<PAGE>
CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY
---------------------------------------------
---------------------------------------------
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
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 Rule 14a-11(c) or Rule 14a-12
U.S. OFFICE PRODUCTS COMPANY
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
Same
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] No Fee Required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i) and 0-11.
1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
-------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------
5) Total fee paid:
-------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials:
-------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
1) Amount Previously Paid:
$
---------------------------------------------------------------
2) Form, Schedule or Registration Statement no.:
---------------------------------------------------------------
3) Filing Party:
---------------------------------------------------------------
4) Date Filed:
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<PAGE>
[LOGO]
1025 Thomas Jefferson Street, N.W.
Suite 600 East
Washington, D.C. 20007
(202) 339-6700
September 8, 1997
To the Stockholders of U.S. Office Products Company:
The Annual Meeting of Stockholders of U.S. Office Products Company (the
"Company") will be held on Tuesday, October 7, 1997, at 10:00 a.m. in the
Ballroom of the Willard Intercontinental Hotel located at 1401 Pennsylvania
Avenue, N.W., Washington, D.C. 20005.
Details of the business to be conducted at the Annual Meeting are provided
in the enclosed Notice of Annual Meeting of Stockholders and Proxy Statement.
You will note that the business scheduled for the Annual Meeting is the election
of Directors, the approval of the U.S. Office Products Company Section 162(m)
Bonus Plan and the ratification of the selection of Price Waterhouse LLP as the
independent accountants of the Company for the 1998 fiscal year.
Please sign, date and promptly return the enclosed proxy card in the
enclosed prepaid return envelope. Your shares will be voted at the Annual
Meeting in accordance with your proxy.
On behalf of the Board of Directors and employees of the Company, I
cordially invite all stockholders to attend the Annual Meeting. If you plan to
attend the meeting, please mark the box where indicated on the enclosed proxy
card.
Sincerely,
Jonathan J. Ledecky
Chairman of the Board of Directors and
Chief Executive Officer
YOUR VOTE IS IMPORTANT
Please Sign, Date and Return Your Proxy Card
<PAGE>
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON OCTOBER 7, 1997
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of U.S.
Office Products Company, a Delaware corporation (the "Company"), will be held in
the Ballroom of the Willard Intercontinental Hotel, 1401 Pennsylvania Avenue,
N.W., Washington, D.C. 20005, at 10:00 a.m. on Tuesday, October 7, 1997, for the
following purposes:
1. To elect 10 directors of the Company to hold office until the next
succeeding annual meeting of stockholders after their election and until their
respective successors shall have been elected and qualified.
2. To consider and act upon a proposal by the Board of Directors of the
Company to adopt the U.S. Office Products Company Section 162(m) Bonus Plan.
3. To ratify the selection of Price Waterhouse LLP as the Company's
independent accountants to audit the Company's consolidated financial statements
for the year ending April 25, 1998.
4. To transact such other business as may properly be brought before the
meeting or any adjournment thereof.
The close of business on August 29, 1997 has been fixed as the record date
for determining the stockholders entitled to notice of and to vote at the Annual
Meeting. All holders of record of common stock of the Company at that date are
entitled to vote at the Annual Meeting.
By Order of the Board of Directors,
Mark D. Director
Secretary
Washington, D.C.
September 8, 1997
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE MEETING REGARDLESS OF THE
NUMBER OF SHARES YOU HOLD. PLEASE COMPLETE, SIGN AND MAIL THE ENCLOSED PROXY IN
THE ACCOMPANYING ENVELOPE EVEN IF YOU INTEND TO BE PRESENT AT THE MEETING.
RETURNING THE PROXY WILL NOT LIMIT YOUR RIGHT TO VOTE IN PERSON OR TO ATTEND THE
ANNUAL MEETING, BUT WILL ENSURE YOUR REPRESENTATION IF YOU CANNOT ATTEND. IF YOU
HOLD SHARES IN MORE THAN ONE NAME, OR IF YOUR STOCK IS REGISTERED IN MORE THAN
ONE WAY, YOU MAY RECEIVE MORE THAN ONE COPY OF THE PROXY MATERIAL. IF SO, PLEASE
SIGN AND RETURN EACH OF THE PROXY CARDS THAT YOU RECEIVE SO THAT ALL OF YOUR
SHARES MAY BE VOTED. THE PROXY IS REVOCABLE AT ANY TIME PRIOR TO ITS USE.
<PAGE>
[LOGO]
1025 Thomas Jefferson Street, N.W.
Suite 600 East
Washington, D.C. 20007
(202) 339-6700
September 8, 1997
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of U.S. Office Products Company (the
"Company") for the Annual Meeting of Stockholders of the Company to be held on
October 7, 1997. Stockholders of record at the close of business on August 29,
1997 (the "Record Date") will be entitled to vote at the meeting and will
receive a copy of this Proxy Statement, which furnishes information relating to
the business to be transacted at the meeting. On the Record Date, there were
issued and outstanding 73,275,512 shares of the Company's common stock, par
value $.001 per share (the "Common Stock"), and no shares of the Company's
preferred stock, par value $.001 per share (the "Preferred Stock"). There are no
other outstanding classes of voting securities of the Company. Each holder of a
share of Common Stock is entitled to one (1) vote per share on each matter
presented at the meeting. This Proxy Statement and the enclosed proxy card are
being mailed to stockholders entitled to vote at the Annual Meeting on or about
September 9, 1997.
A proxy is enclosed for your use. YOU ARE REQUESTED ON BEHALF OF THE BOARD
OF DIRECTORS TO SIGN, DATE AND RETURN THE PROXY IN THE ACCOMPANYING ENVELOPE,
which requires no postage if mailed in the United States.
If no instructions are specified on the proxy, shares represented thereby
will be voted:
(i) for the election of the 10 nominees for directors of the Company listed
herein;
(ii) in favor of the adoption of the U.S. Office Products Company Section
162(m) Bonus Plan (the "Bonus Plan"); and
(iii) in favor of the ratification of the appointment of Price Waterhouse
LLP as the Company's independent accountants for the fiscal year ending
April 25, 1998.
Any stockholder who has given a proxy may revoke the proxy by executing a
proxy bearing a later date or by delivering written notice of revocation of the
proxy to the Secretary of the Company at the Company's executive offices at any
time prior to the meeting or any postponement or adjournment thereof. Prior to
exercise thereof with respect to any matter submitted to a vote of the
stockholders, any stockholder who attends in person the Annual Meeting or any
postponement or adjournment thereof may revoke any proxy previously given and
vote by ballot.
The presence of the holders of a majority of the issued and outstanding
shares of Common Stock entitled to vote at the Annual Meeting, either in person
or represented by properly executed proxies, is necessary to constitute a quorum
for the transaction of business at the Annual Meeting. Abstentions will be
counted for purposes of determining the existence of a quorum at the Annual
Meeting. If there are not sufficient shares represented in person or by proxy at
the meeting to constitute a quorum, the meeting may be postponed or adjourned in
order to permit further solicitation of proxies by the Company. Proxies given
pursuant to this solicitation and not revoked will be voted at any postponement
or adjournment of the Annual Meeting in the manner described above.
The vote of a plurality of holders of the outstanding shares of Common Stock
present in person or represented by duly executed proxies at the Annual Meeting
is necessary for the election of a nominee as a director of the Company. The
approval of all other matters will require the affirmative vote of holders of a
majority of the shares present in person or represented by duly executed proxies
at the Annual Meeting
<PAGE>
and entitled to vote on the subject matter. Cumulative voting for the election
of directors is not permitted. Shares represented by proxies that are marked
"WITHHELD" with regard to the election of directors will be excluded entirely
from the vote and will have no effect. Abstentions will be treated as shares
present and entitled to vote. Accordingly, any shares that are present at the
Annual Meeting for quorum purposes, which are not voted for a particular nominee
for director, will not prevent the election of such nominee if other
stockholders vote for such nominee; an abstention on any other proposal,
however, will operate as a vote "against" such proposal. Brokers who hold shares
in street name for beneficial owners have the authority to vote on the business
scheduled for the Annual Meeting if the brokers do not receive voting
instructions from such beneficial owners.
The expense of preparing, printing and mailing proxy solicitation materials
will be borne by the Company. The Company has engaged MacKenzie Partners, Inc.,
to assist in the distribution of proxy materials and the solicitation of proxies
at a cost of approximately $6,500 plus out-of-pocket expenses. In addition,
certain directors, officers, representatives and employees of the Company may
solicit proxies by telephone and personal interview. Such individuals will not
receive additional compensation from the Company for solicitation of proxies,
but they may be reimbursed for reasonable out-of-pocket expenses in connection
with such solicitation. Banks, brokers and other custodians, nominees and
fiduciaries also will be reimbursed by the Company for their reasonable expenses
for sending proxy solicitation materials to the beneficial owners of Common
Stock.
The Company's Annual Report to Stockholders for the fiscal year ended April
26, 1997, including consolidated financial statements, is being mailed to all
stockholders entitled to vote at the Annual Meeting together with this Proxy
Statement. The Annual Report does not constitute a part of the proxy
solicitation material.
2
<PAGE>
PROPOSAL 1
ELECTION OF DIRECTORS
At the 1996 Annual Meeting of Stockholders, the Company's stockholders
elected 13 directors. During the Company's 1997 fiscal year, three of the
directors resigned, one director determined not to stand for re-election at this
Annual Meeting, and one new director was appointed by the Board of Directors.
Pursuant to its authority to adjust the number of directors of the Company, the
Board of Directors fixed the number of directors of the Company at 11, effective
as of August 4, 1997, with such number of directors being reduced to 10
effective as of the date of the Annual Meeting. The Board of Directors has
nominated the 10 persons named below to serve as directors until the next Annual
Meeting of Stockholders or until their earlier resignation or removal. Each of
the 10 nominees is presently a member of the Board of Directors of the Company
and has consented to serve another term as a director if re-elected. If any of
the nominees should be unavailable to serve for any reason (which is not
anticipated), the Board of Directors may (i) designate a substitute nominee or
nominees, in which case the persons named on the enclosed proxy will vote all
valid proxies for the election of such substitute nominee or nominees; (ii)
allow the vacancy or vacancies to remain open until a suitable candidate or
candidates are located; or (iii) by resolution, provide for fewer directors.
Proxies for this Annual Meeting may not be voted FOR more than 10 nominees.
NOMINEES FOR ELECTION AT THIS ANNUAL MEETING
<TABLE>
<S> <C>
JONATHAN J. LEDECKY...................... Mr. Ledecky founded the Company in October 1994
AGE 39 and has served since then as its Chairman and
Chief Executive Officer. Prior to founding the
Company, Mr. Ledecky served from 1989 to 1991 as
the President of The Legacy Fund, Inc., and from
1991 to September 1994 as President and Chief
Executive Officer of Legacy Dealer Capital Fund,
Inc., a wholly owned subsidiary of Steelcase
Inc. ("Steelcase"), the nation's largest
manufacturer of office furniture products. While
at Legacy Dealer Capital Fund, Inc., Mr. Ledecky
was responsible for providing corporate advisory
services for Steelcase's network of office
products distributors. In addition, Mr. Ledecky
has served as a director of, or corporate
advisor and/or consultant to, several office
products companies. Prior to his tenure at The
Legacy Fund, Inc., Mr. Ledecky was a partner at
Adler and Company and a Senior Vice President at
Allied Capital Corporation, a publicly traded
investment management company. Mr. Ledecky
serves as a director of publicly traded MLC
Holdings, Inc. Mr. Ledecky is a graduate of
Harvard College and Harvard Business School.
TIMOTHY J. FLYNN......................... Mr. Flynn has served as Vice Chairman of the
AGE 43 Company since June 9, 1997. From February 1995
through June 8, 1997, Mr. Flynn served as a
Director and the President and Chief Operating
Officer of the Company. Mr. Flynn held a variety
of positions at Andrews Office Supply and
Equipment Company ("Andrews"), a subsidiary of
the Company, including President, Executive Vice
President and Chief Operating Officer, between
1987 and 1996.
</TABLE>
3
<PAGE>
<TABLE>
<S> <C>
Mr. Flynn joined Andrews in 1986 after being
employed for 10 years in the commercial sales
division of M.S. Ginn and Company, an office
products supplier in Washington, D.C. Mr. Flynn
is a former member of the board of directors of
the National Purchasing Association ("NPA"), an
association of office products companies, and
the former Vice Chairman of the Commercial
Dealer Division of the Business Products
International Association (formerly known as the
National Office Products Association). Mr. Flynn
received his undergraduate degree and a Masters
in Administration from the University of
Maryland.
THOMAS I. MORGAN......................... Mr. Morgan has served as Chief Operating Officer
AGE 43 since June 9, 1997 and as a director since
February 28, 1997. From February 1997 until June
8, 1997, he was the President of the Company's
North American Office Products Group. Mr. Morgan
had been the Executive Vice President of the
S.P. Richards Company, the second largest office
products wholesaler in the United States and a
division of publicly traded Genuine Parts
Company. Mr. Morgan had spent the last 21 years
with Genuine Parts Company, including the last
11 years in various positions in S.P. Richards,
where he was responsible for operations, sales
and marketing efforts. He is a graduate of the
University of Tennessee, with a degree in
business administration.
JACK L. BECKER, JR....................... Mr. Becker has been a director of the Company
AGE 47 since February 1995, and the President of
Dameron-Pierson Company, Limited
("Dameron-Pierson"), a wholly owned subsidiary
of the Company, since 1992. From 1989 to April
1992, Mr. Becker was Executive Vice President of
Dameron-Pierson with responsibility for sales
and office furniture operations. He is a former
member of the board of directors of NPA and a
member of the dealer councils of Office
Furniture USA, Krueger International and All
Steel, Inc., each of which is an office products
trade organization. Mr. Becker received a
bachelor's degree in management from the
University of New Orleans.
DAVID C. GEZON........................... Mr. Gezon has been a director of the Company
AGE 45 since July 1995, and he is the President of the
C.W. Mills Acquisition Corp. ("C.W. Mills"), a
wholly owned subsidiary of the Company. Mr.
Gezon has worked for C.W. Mills since 1970 and
has served as its President since 1988. Mr.
Gezon received an undergraduate degree from
Calvin College and an M.B.A. from Western
Michigan University.
MILTON H. KUYERS......................... Mr. Kuyers has been a director of the Company
AGE 60 since April 1995. He is a part owner and
executive officer of a
</TABLE>
4
<PAGE>
<TABLE>
<S> <C>
number of privately held companies, including:
Zero Zone, Inc., a manufacturer of commercial
refrigeration units; Desert Air Corp., a
manufacturer of commercial dehumidification
equipment; Northwest Coatings, Inc., a
manufacturer of coating products; Grayline,
Inc., a manufacturer of tubing used in the
appliance and electrical industries; Digicorp
Inc., a distributor of business telephone
systems and cellular telephones; and Faustel,
Inc., a manufacturer of custom coating
equipment. Prior to 1993, Mr. Kuyers served as
the President of Star Sprinkler Corp., a
manufacturer of sprinkler heads for fire
protection systems. Mr. Kuyers previously served
on the board of directors of Medical Advances,
Inc., a manufacturer of parts for medical
diagnostic applications, until its sale in March
1997. Prior to its acquisition by the Company,
Mr. Kuyers also served as a director of The H.H.
West Company, a wholly owned subsidiary of the
Company ("H.H. West Company"). Mr. Kuyers holds
an undergraduate degree in business
administration and an M.B.A. from the University
of Michigan.
ALLON H. LEFEVER......................... Mr. Lefever has served as a director of the
AGE 50 Company since February 1995. He has been Vice
President of the Affiliated Companies for High
Industries, Inc., since April 1988. From 1988
until its acquisition by the Company, Mr.
Lefever served as the Chairman of the Board and
Chief Executive Officer of The Office Works,
Inc., and he currently serves on the boards of
directors of several private companies. In
addition, he is a director of Red Rose SuperNet
and Goodville Insurance Co. and serves on the
Business Advisory Board of Millersville State
University. Mr. Lefever received his
undergraduate degree from Millersville State
University and a Masters in Economics from
Pennsylvania State University.
EDWARD J. MATHIAS........................ Mr. Mathias has been a director of the Company
AGE 55 since February 1995. Currently, Mr. Mathias is a
Managing Director of The Carlyle Group, a
merchant bank based in Washington, D.C. From
1971 through 1993, Mr. Mathias was employed by
T. Rowe Price Associates, Inc., a major
investment management organization, most
recently as a Managing Director. Mr. Mathias
presently serves on the boards of directors of
Sirrom Capital Corporation, Pathogenesis and The
Fortress Group, Inc. as well as on the boards of
directors of several private companies. Mr.
Mathias holds an undergraduate degree from The
University of Pennsylvania and an M.B.A. from
Harvard Business School.
</TABLE>
5
<PAGE>
<TABLE>
<S> <C>
CLIFTON B. PHILLIPS...................... Mr. Phillips has served as a director of the
AGE 38 Company since August 1995. Mr. Phillips has
served as Chairman of Mills Morris Business
Products, Inc. ("Mills Morris") from June 1996
to the present. Previously, he served as
President of Mills Morris from 1993 to May 1996.
For more than four years prior to becoming
president of Mills Morris, Mr. Phillips held a
variety of positions with Mills Morris,
including President of Mills Morris Business
Interiors and General Manager of Arrow Business
Products. Mr. Phillips received his
undergraduate degree from Columbia University
and an M.B.A. from the University of
Pennsylvania.
JOHN A. QUELCH........................... Dr. Quelch has served as a director of the
AGE 46 Company since February 1995. Dr. Quelch is the
Sebastian S. Kresge Professor of Marketing at
the Harvard Business School, and he is the
author of 12 books on marketing and is widely
published in leading American business
publications. Dr. Quelch serves on the board of
directors of WPP Group plc, a marketing services
company that includes Ogilvy & Mather, J. Walter
Thompson and Hill & Knowlton. He is a national
public director of the Council of Better
Business Bureaus, Inc. Dr. Quelch received an
undergraduate degree from Oxford University in
England, an M.B.A. from the University of
Pennsylvania, and M.S. and Doctor of Business
Administration degrees from Harvard University.
</TABLE>
VOTE REQUIRED FOR APPROVAL
The vote of a plurality of holders of the outstanding shares of Common Stock
present in person or represented by duly executed proxies at the Annual Meeting
is necessary for the election of a nominee as a director of the Company. Shares
represented by an executed proxy in the form enclosed will, unless otherwise
directed, be voted for the election of the 10 persons nominated to serve as
directors.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE
ELECTION OF THE 10 PERSONS NOMINATED TO SERVE AS DIRECTORS.
BOARD ORGANIZATION AND MEETINGS
During the Company's fiscal year ended April 26, 1997, the Board of
Directors held four meetings and acted more than ten times by unanimous consent.
No member of the Board of Directors attended fewer than 75% of the total number
of meetings of the Board of Directors and all committees of the Board on which
he served.
The Board of Directors has the following committees:
EXECUTIVE COMMITTEE. The Executive Committee consists of Jonathan J.
Ledecky, Timothy J. Flynn, Edward J. Mathias and Clifton B. Phillips. The
Executive Committee has the authority to exercise the powers of the Board of
Directors between the meetings of the Board, including the authority to issue
shares and such other authority as is delegated to it from time to time by the
full Board of Directors. During the 1997 fiscal year, the Executive Committee
met 5 times and acted more than 10 times by unanimous consent.
6
<PAGE>
AUDIT COMMITTEE. The Audit Committee consists of Allon H. Lefever, John A.
Quelch and Milton H. Kuyers. The Audit Committee: (i) makes recommendations to
the Board of Directors with respect to the independent auditors who conduct the
annual examination of the Company's accounts; (ii) reviews the scope of the
annual audit and meets periodically with the Company's independent auditors to
review their findings and recommendations; (iii) approves major accounting
policies or changes thereto; and (iv) periodically reviews principal internal
controls to assure that the Company is maintaining a sound and modern system of
financial controls. In carrying out the foregoing functions, the Audit Committee
consults with the Company's internal audit staff, including the Corporate
Controller. During the 1997 fiscal year, the Audit Committee met 3 times.
COMPENSATION COMMITTEE. The Compensation Committee consists of Edward J.
Mathias and John A. Quelch. The Compensation Committee periodically determines
the amount and form of compensation and benefits payable to all executive
officers and certain other management personnel. This committee also administers
the U.S. Office Products Company Amended and Restated 1994 Long-Term Incentive
Compensation Plan (the "Incentive Plan") and the U.S. Office Products Company
Executive Deferred Compensation Plan (the "Executive Deferred Compensation
Plan"). If the proposed U.S. Office Products Company Section 162(m) Bonus Plan
(the "Bonus Plan") is adopted by the stockholders, it will be administered by
the Compensation Committee. During the 1997 fiscal year, the Compensation
Committee held 3 meetings and acted more than 60 times by unanimous consent.
DIRECTORS' REMUNERATION
Non-employee directors of the Company receive an annual retainer of $25,000
and are reimbursed for all expenses relating to attendance at meetings. During
the fiscal year ended April 26, 1997, fees for all directors aggregated
$100,000. In addition, each non-employee director who agreed to serve as such
prior to the consummation of the Company's initial public offering of Common
Stock in February 1995 (Messrs. Lefever, Mathias and Quelch) received options to
acquire 15,000 shares of Common Stock, exercisable in three equal installments,
commencing on the date of the grant and on each anniversary thereof, at an
exercise price per share of $8.00. Under the U.S. Office Products Company 1996
Non-Employee Directors' Stock Plan, non-employee directors receive options to
acquire 21,000 shares of Common Stock upon their initial election as a member of
the Board of Directors and thereafter receive annually options to acquire 6,000
shares in each year they are re-elected. In connection with the adoption of the
Directors' Plan at the Company's 1996 Annual Meeting, each of the four
non-employee directors who served as directors during the 1996 fiscal year
received, upon their re-election, options for 21,000 shares of Common Stock and,
for the 1997 fiscal year, received options for 6,000 shares of Common Stock. In
addition, pursuant to the Directors' Plan, non-employee directors are entitled
to have their directors' fees paid in the form of shares of the Company's Common
Stock or "deferred" shares of the Company's Common Stock. Two directors, Mr.
Lefever and Dr. Quelch, made elections to have their 1997 directors' fee paid in
the form of deferred shares. Directors who are employees of the Company do not
receive additional compensation for serving as directors. No non-employee member
of the Board of Directors was paid compensation during the 1997 fiscal year for
his service as a director of the Company other than pursuant to the standard
compensation arrangement described above.
7
<PAGE>
STOCK OWNERSHIP
The following table sets forth, as of August 15, 1997, information with
respect to the beneficial ownership of the Company's Common Stock by (i) each
director and nominee as director, (ii) each executive officer and former
executive officer named in the Summary Compensation Table, (iii) the current
executive officers and directors as a group, and (iv) each person known to the
Company who beneficially owns 5% or more of the outstanding shares of the Common
Stock. Unless otherwise indicated, each of the stockholders has sole voting and
investment power with respect to the shares beneficially owned.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF BENEFICIAL OWNER NUMBER PERCENT
- -------------------------------------------------------------------------------------------- ---------- -----------
<S> <C> <C>
EXECUTIVE OFFICERS AND DIRECTORS
Jonathan J. Ledecky(1)...................................................................... 1,980,804 2.7%
Clifton B. Phillips(2)(3)................................................................... 1,227,857 1.7%
Timothy J. Flynn(3)(4)...................................................................... 600,626 *
Michael J. Barnell(3)(5).................................................................... 350,269 *
Edward J. Mathias(3)(6)..................................................................... 223,250 *
David C. Copenhaver(3)(7)................................................................... 213,323 *
Martin S. Pinson(8)......................................................................... 67,051 *
David C. Gezon(3)(9)........................................................................ 119,443 *
Milton H. Kuyers(3)(10)..................................................................... 113,521 *
Donald H. Platt(11)......................................................................... 125,024 *
Allon H. Lefever(3)(12)..................................................................... 58,200 *
Jack L. Becker, Jr.(3)(13).................................................................. 44,923 *
Mark D. Director(14)........................................................................ 44,290 *
John A. Quelch(15).......................................................................... 42,000 *
Thomas I. Morgan(16)........................................................................ 400 *
All current executive officers and directors as a group..................................... 5,143,930 7.0%
5% STOCKHOLDERS
Pilgrim Baxter & Associates(17)............................................................. 4,128,000 5.6%
1255 Drummers Lane, Suite 300
Wayne, PA 19087-1950
FMR Corp.(18)............................................................................... 3,983,470 5.4%
82 Devonshire Street
Boston, MA 02109
</TABLE>
- ------------------------
* Less than 1%.
(1) Includes 362,500 shares which may be acquired upon the exercise of options
which are exercisable currently or exercisable within 60 days.
(2) Includes 200,000 shares held in two grantor retained annuity trusts.
(3) These persons were stockholders, executive officers, directors or employees
of entities acquired by, or combined into, the Company.
(4) Includes 156,250 shares which may be acquired upon the exercise of options
which are exercisable within 60 days and 27,500 shares held by a private
foundation.
(5) Includes 161,747 shares held indirectly by the Michael J. Barnell Trust of
which Mr. Barnell is trustee and beneficiary, 102,213 shares held indirectly
by MVB Investments, L.P., of which the Michael J. Barnell Trust is the
general partner and a limited partner and 86,032 shares owned by Mr.
Barnell's wife. Mr. Barnell was appointed President of the North American
Office Products Group effective August 1, 1997.
8
<PAGE>
(6) Incudes 42,000 shares which may be acquired upon the exercise of options
which currently are exercisable and 50,000 shares owned by Mr. Mathias'
wife.
(7) Includes 53,163 shares held in a trust in which Mr. Copenhaver has a 50%
beneficial interest and of which Mr. Copenhaver is a co-trustee and 2,500
shares which may be acquired upon the exercise of options which are
exercisable within 60 days. Mr. Copenhaver is not standing for re-election
as a director of the Company.
(8) Includes 60,000 shares owned by the Pinson and Associate Profit Sharing
Plan of which Mr. Pinson is the trustee and beneficiary and 6,250 shares
which may be acquired upon the exercise of options which currently are
exercisable. Mr. Pinson resigned from his position with the Company after
the end of its 1997 fiscal year.
(9) Includes 4,000 shares which may be acquired upon the exercise of options
which currently are exercisable and, 1,500 shares owned by Mr. Gezon's
children.
(10) Includes 27,000 shares which may be acquired upon the exercise of options
which currently are exercisable and 86,251 shares held by the Kuyers 1996
Joint Revocable Trust in which Mr. Kuyers serves as a trustee.
(11) Includes 123,350 shares which may be acquired upon the exercise of options
which are exercisable within 60 days.
(12) Includes 42,000 shares which may be acquired upon the exercise of options
which currently are exercisable.
(13) Includes 39,525 shares which may be acquired upon the exercise of options
which currently are exercisable or are exercisable within 60 days.
(14) Includes 43,750 shares which may be acquired upon the exercise of options
which are exercisable within 60 days.
(15) Includes 42,000 shares which may be acquired upon the exercise of options
which currently are exercisable.
(16) Includes 200 shares owned by Mr. Morgan's wife.
(17) Pilgrim Baxter & Associates ("Pilgrim Baxter") disclosed in a Schedule 13G
filed with the Securities and Exchange Commission (the "SEC") that, as of
December 31, 1996, it had sole investment power and shared voting power with
respect to the 4,128,000 shares reported herein. Pilgrim Baxter also filed a
Form 13F with the SEC reporting that, as of March 31, 1997, it had sole
investment discretion and shared voting authority with respect to 3,685,100
shares of Common Stock.
(18) FMR Corp. disclosed in a Schedule 13G filed with the SEC that, as of
December 31, 1996, it and certain affiliated persons had sole dispositive
power and no voting power with respect to the 3,983,470 shares reported
herein. FMR Corp. also filed a Form 13F with the SEC reporting that, as of
March 31, 1997, it had shared investment discretion and no voting authority
with respect to 7,895,500 shares of Common Stock.
9
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table provides, for the periods indicated, certain summary
information concerning the cash and non-cash compensation earned by or awarded
to (i) the Company's Chief Executive Officer, and (ii) each of the Company's
other executive officers during or at the end of the Company's 1997 fiscal year
(collectively, the "named executive officers"). The Company was organized in
October 1994 and did not conduct any operations prior to February 1995.
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
-------------------------------------------------- --------------------
OTHER SECURITIES
ANNUAL UNDERLYING ALL OTHER
FISCAL SALARY BONUS COMPENSATION OPTIONS/ COMPENSATION
NAME AND PRINCIPAL POSITION (1) YEAR (2) (3) (4) SARS (#) (5) (6)
- ------------------------------------- ----------- ---------- ---------- ------------- -------------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Jonathan J. Ledecky.................. 1997 $ 950,000 -- -- 500,000 $ 10,256
Chief Executive Officer 1996 250,000 -- -- 500,000 --
and Chairman of the Board 1995 145,833 -- -- 100,000 --
Timothy J. Flynn..................... 1997 300,000 -- -- 75,000 18,409
President and Chief 1996 250,000 $ 75,000 -- 310,000 15,256
Operating Officer 1995 45,912 -- -- 25,000 15,390
Thomas I. Morgan..................... 1997 101,000 37,500 $ 36,500 250,000 --
President--North American
Office Products Division
Donald H. Platt...................... 1997 200,000 100,000 -- 75,000 3,394
Senior Vice President--Chief 1996 150,000 125,000 45,300 250,000 --
Financial Officer
Mark D. Director..................... 1997 200,000 100,000 -- 75,000 --
Executive Vice President, 1996 38,061 75,000 -- 100,000 --
General Counsel and
Secretary
Martin S. Pinson..................... 1997 175,000 -- -- 25,000 1,720
Executive Vice President 1996 150,000 50,000 -- 100,000 --
1995 57,757 -- -- 25,000 --
</TABLE>
- ------------------------
(1) The positions of Messrs. Flynn, Morgan and Director changed after the end of
the Company's 1997 fiscal year. Mr. Flynn now serves as the Vice Chairman of
the Board; Mr. Morgan now serves as the Chief Operating Officer of the
Company; and Mr. Director now serves as the Chief Administrative Officer,
General Counsel and Secretary of the Company. Mr. Pinson resigned from his
position after the end of the 1997 fiscal year.
(2) The salary for Mr. Morgan for fiscal 1997 represents less than one full
year's compensation, as he commenced employment with the Company during
fiscal 1997. The salary for Mr. Director for fiscal 1996 represents less
than one full year's compensation, as he commenced employment with the
Company during fiscal 1996. Each salary shown for fiscal 1995 represents
less than one full year's compensation. No compensation was paid to any
named executive officer prior to February 23, 1995, the date that the
Company commenced operations. With respect to Messrs. Ledecky and Pinson,
the salary amounts for 1995 include $99,921 and $30,000, respectively, for
services rendered prior to the commencement of operations by the Company.
10
<PAGE>
(3) In addition to the cash bonuses paid related to fiscal 1996, the Company
granted options in fiscal 1997 as bonuses for fiscal 1996 to Messrs. Flynn,
Platt, Director and Pinson to purchase 75,000, 75,000, 75,000 and 25,000
shares of Common Stock, respectively, at an exercise price of $38.00 per
share. The amount of $37,500 reflects an accrual of the pro rata portion of
a bonus payable to Mr. Morgan no later than 12 months after the date of his
employment. See "--Employment Agreements."
(4) Includes $36,500 of moving related expenses for Mr. Morgan during fiscal
1997 and $45,300 in moving and automobile related expenses for Mr. Platt in
fiscal 1996.
(5) Represents options granted during fiscal years 1997, 1996 and 1995 with
respect to the stated number of shares of Common Stock.
(6) For Mr. Ledecky, this amount represents matching contributions under the
Company's 401(k) Retirement Plan in the amount of $2,170 and the payment of
executive disability insurance premiums in the amount of $8,086; for Mr.
Flynn, the 1997 amount represents matching contributions under the Company's
401(k) Retirement Plan in the amount of $1,001, the payment of executive
disability insurance premiums in the amount of $2,295 and the payment of
split-dollar life insurance premiums in the amount of $15,113; for Mr.
Platt, this amount represents matching contributions under the Company's
401(k) Retirement Plan in the amount of $1,740 and the payment of executive
disability insurance premiums in the amount of $1,654; and for Mr. Pinson,
this amount represents the payment of executive disability insurance
premiums in the amount of $1,720.
EMPLOYMENT AGREEMENTS
Each named executive officer has entered into an employment agreement with
the Company. The employment agreements (the "Employment Agreements") for
Jonathan J. Ledecky, Timothy J. Flynn, Donald H. Platt, Martin S. Pinson (who
resigned from the Company after the end of fiscal year 1997) and Mark D.
Director (the "Specific Officers") include substantially the same terms (except
for minimum base salary amounts) and are described below. Thomas I. Morgan's
employment agreement is described separately below.
Pursuant to the Employment Agreements, the Specific Officers receive an
annual base salary of no less than the following amounts: Jonathan J. Ledecky,
$250,000; Timothy J. Flynn, $250,000; Thomas I. Morgan, $450,000; Donald H.
Platt, $150,000; Mark D. Director, $150,000; and Martin S. Pinson, $150,000.
Base salaries are reviewed and subject to upward adjustment by the Compensation
Committee of the Board of Directors on an annual basis. The base salaries of the
Specific Officers for the Company's last three fiscal years are set forth under
the heading "--Summary Compensation Table." In addition, each Specific Officer
is eligible to earn additional year-end bonus compensation in an amount equal to
up to 100% of such employee's base salary, payable out of a bonus pool
determined by the Compensation Committee of the Board of Directors. Bonuses are
determined by measuring such officer's performance and the Company's overall
performance against target performance levels, typically based on the following
criteria: (i) the Company's overall profit; (ii) the Company's internal revenue
growth; and (iii) the Company's revenue growth due to acquisitions. Each
Employment Agreement is for an initial term of four years and is automatically
renewable at the end of the second year and each succeeding year for an
additional year, such that the remaining terms of such agreements are at all
times more than two years, unless terminated or not renewed by the Company or
the employee.
Each of the Employment Agreements provides that, in the event of a
termination of employment by the Company without cause, the Specific Officer
shall be entitled to receive from the Company such employee's then current
salary for whatever period is remaining under the term of the agreement. In the
event of a change in control of the Company (involving a change in the ownership
of a majority of the voting stock of the Company; a change in the majority of
the Board of Directors without approval of the current Board; a merger,
consolidation, recapitalization, reorganization or reverse stock split in which
the stockholders of the Company prior to such transaction do not continue to own
at least 75% of the stock of
11
<PAGE>
the Company following such transaction; or the approval by the stockholders of a
plan of complete liquidation or disposition of more than 50% of the Company's
assets), each Employment Agreement permits the employee to elect to terminate
his employment, entitling him to receive his base salary at the rate then in
effect for the remaining term of the agreement or two years, whichever is
greater.
Each Employment Agreement contains a covenant not to compete with the
Company for a period equal to the longer of: (i) two years immediately following
the termination of employment; or (ii) in the case of a termination without
cause pursuant to which such employee is entitled to continue to receive his
base salary, for so long as the Company continues to pay such salary. Applicable
law may reduce the scope of the covenant not to compete. In the event that the
term of any such covenant is reduced in accordance with applicable law, the
compensation to which the Specific Officer is entitled shall be paid to the
employee only for such reduced period of time as the employee is so prohibited
from competing or is not so competing.
Mr. Morgan's employment agreement provides for a base salary of $450,000,
which is reviewed and subject to upward adjustment by the Compensation Committee
of the Board of Directors on an annual basis. Mr. Morgan is entitled to a bonus
under the same terms as the Specific Officers, except that his employment
agreement guarantees the payment of an incentive bonus in an amount equal to no
less than $150,000 to be paid no later than the end of the first 12 months after
the date of his employment. In addition, Mr. Morgan's employment agreement
provides for the grant of an option for 250,000 shares of Common Stock to Mr.
Morgan, which grant was made under the Incentive Plan on February 3, 1997. Mr.
Morgan's employment agreement is for an initial term of two years and is
automatically renewable for additional, successive one-year terms, unless
terminated or not renewed by the Company or Mr. Morgan. In the event of a
termination of employment by the Company without cause, Mr. Morgan is entitled
to receive his base salary for the longer of one year from the date of
termination or whatever period is remaining under the employment agreement.
Pursuant to his employment agreement, Mr. Morgan is subject to the same covenant
not to compete as is included in the Employment Agreements.
OPTION GRANTS IN FISCAL 1997
The following tables set forth certain information concerning the grant and
exercise of options to purchase Common Stock of the Company during the last
completed fiscal year to each of the named executive officers.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
NUMBER OF PERCENT OF AT ASSUMED ANNUAL RATES OF
SECURITIES TOTAL OPTIONS STOCK PRICE
UNDERLYING GRANTED TO APPRECIATION FOR OPTION TERM (2)
OPTIONS EMPLOYEES IN EXERCISE EXPIRATION ----------------------------------------
NAME GRANTED (1) FISCAL YEAR PRICE DATE 0% 5% 10%
- ---------------------------------- ----------- --------------- ----------- ----------- --------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Jonathan J. Ledecky............... 500,000 11.1% $ 25.38 3/6/2006 $ -- $ 7,979,101 $ 20,220,607
Timothy J. Flynn.................. 75,000 1.7% $ 38.00 6/3/2006 -- 1,792,350 4,542,166
Thomas I. Morgan.................. 250,000 5.6% $ 33.13 2/3/2007 -- 5,208,034 13,198,180
Donald H. Platt................... 75,000 1.7% $ 38.00 6/3/2006 -- 1,792,350 4,542,166
Mark D. Director.................. 75,000 1.7% $ 38.00 6/3/2006 -- 1,792,350 4,542,166
Martin S. Pinson.................. 25,000 0.6% $ 38.00 6/3/2006 -- 597,450 1,514,055
All Optionees..................... 4,486,110 100.0% $ 30.62 Various -- 86,387,914 218,923,936
</TABLE>
- ------------------------
(1) The options granted are non-qualified stock options, which are exercisable
at the market price on the date of grant beginning one year from the date of
grant in cumulative yearly amounts of 25% of the shares and expire ten years
from the date of grant. The options become fully exercisable upon a change
in control, as defined in the Incentive Plan.
(2) The dollar amounts under these columns are the results of calculations at
assumed annual rates of stock appreciation of zero percent (0%), five
percent (5%) and ten percent (10%). These assumed
12
<PAGE>
rates of growth were selected by the SEC for illustration purposes only.
They are not intended to forecast possible future appreciation, if any, of
the Company's stock price. No gain to the optionees is possible without an
increase in stock prices, which will benefit all stockholders. A zero
percent (0%) gain in stock price will result in a zero percent (0%) benefit
to optionees.
OPTION EXERCISES IN FISCAL 1997 AND VALUE OF OPTIONS AT APRIL 26, 1997
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS HELD IN-THE-MONEY (3) OPTIONS
SHARES VALUE AT FISCAL YEAR-END (#) AT FISCAL YEAR-END ($)(4)
ACQUIRED ON REALIZED -------------------------- ---------------------------
NAME EXERCISE (#) (1) ($)(2) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- --------------------------------- ----------------- -------------- ----------- ------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Jonathan J. Ledecky.............. 0 0 175,000 925,000 $ 1,298,438 $ 2,432,813
Timothy J. Flynn................. 0 0 90,000 320,000 613,438 1,474,688
Thomas I. Morgan................. 0 0 -- 250,000 -- --
Donald H. Platt.................. 1,650 $ 32,950 60,850 262,500 392,750 1,228,219
Mark D. Director................. 0 0 25,000 150,000 157,813 473,438
Martin S. Pinson................. 0 0 37,500 112,500 350,781 686,719
</TABLE>
- ------------------------
(1) Represents the number of shares with respect to which options were
exercised.
(2) The value of exercised options represents the difference between the
exercise price of such options and the closing market price of the Company's
Common Stock on the date of exercise.
(3) Options are "in-the-money" if the closing market price of the Company's
Common Stock exceeds the exercise price of the options.
(4) The value of unexercised options represents the difference between the
exercise price of such options and $22.625, the closing market price of the
Company's Common Stock on April 26, 1997.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Company's Board of Directors is composed
of two independent, non-employee directors. The Compensation Committee reports
as follows:
GENERAL. The Compensation Committee of the Company's Board of Directors
(the "Committee") is responsible for approving and reviewing with the Board of
Directors the compensation of the Company's executive officers and certain other
management personnel. This includes compensation awarded in the form of cash
bonuses and equity-based incentives. The Committee administers the Company's
stock benefit plans, including the Incentive Plan and the Executive Deferred
Compensation Plan. The Committee will also administer the Bonus Plan (see
Proposal 2 herein) if it is authorized by the stockholders at the Annual
Meeting.
The Committee believes that compensation must be competitive, as well as
directly and materially linked to the Company's performance. In administering
the Company's compensation program, the Committee's objectives include the
following: attracting and retaining executive talent, motivating executives to
maximize operating performance, measuring performance on both an individual and
a Company-wide basis, reflecting the Company's success in meeting growth and
profitability targets, and linking executive and stockholder interests through
the grant of stock options and other equity-based compensation.
The key components of the Company's executive compensation program consist
of salary, annual incentive bonuses and stock options. The long-term
compensation of the Company's executive officers consists primarily of stock
options. The short-term compensation consists principally of base salary and a
cash bonus. The Committee's policy with respect to each of these elements,
including the basis of the
13
<PAGE>
compensation awarded to Mr. Ledecky, the Company's Chief Executive Officer
("CEO"), is discussed below.
Since the Company's inception, the Committee has strived to balance the cash
compensation needed to attract, motivate and retain executive talent with
long-term incentives through the grant of stock options with multi-year vesting
schedules. In the Committee's judgment, this approach tends to align the
interests of management most closely with those of the Company's stockholders.
BASE SALARY. The Committee significantly adjusted the base salary levels of
the Company's executives for the 1997 fiscal year. These adjustments were based
upon numerous factors, including the findings and recommendations of an
independent compensation consultant, the significant growth and then-current
size of the Company and the need to provide base salary levels comparable to
those being offered by the Company's major competitors (including the peer group
reflected in the Stock Performance Graph). In setting base salaries for new
executive officers, the Committee took into account the background and
qualifications of the new executives, the base salary levels of the Company's
other executive officers and the salaries that the Company's competitors were
paying to executives employed in comparable positions. The Committee also
increased the base salary levels of certain executive officers for the 1988
fiscal year. The Committee made these additional adjustments taking into account
the changing and expanded responsibilities of certain of the executive officers
as well as its continued desire to reward certain executives for their
significant contributions to the Company's continued growth and to respond to
competitive pay practices.
ANNUAL INCENTIVE BONUS. At the end of each fiscal year, the Committee
decides whether to award incentive bonuses to executive officers, based on the
Company's success in achieving its growth and profitability targets and
recommendations made by the Company's CEO. In making decisions about incentive
bonuses for other management personnel, the Committee considers the
recommendations of the executive officers. Bonuses are determined by measuring
an officer's performance and the Company's overall performance against target
performance levels, typically based on (i) the executive's overall performance
and contribution to the Company's growth and profitability; (ii) the Company's
overall profit; (iii) the Company's internal revenue growth; and (iv) the
Company's revenue growth due to acquisitions. In awarding cash incentive bonuses
for the 1997 fiscal year, the Committee also took account of the fact that
transfer restrictions imposed on the Company's executive officers by the
pooling-of-interests accounting rules impose a particularly severe limit on the
ability of the Company's executive officers to realize near-term benefits from
equity-based awards, even after the vesting requirements of those awards have
been met. The pooling-of-interests rules preclude the Company's executive
officers from selling shares of the Company's Common Stock in more than DE
MINIMIS amounts for a period beginning 30 days prior to completion of an
acquisition to be accounted for under the pooling-of-interests method and ending
when combined results of the Company and the acquired company for at least 30
days after the consummation of the acquisition have been published. During
fiscal 1997, the Company completed 40 acquisitions accounted for under the
pooling-of-interests method. Throughout its history, the Company has been
involved in pooling transactions almost continuously, and it is the Committee's
understanding that this is reasonably expected to continue into the future. As a
result, the Company's executive officers have been (and are reasonably expected
to continue to be) severely limited in the number of shares of Common Stock that
they can sell in the near term upon the exercise of vested stock options.
LONG-TERM INCENTIVE PLAN. Prior to the completion of the Company's initial
public offering of its Common Stock in February 1995, the Company's Board of
Directors and stockholders adopted the Incentive Plan to provide directors,
officers and key employees and consultants with additional incentives by
increasing their ownership interests in the Company and thereby focusing their
efforts on the long-term goals of the Company and the maximization of the total
return to stockholders.
Under the Incentive Plan, the Committee can award (i) stock options,
including incentive stock options, non-qualified stock options or both, which
options may contain automatic reload features;
14
<PAGE>
(ii) stock appreciation rights ("SARs"), whether in conjunction with the grant
of stock options or independent of such grants, or SARs that are only
exercisable in the event of a change in control of the Company or upon other
events; (iii) performance awards, consisting of a right to receive cash in an
amount determined with reference to the value of the Common Stock, a fixed
dollar amount payable in cash, or a combination of both; (iv) dividend
equivalents, consisting of a right to receive cash, other awards, or other
property equal in value to dividends paid with respect to a specified number of
shares of Common Stock, or other periodic payments; or (v) other awards not
otherwise provided for, the value of which are based in whole or in part upon
the value of the Common Stock. Thus far, the Committee has granted only non-
qualified stock options under the Incentive Plan.
The Committee believes that aligning management's interests with those of
the Company's stockholders is an important element of the Company's approach to
executive compensation. Stock options align the interests of employees and
stockholders by providing value to the executive through stock price
appreciation only. The stock options granted during the 1997 fiscal year have
ten-year terms and are exercisable at the fair market value of the Company's
stock on the date of grant beginning one year from the date of grant in
cumulative yearly amounts of 25% of the shares granted. The Committee granted
options to purchase 1,000,000 shares of Common Stock to executive officers for
the 1997 fiscal year. During the 1997 fiscal year, the Committee granted a lower
level of options to executive officers (other than the CEO) than it had during
the 1996 fiscal year because of its view that the higher salaries paid during
the 1997 fiscal year, the cash incentive bonuses paid for the 1997 fiscal year,
and the cumulative option grants to the Company's executive officers during the
1996 and 1997 fiscal years appropriately achieved the Committee's objectives in
rewarding and motivating the executive officers.
Stock options have been, and will continue to be, awarded periodically at
the discretion of the Compensation Committee, based upon recommendations of the
Company's CEO. The size of such grants, in general, will be evaluated by
regularly assessing competitive market practices, the recipient's position and
level of responsibility within the Company and the Company's overall
performance. Grants also will take into account the differential between the
levels of cash compensation paid by the Company as compared to those of the
Company's competitors.
The Committee intends, to the extent possible, that options and other
equity-based awards granted to executive officers under the Incentive Plan be
deductible for federal tax purposes. Stock option awards granted under the
Incentive Plan are deductible in accordance with Section 162(m) of the Internal
Revenue Code.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER. The Compensation Committee
considered several factors in establishing the CEO's compensation package,
including competitive pay practices, the CEO's level of stock ownership, his
contributions toward achievement of strategic goals and the Company's overall
financial and operating success and motivational factors. In determining Mr.
Ledecky's base salary level for the 1997 fiscal year, the Committee concluded
that a significant change to Mr. Ledecky's overall compensation was both
appropriate and necessary, in light of a variety of factors, including,
primarily, the extent to which Mr. Ledecky's compensation was significantly
lower than that received by the chief executives of the Company's competitors
and the critical role Mr. Ledecky plays in fostering rapid growth. An
independent compensation consultant confirmed that Mr. Ledecky's overall
compensation was substantially lower than the compensation that the Company's
competitors pay to their chief executives. The Committee also took into account
that Mr. Ledecky's leadership, background and skills had enabled (and continues
to enable) the Company to pursue a very aggressive acquisition program without
having to retain and pay substantial transaction fees to outside investment
bankers or brokers.
During the 1997 fiscal year, Mr. Ledecky's background, leadership and skills
continued to contribute significantly to the Company's internal revenue growth,
revenue growth due to acquisitions and increased profitability. Because the
Committee believed that its previous adjustment to Mr. Ledecky's salary
15
<PAGE>
adequately reflected his contributions to the Company's growth and
profitability, the Committee maintained Mr. Ledecky's base salary for the 1998
fiscal year at the level established for the 1997 fiscal year. The Committee
also chose not to award Mr. Ledecky a cash bonus for the 1997 fiscal year in
light of its judgment that Mr. Ledecky's total compensation package for that
year was adequate.
During the 1997 fiscal year, the Committee granted Mr. Ledecky an option for
500,000 shares to reflect Mr. Ledecky's contributions to the Company and the
Committee's belief that such grant would be a significant motivational factor
and would further solidify his long-term ties to the Company. The Committee
believes that tying Mr. Ledecky's financial reward to the market price of the
Company's stock best aligns Mr. Ledecky's interests with the interests of the
Company's stockholders. Mr. Ledecky was not awarded stock options as a year-end
bonus for the 1997 fiscal year because the Committee believed that the grants
made during the year reflected Mr. Ledecky's contributions to the Company's
growth, profitability and overall performance.
COMPENSATION COMMITTEE:
Edward J. Mathias
John A. Quelch
STOCK PERFORMANCE GRAPH
The following graph compares, from February 15, 1995, the date that the
Company's Common Stock began trading on the Nasdaq Stock Market following its
initial public offering, through the end of the Company's 1997 fiscal year, the
percentage change in the Company's Common Stock to the cumulative total returns
of the NASDAQ Composite Index and the Industry Comparables Index, a selected
group of issuers consisting of the following office products companies: Boise
Cascade Office Products Corp., BT Office Products International Inc., Corporate
Express Inc., Office Depot Inc. and Staples Inc. The graph plots the growth in
value of an initial $100 investment over the indicated time period, assuming the
reinvestment of dividends.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
U.S. OFFICE
NASDAQ PRODUCTS INDUSTRY COMPARABLES INDEX
<S> <C> <C> <C>
2/15/95 $100.00 $100.00 $100.00
99.76 107.14 93.69
102.71 136.90 101.19
4/28/95 106.08 120.24 95.84
109.20 104.76 103.41
117.32 114.29 108.49
7/31/95 125.84 146.43 120.85
128.21 164.29 124.93
131.16 144.05 129.57
10/31/95 130.22 163.10 134.48
133.13 159.52 130.77
132.24 216.67 139.98
1/31/96 133.20 223.81 140.61
138.26 288.10 159.58
138.43 295.24 168.92
4/30/96 149.63 342.86 184.65
156.28 361.90 204.24
148.94 400.00 181.04
7/26/96 135.67 283.33 140.48
143.47 252.38 145.87
154.21 341.67 153.47
10/26/96 153.66 280.95 134.14
162.46 295.24 127.18
162.27 325.00 127.18
1/25/97 171.42 327.38 147.33
164.52 304.76 134.73
153.55 235.71 107.04
4/25/97 151.99 215.48 101.23
</TABLE>
16
<PAGE>
The performance of the Company's Common Stock reflected above is not
necessarily indicative of future performance of the Common Stock. The
performance graph which appears above shall not be deemed incorporated by
reference by any general statement incorporating this Proxy Statement by
reference into any filing under the Securities Act of 1933, as amended, or under
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and shall
not be deemed filed under either of such acts, except to the extent that the
Company specifically incorporates this information by reference.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Exchange Act requires the Company's directors,
executive officers and persons holding more than 10% of the Company's
outstanding Common Stock to file with the SEC initial reports of ownership,
reports of changes in ownership and annual reports of ownership of Common Stock
and other equity securities of the Company. Specific due dates for these reports
have been established and the Company is required to report herein any failure
to file by these dates in fiscal 1997. Donald H. Platt was late in reporting his
acquisition of shares through the exercise of options issued to him under the
Incentive Plan and related sale of shares on September 19, 1996. In addition,
Clifton B. Phillips was late in reporting a gift of shares in December 1996.
CERTAIN TRANSACTIONS
The Company leases office, warehouse and retail store space from two
partnerships, a principal partner of which is Mr. Kuyers, a director of the
Company. The Company believes that such leases are on terms not less favorable
than would be obtainable in an arm's-length transaction from an unaffiliated
third party. The amounts paid to these partnerships by The H.H. West Company for
fiscal year 1997 was approximately $446,709, and, pursuant to the terms of the
lease agreement, will increase by five percent (5%) for fiscal 1998.
Mr. Phillips entered into an employment agreement with the Company on August
2, 1995, pursuant to which he is paid $24,000 per year for consulting services
rendered to the Company in connection with acquisitions and the operations of
Mills Morris.
17
<PAGE>
PROPOSAL 2
APPROVAL OF THE U.S. OFFICE PRODUCTS COMPANY SECTION 162(M) BONUS PLAN
GENERAL
At the Annual Meeting, Company stockholders will be asked to approve the
adoption of the Bonus Plan. Section 162(m) of the Internal Revenue Code
generally disallows a public company's tax deduction in excess of $1 million for
compensation to its chief executive officer and the four other most highly
compensated executive officers, subject to several exceptions, including an
exception for compensation paid under a stockholder-approved plan that is
"performance-based" within the meaning of Section 162(m). The Bonus Plan will
provide the Compensation Committee with the flexibility, as the Company grows
and as it considers hiring additional senior management, to ensure that
compensation packages for senior management can include the award of cash
bonuses that would be tax deductible by the Company. The Bonus Plan will enable
the Company to pay performance-based cash bonuses to certain key senior
executives of the Company while preserving, if necessary, the Company's
tax-deduction with respect to the payment thereof.
The Bonus Plan has been adopted by a unanimous vote of the Board of
Directors, effective for the performance periods commencing on or after April
26, 1997, subject to approval by the Company's stockholders. Should stockholder
approval not be obtained, the Bonus Plan will be void.
The Board of Directors and its Compensation Committee believe that, as a
matter of general policy, the Company's incentive compensation plans should be
structured to facilitate compliance with Section 162(m) and avoid a loss of the
deduction for executive compensation that exceeds $1 million. Nevertheless, the
Board of Directors and the Compensation Committee believe that the Compensation
Committee should reserve the right to establish separate annual and other
incentive compensation arrangements for otherwise covered executive officers
that may not comply with Section 162(m) if it determines, in its sole
discretion, that to do so would be in the best interests of the Company and its
stockholders.
The principal terms of the Bonus Plan are summarized below and a copy of the
Plan is annexed to this Proxy Statement as Annex A. The summary of the Bonus
Plan set forth below is not intended to be a complete description thereof and
such summary is qualified in its entirety by the actual text of the Bonus Plan
to which reference is made.
SUMMARY DESCRIPTION OF THE BONUS PLAN
The purpose of the Bonus Plan is (i) to enable the Compensation Committee to
design compensation packages for senior management intended to retain and
motivate them by providing them with the opportunity to earn annual bonus awards
that are based on the extent to which specified performance goals for such
performance period have been achieved or exceeded, through their designation as
participants in the Bonus Plan for a given performance period (generally, any
period used to determine whether the established goals have been attained, which
may be one or more fiscal years or portions thereof), and (ii) to structure
annual bonus opportunities, if necessary, in a way that will qualify the awards
made as "performance-based" for purposes of Section 162(m) so that the Company
will be entitled to a tax deduction on the payment of such incentive awards to
the Company's chief executive officer and its four other most highly compensated
executive officers.
The Board of Directors has appointed the Compensation Committee to
administer the Bonus Plan (in such capacity, the "Plan Committee"). The Plan
Committee will have broad administrative authority to, among other things,
designate participants, establish performance goals and performance periods
(I.E, the period or periods during which participants' performance will be
measured), determine the effect of participant termination of employment and
"change of control" transactions (as defined in the Bonus Plan,
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which is the same definition as that set forth in the Incentive Plan) prior to
payment of an award, and generally interpret and administer the Bonus Plan.
The Bonus Plan provides that participants for any given performance period
may include any key employee of the Company (including any subsidiary, operating
unit or division) who is also an executive officer of the Company, and who is
designated as a participant for such period by the Plan Committee. The
participants in the Bonus Plan for any given period will be designated by the
Plan Committee, in its sole discretion, within the earlier of the first 90 days
of each performance period or the date on which 25% of such performance period
has been completed (such period, the "Applicable Period"). This determination
may vary from period to period, and will be based primarily on the Plan
Committee's judgment as to which executive officers are likely to be named
executive officers of the Company for proxy purposes as of the end of such
performance period, and which are reasonably expected to have compensation in
excess of $1 million.
Within the Applicable Period, the Plan Committee will specify the applicable
performance criteria and targets to be used under the Bonus Plan for such
performance period which may vary from participant to participant, and will be
based on one or more of the following Company, subsidiary, operating unit or
division financial performance measures: pre-tax or after-tax net income,
operating income, gross revenue (aggregate or "same store"), profit margin,
stock price, cash flows or strategic business criteria consisting of one or more
objectives based upon meeting specified revenue, market penetration, geographic
business expansion goals, cost targets and goals relating to acquisitions or
divestitures. These performance measures or goals may be (i) expressed on an
absolute or relative basis, (ii) based on internal targets, (iii) based on
comparison(s) with prior performance, (iv) based on comparison(s) to capital,
stockholders' equity, shares outstanding, assets or net assets, and/or (v) based
on comparison(s) to the performance of other companies. For example, an
income-based performance measure could be expressed in a number of ways, such as
net earnings per share, or return on equity, or with reference to meeting or
exceeding a specific target, or with reference to growth above a specified
level, such as prior year's performance or peer group performance. The Bonus
Plan provides that the achievement of such goals must be substantially uncertain
at the time they are established and are subject to the Plan Committee's right
to reduce the amount of any award payable as a result of such performance as
discussed below.
The target bonus opportunity for each participant may be expressed as a
dollar-denominated amount or as a percentage share of a bonus pool to be created
under the Bonus Plan, provided that, if a pool approach is used, the total bonus
opportunities represented by the percentage share designated for the
participants may not exceed 100% of the pool, and the Plan Committee has the
sole discretion to reduce (but not increase) the actual bonus awarded under the
Plan. The actual bonus awarded to any given participant at the end of a given
performance period will be based on the extent to which the applicable financial
performance goals for such performance period are achieved as determined by the
Plan Committee. The maximum bonus payable under the Plan to any one individual
in any one calendar year is $3 million.
The Board of Directors may at any time amend or terminate the Bonus Plan,
provided that (i) without a participant's written consent, no such amendment or
termination will adversely affect the annual bonus rights (if any) of any
already designated participant for a given performance period once the
participant designations and performance goals for such performance period have
been announced, (ii) the Board of Directors will be authorized to make any
amendments necessary to comply with applicable regulatory requirements
(including, without limitation, Section 162(m)), and (iii) the Board of
Directors will submit any Bonus Plan amendments for the approval of the
stockholders of the Company if and to the extent such approval is required under
Section 162(m) of the Internal Revenue Code.
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NEW PLAN BENEFITS
No bonus award opportunity has been granted under the Bonus Plan to date and
the Compensation Committee has no present intent to award any bonus award
opportunities under the Bonus Plan. The Board of Directors and the Compensation
Committee are recommending adoption of the Bonus Plan by the stockholders to
provide the Compensation Committee with the flexibility, as the Company grows
and as it considers hiring additional senior management, as discussed above, to
ensure that compensation packages for senior management include the award of
cash bonuses that would be tax deductible by the Company. Any award opportunity
that may be granted in the future under the Bonus Plan will be tied to the
achievement of performance measurements set by the Plan Committee at the
beginning of the fiscal year or, if awards are based upon a portion of a fiscal
year, within the period required under the Bonus Plan. Achievement of those
performance measurements will not be determinable until after the end of the
relevant fiscal year (or portion thereof), and, in addition, will be subject to
the Plan Committee's determinations regarding the extent of any reduction
adjustments that will be applied which likewise are not determinable until after
the end of any such fiscal year (or portion thereof). Thus, the amounts that
will be paid under the Bonus Plan with respect to any fiscal year (or portion
thereof) are not currently determinable. However, as stated in the Plan
description, the bonus that may be payable under the Bonus Plan to any
individual participant in any calendar year cannot exceed $3 million.
FEDERAL TAX CONSEQUENCES
The following is a brief description of the federal income tax consequences
generally arising with respect to awards that may be granted under the Bonus
Plan. This discussion is intended for the information of stockholders of the
Company considering how to vote at the Annual Meeting and not as tax guidance to
individuals who may participate in the Bonus Plan.
Under present federal income tax law, participants will realize ordinary
income equal to the amount of the award received under the Bonus Plan in the
year of such receipt. The Company will receive a deduction for the amount
constituting ordinary income to the participant, provided that the participant's
total compensation is below the Section 162(m) limit or the Bonus Plan satisfies
the requirements of Section 162(m) of the Internal Revenue Code. It is the
Company's intention that the Bonus Plan be adopted and administered in a manner
that maximizes the Company's deductibility of compensation under Section 162(m)
of the Internal Revenue Code.
VOTE REQUIRED FOR APPROVAL
The affirmative vote of a majority of the outstanding shares of Common Stock
present in person or represented by proxy at the Annual Meeting and entitled to
vote is required to approve the adoption of the Bonus Plan.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE
ADOPTION OF THE BONUS PLAN.
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PROPOSAL 3
APPOINTMENT OF INDEPENDENT ACCOUNTANTS
Upon recommendation of the Audit Committee of the Board of Directors, and
subject to ratification by the stockholders, the Board of Directors has
appointed Price Waterhouse LLP as independent public accountants to examine the
Company's consolidated financial statements for the fiscal year ending April 25,
1998. Price Waterhouse LLP has served as the Company's independent accountants
since its formation in October 1994. Representatives of Price Waterhouse LLP are
expected to be present at the Annual Meeting and will have the opportunity to
make a statement, if they so desire, and to respond to appropriate questions
from those attending the meeting.
VOTE REQUIRED FOR APPROVAL
The affirmative vote of a majority of the outstanding shares of Common Stock
present in person or represented by proxy at the Annual Meeting and entitled to
vote is required to ratify the appointment of the Company's independent
accountants.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE
RATIFICATION OF THE APPOINTMENT OF PRICE WATERHOUSE LLP AS INDEPENDENT
ACCOUNTANTS TO EXAMINE THE COMPANY'S CONSOLIDATED FINANCIAL STATEMENTS FOR THE
1998 FISCAL YEAR.
SUBMISSION OF STOCKHOLDER PROPOSALS
Any proposal to be presented by a stockholder at the Company's 1998 Annual
Meeting of Stockholders must be received by the Company no later than May 12,
1998, so that it may be considered by the Company for inclusion in its Proxy
Statement and form of proxy relating to that meeting.
OTHER MATTERS
The Board of Directors knows of no matters that are expected to be presented
for consideration at the Annual Meeting other than those described in this Proxy
Statement. Should any other matter properly come before the Annual Meeting,
however, the persons named in the form of proxy accompanying this Proxy
Statement will vote all shares represented by proxies in accordance with their
best judgment on such matters.
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ANNEX A
U.S. OFFICE PRODUCTS COMPANY
SECTION 162(M) BONUS PLAN
1. PURPOSE. The purpose of this Section 162(m) Bonus Plan (the "Plan") of
U.S. Office Products Company (the "Company") is (i) to retain and motivate key
senior executives of the Company who have been designated as Participants in the
Plan for a given Performance Period, by providing them with the opportunity to
earn bonus awards that are based on the extent to which specified performance
goals for such Performance Period have been achieved or exceeded; and (ii) to
structure such bonus opportunities in a way that will qualify the awards made as
"performance-based" for purposes of Section 162(m) of the Internal Revenue Code
of 1986, as amended, (or any successor section) so that the Company will be
entitled to a tax deduction on the payment of such incentive awards to such
employees.
2. DEFINITIONS. As used in the Plan, the following terms shall the
meanings set forth below:
(a) "Annual Base Salary" shall mean the amount of base salary paid to a
Participant (including amounts of base salary payable to such Participant
but deferred pursuant to the Company's Executive Deferred Compensation Plan)
for a given year, unless the Plan Committee specifies otherwise at the time
that the Participant's award opportunity for a given Performance Period is
established.
(b) "Applicable Period" shall mean, with respect to any Performance
Period, a period commencing on or before the first day of such Performance
Period and ending no later than the earlier of (i) the 90th day of such
Performance Period, or (ii) the date on which 25% of such Performance Period
has been completed. Any action required under the Plan to be taken within
the period specified in the preceding sentence may be taken at a later date
if, but only if, the regulations under Section 162(m) of the Code are
hereafter amended, or interpreted by the Internal Revenue Service, to permit
such later date, in which case the term "Applicable Period" shall be deemed
amended accordingly.
(c) "Board" shall mean the Board of Directors of the Company as
constituted from time to time.
(d) "Cause" shall mean "cause" as defined in any employment agreement
then in effect between the Participant and the Company or if not defined
therein or, if there shall be no such agreement, where the Participant: (i)
commits any act of fraud, willful misconduct or dishonesty in connection
with his employment or which injures the Company or its direct or indirect
subsidiaries; (ii) breaches any other material provision of any agreement
between the Participant and the Company or a subsidiary of the Company
relating to the Participant's employment or breaches any fiduciary duty to
the Company or its direct or indirect subsidiaries; (iii) fails, refuses or
neglects to timely perform any material duty or obligation relating to his
position; (iv) commits a material violation of any law, rule, regulation or
by-law of any governmental authority (state, federal or foreign), any
securities exchange or association or other regulatory or self-regulatory
body or agency applicable to the Company or its direct or indirect
subsidiaries or any general policy or directive of the Company or its direct
or indirect subsidiaries communicated in writing to the Participant; or (v)
is charged with a crime involving moral turpitude, dishonesty, fraud or
unethical business conduct, or a felony.
(e) "Change of Control" shall have the same meaning as set forth in the
U.S. Office Products Company Amended and Restated 1994 Long-Term Incentive
Plan, as amended from time to time (the "1994 LTIP").
(f) "Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
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(g) "Committee" or "Plan Committee" shall mean the committee of the
Board consisting solely of two or more non-employee directors (each of whom
is intended to qualify as an "outside director" within the meaning of
Section 162(m) of the Code) designated by the Board as the committee
responsible for administering and interpreting the Plan.
(h) "Company" shall mean U.S. Office Products Company, a corporation
organized under the laws of the State of Delaware, and any successor
thereto.
(i) "Disability" shall mean "disability" as defined in any employment
agreement then in effect between the Participant and the Company or if not
defined therein or if there shall be no such agreement, as defined in the
Company's long-term disability plan as in effect from time to time, or if
there shall be no plan or if not defined therein, the Participant's becoming
physically or mentally incapacitated and consequent inability for a period
of 120 days in any twelve consecutive month period to perform his duties to
the Company.
(j) "Executive Officer" shall have the meaning set forth in Rule 3b-7
promulgated under the Securities Exchange Act of 1934, in each case as
amended from time to time.
(k) "Individual Award Opportunity" shall mean the performance-based
award opportunity for a given Participant for a given Performance Period as
specified by the Plan Committee within the Applicable Period, which may be
expressed in dollars or on a formula basis that is consistent with the
provisions of this Plan.
(l) "Negative Discretion" shall mean the discretion authorized by the
Plan to be applied by the Committee to eliminate, or reduce the size of, a
bonus award otherwise payable to a Participant for a given Performance
Period, provided that the exercise of such discretion would not cause the
award to fail to qualify as "performance-based compensation" under Section
162(m) of the Code. By way of example and not by way of limitation, in no
event shall any discretionary authority granted to the Committee by the Plan
including, but not limited to, Negative Discretion, be used (i) to provide
for an award under the Plan in excess of the amount payable based on actual
performance versus the applicable performance goals for the Performance
Period in question, or in excess of the maximum individual award limit
specified in Section 6(b) below, or (ii) to increase the amount otherwise
payable to any other Participant.
(m) "Participant" shall mean, for any given Performance Period with
respect to which the Plan is in effect, each key employee of the Company
(including any subsidiary, operating unit or division) who is an Executive
Officer of the Company and who is designated as a Participant in the Plan
for such Performance Period by the Committee pursuant to Section 4 below.
(n) "Performance Period" shall mean any period commencing after April
26, 1997 for which performance goals are set under Section 5 and during
which performance shall be measured to determine whether such goals have
been met for purposes of determining whether a Participant is entitled to
payment of a bonus under the Plan. A Performance Period may be coincident
with one or more fiscal years of the Company, or a portion thereof.
(o) "Plan" or "Section 162(m) Plan" shall mean the U.S. Office Products
Company Section 162(m) Bonus Plan as set forth in this document, and as
amended from time to time.
(p) "Retirement" shall mean any termination of employment with the
Company and its subsidiaries (other than a termination by the Company (or
any of its subsidiaries) for Cause) that (i) occurs upon or after attainment
of age 65, and (ii) is approved in writing as a "Retirement" event for
purposes of this Plan by (or pursuant to procedures established by) the Plan
Committee.
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3. ADMINISTRATION.
(a) GENERAL. The Plan shall be administered by the Committee. Subject
to the terms of the Plan and applicable law (including, but not limited to,
Section 162(m) of the Code), and in addition to any other express powers and
authorizations conferred on the Committee by the Plan, the Committee shall
have the full power and authority, after taking into account, in its sole
and absolute discretion, the recommendations of the Company's Chief
Executive Officer:
(i) to designate (within the Applicable Period) the Participants in
the Plan and the individual award opportunities and/or, if
applicable, bonus pool award opportunities for such Performance
Period;
(ii) to designate (within the Applicable Period) and thereafter
administer the performance goals and other award terms and
conditions that are to apply under the Plan for such
Performance Period;
(iii) to determine and certify the bonus amounts earned for any given
Performance Period, based on actual performance versus the
performance goals for such Performance Period, after making any
permitted Negative Discretion adjustments;
(iv) to decide (within the Applicable Period) any issues that are
not resolved under the express terms of the Plan relating to
the impact on the bonus awards for such Performance Period of
(A) a termination of employment (due to death, Disability,
Retirement, voluntary termination (other than Retirement),
termination by the Company other than for Cause, or termination
by the Company for Cause), provided, in each case, that no
payment shall be made for any given Performance Period prior to
the time that the Plan Committee certifies, pursuant to Section
6(c)(i) below, that the applicable performance goals for such
Performance Period have been met or (B) a Change of Control;
(v) to decide whether, under what circumstances and subject to what
terms bonus payouts are to be paid on a deferred basis,
including automatic deferrals at the Committee's election as
well as elective deferrals at the election of Participants;
(vi) to adopt, revise, suspend, waive or repeal, when and as
appropriate, in its sole and absolute discretion, such
administrative rules, guidelines and procedures for the Plan as
it deems necessary or advisable to implement the terms and
conditions of the Plan;
(vii) to interpret and administer the terms and provisions of the
Plan and any award issued under the Plan (including reconciling
any inconsistencies, correcting any defaults and addressing any
omissions in the Plan or any related instrument or agreement);
and
(viii) to otherwise supervise the administration of the Plan.
It is intended that all amounts payable to Participants under the Plan who
are "covered employees" within the meaning of Treas. Reg. Sec. 1.162-27(c)(2)
(as amended from time to time) shall constitute "qualified performance-based
compensation" within the meaning of Section 162(m) of the Code and Treas. Reg.
Sec. 1.162-27(e) (as amended from time to time), and, to the maximum extent
possible, the Plan and the terms of any awards under the Plan shall be so
interpreted and construed.
(b) BINDING NATURE OF COMMITTEE DECISIONS. Unless otherwise expressly
provided in the Plan, all designations, determinations, interpretations and
other decisions made under or with respect to the Plan or any award under
the Plan shall be within the sole and absolute discretion of the Committee,
and shall be final, conclusive and binding on all persons, including the
Company, any Participant, and any award beneficiary or other person having,
or claiming, any rights under the Plan.
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(c) OTHER. No member of the Committee shall be liable for any action
or determination (including, but limited to, any decision not to act) made
in good faith with respect to the Plan or any award under the Plan. If a
Committee member intended to qualify as an "outside director" under Section
162(m) of the Code does not in fact so qualify, the mere fact of such
non-qualification shall not invalidate any award or other action made by the
Committee under the Plan which otherwise was validly made under the Plan.
4. PLAN PARTICIPATION.
(a) ANNUAL PARTICIPANT DESIGNATIONS BY PLAN COMMITTEE. For any given
Performance Period, the Plan Committee, in its sole and absolute discretion,
shall, within the Applicable Period, designate those key employees of the
Company (including its subsidiaries, operating units and divisions) who
shall be Participants in the Plan for such Performance Period. Such
Participant designations shall be made by the Plan Committee, in its sole
and absolute discretion, based primarily on its determination as to which
key employees:
(i) are likely to be Executive Officers of the Company as of the last
day of the fiscal year for which the Company would be entitled to
a Federal tax deduction for payment of the award in respect of
such Performance Period;
(ii) are reasonably expected by the Plan Committee to have individual
compensation for such fiscal year that may be in excess of $1
million, excluding any compensation that is grandfathered for
Section 162(m) purposes or is otherwise excluded for Section
162(m) purposes based on an existing or other "performance-based"
plan other than this Plan; and
(iii) are reasonably expected by the Plan Committee to be "covered
employees" for such fiscal year for Section 162(m) purposes,
and such other consideration as the Committee deems appropriate, in its sole
and absolute discretion.
(b) IMPACT OF PLAN PARTICIPATION. An individual who is a designated
Participant in the Section 162(m) Plan for any given Performance Period
shall not also participate in the Company's general bonus plans for such
Performance Period, if such participation would cause any award hereunder to
fail to qualify as "performance-based" under Section 162(m).
5. PERFORMANCE GOALS.
(a) SETTING OF PERFORMANCE GOALS. For a given Performance Period, the
Plan Committee shall, within the Applicable Period, set one or more
objective performance goals for each Participant and/or each group of
Participants and/or each bonus pool (if any). Such goals shall be based
exclusively on one or more of the following financial measures, which may be
determined on a Company-wide basis or by subsidiary, division or operating
unit:
(1) pre-tax or after-tax net income,
(2) operating income,
(3) gross revenue,
(4) profit margin,
(5) stock price,
(6) cash flow(s),
(7) 'same store" revenues,
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(8) strategic business criteria, consisting of one or more objectives
based on meeting specified revenue, market penetration,
geographic business expansion goals, cost targets, and goals
relating to acquisitions or divestitures,
or any combination thereof (in each case before or after such objective income
and expense allocations or adjustments as the Committee may specify within the
Applicable Period). Each such goal may be expressed on an absolute and/or
relative basis, may be based on or otherwise employ comparisons based on current
internal targets, the past performance of the Company (including the performance
of one or more subsidiaries, divisions and/or operating units) and/or the past
or current performance of other companies, and in the case of earnings-based
measures, may use or employ comparisons relating to capital (including, but
limited to, the cost of capital), stockholders' equity and/or shares
outstanding, or to assets or net assets. In all cases, the performance goals
shall be such that they satisfy any applicable requirements under Treas. Reg.
Sec. 1.162-27(e)(2) (as amended from time to time) that the achievement of such
goals be "substantially uncertain" at the time that they are established, and
that the award opportunity be defined in such a way that a third party with
knowledge of the relevant facts could determine whether and to what extent the
performance goal has been met, and, subject to the Plan Committee's right to
apply Negative Discretion, the amount of the award payable as a result of such
performance.
(b) Impact Of Extraordinary Items Or Changes In Accounting. The measures
used in setting performance goals set under the Plan for any given
Performance Period shall be determined in accordance with GAAP and a manner
consistent with the methods used in the Company's audited financial
statements, without regard to (i) extraordinary items as determined by the
Company's independent public accountants in accordance with GAAP, (ii)
changes in accounting, unless, in each case, the Plan Committee decides
otherwise within the Applicable Period, or (iii) non-recurring acquisition
expenses and restructuring charges.
6. BONUS POOLS, AWARD OPPORTUNITIES AND AWARDS.
(a) SETTING OF INDIVIDUAL AWARD OPPORTUNITIES. At the time that annual
performance goals are set for Participants for a given Performance Period
(within the Applicable Period), the Plan Committee shall also establish each
Individual Award Opportunity for such Performance Period, which shall be
based on the achievement of stated target performance goals, and may be
stated in dollars or on a formula basis (based, for example, on a designated
share of a bonus pool or on a multiple of Annual Base Salary), provided:
(i) that the designated shares of any bonus pool shall not exceed
100% of such pool; and
(ii) that the Plan Committee, in all cases, shall have the sole and
absolute discretion, based on such factors as it deems
appropriate, to apply Negative Discretion to reduce (but not
increase) the actual bonus awards that would otherwise actually
be payable to any Participant on the basis of the achievement of
the applicable performance goals.
(b) MAXIMUM INDIVIDUAL BONUS AWARD. Notwithstanding any other
provision of this Plan, the maximum bonus payable under the Plan to any one
individual in any one calendar year shall be $3.0 million.
(c) BONUS PAYMENTS. Subject to the following, bonus awards determined
under the Plan for a given Performance Period shall be paid to Participants
in cash, or, if permitted under the Company's 1994 LTIP, in shares of
Company stock or other equity-based awards, as soon as practicable following
the end of the Performance Period to which they apply, provided:
(i) that no such payment shall be made unless and until the Plan
Committee, based on the Company's audited financial results for
such Performance Period (as prepared and reviewed by the
Company's independent public accountants), has certified (in the
manner prescribed under applicable regulations) the extent to
which the applicable
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performance goals for such Performance Period have been
satisfied, and has made its decisions regarding the extent of any
Negative Discretion adjustment of awards (to the extent permitted
under the Plan);
(ii) that the Plan Committee may specify that a portion of the actual
bonus award for any given Performance Period shall be paid on a
deferred basis, based on such award payment rules as the Plan
Committee may establish and announce for such Performance Period;
(iii) that the Plan Committee may require (if established and
announced within the Applicable Period), as a condition of bonus
eligibility (and subject to such exceptions as the Committee may
specify within the Applicable Period) that Participants for such
Performance Period must still be employed as of end of such
Performance Period and/or as of the later date that the actual
bonus awards for such Performance Period are announced, in order
to be eligible for an award for such Performance Period;
(iv) that, within the Applicable Period and subject to Section
6(c)(i) above, the Committee may adopt such forfeiture,
pro-ration or other rules as it deems appropriate, in its sole
and absolute discretion, regarding the impact on bonus award
rights of a Participant's death, Disability, Retirement,
voluntary termination (other than Retirement), termination by the
Company other than for Cause, or termination by the Company for
Cause; and
(v) that, within the Applicable Period and subject to Section
3(a)(iv) above, the Committee may adopt such rules as it deems
appropriate, in its sole and absolute discretion, regarding the
impact on bonus award rights of a Change of Control.
7. GENERAL PROVISIONS.
(a) PLAN AMENDMENT OR TERMINATION. The Board may at any time amend or
terminate the Plan, provided that (i) without the Participant's written
consent, no such amendment or termination shall adversely affect the bonus
rights (if any) of any already designated Participant for a given
Performance Period once the Participant designations and performance goals
for such Performance Period have been announced, (ii) the Board shall be
authorized to make any amendments necessary to comply with applicable
regulatory requirements (including, without limitation, Section 162(m) of
the Code), and (iii) the Board shall submit any Plan amendment to the
Company's stockholders for their approval if and to the extent such approval
is required under Section 162(m) of the Code.
(b) APPLICABLE LAW. All issues arising under the Plan shall be
governed by, and construed in accordance with, the laws of the State of
Delaware, applied without regard to conflict of law principles.
(c) TAX WITHHOLDING. The Company (and its subsidiaries) shall have
right to make such provisions and take such action as it may deem necessary
or appropriate for the withholding of any and all Federal, state and local
taxes that the Company (or any of its subsidiaries) may be required to
withhold.
(d) NO EMPLOYMENT RIGHT CONFERRED. Participation in the Plan shall not
confer on any Participant the right to remain employed by the Company or any
of its subsidiaries, and the Company and its subsidiaries specifically
reserve the right to terminate any Participant's employment at any time with
or without cause or notice.
(e) IMPACT OF PLAN AWARDS ON OTHER PLANS. Plan awards shall not be
treated as compensation for purposes of any other compensation or benefit
plan, program or arrangement of the Company or any subsidiary, unless and
except to the extent that the Board or its Compensation Committee so
determines in writing. Neither the adoption of the Plan nor the submission
of the Plan to the
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Company's stockholders for their approval shall be construed as limiting the
power of the Board or the Plan Committee to adopt such other incentive
arrangements as it may otherwise deem appropriate.
(f) BENEFICIARY DESIGNATIONS. Each Participant shall designate in a
written form filed with the Committee the beneficiary (or beneficiaries) to
receive the amounts (if any) payable under the Plan in the event of the
Participant's death prior to the bonus payment date for a given Performance
Period. Any such beneficiary designation may be changed by the Participant
at any time without the consent of the beneficiary (unless otherwise
required by law) by filing a new written beneficiary designation with the
Committee. A beneficiary designation shall be effective only if the Company
is in receipt of the designation prior to the Participant's death. If no
effective beneficiary designation is made, the beneficiary of any amounts
shall be the Participant's estate.
(g) COSTS AND EXPENSES. All award and administrative costs and
expenses of the Plan shall be borne by the Company.
(h) NON-TRANSFERABILITY OF RIGHTS. Except as and to the extent
required by law, a Participant's rights under the Plan may not be assigned
or transferred in whole or in part either directly or by operation of law or
otherwise (except, pursuant to Section 7(f) above, in the event of the
Participant's death), including, but not limited to, by way of execution,
levy, garnishment, attachment, pledge, bankruptcy or in any other manner,
and no such right of the Participant shall be subject to any obligation or
liability of the Participant other than any obligation or liability owed by
the Participant to the Company (or any of its subsidiaries).
8. EFFECTIVE DATE.
The Plan was adopted by the Board on August 4, 1997, effective for
Performance Periods commencing after April 26, 1997, subject to stockholder
approval of the Plan at the 1997 annual shareholders' meeting. No payments shall
be made under the Plan prior to the time such stockholder approval is obtained
in accordance with applicable law. If approved, the Plan will remain effective
until the end of the fiscal year ending on the last Saturday in April 2002,
unless the Board terminates the Plan earlier.
7
<PAGE>
U.S. OFFICE PRODUCTS COMPANY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD OCTOBER 7, 1997
Revoking all prior proxies, the undersigned, a stockholder of U.S. OFFICE
PRODUCTS COMPANY (the "Company"), hereby appoints Jonathan J. Ledecky, Donald H.
Platt and Mark D. Director, and each of them, attorneys and agents of the
undersigned, with full power of substitution, to vote all shares of the Common
Stock, par value $.001 per share (the "Common Stock"), of the undersigned in the
Company at the Annual Meeting of Stockholders of the Company to be held in the
Ballroom of the Willard Intercontinental Hotel, 1401 Pennsylvania Avenue, N.W.,
Washington, D.C. 20005 on October 7, 1997 at 10:00 a.m., local time, and at any
adjournment thereof, as fully and effectively as the undersigned could do if
personally present and voting, hereby approving, ratifying and confirming all
that said attorneys and agents or their substitutes may lawfully do in place of
the undersigned as indicated below.
<TABLE>
<S> <C> <C>
1. Election of Directors / / FOR all nominees listed below / / WITHHOLD AUTHORITY to vote for
(Except as marked to the contrary below) all nominees listed below
</TABLE>
Nominees: Jonathan J. Ledecky, Timothy J. Flynn, Thomas I. Morgan, Jack L.
Becker, Jr., David C. Gezon, Milton H. Kuyers, Allon H. Lefever, Edward J.
Mathias, Clifton B. Phillips, and John A. Quelch
(INSTRUCTIONS: To withhold authority to vote for any individual nominee, write
that nominee's name in the space provided below.)
- --------------------------------------------------------------------------------
2. Approval of adoption of the U.S. Office Products Company Section 162(m)
Bonus Plan.
/ / FOR / / AGAINST / / ABSTAIN
3. Ratification of the appointment of Price Waterhouse LLP as the independent
public accountants to examine the Company's consolidated financial
statements for the fiscal year ending April 25, 1998.
/ / FOR / / AGAINST / / ABSTAIN
(CONTINUED AND TO BE SIGNED AND DATED ON THE OTHER SIDE)
<PAGE>
IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON ANY OTHER
MATTERS WHICH MAY PROPERLY COME BEFORE THE MEETING OR ANY ADJOURNMENT THEREOF.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED. IF NO
DIRECTION IS INDICATED, THIS PROXY WILL BE VOTED FOR THE ELECTION OF THE LISTED
NOMINEES AS DIRECTORS AND FOR PROPOSALS 2 and 3.
Please sign exactly as name appears below.
When shares are held by joint tenants, both should sign. When signing as
attorney, executor, administrator, trustee or guardian, please give full title
as such. If a corporation, please sign in full corporation name by President or
other authorized officer. If a partnership, please sign in partnership name by
authorized person.
PLEASE SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY, USING THE ENCLOSED
ENVELOPE
Dated ________________________, 1997
____________________________________
(Signature)
____________________________________
(Signature if held jointly)
/ / PLEASE CHECK HERE IF YOU PLAN
TO ATTEND THE ANNUAL MEETING.
