TAB PRODUCTS CO, DEF 14A, 1996-09-11

TAB PRODUCTS CO
DEF 14A, 1996-09-11
OFFICE FURNITURE (NO WOOD)

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<PAGE>

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 Section 240.14a-11(c) or Section 240.14a-12

TAB PRODUCTS CO.
(Name of Registrant as Specified In Its Charter)

TAB PRODUCTS CO.
1400 PAGE MILL ROAD
PALO ALTO, CALIFORNIA 94304
(Name of Person(s) Filing Proxy Statement)

Payment of Filing Fee (Check the appropriate box):
/x/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:

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2) Aggregate number of securities to which transaction applies:

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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):

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4) Proposed maximum aggregate value of transaction:

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5) Total fee paid:

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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:

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2) Form, Schedule or Registration Statement No.:

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3) Filing Party:

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4) Date Filed:

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<PAGE>

TAB PRODUCTS CO.
1400 PAGE MILL ROAD
PALO ALTO, CALIFORNIA 94304
--------------------

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD OCTOBER 17, 1996

--------------------

Dear Stockholder:

You are invited to attend the Annual Meeting of Stockholders of Tab
Products Co. (the "Company"), which will be held on Thursday, October 17, 1996,
at 2:00 p.m. local time at Hyatt Rickeys, 4219 El Camino Real, Palo Alto,
California in the Executive Conference Room, for the following purposes:

1. To elect six (6) members of the Board of Directors to hold office
until the 1997 Annual Meeting of Stockholders and until their
respective successors are elected and qualified.

2. To approve the Company's 1996 Outside Directors Stock Option Plan.

3. To ratify the appointment of Deloitte & Touche LLP as the independent
accountants of the Company for the fiscal year ending May 31, 1997.

4. To transact such other business as may properly come before the
meeting.

Stockholders of record at the close of business on September 3, 1996 are
entitled to notice of, and to vote at, this meeting and any adjournments
thereof. For ten days prior to the meeting, a complete list of the stockholders
entitled to vote at the meeting will be available for examination by any
stockholder for any purpose relating to the meeting during ordinary business
hours at the principal office of Tab Products Co.

By Order of the Board of Directors,

/s/ Robert J. Sexton

ROBERT J. SEXTON
SECRETARY

Palo Alto, California
September 16, 1996

STOCKHOLDERS ARE REQUESTED TO COMPLETE, DATE AND SIGN THE ENCLOSED PROXY AND
RETURN IT IN THE ENCLOSED POSTAGE-PREPAID ENVELOPE. PROXIES ARE REVOCABLE, AND
ANY STOCKHOLDER MAY WITHDRAW HIS PROXY AND VOTE IN PERSON AT THE MEETING.

<PAGE>

TAB PRODUCTS CO.
1400 PAGE MILL ROAD
PALO ALTO, CALIFORNIA 94304

--------------------

PROXY STATEMENT FOR ANNUAL MEETING OF STOCKHOLDERS

--------------------

The accompanying proxy is solicited by the Board of Directors of Tab
Products Co., a Delaware corporation (the "Company") for use at the Annual
Meeting of Stockholders to be held Thursday, October 17, 1996, at 2:00 p.m.
local time, or any adjournment thereof, for the purposes set forth in the
accompanying Notice of Annual Meeting. The date of this Proxy Statement is
September 16, 1996, the approximate date on which this Proxy Statement and the
accompanying form of proxy were first sent or given to stockholders.

GENERAL INFORMATION

ANNUAL REPORT. An annual report for the fiscal year ended May 31, 1996, is
enclosed with this Proxy Statement.

VOTING SECURITIES. Only stockholders of record as of the close of business
on September 3, 1996, will be entitled to vote at the meeting and any
adjournment thereof. As of that date, there were 4,857,701 shares of Common
Stock of the Company, par value $.01 per share, issued and outstanding.
Stockholders may vote in person or in proxy. Each holder of shares of Common
Stock is entitled to one vote for each share of stock held on the proposals
presented in this Proxy Statement. The Company's bylaws provide that a majority
of all of the shares of the stock entitled to vote, whether present in person or
represented by proxy, shall constitute a quorum for the transaction of business
at the meeting.

SOLICITATION OF PROXIES. The cost of soliciting proxies will be borne by
the Company. In addition to soliciting stockholders by mail through its regular
employees, the Company will request banks and brokers, and other custodians,
nominees and fiduciaries, to solicit their customers who have stock of the
Company registered in the names of such persons and will reimburse them for
their reasonable, out-of-pocket costs. The Company may use the services of its
officers, directors, and others to solicit proxies, personally or by telephone,
without additional compensation.

VOTING OF PROXIES. All valid proxies received prior to the meeting will be
voted. All shares represented by a proxy will be voted, and where a stockholder
specifies by means of the proxy a choice with respect to any matter to be acted
upon, the shares will be voted in accordance with the specification so made. If
no choice is indicated on the proxy, the shares will be voted in favor of the
proposal. A stockholder giving a proxy has the power to revoke his or her
proxy, at any time prior to the time it is voted, by delivery to the Secretary
of the Company of a written instrument revoking the proxy or a duly executed
proxy with a later date, or by attending the meeting and voting in person.

STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. The following
table sets forth certain information, as of July 31, 1996, with respect to the
beneficial ownership of the Company's Common Stock by (i) all persons known by
the Company to be the beneficial owners of more than 5% of the outstanding
Common Stock of the Company, (ii) each director and director-nominee of the
Company, (iii) each of the executive officers named in the Summary Compensation
Table, and (iv) all directors and executive officers of the Company as a group.

<PAGE>

SHARES OWNED (1)
--------------------------
NAME AND ADDRESS OF NUMBER PERCENTAGE
BENEFICIAL OWNERS OF SHARES OF CLASS
------------------- --------- ----------
<S> <C> <C>
Tab Products Co. Pension, Profit Sharing & Tax
Deferred Savings Trusts. . . . . . . . . . . . . . . . . . . . . 541,953 11.2%
1400 Page Mill Road
Palo Alto, CA 94304

David L. Babson & Co., Inc.. . . . . . . . . . . . . . . . . . . 518,700(2) 10.7%
One Memorial Drive
Cambridge, MA 02142-1300

T. Rowe Price Associates, Inc. . . . . . . . . . . . . . . . . . 445,000(3) 9.2%
100 E. Pratt Street
Baltimore, MD 21202

Quest Advisory Corp. . . . . . . . . . . . . . . . . . . . . . . 388,400(4) 8.0%
1414 Avenue of the Americas
New York, NY 10019

Dimensional Fund Advisors Inc. . . . . . . . . . . . . . . . . . 374,300(5) 7.7%
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401

Robert R. Augsburger . . . . . . . . . . . . . . . . . . . . . . 12,575 *

Dr. William E. Ayer. . . . . . . . . . . . . . . . . . . . . . . 2,000 *

Robert S. Cecil. . . . . . . . . . . . . . . . . . . . . . . . . 0 *

Michael A. Dering. . . . . . . . . . . . . . . . . . . . . . . . 16,003(6) *

Dr. Kathryn S. Hanson. . . . . . . . . . . . . . . . . . . . . . 0 *

Jerry K. Myers . . . . . . . . . . . . . . . . . . . . . . . . . 2,000 *

John W. Peth . . . . . . . . . . . . . . . . . . . . . . . . . . 77,750(7) 1.6%

Hans A. Wolf . . . . . . . . . . . . . . . . . . . . . . . . . . 13,750(8) *

James A. Ayre. . . . . . . . . . . . . . . . . . . . . . . . . . 20,000(9) *

John M. Palmer . . . . . . . . . . . . . . . . . . . . . . . . . 9,037(10) *

Patricia J. Robitaille . . . . . . . . . . . . . . . . . . . . . 8,750(11) *

Directors and executive officers as a group (17 persons) . . . . 214,923(12) 4.3%
- --------------------------------
</TABLE>

* Less than 1%

<PAGE>

(1) Except as indicated in the footnotes to this table, the persons named in
the table have sole voting and investment power with respect to all shares
of Common Stock shown as beneficially owned by them, subject to community
property laws, where applicable.

(2) According to a Schedule 13G filed February 15, 1996 by David L. Babson &
Co., Inc. ("Babson & Co."), Babson & Co. is deemed to have beneficial
ownership of 518,700 shares of the Company's Common Stock. Babson & Co.
has sole voting power as to 386,100 shares, shared voting power as to
132,600 shares and sole dispositive power as to 518,700 shares.

(3) According to a Schedule 13G jointly filed February 14, 1996 by T. Rowe
Price Associates, Inc. ("Price Associates") and T. Rowe Price Small Cap
Value Fund, Inc. ("Price Fund"), such persons are deemed to have beneficial
ownership of 445,000 shares and 400,000 shares, respectively, of the
Company's Common Stock. The 400,000 shares deemed to be beneficially owned
by Price Fund are included in the 445,000 shares deemed to be beneficially
owned by Price Associates. Price Associates has sole voting power as to
45,000 shares and sole dispositive power as to 445,000 shares. Price Fund
has sole voting power as to 400,000 shares.

(4) According to a Schedule 13G jointly filed February 14, 1996 by Quest
Advisory Corp. ("Quest") and Charles M. Royce, such persons are deemed to
be a group and may be deemed to have beneficial ownership of 388,400 shares
of the Company's Common Stock. Mr. Royce may be deemed to be a controlling
person of Quest, and as such may be deemed to beneficially own the shares
of Common Stock of the Company beneficially owned by Quest. Mr. Royce does
not own any shares outside of Quest, and disclaims beneficial ownership of
the shares held by Quest. Quest has sole voting and dispositive power as
to 388,400 shares of the Company's Common Stock.

(5) According to a Schedule 13G/A filed February 3, 1996 by Dimensional Fund
Advisors Inc. ("Dimensional"), Dimensional is deemed to have beneficial
ownership of 374,300 shares of the Company's Common Stock. Dimensional has
sole voting power as to 277,350 shares and sole dispositive power as to
374,300 shares. Persons who are officers of Dimensional also serve as
officers of DFA Investment Dimensions Group Inc., (the "Fund") and The DFA
Investment Trust Company (the "Trust"), each an open-end management
investment company registered under the Investment Company Act of 1940. In
their capacities as officers of the Fund and the Trust, these persons vote
25,600 additional shares which are owned by the Fund and 71,350 shares
which are owned by the Trust.

(6) Includes 15,003 shares allocated to Mr. Dering's account under the
Company's Tax Deferred Savings Plan ("401(k) Plan") as of May 31, 1996,
based upon the most recent quarterly report prepared by the trustee under
the 401(k) Plan. Under certain circumstances, Mr. Dering may be deemed to
have sole dispositive power over such shares pursuant to the terms of the
401(k) Plan. Such shares are also included in the number of shares shown
as beneficially owned by Tab Products Co. Pension, Profit Sharing and Tax
Deferred Savings Trusts.

(7) Includes 60,000 shares which are subject to options exercisable within
60 days of July 31, 1996. Also includes 7,750 shares allocated to Mr.
Peth's account under the 401(k) Plan as of May 31, 1996, based upon the
most recent quarterly report prepared by the trustee under the 401(k) Plan.
Under certain circumstances, Mr. Peth may be deemed to have sole
dispositive power over such shares pursuant to the terms of the 401(k)
Plan. Such shares are also included in the number of shares shown as
beneficially owned by Tab Products Co. Pension, Profit Sharing and Tax
Deferred Savings Trusts.

(8) Includes 3,750 shares which are subject to options exercisable within
60 days of July 31, 1996.

(9) Includes 20,000 shares which are subject to options exercisable within
60 days of July 31, 1996.

<PAGE>

(10) Includes 6,875 shares which are subject to options exercisable within 60
days of July 31, 1996. Also includes 162 shares allocated to Mr. Palmer's
account under the 401(k) Plan as of May 31, 1996, based upon the most
recent quarterly report prepared by the trustee under the 401(k) Plan.
Under certain circumstances, Mr. Palmer may be deemed to have sole
dispositive power over such shares pursuant to the terms of the 401(k)
Plan. Such shares are also included in the number of shares shown as
beneficially owned by Tab Products Co. Pension, Profit Sharing and Tax
Deferred Savings Trusts.

(11) Includes 8,750 shares which are subject to options exercisable within
60 days of July 31, 1996.

(12) Includes 127,125 shares which are subject to options exercisable within 60
days of July 31, 1996. Also includes 37,058 shares allocated to individual
executive officer's accounts under the 401(k) Plan as of May 31, 1996,
based upon the most recent quarterly report prepared by the trustee under
the 401(k) Plan. Under certain circumstances, such executive officers may
be deemed to have sole dispositive power over such shares pursuant to the
terms of the 401(k) Plan. Such shares are also included in the number of
shares shown as beneficially owned by Tab Products Co. Pension, Profit
Sharing and Tax Deferred Savings Trusts.

<PAGE>

ELECTION OF DIRECTORS

The Company's Board of Directors currently consists of eight (8) directors:
Robert R. Augsburger, Dr. William E. Ayer, Robert S. Cecil, Michael A. Dering,
Dr. Kathryn S. Hanson, Jerry K. Myers, John W. Peth and Hans A. Wolf. In April
1996, the size of the Company's Board of Directors was increased from five (5)
to eight (8) members with the additions of Robert S. Cecil, Dr. Kathryn S.
Hanson and Jerry K. Myers. Terms for Dr. William E. Ayer and Michael A. Dering
as directors expire immediately prior to the time of the 1996 Annual Meeting of
Stockholders, and Dr. Ayer and Mr. Dering will not stand for re-election.
Effective immediately prior to the 1996 Annual Meeting, the authorized number of
directors of the Company will be reduced from eight (8) to six (6), and the
Board of Directors will consist of six (6) directors.

Management's six (6) nominees for election to the Board of Directors, and
certain information with respect to their age and background, are set forth
below. Each of the nominees was elected to his present term of office at the
1995 Annual Meeting of Stockholders, with the exception of Messrs. Cecil and
Myers and Dr. Hanson who were appointed to the Board of Directors in April 1996.
Management knows of no reason why any nominee should be unable or unwilling to
serve. However, if any nominee(s) should for any reason be unable or unwilling
to serve, the proxies will be voted for such substitute nominees as Management
may designate. If elected, the nominees will serve as directors until the
Company's Annual Meeting of Stockholders in 1997, and until their successors are
elected and qualified.

If a quorum is present and voting, the nominees for directors receiving the
highest number of votes will be elected as directors. Abstentions and shares
held by brokers that are present, but not voted because the brokers were
prohibited from exercising discretionary authority, i.e., "broker non-votes"
will be counted as present for purposes of determining if a quorum is present.

DIRECTOR
NAME POSITION WITH THE COMPANY AGE SINCE
- ---- ------------------------- --- -----
Robert R. Augsburger Director 70 1976

Robert S. Cecil Director 61 1996

Dr. Kathryn S. Hanson Director 47 1996

Jerry K. Myers Director 55 1996

John W. Peth Director, Acting President 47 1991
and Chief Executive Officer

Hans A. Wolf Chairman of the Board 68 1992

ROBERT R. AUGSBURGER. Mr. Augsburger has been a director of the Company
since September 1976. Mr. Augsburger is also a consultant. Mr. Augsburger was a
Lecturer in Management at the Graduate School of Business at Stanford University
from April 1986 to December 1994, and from 1978 to January 1987 he was Executive
Director of Peninsula Open Space Trust, a non-profit land conservation
organization.

ROBERT S. CECIL. Mr. Cecil has served as a director of the Company since
April 1996. Mr. Cecil is Chairman of the Board and Chief Executive Officer of
Plantronics, Inc., a manufacturer and marketer of telecommunications accessories
products. Mr. Cecil has been with Plantronics, Inc. since 1992. Prior to that,
Mr. Cecil spent six years with Lin Broadcasting Corporation, where his last

<PAGE>

position was President, Cellular Group. Mr. Cecil holds a B.S. from the U.S.
Naval Academy and an M.B.A. degree from Harvard Graduate School of Business.

DR. KATHRYN S. HANSON. Dr. Hanson has been a director of the Company since
April 1996. Dr. Hanson is a management consultant at The Hanson Group, a
strategic management and marketing consulting practice which she founded in
1988. Prior to that, she spent three years with Convergent, Inc., where her
last position was Director of Marketing, Cluster Systems Division. Dr. Hanson
holds a B.A. degree from Stanford University, M.A. and PhD degrees from the
University of Chicago and an M.B.A. degree from Harvard Graduate School of
Business.

JERRY K. MYERS. Mr. Myers has been a director of the Company since April
1996. Since December 1995 he has been chairman of Medcor, Inc., a provider of
on-site occupational health services. Since January 1995 Mr. Myers has been a
partner in the investment firm of CroBern Management Partnership. From 1990 to
1994 he served as President, Chief Executive Officer and a director of
Steelcase, Inc. From 1986 through 1990 he was employed by TRW, Inc. serving as
general manager of the automotive sector. Mr. Myers is also a director of
Autocam Corporation and APS Holding Corporation.

JOHN W. PETH. Mr. Peth has served as director of the Company since March
1991. Mr. Peth has also served as the Acting President and Chief Executive
Officer of the Company since July 1996, as Executive Vice President and Chief
Operating Officer since March 1991 and as President, Tab U.S. since July 1994.
Mr. Peth served as the Company's Chief Financial Officer from July 1991 to July
1994. Mr. Peth was the Office Managing Partner, San Jose Region, of Deloitte &
Touche from December 1989 to March 1991 and Partner-in-Charge, San Jose Office,
of Deloitte Haskins & Sells from August 1985 to December 1989. Mr. Peth is also
a director of Aspect Telecommunications and Business Resource Group.

HANS A. WOLF. Mr. Wolf has served as a director of the Company since
February 1992 and as Chairman of the Board since February 1995. Mr. Wolf was
the Vice Chairman of Syntex Corporation ("Syntex") from October 1985 to December
1992, and was the Chief Administrative Officer at Syntex from October 1985 to
February 1992. Mr. Wolf is also chairman of Network Equipment Technologies,
Inc. and a director of Hyal Pharmaceutical Corporation.

BOARD MEETINGS. During the fiscal year ended May 31, 1996, the Board held
nine meetings. No director serving on the Board during fiscal 1996 attended
fewer than 75% of such meetings of the Board and the Committees on which he or
she serves, except that Dr. Kathryn S. Hanson did not attend one of the two
meetings of the Board held since she became a director in April 1996.

COMMITTEES OF THE BOARD. The Company has an Audit Committee, a
Compensation Committee and a Nominating Committee.

The Audit Committee's function is to review with the Company's independent
accountants and management the annual financial statements and independent
accountants' opinion, review the scope and results of the examination of the
Company's financial statements by the independent accountants, approve all
professional services and related fees performed by the independent accountants,
recommend the retention of the independent accountants to the Board, subject to
ratification by the stockholders, and periodically review the Company's
accounting policies and internal accounting and financial controls. Each of
Messrs. Augsburger, Wolf and Peth and Dr. Ayer were members of the Audit
Committee during the fiscal year ended May 31, 1996. Mr. Peth became a member
of the Audit Committee in April 1996. During the fiscal year ended May 31,
1996, the Audit Committee held two meetings.

The Compensation Committee's function is to review and grant stock options
and recommend salary levels for executive officers and certain other management
employees. Each of

<PAGE>

Messrs. Augsburger, Cecil, John L. Doyle and Dr. Ayer and Dr. Hanson were
members of the Compensation Committee during the fiscal year ended May 31, 1996.
John L. Doyle's term as director expired immediately prior to the time of the
1995 Annual Meeting of Stockholders in October 1995 and Mr. Doyle did not stand
for re-election at the 1995 Annual Meeting of Stockholders. Mr. Cecil and
Dr. Hanson were appointed to the Compensation Committee when they joined the
Company's Board of Directors in April 1996. During the fiscal year ended May
31, 1996, the Compensation Committee held two meetings. For additional
information concerning the Compensation Committee, see "REPORT OF THE
COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION."

The Nominating Committee interviews and recommends action to the Board
regarding any potential member of the Board of Directors. Each of Messrs.
Augsburger, Dering, Doyle and Wolf were members of the Nominating Committee
during the fiscal year ended May 31, 1996. Mr. Doyle's term as director expired
immediately prior to the time of the 1995 Annual Meeting of Stockholders in
October 1995. Mr. Doyle did not stand for re-election at the 1995 Annual
Meeting of Stockholders. During the fiscal year ended May 31, 1996, the
Nominating Committee held one meeting.

<PAGE>
EXECUTIVE COMPENSATION AND OTHER MATTERS

EXECUTIVE COMPENSATION. The following table sets forth information
concerning the compensation of the Chief Executive Officer of the Company and
the four other most highly compensated executive officers of the Company as
of May 31, 1996 whose total salary and bonus for the fiscal year ended May
31, 1996 exceeded $100,000, for services in all capacities to the Company and
its subsidiaries, during the fiscal years ended May 31, 1996, 1995 and 1994.

SUMMARY COMPENSATION TABLE

LONG-TERM
ANNUAL COMPENSATION COMPENSATION
------------------------------- ------------

SECURITIES ALL OTHER
UNDERLYING COMPENSA-
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS TION(12)
- --------------------------- ------ ------------ ---------- ------------- -----------

<S> <C> <C> <C> <C> <C>
Michael A. Dering(1) 1996 $285,000 $65,000 135,000(7) $4,620
1995 $285,000 $ 0 0 $4,926
1994 $285,000 $ 0 0 $4,803

John W. Peth(2) 1996 $250,000 $50,000 120,000(8) $5,490
Acting President and Chief 1995 $250,000 $ 0 0 $5,142
Executive Officer 1994 $250,000 $ 0 0 $5,019

James A. Ayre 1996 $157,188 $11,656 40,000(9) $ 549
Vice President, Canadian 1995 $132,397 $38,864 0 $ 598
and Australian Operations 1994 $ 82,689(4) $25,200 40,000 $ 456

Patricia J. Robitaille(3) 1996 $135,000 $30,000 20,000(10) $ 0
Vice President, Information 1995 $120,000 $ 0 0 $ 243
and Business Systems 1994 $ 30,500(5) $ 0 15,000 $ 0

John M. Palmer 1996 $112,167 $30,000 20,000(11) $ 930
Vice President, Finance and 1995 $ 80,277 $ 0 0 $ 49
Chief Fianancil Officer 1994 $ 31,515(6) $ 0 7,500 $ 17
</TABLE>

- -----------------------------

(1) Mr. Dering resigned from the position of President and Chief Executive
Officer of the Company in July 1996 to accept the position of President and
Chief Executive Officer of Bell+Howell Publication Systems Company. During
the fiscal year ended May 31, 1996, there was outstanding to Mr. Dering a
non-interest bearing note payable to the Company. See "EXECUTIVE
COMPENSATION AND OTHER MATTERS -- Certain Relationships and Related
Transactions."

(2) Mr. Peth was appointed Acting President and Chief Executive Officer of the
Company in July 1996 upon the resignation of Michael A. Dering. Mr. Peth
continues to hold the positions of Executive Vice President, Chief
Operating Officer and President, Tab U.S.

<PAGE>

(3) During the fiscal year ended May 31, 1996, there was outstanding to Ms.
Robitaille a non-interest bearing note payable to the Company. See
"EXECUTIVE COMPENSATION AND OTHER MATTERS -- Certain Relationships and
Related Transactions."

(4) Mr. Ayre commenced his employment with the Company in October 1993.

(5) Ms. Robitaille commenced her employment with the Company in March 1994.

(6) Mr. Palmer commenced his employment with the Company in October 1993.

(7) Includes options to purchase an aggregate of 135,000 shares which were
repriced June 9, 1995, replacing options to purchase 10,000 shares granted
in fiscal 1988, options to purchase 30,000 shares granted in fiscal 1989,
options to purchase 175,000 shares granted in fiscal 1991 and options to
purchase 20,000 shares granted in fiscal 1992. Options to purchase
100,000 shares were canceled in connection with the repricing. Upon Mr.
Dering's resignation from the position of President and Chief Executive
Officer of the Company in July 1996, options to purchase a total of 67,500
shares of the Company's Common Stock were vested and exercisable by him.
After Mr. Dering's resignation, these options were canceled and repurchased
by the Company for $1.375 per share or $92,812.50, the difference between
the per share fair market value of the Company's Common Stock on the date
of cancellation and repurchase and Mr. Dering's per share exercise price.
See "EXECUTIVE COMPENSATION AND OTHER MATTERS -- Repricing of Options"
and "REPORT OF THE COMPENSATION COMMITTEE ON REPRICING OF OPTIONS."

(8) Includes options to purchase an aggregate of 120,000 shares which were
repriced June 9, 1995, replacing options to purchase 200,000 shares granted
in fiscal 1991 and options to purchase 20,000 shares granted in fiscal
1992. Options to purchase 100,000 shares were canceled in connection with
the repricing. See "EXECUTIVE COMPENSATION AND OTHER MATTERS -- Repricing
of Options" and "REPORT OF THE COMPENSATION COMMITTEE ON REPRICING OF
OPTIONS."

(9) Includes an option to purchase an aggregate of 40,000 shares which was
repriced June 9, 1995, replacing an option to purchase 40,000 shares
granted in fiscal 1994. See "EXECUTIVE COMPENSATION AND OTHER MATTERS --
Repricing of Options" and "REPORT OF THE COMPENSATION COMMITTEE ON
REPRICING OF OPTIONS."

(10) Includes an option to purchase 15,000 shares which was repriced June 9,
1995, replacing an option to purchase 15,000 shares granted in fiscal 1994.
See "EXECUTIVE COMPENSATION AND OTHER MATTERS -- Repricing of Options"
and "REPORT OF THE COMPENSATION COMMITTEE ON REPRICING OF OPTIONS."

(11) Includes an option to purchase 7,500 shares which was repriced June 9,
1995, replacing an option to purchase 7,500 shares granted in fiscal 1994.
See "EXECUTIVE COMPENSATION AND OTHER MATTERS -- Repricing of Options"
and "REPORT OF THE COMPENSATION COMMITTEE ON REPRICING OF OPTIONS."

(12) Includes amounts deferred in the Company's Tax Deferred Savings Plan
("401(k) Plan") for Messrs. Dering, Peth and Palmer in the amounts of
$4,620, $4,620, and $679, respectively, during fiscal year ended May 31,
1996. Also includes annual premiums paid by the Company for life insurance
policies for Messrs. Peth, Ayre and Palmer in the amounts of $870, $549 and
$251, respectively.

<PAGE>

STOCK OPTIONS GRANTED DURING FISCAL 1996. The following table provides the
specified information concerning grants of options to purchase the Company's
Common Stock made during the fiscal year ended May 31, 1996 to the persons named
in the Summary Compensation Table.

STOCK OPTION GRANTS IN LAST FISCAL YEAR

<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE AT
ASSUMED ANNUAL RATES OF STOCK
PRICE APPRECIATION
INDIVIDUAL GRANTS IN FISCAL 1996 FOR OPTION TERM(11)
-------------------------------------------------------- ------------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS EXERCISE OR
UNDERLYING GRANTED TO BASE
OPTIONS EMPLOYEES IN PRICE (10) EXPIRATION
NAME GRANTED (3)(4) FISCAL YEAR ($/SH) DATE 5% ($) 10% ($)
- ---------------------- -------------- ------------ ----------- ---------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Michael A. Dering(1) 135,000(5) 18.7% $6.00 6/9/05 $508,950 $1,290,600

John W. Peth(2) 120,000(6) 16.6% $6.00 6/9/05 $452,400 $1,147,200

James A. Ayre 40,000(7) 5.5% $6.00 6/9/05 $150,800 $ 382,400

Patricia J. Robitaille 20,000(8) 2.8% $6.00 6/9/05 $ 75,400 $ 191,200

John M. Palmer 20,000(9) 2.8% $6.00 6/9/05 $ 75,400 $ 191,200

</TABLE>
- ---------------

(3) Options granted during fiscal 1996 under the Company's 1991 Stock Option
Plan (the "Option Plan") vest at a rate of 25% per year over four years.
Repriced options generally vest 50% on the first anniversary of the date of
repricing and 25% on each of the second and third anniversary of the date
of repricing and optionees forfeit any accrued vesting on their canceled
options. Under the Option Plan, the Board of Directors retains discretion
to modify the terms of outstanding options. See also "EXECUTIVE
COMPENSATION AND OTHER MATTERS -- Repricing of Options" and "REPORT OF
THE COMPENSATION COMMITTEE ON REPRICING OF OPTIONS."

(4) In June 1995, as a result of a broad decline in the fair market value of
the Company's common stock, the Compensation Committee determined that it
was in the best interests of the Company to offer to all current option
holders, with the exception of Messrs. Dering and Peth whom the Committee
considered separately, the opportunity to exchange outstanding options with
an exercise price above the then current price for options with an exercise
price equal to the then current fair market value. Under the Compensation
Committee-approved changes, optionees who agreed to the cancellation of
their outstanding options received in exchange new options exercisable for
the same number of shares with an exercise price of $6.00 per share, the
higher of $6.00 per share or the closing price of the Company's common
stock on

<PAGE>

June 9, 1995, the date of the Committee's approval of the repricing. The
repriced options vest 50% on the first anniversary of the date of grant and
25% on each of the second and third anniversary of the date of grant.
Therefore, optionees who agreed to the exchange received a lower exercise
price and generally gave up any vesting accrued through the date of their
canceled options. Messrs. Dering, Peth, Ayre and Palmer and Ms. Robitaille
participated in the exchange. In connection with the repricing,
Messrs. Dering and Peth forfeited options to purchase 100,000 shares each.
Under the Option Plan, the Board retains discretion to modify the terms of
outstanding options. For details concerning the repricings of options held
by Messrs. Dering, Peth, Ayre and Palmer and Ms. Robitaille see "EXECUTIVE
COMPENSATION AND OTHER MATTERS -- Repricing of Options" and "REPORT OF THE
COMPENSATION COMMITTEE ON REPRICING OF OPTIONS."

(5) Includes options to purchase an aggregate of 135,000 shares which were
repriced June 9, 1995, replacing options granted May 7, 1988, September 8,
1988, December 1, 1988, May 15, 1989, March 21, 1991 and March 17, 1992.
Upon Mr. Dering's resignation from the position of President and Chief
Executive Officer of the Company in July 1996, options to purchase a total
of 67,500 shares of the Company's Common Stock were vested and exercisable
by him. After Mr. Dering's resignation, these options were canceled and
repurchased by the Company for $1.375 per share or $92,812.50, the
difference between the per share fair market value of the Company's Common
Stock on the date of cancellation and repurchase and Mr. Dering's per share
exercise price. See also "EXECUTIVE COMPENSATION AND OTHER MATTERS --
Repricing of Options" and "REPORT OF THE COMPENSATION COMMITTEE ON
REPRICING OF OPTIONS."

(6) Includes options to purchase an aggregate of 120,000 shares which were
repriced June 9, 1995, replacing options granted March 21, 1991 and
March 17, 1992. See "EXECUTIVE COMPENSATION AND OTHER MATTERS --
Repricing of Options" and "REPORT OF THE COMPENSATION COMMITTEE ON
REPRICING OF OPTIONS."

(7) Includes an option to purchase 40,000 shares which was repriced June 9,
1995, replacing an option granted October 26, 1993. See "EXECUTIVE
COMPENSATION AND OTHER MATTERS -- Repricing of Options" and "REPORT
OF THE COMPENSATION COMMITTEE ON REPRICING OF OPTIONS."

(8) Includes an option to purchase 15,000 shares which was repriced June 9,
1995, replacing an option granted March 29, 1994. See "EXECUTIVE
COMPENSATION AND OTHER MATTERS -- Repricing of Options" and
"REPORT OF THE COMPENSATION COMMITTEE ON REPRICING OF OPTIONS."

(9) Includes options to purchase an aggregate of 7,500 shares which were
repriced June 9, 1995, replacing options granted October 26, 1993. See
"EXECUTIVE COMPENSATION AND OTHER MATTERS -- Repricing of Options" and
"REPORT OF THE COMPENSATION COMMITTEE ON REPRICING OF OPTIONS."

(10) All options were granted at fair market value on the date of grant. The
repriced options were granted at an exercise price equal to $6.00 per
share, the higher of $6.00 per share or the closing sales price of the
common stock of the Company on June 9, 1995, the date the repricing was
approved by the Compensation Committee.

(11) Potential gains are net of exercise price, but before taxes associated with
exercise. These amounts represent certain assumed rates of appreciation
only, in accordance with the Securities and Exchange Commission's rules.
Actual gains, if any, on stock option exercises are dependent on the future
performance of the Common Stock, overall market conditions and the
optionholders' continued employment through the vesting period. The
amounts reflected

<PAGE>

in this table may not necessarily be achieved. Shares of stock purchased
at $6.00 per share in fiscal 1996 would yield profits of $3.77 per share at
5% appreciation over ten years, or $9.56 per share at 10% appreciation over
the same period.

OPTION EXERCISES AND FISCAL 1996 YEAR-END VALUES. The following table
provides the specified information concerning exercises of options to purchase
the Company's Common Stock during the fiscal year ended May 31, 1996, and
unexercised options held as of May 31, 1996, by the persons named in the Summary
Compensation Table:

AGGREGATED OPTION EXERCISES(1) IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES

NUMBER OF UNEXERCISED VALUE OF UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT 5/31/96 AT 5/31/96(6)
----------------------------------------- -------------------------------------------
NAME EXERCISABLE UNEXERCISABLE(4) EXERCISABLE UNEXERCISABLE
- ------------------------ ----------------------------------------- -------------------------------------------
<S> <C> <C> <C> <C>
Michael A. Dering(2) 0 135,000(5) $0 $202,500

John W. Peth(3) 0 120,000 $0 $180,000

James A. Ayre 0 40,000 $0 $ 60,000

Patricia J. Robitaille 0 20,000 $0 $ 30,000

John M. Palmer 0 20,000 $0 $ 30,000

</TABLE>
- ---------------

(1) There were no option exercises during the fiscal year ended May 31, 1996 by
the persons named in the Summary Compensation Table.

(3) Mr. Peth was appointed Acting President and Chief Executive Officer of the
Company in July 1996 upon the resignation of Michael A. Dering. Mr. Peth
continues to hold the positions of Executive Vice President, Chief
Operating Officer and President, Tab U.S.

(4) Includes options granted June 9, 1995 as part of the Company's repricing,
replacing options granted during previous fiscal years. Repriced options
generally vest 50% on the first anniversary of the date of repricing and
25% on each of the second and third anniversary of the date of repricing
and optionees forfeit any accrued vesting on their canceled options. See
"EXECUTIVE COMPENSATION AND OTHER MATTERS -- Repricing of Options" and
"REPORT OF THE COMPENSATION COMMITTEE ON REPRICING OF OPTIONS."

(5) Upon Mr. Dering's resignation from the position of President and Chief
Executive Officer of the Company in July 1996, options to purchase a total
of 67,500 shares of the Company's Common Stock were vested and exercisable
by him. After Mr. Dering's resignation, these options were canceled and
repurchased by the Company for $1.375 per share or $92,812.50, the
difference between the per share fair market value of the Company's Common
Stock on the date of cancellation and repurchase and Mr. Dering's per share
exercise price.

<PAGE>

(6) Valuation based on the difference between the option exercise price and the
fair market value of the Company's Common Stock on May 31, 1996 (which was
$7.50 per share, based on the closing trade price of the stock on the
American Stock Exchange).

REPRICING OF OPTIONS. The following table provides the specified
information concerning all repricings of options to purchase the Company's
Common Stock held by any executive officer of the Company from June 1, 1986
through May 31, 1996:

TEN-YEAR OPTION REPRICINGS
<TABLE>
<CAPTION>

NUMBER OF LENGTH OF
SECURITIES ORIGINAL OPTION
UNDERLYING MARKET PRICE OF TERM REMAINING
OPTIONS STOCK AT TIME EXERCISE PRICE AT AT DATE OF
DATE OF REPRICED OR OF REPRICING OR TIME OF REPRICING NEW EXERCISE REPRICING OR
NAME AND POSITION REPRICING AMENDED(#) AMENDMENT($) OR AMENDMENT ($) PRICE ($) AMENDMENT(4)
- ---------------------------- --------------- --------------- ---------------- ----------------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
John W. Peth(1) 6/9/95 200,000 $6.00 $ 10.000 $6.00 70 mos.
Acting President and Chief 20,000 $6.00 $ 12.375 $6.00 82 mos.
Executive Officer

James A. Ayre 6/9/95 40,000 $6.00 $ 7.875 $6.00 100 mos.
Vice President, Canadian
and Australian Operations

Patricia J. Robitaille 6/9/95 15,000 $6.00 $ 10.000 $6.00 105 mos.
Vice President, Information
and Business Systems

John M. Palmer 6/9/95 7,500 $6.00 $ 7.875 $6.00 100 mos.
Vice President, Finance and
Chief Financial Officer

David H. Haskin 6/9/95 3,000 $6.00 $ 10.500 $6.00 25 mos.
Vice President, Marketing 10,000 $6.00 $ 12.375 $6.00 34 mos.
7,000 $6.00 $ 9.500 $6.00 98 mos.

Robert J. Sexton 6/9/95 7,500 $6.00 $ 10.750 $6.00 38 mos.
Treasurer and Secretary 2,000 $6.00 $ 7.875 $6.00 103 mos.

James L. Anderson 6/9/95 3,000 $6.00 $ 10.500 $6.00 25 mos.
Controller 2,000 $6.00 $ 9.500 $6.00 98 mos.
8,000 $6.00 $ 7.875 $6.00 92 mos.

Nancy R. Green 6/9/95 3,000 $6.00 $ 10.500 $6.00 25 mos.
Assistant Treasurer
and Assistant Secretary

FORMER EXECUTIVE OFFICERS:

Michael A. Dering(2) 6/9/95 10,000 $6.00 $ 11.875 $6.00 36 mos.
20,000 $6.00 $ 11.875 $6.00 39 mos.
5,000 $6.00 $ 13.500 $6.00 43 mos.
5,000 $6.00 $ 11.875 $6.00 48 mos.
175,000 $6.00 $ 10.000 $6.00 70 mos.
20,000 $6.00 $ 12.375 $6.00 82 mos.

Gregory M. Beranek(3) 6/9/95 5,000 $6.00 $ 10.500 $6.00 25 mos.
5,000 $6.00 $ 10.750 $6.00 38 mos.
7,000 $6.00 $ 9.500 $6.00 98 mos.
</TABLE>

<PAGE>

- ---------------

(1) Mr. Peth was appointed Acting President and Chief Executive Officer of the
Company in July 1996 upon the resignation of Michael A. Dering. Mr. Peth
continues to hold the positions of Executive Vice President, Chief
Operating Officer and President, Tab U.S. In connection with the
repricing, Mr. Peth forfeited options to purchase 100,000 shares. See
"REPORT OF THE COMPENSATION COMMITTEE ON REPRICING OF OPTIONS."

(2) Mr. Dering resigned from the position of President and Chief Executive
Officer of the Company in July 1996 to accept the position of President and
Chief Executive Officer of Bell+Howell Publication Systems Company. In
connection with the repricing, Mr. Dering forfeited options to purchase
100,000 shares. See "REPORT OF THE COMPENSATION COMMITTEE ON REPRICING OF
OPTIONS."

(3) Mr. Beranek resigned from the position of Vice President of Manufacturing
in January 1996.

(4) Repriced options generally vest 50% on the first anniversary of the date of
repricing and 25% on each of the second and third anniversary of the date
of repricing and optionees forfeit any accrued vesting on their canceled
options. See also "REPORT OF THE COMPENSATION COMMITTEE ON REPRICING OF
OPTIONS."

CHANGE-IN-CONTROL ARRANGEMENTS. Options granted under the Company's Option
Plan contain provisions pursuant to which unexercised options become immediately
exercisable upon a "transfer of control" as defined under the Option Plan and
terminate to the extent they are not exercised as of the consummation of the
transfer of control.

COMPENSATION OF DIRECTORS. The Company pays each of its outside directors
$10,000 per year, plus an additional $500 for each Board and Committee meeting
attended, as compensation for their services as members of the Board of
Directors of the Company. During the fiscal year ended May 31, 1996, the
Chairman of the Board received an additional $50,000 for his services to the
Company in that capacity. On June 1, 1996, the Company reduced the amount of
compensation to be paid to its Chairman of the Board of Directors to $30,000 per
year. In addition, the Company's 1996 Outside Directors Stock Option Plan (the
"Directors Plan") provides for initial grants of options to purchase 10,000
shares of the Common Stock of the Company to non-employee directors at the fair
market value on the date of grant. Subject to approval by the Company's
stockholders, each of Messrs. Augsburger, Cecil, Myers and Wolf and Dr. Hanson
will be automatically granted an initial option to purchase 10,000 shares of the
Company's Common Stock on the date of this Annual Meeting of Stockholders. The
Directors Plan further provides for the automatic annual grant of an additional
option to purchase 2,000 shares of the Common Stock of the Company on the date
of each annual meeting of stockholders after adoption of the plan to each non-
employee director of the company remaining a member of the Board of Directors of
the Company. See "APPROVAL OF 1996 OUTSIDE DIRECTORS STOCK OPTION PLAN."

The following table provides the specified information concerning all
compensation paid to persons who were directors of the Company during the fiscal
year ended May 31, 1996 who are not named in the Summary Compensation Table.

<PAGE>

DIRECTOR COMPENSATION FOR LAST FISCAL YEAR(1)

CASH COMPENSATION
-----------------------------------------------
ANNUAL
NAME RETAINER FEES MEETING FEES
- ------------------------- ---------------------- ----------------------
Robert R. Augsburger $10,000 $ 6,000

William E. Ayer(2) $10,000 $ 6,500

Robert S. Cecil(3) $ 1,250 $ 1,000

John L. Doyle(4) $ 4,000 $ 3,500

Dr. Kathryn S. Hanson(5) $ 1,250 $ 500

Jerry K. Myers(6) $ 1,250 $ 1,000

Hans A. Wolf $60,000(7) $ 5,500

- ---------------

(1) See also "APPROVAL OF 1996 OUTSIDE DIRECTORS STOCK OPTION PLAN."

(2) Dr. Ayer's term as a director expires immediately prior to the time of the
1996 Annual Meeting of Stockholders and Dr. Ayer will not stand for
re-election to the Company's Board of Directors.

(3) Mr. Cecil was appointed to the Company's Board of Directors in April 1996.

(4) Mr. Doyle's term as a director expired immediately prior to the time of the
1995 Annual Meeting of Stockholders in October 1995 and Mr. Doyle did not
stand for re-election at the 1995 Annual Meeting of Stockholders.

(5) Dr. Hanson was appointed to the Company's Board of Directors in April 1996.

(6) Mr. Myers was appointed to the Company's Board of Directors in April 1996.

(7) Includes $50,000 paid to Mr. Wolf in compensation for his service to the
Company as Chairman of the Board of Directors. Commencing June 1, 1996,
the additional compensation to be paid to the Company's Chairman of the
Board of Directors will be reduced to $30,000 per year.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. During fiscal 1988, the
Company lent Mr. Dering $200,000, as a non-interest bearing note. The note,
which was secured by a deed of trust, was payable upon demand, or in 2001 if the
note was not called by that time. Mr. Dering repaid the entire amount of the
loan upon his resignation from the position of President and Chief Executive
Officer of the Company in July 1996.

<PAGE>

In July 1995, the Company lent Ms. Robitaille $200,000, as a non-interest
bearing note. The note, secured by a deed of trust, is payable upon demand, or
in 2000 if the note has not been called by that time. The entire amount of the
note is currently outstanding.

CHANGES TO BENEFIT PLANS. The Company has proposed the approval of the
Company's 1996 Outside Directors Stock Option Plan (the "Directors Plan"). See
"APPROVAL OF 1996 OUTSIDE DIRECTORS STOCK OPTION PLAN." Subject to approval of
the Directors Plan by the Company's stockholders, Messrs. Augsburger, Cecil,
Myers and Wolf and Dr. Hanson each will be granted automatically an initial
option to purchase 10,000 shares of the Company's Common Stock at the fair
market value on the date of this Annual Meeting of Stockholders. In addition,
Messrs. Augsburger, Cecil, Myers and Wolf and Dr. Hanson will thereafter receive
on the date of each annual meeting of stockholders following which he or she
remains a director an automatic grant of an option to purchase 2,000 shares.
Employee directors are not eligible to participate in the Directors Plan. For
the fiscal year ending May 31, 1997, there are currently no other anticipated
grants of options to purchase the Company's Common Stock to the aforementioned
non-employee directors under the Directors Plan.

<PAGE>

REPORT OF THE COMPENSATION COMMITTEE ON REPRICING OF OPTIONS

In June 1995, the Compensation Committee, which at the time was comprised
of Robert R. Augsburger, John L. Doyle and Dr. William E. Ayer, considered the
options held by the Company's executive officers, other than those held by
Michael A. Dering and John W. Peth which the Compensation Committee considered
separately, and other employees and the fact that a broad decline in the price
of the Common Stock of the Company had resulted in a substantial number of stock
options granted pursuant to the Option Plan having exercise prices above the
recent historical trading prices for the Company's Common Stock. The Committee
was advised by management that management believed that employee turnover was
likely to increase in part because the Company's total compensation package for
long-term employees, which included substantial options with exercise prices
above the current trading price, was less attractive than compensation offered
by other companies in the same geographic location, because options granted to
new hires at other companies would be granted at current trading prices,
providing more opportunity for appreciation than the Company's options.

The Committee believed that the Company's success in the future would
depend in large part on its ability to retain a number of its highly skilled
technical, managerial and marketing personnel and the loss of key employees
could have a significant adverse impact on the Company's business. The
Committee also believed that unless an adjustment was made in option prices,
longer term employees holding options would perceive a substantial inequity in
comparison to newer employees granted stock options with exercise prices set at
the current, lower fair market value of the Company's Common Stock and that
employee morale would suffer as a consequence. The Committee concluded that it
was important and cost-effective to provide equity incentives to employees and
executive officers of the Company to improve the Company's performance and the
value of the Company for its stockholders. The Committee considered granting
new options selectively to current key employees at fair market value, but
recognized that the size of the option grants required to offset the decline in
market price would result in significant additional dilution to stockholders.
The Committee recognized that an exchange of existing options with exercise
prices higher than fair market value for options at fair market value would
provide additional incentives to employees because of the increased potential
for appreciation. The Committee also recognized that it could require restarted
vesting in the exchange options so that optionees participating in the exchange
would have incentives to remain with the Company. Considering these factors,
the Committee determined that it was in the best interests of the Company and
its stockholders to restore the incentives for employees and executive officers
to remain as employees of the Company and to exert their maximum efforts on
behalf of the Company by granting replacement stock options under the Option
Plan at the optionee's request for those options with exercise prices above
recent trading prices, with restarted vesting and exercise prices equal to the
higher of $6.00 or the closing sales price of the Company's Common Stock on the
date of the Committee's approval of the repricing.

Accordingly, in June 1995, the Committee approved an offer to all employees
of the Company, including executive officers with the exception of Messrs.
Dering and Peth whom the Committee considered separately, to exchange
outstanding options with exercise prices above the then current trading price
for options with an exercise price equal to the higher of $6.00 or the closing
sales price of the Company's Common Stock on the date of the Committee's
approval of the repricing, with vesting commencing on the date of the exchange.
The Committee approved new vesting for exchanged options as follows: 50% on the
first anniversary of the grant, and 25% on each of the second and third
anniversary, respectively. All exchanged options will terminate no later than
ten (10) years from the date of the exchange. Accordingly, optionees who
participated in the exchange received a lower exercise price in exchange for
their forfeiting accrued vesting on their exchanged options. The offer to
exchange options was completed in July 1995; options for a total of 576,500
shares with exercise prices ranging from $6.375 per share to $13.50 per share
were exchanged for options for an equal number of shares at an exercise price of
$6.00 per share, the higher of $6.00 per share or the closing price of the
Company's Common Stock on June 9, 1995, the date of the Committee's approval of
the repricing.

<PAGE>

The Compensation Committee separately considered options outstanding for
Michael Dering and John Peth and the fact that a broad decline in the price of
the Company's Common Stock had resulted in all of the stock options granted to
Messrs. Dering and Peth having exercise prices above the recent historical
trading prices for the Common Stock. The Committee believed that such options
were not likely to serve the purposes of retaining and motivating Messrs. Dering
and Peth, that their contributions were important to the Company's future
success, and it would be prudent and cost effective to provide equity incentives
to Messrs. Dering and Peth to improve the Company's performance and the value of
the Company for its stockholders. The Committee noted that Mr. Dering had
options outstanding for a total of 235,000 shares of the Company's Common Stock,
with 175,000 shares at an exercise price of $10.00 per share and the remaining
shares at prices ranging between $11.875 and $13.50 per share and that Mr. Peth
had options outstanding for a total of 200,000 shares at an exercise price of
$10.00 per share and 20,000 shares at an exercise price of $12.375. The
Committee noted that the options held by Messrs. Dering and Peth were together
larger than options for all other employees combined and that the cancellation
of options for 200,000 shares would permit the Committee to redistribute those
options to other employees and limit potential dilution to stockholders.
Considering these factors, the Committee concluded that it would be in the best
interests of the Company's stockholders to condition the repricing of
Messrs. Dering and Peth's options on the same terms as the exchange approved for
the other employees on their surrender of options to purchase 100,000 shares
each.

Accordingly, in June 1995, the Committee approved an offer to Messrs.
Dering and Peth to exchange their outstanding options for new stock options to
purchase 100,000 fewer shares than the aggregate number of shares which each of
Messrs. Dering and Peth had a right to purchase prior to the exchange, on the
same terms as the exchange approved for other employees. Messrs. Dering and
Peth each accepted the offer of repricing and were issued options to purchase
135,000 and 120,000 shares, respectively.

COMPENSATION COMMITTEE

Robert R. Augsburger
Dr. William E. Ayer

<PAGE>

REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION

The Compensation Committee is comprised of four outside directors of the
Board of Directors and is responsible for setting and monitoring policies
governing compensation of executive officers. The Compensation Committee
reviews the performance and compensation levels for executive officers, and sets
salary and incentive levels and option grants under the Option Plan. The
objectives of the Committee are to correlate executive compensation with the
Company's business objectives and performance, and to enable the Company to
attract, retain and reward executive officers who contribute to the long-term
success of the Company. The Compensation Committee also seeks to establish
compensation policies that allow the Company flexibility to respond to changes
in its business environment.

SALARY. Salaries for executive officers are based on a review of salaries
for similar positions requiring similar qualifications. In determining
executive officer salaries, the Compensation Committee reviews recommendations
from management which include information from salary surveys.

The Compensation Committee annually assesses the performance and sets the
salary of the Company's President and Chief Executive Officer. The President
and Chief Executive Officer annually assesses the performance of all other
executive officers and recommends salary increases subject to review and
approval by the Compensation Committee.

In addition to reviewing performance evaluations, the Compensation
Committee also reviews the financial condition of the Company in setting
salaries. The Compensation Committee did not increase the President and Chief
Executive Officer's salary during fiscal 1996 because the Company had not met
all of its financial goals for fiscal 1995.

ANNUAL INCENTIVE. The Compensation Committee administers an incentive plan
to provide additional compensation to executives who meet established
performance goals for the Company. In consultation with the Chief Executive
Officer, the Compensation Committee annually determines the total amount of cash
bonuses available for executive officers and certain other management employees.
For fiscal 1996, awards under this bonus plan were contingent upon the Company's
attainment of revenue and operating profit targets set by the Compensation
Committee in consultation with the Chief Executive Officer. The target amount
of bonuses for the Chief Executive Officer and senior executive officers was set
by the Compensation Committee; the amount of individual bonuses for the
remaining executive officers and other management was proposed by the Chief
Executive Officer, subject to approval by the Compensation Committee. Awards
are weighted so that proportionately higher awards are received when the
company's performance reaches maximum targets, proportionately smaller awards
are received when the company's performance reaches minimum targets and no
awards are made when the company does not meet minimum performance targets.
During fiscal 1996, the Company's performance reached maximum targets and annual
incentives were paid to all executive officers.

STOCK OPTIONS. The Compensation Committee believes that employee equity
ownership provides significant motivation to executive officers to maximize
value for the Company's stockholders and, therefore, periodically grants stock
options under the Option Plan at the current market price. Stock options will
only have value if the Company's stock price increases over the exercise price.

<PAGE>

The Compensation Committee grants options to executive officers after
consideration of recommendations from the Chief Executive Officer.
Recommendations for options are based upon the relative position and
responsibilities of each executive officer, previous and expected contributions
of each officer to the Company and previous option grants to such executive
officers. Generally, option grants vest over four years with the life of the
option ten years.

COMPENSATION COMMITTEE

Robert R. Augsburger
Dr. William E. Ayer
Robert S. Cecil
Dr. Kathryn S. Hanson

<PAGE>

COMPARISON OF STOCKHOLDER RETURN(1)

Set forth below is a line graph comparing the annual percentage change in
the cumulative total return on the Company's Common Stock with the cumulative
total return of the Russell 2000 Index and the S&P Office Equipment & Supply
Index for the period commencing on June 1, 1991 and ending on May 31, 1996.

[Graph]

Cumulative Total Return
---------------------------------------
5/91 5/92 5/93 5/94 5/95 5/96
---- ---- ---- ---- ---- ----

Tab Products Co. 100 86 104 93 60 76

Russell 2000 Index 100 113 135 147 162 220

S&P Office Equipment and Supply Index 100 113 129 153 172 244

(1) Assumes that $100.00 was invested on May 31, 1991 in the Company's Common
Stock and in each index, and that all dividends were reinvested.
Stockholder returns over the indicated period should not be considered
indicative of future stockholder returns.

<PAGE>

APPROVAL OF 1996 OUTSIDE DIRECTORS STOCK OPTION PLAN

GENERAL. The Board of Directors adopted, subject to stockholder approval,
the 1996 Outside Directors Stock Option Plan (the "Directors Plan") in April
1996. A maximum of 150,000 shares of the Company's Common Stock may be issued
under the Directors Plan. The Board of Directors believes that approval of the
Directors Plan is in the best interests of the Company and its stockholders
because the availability of stock options is an important factor in attracting
and retaining highly qualified non-employee directors essential to the success
of the Company and in aligning their long-term interests with those of the
stockholders.

DESCRIPTION OF THE PLAN. The following summary of the Directors Plan is
qualified in its entirety by the specific language of the Directors Plan, a copy
of which is available to any stockholder upon request.

GENERAL. The Directors Plan provides for the automatic grant of
nonstatutory stock options to non-employee directors of the Company and is
intended to qualify as a "formula plan" for the purposes of Rule 16b-3 under the
Securities Exchange Act of 1934, as amended.

SHARES SUBJECT TO PLAN. A maximum of 150,000 of the authorized but
unissued or reacquired shares of the Common Stock of the Company may be issued
upon the exercise of options granted under the Directors Plan. Upon any stock
dividend, stock split, reverse stock split, recapitalization, combination,
reclassification, or similar change in the capital structure of the Company,
appropriate adjustments will be made to the shares subject to the Directors
Plan, to the terms of the automatic option grants described below, and to
outstanding options. To the extent that any outstanding option under the
Directors Plan expires or terminates prior to exercise in full or if shares
issued upon the exercise of an option are repurchased by the Company, the shares
of Common Stock for which such option is not exercised or the repurchased shares
are returned to the plan and become available for future grants.

ADMINISTRATION. The Directors Plan is intended to operate
automatically without discretionary administration. To the extent
administration is necessary, it will be performed by the Board of Directors or a
duly appointed committee of the Board (hereinafter referred to as the "Board").
However, the Board has no discretion to select the non-employee directors of the
Company who are granted options under the Directors Plan, to set the exercise
price of such options, to determine the number of shares for which or the time
at which particular options are granted or to establish the duration of such
options. The Directors Plan provides, subject to certain limitations, for
indemnification by the Company of any director, officer or employee against all
reasonable expenses, including attorneys' fees, incurred in connection with any
legal action arising from such person's action or failure to act in
administering the Directors Plan. The Board is authorized to interpret the
Directors Plan and options granted thereunder, and all determinations of the
Board will be final and binding on all persons having an interest in the
Directors Plan or any option.

ELIGIBILITY. Only directors of the Company who are not at the time of
option grant employees of the Company or of any parent or subsidiary corporation
of the Company (the "Outside Directors") are eligible to participate in the
Directors Plan. The Company has five (5) Outside Directors, excluding Dr.
William E. Ayer and Michael A. Dering who are not standing for re-election at
this Annual Meeting of Stockholders.

AUTOMATIC GRANT OF OPTIONS. Subject to stockholder approval of the
Directors Plan, each Outside Director holding office on the date of this Annual
Meeting of Stockholders (the "Effective Date"), will be automatically granted on
the Effective Date an option to purchase 10,000 shares of the Company's Common
Stock. The Directors Plan further provides that each Outside Director first
elected or appointed to the Board after the Effective Date will be granted
automatically, on the date of

<PAGE>

such initial election or appointment, an option to purchase 10,000 shares of
Common Stock. An option granted on the Effective Date or on the date of initial
appointment or election as an Outside Director is referred to herein as an
"Initial Option". The Directors Plan also provides for the automatic grant, on
the day of each annual meeting of the stockholders of the Company after the
Effective Date, of an additional option to purchase 2,000 shares of Common Stock
(an "Annual Option") to each Outside Director remaining a member of the Board
(including a director who previously did not qualify as an Outside Director but
who subsequently qualifies) other than an Outside Director receiving an Initial
Option within six months of the date of the annual meeting.

TERMS AND CONDITIONS OF OPTIONS. Each option granted under the
Directors Plan will be evidenced by a written agreement between the Company and
the Outside Director specifying the number of shares subject to the option and
the other terms and conditions of the option, consistent with the requirements
of the Directors Plan. The exercise price of any option granted under the
Directors Plan must equal the fair market value, as determined pursuant to the
plan, of a share of the Company's Common Stock on the date of grant. Generally,
the fair market value of the Common Stock will be the closing price per share on
the date of grant as reported on the American Stock Exchange. No option granted
under the Directors Plan is exercisable after the expiration of 10 years after
the date such option is granted, subject to earlier termination in the event the
optionee's service with the Company ceases or in the event of a Transfer of
Control of the Company, as discussed below. Initial Options granted under the
Directors Plan will become exercisable cumulatively in installments of 25% of
the shares subject to the option on each of the first four anniversaries of the
date of grant. Annual Options will become exercisable in full on the day
preceding the first annual meeting of the stockholders occurring after the date
of grant. If an optionee retires from service with the Company at or after the
age of 70, other than by reason of death or disability, any option held by the
optionee under the Directors Plan will become fully exercisable and vested as of
the date of retirement.

Generally, the exercise price may be paid in cash, by check, or in cash
equivalent, by tender of shares of the Company's Common Stock owned by the
optionee having a fair market value not less than the exercise price, by the
assignment of the proceeds of a sale or loan with respect to some or all of the
shares of Common Stock being acquired upon the exercise of the option, or by any
combination of these. During the lifetime of the optionee, the option may be
exercised only by the optionee. An option may not be transferred or assigned,
except by will or the laws of descent and distribution.

TRANSFER OF CONTROL. The Directors Plan provides that, in the event
of (i) a sale or exchange by the stockholders in a single or series of related
transactions of more than 50% of the Company's voting stock, (ii) a merger or
consolidation in which the Company is a party, (iii) the sale, exchange or
transfer of all or substantially all of the assets of the Company, or (iv) a
liquidation or dissolution of the Company wherein, upon any such event, the
stockholders of the Company immediately before such event do not retain direct
or indirect beneficial ownership of more than 50% of the total combined voting
power of the voting stock of the Company, its successor, or the corporation to
which the assets of the Company were transferred (a "Transfer of Control"), all
options outstanding under the Directors Plan will become immediately exercisable
and vested in full prior to the Transfer of Control. In addition, the acquiring
or successor corporation may assume or substitute substantially equivalent
options for the options outstanding under the Directors Plan. To the extent
that the options outstanding under the Directors Plan are not assumed,
substituted for, or exercised prior to the Transfer of Control, they will
terminate.

TERMINATION OR AMENDMENT. The Directors Plan will continue until
terminated by the Board or until all of the shares reserved for issuance under
the plan have been issued. The Board may terminate or amend the Directors Plan
at any time. However, subject to changes in the law that would permit
otherwise, without stockholder approval, the Board may not amend the Directors
Plan to increase the total number of shares of Common Stock reserved for
issuance thereunder or expand the class of persons eligible to receive options.
In the future, the Board of Directors may approve

<PAGE>

amendments to the Directors Plan to eliminate provisions made unnecessary by, or
to add provisions permitted by, Rule 16b-3 under the Securities Exchange Act of
1934, as recently amended by Securities and Exchange Commission Release
No. 34-37260 ("New Rule 16b-3"). The Company must bring its plan under which
officers and directors may acquire equity securities of the Company into
compliance with New Rule 16b-3 on or before November 1, 1996. No termination or
amendment of the Directors Plan may adversely affect an outstanding option
without the consent of the optionee, unless such termination or amendment is
necessary to comply with any applicable law.

SUMMARY OF UNITED STATES FEDERAL INCOME TAX CONSEQUENCES. The following
summary is intended only as a general guide as to the United States federal
income tax consequences under current law of participation in the Directors Plan
and does not attempt to describe all possible federal or other tax consequences
of such participation or tax consequences based on particular circumstances.

Nonstatutory stock options have no special tax status. An optionee
generally recognizes no taxable income as the result of the grant of such an
option. Upon exercise of a nonstatutory stock option, the optionee normally
recognizes ordinary income in the amount of the difference between the option
exercise price and the fair market value of the shares on the determination date
(as defined below). If the optionee is an employee, such ordinary income
generally is subject to withholding of income and employment taxes. The
"determination date" is the date on which the option is exercised unless the
shares are subject to a substantial risk of forfeiture and are not transferable,
in which case the determination date is the earlier of (i) the date on which the
shares are transferable or (ii) the date on which the shares are not subject to
a substantial risk of forfeiture. If the determination date is after the
exercise date, the optionee may elect, pursuant to Section 83(b) of the Code, to
have the exercise date be the determination date by filing an election with the
Internal Revenue Service not later than 30 days after the date the option is
exercised. Upon the sale of stock acquired by the exercise of a nonstatutory
stock option, any gain or loss, based on the difference between the sale price
and the fair market value on the determination date, will be taxed as capital
gain or loss. A capital gain or loss will be long-term if the optionee's
holding period is more than 12 months. No tax deduction is available to the
Company with respect to the grant of a nonstatutory stock option or the sale of
the stock acquired pursuant to such grant. The Company generally should be
entitled to a deduction equal to the amount of ordinary income recognized by the
optionee as a result of the exercise of a nonstatutory stock option, except to
the extent such deduction is limited by applicable provisions of the Code or the
regulations thereunder.

VOTE REQUIRED AND BOARD OF DIRECTORS' RECOMMENDATION. The affirmative vote
of a majority of the votes present or represented by proxy and entitled to vote
at the Annual Meeting of Stockholders, at which a quorum representing a majority
of all outstanding shares of Common Stock of the Company is present, either in
person or by proxy, is required for approval of this proposal. Abstentions and
broker non-votes will each be counted as present for purposes of determining the
presence of a quorum. Abstentions will have the same effect as a negative vote
on this proposal. Broker non-votes will have no effect on the outcome of this
vote.

The Board of Directors believes that the proposed 1996 Outside Director
Stock Option Plan, and the reservation of 150,000 shares of the Common Stock of
the Company for issuance thereunder, is in the best interests of the Company and
the stockholders for the reasons stated above. THEREFORE, THE BOARD OF
DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE PROPOSAL TO APPROVE THE 1996
OUTSIDE DIRECTORS STOCK OPTION PLAN AND TO RESERVE 150,000 SHARES OF COMMON
STOCK FOR ISSUANCE PURSUANT TO THE DIRECTORS PLAN.

<PAGE>

RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS

The Board of Directors of the Company has selected Deloitte & Touche LLP as
independent accountants to audit the financial statements of the Company for the
fiscal year ending May 31, 1997. Deloitte & Touche LLP has acted in such
capacity since its appointment during the fiscal year ended May 31, 1992. A
representative of Deloitte & Touche LLP is expected to be present at the Annual
Meeting with the opportunity to make a statement if the representative desires
to do so, and is expected to be available to respond to appropriate questions.

The affirmative vote of a majority of the votes cast at the Annual Meeting
of Stockholders, at which a quorum representing a majority of all outstanding
shares of Common Stock of the Company is present and voting, either in person or
by proxy, is required for approval of this proposal. Abstentions and broker
non-votes will each be counted as present for purposes of determining the
presence of a quorum. Abstentions and broker non-votes will each have the same
effect as a negative vote on this proposal. THE BOARD OF DIRECTORS UNANIMOUSLY
RECOMMENDS A VOTE "FOR" THE APPOINTMENT OF DELOITTE & TOUCHE LLP AS THE
COMPANY'S INDEPENDENT ACCOUNTANTS FOR THE FISCAL YEAR ENDING MAY 31, 1997.

STOCKHOLDER PROPOSALS TO BE PRESENTED
AT NEXT ANNUAL MEETING

Proposals of stockholders intended to be presented at the next Annual
Meeting of the Stockholders of the Company must be received by the Company at
its offices at 1400 Page Mill Road, Palo Alto, California, 94304, not later than
May 19, 1997, and satisfy the conditions established by the Securities and
Exchange Commission for stockholder proposals to be included in the Company's
proxy statement for that meeting.

TRANSACTION OF OTHER BUSINESS

At the date of this Proxy Statement, the only business which the Board of
Directors intends to present or knows that others will present at the meeting is
as set forth above. If any other matter or matters are properly brought before
the meeting, or any adjournment thereof, it is the intention of the persons
named in the accompanying form of proxy to vote the proxy on such matters in
accordance with their best judgment.

By Order of the Board of Directors,

/s/ Robert J. Sexton

ROBERT J. SEXTON
SECRETARY

September 16, 1996

<PAGE>

TAB PRODUCTS CO.

PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
SOLICITED BY THE BOARD OF DIRECTORS

The undersigned hereby appoints John W. Peth and Robert J. Sexton, and each
of them, with full power of substitution to represent the undersigned and to
vote all the shares of the stock of Tab Products Co. which the undersigned is
entitled to vote at the Annual Meeting of Stockholders of the Company to be
held at Hyatt Rickeys, 4219 El Camino Real, Palo Alto, California in the
Executive Conference Room on Thursday, October 17, 1996, at 2:00 p.m. local
time, and at any adjournment thereof (1) as hereinafter specified upon the
proposals listed below and as more particularly described in the Company's
Proxy Statement and (2) in their discretion upon such other matters as may
properly come before the meeting.

The undersigned hereby acknowledges receipt of: (1) Notice of Annual
Meeting of Stockholders of the Company, (2) accompanying Proxy Statement, and
(3) Annual Report of the Company for the fiscal year ended May 31, 1996.

CONTINUED AND TO BE SIGNED ON REVERSE SIDE

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<PAGE>

Please mark your
votes as indicated X
in this example

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY.

1. Election of the following directors:

[ ] FOR the nominees [ ] WITHHOLD AUTHORITY
listed below (except to vote for the
as marked to the nominees listed
contrary below.) below.

(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR A NOMINEE, STRIKE A
LINE THROUGH THE NOMINEE'S NAME.)

Robert R. Augsburger
Robert S. Cecil
Dr. Kathryn S. Hanson
Jerry K. Myers
John W. Peth
Hans A. Wolf

2. To approve the Company's 1996 Outside Directors Stock Option Plan.

[ ] FOR [ ] AGAINST [ ] ABSTAIN

3. To ratify the appointment of Deloitte & Touche LLP as independent
accountants of the Company for the fiscal year ending May 31,
1997.

[ ] FOR [ ] AGAINST [ ] ABSTAIN

WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON, YOU ARE URGED TO
SIGN AND PROMPTLY MAIL THIS PROXY IN THE RETURN ENVELOPE SO THAT YOUR STOCK
MAY BE REPRESENTED AT THE MEETING.

THE SHARES REPRESENTED HEREBY SHALL BE VOTED AS SPECIFIED. IF NO
SPECIFICATION IS MADE, SUCH SHARES SHALL BE VOTED FOR PROPOSALS 1, 2 AND 3.

[ ] CHECK HERE FOR ADDRESS CHANGE AND NOTE BELOW.

[ ] CHECK HERE IF YOU PLAN TO ATTEND THE ANNUAL MEETING.

Sign exactly as your name(s) appears on your stock certificate. If shares of
stock stand of record in the names of two or more persons or in the name of
husband and wife, whether as joint tenants or otherwise, both or all of such
persons should sign the above Proxy. If shares of stock are held of record
by a corporation, the Proxy should be executed by the President or Vice
President and the Secretary or Assistant Secretary, and the corporate seal
should be affixed thereto. Executors or administrators or other fiduciaries
who execute the above Proxy for a deceased stockholder should give their full
title. Please date the Proxy.

Dated: _______________________,1996

Signature(s): _____________________

___________________________________

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