<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
VIKING OFFICE PRODUCTS, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] $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):
-------------------------------------------------------------------------
(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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
<PAGE>
[LOGO OF VIKING OFFICE PRODUCTS, INC.]
VIKING OFFICE PRODUCTS, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON NOVEMBER 14, 1996
To the Shareholders of Viking Office Products, Inc.:
The Annual Meeting of Shareholders of Viking Office Products, Inc., a
California corporation ("Viking"), will be held on Thursday, November 14, 1996
at 9:00 a.m., P.S.T., at Viking's executive offices, 879 West 190th Street,
10th Floor, Gardena, California 90248, for the following purposes:
(1) To elect a Board of Directors;
(2) To consider and act upon a proposal to adopt the President's Performance
Based Bonus Plan;
(3) To consider and act upon a proposal to ratify the selection of auditors;
and
(4) To transact any other business which may properly come before the
meeting.
Only shareholders of record at the close of business on September 20, 1996,
are entitled to notice of and to vote at the meeting and any adjournments
thereof.
All shareholders are cordially invited to attend the meeting in person.
Whether or not you expect to attend the meeting, PLEASE COMPLETE AND SIGN THE
ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE. The giving of
your proxy will not affect your right to vote in person should you later
decide to attend the meeting.
By Order of the Board of Directors
/s/ Stephen R. Kroll
Stephen R. Kroll,
Secretary
Gardena, California
October 3, 1996
<PAGE>
VIKING OFFICE PRODUCTS, INC.
879 W. 190TH STREET, 10TH FLOOR
GARDENA, CALIFORNIA 90248
(310) 225-4500
PROXY STATEMENT
OCTOBER 3, 1996
GENERAL INFORMATION
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Viking Office Products, Inc. ("Viking"),
for the Annual Meeting of Shareholders to be held on November 14, 1996, and
any postponements or adjournments thereof. This Proxy Statement and the
accompanying Notice of Annual Meeting and form of proxy were first mailed to
shareholders on or about October 3, 1996.
The execution and return of the enclosed proxy will not in any way affect a
shareholder's right to attend the Annual Meeting in person. Any shareholder
giving a proxy may revoke it before it is voted by notifying the Secretary of
Viking in writing before or at the meeting, by providing a proxy bearing a
later date or by attending the meeting and expressing a desire to vote in
person. Your cooperation in promptly returning the enclosed proxy will reduce
Viking's expenses and enable its management and employees to continue their
normal duties for your benefit with minimum interruption for follow-up proxy
solicitation.
Only shareholders of record at the close of business on September 20, 1996,
are entitled to receive notice of and to vote at the meeting. On that date,
Viking had outstanding 83,214,456 shares of Common Stock, each of which is
entitled to one vote at the meeting. Directors are elected by a plurality of
the votes cast, and the affirmative vote of a majority of the shares present
or represented by proxy at the meeting is required for approval of all other
matters being submitted to the shareholders for their consideration.
The presence at the Annual Meeting, either in person or by proxy, of the
holders of a majority of the shares of Common Stock outstanding on the record
date is necessary to constitute a quorum for the transaction of business.
Abstentions and broker non-votes (which occur if a broker or other nominee
does not have discretionary authority and has not received voting instructions
from the beneficial owner with respect to the particular item) are counted for
purposes of determining the presence or absence of a quorum for the
transaction of business. Abstentions are counted in tabulations of the votes
cast on proposals presented to the shareholders and have the same legal effect
as a vote against a particular proposal. Broker non-votes are not taken into
account for purposes of determining whether a proposal has been approved by
the requisite shareholder vote.
All proxies will be voted as directed by the shareholder on the proxy card.
IF NO CHOICE IS SPECIFIED, PROXIES WILL BE VOTED "FOR" THE DIRECTORS NOMINATED
BY THE BOARD OF DIRECTORS, "FOR" THE PRESIDENT'S PERFORMANCE BASED BONUS PLAN
AND "FOR" THE RATIFICATION OF THE SELECTION OF AUDITORS.
If any other matters are properly presented at the Annual Meeting,
including, among other things, consideration of a motion to adjourn the Annual
Meeting to another time or place for the purpose of soliciting additional
proxies, the persons named in the enclosed form of proxy and acting thereunder
will have the discretion to vote on those matters in accordance with their
best judgment, subject to direction by the Board of Directors, to the same
extent as the person signing the proxy. It currently is not anticipated that
any other matters will be raised at the Annual Meeting.
<PAGE>
The cost of preparing, printing and mailing the Proxy Statement, the Notice
and the enclosed form of proxy, as well as the cost of soliciting proxies
relating to the Annual Meeting, will be borne by Viking. The original
solicitation of proxies by mail may be supplemented by telephone, telegram and
personal solicitation by officers and other regular employees of Viking, but
no additional compensation will be paid to such individuals on account of such
activities. Viking will reimburse banks, brokerage houses and other
custodians, nominees and fiduciaries for their reasonable expenses in
forwarding proxy materials to their principals.
ELECTION OF DIRECTORS
NOMINEES AND VOTING
Six directors are to be elected at the Annual Meeting. All directors hold
office until the next Annual Meeting and until their respective successors are
elected and qualified. The Board of Directors has nominated for election as
directors the six persons named below, all of whom are incumbent directors,
except Mr. Nelson, who is Viking's President and Chief Operating Officer. All
of these nominees have indicated that they are able and willing to serve as
directors.
Based on the number of holders of Viking's outstanding Common Stock on
September 20, 1996, the record date for the Annual Meeting, Viking meets the
requirements for a listed corporation within the meaning of the California
Corporations Code. As a result, in accordance with the provisions of Viking's
bylaws, shareholders do not have cumulative voting rights in connection with
the election of directors. Instead, each share of Common Stock is entitled to
one vote for each director to be elected.
The Board of Directors recommends that the shareholders vote "FOR" the
election of its nominees. Unless otherwise instructed, the persons named in
the enclosed proxy intend to vote the shares of Common Stock represented by
the proxies in favor of the election of these nominees. If for any reason any
of these nominees will be unable to serve, the persons named in the enclosed
proxy will vote instead for such other person or persons as the Board of
Directors may recommend.
The following table sets forth certain information as of September 20, 1996
with respect to the Board's nominees:
<TABLE>
<CAPTION>
DIRECTOR
NAME OF NOMINEE AGE SINCE
--------------- --- --------
<S> <C> <C>
Irwin Helford................................................ 62 1985
M. Bruce Nelson.............................................. 51
Lee A. Ault III.............................................. 60 1992
Neil R. Austrian............................................. 56 1988
Charles P. Durkin, Jr........................................ 58 1992
Joan D. Manley............................................... 64 1989
</TABLE>
BUSINESS EXPERIENCE DURING THE PAST FIVE YEARS
Irwin Helford served as President since joining Viking in January 1984 until
January 1996 and also has served as Chairman of the Board and Chief Executive
Officer since September 1988.
M. Bruce Nelson joined Viking in January 1995 as Executive Vice President
and was elected Chief Operating Officer in July 1995 and President in January
1996. From 1990 until July 1994, Mr. Nelson was President and Chief Executive
Officer of BT Office Products USA. Mr. Nelson had previously worked for over
22 years at Boise Cascade Office Products in a number of executive positions.
2
<PAGE>
Lee A. Ault III served as the Chief Executive Officer of Telecredit, Inc., a
payment services company, from November 1968 until January 1992. Mr. Ault also
was President of Telecredit, Inc., from 1968 until 1983 and Chairman of the
Board from 1983 until January 1992. Since January 1991, Mr. Ault has served as
a director of Equifax Inc., a New York Stock Exchange listed company and the
parent company of Telecredit, Inc. Mr. Ault also serves as a director of Alex.
Brown Incorporated and Sunrise Medical Inc.
Neil R. Austrian has served as President and Chief Operating Officer of the
National Football League since April 1991. He was a Managing Director of
Dillon, Read & Co. Inc. ("Dillon Read") from October 1987 to March 1991. Mr.
Austrian also serves as a director of Alex. Brown Incorporated and Refac
Technology Development.
Charles P. Durkin, Jr., is a Managing Director of Dillon Read and has been
employed by that firm in various capacities since 1966. Mr. Durkin also serves
as a director of Big River Minerals, Hi-Lo Automotive Corporation, Inc., and
CapMAC Holdings Inc.
Joan D. Manley retired in 1984 after serving six years as a Group Vice
President and a director of Time Incorporated. Ms. Manley also serves as a
director of Sara Lee Corporation, Aon Corporation, Scholastic, Inc., and BFP
Holdings Inc.
No family relationships exist between any of the directors or officers of
Viking.
MEETINGS OF THE BOARD OF DIRECTORS AND COMMITTEES
Viking maintains an Audit Committee whose current members are Messrs. Ault,
Austrian and Durkin and Ms. Manley. The Audit Committee approves the selection
and engagement of independent accountants and reviews with them the plan and
scope of their audit for each year, the results of such audit when completed
and their fees for services performed. The Audit Committee also assists and
makes recommendations to the Board of Directors in fulfilling the Board's
responsibilities relating to Viking's accounting, financial reporting and
internal auditing policies and practices. The Audit Committee met twice during
fiscal 1996.
Viking maintains a Compensation Committee whose current members are Messrs.
Ault, Austrian and Durkin and Ms. Manley. The Compensation Committee approves
the compensation of the officers of Viking, formulates and reviews significant
compensation policies and decisions and administers Viking's employee benefit
plans. The Compensation Committee met four times during fiscal 1996.
Viking's Board of Directors met four times during fiscal 1996. Each director
attended at least 75% all of the meetings of the Board of Directors and of any
committees on which he or she served. Viking does not maintain a nominating
committee.
COMPENSATION OF DIRECTORS
During calendar 1996, directors who were not employees of Viking or
affiliated with Dillon Read were paid an annual retainer of $8,000 plus $4,000
for each Board meeting attended. The same compensation arrangements are
expected to apply in calendar 1997. All directors are reimbursed for their
travel expenses incurred in attending Board or committee meetings.
Pursuant to the provisions of the Viking Office Products, Inc. 1992
Directors' Stock Option Plan, as amended (the "Directors' Plan"), each new
non-employee director, on the date of his or her election to the Board of
Directors (whether elected by the shareholders or the Board of Directors), and
each director who was an
3
<PAGE>
employee of Viking and later ceases to be an employee, on the first date that
such director is not an employee and is re-elected as a director,
automatically will be granted a stock option to purchase 40,000 shares of
Common Stock at an exercise price equal to the fair market value of the Common
Stock on the date of grant. In addition, each time a non-employee director has
served on the Board for a period of five consecutive years, such director
automatically will be granted a stock option to purchase 20,000 shares of
Common Stock at an exercise price equal to the fair market value of the Common
Stock on the date of grant. Accordingly, on September 25, 1995, Ms. Manley and
Mr. Austrian were each automatically granted a stock option to purchase 20,000
shares of Common Stock at an exercise price of $19.72, the fair market value
of the Common Stock on the date of grant.
As part of its overall program to promote charitable giving, Viking is
establishing a directors' charitable award program which will be funded by
life insurance policies on each of the directors. Under the program,
directors, including employee and non-employee directors, who have served at
least five years as a director of Viking, will be eligible to recommend up to
five charitable organizations that would share in a $1 million contribution to
be made by Viking, with $100,000 paid out upon the director's retirement and
the remaining $900,000 paid out in nine equal annual installments commencing
after the death of the director. Viking's payment of the contributions will
ultimately be recovered from the proceeds of life insurance policies which
will be maintained by Viking for this purpose. Individual directors derive no
financial benefit from this program since all charitable deductions accrue
solely to Viking. The overall program will not result in a material cost to
Viking.
4
<PAGE>
OWNERSHIP OF COMMON STOCK
The following table sets forth information with respect to the beneficial
ownership of Viking Common Stock as of September 20, 1996 by (i) each person
who is known by Viking to be the beneficial owner of more than five percent
(5%) of the outstanding Common Stock, (ii) each continuing director of Viking,
(iii) the executive officers named in the Summary Compensation Table below,
and (iv) all directors and executive officers as a group. Unless otherwise
indicated, each of the entities and persons named in the table has sole voting
and investment power with respect to all shares of Common Stock beneficially
owned by it, him or her.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED(1)
--------------------------
NAME AND ADDRESS NUMBER PERCENT OF CLASS
---------------- --------- ----------------
<S> <C> <C>
Putnam Investments, Inc............................. 9,006,326 10.82%
One Post Office Square
Boston, Massachusetts 02109
Irwin Helford(2).................................... 3,892,638 4.68%
879 W. 190th Street, 10th Floor
Gardena, California 90248
Mark Muir(2)........................................ 374,612 *
Mark R. Brown(2).................................... 372,252 *
Neil R. Austrian.................................... 142,848 *
Charles P. Durkin, Jr............................... 124,368 *
Joan D. Manley...................................... 108,000 *
Lee A. Ault III..................................... 40,800 *
Ronald W. Weissman(3)............................... 25,738 *
M. Bruce Nelson..................................... 24,040 *
All directors and executive officers as a group (13
persons)(4)......................................... 6,022,722 7.14%
</TABLE>
- --------
* Indicates ownership of less than one percent.
(1) Includes shares which may be purchased upon the exercise of options which
are exercisable as of September 20, 1996, or become exercisable within 60
days thereafter, for the following: Mr. Helford--32,000 shares; Mr. Muir--
153,632 shares; Mr. Brown--265,600 shares; Mr. Austrian--44,000 shares;
Ms. Manley--44,000 shares; Mr. Ault--32,000 shares; Mr. Weissman--4,480
shares; Mr. Nelson--24,000 shares; and all directors and executive
officers as a group--1,128,512 shares.
(2) Includes 100,000 shares issued under the Long-Term Stock Incentive Plan
(the "Incentive Plan") which are subject to transfer restrictions and to
forfeiture until June 30, 2007.
(3) Includes 20,000 shares issued under the Incentive Plan which are subject
to transfer restrictions and to forfeiture until June 30, 2007.
(4) Includes 620,000 shares issued under the Incentive Plan which are subject
to transfer restrictions and to forfeiture until June 30, 2007.
5
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following tables summarizes all compensation paid to Viking's Chief
Executive Officer and to each of the other four most highly paid executive
officers for services rendered in all capacities to Viking and its
subsidiaries for the fiscal years ended June 28, 1996, June 30, 1995 and June
24, 1994.
<TABLE>
<CAPTION>
ANNUAL LONG TERM COMPENSATION
COMPENSATION AWARDS(1)
----------------- ----------------------------
SECURITIES
NAME AND UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS(#) COMPENSATION(2)
------------------ ---- -------- -------- ---------- ---------------
<S> <C> <C> <C> <C> <C>
Irwin Helford 1996 $700,000 $525,000(3) 37,407(3) $346,117(4)
Chairman of the Board 1995 600,000 633,333(3) 19,638(3) 356,577(4)
and Chief Executive 1994 550,000 800,000 160,000 16,450
Officer
M. Bruce Nelson(5) 1996 400,000 295,000 250,000 8,209
President and Chief 1995 161,538 70,000 40,000 --
Operating Officer 1994 -- -- -- --
Mark Muir 1996 222,000 155,000 53,600 9,874
Vice President, 1995 185,000 131,000 20,000 8,751
Marketing 1994 140,000 87,700 64,000 10,783
Mark R. Brown 1996 230,000 130,000 53,600 8,607
Vice President, 1995 195,000 138,000 20,000 8,751
Information Systems 1994 170,000 93,500 40,000 12,849
Ronald W. Weissman(5) 1996 220,000 120,000 51,440 9,034
Vice President, 1995 161,443 84,500 20,000 8,751
Logistics 1994 -- -- -- --
</TABLE>
- --------
(1) Stock-based compensation amounts have been adjusted for all years to
reflect Viking's May 1994 and May 1996 two-for-one stock splits. The
following number of restricted shares (and the value of such shares based
on the closing price of the Common Stock on June 28, 1996) were held by
the named executives as of June 28, 1996: Mr. Helford, 100,000 shares
($3,137,500); Mr. Nelson, 0 shares ($0); Mr. Muir, 100,000 shares
($3,137,500); Mr. Brown, 100,000 shares ($3,137,500); and Mr. Weissman, 0
shares ($0). Dividends are payable on such shares at the same rate as paid
to all shareholders. Subject to the executive's continued employment with
Viking, all restricted shares will vest in 2007.
(2) The amounts shown in the table for fiscal 1994 and 1995 consist of
Viking's contributions to its Profit Sharing Plan for the named
executives. For fiscal 1996, the amounts shown include Profit Sharing Plan
contributions of $8,209 for the named executives and contributions by
Viking to a defined contribution 401(k) plan of $2,250 for Mr. Helford,
$1,665 for Mr. Muir, $398 for Mr. Brown and $825 for Mr. Weissman. For Mr.
Helford, the amounts also include $3,330 paid in fiscal 1996, $3,038 paid
in fiscal 1995 and $2,454 paid in fiscal 1994 in premiums for additional
life insurance benefits payable to beneficiaries designated by him.
(3) Mr. Helford's bonus for fiscal 1995 and 1996 was determined pursuant to
the Chief Executive Officer Performance Based Bonus Plan (the "CEO Bonus
Plan"). Pursuant to the CEO Bonus Plan, one-fourth of the bonus payable to
Mr. Helford for fiscal 1996 ($175,000), and one-third of the bonus payable
to him for fiscal 1995 ($316,667), was paid by the issuance of stock
options to purchase shares of Viking Common
6
<PAGE>
Stock under the Amended and Restated 1991 Nonstatutory Stock Option Plan
(the "1991 Plan") with an exercise price of $1.25 per share. Accordingly,
Mr. Helford was granted stock options to purchase an aggregate of 7,407
shares of Common Stock for fiscal 1996 and an aggregate of 19,368 shares of
Common Stock for fiscal 1995. See "Compensation Committee Report on
Executive Compensation--Compensation of Irwin Helford".
(4) In fiscal 1996 and 1995, Viking paid insurance premiums under a split
dollar life insurance arrangement with a trust for named beneficiaries of
Mr. Helford. At the death of Mr. Helford or, if certain assumptions as to
life expectancy, policy dividends and other factors are realized, at the
surrender of the policies, Viking will recover the full amount of premiums
it paid. The amount in the table includes $332,328 for fiscal 1996 and
$344,788 for fiscal 1995, which represents the present value of the
benefit from premiums paid by Viking.
(5) Mr. Nelson joined Viking in January 1995, and Mr. Weissman joined Viking
in August 1994.
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth certain information at June 28, 1996, and for
the fiscal year then ended, with respect to stock options granted to the
individuals named in the Summary Compensation Table.
<TABLE>
<CAPTION>
PERCENT POTENTIAL REALIZED VALUE OF
NUMBER OF OF TOTAL ASSUMED ANNUAL RATES OF STOCK
SECURITIES GRANTED TO EXERCISE GRANT PRICE APPRECIATION FOR OPTION
UNDERLYING EMPLOYEES PRICE DATE TERM
OPTIONS IN FISCAL PER MARKET EXPIRATION ------------------------------
NAME GRANTED(1) 1996(2) SHARE(3) PRICE DATE 0%(4) 5%(5) 10%(5)
---- ---------- ---------- -------- ------- ---------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Irwin Helford........... 30,000 1.43% $26.938 $26.938 04/11/06 -- $ 508,260 $1,287,960
7,407(6) 0.35 1.250 24.875 07/15/06 $175,000 278,948 464,419
M. Bruce Nelson......... 100,000 4.77 17.375 17.375 07/13/05 -- 1,092,500 2,769,500
20,000 0.95 1.000 17.375 07/13/05 327,500 546,000 881,400
100,000 4.77 20.938 20.938 01/10/06 -- 1,317,200 3,337,200
30,000 1.43 26.938 26.938 04/11/96 -- 508,260 1,287,960
Mark Muir............... 20,000 0.95 17.375 17.375 07/13/05 -- 218,500 553,900
3,600 0.17 0.250 17.375 07/13/05 61,650 100,980 161,352
30,000 1.43 26.938 26.938 04/11/06 -- 508,260 1,287,960
Mark R. Brown........... 20,000 0.95 17.375 17.375 07/13/05 -- 218,500 553,900
3,600 0.17 0.250 17.375 07/13/05 61,650 100,980 161,352
30,000 1.43 26.938 26.938 04/11/06 -- 508,260 1,287,960
Ronald W. Weissman...... 20,000 0.95 17.375 17.375 07/13/05 -- 218,500 553,900
1,440 0.07 0.250 17.375 07/13/05 24,660 40,392 64,541
30,000 1.43 26.938 26.938 04/11/06 -- 508,260 1,287,960
</TABLE>
- --------
(1) Gives effect to Viking's May 1996 two-for-one stock split. All options
have a ten-year term and are subject to vesting over a five-year period,
with 20% of the options becoming exercisable on each successive
anniversary of the date of grant. The vesting of the options will be
accelerated upon a sale of substantially all of Viking's assets, the
dissolution of Viking or upon a change in the controlling shareholder
interest in Viking resulting from a tender offer, reorganization, merger
or consolidation.
(2) Includes options to purchase 7,407 shares of Common Stock granted to Mr.
Helford in fiscal 1997 in payment of a portion of his fiscal 1996 bonus
under the CEO Bonus Plan. Does not include options to purchase 19,638
shares of Common Stock granted to Mr. Helford in fiscal 1996 in payment of
a portion of his fiscal 1995 bonus under the CEO Bonus Plan. See the
Summary Compensation Table, above.
7
<PAGE>
(3) The exercise price may be paid by delivery of owned shares of Common Stock
valued at fair market value on the date of exercise. The Compensation
Committee retains discretion, subject to plan limits, to modify the terms
of outstanding options, to reprice the options and to provide for the
payment of any tax withholding obligations related to the exercise of the
stock options to be made by offset of the underlying shares.
(4) Represents the difference between the exercise price of these options and
the fair market value of the Common Stock on the date of grant.
(5) Represents the future value of the options (net of exercise price)
assuming the market price of the Common Stock appreciates by 5% and 10%,
respectively, during each year of the options' ten-year term. The 5% and
10% rates of appreciation are prescribed by regulations of the Securities
and Exchange Commission and are not intended to forecast possible future
appreciation of Viking Common Stock.
(6) Consists of options granted to Mr. Helford in fiscal 1997 in payment of a
portion of his bonus for fiscal 1996 pursuant to the terms of the CEO
Bonus Plan.
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END VALUE
The following table sets forth information with respect to the named
executive officers with respect to the exercise of stock options during fiscal
1996 and unexercised stock options held by them as of the end of the fiscal
year, after giving effect to Viking's May 1996 two-for-one stock split.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS HELD AT IN-THE-MONEY OPTIONS
JUNE 8, 1996(#) AT JUNE 28, 1996($)(1)
----------------------------- -----------------------------
SHARES
ACQUIRED ON VALUE
EXERCISE (#) REALIZED (#)(1) EXERCISABLE / UNEXERCISABLE EXERCISABLE / UNEXERCISABLE
------------ --------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Irwin Helford(2)........ 51,638 $ 909,459 32,000 / 133,407 $ 617,984 / $2,210,198
M. Bruce Nelson......... 8,000 165,252 0 / 282,000 0 / 3,926,310
Mark Muir............... 127,984 3,175,028 112,416 / 153,200 2,974,531 / 2,950,467
Mark R. Brown........... -- -- 224,400 / 129,200 6,437,260 / 2,369,792
Ronald W. Weissman...... 480 9,900 4,000 / 66,960 71,000 / 726,990
</TABLE>
- --------
1) Based on the difference between the closing price on The Nasdaq National
Market of Viking Common Stock on June 28, 1996 ($31.375) and the exercise
price.
(2) Includes options to purchase 7,407 shares of Common Stock, at an exercise
price of $1.25 per share, granted to Mr. Helford in fiscal 1997 in payment
of a portion of his bonus for fiscal 1996 pursuant to the terms of the CEO
Bonus Plan.
EMPLOYMENT AGREEMENT AND CHANGE-IN-CONTROL ARRANGEMENTS
Mr. Helford serves as Chairman and Chief Executive Officer pursuant to the
terms of an employment agreement which continues in effect until June 30,
1998, and automatically renews for successive 12-month periods thereafter
unless terminated by either party. Under the terms of the agreement, Mr.
Helford receives an annual salary of $700,000 and a bonus in an amount
determined by the Board of Directors (which has delegated this authority to
the Compensation Committee). In addition to salary and bonus, Mr. Helford is
entitled to receive an automobile allowance at the rate of $31,200 per year,
and Viking is required to maintain insurance on Mr. Helford's life in the
amount of $500,000, payable to beneficiaries designated by Mr. Helford.
In April 1995, Viking entered into an agreement with M. Bruce Nelson,
Viking's President and Chief Operating Officer, which provides for certain
payments to Mr. Nelson in the event of a change in control of Viking. Under
the agreement, if Mr. Nelson's employment is terminated following a change in
control of Viking,
8
<PAGE>
Mr. Nelson will receive an amount equal to three times the average of his
annual salary and bonus for the three years immediately preceding the change
in control (or such shorter period for which he has been employed by Viking)
unless such termination is (i) because of Mr. Nelson's death or disability,
(ii) by Viking for "Cause" (as defined in the agreement) or (iii) by Mr.
Nelson's resignation other than for "Good Reason" (as defined in the
agreement). The amount otherwise payable to Mr. Nelson under the agreement
will be reduced to the extent necessary to prevent the payments made to Mr.
Nelson from exceeding the limits imposed by Section 280G of the Internal
Revenue Code of 1986. In July 1996, Viking entered into a similar agreement
with Frank R. Jarc, Viking's Chief Financial Officer, which agreement also
provides that if Mr. Jarc is terminated by Viking without "Cause" (as defined
in the Agreement) before June 15, 1997, Mr. Jarc will be entitled to receive
his full monthly salary for 12 months following any such termination.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee (the "Committee") of the Board of Directors,
which consists of Ms. Manley and Messrs. Ault, Austrian and Durkin, each of
whom is a non-employee director, sets Viking's compensation policies
applicable to executive officers, determines the compensation of the executive
officers, subject to review by the Board of Directors, and administers
Viking's stock option and stock incentive plans, other than the 1992
Directors' Stock Option Plan, which is administered by the Board. The
Committee has prepared the following report for inclusion in this Proxy
Statement.
Compensation Policy for Executive Officers
The policy of the Committee is to provide each executive officer current
cash compensation that is reasonable and consistent with Viking's size,
industry and performance, and long-term incentive compensation based on the
increase in the value of Viking's Common Stock and the achievement of Viking's
long term goals. In addition to salary, current cash compensation includes a
bonus based in part on Viking's current annual performance and in part on the
executive's individual performance. The Committee has relied heavily on the
recommendations of Mr. Helford in setting the compensation of the other
executive officers.
Compensation of Irwin Helford
Mr. Helford's salary is fixed by his employment contract, and he is entitled
under the contract to a bonus determined by the Board of Directors in its
discretion. The Board has delegated this responsibility to the Committee. In
view of Viking's continued outstanding performance and Mr. Helford's
contribution to such performance, the Committee approved a $100,000 increase
in Mr. Helford's base salary under his employment agreement for fiscal 1996.
In keeping with the Committee's objective of rewarding executive officers
based on corporate performance, and in order to assure the deductibility to
Viking of amounts paid to Mr. Helford, in July 1994, the Committee adopted the
Chief Executive Officer Performance Based Plan (the "CEO Bonus Plan"), which
was approved by shareholders in November 1994. The CEO Bonus Plan provides for
the payment to Mr. Helford of a bonus for each fiscal year consisting of the
sum of specified percentages of his salary if Viking meets or exceeds 90% of
the target amounts contained in Viking's business plan for that fiscal year
for one or more of the following: consolidated revenues, gross profit, pretax
profit and net income. A separate percentage of salary applies to each such
target, with a maximum annual bonus payable under the CEO Bonus Plan set at
$1,300,000 for fiscal 1996, increasing to $1,400,000 for fiscal 1997 and
$1,500,000 for fiscal 1998 and each subsequent fiscal year. Pursuant to the
CEO Bonus Plan, Mr. Helford was paid a bonus of $700,000 for fiscal 1996, with
one-fourth of such bonus ($175,000) paid to Mr. Helford by the issuance of
stock options to purchase an aggregate of 7,407 shares
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<PAGE>
of Viking Common Stock under the Amended and Restated 1991 Nonstatutory Stock
Option Plan (the "1991 Plan"). Pursuant to the CEO Bonus Plan, all such
options have an exercise price of $1.25 per share, subject to adjustment as
provided in the 1991 Plan, and are deemed to have a value equal to the
difference between such exercise price and the closing price of Viking Common
Stock on July 15, 1996 ($24.875), the last trading day prior to the date of
grant.
In fiscal 1995, the Committee approved a split dollar life insurance
arrangement with a trust for beneficiaries named by Mr. Helford. Premiums
under this policy are paid annually by Viking. At the death of Mr. Helford or,
if certain assumptions as to life expectancy, policy dividends and other
factors are realized, at the surrender of the policies, Viking will recover
the full amount of premiums it paid.
Compensation of Other Executive Officers
The salaries of the executive officers other than Mr. Helford reflect annual
discretionary increases based primarily on individual performance factors. The
Committee believes that the salaries of these executive officers are
comparable to the salaries of executives with similar responsibilities based
on a study prepared for the Committee in 1991 by a management compensation
consultant. Several of the executive officers were promoted to their current
positions from subordinate positions they held with Viking and received salary
increases consistent with their increased responsibility.
In awarding bonuses to the executive officers (other than Mr. Helford) for
the fiscal year ended June 28, 1996, the Committee considered Viking's overall
performance, as reflected in its revenues and net income, each executive's
success in meeting individual performance targets applicable to his or her
area of responsibility and the personal performance of the executive,
including commitment, leadership and effort. These targets were set near the
beginning of the year by Mr. Helford in consultation with the executive and
generally relate to reducing the cost or increasing the productivity or
efficiency of the activity managed by the executive. The amount of bonus that
each executive received was discretionary with the Committee, with 40% of the
potential bonus contingent on attaining specific objective goals related to
Viking's overall performance, 40% contingent on attaining specified goals
related to the executive's individual performance in his or her area of
responsibility and 20% contingent on the executive's personal performance.
Amounts of compensation deemed to have been realized by executive officers
as a result of the exercise of stock options that were granted to them in
prior years were not taken into account in determining their bonuses for the
current year.
In keeping with the Committee's objective of rewarding executive officers
based on corporate performance, and in order to assure the deductibility to
Viking of amounts paid to Mr. Nelson, Viking's President and Chief Operating
Officer, for fiscal 1997 and subsequent fiscal years, the Committee has
adopted, subject to shareholder approval, a formula bonus for Mr. Nelson based
on Viking's consolidated revenues, gross profit, pretax profit and net income.
See "Approval of President's Performance Based Plan" for further information
regarding this bonus plan.
Equity-Based Incentive Plans
The Committee believes that basing a significant portion of the compensation
of executive officers and other key employees on increases in the value of
Viking Common Stock harmonizes the interests of the executives and the
shareholders and is in the best interests of the shareholders. Viking's option
plans are designed to accomplish this purpose. The Incentive Plan, which
provides incentive to attain long term financial performance goals, is not
solely dependent on increases in the value of the Common Stock.
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<PAGE>
Executive officers (including Mr. Helford) and other key employees have been
awarded stock options under the Amended and Restated Incentive Stock Option Plan
(the "ISO Plan"). For each key employee, including executive officers, the
Committee determines, on an annual basis, the number of options shares to be
granted under the ISO Plan to the employee based upon his or her level of
responsibility, a review of Viking's overall performance and prior grants. Newly
hired management personnel, including executive officers, are eligible to
receive stock options under the ISO Plan after satisfactory completion of an
introductory period, and annually thereafter. Internally promoted management
personnel are eligible to receive additional options at the time of their
promotion in order to reflect their new positions and increased responsibilities
and are eligible to receive additional grants annually thereafter.
Viking's stock option grant program was reviewed by a management compensation
consultant and by senior managers at Viking in December 1993, and was found to
be appropriate at that time. In June 1996, senior Viking management again
thoroughly analyzed and updated the number of options awarded for each
management level in order to assure that the number of option shares was
appropriate for the responsibility of the optionee and sufficient to provide
incentive to each optionee. Options generally become exercisable over a five
year period. To fully exercise an option, the optionee generally must remain in
the employ of Viking throughout the period.
Options have been granted under the 1991 Plan, which permits the grant of
stock options with exercise prices at less than the fair market value of the
Common Stock on the date of grant, only in limited instances when it has been
found to be appropriate to provide special incentives over and above the
incentives provided by the grant of a stock option at fair market value. In
addition to options granted to Mr. Helford pursuant to the terms of the CEO
Bonus Plan, during fiscal 1996, Viking granted options under the 1991 Plan to
purchase an aggregate of 96,880 shares of Common Stock to selected key
employees, including an option to Mr. Nelson to purchase 20,000 shares of Common
Stock at an exercise price of $1.00 per share, an option to each of five other
executive officers to purchase 3,600 shares of Common Stock at an exercise price
of $0.25 per share and an option to one other executive officer to purchase
1,440 shares of Common Stock at an exercise price of $0.25 per share.
Six of the current executive officers have been awarded 100,000 shares of
Common Stock, subject to vesting, under the Incentive Plan. Each participant
is considered to be an employee whose responsibilities and decisions directly
affect the management, growth, performance or profitability of Viking. The
Committee awarded the shares to provide for the participants' retirement if
they remain in the employ of Viking until June 30, 2007, or until retirement
at age 65, death or disability, if sooner.
Internal Revenue Code Amendments
The Committee will continue to consider the anticipated tax treatment to
Viking regarding the compensation and benefits paid to the Chief Executive
Officer and the four other most highly compensated executive officers of
Viking in light of the 1993 addition to Section 162(m) of the Internal Revenue
Code of 1986, as amended ("Section 162(m)"). The Committee will from time to
time consider amendments to Viking's compensation, including further
amendments to its equity-based incentive plans, necessary to preserve the
deductibility of all compensation paid by Viking which is subject to Section
162(m). While Viking does not expect to pay its executive officers
compensation in fiscal 1997 in excess of the Section 162(m) deductibility
limit, the Board of Directors and the Committee retain discretion to authorize
the payment of compensation that does not qualify for income tax deductibility
under Section 162(m).
Lee A. Ault III Neil R. Austrian
Charles P. Durkin, Jr. Joan D. Manley
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PERFORMANCE GRAPH
The following graph compares the cumulative shareholder return on Viking
Common Stock from June 28, 1991 through June 28, 1996, based on the market
price of the Common Stock, with the cumulative total return of the Nasdaq
Market Value Index (Broad Market) and the Media General Other Importers,
Wholesalers and Retailers Index (Peer Group). The graph assumes that the value
of the investment in Viking Common Stock and each index was $100 on June 28,
1991 and that all dividends, if any, were reinvested. The comparisons in this
table are not intended to forecast or be indicative of possible future price
performance.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
AMONG VIKING OFFICE PRODUCTS, PEER GROUP AND BROAD MARKET
PERFORMANCE GRAPH APPEARS HERE
<TABLE>
<CAPTION>
Measurement Period Viking Office Broad
(Fiscal Year Covered) Products Peer Group Market
- ------------------- ------------- ---------- ------
<S> <C> <C> <C>
Measurement Pt- 6/28/91 $100 $100 $100
FYE 6/28/92 $176.19 $128.93 $107.75
FYE 6/28/93 $316.67 $151.99 $132.27
FYE 6/28/94 $455.95 $157.10 $145.04
FYE 6/28/95 $697.62 $176.29 $170.11
FYE 6/28/96 $1,195.24 $252.78 $214.14
</TABLE>
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CERTAIN TRANSACTIONS
Viking has assisted certain of its executive officers in acquiring residences
by paying a portion of the purchase price of such residences. Viking receives an
undivided interest in the property in proportion to the amount of purchase price
paid by Viking, and all debt service and other costs relating to the property
are paid by the executive officer. Upon any sale of the property, the net sales
proceeds will be divided according to the parties' respective ownership
interests, provided that Viking is to receive at least as much as it paid for
its portion of the property. Pursuant to such arrangements, Viking paid
$1,300,000 of the $2,300,000 purchase price of the residence purchased by Mr.
Nelson, $500,000 of the $2,100,000 purchase price of a residence purchased by
Mr. Muir, $500,000 of the $1,000,000 purchase price of a residence purchased by
Mr. Brown, $500,000 of the $2,000,000 purchase price of a residence purchased by
Mr. Weissman, $500,000 of the $1,960,000 purchase price of a residence purchased
by Ms. Billig, Viking's Vice President, Finance, and $350,000 of the $1,125,000
purchase price of a residence purchased by Stephen R. Kroll, Viking's Vice
President, Administration.
APPROVAL OF PRESIDENT'S
PERFORMANCE BASED BONUS PLAN
The Committee believes that an annual bonus for Mr. Nelson, Viking's President
and Chief Operating Officer is an important part of his overall compensation.
The Board of Directors recommends that shareholders approve the Viking Office
Products, Inc., President's Performance Based Bonus Plan (the "President's Bonus
Plan") in order to assure the deductibility for federal income tax purposes of
bonuses paid to Mr. Nelson in light of the limitations imposed by Section
162(m).
In general, Section 162(m) denies a publicly held corporation a deduction for
federal income tax purposes for otherwise deductible compensation in excess of
$1.0 million per year that is paid to its chief executive officer or any of the
four other officers whose compensation is disclosed in its proxy statement,
subject to certain exceptions. The President's Bonus Plan is intended to qualify
under one of these exceptions, which excludes from the $1.0 million limit any
compensation that is contingent on the attainment of one or more objective, pre-
established performance goals if a person with knowledge of the relevant facts
would be able to calculate the maximum amount payable to the executive under the
plan. In addition, prior to any payments, the plan must be approved by the
corporation's shareholders, and the corporation's compensation committee must
certify that the performance goals have been met.
The proposed President's Bonus Plan covers only Mr. Nelson. Mr. Helford's
bonus is determined pursuant to the CEO Bonus Plan. The compensation payable for
fiscal 1997 to the other four executives named in the Summary Compensation Table
is not expected to exceed the limitations set forth in Section 162(m).
The President's Bonus Plan provides for the payment to Mr. Nelson of an annual
bonus consisting of the sum of the specified percentages of his salary if Viking
meets or exceeds 90% of the target amounts contained in Viking's fiscal 1997
business plan for one or more of the following: consolidated revenues; gross
profit; pretax profit; and net income. A separate percentage of salary applies
to each such target. The maximum annual bonus payable to Mr. Nelson under the
President's Bonus Plan for each fiscal year is established annually by the
Committee, up to a limit of $800,000, with the maximum bonus for fiscal 1997 set
at $400,000. The Committee may increase or decrease the maximum bonus payable
under the President's Bonus Plan for a fiscal year (up to the limit) at any time
before or within 30 days after the start of the fiscal year. If less than 90% of
each of these targets is met, no bonus will be payable to Mr. Nelson under the
President's Bonus Plan for fiscal 1997.
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<PAGE>
If shareholders approve the President's Bonus Plan, the President's Bonus
Plan will be used to determine the amount of Mr. Nelson's bonus for fiscal
1997. Mr. Nelson's bonus for each subsequent fiscal year also will be
determined pursuant to the President's Bonus Plan (based on Viking's meeting
the comparable target amounts contained in the business plan for such year)
unless and until the Committee determines otherwise. Payments under the
President's Bonus Plan will be made as soon as practicable after the Committee
certifies that the performance goals have been met. Participation in the
President's Bonus Plan is not exclusive and will not prevent Mr. Nelson from
participating in other compensation plans of Viking. If the President's Bonus
Plan is not approved by shareholders at the Annual Meeting, no payments will
be made under the President's Bonus Plan.
The following table sets forth the bonus that would have been payable under
the President's Plan to Mr. Nelson for fiscal 1996 assuming the President's
Bonus Plan had been in effect for such year.
NEW PLAN BENEFITS
PRESIDENT'S PERFORMANCE BASED BONUS PLAN
<TABLE>
<CAPTION>
NAME AND POSITION FISCAL 1996 BONUS
----------------- -----------------
<S> <C>
M. Bruce Nelson, President
and Chief Operating Officer............................ $315,000
</TABLE>
RATIFICATION OF SELECTION OF AUDITORS
The Board of Directors has selected the accounting firm of Deloitte & Touche
LLP to serve as independent auditors for the current fiscal year, subject to
ratification by the shareholders. Deloitte & Touche LLP has served as Viking's
independent auditors since 1986.
The Board of Directors recommends a vote "FOR" ratification of this
selection. Shareholder ratification of the selection of auditors is not
required under the laws of the State of California, but the Board has
determined to ascertain the position of the shareholders on the selection. The
Board of Directors will reconsider the selection if it is not ratified by the
shareholders.
It is anticipated that representatives of Deloitte & Touche LLP will be
present at the Annual Meeting, and such representatives will be given the
opportunity to make a statement, if they so desire, and to answer appropriate
questions.
MISCELLANEOUS
SHAREHOLDER PROPOSALS
Shareholder proposals intended to be presented at the 1997 Annual Meeting of
Shareholders must be received by Viking by June 5, 1997 to be considered by
Viking for inclusion in Viking's proxy statement and form of proxy relating to
that meeting. Such proposals should be directed to the attention of the
Secretary, Viking Office Products, Inc., 879 West 190th Street, 10th Floor,
Gardena, California 90248.
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COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 requires Viking's
officers and directors, and persons who own more than ten percent of a
registered class of Viking's equity securities, to file reports of ownership and
changes in ownership with the Securities and Exchange Commission. Officers,
directors and greater than ten percent shareholders are required by Securities
and Exchange Commission regulations to furnish Viking with copies of all Section
16(a) forms they file.
Based solely on a review of the copies of such forms furnished to Viking, or
written representations that no Forms 5 were required, Viking believes that
during the period from June 30, 1995 to June 28, 1996 all Section 16(a) filing
requirements applicable to its officers, directors and greater than ten-percent
beneficial owners were complied with, except that a grant of a stock option was
reported late by Messrs. Austrian and Ostern and Ms. Manley, the grant of four
stock options was reported late by Mr. Nelson and the exercise of a stock option
was reported late by Mr. Muir.
OTHER MATTERS
Neither Viking nor any of the persons named as proxies knows of any matters to
be voted on at the Annual Meeting other than as described in this Proxy
Statement. However, if any other matters are properly presented at the meeting,
it is the intention of the persons named as proxies to vote in accordance with
their judgment on such matters, subject to direction by the Board of Directors.
The 1996 Annual Report to Shareholders accompanies this Proxy Statement, but
is not to be deemed a part of the proxy soliciting material.
WHILE YOU HAVE THE MATTER IN MIND, PLEASE COMPLETE, SIGN AND RETURN THE
ENCLOSED PROXY CARD.
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<PAGE>
VIKING OFFICE PRODUCTS, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS FOR THE ANNUAL MEETING OF
SHAREHOLDERS TO BE HELD ON NOVEMBER 14, 1996
The undersigned, revoking any previous proxies for such stock, hereby
appoints Irwin Helford and Stephen R. Kroll, and each of them, proxies of the
undersigned with full power of substitution to each, to vote all shares of
common stock of VIKING OFFICE PRODUCTS, INC., which the undersigned is entitled
to vote at the Annual Meeting of Shareholders of Viking Office Products, Inc.,
to be held on November 14, 1996, and all postponements or adjournments thereof,
with all the power the undersigned would possess if personally present, with
authority to vote (i) as specified by the undersigned below and (ii) in the
discretion of any proxy upon such other business as may properly come before
the meeting.
Vote this proxy as follows:
1. Election of Directors:
FOR ALL NOMINEES LISTED BELOW [_] WITHHOLD VOTE [_]
(except as marked to the contrary below) (for all nominees)
Irwin Helford, M. Bruce Nelson, Lee A. Ault III, Neil R. Austrian, Charles P.
Durkin, Jr. and Joan D. Manley
INSTRUCTION: TO WITHHOLD VOTE FOR ANY INDIVIDUAL NOMINEE, MARK THROUGH THE
NOMINEE'S NAME IN THE ABOVE LIST.
2. Proposal to approve the President's Performance Based Bonus Plan:
FOR [_] AGAINST [_] ABSTAIN [_]
3. Proposal to ratify the selection of Deloitte & Touche LLP as independent
auditors:
FOR [_] AGAINST [_] ABSTAIN [_]
CONTINUED ON REVERSE--PLEASE COMPLETE OTHER SIDE
- --------------------------------------------------------------------------------
(Continued from other side)
THIS PROXY WILL BE VOTED AS DIRECTED, OR, IF NO DIRECTION IS INDICATED, FOR THE
ELECTION OF THE NOMINEES OF THE BOARD OF DIRECTORS, FOR THE PRESIDENT'S
PERFORMANCE BASED BONUS PLAN, FOR THE RATIFICATION OF AUDITORS AND OTHERWISE IN
THE DISCRETION OF ANY OF THE PERSONS ACTING AS PROXIES.
IMPORTANT: Please date this proxy and sign exactly as your name or names appear
hereon. If stock is held jointly, each should sign. Executors, administrators,
trustees, guardians and others signing in a representative capacity, please
give your full title(s). If this proxy is submitted by a corporation or
partnership, it should be executed in the full corporate or partnership name by
a duly authorized person.
-----------------------------------
-----------------------------------
(SIGNATURE OF SHAREHOLDER)
Dated _____________________ , 1996
IMPORTANT: PLEASE SIGN PROXY
EXACTLY AS YOUR NAME OR NAMES
APPEAR HEREON.
