<PAGE>
================================================================================
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
Viking Office Products, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(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>
[LOGO OF VIKING OFFICE PRODUCTS]
VIKING OFFICE PRODUCTS, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON NOVEMBER 13, 1997
To the Shareholders of Viking Office Products, Inc.:
The Annual Meeting of Shareholders of Viking Office Products, Inc., a
California corporation ("Viking"), will be held on Thursday, November 13,
1997, at 9:00 a.m., P.S.T., at Viking's executive offices, 950 West 190th
Street, Torrance, California 90502, for the following purposes:
(1) To elect a Board of Directors;
(2) To consider and act upon a proposal to adopt the 1997 Incentive Stock
Option Plan;
(3) To consider and act upon a proposal to ratify the selection of auditors;
and
(4) To transact any other business which may properly come before the
meeting.
Only shareholders of record at the close of business on September 19, 1997,
are entitled to notice of and to vote at the meeting and any adjournments
thereof.
All shareholders are cordially invited to attend the meeting in person.
Whether or not you expect to attend the meeting, PLEASE COMPLETE AND SIGN THE
ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE. The giving of
your proxy will not affect your right to vote in person should you later
decide to attend the meeting.
By Order of the Board of Directors
/s/ Charlotte Wiethoff
Torrance, California Charlotte Wiethoff,
October 2, 1997 Secretary
<PAGE>
VIKING OFFICE PRODUCTS, INC.
950 WEST 190TH STREET
TORRANCE, CALIFORNIA 90502
(310) 225-4500
PROXY STATEMENT
OCTOBER 3, 1997
GENERAL INFORMATION
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Viking Office Products, Inc. ("Viking"),
for the Annual Meeting of Shareholders to be held on November 13, 1997, and
any postponements or adjournments thereof. This Proxy Statement and the
accompanying Notice of Annual Meeting and form of proxy were first mailed to
shareholders on or about October 2, 1997.
The execution and return of the enclosed proxy will not in any way affect a
shareholder's right to attend the Annual Meeting in person. Any shareholder
giving a proxy may revoke it before it is voted by notifying the Secretary of
Viking in writing before or at the meeting, by providing a proxy bearing a
later date or by attending the meeting and expressing a desire to vote in
person. Your cooperation in promptly returning the enclosed proxy will reduce
Viking's expenses and enable its management and employees to continue their
normal duties for your benefit with minimum interruption for follow-up proxy
solicitation.
Only shareholders of record at the close of business on September 19, 1997,
are entitled to receive notice of and to vote at the meeting. On that date,
Viking had outstanding 84,042,093 shares of Common Stock, each of which is
entitled to one vote at the meeting. Directors are elected by a plurality of
the votes cast, and the affirmative vote of a majority of the shares present
or represented by proxy at the meeting is required for approval of all other
matters being submitted to the shareholders for their consideration.
The presence at the Annual Meeting, either in person or by proxy, of the
holders of a majority of the shares of Common Stock outstanding on the record
date is necessary to constitute a quorum for the transaction of business.
Abstentions and broker non-votes (which occur if a broker or other nominee
does not have discretionary authority and has not received voting instructions
from the beneficial owner with respect to the particular item) are counted for
purposes of determining the presence or absence of a quorum for the
transaction of business. Abstentions are counted in tabulations of the votes
cast on proposals presented to the shareholders and have the same legal effect
as a vote against a particular proposal. Broker non-votes are not taken into
account for purposes of determining whether a proposal has been approved by
the requisite shareholder vote.
All proxies will be voted as directed by the shareholder on the proxy card.
IF NO CHOICE IS SPECIFIED, PROXIES WILL BE VOTED "FOR" THE DIRECTORS NOMINATED
BY THE BOARD OF DIRECTORS, "FOR" THE 1997 INCENTIVE STOCK OPTION PLAN AND
"FOR" THE RATIFICATION OF THE SELECTION OF AUDITORS.
If any other matters are properly presented at the Annual Meeting,
including, among other things, consideration of a motion to adjourn the Annual
Meeting to another time or place for the purpose of soliciting additional
proxies, the persons named in the enclosed form of proxy and acting thereunder
will have the discretion to vote on those matters in accordance with their
best judgment, subject to direction by the Board of Directors, to the same
extent as the person signing the proxy. It currently is not anticipated that
any other matters will be raised at the Annual Meeting.
<PAGE>
The cost of preparing, printing and mailing the Proxy Statement, the Notice
and the enclosed form of proxy, as well as the cost of soliciting proxies
relating to the Annual Meeting, will be borne by Viking. The original
solicitation of proxies by mail may be supplemented by telephone, telegram and
personal solicitation by officers and other regular employees of Viking, but
no additional compensation will be paid to such individuals on account of such
activities. Viking will reimburse banks, brokerage houses and other
custodians, nominees and fiduciaries for their reasonable expenses in
forwarding proxy materials to their principals.
ELECTION OF DIRECTORS
NOMINEES AND VOTING
Six directors are to be elected at the Annual Meeting. All directors hold
office until the next Annual Meeting and until their respective successors are
elected and qualified. The Board of Directors has nominated for election as
directors the six persons named below, all of whom are incumbent directors.
All of these nominees have indicated that they are able and willing to serve
as directors.
Based on the number of holders of Viking's outstanding Common Stock on
September 19, 1997, the record date for the Annual Meeting, Viking meets the
requirements for a listed corporation within the meaning of the California
Corporations Code. As a result, in accordance with the provisions of Viking's
bylaws, shareholders do not have cumulative voting rights in connection with
the election of directors. Instead, each share of Common Stock is entitled to
one vote for each director to be elected.
The Board of Directors recommends that the shareholders vote "FOR" the
election of its nominees. Unless otherwise instructed, the persons named in
the enclosed proxy intend to vote the shares of Common Stock represented by
the proxies in favor of the election of these nominees. If for any reason any
of these nominees will be unable to serve, the persons named in the enclosed
proxy will vote instead for such other person or persons as the Board of
Directors may recommend.
The following table sets forth certain information as of September 19, 1997
with respect to the Board's nominees:
<TABLE>
<CAPTION>
DIRECTOR
NAME OF NOMINEE AGE SINCE
--------------- --- --------
<S> <C> <C>
Irwin Helford................................................ 63 1985
M. Bruce Nelson.............................................. 52 1996
Lee A. Ault III.............................................. 61 1992
Neil R. Austrian............................................. 57 1988
Charles P. Durkin, Jr........................................ 59 1992
Joan D. Manley............................................... 65 1989
</TABLE>
BUSINESS EXPERIENCE DURING THE PAST FIVE YEARS
Irwin Helford served as President since joining Viking in January 1984 until
January 1996 and also has served as Chairman of the Board and Chief Executive
Officer since September 1988.
M. Bruce Nelson joined Viking in January 1995 as Executive Vice President
and was elected Chief Operating Officer in July 1995 and President in January
1996. From 1990 until July 1994, Mr. Nelson was President and Chief Executive
Officer of BT Office Products USA. Mr. Nelson had previously worked for over
22 years at Boise Cascade Office Products in a number of executive positions.
2
<PAGE>
Lee A. Ault III served as the Chief Executive Officer of Telecredit, Inc., a
payment services company, from November 1968 until January 1992. Mr. Ault also
was President of Telecredit, Inc., from 1968 until 1983 and Chairman of the
Board from 1983 until January 1992. Since January 1991, Mr. Ault has served as
a director of Equifax Inc., a New York Stock Exchange listed company and the
parent company of Telecredit, Inc. Mr. Ault also serves as a director of
Bankers Trust New York Corporation, Bankers Trust Company and Sunrise Medical
Inc.
Neil R. Austrian has served as President and Chief Operating Officer of the
National Football League since April 1991. He was a Managing Director of
Dillon, Read & Co. Inc. ("Dillon Read") from October 1987 to March 1991. Mr.
Austrian also serves as a director of Bankers Trust New York Corporation and
Refac Technology Development.
Charles P. Durkin, Jr., is a Managing Director of Dillon Read and has been
employed by that firm in various capacities since 1966. Mr. Durkin also serves
as a director of Big River Minerals, Hi-Lo Automotive Corporation, Inc. and
CapMAC Holdings Inc.
Joan D. Manley retired in 1984 after serving six years as a Group Vice
President and a director of Time Incorporated. Ms. Manley also serves as a
director of Sara Lee Corporation, Aon Corporation, Scholastic, Inc. and BFP
Holdings Inc.
No family relationships exist between any of the directors or officers of
Viking.
MEETINGS OF THE BOARD OF DIRECTORS AND COMMITTEES
Viking maintains an Audit Committee whose current members are Ms. Manley and
Messrs. Ault, Austrian and Durkin. The Audit Committee approves the selection
and engagement of independent accountants and reviews with them the plan and
scope of their audit for each year, the results of such audit when completed
and their fees for services performed. The Audit Committee also assists and
makes recommendations to the Board of Directors in fulfilling the Board's
responsibilities relating to Viking's accounting, financial reporting and
internal auditing policies and practices. The Audit Committee met three times
during fiscal 1997.
Viking maintains a Compensation Committee whose current members are Ms.
Manley and Messrs. Ault, Austrian and Durkin. The Compensation Committee
approves the compensation of the officers of Viking, formulates and reviews
significant compensation policies and decisions and administers Viking's
employee benefit plans. The Compensation Committee met six times during fiscal
1997.
Viking's Board of Directors met six times during fiscal 1997. Each director
attended at least 75% all of the meetings of the Board of Directors and of any
committees on which he or she served. Viking does not maintain a nominating
committee.
COMPENSATION OF DIRECTORS
During calendar 1997, directors who were not employees of Viking or
affiliated with Dillon Read were paid an annual retainer of $8,000 plus $4,000
for each Board meeting attended. The same compensation arrangements are
expected to apply in calendar 1998. All directors are reimbursed for their
travel expenses incurred in attending Board or committee meetings.
3
<PAGE>
Pursuant to the provisions of the Viking Office Products, Inc. 1992
Directors' Stock Option Plan, as amended (the "Directors' Plan"), each new
non-employee director, on the date of his or her election to the Board of
Directors (whether elected by the shareholders or the Board of Directors), and
each director who was an employee of Viking and later ceases to be an
employee, on the first date that such director is not an employee and is re-
elected as a director, automatically will be granted a stock option to
purchase 40,000 shares of Common Stock at an exercise price equal to the fair
market value of the Common Stock on the date of grant. In addition, each time
a non-employee director has served on the Board for a period of five
consecutive years, such director automatically will be granted a stock option
to purchase 20,000 shares of Common Stock at an exercise price equal to the
fair market value of the Common Stock on the date of grant. Accordingly, on
January 9, 1997, Mr. Ault was automatically granted a stock option to purchase
20,000 shares of Common Stock at an exercise price of $27.00, the fair market
value of the Common Stock on the date of grant. Mr. Durkin, who was elected to
the Board of Directors in July 1992, also is eligible to receive an additional
stock option under the terms of the Directors' Plan. However, in accordance
with the policies of Dillon Read, Mr. Durkin declined the stock option award
to which he would otherwise have been entitled.
As part of its overall program to promote charitable giving, Viking has
established a directors' charitable award program which is funded by life
insurance policies on each of the directors. Under the program, directors,
including employee and non-employee directors, who have served at least five
years as a director of Viking, are eligible to recommend up to five charitable
organizations that would share in a $1 million contribution to be made by
Viking, with $100,000 paid out upon the director's retirement and the
remaining $900,000 paid out in nine equal annual installments commencing after
the death of the director. Viking's payment of the contributions will
ultimately be recovered from the proceeds of life insurance policies which are
being maintained by Viking for this purpose. Individual directors derive no
financial benefit from this program since all charitable deductions accrue
solely to Viking. Five of Viking's six directors have served at least five
years on the Board and currently participate in this program. The overall
program will not result in a material cost to Viking.
4
<PAGE>
OWNERSHIP OF COMMON STOCK
The following table sets forth information with respect to the beneficial
ownership of Viking Common Stock as of September 19, 1997 by (i) each person
who is known by Viking to be the beneficial owner of more than five percent
(5%) of the outstanding Common Stock, (ii) each continuing director of Viking,
(iii) the executive officers named in the Summary Compensation Table below and
(iv) all directors and executive officers as a group. Unless otherwise
indicated, each of the entities and persons named in the table has sole voting
and investment power with respect to all shares of Common Stock beneficially
owned by it, him or her.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED(1)
----------------------------
PERCENT
NAME AND ADDRESS NUMBER OF CLASS
---------------- ----------- -----------
<S> <C> <C>
FMR Corp.................................... 11,337,100 13.49%
82 Devonshire Street
Boston, Massachusetts 02109
Putnam Investments, Inc. ................... 10,602,451 12.62%
One Post Office Square
Boston, Massachusetts 02109
Edgemont Asset Management Corp. ............ 6,117,000 7.28%
140 E. 45th Street, 43rd Floor
New York, New York 10017
The Capital Group Companies, Inc.(2)........ 4,790,000 5.70%
333 South Hope Street
Los Angeles, California 90071
Irwin Helford(3)............................ 3,630,045 4.31%
Mark Muir(3)................................ 342,683 *
Neil R. Austrian............................ 146,848 *
Charles P. Durkin, Jr. ..................... 124,368 *
M. Bruce Nelson............................. 113,133 *
Joan D. Manley.............................. 112,000 *
Lee A. Ault III............................. 48,800 *
Ronald W. Weissman(4)....................... 54,144 *
Frank R. Jarc............................... 25,026 *
All directors and executive officers as a
group (12 persons)(5)...................... 5,396,682 6.33%
</TABLE>
- --------
* Indicates ownership of less than one percent.
(1) Includes shares which may be purchased upon the exercise of options which
are exercisable as of September 19, 1997, or become exercisable within 60
days thereafter, for the following: Mr. Helford--101,407 shares; Mr.
Muir--153,394 shares; Mr. Austrian--48,000 shares; Mr. Nelson--112,000
shares; Ms. Manley--48,000 shares; Mr. Ault--40,000 shares; Mr. Weissman--
41,480 shares; Mr. Jarc--24,000 shares; and all directors and executive
officers as a group--1,149,321 shares.
(2) A parent holding company of a group of investment management companies
that hold investment power and, in some cases, voting power over the
securities indicated. The Capital Group Companies, Inc. does not have
investment or voting power over any of the securities indicated as
beneficially owned by it.
(3) Includes 100,000 shares issued under the Long-Term Stock Incentive Plan
(the "Incentive Plan") which are subject to transfer restrictions and to
forfeiture until June 30, 2007.
(4) Includes 20,000 shares issued under the Incentive Plan which are subject
to transfer restrictions and to forfeiture until June 30, 2007.
(5) Includes 430,000 shares issued under the Incentive Plan which are subject
to transfer restrictions and to forfeiture until June 30, 2007.
5
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table summarizes all compensation paid to Viking's Chief
Executive Officer and to each of the other four most highly paid executive
officers for services rendered in all capacities to Viking and its
subsidiaries for fiscal 1997, 1996 and 1995.
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL ------------
COMPENSATION AWARDS(1)
----------------- ------------
SECURITIES
NAME AND PRINCIPAL UNDERLYING ALL OTHER
POSITION YEAR SALARY BONUS OPTIONS(#) COMPENSATION(2)
------------------ ---- -------- -------- ------------ --------------
<S> <C> <C> <C> <C> <C>
Irwin Helford(3)....... 1997 $700,000 $136,500 2,619 $337,817(4)
Chairman of the Board 1996 700,000 525,000 37,407 346,117(4)
and Chief Executive 1995 600,000 633,333 19,638 356,577(4)
Officer
M. Bruce Nelson(5)..... 1997 500,000 180,000(6) 95,000 6,944
President and Chief 1996 400,000 295,000 250,000 8,209
Operating Officer 1995 161,538 70,000 40,000 --
Frank R. Jarc(5)....... 1997 350,000 119,700 145,000 90,144(7)
Executive Vice 1996 9,423 -- -- --
President and Chief 1995 -- -- -- --
Financial Officer
Ronald W. Weissman(5).. 1997 250,000 142,500 22,500 8,815
Vice President, 1996 220,000 120,000 51,440 9,034
Logistics 1995 161,443 84,500 20,000 8,751
Mark Muir.............. 1997 260,000 72,800 22,500 9,468
Vice President, 1996 222,000 155,000 53,600 9,874
Marketing 1995 185,000 131,000 20,000 8,751
</TABLE>
- --------
(1) Stock-based compensation amounts have been adjusted for all years to
reflect Viking's May 1996 two-for-one stock split. The following number of
restricted shares (and the value of such shares based on the closing price
of the Common Stock on June 27, 1997) were held by the named executives as
of June 27, 1997: Mr. Helford, 100,000 shares ($1,862,500); Mr. Nelson, 0
shares ($0); Mr. Jarc, 0 shares ($0); Mr. Weissman, 20,000 shares
($372,500); and Mr. Muir, 100,000 shares ($1,862,500). Dividends are
payable on such shares at the same rate as paid to all shareholders.
Subject to the executive's continued employment with Viking, all
restricted shares will vest in 2007.
(2) For fiscal 1997, the amounts shown include Profit Sharing Plan
contributions of $6,944 for each of the named executives and contributions
by Viking to a defined contribution 401(k) plan of $1,010 for Mr. Helford,
$0 for Mr. Nelson, $4,500 for Mr. Jarc, $1,871 for Mr. Weissman and $2,524
for Mr. Muir. For fiscal 1996, the amounts shown include Profit Sharing
Plan contributions of $8,209 for each of Messrs. Helford, Nelson, Weissman
and Muir and contributions by Viking to a defined contribution 401(k) plan
of $2,250 for Mr. Helford, $0 for Mr. Nelson, $0 for Mr. Jarc, $825 for
Mr. Weissman and $1,665 for Mr. Muir. The amounts shown in the table for
fiscal 1995 consist of Viking's contributions to its Profit Sharing Plan
for the named executives other than Messrs. Nelson and Jarc. For Mr.
Helford, the amounts also include $4,180 paid in fiscal 1997, $3,330 paid
in fiscal 1996 and $3,038 paid in fiscal 1995 in premiums for additional
life insurance benefits payable to beneficiaries designated by him.
6
<PAGE>
(3) Mr. Helford's bonus for fiscal 1997, 1996 and 1995 was determined pursuant
to the Chief Executive Officer Performance Based Bonus Plan (the "CEO
Bonus Plan"). Pursuant to the CEO Bonus Plan, one-fourth of the bonus
payable to Mr. Helford for fiscal 1997 ($45,500) and fiscal 1996
($175,000), and one-third of the bonus payable to him for fiscal 1995
($316,667), was paid by the issuance of stock options to purchase shares
of Viking Common Stock under the Amended and Restated 1991 Nonstatutory
Stock Option Plan (the "1991 Plan") with an exercise price of $1.25 per
share. Accordingly, Mr. Helford was granted stock options to purchase an
aggregate of 2,619 shares of Common Stock for fiscal 1997, 7,407 shares of
Common Stock for fiscal 1996 and 19,368 shares of Common Stock for fiscal
1995. See "Compensation Committee Report on Executive Compensation--
Compensation of Irwin Helford".
(4) In fiscal 1997, 1996 and 1995, Viking paid insurance premiums under a
split dollar life insurance arrangement with a trust for named
beneficiaries of Mr. Helford. At the death of Mr. Helford or, if certain
assumptions as to life expectancy, policy dividends and other factors are
realized, at the surrender of the policies, Viking will recover the full
amount of premiums it paid. The amount in the table includes $325,683 for
fiscal 1997, $332,328 for fiscal 1996 and $344,788 for fiscal 1995, which
represents the present value of the benefit from premiums paid by Viking.
(5) Mr. Nelson joined Viking in January 1995, Mr. Jarc joined Viking in June
1996 and Mr. Weissman joined Viking in August 1994.
(6) Includes a bonus of $80,000 pursuant to the President's Performance Based
Bonus Plan and an additional bonus of $100,000 approved by the
Compensation Committee. See "Compensation Committee Report on Executive
Compensation--Compensation of Other Executive Officers".
(7) Includes $78,700 in reimbursement of moving expenses, including closing
costs on the sale of his personal residence, a temporary housing allowance
and tax equalization payments made to Mr. Jarc in connection with his
relocation to Los Angeles.
7
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth certain information at June 27, 1997, and for
the fiscal year then ended, with respect to stock options granted to the
individuals named in the Summary Compensation Table.
<TABLE>
<CAPTION>
POTENTIAL REALIZED VALUE OF
NUMBER OF PERCENT ASSUMED ANNUAL RATES OF STOCK
SECURITIES OF TOTAL GRANT PRICE APPRECIATION FOR OPTION
UNDERLYING GRANTED TO EXERCISE DATE TERM
OPTIONS EMPLOYEES IN PRICE PER MARKET EXPIRATION ------------------------------
NAME GRANTED(1) FISCAL 1997 SHARE(2) PRICE DATE 0%(3) 5%(4) 10%(4)
---- ---------- ------------ --------- ------- ---------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Irwin Helford........... 2,619(5) 0.14% $ 1.250 $18.625 08/18/07 $ 45,505 $ 76,182 $ 123,246
M. Bruce Nelson......... 30,000 1.57 24.875 24.875 07/15/06 -- 469,313 1,189,330
15,000 0.78 14.313 14.313 04/17/07 -- 135,021 342,169
50,000 2.61 14.313 14.313 04/17/07 -- 450,068 1,140,562
Frank R. Jarc........... 100,000 5.22 24.875 24.875 07/15/06 -- 1,564,375 3,964,434
20,000 1.04 2.500 24.875 07/15/06 447,500 760,375 1,240,387
15,000 0.78 27.000 27.000 01/09/07 -- 254,702 645,466
10,000 0.52 14.313 14.313 04/17/07 -- 90,014 228,112
Ronald W. Weissman...... 15,000 0.78 24.875 24.875 07/15/06 -- 234,656 594,665
7,500 0.39 14.313 14.313 04/17/07 -- 67,510 171,084
Mark Muir............... 15,000 0.78 24.875 24.875 07/15/06 -- 234,656 594,665
7,500 0.39 14.313 14.313 04/17/07 -- 67,510 171,084
</TABLE>
- --------
(1) All options have a ten-year term and, except for the options granted to
Mr. Helford, are subject to vesting over a five-year period, with 20% of
the options becoming exercisable on each successive anniversary of the
date of grant. Pursuant to the CEO Bonus Plan, Mr. Helford's options vest
in full on the sixth month anniversary of the date of grant. The vesting
of all options will be accelerated upon a sale of substantially all of
Viking'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.
(2) The exercise price may be paid by delivery of owned shares of Common Stock
valued at fair market value on the date of exercise. The Compensation
Committee retains discretion, subject to plan limits, to modify the terms
of outstanding options, to reprice the options and to provide for the
payment of any tax withholding obligations related to the exercise of the
stock options to be made by offset of the underlying shares.
(3) Represents the difference between the exercise price of these options and
the fair market value of the Common Stock on the date of grant.
(4) Represents the future value of the options (net of exercise price)
assuming the market price of the Common Stock appreciates by 5% and 10%,
respectively, during each year of the options' ten-year term. The 5% and
10% rates of appreciation are prescribed by regulations of the Securities
and Exchange Commission and are not intended to forecast possible future
appreciation of Viking Common Stock.
(5) Consists of options granted to Mr. Helford in fiscal 1998 in payment of a
portion of his fiscal 1997 bonus under the CEO Bonus Plan. Does not
include options to purchase 7,407 shares of Common Stock granted to Mr.
Helford in fiscal 1997 in payment of a portion of his fiscal 1996 bonus
under the CEO Bonus Plan.
8
<PAGE>
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END VALUE
The following table sets forth information with respect to the named
executive officers with respect to the exercise of stock options during fiscal
1997 and unexercised stock options held by them as of the end of the fiscal
year.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS HELD AT IN-THE-MONEY OPTIONS AT
SHARES JUNE 27, 1997(#) JUNE 27, 1997($)(1)
ACQUIRED ON VALUE ----------------------------- -----------------------------
NAME EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ------------ ------------ ----------- / ------------- ----------- / -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Irwin Helford(2)........ 0 -- 71,407 / 96,619 $ 548,665 / $465,473
M. Bruce Nelson......... 0 -- 52,000 / 325,000 179,000 / 912,775
Frank R. Jarc........... 0 -- 0 / 145,000 0 / 365,625
Ronald W. Weissman...... 12,480 $ 191,200 0 / 80,980 0 / 121,164
Mark Muir............... 65,222 1,355,458 96,394 / 126,500 1,398,892 / 689,471
</TABLE>
- --------
(1) Based on the difference between the closing price on The Nasdaq National
Market of Viking Common Stock on June 27, 1997 ($18.625) and the exercise
price.
(2) Includes options to purchase 2,619 shares of Common Stock, at an exercise
price of $1.25 per share, granted to Mr. Helford in fiscal 1998 in payment
of a portion of his bonus for fiscal 1997 pursuant to the terms of the CEO
Bonus Plan.
EMPLOYMENT AGREEMENTS AND CHANGE-IN-CONTROL ARRANGEMENTS
Mr. Helford serves as Chairman and Chief Executive Officer of Viking
pursuant to the terms of an employment agreement entered into in July 1997,
which continues in effect until June 30, 2002, and automatically renews for
successive 12-month periods thereafter unless terminated by either party.
Under the terms of the agreement, Mr. Helford receives an annual salary of
$800,000 and a bonus in an amount determined by the Board of Directors (which
has delegated this authority to the Compensation Committee). In addition to
salary and bonus, Mr. Helford is entitled to receive an automobile allowance
at the rate of $31,200 per year, and Viking is required to maintain insurance
on Mr. Helford's life in the amount of $500,000, payable to beneficiaries
designated by Mr. Helford. During fiscal 1997, Mr. Helford served as Chairman
and Chief Executive Officer pursuant to the terms of an employment agreement
which was to expire on June 30, 1998 and which was superseded by the current
agreement. The terms of the prior agreement were similar to the terms of the
current agreement, except that Mr. Helford's annual salary was $700,000.
In May 1997, Viking entered into an agreement with each of the named
executive officers which provides for certain severance payments to the
executive officer in the event his employment is terminated after a change in
control of Viking. Under the agreements, if the executive's employment is
terminated within 24 months following a change in control of Viking, the
executive will receive a severance payment equal to a specified multiple of
the executive officer's "Total Compensation" (as defined in the agreement),
unless such termination is (i) because of the executive's death or disability,
(ii) by Viking for "Cause" (as defined in the agreement) or (iii) by the
executive's resignation other than for "Good Reason" (as defined in the
agreement). To the extent the executive officer incurs any tax liability as a
result of payments under the agreement being treated as excess parachute
payments under Section 280G of the Internal Revenue Code of 1986, the
executive will be entitled to receive an additional payment necessary to
assure that the executive receives the same net after tax amount the executive
would have received under the agreement had the payments not been treated as
excess parachute payments. Under the terms of the agreements, each of Messrs.
Helford, Nelson and Jarc would be entitled to receive severance payments equal
to three times his Total Compensation, while each other named executive
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officer would be entitled to receive an amount equal to one and one-half times
his Total Compensation. Each of Messrs. Helford and Nelson also has the right
under his agreement to resign without Good Reason during a thirty day period
commencing one year after a change in control of Viking and receive severance
payments equal to one-half of the severance payments to which he would be
entitled if his resignation were for Good Reason.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee (the "Committee") of the Board of Directors,
which consists of Ms. Manley and Messrs. Ault, Austrian and Durkin, each of
whom is a non-employee director, sets Viking's compensation policies
applicable to executive officers, determines the compensation of the executive
officers, subject to review by the Board of Directors, and administers
Viking's stock option and stock incentive plans, other than the 1992
Directors' Stock Option Plan, which is administered by the Board of Directors.
The Committee has prepared the following report for inclusion in this Proxy
Statement.
Compensation Policy for Executive Officers
The policy of the Committee is to provide each executive officer current
cash compensation that is reasonable and consistent with Viking's size,
industry and performance, and long-term incentive compensation based on the
increase in the value of Viking's Common Stock and the achievement of Viking's
long term goals. In addition to salary, current cash compensation includes a
bonus based in part on Viking's current annual performance and in part on the
executive's individual performance. The Committee has relied heavily on the
recommendations of Mr. Helford in setting the compensation of the other
executive officers.
Compensation of Irwin Helford
Mr. Helford's salary is fixed by his employment contract, and he is entitled
under the contract to a bonus determined by the Board of Directors in its
discretion. The Board of Directors has delegated this responsibility to the
Committee. In July 1997, Viking and Mr. Helford entered into a new employment
agreement, and, in view of Viking's continued outstanding performance and Mr.
Helford's contribution to such performance, the Committee approved a $100,000
increase in Mr. Helford's base salary under the new employment agreement.
In keeping with the Committee's objective of rewarding executive officers
based on corporate performance, and in order to assure the deductibility to
Viking of amounts paid to Mr. Helford, in July 1994, the Committee adopted the
CEO Bonus Plan, which was approved by shareholders in November 1994. The CEO
Bonus Plan provides for the payment to Mr. Helford of a bonus for each fiscal
year consisting of the sum of specified percentages of his salary if Viking
meets or exceeds 90% of the target amounts contained in Viking's business plan
for that fiscal year for one or more of the following: consolidated revenues,
gross profit, pretax profit and net income. A separate percentage of salary
applies to each such target, with a maximum annual bonus payable under the CEO
Bonus Plan set at $1,400,000 for fiscal 1997 and $1,500,000 for fiscal 1998
and each subsequent fiscal year. Pursuant to the CEO Bonus Plan, Mr. Helford
was paid a bonus of $182,000 for fiscal 1997, with one-fourth of such bonus
($45,500) paid to Mr. Helford by the issuance of stock options to purchase an
aggregate of 2,619 shares of Viking Common Stock under the 1991 Plan. Pursuant
to the CEO Bonus Plan, all such options have an exercise price of $1.25 per
share, subject to adjustment as provided in the 1991 Plan, and are deemed to
have a value equal to the difference between such exercise price and the
closing price of Viking Common Stock on August 18, 1997 ($17.37), the last
trading day prior to the date of grant.
In fiscal 1995, the Committee approved a split dollar life insurance
arrangement with a trust for beneficiaries named by Mr. Helford. Premiums
under this policy are paid annually by Viking. At the death of Mr. Helford or,
if certain assumptions as to life expectancy, policy dividends and other
factors are realized, at the surrender of the policies, Viking will recover
the full amount of premiums it paid.
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Compensation of Other Executive Officers
The salaries of the executive officers other than Mr. Helford reflect annual
discretionary increases based primarily on individual performance factors.
Several of the executive officers were promoted to their current positions
from subordinate positions they held with Viking and received salary increases
consistent with their increased responsibility.
In keeping with the Committee's objective of rewarding executive officers
based on corporate performance, and in order to assure the deductibility to
Viking of amounts paid to Mr. Nelson, Viking's President and Chief Operating
Officer, for fiscal 1997 and subsequent fiscal years, the Committee has
adopted the President's Performance Based Plan (the "President's Bonus Plan"),
which was approved by shareholders in November 1996. The President's Bonus
Plan provides for the payment to Mr. Nelson of a bonus for each fiscal year
consisting of the sum of specified percentages of his salary if Viking meets
or exceeds 90% of the target amounts contained in Viking's business plan for
that fiscal year for one or more of the following: consolidated revenues,
gross profit, pretax profit and net income. A separate percentage of salary
applies to each such target, with a maximum annual bonus payable under the
President's Bonus Plan set at $800,000. For fiscal 1997, the bonus payable to
Mr. Nelson under the President's Bonus Plan was $80,000. However, in view of
Viking's outstanding performance during fiscal 1997 and Mr. Nelson's
contribution to such performance, the Committee approved an additional bonus
of $100,000 for Mr. Nelson for fiscal 1997.
In awarding bonuses to the executive officers (other than Mr. Helford and
Mr. Nelson) for fiscal 1997, the Committee considered Viking's overall
performance, as reflected in its revenues and net income, each executive's
success in meeting individual performance targets applicable to his or her
area of responsibility and the personal performance of the executive,
including commitment, leadership and effort. These targets were set near the
beginning of the year by Mr. Helford in consultation with the executive and
generally relate to increasing revenues or reducing the cost or increasing the
productivity or efficiency of the activity managed by the executive. The
amount of bonus that each executive received was discretionary with the
Committee, with 40% of the potential bonus contingent on attaining specific
objective goals related to Viking's overall performance, 40% contingent on
attaining specified goals related to the executive's individual performance in
his or her area of responsibility and 20% contingent on the executive's
personal performance.
Amounts of compensation deemed to have been realized by executive officers
as a result of the exercise of stock options that were granted to them in
prior years were not taken into account in determining their bonuses for the
current year.
Equity-Based Incentive Plans
The Committee believes that basing a significant portion of the compensation
of executive officers and other key employees on increases in the value of
Viking Common Stock harmonizes the interests of the executives and the
shareholders and is in the best interests of the shareholders. Viking's option
plans are designed to accomplish this purpose. The Incentive Plan, which
provides incentive to attain long term financial performance goals, is not
solely dependent on increases in the value of the Common Stock.
Executive officers (including Mr. Helford) and other key employees have been
awarded stock options under the Amended and Restated 1989 Incentive Stock
Option Plan (the "1989 Plan"). For each key employee, including executive
officers, the Committee determines, on an annual basis, the number of options
shares to be granted under the 1989 Plan to the employee based upon his or her
level of responsibility, a review of Viking's overall performance and prior
grants. Newly hired management personnel, including executive officers, are
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eligible to receive stock options under the 1989 Plan after satisfactory
completion of an introductory period, and annually thereafter. Internally
promoted management personnel are eligible to receive additional options at
the time of their promotion in order to reflect their new positions and
increased responsibilities and are eligible to receive additional grants
annually thereafter.
Viking's stock option grant program was reviewed by a management
compensation consultant and by senior managers at Viking in December 1993, and
was found to be appropriate at that time. In June 1996, senior Viking
management again thoroughly analyzed and updated the number of options awarded
for each management level in order to assure that the number of option shares
was appropriate for the responsibility of the optionee and sufficient to
provide incentive to each optionee. Options generally become exercisable over
a five year period. To fully exercise an option, the optionee generally must
remain in the employ of Viking throughout the period.
Options have been granted under the 1991 Plan, which permits the grant of
stock options with exercise prices at less than the fair market value of the
Common Stock on the date of grant, only in limited instances when it has been
found to be appropriate to provide special incentives over and above the
incentives provided by the grant of a stock option at fair market value. In
addition to options granted to Mr. Helford pursuant to the terms of the CEO
Bonus Plan, during fiscal 1997, Viking granted to Mr. Jarc options under the
1991 Plan to purchase 20,000 shares of Common Stock at an exercise price of
$2.50 per share.
Executive officers have also been awarded shares of Common Stock, subject to
vesting, under the Incentive Plan, with four current executive officers each
having been granted 100,000 shares of Common Stock, one current executive
having been granted 20,000 shares of Common Stock and one current executive
officer having been granted 10,000 shares of Common Stock. Each participant is
considered to be an employee whose responsibilities and decisions directly
affect the management, growth, performance or profitability of Viking. The
Committee awarded the shares to provide for the participants' retirement if
they remain in the employ of Viking until June 30, 2007, or until retirement
at age 65, death or disability, if sooner.
Internal Revenue Code Amendments
The Committee will continue to consider the anticipated tax treatment to
Viking regarding the compensation and benefits paid to the Chief Executive
Officer and the four other most highly compensated executive officers of
Viking in light of the 1993 addition to Section 162(m) of the Internal Revenue
Code of 1986, as amended ("Section 162(m)"). The Committee will from time to
time consider amendments to Viking's compensation, including further
amendments to its equity-based incentive plans, necessary to preserve the
deductibility of all compensation paid by Viking which is subject to Section
162(m). While Viking does not expect to pay its executive officers
compensation in fiscal 1997 in excess of the Section 162(m) deductibility
limit, the Board of Directors and the Committee retain discretion to authorize
the payment of compensation that does not qualify for income tax deductibility
under Section 162(m).
Lee A. Ault III Neil R. Austrian
Charles P. Durkin, Jr. Joan D. Manley
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PERFORMANCE GRAPH
The following graph compares the cumulative shareholder return on Viking
Common Stock from June 26, 1992 through June 27, 1997, based on the market
price of the Common Stock, with the cumulative total return of the Nasdaq
Market Value Index (Broad Market) and the Media General Other Importers,
Wholesalers and Retailers Index (Peer Group). The graph assumes that the value
of the investment in Viking Common Stock and each index was $100 on June 26,
1992 and that all dividends, if any, were reinvested. The comparisons in this
table are not intended to forecast or be indicative of possible future price
performance.
COMPARISON OF CUMULATIVE SHAREHOLDER RETURN OF
VIKING OFFICE PRODUCTS, INC., NASDAQ MARKET VALUE INDEX AND
MEDIA GENERAL OTHER IMPORTERS, WHOLESALERS AND RETAILERS INDEX
PERFORMANCE GRAPH APPEARS HERE
<TABLE>
<CAPTION>
Measurement Period Viking Office Broad
(Fiscal Year Covered) Products Peer Group Market
- ------------------- ------------- ---------- ------
<S> <C> <C> <C>
Measurement Pt- 6/28/92 $100 $100 $100
FYE 6/28/93 $179.73 $117.89 $122.76
FYE 6/28/94 $258.78 $121.85 $134.61
FYE 6/28/95 $395.95 $136.74 $157.88
FYE 6/28/96 $678.38 $196.06 $198.73
FYE 6/28/97 $402.70 $188.79 $239.40
</TABLE>
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CERTAIN TRANSACTIONS
Viking has assisted certain of its executive officers in acquiring
residences by paying a portion of the purchase price of such residences.
Viking receives an undivided interest in the property in proportion to the
amount of the purchase price paid by Viking, and all debt service and other
costs relating to the property are paid by the executive officer. Upon any
sale of the property, the net sales proceeds will be divided according to the
parties' respective ownership interests, provided that Viking is to receive at
least as much as it paid for its portion of the property. Pursuant to such
arrangements, Viking paid $1,300,000 of the $2,300,000 purchase price of the
residence purchased by Mr. Nelson, $500,000 of the $2,100,000 purchase price
of a residence purchased by Mr. Muir, $500,000 of the $2,000,000 purchase
price of a residence purchased by Mr. Weissman, and $500,000 of the $1,000,000
purchase price of a residence purchased by Mr. Brown, Viking's Vice President,
Information Systems.
APPROVAL OF 1997 INCENTIVE STOCK OPTION PLAN
INTRODUCTION
On July 10, 1997, the Board of Directors adopted, subject to shareholder
approval, the Viking Office Products, Inc. 1997 Incentive Stock Option Plan
(the "1997 Plan"). The 1997 Plan enables the Compensation Committee to grant
to executive officers and other key employees of Viking and its subsidiaries
options to purchase shares of Common Stock. The 1997 Plan provides that the
maximum number of shares of Common Stock issuable upon the exercise of options
granted under the 1997 Plan (sometimes called "Option Shares" herein) is
initially set at 5,000,000, with such maximum being increased on the last
business day of each fiscal year of Viking, commencing with the last business
day of the fiscal year ending June 26, 1998, by a number equal to 1.30% of the
number of shares of Common Stock issued and outstanding on the close of
business on such date, with a maximum number of shares of Common Stock that
may be issued upon exercise of options granted under the 1997 Plan being
limited to 10,000,000.
The Board of Directors believes the opportunity to receive options under the
1997 Plan provides an important incentive to employees to make significant and
extraordinary contributions to the long-term performance and growth of Viking.
While Viking currently has in place the 1989 Plan, as a result of prior grants
made under the 1989 Plan, there were 1,207,406 Option Shares available for
future grants under the 1989 Plan as of June 27, 1997. In addition, no stock
options may be granted under the 1989 Plan after December 14, 1999.
Accordingly, the Board of Directors recommends that stockholders vote "FOR"
the 1997 Plan in order to assure that Viking will continue to have sufficient
options and Option Shares to serve as a vehicle for attracting and retaining
employees of exceptional ability.
The full text of the 1997 Plan is set forth as Exhibit A hereto, and
shareholders are urged to refer to it for a complete description. The summary
of the principal features of the 1997 Plan which follows is qualified in its
entirety by reference to the complete text of the 1997 Plan.
PRINCIPAL FEATURES OF THE PLAN
Stock options granted under the 1997 Plan are intended to qualify as
incentive stock options within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code"), if so designated on the date of
grant. Stock options that are not designated or do not qualify as incentive
stock options are nonstatutory stock options and are not eligible for the tax
benefits applicable to incentive stock options.
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No stock options may be granted under the 1997 Plan after July 9, 2007. 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
are available for future grants.
The 1997 Plan is administered by the Compensation Committee, all of whose
members are non-employee Directors. Members of the Compensation Committee are
eligible to and have received awards under the 1992 Directors' Stock Option
Plan (other than Mr. Durkin, who has declined the stock option awards to which
he was entitled), but are not eligible to receive awards under the 1997 Plan.
The Compensation Committee has complete authority, subject to the express
provisions of the 1997 Plan, to approve the employees nominated by the
management of Viking to be granted stock options, to determine the number of
stock options to be granted to employees, to set the terms and conditions of
stock options, to remove or adjust any restrictions and conditions upon stock
options and to adopt such rules and regulations, and to make all other
determinations, deemed necessary or desirable for the administration of the
1997 Plan.
In selecting optionees, consideration is given to factors such as employment
position, duties and responsibilities, ability, productivity, length of
service, morale, interest in Viking and supervisor recommendations. Awards may
be granted to the same employee on more than one occasion. Each stock option
is evidenced by a written option agreement in a form approved by the
Compensation Committee.
The purchase price (the "Exercise Price") of Option Shares must be at least
equal to the fair market value of such shares on the date the stock option is
granted. The determination of fair market value of Option Shares is based on
Nasdaq quotations. The stock option term is for a period of ten years from the
date of grant or such shorter period as is determined by the Compensation
Committee. Each stock option may provide that it is exercisable in full or in
cumulative or noncumulative installments, and each stock option is exercisable
from the date of grant or any later date specified therein, all as determined
by the Compensation Committee. The Compensation Committee's authority to take
certain actions under the 1997 Plan includes authority to accelerate vesting
schedules and to otherwise waive or adjust restrictions applicable to the
exercise of stock options.
Each stock option may be exercised in whole or in part (but not as to
fractional shares) by delivering a notice of exercise to Viking, together with
payment of the Exercise Price. The Exercise Price may be paid in cash, by
cashier's or certified check or, if the Compensation Committee authorizes
payment in stock, by surrender of previously owned shares of Common Stock.
Except as otherwise provided below, an optionee may not exercise a stock
option unless from the date of grant to the date of exercise the optionee
remains continuously in the employ of Viking. If the employment of the
optionee terminates for any reason other than death or disability, the stock
options then currently exercisable remain exercisable for a period of three
months after such termination of employment, subject to earlier expiration at
the end of their fixed term. If the employment of the optionee terminates
because of death, the stock options then currently exercisable remain in full
force and effect and may be exercised at any time during the option term
pursuant to the provisions of the 1997 Plan. If the employment of the optionee
terminates because of disability, the stock options then currently exercisable
remain exercisable for a period of twelve months after such termination of
employment, subject to earlier expiration at the end of their fixed term.
An employee may receive incentive stock options covering Option Shares of
any value, provided that the value of all Option Shares subject to one or more
of such incentive stock options which are first exercisable in any one
calendar year may not exceed the maximum amount permitted under Section 422 of
the Code (currently $100,000). No employee may be granted incentive or
nonstatutory stock options in any calendar year with respect to more than
200,000 Option Shares.
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Each stock option granted under the 1997 Plan is exercisable during an
optionee's lifetime only by such optionee or by such optionee's legal
representative. Incentive stock options are transferable only by will or the
laws of intestate succession, but the Compensation Committee has the
discretion to grant non-statutory stock options free of such restrictions.
The Board of Directors may at any time suspend, amend or terminate the 1997
Plan. Shareholder approval is required, however, to materially increase the
benefits accruing to optionees, materially increase the number of securities
which may be issued (except for adjustments under anti-dilution clauses) or
materially modify the requirements as to eligibility for participation. The
1997 Plan authorizes the Compensation Committee to include in stock options
provisions which permit the acceleration of vesting in the event of a change
in control of Viking resulting from certain occurrences. Viking intends to
maintain a current registration statement under the Securities Act of 1933
with respect to the shares of Common Stock issuable upon the exercise of stock
options granted under the 1997 Plan.
To date, no stock options have been granted under the 1997 Plan. Future
grants under the 1997 Plan will be made at the discretion of the Compensation
Committee and are not yet determinable. On September 19, 1997, the last sales
price of the Common Stock, as reported on The Nasdaq National Market, was
$24.25 per share.
SUMMARY OF FEDERAL INCOME TAX CONSEQUENCES
The following discussion is a short summary of the Federal income tax
consequences of the grant and exercise of stock options under the 1997 Plan.
Tax Consequences to Optionees
Incentive Stock Options. An optionee recognizes no taxable income upon the
grant of an incentive stock option. In addition, there will be no taxable
income recognized by the optionee at the time of exercise of an incentive
stock option provided the optionee has been in the employ of Viking at all
times during the period beginning on the date of grant and ending on the date
three months before the date of exercise.
Gain recognized upon a disposition of the Option Shares generally will be
taxable as long-term capital gain if the shares are not disposed of within (i)
two years from the date of grant of the incentive stock option and (ii) one
year from the exercise date. If both of these conditions are not satisfied,
the disposition is a "disqualifying disposition". In that event, gain equal to
the excess of the fair market value of the Option Shares at the exercise date
over the Exercise Price generally will be taxed as ordinary income and any
further gain will be taxed as long-term capital gain if the shares were held
more than 12 months. Different rules apply if an optionee exercises a stock
option by surrendering shares of Common Stock which were previously acquired
upon the exercise of an incentive stock option and with respect to which the
optionee has not satisfied certain holding periods.
Shares acquired upon the exercise of an incentive stock option by the
payment of cash will have a basis equal to the Exercise Price of the stock
option. Different rules apply if an optionee exercises a stock option by
surrendering previously owned shares of Common Stock.
Upon the exercise of an incentive stock option, an amount equal to the
excess of the fair market value of the Option Shares at the exercise date over
the Exercise Price is treated as alternative minimum taxable income for
purposes of the alternative minimum tax.
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Incentive stock options exercised by an optionee who has not satisfied the
applicable requirements as to continuous employment do not qualify for the tax
treatment discussed above. Instead, the exercise of such options will be
subject to the rules which apply to the exercise of nonstatutory stock
options.
Nonstatutory Stock Options. An optionee recognizes no taxable income upon
the grant of a nonstatutory stock option with an Exercise Price equal to the
fair market value of the Common Stock on the date of grant. In general, upon
the exercise of a nonstatutory stock option, the optionee will recognize
ordinary income in an amount equal to the excess of the fair market value of
the Option Shares on the exercise date over the Exercise Price.
Shares acquired upon the exercise of a nonstatutory stock option by the
payment of cash will have a basis equal to their fair market value on the
exercise date and have a holding period beginning on the exercise date.
Different rules apply if an optionee exercises a stock option by surrendering
previously owned shares of Common Stock. Gain or loss recognized on a
disposition of the Option Shares generally will qualify as long-term capital
gain or loss if the shares have a holding period of more than 12 months.
Viking generally must collect and pay withholding taxes upon the exercise of
a nonstatutory stock option. Withholding tax obligations arising from the
exercise of a nonstatutory stock option may be satisfied by any payment method
deemed appropriate by the Compensation Committee, including by withholding
from the Option Shares otherwise issuable upon the exercise of the
nonstatutory stock option the number of Option Shares having a fair market
value equal to the amount of the withholding tax obligation. If Option Shares
are withheld upon exercise in order to satisfy withholding taxes, such
withholding will be treated as though the optionee had received the withheld
Option Shares upon the exercise of the nonstatutory stock option and
immediately sold them to Viking at their fair market value on the exercise
date. The optionee accordingly must recognize ordinary income in an amount
equal to the excess of the fair market value of the withheld Option Shares on
the exercise date over the amount he or she is deemed to have paid for them,
in addition to the ordinary income attributable to the Option Shares which
were not withheld.
Tax Consequences to Viking
Viking generally is allowed an income tax deduction for amounts that are
taxable to optionees as ordinary income under the foregoing rules, if it
satisfies all Federal income tax withholding requirements. Amounts deemed to
be compensation to executive officers as a result of the exercise of stock
options or the sale of Option Shares will not be taken into account in
determining whether the compensation paid to the executive exceeds the limits
on deductibility imposed under Section 162(m) of the Code.
RATIFICATION OF SELECTION OF AUDITORS
The Board of Directors has selected the accounting firm of Deloitte & Touche
LLP to serve as independent auditors for the current fiscal year, subject to
ratification by the shareholders. Deloitte & Touche LLP has served as Viking's
independent auditors since 1986.
The Board of Directors recommends a vote "FOR" ratification of this
selection. Shareholder ratification of the selection of auditors is not
required under the laws of the State of California, but the Board has
determined to ascertain the position of the shareholders on the selection. The
Board of Directors will reconsider the selection if it is not ratified by the
shareholders.
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It is anticipated that representatives of Deloitte & Touche LLP will be
present at the Annual Meeting, and such representatives will be given the
opportunity to make a statement, if they so desire, and to answer appropriate
questions.
MISCELLANEOUS
SHAREHOLDER PROPOSALS
Shareholder proposals intended to be presented at the 1998 Annual Meeting of
Shareholders must be received by Viking by June 5, 1998 to be considered by
Viking for inclusion in Viking's proxy statement and form of proxy relating to
that meeting. Such proposals should be directed to the attention of the
Secretary, Viking Office Products, Inc., 950 West 190th Street, Torrance,
California 90502.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 requires Viking's
officers and directors, and persons who own more than ten percent of a
registered class of Viking's equity securities, to file reports of ownership
and changes in ownership with the Securities and Exchange Commission.
Officers, directors and greater than ten percent shareholders are required by
Securities and Exchange Commission regulations to furnish Viking with copies
of all Section 16(a) forms they file.
Based solely on a review of the copies of such forms furnished to Viking, or
written representations that no Forms 5 were required, Viking believes that
during the period from June 28, 1996 to June 27, 1997 all Section 16(a) filing
requirements applicable to its officers, directors and greater than ten-
percent beneficial owners were complied with.
OTHER MATTERS
Neither Viking nor any of the persons named as proxies knows of any matters
to be voted on at the Annual Meeting other than as described in this Proxy
Statement. However, if any other matters are properly presented at the
meeting, it is the intention of the persons named as proxies to vote in
accordance with their judgment on such matters, subject to direction by the
Board of Directors.
The 1997 Annual Report to Shareholders accompanies this Proxy Statement, but
is not to be deemed a part of the proxy soliciting material.
WHILE YOU HAVE THE MATTER IN MIND, PLEASE COMPLETE, SIGN AND RETURN THE
ENCLOSED PROXY CARD.
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EXHIBIT A
VIKING OFFICE PRODUCTS, INC.
1997 INCENTIVE STOCK OPTION PLAN
1. PURPOSE. This Viking Office Products, Inc., 1997 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 under the Plan
("Stock Options") to purchase Viking's common stock ("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 "Non-Employee Director" as that term is defined in
Rule 16b-3 ("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 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 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; to reprice 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.
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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.
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 200,000. 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 5,000,000; 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 26, 1998,
such maximum number shall be increased by a number equal to 1.30% 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 10,000,000. 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 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
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its term in such periodic installments as the Committee in its sole discretion
may determine. Such provisions need not be uniform. 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 Vice President, Administration, 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 subject to the reporting requirements of Section 16(a) of the
Exchange Act (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 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
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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. Incentive stock options granted under this Plan
shall be transferable only by will or the laws of descent and distribution.
The Committee shall have discretion to grant non-statutory stock options that
are not subject to the restrictions on transfer relating to incentive stock
options contained in the preceding sentence; provided, however, that non-
statutory stock options granted to a Section 16 Reporting Person shall be
subject to such restrictions on transfer as may be required to qualify for the
exemption provided for in Rule 16b-3 or otherwise imposed by the Committee in
its sole and absolute discretion. 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
shall be exercisable during an Employee's lifetime only by such Employee and,
in the case of non-statutory stock options, such Employee's permitted
transferees.
10. TERMINATION OF EMPLOYMENT.
10.1 Subject to the discretion of the Committee with respect to non-
statutory Stock Options, upon termination of an Employee's employment with the
Company by reason of death, all outstanding Stock Options to the extent
exercisable on the date of death of the Employee shall remain in full force
and effect and may be exercised pursuant to the provisions thereof at any time
prior to expiration at the end of the fixed term thereof. Upon termination of
an Employee's employment with the Company by reason of Disability, all
outstanding Stock Options to the extent exercisable on the date of termination
of employment may be exercised pursuant to the provisions thereof at any time
until the earlier of the end of the fixed term thereof and the expiration of
twelve months following termination of the Employee's employment. Unless
otherwise provided by the Committee, all Stock Options to the extent not
presently exercisable by such Employee at the date of death or termination of
employment by reason of Disability shall terminate as of the date of death or
such termination of employment and shall not be exercisable thereafter.
10.2 Subject to the discretion of the Committee with respect to non-
statutory Stock Options, upon the termination of the Employee's employment
with the Company for any reason other than the reasons set forth in paragraph
10.1 hereof, the Stock Option may be exercised during the period of three
months following the date of such termination of employment, but only to the
extent that such Stock Option was outstanding and exercisable on such date of
termination of employment. 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.
10.3 For purposes of this Plan, "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.
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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 two and one-half percent (2.5%) 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 "Change in Control" (as defined by the Committee in its
sole discretion) of the Company.
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 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 upon satisfaction of
such additional conditions as the Committee shall deem in its sole and
absolute discretion as appropriate in order for such withholding of Option
Shares to qualify for the exemption provided for in Section 16b-3 of the
Exchange Act.
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.
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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
materially increase the number of securities which may be issued under this
Plan (except for adjustments pursuant to paragraph 11 hereof) or change the
designation of Employees eligible to receive incentive stock options under 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 shall be evidenced by written agreements executed
by the Company and the Employees to whom the Stock Options have been granted.
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 July 10,
1997. No Stock Options may be granted under this Plan after July 9, 2007.
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 Plan has been executed effective as of the 10th day
of July, 1997.
VIKING OFFICE PRODUCTS, INC.
By /s/ Irwin Helford
-------------------------------
Irwin Helford, Chairman of the
Board
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VIKING OFFICE PRODUCTS, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS FOR THE ANNUAL
MEETING OF SHAREHOLDERS TO BE HELD ON NOVEMBER 13, 1997
The undersigned, revoking any previous proxies for such stock, hereby
appoints Irwin Helford and Charlotte Wiethoff, and each of them, proxies
of the undersigned with full power of substitution to each, to vote all
shares of common stock of VIKING OFFICE PRODUCTS, INC., which the
undersigned is entitled to vote at the Annual Meeting of Shareholders of
Viking Office Products, Inc., to be held on November 13, 1997, and all
postponements or adjournments thereof, with all the power the undersigned
would possess if personally present, with authority to vote (i) as
specified by the undersigned below and (ii) in the discretion of any proxy
upon any other business that may come before the meeting.
Vote this proxy as follows:
1. Election of Directors:
FOR ALL NOMINEES LISTED BELOW [_]
(except as marked to the contrary below)
WITHHOLD VOTE [_]
(for all nominees)
Irwin Helford, M. Bruce Nelson, Lee A. Ault III, Neil R. Austrian, Charles
P. Durkin, Jr. and Joan D. Manley.
INSTRUCTION: TO WITHHOLD VOTE FOR ANY INDIVIDUAL NOMINEE, MARK THROUGH THE
NOMINEE'S NAME IN THE ABOVE LIST.
2. Proposal to adopt to the 1997 Incentive Stock Option Plan:
FOR [_] AGAINST [_] ABSTAIN [_]
3. Proposal to ratify the selection of Deloitte & Touche LLP as
independent auditors:
FOR [_] AGAINST [_] ABSTAIN [_]
THIS PROXY WILL BE VOTED AS DIRECTED, OR, IF NO DIRECTION IS INDICATED,
FOR THE ELECTION OF THE NOMINEES OF THE BOARD OF DIRECTORS, FOR THE 1997
INCENTIVE STOCK OPTION PLAN, FOR THE RATIFICATION OF AUDITORS AND
OTHERWISE IN THE DISCRETION OF ANY OF THE PERSONS ACTING AS PROXIES.
IMPORTANT: Please date this proxy and sign exactly as your name or names
appear hereon. If stock is held jointly, each should sign. Executors,
administrators, trustees, guardians and others signing in a representative
capacity, please give your full title(s). If this proxy is submitted to a
corporation or partnership, it should be executed in the full corporate or
partnership name by a duly authorized person.
------------------------------
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(Signature of Shareholder)
Dated __________________, 1997
IMPORTANT: PLEASE SIGN PROXY
EXACTLY AS YOUR NAME OR NAMES
APPEAR HEREON.
