... 0.0 0.0 0.0 0.0 31.1 5.2
----- ----- ----- -----
Income before
taxes on income .. 7.8 7.9 8.4 8.4 39.4 41.2
Taxes on income..... 2.9 3.2 3.2 3.5 26.7 27.5
----- ----- ----- -----
Net income.......... 4.9% 4.7% 5.2% 4.9% 48.2 50.9
===== ===== ===== =====
</TABLE>
THREE MONTHS ENDED DECEMBER 31, 1994 COMPARED TO THE THREE MONTHS ENDED
- -----------------------------------------------------------------------
DECEMBER 31, 1993.
- ------------------
Revenues for the three months ended December 31, 1994, increased by $56.0
million, 42.1% over the comparable period of the prior year. Of this increase,
$12.9 million was attributable to United States operations, $36.6 million was
attributable to European operations and $6.5 million was attributable to
Viking's Australian division, which began sales in November 1993. The European
operations include cross-border sales into Belgium beginning in May 1994, sales
into Luxembourg and the Republic of Ireland beginning in September 1994, and
sales into the Netherlands beginning in November 1994. On a company-wide basis,
during the three months ended December 31, 1994, the number of catalogs mailed
increased 33.0%, the number of customers who purchased products increased 28.3%
and the average revenue per customer increased by 10.7% compared to the
comparable period of the prior year.
6
<PAGE>
Gross profit for the three months ended December 31, 1994 increased by
$16.7 million or 35.9% over the comparable period of the prior year. As a
percentage of revenues, gross profit decreased from 34.8% in the three months
ended December 31, 1993 to 33.3% in the three months ended December 31, 1994.
The decrease in the gross profit margin is primarily attributable to lower
margins associated with the Company's entry into new markets in Belgium,
Luxembourg, the Republic of Ireland and the Netherlands. Gross margin was also
lower in the United Kingdom as a result of the promotion of the new same day
delivery program and the reduction of the minimum order required for free
delivery from (Pounds)50 to (Pounds)30.
Selling, general, and administrative expenses for the three months ended
December 31, 1994, increased by $13.2 million, or 35.9% over the comparable
period of the prior year. As a percentage of revenues, these expenses decreased
from 27.7% in the three months ended December 31, 1993 to 26.4% in the three
months ended December 31, 1994. This percentage decrease is primarily due to the
Company achieving certain economies of scale in its largest branches and in
general and administrative expenses.
Other income for the three months ended December 31, 1994 increased by
$723,000 or 67.5% over the comparable period of the prior year. The increase was
attributable to cash discounts received on higher European inventory purchases,
and to higher investment income due to higher invested balances and interest
rates.
Taxes on income for the three months ended December 31, 1994 increased by
$1.2 million due to higher pretax earnings. The estimated effective tax rate
decreased from 40.9% for the three months ended December 31, 1993 to 37.2% for
the current period. This decrease was primarily attributable to non-deductible
losses incurred in France in the prior year and the utilization of available
operating loss carryforwards in France.
SIX MONTHS ENDED DECEMBER 31, 1994 COMPARED TO THE SIX MONTHS ENDED
- -------------------------------------------------------------------
DECEMBER 31, 1993.
- ------------------
Revenues for the six months ended December 31, 1994, increased by $108.6
million, or 41.3%, over the comparable period of the prior year. Of this
increase, $28.2 million was attributable to United States operations, $63.9
million was attributable to European operations and $16.5 million was
attributable to Viking's Australian division, which began sales in November,
1993. On a company-wide basis, during the six months ended December 31, 1994,
the number of catalogs mailed increased 33.1%, the number of customers who
purchased products increased 27.0% and the average revenue per customer
increased approximately 11.4% versus the comparable period of the prior year.
Gross profit for the six months ended December 31, 1994 increased by $34.0
million or 37.1% over the comparable period of the prior year. As a percentage
of revenues, gross profit decreased from 34.9% in the six months ended
December 31, 1993 to 33.8% in the six months ended December 31, 1994. The
decrease in the gross profit margin is primarily attributable to lower margins
associated with the Company's entry into new markets in Belgium, Luxembourg, the
Republic of Ireland and the Netherlands. Gross margin was also lower in the
United Kingdom as a result of the promotion of the new same day delivery program
and the reduction of the minimum order required for free delivery from
(Pounds)50 to (Pounds)30.
Selling, general, and administrative expenses for the six months ended
December 31, 1994, increased by $26.1 million, or 36.5% over the comparable
period of the prior year. As a percentage of revenues, these expenses decreased
from 27.2% in the six months ended December 31, 1993 to 26.3% in the six months
ended December 31, 1994. This percentage decrease is primarily due to the
Company achieving certain economies of scale in its largest branches and in
general and administrative expenses.
7
<PAGE>
Other income for the six months ended December 31, 1994 increased by
$1,214,000 or 55.7% over the comparable period of the prior year. The increase
was attributable to cash discounts received on higher European inventory
purchases, and to higher investment income due to higher invested balances and
interest rates.
Taxes on income for the six months ended December 31, 1994 increased by
$2.5 million due to higher pretax earnings. The estimated effective tax rate
decreased from 41.6% for the six months ended December 31, 1993 to 37.6% for the
current period. This decrease was primarily attributable to non-deductible
losses incurred in France in the prior year and the utilization of available
operating loss carryforwards in France. In the six months ended December 31,
1993, taxes on income includes a $450,000 one time charge for the cumulative
effect on prior years of adopting Statement of Financial Accounting Standard No.
109.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
Viking's primary source of liquidity has been cash flow from operations.
Viking believes that its existing cash and short-term investments, funds
generated from operations and available credit under its revolving credit
facility will be sufficient to finance its working capital and capital
expenditure requirements for the foreseeable future, including all such
requirements for the distribution centers in potential future markets.
Viking believes there are substantial opportunities throughout Europe to
expand its business and is currently developing plans for at least one other
European distribution center. Future capital expenditures related to European
expansion have not yet been determined, however, management believes that
capital requirements for such expansion will be provided from existing cash and
short term investments, and cash flows from operations.
Viking has a revolving credit agreement with Citibank, N.A. which provides
for an unsecured revolving credit facility up to $30.0 million through June
1995. Advances under this credit facility bear interest at the bank's base rate
or at the bank's base rate less 1/4% depending on certain of Viking's financial
ratios. At the option of Viking, the rate of interest may be determined by
reference to LIBOR or domestic certificate of deposit rates. In addition, Viking
is required to pay a commitment fee varying from 1/4% to 1/2% on the unused
amount of the revolving credit facility. Such commitment fee rates are dependent
on certain of Viking's financial ratios. At December 31, 1994, no amounts were
outstanding under this credit facility and the entire $30.0 million was
available for borrowing.
8
<PAGE>
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
----------------------------------------------------
The annual meeting of shareholders for Viking Office Products, Inc. was
held on November 16, 1994. At the meeting, the shareholders elected a Board of
Directors pursuant to management's nomination in the proxy statement dated
October 6, 1994.
At the meeting, the shareholders also voted on two proposals to approve
amendments to the Amended and Restated 1989 Incentive Stock Option Plan, to
approve an amendment to the Amended and Restated 1991 Nonstatutory Stock Option
Plan, to approve the Chief Executive Officer Performance Based Bonus Plan, to
approve the 1994 Employee Stock Purchase Plan and to ratify the selection of
Deloitte & Touche as independent auditors.
The vote on the proposal to amend the Amended and Restated 1989 Incentive Stock
Option Plan to increase the number of shares issuable thereunder was as follows:
Votes Votes
For Against Abstentions
--- ------- -----------
24,236,199 8,624,720 42,192
The vote on the proposal to amend the Amended and Restated 1989 Incentive Stock
Option Plan to limit the number of shares issuable annually thereunder to any
individual was as follows:
Votes Votes
For Against Abstentions
--- ------- -----------
32,514,003 414,874 36,080
The vote on the proposal to amend the Amended and Restated 1991 Nonstatutory
Stock Option Plan to limit the number of shares issuable annually thereunder to
any individual was as follows:
Votes Votes
For Against Abstentions
--- ------- -----------
30,125,685 2,802,319 36,953
The vote on the proposal to approve the Chief Executive Officer Performance
Based Bonus Plan was as follows:
Votes Votes
For Against Abstentions
--- ------- -----------
31,952,803 822,950 189,564
The vote on the proposal to approve Viking's 1994 Employee Stock Purchase Plan
was as follows:
Votes Votes
For Against Abstentions
--- ------- -----------
32,807,281 110,810 46,866
9
<PAGE>
The vote on the proposal to ratify the selection of auditors was as follows:
Votes Votes
For Against Abstentions
----- ------- -----------
33,015,902 5,855 13,659
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) EXHIBITS
The following exhibits are filed as a part of this report:
10. Material Contracts
10.13* Amended and Restated 1989 Incentive Stock Option Plan
10.25* Chief Executive Officer Performance Based Bonus Plan
10.26* 1994 Employee Stock Purchase Plan
(b) REPORTS ON FORM 8-K.
There were no reports filed on Form 8-K during the three months ended
December 31, 1994.
* Management contract, compensatory plan or arrangement.
10
<PAGE>
SIGNATURE
---------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
VIKING OFFICE PRODUCTS, INC.
DATE: February 8, 1995 By: /s/ Lisa Y. Billig
-------------------------------
Lisa Y. Billig
Vice President, Finance
Chief Financial Officer
11
<PAGE>
EXHIBIT 10.13
EXHIBIT A
AMENDED AND RESTATED
VIKING OFFICE PRODUCTS, INC.
1989 INCENTIVE STOCK OPTION PLAN
1. PURPOSE.
This Amended and Restated Viking Office Products, Inc., 1989 Incentive Stock
Option Plan (the "Plan") is intended to allow designated employees, executive
officers and other corporate and divisional officers (all of whom are sometimes
collectively referred to herein as "Employees") of Viking Office Products, Inc.,
a California corporation ("Viking"), and Subsidiaries which it may have from
time to time (Viking and such Subsidiaries being together referred to herein as
the "Company") to receive certain options ("Stock Options") to purchase Viking's
common stock, without par value ("Common Stock"), as herein provided.
"Subsidiary" shall mean each corporation which is a "subsidiary corporation" of
Viking, within the definition contained in Section 424(f) of the Internal
Revenue Code of 1986, as amended (the "Code"). The purpose of the Plan is to
provide Employees with additional incentives to make significant and
extraordinary contributions to the long-term performance and growth of the
Company and to attract and retain Employees of exceptional ability.
2. ADMINISTRATION.
2.1 The Plan shall be administered by the Compensation Committee (the
"Committee") of the Board of Directors of Viking (the "Board"). Each member of
the Committee shall be a "disinterested person" as that term is defined in Rule
16b-3 promulgated by the Securities and Exchange Commission (the "Commission")
pursuant to the Securities Exchange Act of 1934 (the "Exchange Act"), but no
action of the Committee shall be invalid if this requirement is not met. The
Committee shall select one of its members as Chairman and shall act by vote of a
majority of a quorum or by unanimous written consent. A majority of its members
shall constitute a quorum. The Committee shall be governed by the provisions of
Viking's By-Laws and of California law applicable to the Board, except as
otherwise provided herein or determined by the Board.
2.2 The Committee shall have full and complete authority, in its discretion,
but subject to the express provisions of the Plan: to approve the Employees
nominated by the management of the Company to be granted Stock Options; to
determine the number of Stock Options to be granted to an Employee; to determine
the time or times at which Stock Options shall be granted; to establish the
terms and conditions upon which Stock Options may be exercised; to remove or
adjust any restrictions and conditions upon Stock Options; to specify, at the
time of grant, provisions relating to the exercisability of Stock Options and to
accelerate or otherwise modify the exercisability of any Stock Options; and to
adopt such rules and regulations and to make all other determinations deemed
necessary or desirable for the administration of the Plan. All interpretations
and constructions of the Plan by the Committee, and all of its actions
hereunder, shall be binding and conclusive on all persons for all purposes.
2.3 The Company hereby agrees to indemnify and hold harmless each Committee
member and each employee of the Company, and the estate and heirs of such
Committee member or employee, against all claims, liabilities, expenses,
penalties, damages or other pecuniary losses, including legal fees, which such
Committee member or employee or his or her estate or heirs may suffer as a
result of his or her responsibilities, obligations or duties in connection with
the Plan, to the extent that insurance, if any, does not cover the payment of
such items.
A-1
<PAGE>
3. ELIGIBILITY AND PARTICIPATION.
Employees eligible under the Plan shall be approved by the Committee from
those Employees who, in the opinion of the management of the Company, are in
positions which enable them to make significant and extraordinary contributions
to the long-term performance and growth of the Company. In selecting Employees
to whom Stock Options may be granted, consideration shall be given to factors
such as employment position, duties and responsibilities, ability, productivity,
length of service, morale, interest in the Company and recommendations of
supervisors. No member of the Committee shall be eligible to participate under
the Plan or under any other Company plan if such participation would contravene
the standard of paragraph 2.1 above relating to "disinterested persons".
4. GRANTS.
The Committee may grant Stock Options in such amounts, at such times, and to
such Employees nominated by the management of the Company as the Committee, in
its discretion, may determine; provided, however, that, subject to adjustment as
provided in paragraph 11, the maximum number of shares of Common Stock for which
Stock Options may be granted to any one Employee during any one calendar year
shall be 100,000. Stock Options granted under the Plan shall constitute
"incentive stock options" within the meaning of Section 422 of the Code, if so
designated by the Committee on the date of grant. The Committee shall also have
the discretion to grant Stock Options which do not constitute incentive stock
options and any such Stock Options shall be designated non-statutory stock
options by the Committee on the date of grant. The aggregate fair market value
(determined as of the time an incentive stock option is granted) of the Common
Stock with respect to which incentive stock options are exercisable for the
first time by any Employee during any one calendar year (under all plans of the
Company and any parent or subsidiary of the Company) may not exceed the maximum
amount permitted under Section 422 of the Code (currently $100,000.00). Non-
statutory stock options shall not be subject to the limitations relating to
incentive stock options contained in the preceding sentence. Subject to the
provisions of paragraph 11 hereof, the number of shares of Common Stock issued
and issuable pursuant to the exercise of Stock Options granted hereunder shall
not exceed 5,400,000; provided, however, that on the last business day of each
fiscal year of the Company, commencing with the last business day of the fiscal
year ending June 30, 1995, such maximum number shall be increased by a number
equal to 1.25% of the number of shares of Common Stock issued and outstanding on
the close of business on such day; provided, further, that in no event shall the
aggregate number of shares issued and issuable pursuant to the exercise of Stock
Options granted hereunder exceed 7,000,000. Each Stock Option shall be evidenced
by a written agreement (the "Option Agreement") in a form approved by the
Committee, which shall be executed on behalf of the Company and by the Employee
to whom the Stock Option is granted. If a Stock Option expires, terminates or is
cancelled for any reason without having been exercised in full, the shares of
Common Stock not purchased thereunder shall again be available for purposes of
the Plan.
5. PURCHASE PRICE.
The purchase price (the "Exercise Price") of shares of Common Stock subject to
each Stock Option ("Option Shares") shall equal the fair market value ("Fair
Market Value") of such shares on the date of grant of such Stock Option.
Notwithstanding the foregoing, the Exercise Price of Option Shares subject to an
incentive stock option granted to an Employee who at the time of grant owns
stock possessing more than 10% of the total combined voting power of all classes
of stock of the Company or of any parent or Subsidiary shall be at least equal
to 110% of the Fair Market Value of such shares on the date of grant of such
Stock Option. The Fair Market Value of a share of Common Stock on any date shall
be equal to the closing price
A-2
<PAGE>
of the Common Stock for the last preceding day on which Viking's shares were
traded, and the method for determining the closing price shall be determined by
the Committee.
6. OPTION PERIOD.
The Stock Option period (the "Term") shall commence on the date of grant of
the Stock Option and shall be ten years or such shorter period as is determined
by the Committee. Notwithstanding the foregoing, the Term of an incentive stock
option granted to an Employee who at the time of grant owns stock possessing
more than 10% of the total combined voting power of all classes of stock of the
Company or of any parent or subsidiary shall not exceed five years. Each Stock
Option shall provide that it is exercisable over its term in such periodic
installments as the Committee in its sole discretion may determine. Such
provisions need not be uniform. Notwithstanding the foregoing, but subject to
the provisions of paragraphs 2.2 and 11.3, Stock Options granted to Employees
who are subject to the reporting requirements of Section 16(a) of the Exchange
Act ("Section 16 Reporting Persons") shall not be exercisable until at least six
months and one day from the date the Stock Option is granted. If an Employee
shall not in any period purchase all of the Option Shares which the Employee is
entitled to purchase in such period, the Employee may purchase all or any part
of such Option Shares at any time prior to the expiration of the Stock Option.
7. EXERCISE OF OPTIONS.
7.1 Each Stock Option may be exercised in whole or in part (but not as to
fractional shares) by delivering it for surrender or endorsement to the Company,
attention of the Corporate Secretary, at the principal office of the Company,
together with payment of the Exercise Price and an executed Notice and Agreement
of Exercise in the form prescribed by paragraph 7.2. Payment may be made in
cash, by cashier's or certified check or by surrender of previously owned shares
of the Company's Common Stock valued pursuant to paragraph 5 (if the Committee
authorizes payment in stock).
7.2 Exercise of each Stock Option is conditioned upon the agreement of the
Employee to the terms and conditions of this Plan and of such Stock Option as
evidenced by the Employee's execution and delivery of a Notice and Agreement of
Exercise in a form to be determined by the Committee in its discretion. Such
Notice and Agreement of Exercise shall set forth the agreement of the Employee
that: (a) no Option Shares will be sold or otherwise distributed in violation of
the Securities Act of 1933 (the "Securities Act") or any other applicable
federal or state securities laws, (b) each Option Share certificate may be
imprinted with legends reflecting any applicable federal and state securities
law restrictions and conditions, (c) the Company may comply with said securities
law restrictions and issue "stop transfer" instructions to its Transfer Agent
and Registrar without liability, (d) if the Employee is a Section 16 Reporting
Person, the Employee will furnish to the Company a copy of each Form 4 or Form 5
filed by said Employee and will timely file all reports required under federal
securities laws, and (e) the Employee will report all sales of Option Shares to
the Company in writing on a form prescribed by the Company.
7.3 No Stock Option shall be exercisable unless and until any applicable
registration or qualification requirements of federal and state securities laws,
and all other legal requirements, have been fully complied with. The Company
will use reasonable efforts to maintain the effectiveness of a Registration
Statement under the Securities Act for the issuance of Stock Options and shares
acquired thereunder, but there may be times when no such Registration Statement
will be currently effective. The exercise of Stock Options may be temporarily
suspended without liability to the Company during times when no such
Registration Statement is currently effective, or during times when, in the
reasonable opinion of the Committee, such suspension is necessary to preclude
violation of any requirements of applicable law or regulatory bodies having
jurisdiction
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over the Company. If any Stock Option would expire for any reason except the end
of its term during such a suspension, then if the exercise of such Stock Option
is duly tendered before its expiration, such Stock Option shall be exercisable
and exercised (unless the attempted exercise is withdrawn) as of the first day
after the end of such suspension. The Company shall have no obligation to file
any Registration Statement covering resales of Option Shares.
8. CONTINUOUS EMPLOYMENT.
Except as provided in paragraph 10 below, an Employee may not exercise a Stock
Option unless from the date of grant to the date of exercise such Employee
remains continuously in the employ of the Company. For purposes of this
paragraph 8, the period of continuous employment of an Employee with the Company
shall be deemed to include (without extending the term of the Stock Option) any
period during which such Employee is on leave of absence with the consent of the
Company, provided that such leave of absence shall not exceed three (3) months
and that such Employee returns to the employ of the Company at the expiration of
such leave of absence. If such Employee fails to return to the employ of the
Company at the expiration of such leave of absence, such Employee's employment
with the Company shall be deemed terminated as of the date such leave of absence
commenced. The continuous employment of an Employee with the Company shall also
be deemed to include any period during which such Employee is a member of the
Armed Forces of the United States, provided that such Employee returns to the
employ of the Company within ninety (90) days (or such longer period as may be
prescribed by law) from the date such Employee first becomes entitled to
discharge. If an Employee does not return to the employ of the Company within
ninety (90) days (or such longer period as may be prescribed by law) from the
date such Employee first becomes entitled to discharge, such Employee's
employment with the Company shall be deemed to have terminated as of the date
such Employee's military service ended.
9. RESTRICTIONS ON TRANSFER.
Each Stock Option granted under this Plan shall be transferable only by will
or the laws of descent and distribution. No interest of any Employee under the
Plan shall be subject to attachment, execution, garnishment, sequestration, the
laws of bankruptcy or any other legal or equitable process. Each Stock Option
granted under this Plan shall be exercisable during an Employee's lifetime only
by such Employee or by such Employee's legal representative.
10. TERMINATION OF EMPLOYMENT.
10.1 Upon an Employee's Retirement, Disability or death, (a) all Stock
Options to the extent then presently exercisable shall remain in full force and
effect and may be exercised pursuant to the provisions thereof, including
expiration at the end of the fixed term thereof, and (b) unless otherwise
provided by the Committee, all Stock Options to the extent not then presently
exercisable by such Employee shall terminate as of the date of such termination
of employment and shall not be exercisable thereafter.
10.2 Upon the termination of the employment of an Employee with the Company
for any reason other than the reasons set forth in paragraph 10.1 hereof, (a)
all Stock Options to the extent then presently exercisable by such Employee
shall remain exercisable only for a period of ninety (90) days after the date of
such termination of employment (except that the ninety (90) day period shall be
extended to twelve (12) months if the Employee shall die during such ninety (90)
day period), and may be exercised pursuant to the provisions thereof, including
expiration at the end of the fixed term thereof, and (b) unless otherwise
provided
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by the Committee, all Stock Options to the extent not then presently exercisable
by such Employee shall terminate as of the date of such termination of
employment and shall not be exercisable thereafter.
10.3 For purposes of this Plan:
(a) "Retirement" shall mean an Employee's retirement from the employ of the
Company on or after the date on which such Employee attains the age of sixty-
five (65) years; and
(b) "Disability" shall mean total and permanent incapacity of an Employee,
due to physical impairment or legally established mental incompetence, to
perform the usual duties of such Employee's employment with the Company, which
disability shall be determined: (i) on medical evidence by a licensed
physician designated by the Committee, or (ii) on evidence that the Employee
has become entitled to receive primary benefits as a disabled employee under
the Social Security Act in effect on the date of such disability.
11. ADJUSTMENTS UPON CHANGE IN CAPITAlIZATION.
11.1 The number and class of shares subject to each outstanding Stock Option,
the Exercise Price thereof (but not the total price) and the maximum number of
Stock Options that may be granted under the Plan shall be proportionately
adjusted in the event of any increase or decrease in the number of the issued
shares of Common Stock which results from a split-up or consolidation of shares,
payment of a stock dividend or dividends exceeding a total of five percent (5%)
for which the record dates occur in any one fiscal year, a recapitalization
(other than the conversion of convertible securities according to their terms),
a combination of shares or other like capital adjustment, so that upon exercise
of the Stock Option, the Employee shall receive the number and class of shares
such Employee would have received had such Employee been the holder of the
number of shares of Common Stock for which the Stock Option is being exercised
upon the date of such change or increase or decrease in the number of issued
shares of the Company.
11.2 Upon a reorganization, merger or consolidation of the Company with one or
more corporations as a result of which Viking is not the surviving corporation
or in which Viking survives as a wholly-owned subsidiary of another corporation,
or upon a sale of all or substantially all of the property of the Company to
another corporation, or any dividend or distribution to shareholders of more
than ten percent (10%) of the Company's assets, adequate adjustment or other
provisions shall be made by the Company or other party to such transaction so
that there shall remain and/or be substituted for the Option Shares provided for
herein, the shares, securities or assets which would have been issuable or
payable in respect of or in exchange for such Option Shares then remaining, as
if the Employee had been the owner of such Option Shares as of the applicable
date. Any securities so substituted shall be subject to similar successive
adjustments.
11.3 In the sole discretion of the Committee, Stock Options may include
provisions, on terms (which need not be uniform) authorized by the Committee in
its sole discretion, that accelerate the Employees' rights to exercise Stock
Options upon a sale of substantially all of the Company's assets, the
dissolution of Viking or upon a change in the controlling shareholder interest
in Viking resulting from a tender offer, reorganization, merger or consolidation
or from any other transaction or occurrence, whether or not similar to the
foregoing (each, a "Change in Control").
12. WITHHOLDING TAXES.
The Company shall have the right at the time of exercise of any Stock Option
to make adequate provision for any federal, state, local or foreign taxes which
it believes are or may be required by law to be withheld
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with respect to such exercise ("Tax Liability"), to ensure the payment of any
such Tax Liability. The Company may provide for the payment of any Tax Liability
by any of the following means or a combination of such means, as determined by
the Committee in its sole and absolute discretion in the particular case: (i) by
requiring the Employee to tender a cash payment to the Company, (ii) by
withholding from the Employee's salary, (iii) by withholding from the Option
Shares which would otherwise be issuable upon exercise of the Stock Option that
number of Option Shares having an aggregate fair market value (determined in the
manner prescribed by paragraph 5) as of the date the withholding tax obligation
arises that is equal to the Employee's Tax Liability or (iv) by any other method
deemed appropriate by the Committee. Satisfaction of the Tax Liability of a
Section 16 Reporting Person may be made by the method of payment specified in
clause (iii) above only if the following two conditions are satisfied:
(a) the withholding of Option Shares and the exercise of the related Stock
Option occurs at least six months and one day following the date of grant of
such Stock Option; and
(b) the withholding of Option Shares is made either (i) pursuant to an
irrevocable election ("Withholding Election") made by such Employee at least
six months in advance of the withholding of Options Shares or (ii) on a day
within a ten-day "window period" beginning on the third business day following
the date of release of the Company's quarterly or annual summary statement of
sales and earnings.
Anything herein to the contrary notwithstanding, a Withholding Election may be
disapproved by the Committee at any time.
13. RELATIONSHIP TO OTHER EMPLOYEE BENEFIT PLANS.
Stock Options granted hereunder shall not be deemed to be salary or other
compensation to any Employee for purposes of any pension, thrift, profit-
sharing, stock purchase or any other employee benefit plan now maintained or
hereafter adopted by the Company.
14. AMENDMENTS AND TERMINATION.
The Board of Directors may at any time suspend, amend or terminate this Plan.
No amendment or modification of this Plan may be adopted, except subject to
shareholder approval, which would: (a) materially increase the benefits accruing
to Employees under this Plan, (b) materially increase the number of securities
which may be issued under this Plan (except for adjustments pursuant to
paragraph 11 hereof) or (c) materially modify the requirements as to eligibility
for participation in the Plan.
15. SUCCESSORS IN INTEREST.
The provisions of this Plan and the actions of the Committee shall be binding
upon all heirs, successors and assigns of the Company and of Employees.
16. OTHER DOCUMENTS.
All documents prepared, executed or delivered in connection with this Plan
shall be, in substance and form, as established and modified by the Committee or
by persons under its direction and supervision; provided, however, that all such
documents shall be subject in every respect to the provisions of this Plan, and
in the event of any conflict between the terms of any such document and this
Plan, the provisions of this Plan shall prevail. All Stock Options granted under
the Plan shall be evidenced by written agreements executed by the Company and
the Employees to whom the Stock Options have been granted. Each agreement shall
specify whether a Stock Option is an incentive stock option or a non-statutory
stock option.
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17. NO OBLIGATION TO CONTINUE EMPLOYMENT.
This Plan and grants hereunder shall not impose any obligation on the Company
to continue to employ any Employee. Moreover, no provision of this Plan or any
document executed or delivered pursuant to this Plan shall be deemed modified in
any way by any employment contract between an Employee (or other employee) and
the Company.
18. MISCONDUCT OF AN EMPLOYEE.
Notwithstanding any other provision of this Plan, if an Employee commits fraud
or dishonesty toward the Company or wrongfully uses or discloses any trade
secret, confidential data or other information proprietary to the Company, or
intentionally takes any other action materially inimical to the best interests
of the Company, as determined by the Committee, in its sole and absolute
discretion, such Employee shall forfeit all rights and benefits under this Plan.
19. TERM OF PLAN.
This Plan was adopted by the Board effective December 14, 1989. No Stock
Options may be granted under this Plan after December 14, 1999.
20. GOVERNING LAW.
This Plan shall be construed in accordance with, and governed by, the laws
of the State of California.
21. SHAREHOLDER APPROVAL.
No Stock Option shall be exercisable unless and until the Shareholders of the
Company have approved this Plan and all other legal requirements have been fully
complied with.
22. PRIVILEGES OF STOCK OWNERSHIP.
The holder of a Stock Option shall not be entitled to the privileges of stock
ownership as to any shares of the Company common stock not actually issued to
such holder.
IN WITNESS WHEREOF, this Amended and Restated Plan has been executed effective
as of the 25th day of August, 1993.
VIKING OFFICE PRODUCTS, INC.
By /s/ STEPHEN R. KROLL
---------------------------------
Stephen R. Kroll
Vice-President,
Administration and Secretary
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EXHIBIT 10.25
Exhibit A
---------
VIKING OFFICE PRODUCTS, INC.
CHIEF EXECUTIVE OFFICER
PERFORMANCE BASED BONUS PLAN
1. Purpose. The purpose of the Viking Office Products, Inc., Chief
-------
Executive Officer Performance Based Bonus Plan (hereinafter the "Plan") is to
provide for the payment of annual performance bonuses to Irwin Helford
("Executive"), as long as he remains Chief Executive Officer of the Company,
that qualify for federal income tax deduction by the Company.
2. Certain Definitions. The following terms used in the Plan (whether
-------------------
used in the singular or plural) have the following meanings:
"Annual Award" means the actual dollar amount of the annual bonus
determined by the Committee to be payable to Executive under the Plan,
which may not exceed the Maximum Bonus.
"Board" means the Board of Directors of the Company.
"Business Plan" for any fiscal year means the consolidated business plan
or budget of the Company and its consolidated subsidiaries prepared by the
management of the Company and presented to and approved by the Board prior
to or within thirty days after the commencement of the fiscal year for
which it is prepared.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time, or any successor statute or statutes thereto, and the regulations
thereunder. Reference to any specific Code section shall include any
successor section.
"Committee" means the Compensation Committee of the Board or such other
committee of the Board as the Board may appoint to administer the Plan.
"Company" or "Viking" means Viking Office Products, Inc., a California
corporation, or any successor.
"Discount Option" means a stock option issued under the Company's 1991
Nonstatutory Stock Option Plan or any successor plan adopted by the Company
on similar terms (the "Option Plan"). Each Discount Option (a) shall be
governed by the terms of the Option Plan, (b) shall have a term of ten
years, subject to termination as provided in the Option Plan, (c) shall be
granted at an exercise price of $2.50 per share, subject to adjustment as
provided in the Option Plan, (d)
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<PAGE>
shall be granted on the date the conditions of this Plan for payment of the
Annual Award are satisfied, including the Committee's determination of the
amount of the Annual Award, (e) shall become initially exercisable to purchase
20% of the underlying shares of common stock on each of the first five
anniversaries of the date of grant and (f) shall be deemed to have a value equal
to the difference between the exercise price and the closing price of a share of
common stock of the Company for the last preceding day prior to the date of
grant on which such shares were traded.
"Financial Statements" for any year means the consolidated financial
statements of the Company and its consolidated subsidiaries for such year,
prepared in accordance with generally accepted accounting principles applicable
to the Company and audited by independent accountants.
"Fiscal Year" or "fiscal year" means the Company's regular fiscal year, and
"Fiscal 1995" or "fiscal 1995" (or any subsequent year) means the fiscal year
ending in such numbered calendar year.
"Gross Profit" for any fiscal year means the amount derived from the
Financial Statements for such fiscal year that comprises the same elements of
income and cost as and otherwise corresponds to Target Gross Profit in the
Business Plan for such fiscal year.
"Limit" for any fiscal year means $950,000 (for fiscal 1995) or such other
amount as the Committee may determine prior to or within thirty days after the
beginning of such fiscal year.
"Maximum Bonus" means the lesser of the Limit and the sum of the following:
1% of Salary for each full 0.5% of Target Revenues by which Revenues exceed
90% of Target Revenues and do not exceed 100% of Target Revenues; plus
1% of Salary for each full 0.4% of Target Gross Profit by which Gross
Profit exceeds 90% of Target Gross Profit and does not exceed 100% of
Target Gross Profit; plus
1% of Salary for each full 2/7 of 1.0% of Target Pre-Tax Profit by which
Pre-Tax Profit exceeds 90% of Target Pre-Tax Profit and does not exceed
100% of Target Pre-Tax Profit; plus
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1% of Salary for each full 0.25% of Target Net Income by which Net Income
exceeds 90% of Target Net Income and does not exceed 100% of Target Net
Income; plus,
If each of Revenues, Gross Profit, Pre-Tax Profit and Net Income equals or
exceeds 100% of Target Revenues, Target Gross Profit, Target Pre-Tax Income
and Target Net Income, respectively:
20% of Salary; plus
1% of Salary for each full 1.0% of Target Revenues by which Revenues
exceed 100% of Target Revenues; plus
1% of Salary for each full 1.0% of Target Gross Profit by which Gross
Profit exceeds 100% of Target Gross Profit; plus
1% of Salary for each full 1.0% of Target Pre-Tax Profit by which Pre-
Tax Profit exceeds 100% of Target Pre-Tax Profit; plus
1% of Salary for each full 1.0% of Target Net Income by which Net
Income exceeds 100% of Target Net Income.
"Net Income" for any fiscal year means the amount derived by adding back to
the amount identified as Net Income ( or similar term) in the Financial
Statements for such fiscal year the amount deducted therein (net of tax benefit)
for Annual Award for such fiscal year.
"Performance Goals" means 90% of Target Revenues, 90% of Target Gross
Profit, 90% of Target Pre-Tax Income and 90% of Target Net Income, or any one or
more of them.
"Pre-Tax Profit" for any fiscal year means the amount derived by adding
back to the amount identified as Income Before Taxes on Income (or similar term)
in the Financial Statements for such fiscal year the amount deducted therein for
the Annual Award for such fiscal year.
"Revenues" for any fiscal year means the amount derived from the Financial
Statements for such fiscal year that comprises the same elements of income and
deductions, if any, as and otherwise corresponds to Target Revenues in the
Business Plan for such fiscal year.
"Salary" for any fiscal year means the amount payable to Executive as
salary for such fiscal year in accordance with his Employment Agreement, as
approved by the Committee, as in
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effect on the thirtieth day of such fiscal year, without regard to any
subsequent changes.
"Target Gross Profit" for any fiscal year means the amount identified
as Gross Profit on Sales (or similar term) in the Business Plan for such
fiscal year.
"Target Net Income" for any fiscal year means the amount derived by
adding back to the amount identified as Net income (or similar term) in the
Business Plan for such fiscal year the amount deducted therein (net of tax
benefit) for the Annual Award for such fiscal year.
"Target Pre-Tax Profit" for any fiscal year means the amount derived
by adding back to the amount identified as Pretax income (or similar term)
in the Business Plan for such fiscal year the amount deducted therein for
the Annual Award for such fiscal year.
"Target Revenues" for any fiscal year means the amount identified as
Total Revenue (or similar term) in the Business Plan for such fiscal year.
3. Payment of Annual Bonus. Subject to the other provisions of this
-----------------------
Section 3, the Committee shall determine the amount and time of payment of the
Annual Award.
3.1 Before the Committee makes an Annual Award, the Company's
independent auditors shall review the calculations of the Maximum Bonus, and the
Committee shall certify that one or more of the Performance Goals have been met.
3.2 Notwithstanding the foregoing, the Committee may in its discretion
determine to make an Annual Award for any year in an amount that is less than
the Maximum Bonus.
3.3 One-third of each Annual Award (or such lesser portion as does not
result in the issuance of Discount Options in excess of the individual limit set
forth in the Option Plan) shall be paid by issuing to Executive Discount Options
having a value equal to one-third of the amount of the Annual Award (or such
lesser amount). Such options shall be valued as provided in this Plan. The
balance of the Annual Award shall be paid in cash.
3.4 Subject to Section 5 of this Plan, payment of an Annual Award, if
any, under the Plan with respect to any fiscal year shall be made as soon as
practicable after the Committee certifies that one or more of the Performance
Goals have been met or exceeded.
4. Administration. The Plan shall be administered by the Committee
--------------
subject to the express provisions of the Plan and the
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<PAGE>
requirements of section 162(m) of the Code. The Committee shall have plenary
authority to interpret the Plan, to prescribe, amend and rescind the rules and
regulations relating to it and to make all other determinations deemed necessary
or advisable for the administration of the Plan. Each member of the Committee
shall be an "outside director" within the meaning of the Code. The Board may
from time to time appoint members of the Committee in substitution for or in
addition to members previously appointed and may fill vacancies in the
Committee.
5. Deferral of Annual Award. Executive may elect by written notice
-------------------------
delivered to the Company at least 15 days prior to the commencement of any
fiscal year with respect to which an Annual Award would be payable under the
Plan to defer payment of all or any portion of the Annual Award Executive might
earn with respect to such year, all in accordance with the Code and on such
terms and conditions as the Committee may establish from time to time or as may
be provided in any employment agreement between the Company and Executive.
6. Termination and Amendment. The Plan shall continue in effect until
--------------------------
terminated by the Committee or the Board. The Committee may at any time
modify or amend the Plan in such respects as it shall deem advisable; provided,
however, that any such modification or amendment shall comply with all
applicable laws and applicable requirements for exemption (to the extent
necessary) under section 162(m) of the Code.
7. Effectiveness of the Plan. The Plan shall become effective upon
--------------------------
approval by the vote of a majority of the votes cast at a duly called and held
meeting of shareholders of the Company. Subject to such shareholder approval,
the Plan shall apply to the annual bonus payable to Executive in respect of
fiscal 1995 and each year thereafter.
8. Withholding. The obligations of the Company to make payments under
-----------
the Plan shall be subject to applicable federal, state and local tax withholding
requirements.
9. Severability. If any of the terms or provisions of this Plan conflict
-------------
with the requirements of section 162(m) of the Code or applicable law, then such
terms or provisions shall be deemed inoperative to the extent necessary to avoid
conflict with the requirements of section 162(m) of the Code or applicable law
without invalidating the remaining provisions hereof. If this Plan does not
contain any provision required to be included herein under section 162(m) of the
Code, such provision shall be deemed to be incorporated herein with the same
force and effect as if such provision had been set out at length herein.
10. Non-Exclusivity of the Plan. Neither the adoption of the Plan by the
----------------------------
Committee nor the submission of the Plan to the
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shareholders of the Company for approval shall be construed as creating any
limitations on the power of the Committee or the Board to adopt such other
incentive arrangements as it may deem desirable, including, without limitation,
the granting of stock options or the awarding of stock or cash or other
benefits otherwise than under the Plan, and such arrangements may be either
generally applicable or applicable only in specific cases. None of the
provisions of this Plan shall be deemed to be an amendment to or incorporated
in any employment agreement between the Company and Executive.
11. Beneficiaries. Executive may designate a beneficiary or beneficiaries
-------------
to receive, in the event of the death of Executive, any payments remaining to be
made to Executive under the Plan. The Executive shall have the right to revoke
any such designation and to redesignate a beneficiary or beneficiaries by
written notice to the Company to such effect. If Executive dies without naming a
beneficiary or if all of the beneficiaries named by Executive predecease
Executive, then any amounts remaining to be paid under the Plan shall be paid to
Executive's estate.
12. Law Governing. The Plan shall be governed by, and construed in
-------------
accordance with, the laws of the State of California.
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EXHIBIT 10.26
EXHIBIT B
VIKING OFFICE PRODUCTS, INC.
1994 EMPLOYEE STOCK PURCHASE PLAN
1. PURPOSE.
This Viking Office Products, Inc. 1994 Employee Stock Purchase Plan (the
"Plan") is intended as an incentive to encourage stock ownership by employees of
Viking Office Products, Inc., a California corporation ("Viking"), and
Subsidiaries which it may have from time to time (Viking and its Subsidiaries
together being referred to herein as the "Company"), so that they may acquire a
proprietary interest, or increase their proprietary interest, in the Company,
and to encourage them to remain in the employ of the Company and its
Subsidiaries. "Subsidiary" shall mean each corporation which (i) is or becomes a
"subsidiary corporation" of Viking, within the definition contained in Section
424(f) of the Internal Revenue Code of 1986, as amended (the "Code"), (ii)
conducts its principal business operations in the United States, and (iii) is
designated to have its employees participate in this Plan by the Committee (as
defined below). It is further intended that the Plan qualify as an "employee
stock purchase plan" within the meaning of Section 423 of the Code.
2. ADMINISTRATION.
2.1 The Plan shall be administered by the Compensation Committee (the
"Committee") of Viking's Board of Directors (the "Board"). Each member of the
Committee shall be a "disinterested person" as that term is defined in
Rule 16b-3 of the Securities and Exchange Act of 1934, as amended, but no action
of the Committee shall be invalid if this requirement is not met. The Committee
shall select one of its members as Chairman and shall act by vote of a majority
of a quorum or by unanimous written consent. A majority of its members shall
constitute a quorum. The Committee shall be governed by the provisions of the
Company's Bylaws and of California law applicable to the Board, except as
otherwise provided herein or determined by the Board.
2.2 The Committee shall have full and complete authority, in its discretion,
but subject to the express provisions of the Plan: to designate which
corporations shall be "Subsidiaries" under this Plan, to determine when the
first offering shall be made; to determine the aggregate number of shares of
common stock, without par value, of Viking ("Common Stock"), to be made
available for each offering, and to adopt such rules and regulations and to make
all other interpretations, constructions or determinations deemed necessary or
desirable for the administration of the Plan in its discretion. All
interpretations and constructions of the Plan by the Committee, and all of its
actions hereunder, shall be binding and conclusive on all persons for all
purposes.
2.3 The Company hereby agrees to indemnify and hold harmless each Committee
member and each employee of the Company, and the estate and heirs of such
Committee member or employee, against all claims, liabilities, expenses,
penalties, damages or other pecuniary losses, including legal fees, which such
Committee member or employee or his or her estate or heirs may suffer as a
result of his or her responsibilities, obligations or duties in connection with
the Plan, to the extent that insurance, if any, does not cover the payment of
such items.
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<PAGE>
3. ELIGIBILITY.
3.1 Each regular full-time employee of the Company shall be eligible to
participate in the Plan, provided such employee has been employed continuously
by the Company for at least 90 days as of the Effective Date or any subsequent
Offering Date (in each case as defined in paragraph 4 below).
3.2 The term "employee" shall have the same meaning as the term "employee" as
defined in Treasury Regulation Section 1.421-7(h), and shall include officers,
directors who are also employees and employees on Participant Leaves of Absence
(as defined in paragraph 22), but shall exclude employees whose customary
employment is for less than 20 hours per week or for less than five months in
any calendar year.
3.3 Any provision of the Plan to the contrary notwithstanding, no employee
shall be granted an award:
(a) if, immediately after the grant, such employee would own stock, and/or
hold outstanding options to purchase stock, possessing 5% or more of the total
combined voting power or value of all classes of stock of Viking or of any
subsidiary or parent of Viking, determinations of employee stock ownership
being made for this purpose in accordance with Section 424(d) of the Code; or
(b) which permits such employee's rights to purchase stock under all
employee stock purchase plans (within the meaning of Section 423 of the Code)
for the Company to accrue at a rate which exceeds $25,000 in fair market value
of such stock (determined at the time the award is made) for each calendar
year in which such award would be outstanding at any time, within the meaning
of Section 423(b)(8) of the Code.
4. OFFERING DATES.
The Plan will be implemented by a continuous series of offerings, each of
which shall commence on the first business day after the completion of the
immediately prior offering (the "Offering Date") and shall terminate six months
after the applicable Offering Date (the "Termination Date"). The first offering
shall be made as soon after shareholder approval of the Plan as is determined by
the Committee in its sole discretion (the "Effective Date"). No offering shall
be made if in the opinion of the Committee the Common Stock available under the
Plan has been so substantially exhausted as to make an offering to all eligible
employees impractical under the Plan.
5. PARTICIPATION.
An eligible employee may become a participant by completing and filing an
authorization for a payroll deduction on the form provided by the Committee.
Payroll deductions shall become effective on the first Offering Date after a
participant has filed an authorization and shall terminate upon the earlier to
occur of (i) the participant's request to have payroll deductions discontinued,
as set forth in paragraph 6.3, or (ii) the ceasing for any reason of the
participant to meet the eligibility requirements of paragraph 3, in which event
the provisions of paragraph 9.2 shall apply. Each participant will receive an
award on each Offering Date, and all participants will have the same rights and
privileges under the Plan.
6. PAYROLL DEDUCTIONS.
6.1 At the time a participant files an authorization for a payroll deduction,
he or she shall elect to have deductions made from his or her Annualized Base
Pay, as hereinafter defined, on each payday during the time he or she is a
participant. The minimum deduction permitted hereunder shall be $5.00 per week,
and
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the maximum deduction shall be 10% of the participant's Annualized Base Pay. For
purposes of the Plan, the term "Annualized Base Pay" shall mean the
participant's current annualized base pay from the Company (excluding overtime
and all other extra compensation such as bonuses and contributions to pension,
profit sharing, health and life insurance and other plans).
6.2 All payroll deductions made for a participant shall be credited to his or
her account under the Plan and held with other Company funds. A participant may
not make any separate cash payment into such account, except as provided in
paragraph 22.
6.3 A participant may elect to have payroll deductions completely discontinued
at any time, but an election to discontinue payroll deductions during an
offering shall be deemed to be an election to withdraw pursuant to paragraph
9.1. No change in payroll deductions other than complete discontinuance can be
made during an offering, and, specifically, once an offering has commenced, a
participant may not alter the rate of his or her payroll deductions for such
offering.
7. GRANTING OF AWARDS.
7.1 On each Offering Date, the Committee shall determine the number of
available shares of Common Stock which will be sold to participants in such
offering. On each Offering Date, each participant shall be granted an award to
purchase up to that number of available shares which is equal to the total
number of available shares for such offering multiplied by a fraction, the
numerator of which is the amount of payroll deductions from such participant's
Annualized Base Pay authorized by such participant for the offering period
beginning on such Offering Date, and the denominator of which is the total
amount of payroll deductions from the Annualized Base Pay of all participants
authorized by such participants for the offering period beginning on such
Offering Date. The purchase price of each such share shall be the lower of:
(a) 85% of the fair market value per share of the Common Stock on the
Offering Date, or
(b) 85% of the fair market value per share of the Common Stock on the
Termination Date.
7.2 The fair market value of a share of Common Stock shall be equal to the
closing price of the Common Stock for the last preceding day on which Viking's
shares were traded, and the method for determining the closing price shall be
determined by the Committee.
8. EXERCISE OF AWARDS.
8.1 Unless a participant gives written notice to the Committee as hereinafter
provided, the participant's award will be exercised automatically for such
participant on the Termination Date for the purchase of as many full shares of
Common Stock (no fractional shares shall be issued under this Plan) as the
accumulated payroll deductions in such participant's account at that time will
purchase at the applicable purchase price (but not to exceed the maximum number
of shares subject to the award), and such shares shall be credited to the
participant's account at such time. The amount remaining in the account of a
participant after the exercise in full of an award shall be carried forward in
the participant's account and be available for the next succeeding offering to
the extent such remaining amount is attributable to fractional shares; such
remaining amount shall be refunded to the participant to the extent it exceeds
the amount attributable to fractional shares.
8.2 No participant may purchase during any calendar year Common Stock under
this and all other employee stock purchase plans (within the meaning of Section
423 of the Code) of the Company having a fair market value (determined at the
time the award is made) in excess of $25,000. When a participant has
B-3
<PAGE>
purchased the maximum amount of stock which may be purchased in any calendar
year, all amounts credited to such participant's account under the Plan in
excess of the amount applied to the purchase of such stock shall be returned to
the participant, payroll deductions for the participant shall cease and the
participant shall be ineligible to participate in any additional offering during
such calendar year.
8.3 Upon a participant's death, his beneficiary (or executor or administrator,
as determined under paragraph 12) shall have the right to elect, by written
notice given to the Committee before the earlier of the Termination Date of the
current offering or the expiration of a period of 60 days beginning with the
date of the participant's death, either to:
(a) withdraw all of the payroll deductions previously credited to the
participant's account, or
(b) apply to the exercise of the participant's award any amount in such
participant's account as of the date of his death, and thereby purchase Common
Stock on the Termination Date next following the date of the participant's
death, with any excess payroll deductions in such account being returned to
such beneficiary (or other person entitled thereto under paragraph 12)
without interest.
If the Committee does not receive any such written notice of election within
the time specified in this paragraph 8.3, the beneficiary (or executor or
administrator, as determined under paragraph 12) shall be deemed to have
automatically elected to exercise the participant's award pursuant to
subparagraph (b) of this paragraph 8.3.
9. WITHDRAWAL.
9.1 By written notice to the Committee at any time during any offering, a
participant may elect to withdraw all the accumulated payroll deductions in such
participant's account as of the Termination Date of such offering, without
interest. A participant shall be deemed to have elected to make such a
withdrawal if such participant elects to discontinue payroll deductions
completely during an offering as described in paragraph 6.3. A participant who
withdraws all or any part of the amount credited to such participant's account
during an offering, or who elects to discontinue payroll deductions completely
during an offering under paragraph 6.3, shall be deemed to have given notice of
his or her intention to cease to be a participant for that offering and any
succeeding offerings, and all payroll deductions under the Plan with respect to
such participant shall be discontinued; provided, however, that such participant
may become a participant in any succeeding offering for which he or she is
otherwise eligible in accordance with the Plan, if the participant files with
the Committee a new authorization for payroll deductions in accordance with
paragraph 5.
9.2 Upon the ceasing of a participant to meet the eligibility requirements of
paragraph 3, or the termination of the participant's employment for any reason,
including retirement, except as provided in paragraph 8.3, he or she shall
immediately cease to be a participant, any award which he or she may have been
granted under the Plan shall immediately expire and shall not be exercised, and
the payroll deductions and shares previously credited to his or her account
shall be returned to him or her within 30 days after such cessation or
termination, without interest.
10. DELIVERY.
As promptly as practicable after each Termination Date, the Company will
deliver to each participant, as appropriate, any Common Stock purchased upon the
exercise of his or her award and any cash to which he or she may be entitled.
B-4
<PAGE>
11. STOCK.
11.1 The stock to be sold to participants under the Plan shall be Common Stock
of Viking. The maximum number of shares of Common Stock which shall be made
available for sale under the Plan during all offerings under the Plan shall be
720,000 shares, subject to adjustment upon changes in capitalization of the
Company as provided in paragraph 15.
11.2 Stock to be delivered to a participant under the Plan will be registered
in the name of the participant.
11.3 No participant will have any interest in stock covered by an award until
such award has been exercised. Any shares which are subject to sale pursuant to
an award made under the Plan but which are not purchased on the Termination Date
of the related offering shall be available for sale pursuant to awards made in
subsequent offerings under the Plan.
12. DESIGNATION OF BENEFICIARY.
A participant may file with the Committee, and change from time to time, a
written designation of a beneficiary who is to receive any payroll deductions
and shares of Common Stock credited to the participant's account under the Plan
in the event of such participant's death. Upon receipt by the Committee at the
participant's death of proof of the identity and existence of a beneficiary
validly designated by the participant under the Plan, the Company shall deliver
such Common Stock and cash to such beneficiary. In the event of the death of a
participant who has not filed a written designation of a beneficiary, the
Company shall deliver such cash and Common Stock to the executor or
administrator of the estate of the participant, or, if no such executor or
administrator has been appointed (to the knowledge of the Committee), at the
direction of the Committee acting in its discretion, to the spouse or to any one
or more dependents or relatives of the participant, or, if no spouse, dependent,
or relative is known to the Committee, to such other person as the Committee may
designate. No designated beneficiary shall, prior to the death of the
participant, acquire any interest in the cash or Common Stock credited to a
participant's account under the Plan.
13. TRANSFERABILITY.
Neither awards, payroll deductions credited to a participant's account nor any
rights to receive Common Stock under the Plan may be assigned, transferred,
pledged, or otherwise disposed of in any way by the participant, except that
payroll deductions and shares credited to a participant's account shall be
transferable by will or the laws of descent and distribution or as provided by
paragraph 12. Any attempted assignment, transfer, pledge or other disposition
prohibited by the preceding sentence shall be without effect, except that the
Company may treat such act as an election to withdraw funds in accordance with
paragraph 9.
14. USE OF FUNDS.
All payroll deductions received or held by the Company under the Plan may be
used by the Company for any corporate purpose, and the Company shall not be
obligated to segregate such payroll deductions.
15. CHANGES IN CAPITALIZATION.
15.1 The number and class of shares of stock covered by each outstanding
award, the purchase price per share thereof, and the maximum number and class of
shares of stock issuable upon exercise of all awards
B-5
<PAGE>
under the Plan shall be proportionately adjusted in the event of any increase or
decrease in the number of the issued shares of Common Stock of the Company which
results from a split-up or consolidation of shares, payment of a stock dividend
or dividends exceeding a total of 5% for which the record dates occur in any one
fiscal year, a recapitalization (other than the conversion of convertible
securities according to their terms), a combination of shares or other like
capital adjustment, so that upon exercise of the award, the participant shall
receive the number and class of shares such participant would have received had
such participant been the holder of the number of shares of Common Stock for
which the award is being exercised upon the date of such change or increase or
decrease in the number of issued shares of the Company. If any adjustment
hereunder would create a fractional share or a right to acquire a fractional
share, such fractional share shall be disregarded and the number of shares
available under this Plan or the number of shares to which any optionee is
entitled shall be the next lower number of whole shares, rounding all fractions
downward.
15.2 Upon a reorganization, merger or consolidation of Viking with one or more
corporations as a result of which Viking is not the surviving corporation or in
which Viking survives as a wholly-owned subsidiary of another corporation, or
upon a sale of all or substantially all of the property of the Company to
another corporation, or any dividend or distribution to shareholders of more
than ten percent (10%) of the Company's assets, adequate adjustment or other
provisions shall be made by the Company or other party to such transaction so
that there shall remain and/or be substituted for the Common Stock subject to
each award, the shares, securities, cash or assets which would have been
issuable in respect of such award, as if the participant had been the owner of
such Common Stock as of the applicable date. Any shares, securities, cash or
assets so substituted shall be subject to similar successive adjustments.
16. SECURITIES REGISTRATION.
16.1 If the Company shall deem it necessary to register under the Securities
Act of 1933, as amended (the "Securities Act"), or other applicable statutes any
shares with respect to which an award shall have been made, then the Company
will use reasonable efforts to maintain the effectiveness of a Registration
Statement under the Securities Act before delivery of such shares. If the shares
of stock of the Company shall be listed on any national securities exchange at
the time of exercise of any award, then whenever required, the Company shall
make prompt application for the listing on such stock exchange of such shares,
at the sole expense of the Company.
16.2 Notwithstanding any other provision of this Plan or any award hereunder,
the Company shall be under no obligation to issue shares under the Plan while,
in the opinion of its counsel, any applicable legal requirement for the issuance
of such shares may not be satisfied, including but not limited to the
requirements of the Securities Act and California or other state securities
laws. The Company shall use its best efforts to satisfy all such applicable
legal requirements. If any shares are issued upon exercise of an award under the
Plan without registration under the Securities Act, then the award shares shall
bear a suitable restrictive legend and the acceptance of such Award Shares shall
be subject to the execution of an investment letter by the participant, in form
and substance satisfactory to the Committee.
17. AMENDMENT OR TERMINATION.
The Board may at any time terminate or amend the Plan. No such termination
shall affect awards previously made, nor may an amendment make any change in any
award theretofore granted which would
B-6
<PAGE>
adversely affect the rights of any participant, nor may an amendment be made
without prior approval of the shareholders of the Company if such amendment
would:
(a) Permit the sale of more shares of Common Stock than are authorized
under paragraph 11 of the Plan;
(b) Effect any change in the designation of eligible employees under
paragraph 3 of the Plan; or
(c) Materially increase the benefits accruing to participants under
the Plan.
18. APPLICATION OF PROCEEDS.
Proceeds from the sale of award shares shall constitute a part of the
general funds of the Company.
19. SUCCESSORS IN INTEREST.
The provisions of this Plan and the actions of the Committee shall be binding
on all heirs and successors of the Company and each participant.
20. WITHHOLDING TAXES.
The Company shall have the right at the time of purchase of any shares of
Common Stock hereunder to make adequate provision for any federal, state, local
or foreign taxes which it believes are or may be required by law to be withheld
with respect to such purchase, to ensure the payment of any such taxes,
including by withholding from the participant's salary.
21. CONTINUED EMPLOYMENT.
This Plan and awards hereunder shall not impose any obligation on the Company
to continue to employ any participant. Moreover, no provision of this Plan or
any document executed or delivered pursuant hereto shall be deemed modified in
any way by any employment contract between a participant (or other employee) and
the Company.
22. LEAVES OF ABSENCE.
22.1 For purposes of participation in this Plan, a person on leave of absence
shall be deemed to be an employee for the first 90 days of such leave of
absence, or, if longer, the period for which the participant's reemployment is
guaranteed by statute (a "Participant Leave Of Absence"). Such employee's
employment for all purposes of this Plan, and such employee's participation in
this Plan and right to exercise any award, shall be deemed to have terminated at
the close of business on the last day of such Participant Leave Of Absence and
the provisions of paragraph 6.3 shall apply, unless such employee returns to
employment (as defined in paragraph 3.2) before the close of business on such
last day. Termination by the Company of any employee's leave of absence, other
than termination of such leave of absence on return to employment (as defined in
paragraph 3.2), shall terminate such employee's employment for all purposes of
this Plan, and shall terminate such employee's participation in the Plan and
right to exercise any award, and the provisions of paragraph 6.3 shall apply.
22.2 While a participant is on a Participant Leave Of Absence treated as
employment under the provisions of paragraph 22.1, such participant shall have
the right to continue participation in the Plan, and to apply to the exercise of
awards (i) any amounts in such participant's account as of the commencement of
such Participant Leave Of Absence, (ii) any amounts which the participant
authorizes the Company to deduct
B-7
<PAGE>
from any payments made by the Company to such participant during such
Participant Leave Of Absence, and (iii) any amounts paid by the participant to
the Company to the extent that the amounts set forth in clauses (i) and (ii) of
this sentence are less than the amounts such participant could have had deducted
from his Annualized Base Pay if he had actually worked for the Company during
the period of his Participant Leave Of Absence.
23. TERM OF PLAN.
This Plan was adopted by the Board as of September 29, 1994, shall be
effective upon approval by the shareholders of Viking and shall terminate on
September 29, 2004. No award shall be made under the Plan after such
termination, but awards made prior thereto shall be unaffected by such
termination.
24. GOVERNING LAW.
The Plan shall be construed in accordance with, and governed by, the laws
of the State of California.
25. RELATIONSHIP TO OTHER EMPLOYEE BENEFIT PLANS.
The excess of the fair market value of Common Stock purchased hereunder on its
date of purchase over the amount actually paid for such Common Stock hereunder
shall not be deemed to be salary or other compensation to any participant for
purposes of any pension, thrift, profit-sharing, stock option or any other
employee benefit plan now maintained or hereafter adopted by the Company.
26. OTHER DOCUMENTS.
All documents prepared, executed or delivered in connection with this Plan
shall be, in substance and form, as established and modified by the Committee or
by persons under its direction and supervision; provided, however, that all such
documents shall be subject in every respect to the provisions of this Plan, and
in the event of any conflict between the terms of any such document and this
Plan, the provisions of this Plan shall prevail.
27. NOTICES.
All notices or other communications by a participant to the Committee under or
in connection with the Plan shall be deemed to have been duly given when
received in the form specified by the Committee at the location or by the person
designated by the Committee for the receipt thereof.
28. SEVERABILITY.
If any of the provisions of the Plan shall be held invalid, the remainder of
the Plan shall not be affected thereby.
IN WITNESS WHEREOF, this document has been executed as of the 29th day of
September, 1994.
VIKING OFFICE PRODUCTS, INC.
By: /s/ IRWIN HELFORD
------------------------------------
Irwin Helford
Chairman of the Board
President and Chief Executive Officer
B-8
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<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-END> DEC-31-1994
<CASH> 19,112
<SECURITIES> 31,121
<RECEIVABLES> 85,907
<ALLOWANCES> 7,668
<INVENTORY> 57,977
<CURRENT-ASSETS> 196,120
<PP&E> 48,407
<DEPRECIATION> 12,983
<TOTAL-ASSETS> 263,470
<CURRENT-LIABILITIES> 88,610
<BONDS> 0
<COMMON> 87,923
0
0
<OTHER-SE> 86,630
<TOTAL-LIABILITY-AND-EQUITY> 174,553
<SALES> 371,552
<TOTAL-REVENUES> 371,552
<CGS> 245,816
<TOTAL-COSTS> 245,816
<OTHER-EXPENSES> 92,610
<LOSS-PROVISION> 5,102
<INTEREST-EXPENSE> 81
<INCOME-PRETAX> 31,336
<INCOME-TAX> 11,779
<INCOME-CONTINUING> 19,557
<DISCONTINUED> 0
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<EPS-PRIMARY> 0.46
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