<PAGE> 1
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
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
/x/ Definitive proxy statement
/ / Definitive additional materials
/ / Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
PAYLESS CASHWAYS, INC.
(Name of Registrant as Specified In Its Charter)
PAYLESS CASHWAYS, INC.
(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), or
14a-6(j)(2).
/ / $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:
(2) Aggregate number of securities to which transactions
applies:
(3) Per unit price or other underlying value of
transaction computed pursuant to Exchange Act Rule 0-11:1
(4) Proposed maximum aggregate value of transaction:
1 Set forth the amount on which the filing fee is calculated
and state how it was determined.
<PAGE> 2
/ / Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
<PAGE> 1
February 24, 1995
To Our Shareholders:
It is my pleasure to invite you to our Annual Meeting. This year
it will be held on Thursday, April 20, at 10:00 a.m., at our corporate
offices, located at 2300 Main, 1st Floor, Kansas City, Missouri 64108.
With this letter, you will find the formal notice of the Annual
Meeting, our 1994 Annual Report and our Proxy Statement. When you have
finished reading the Proxy Statement, please promptly mark, sign, and return
to us the enclosed proxy card, to insure that your shares will be represented.
We appreciate the continuing interest of our shareholders in
Payless Cashways, Inc., and I look forward to seeing many of you at the Annual
Meeting.
Very truly yours,
/s/ David Stanley
David Stanley
Chairman of the Board and Chief Executive Officer
<PAGE> 1
2300 Main
Kansas City, Missouri 64108
_____________________________
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
OF
PAYLESS CASHWAYS, INC.
To Be Held April 20, 1995
To the Shareholders of PAYLESS CASHWAYS, INC.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of
Shareholders of Payless Cashways, Inc. will be held at 2300 Main, 1st Floor,
Kansas City, Missouri, on Thursday, April 20, 1995, at 10:00 a.m. for the
following purposes:
1. To elect four directors to terms of three years each as set
forth in the Proxy Statement.
2. To transact such other and further business as may properly
come before the meeting.
The Board of Directors has fixed the close of business
on February 15, 1995, as the record date for the determination of shareholders
entitled to notice of and to vote at the meeting.
Dated: February 24, 1995
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Linda J. French
Linda J. French, Senior Vice President - General
Counsel/Secretary
- -----------------------------------------------------------------------------
You are cordially invited to attend the meeting. However,
whether or not you plan to be personally present at the meeting, please date
and sign the enclosed proxy and return it promptly in the enclosed envelope.
If you later desire to revoke your proxy, you may do so at any time before it
is exercised.
- -----------------------------------------------------------------------------
<PAGE> 1
GENERAL INFORMATION FOR SHAREHOLDERS
In order to provide every shareholder with an opportunity to vote on
all matters scheduled to come before the Annual Meeting, whether or not the
shareholder attends in person, proxies are solicited from shareholders by the
Board of Directors of Payless Cashways, Inc. ("Payless" or the "Company").
When the enclosed proxy card is properly executed and returned, the
shares represented will be voted by the persons designated as proxies,
in accordance with the shareholder's directions. Shareholders may vote on a
matter by marking the appropriate box on the card or, if no box is marked for a
specific matter, the shares will be voted as recommended by the Board of
Directors on that matter.
Management knows of no matters other than those set forth on the
proxy card that will be presented for action at the Annual Meeting.
EXECUTION OF A PROXY, HOWEVER, CONFERS ON EACH OF THE PERSONS DESIGNATED AS
PROXIES THE DISCRETIONARY AUTHORITY TO VOTE THE SHARES REPRESENTED IN
ACCORDANCE WITH HIS AND/OR HER BEST JUDGMENT ON ANY OTHER BUSINESS THAT MAY
PROPERLY COME BEFORE THE MEETING.
Any shareholder executing a proxy may revoke that proxy
or submit a revised proxy at any time before it is voted. A shareholder may
also vote by ballot at the Annual Meeting, thereby cancelling any proxy
previously returned as to any matter voted on by ballot. A shareholder
wishing to name as his or her proxy someone other than those designated on
the proxy card may do so by crossing out the names of the designated proxies
and inserting the name(s) of the person(s) he or she wishes to have act as
his or her proxy. In such a case, it will be necessary that the proxy be
delivered by the shareholder to the person(s) named, and that the person(s)
named be present and vote at the meeting. Proxy cards on which alternate
proxies have been named should not be mailed directly to the Company.
Holders of the Common Stock, par value $.01 per share,
of the Company ("Common Stock") and Series A Cumulative Convertible Preferred
Stock, par value $1.00 per share, of the Company ("Preferred Stock") at the
close of business on February 15, 1995, the record date for the Annual
Meeting (the "Record Date"), are entitled to receive notice of, and to vote
at, the Annual Meeting. At the close of business on such date, a total of
37,622,822 shares of Common Stock and 406,000 shares of Preferred Stock were
outstanding. Each share of Common Stock is entitled to one vote and each
share of Preferred Stock is entitled to 5.9994 votes on each matter to be
presented at the Annual Meeting. It is expected that this Proxy Statement
and the enclosed form of proxy will be mailed to the shareholders on or about
February 24, 1995.
<PAGE> 2
MATTERS TO BE CONSIDERED AT THE ANNUAL MEETING
1. ELECTION OF DIRECTORS
The Articles of Incorporation and the By-laws of the Company provide
that the business of the Company shall be managed by a Board of Directors.
Pursuant to the Articles of Incorporation, the directors are divided into 3
classes, designated Class I, Class II and Class III. Each class consists,
as nearly as may be possible, of 1/3 the total number of directors
constituting the entire Board of Directors, which currently numbers 11. At
each Annual Meeting, successors to the class of directors whose terms expire
at that Annual Meeting are elected for a 3-year term.
At the Annual Meeting of Shareholders in 1995, 4 Class II
directors are to be elected. Each of the nominees listed below was
recommended by the Corporate Governance and Nominating Committee and approved
by the Board of Directors. It is the intention of the persons named as
proxies in the accompanying form of proxy, unless such authority is
withheld, to vote for the election of each nominee set forth below. In order
to be elected a Director, a nominee must receive a majority of the votes cast
by the shares entitled to vote in the election at an Annual Meeting at
which a quorum is present. The abstention or failure to vote shares present at
an Annual Meeting and broker nonvotes do not have the effect of a vote
"for" or "against" a nominee.
Each nominee has consented to being named a nominee and
has agreed to serve if elected. In case any nominee is not available for
election for reasons not presently known to the Company, discretionary
authority will be exercised by the proxies named in the enclosed form of proxy
to vote for a substitute selected by the Board of Directors. Information
regarding the nominees is set forth below.
Principal Occupation and
Name Age Five-Year Employment History
---- --- ---------------------------
Gary D. Rose.......................49 Limited Partner of
First elected a director: The Goldman Sachs Group,
1985 L.P. since November 1994;
Class II General Partner of
The Goldman Sachs Group,L.P.
from December 1989 to November
1994; and General Partner of
Goldman Sachs & Co. ("Goldman
Sachs") from November 1984
to November 1994. Mr. Rose is
Chairman of the Compensation
Committee and a member of the
Corporate Governance and
Nominating Committee of Payless'
Board of Directors.
John H. Weitnauer, Jr..............68 Chairman and Chief Executive
First elected a director: Officer of Richway, a mass
1993 merchandising division of
Class II Federated Department Stores, Inc.
from 1980 until his retirement in
1986; and currently a director of
John H. Harland Co. Mr.
Weitnauer is a member of the
Audit Committee and the
Compensation Committee of
Payless' Board of Directors.
William A. Hall....................49 Assistant to the Chairman of
First elected a director: Hallmark Cards, Inc. for more
1993 than five years; and currently
Class II a director of AgriStar, Inc.and
Mercantile Bank Corporation.
Mr. Hall is a member of the Audit
Committee of Payless' Board
of Directors.
Louis W. Smith.....................52 President, Kansas
Proposed for election in City Division of AlliedSignal
1995 as a director in Inc. since April 1990; and
Class II Assistant General Manager,
Administration,
Kansas City Division of
AlliedSignal Inc. from March
1989 to April 1990; and
currently a director of
Western Resources, Inc.
and Commerce Bank, N.A.
<PAGE> 3
Information regarding the 7 directors, who were previously elected
and will continue to serve their terms, is set forth below.
Principal Occupation and
Name Age Five-Year Employment History
- ---- --- ----------------------------
David Stanley......................59 Chairman of the Board and Chief
First elected a director: Executive Officer of Payless since
1969 August 1986; and currently a
Class III director of Piper Jaffray
Companies Inc., Digi
International, Inc. and Best
Buy Co., Inc. Mr. Stanley is a
member of the Corporate
Governance and Nominating
Committee of Payless' Board
of Directors.
Harold Cohen.......................64 Vice-Chairman of the Board of
First elected a director: Payless from October 1988 until
1985 his retirement in December
Class I 1993; Chairman Emeritus of
Somerville Lumber and Supply
Co., Inc. ("Somerville") since
December 1993; Chairman of the
Board of Somerville from March
1991 to December 1993;
Co-Chairman of the Board of
Somerville from March 1987 to
March 1991; and currently a
Director of Syratech Corp.
Wayne B. Lyon......................62 President and Chief Operating
First elected a director: Officer of Masco Corporation
1988 ("Masco") since August 1985;
Class III and currently a director of Masco,
Comerica, Incorporated and
Emco Limited. Mr. Lyon is
Chairman of the Audit Committee
and a member of the
Compensation Committee and of
the Corporate Governance and
Nominating Committee of Payless'
Board of Directors.
Scott G. Fossel....................42 President of Fossel Investments
First elected a director: since September 1994; Vice
1989 President of Court Square Capital
Class I Limited and Vice President of
Citicorp Venture Capital Ltd.,
each an indirect wholly-owned
subsidiary of Citicorp, from
March 1986 to September 1994.
Mr. Fossel is a member of the
Audit Committee and Compensation
Committee of Payless' Board of
Directors.
George Latimer.....................59 Director, Office of Special
First elected a director: Actions, U. S. Department of
1993 Housing and Urban Development
Class I since July 1993; Specialist
Consultant to the U.S. Department
of Housing and Urban Development
from February 1993 to July 1993;
Dean of Hamline University School
of Law from January 1990 to
February 1993; and currently a
director of Digital Biometrics,
Inc. and 13 closed-end mutual
funds managed by Piper Capital
Management, a wholly-owned
subsidiary of Piper Jaffray
Companies, Inc. Mr. Latimer
is a member of the Audit Committee
of Payless' Board of Directors.
Ralph Strangis.....................58 Member of the law firm of Kaplan,
First elected a director: Strangis and Kaplan, P.A. for more
1983 (to 1988); than five years; and currently a
1993 director of National Presto
Class III Industries, Inc., Life USA
Holding, Inc., Damark
International, Inc. and TCF
Financial Corporation. Mr.
Strangis is the Lead Director,
Chairman of the Corporate
Governance and Nominating
Committee and a member of the
Compensation Committee of Payless'
Board of Directors.
Susan M. Stanton...................46 President and Chief Operating
First elected a director: Officer of Payless since November
1993 1993; and Senior Vice President
- Merchandising of Payless from
October 1989 to November 1993.
Ms. Stanton is a member of the
Corporate Governance and
Nominating Committee of Payless'
Board of Directors.
<PAGE> 4
During 1994, there were 6 regular meetings and 1 special meeting of
the Board of Directors. During 1994, each director attended more than 75% of
all meetings of the Board of Directors and of the Committees on which he or she
served. In addition to attending Board of Directors and Committee meetings
during the year, the directors conferred with officers regarding corporate
matters and reviewed material submitted by management to the Board of Directors
and Committees for consideration and action.
COMMITTEES OF THE BOARD
The Board has 3 standing committees. Their functions are described
below:
Audit - The Audit Committee monitors and reviews the adequacy of
financial, operating and system controls, financial reporting, compliance with
legal, ethical and regulatory requirements, and the performance of the external
and internal auditors, serving as the conduit for communication between the
Board of Directors and external and internal auditors. Additionally, the Audit
Committee recommends to the Board of Directors the independent public
accountants to conduct the annual examination of financial statements, and
reviews the proposed scope and fees of the examination, as well
as its results, and any significant, non-audit services and fees. The Audit
Committee met 3 times during 1994. Members of the Audit Committee are Wayne B.
Lyon, Chairman; Scott G. Fossel; George Latimer; John H. Weitnauer, Jr.; and
William A. Hall.
Compensation - The Compensation Committee reviews the compensation
(wages, salaries, supplemental compensation and benefits) of the employees of
the Company, including approval of compensation and benefit policies, approval
of direct and indirect executive officer compensation, administration of stock
programs, and oversight of the Company's executive development plan, and makes
recommendations to the Board of Directors regarding compensation and benefits
for directors. The Compensation Committee met 6 times during 1994. Members of
the Compensation Committee are Gary D. Rose, Chairman; Scott G. Fossel, Wayne B.
Lyon; Ralph Strangis; and John H. Weitnauer, Jr.
Corporate Governance and Nominating - The Corporate
Governance and Nominating Committee reviews the size, composition and
effectiveness of the Board of Directors, including retention, tenure and
retirement policies, criteria for selection of nominees to the Board of
Directors, qualifications of candidates, membership and structure of Board
Committees, and developments in corporate governance. The Corporate
Governance and Nominating Committee met 4 times during 1994. Members of the
Corporate Governance and Nominating Committee are Ralph Strangis, Chairman;
David Stanley; Susan M. Stanton; Gary D. Rose; and Wayne B. Lyon.
COMPENSATION OF DIRECTORS
The Company pays each non-employee director (i) an annual directors'
fee of $25,000 (except that the Lead Director is paid an annual fee of $50,000),
payable quarterly, (ii) $1,000 for each meeting of the Board of Directors
attended by the director and (iii) $1,000 for each Committee meeting attended by
the director on days when the Board of Directors as a whole is not meeting.
Committee chairmen are paid an additional annual fee of $1,500. The Lead
Director, Ralph Strangis, has been elected by the non-management directors to
address, on behalf of the Board of Directors, various governance matters.
The Company has also adopted the Payless Cashways Director Option Plan
for non-employee directors (the "Director Option Plan"), for the purpose of
attracting and retaining outstanding individuals as directors and to provide
them with an equity interest in the Company. Participants consist solely of the
members of the Company's Board of Directors who are not full-time employees of
the Company or its subsidiaries. Under the Director Option Plan, which has a
term of not more than 10 years, each non-employee director is granted an option
of $100,000 worth
<PAGE> 5
of the Company's Common Stock, valued on the date on which the director is
first elected, for an aggregate exercise price of $100,000. In addition,
each non-employee director will be granted an option to purchase 1,000 shares
of Common Stock on the date immediately following the Company's Annual Meeting
so long as such non-employee director continues to serve on the Company's
Board of Directors. Further, in the event that the Director Option Plan, or
any successor plan, allows the grant of additional stock options to a
non-employee director, the Lead Director shall be annually awarded an option to
purchase the number of shares of the Company's Common Stock equal to the
number of shares to which any non-employee director is annually entitled,
plus the number of shares of the Company's Common Stock equal to the number
of shares granted to the Lead Director as a non-employee director during any
fiscal year(s) in which the Lead Director served but was ineligible to
receive such an award. The exercise price for the annual options will be
the fair market value of the Company's Common Stock on the date of grant.
Options granted under the Director Option Plan may be exercised six months
and one day after the grant date and expire on the earlier of (a) 10 years
after the date of grant, or (b) 1 year after the date on which the director
ceases to be a member of the Company's Board of Directors. An aggregate of
350,000 shares of Common Stock are reserved for issuance under the Director
Option Plan, which number is subject to adjustment i) automatically if the
Company issues shares of Common Stock without consideration and ii) by
the Board of Directors if other equitable adjustments are deemed appropriate
after changes in the Common Stock resulting from reorganization, sale, merger,
consolidation or similar occurrence.
The Director Option Plan is administered by the Board of Directors of
the Company which has the authority to amend the plan, terminate the plan,
interpret the plan, prescribe, amend and rescind rules and regulations relating
thereto, and make all other determinations necessary or advisable for the
administration of the plan.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Members of the Compensation Committee of the Company's Board of
Directors during 1994 were: Gary D. Rose, Chairman; Scott G. Fossel, Wayne B.
Lyon; John H. Weitnauer, Jr.; and Ralph Strangis. The law firm of Kaplan,
Strangis and Kaplan, P.A., of which Mr. Strangis is a member, was retained by
and rendered services to the Company in 1994, for an amount which was not
greater than 5% of the Company's or the firm's annual gross revenues. The firm
has also been retained by and will render services to the Company in 1995. Mr.
Rose is a Limited Partner of Goldman Sachs Group L.P. Goldman Sachs Capital
Market L.P., an affiliate of Goldman Sachs Group L.P., entered into a
three-year interest cap agreement with the Company in January, 1995, the
amount of which was not greater than 5% of the Company's or the firm's annual
gross revenues. Mr. Lyon is President and Chief Operating Officer of Masco.
In 1988, Payless entered into a Supply Agreement with Masco, as a preferred
supplier for certain products. The Supply Agreement expires on December 31,
1995 but will be automatically extended for a one-year period for each
succeeding year after December 31, 1995, unless sooner terminated by either
party by written notice to the other party delivered at least 180 days prior to
the end of each succeeding year. During 1994, Payless' purchases from Masco
were not greater than 5% of either Payless' or Masco's annual gross revenues.
Payless will make purchases from Masco in 1995. Payless believes that the
terms and conditions of its relationships with each of Kaplan, Strangis and
Kaplan, P.A., Goldman Sachs Capital Market L.P. and Masco are as
favorable as those that could have been obtained from arm's-length negotiations
with unassociated third parties.
<PAGE> 6
PERFORMANCE GRAPH
The graph set forth below compares the indexed total return on an
investment in the Company's Common Stock on March 9, 1993 (the day the Company
commenced its initial public offering of Common Stock) through November 30,
1994, with the returns on investments in the Standard and Poor's Composite 500
Stock Index ("S&P 500") and the Standard and Poor's Retail (Specialty) Index
("S&P Retail Index") during the same time period. The graph is based on stock
performance and assumes the reinvestment of any dividends. The historical stock
price performance shown on this graph is not necessarily indicative of future
performance.
<TABLE>
<CAPTION>
Measurement Period
Month End Prices(03/10/93 thru 11/30/94)
<S> <C> <C> <C>
Payless S&P 500 S&P Retail
3/10/93 100.00 100.00 100.00
4/30/93 87.90 97.40 91.80
5/31/93 93.10 99.70 99.00
6/30/93 90.50 99.70 96.20
7/30/93 87.10 99.20 94.60
8/31/93 95.70 102.60 95.00
9/30/93 81.00 101.60 95.10
10/29/93 82.80 103.60 96.10
11/30/93 89.70 102.20 101.20
12/31/93 115.50 103.30 100.40
1/31/94 123.30 106.60 94.50
2/28/94 132.80 103.40 97.30
3/31/94 112.90 98.70 92.70
4/29/94 108.60 99.80 92.80
5/31/94 102.60 101.10 96.50
6/30/94 93.10 98.40 93.60
7/29/94 78.40 101.50 92.00
8/31/94 86.20 105.30 99.00
9/30/94 72.40 102.40 98.40
10/31/94 64.60 104.60 99.70
11/30/94 58.60 100.40 99.50
</TABLE>
At November 30, 1994, the value of $100 invested on March 9, 1993 was
$58.60 for the Company, $100.04 for S&P 500 and $99.50 for the S&P Retail Index.
<PAGE> 7
COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors is composed
entirely of directors who are not executive officers of the Company. The
Committee is responsible for establishing and administering the policies which
govern the compensation program for executive officers of the Company, including
cash compensation, stock plans and all other benefit programs.
The Compensation Committee believes that it is in the best interest of
the shareholders of the Company to attract, retain and motivate top quality
management personnel, especially its executive officers, by offering a
competitive compensation package that establishes a relationship between
executive pay and the enhancement of shareholder value.
The Committee reviews its executive officer compensation program each
year and regularly retains the assistance of an independent, executive
compensation consulting firm. Every two or three years, the Committee engages a
firm to conduct a formal study to determine whether the Company's compensation
program is competitive with executive compensation programs of comparable
companies (including building supply companies, similarly-sized companies, and
other retail companies) and national industry data obtained from national
compensation surveys in which the Company annually participates, including an
annual retail compensation study published by another executive compensation
consulting firm. In years in which a formal study is not completed, the prior
study is updated based on a survey of retail compensation trends published by
executive compensation consulting firms, published wage and salary surveys, and
inflation indices.
Each year the Committee reviews the performance of the Company and
approves an annual base salary, an annual incentive bonus opportunity and, if
appropriate, a long-term stock incentive award and a stock option grant for each
executive officer consistent with the policies and objectives described below.
ANNUAL BASE SALARY
The Compensation Committee believes that annual base salaries for the
Company's executives should be maintained at levels which are competitive with
salaries at comparable companies. As a result, the Committee has established a
policy to set annual base salaries at approximately the 50th percentile of
annual base salaries for executives in similar positions at comparable
companies. Prior to the beginning of each fiscal year, the Committee reviews
the performance of the Company and base salaries of executive officers, compares
base salaries against the comparable companies and determines base pay
adjustments, as appropriate. The performance criteria used by the Compensation
Committee includes reporting responsibilities of each officer and corporate
performance in terms of the Company's sales, income, operations, expansion and
similar factors. The Compensation Committee does not employ any specific
weighting of the performance criteria and application of the criteria is also
dependent upon the position of the particular executive officer. When the
Company entered into the employment agreements with executive officers
(discussed in the section entitled "Summary Compensation Table"), the annual
base salaries under the agreements were established consistent with this
criteria.
ANNUAL INCENTIVE BONUS OPPORTUNITY
Annual incentive bonus opportunities are established by the Committee
and predicated upon the Company's annual performance measured by attainment of
established levels of earnings before interest, taxes and depreciation
("EBITD"). Eligible employees, including executive officers, are entitled to
receive 100% of their incentive targets only if the Company achieves 100% of the
EBITD target. Based on the Company's payout schedule, participants may receive
50% of their target incentive for attainment of 90% of the EBITD target, and as
much as 150% of the incentive target for attainment of 110% of the EBITD
target. No incentives are paid if the Company fails to achieve a minimum
of 90% of the EBITD target. Incentive levels are set for eligible employees,
including executive officers, based on salary grade. Total cash compensation
(base salary plus annual incentive) for executive officers is intended
to exceed the Company's established competitive levels (50th percentile of base
salaries and incentives for executives in similar positions at comparable
companies) when superior performance levels are achieved, i.e.,
<PAGE> 8
performance which exceeds 100% EBITD. For the purpose of determining the
achievement of the performance levels, the Committee has the authority in
its discretion to adjust the actual EBITD results to eliminate or reduce
the effect of unanticipated or non-recurring charges, events or transactions
such as special financing expenses or restructuring charges which were not
taken into account in determining the EBITD target and which the Committee
believes should be eliminated or reduced to reflect the ongoing performance
of the Company. For 1994, eligible employees, including the executive
officers, were paid bonuses at 80% of the bonus target, based on attainment
of 96% of the EBITD target. For 1995, annual bonus incentive opportunities
are measured by attainment of established levels of EBITD plus amortization
("EBITDA").
LONG-TERM STOCK INCENTIVE PROGRAM
The Committee believes that it is essential for management employees,
especially executive officers, to own significant amounts of Common Stock,
thereby aligning the long-term interests of management with those of
shareholders. The long-term stock incentive program is also intended to provide
a means of attracting and retaining outstanding individuals as management
employees and executive officers of the Company.
Long-term stock incentives are awarded pursuant to the Payless
Cashways 1992 Incentive Stock Program, which was approved by the Company's
shareholders in July 1992. In June 1993, with the advice of the Company's
independent executive compensation consulting firm, the Committee adopted
incentive stock program guidelines, which provide for annual grants of stock
options to approximately 1,300 management employees, including the executive
officers, and annual restricted stock awards to officers of the Company. It is
anticipated that stock option grants will be made annually during the four-year
period 1993-1996 and that restricted stock awards will be made annually during
the five-year period 1994-1998. One objective of the program and the guidelines
is to provide each executive employee with significant value in the Company's
Common Stock, based on a projected stock price at the end of the grant program
in relation to the employee's expected, aggregate cash compensation during the
term of the program.
Stock option grants are the main element of the Company's long-term
stock incentive program. With respect to stock option grants to participating
executive officers, the program and the guidelines are intended to provide the
opportunity to obtain Common Stock, from annual option grants during 1993-1996,
having a value (based on a targeted stock price) approximately equal to 50% of
their expected, aggregate cash compensation during the five-year period 1993-
1997. The targeted stock price is calculated based upon a projection of future
net income and, therefore, earnings per share. This is combined with a
projected increase in the Company's stock price-to-earnings multiple from its
level in 1993 to a projected level of the S&P 500 in the year 2000. Stock option
incentives are also intended to be provided to all the other participating
management employees (except those reporting to a store director or store
manager), having a value (based on a targeted stock price) approximately equal
to 12% to 40%, depending upon management level, of aggregate cash compensation
expected during the 1993-1997 period. A stock option incentive for an
equivalent, smaller number of shares, not related to compensation, is also
expected to be granted to each participating management employee reporting to a
store director or store manager. The Committee will review the program
guidelines for stock options annually and may make adjustments determined to be
necessary to meet the long-term objectives of the program. The annual stock
option grants are subject to the discretion of the Committee.
In June 1993 and June 1994, pursuant to the program guidelines, the
Committee granted to each eligible employee, including executive officers, 40%
and 20%, respectively, of their allocated portion of the shares subject to stock
options under the program. In each of June 1995 and 1996, the Committee expects
to grant 20% of the shares subject to stock options under the program to each
eligible employee, including executive officers. The exercise price of the
option grants will be 100% of fair market value of the Common Stock on the date
of grant. Stock options are generally subject to a four-year vesting schedule
from the date of grant, with 25% of the grant vesting on each of the first four
anniversaries of the grant date.
Restricted stock awards comprise the remaining part of the long-term
stock incentive program. Each officer of the Company has the opportunity to
receive an annual restricted stock award during the period 1994-1998 based
<PAGE> 9
on the extent of achievement of the previous year's specified EBITD or EBITDA
target and actual, annual incentive cash bonus paid as discussed in the previous
section of this Report. The maximum number of restricted shares to be available
annually to the officers under the program equals the aggregate annual incentive
cash bonuses earned by the officers for the preceding year divided by the
targeted stock price (as defined above). The Committee determines whether
awards will be made to the officers from the annual pool of restricted stock and
allocates the awards among the executive officers in its sole discretion. The
factors which the Committee considers in making allocations include the
performance of each individual officer in his or her position and their
contribution to the performance of the Company in terms of sales, income,
operations, expansion and similar factors. The Compensation Committee does not
employ any specific weighting of the performance criteria and application of the
criteria is also dependent upon the position of the particular officer.
The Committee considers the grant of additional stock options when an
officer is promoted, to reflect the additional contribution which the executive
can have to the Company's performance in his or her position and the amount of
options which have historically been provided to an officer in such a position.
CHIEF EXECUTIVE OFFICER COMPENSATION
The Compensation Committee determines Mr. Stanley's compensation as
Chief Executive Officer using the criteria described above. Based on
performance relating to (i) the Company's income, sales, operations, expansion
and similar factors, (ii) management of the strategic direction of the Company,
(iii) development of senior executives (which performance criteria are not
subject to any specific weighting by the Compensation Committee) and the 50th
percentile of annual base salaries for executives in similar positions at
comparable companies, the Committee determined that Mr. Stanley's annual base
salary should be increased to $650,000 for 1994 from $600,000 in 1993. In
addition, Mr. Stanley received an annual incentive cash bonus of $260,000 for
1994 under the annual incentive cash bonus plan, described above. Under the
long-term stock incentive program described above, the Committee also awarded
Mr. Stanley: (1) a non-qualified stock option on 17,600 shares in June 1994 as
the second annual stock option grant; and (2) a restricted stock award of 5,000
shares in February 1994 as the first annual restricted stock award. These
compensation elements for 1994 are reflected in the table entitled "Summary
Compensation Table". It is anticipated that Mr. Stanley will be granted a
second annual restricted stock award during the current fiscal year with
respect to performance for the fiscal year ending November 26, 1994 under
the terms of the long-term stock program but the amount of the restricted
stock grant is not known at the printing of this Proxy Statement.
COMPENSATION FOR THE OTHER NAMED OFFICERS
Certain other executive officers, named in the Summary Compensation
Table, received base salary increases which were consistent with the Committee's
objective of maintaining annual base salaries at approximately the 50th
percentile of annual base salaries for executives in similar positions at
comparable companies. The annual base salaries for Ms. Stanton, Mr. Butler and
Mr. Buchen, who were either promoted or received increased duties in 1994,
increased, respectively, to $400,000, $300,000 and $225,000 in 1994 from
$240,000, $240,000 and $175,000 in 1993. The annual base salary for Mr.
Lightstone increased to $250,000 in 1994 from $225,000 in 1993. In addition,
the other named executive officers received bonuses under the annual incentive
cash bonus plan at 80% of the bonus opportunity based on the adjusted EBITD
target, described above. The cash bonuses awarded for 1994 were $128,000 for
Ms. Stanton, $79,200 for Mr. Butler, $66,000 for Mr. Lightstone and $59,400 for
Mr. Buchen. As the second annual grant under the long-term stock incentive
program, the following non-qualified stock options were granted to the other
named executives: 13,200 shares to Ms. Stanton; 6,225 to Mr. Butler; 6,225 to
Mr. Lightstone; and 6,225 shares to Mr. Buchen. The Committee also awarded the
following restricted stock awards in February 1994 as the first annual
restricted stock awards under the long-term stock incentive program described
above: 3,900 shares to Ms. Stanton, 2,400 shares to Mr. Butler, 2,400 shares to
Mr. Lightstone and 2,200 shares to Mr. Buchen. These compensation elements
for 1994 are reflected in the table entitled "Summary Compensation Table".
It is anticipated that M. Stanton, Mr. Butler, Mr. Lightstone and Mr. Buchen
will be granted a second annual restricted stock award during the current
fiscal year with respect to performance for the
<PAGE> 10
fiscal year ending November 26, 1994 under the terms of the long-term stock
incentive program but the amounts of the restricted stock awards are not
known at the printing of this Proxy Statement.
OTHER INFORMATION
The Company does not anticipate that compensation to any executive
officer for 1995 will exceed $1 million for purposes of IRS Revenue Rule
162(m). It is the current intention of the Committee that all compensation
paid under the executive compensation program will be tax deductible to the
Company in the year paid to the Executive.
The Compensation Committee:
Gary D. Rose - Chairman
Scott G. Fossel
Wayne B. Lyon
Ralph Strangis
John H. Weitnauer, Jr.
<PAGE> 11
SUMMARY COMPENSATION TABLE
The following table details the compensation during
each of the last three, completed fiscal years for the Company's
named executive officers who held the positions listed in 1994:
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
----------------------------------------
(a) (b) (c) (d) (e)
Other Annual
Name and Compensation
Principal Position Year Salary($)(1) Bonus($) ($)(2)
- ------------------ ---- ------------ -------- ------------
<S> <C> <C> <C> <C>
David Stanley - 1994 650,000 260,000 5,400
Chairman of the 1993 600,000 180,000 10,262
Board & Chief 1992 565,000 226,000 72,027
Executive Officer
Susan M. Stanton - 1994 400,000 128,000 3,615
President, Chief 1993 240,000 59,400 6,897
Operating Officer 1992 225,000 89,250 86,622
and Director
Ronald H. Butler - 1994 300,000 79,200 --
Senior Vice 1993 244,615 59,400 --
President- 1992 225,000 74,250 22,166
Merchandising
Stephen A. Lightstone 1994 250,000 66,000 4,054
-Senior Vice 1993 225,000 55,688 8,045
President-Finance\ 1992 210,000 69,300 81,570
Treasurer
Gerald M. Buchen 1994 225,000 59,400 668
Senior Vice 1993 178,365 40,194 1,274
President-Store 1992 162,500 49,884 13,911
Operations
<CAPTION>
LONG TERM COMPENSATION
AWARDS
- ---------------------------------------------
(f) (g) (i)
Restricted All Other
Stock Awards Options/ Compensation
($)(3) SARs (#) ($) (4)
- ------------ -------- ------------
<C> <C> <C>
95,000 17,600 --
-- 35,200 3,428
-- 33,497 3,326
74,100 27,150 --
-- 37,450 3,428
-- 8,327 3,326
45,600 6,225 --
-- 37,450 10,567
-- 3,300 20,082
45,600 6,225 --
-- 37,450 2,592
-- 8,429 37,839
41,800 10,375 8,227
-- 8,300 4,161
-- 4,746 3,214
<FN>
(1) Mr. Butler's 1993 salary includes base annual salary of
$240,000 plus $4,615 cash in lieu of vacation. Mr. Buchen's 1993
salary includes a base salary of $175,000 plus $3,365 cash
in lieu of vacation.
(2) For 1994 other annual compensation includes above-market
interest earnings under the Wealth-Op Deferred Compensation Plan
and the 1988 Deferred Compensation Plan: $5,400 for Mr.
Stanley, $3,615 for Ms. Stanton, $4,054 for Mr. Lightstone and
$668 for Mr. Buchen.
For 1993 other annual compensation includes above-market
interest earnings under the Wealth-Op Deferred Compensation Plan
and the 1988 Deferred Compensation Plan: $10,262 for Mr.
Stanley, $6,897 for Ms. Stanton, $8,045 for Mr. Lightstone and
$1,274 for Mr. Buchen.
For 1992 other annual compensation includes tax reimbursement
related to restricted stock vesting: $66,579 for Mr. Stanley,
$82,869 for Ms. Stanton, $22,166 for Mr. Butler, $75,807 for
Mr. Lightstone and $12,912 for Mr. Buchen. Above-market
interest earnings under the Wealth-Op Deferred Compensation
Plan and the 1988 Deferred Compensation Plan were $5,448 for Mr.
Stanley, $3,753 for Ms. Stanton, $5,763 for Mr. Lightstone
and $999 for Mr. Buchen.
<PAGE> 12
The Wealth-Op Deferred Compensation Plan and the 1988 Deferred
Compensation Plan are non-qualified deferred compensation plans
which allowed certain employees to elect to defer compensation for
a period of four or eight years. The Plans provide for
interest to be credited to deferred amounts at bench-mark
rates established in the Plans. None of the named officers
deferred compensation under the Plans in 1994.
(3) Each restricted stock award listed above is based upon the
closing fair market value of the stock on the date of grant. For
each of the named executive officers, the number and value
of the aggregate restricted stock holdings at the end of the
fiscal year 1994 was as follows: David Stanley 5,000/$42,500;
Susan M. Stanton 3,900/$33,150; Ronald H. Butler 2,400/$20,400;
Stephen A. Lightstone 2,400/$20,400; and Gerald M. Buchen
2,200/$18,700. The 1994 restricted stock awards were the first
annual restricted stock awards under the long-term stock
incentive program described in the section entitled "Long-Term
Stock Incentive Program". The restricted stock awards are subject
to a three-year-cliff vesting schedule from the date of the
award.
Dividends will be payable on the shares if and to the extent
paid on Payless' Common Stock generally.
(4) All other compensation for 1994 consists of an $8,227 trip
award for Mr. Buchen. Employee Savings Plan contributions for
Mr. Stanley, Ms. Stanton, Mr. Butler, Mr. Lightstone, and Mr.
Buchen have not yet been determined for 1994.
</TABLE>
David Stanley, Susan M. Stanton, Ronald H. Butler and
Stephen A. Lightstone (the "Executives") have entered into employment
agreements (the "Employment Agreements") with Payless. The term of the
Employment Agreement for Mr. Stanley expires on December 1, 1995 and for each
of Ms. Stanton, Mr. Butler and Mr. Lightstone on March 1, 1997, including a
1-year extension period which is automatic unless either the Executive or
Payless gives prior notice of non-renewal. Upon an Executive's termination
of employment by Payless "without cause" or by the Executive for "cause"
(as such terms are defined in the respective Employment Agreements), the
Executive will be entitled to receive (i) base salary regardless of death
or disability of the Executive until the scheduled expiration date of the
Employment Agreement, (ii) unpaid Incentive Compensation (as defined in the
Employment Agreement) for any previous year and the average of the Executive's
Incentive Compensation during the 2 years immediately preceding the year in
which the Executive is terminated, multiplied by a fraction, the numerator of
which is the number of months remaining in the Employment Agreement after the
end of the year for which the Executive's Incentive Compensation has been
determined and the denominator of which is 12, (iii) continuation of
substantially similar health, life and disability insurance to that which the
Executive had been receiving immediately prior to termination for a period
equal to the longer of the Executive's Employment Agreement and the period
during which the Executive otherwise would have received such benefits at
Payless' expense, and (iv) benefits under each of Payless' pension plan and
Payless' Supplemental Retirement Plan (defined below), at the time the
Executive reaches (or would have reached) the earliest retirement age in
effect as of the date of the Executive's Employment Agreement under each such
plan in effect immediately prior to the date of termination in the case of
Mr. Stanley or, in the case of Ms. Stanton, Mr. Butler or Mr. Lightstone,
benefits under such plans will be computed as if the Executive's employment
continued through the term of her or his Employment Agreement. Also,
under Mr. Stanley's Employment Agreement, all options granted pursuant to the
1988 Payless Cashways, Inc. Employee Stock Plan shall remain exercisable during
his lifetime until their normal expiration date (without regard to
termination) or, if he dies before such normal expiration date, then until
the earlier of such normal expiration date or the date which is one
year after death; and, under Ms. Stanton's, Mr. Butler's, and Mr.
Lightstone's Employment Agreements, all options and restricted stock grants
shall continue to vest and be exercisable in accordance with their respective
terms as if the Executive continued to be employed until the scheduled
expiration date of the Employment Agreement (regardless of the death or
disability of the Executive subsequent to the date of termination of
employment) and, from March 1, 1997 to April 30, 1997, each Executive shall
be entitled to put to the Company, for $4.00 per share, all or any
unexercised portion of the option granted pursuant to the Employment
Agreements, upon the occurrence of certain events including employment
on March 1, 1997 and the termination of employment prior to March 1,
1997. In addition, the Employment Agreements for Mr. Stanley,
Ms. Stanton, Mr. Butler and Mr. Lightstone permit the Executive to terminate
her or his employment within a specified period immediately following the
first anniversary of a "Change of Control" (as defined in the
<PAGE> 13
respective Employment Agreements) and receive the same benefits as a
termination by the Company without cause as described above; provided,
however, that all of Mr. Stanley's stock options and restricted stock grants
shall continue to vest or be earned and be exercisable in accordance with
their respective terms as if the Executive continued to be employed until the
scheduled expiration of Mr. Stanley's Employment Agreement (regardless of death
or disability of the Executive subsequent to the date of termination of
employment), and further provided that, in the event that any payment or
benefit to be received as a result of termination following a Change
of Control would constitute a "parachute payment" within the meaning of Section
280G (or any similar or successor provision) of the Internal Revenue Code of
1986, as amended (the "Code"), and would be subject to excise tax pursuant to
Section 4999 of the Code, such payment or benefit shall be reduced so that no
portion thereof would be subject to excise tax.
In addition, the Executives have entered into agreements for
supplemental retirement benefits (the "Supplemental Retirement Agreements")
with Payless. Effective as of August 31, 1994, the Supplemental
Retirement Agreements provide such supplemental retirement benefits as are
set forth in the Payless Cashways, Inc. Supplemental Retirement Plan effective
January 1, 1988 and modified from time to time ("Supplemental Retirement
Plan"). The Supplemental Retirement Plan provides benefits that would
otherwise be denied participants in the Retirement Plan (defined in the section
entitled "Retirement Program") by reason of certain Code limitations
on qualified benefits. The estimated annual benefits payable under both the
Retirement Plan and the Supplemental Retirement Plan and a description of
remuneration covered by the Supplemental Retirement Plan are described in the
section entitled "Retirement Program".
<PAGE> 14
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Individual Grants
--------------------------------------
(a) (b) (c)
% of Total Options/
Options SARs Granted to
Name Granted (#)(1) Employees in FY
- ------------------ --------------- -------------------
<C> <C> <C>
David Stanley 17,600 1.8%
Susan M. Stanton 13,950 1.4%
13,200 1.4%
Ronald H. Butler 6,225 0.6%
Stephen A. Lightstone 6,225 0.6%
Gerald M. Buchen 4,150 0.4%
6,225 0.6%
<CAPTION>
Potential Realizable Value at
Assumed Annual Rates of
Stock Price Appreciation
for Option Term (3)
- --------------------------------------------------------------
(d) (e) (f) (g)
Exercise or
Base Price Expiration
($/share)(2) Date 5% ($) 10% ($)
- ------------ ---------- ----------- -----------
<C> <C> <C> <C>
14.625 06/16/04 161,877 410,229
14.375 12/15/03 126,113 319,595
14.625 06/16/04 121,408 307,672
14.625 06/16/04 57,255 145,095
14.625 06/16/04 57,255 145,095
14.375 12/15/03 37,518 95,077
14.625 06/16/04 57,255 145,095
<FN>
(1) The Payless Cashways 1992 Incentive Stock Program (the "Program")
was adopted by the Board of Directors in June 1992 and
approved by the Company's shareholders in July 1992. Participants in
the Program include such employees as the Compensation Committee of the
Board of Directors in its sole discretion may designate from time to
time. The Committee must consider such factors as it deems pertinent
in selecting participants and in determining the type and amount of
their respective benefits, including the financial condition of the
Company, anticipated profits for the current or future years,
contributions of participants to the profitability and development of the
Company and other compensation provided to participants. All options
are rights to buy Common Stock of the Company. The options are subject
to a four-year vesting schedule from the date of grant, with 25% of the
grant vesting on each of the first four anniversaries of the grant date.
Program guidelines are described in the section entitled, "Committee
Report on Executive Compensation".
(2) The Exercise Prices are equal to the fair market value of the Company's
Common Stock on the date of grant.
(3) The amounts listed under columns (f) and (g) illustrate values that
might be realized upon exercise immediately prior to the expiration
of the options' terms using 5 percent and 10 percent appreciation rates,
compounded annually from the date of grant to the stated expiration
date of the options, and are not intended to forecast possible future
appreciation, if any, of the Company's stock price.
</TABLE>
<PAGE> 15
Aggregated Option/SAR Exercises in Last Fiscal Year
and Fiscal Year-End Option/SAR Values
<TABLE>
<CAPTION>
(a) (b) (c)
Shares Acquired
Name on Exercise # Value Realized($)(1)
- ---------------- --------------- --------------------
<C> <C> <C>
David Stanley
Susan Stanton
Ronald H. Butler
Stephen A. Lightstone
Gerald M. Buchen 3,800 $41,914
<CAPTION>
Number of Unexercised Options/ Value of Unexercised In-the-Money
SARs at FY-End (#) Options/SARs at FY-End ($) (2)
- ------------------------------ ---------------------------------
(d) (e)
Exercisable/Unexercisable Exercisable/Unexercisable
- ------------------------------ ---------------------------------
265,605/ $888,042/
44,000 --
69,448/ $105,184/
58,988 --
30,912/ --/
38,063 --
70,228/ $121,122/
38,063 --
34,657/ $19,317/
16,600 --
<FN>
(1) The value of exercised options is calculated by subtracting the exercise
price from the sale price.
(2) The value of unexercised in-the-money options is calculated by subtracting
the exercise price from the closing price of the Company's Common Stock
at fiscal year end, and multiplying the difference by the number of
shares granted as options.
</TABLE>
<PAGE> 16
RETIREMENT PROGRAM
PENSION BENEFITS
Payless maintains a non-qualified supplemental pension plan for
executive officers, the Payless Supplemental Retirement Plan (the "Supplemental
Retirement Plan"), which provides benefits that would otherwise be denied
participants in the Retirement Plan (defined below) by reason of certain
Code limitations on qualified plan benefits. Mr. Stanley, Ms. Stanton,
Mr. Butler, Mr. Lightstone and Mr. Buchen are participants in the Supplemental
Retirement Plan and have entered into Supplemental Retirement Agreements with
Payless. The estimated annual benefits payable under both the Retirement
Plan and the Supplemental Retirement Plan, based on 10 years or more
of credited service and at different levels of remuneration, are as follows:
<TABLE>
<CAPTION>
Annual Benefits
Final Five-Year Exclusive of Social
Average Security Benefits
Annual (for participants
Pre-Retirement with 10 or more
Earnings years of service)
---------------- -------------------
<C> <C>
$ 100,000 $ 38,624
125,000 51,124
150,000 63,624
175,000 76,124
200,000 88,624
225,000 101,124
250,000 113,624
300,000 138,624
350,000 163,624
400,000 188,624
450,000 213,624
500,000 238,624
550,000 263,624
600,000 288,624
650,000 313,624
700,000 338,624
750,000 363,624
800,000 388,624
850,000 413,624
900,000 438,624
950,000 463,624
1,000,000 488,624
</TABLE>
The remuneration covered by the Supplemental Retirement Plan is the
final 5-year average total cash remuneration, including salary, bonus (both as
reported in the table entitled "Summary Compensation Table") and other cash
amounts which would have been reported on Treasury Form W-2. As of the end of
the last fiscal year, years of service credited pursuant to the Supplemental
Retirement Plan are as follows: Mr. Stanley 14, Ms. Stanton 9, Mr. Butler 3,
Mr. Lightstone 11 and Mr. Buchen 1.
The Payless Cashways Amended Retirement Plan ("Retirement Plan") is a
defined benefit plan under which the annual pension benefits payable to
employees, including officers, upon normal retirement age are based upon both
service credit prior to December 1, 1989, and service after December 1, 1989.
The normal retirement benefit for service prior to December 1, 1989, is the
greater of the 1) product of (i) 1.25% of average compensation (the average for
the five calendar years ending December 31, 1983), plus .9% of that average
annual compensation in excess of the individual's "covered compensation" (a
particular dollar amount which increases depending on the year
<PAGE> 17
of birth to 1950), multiplied by (ii) the number of years and fractional
years of benefit service prior to December 1, 1983, or 2) the product of (i)
1% of average annual compensation (the average for calendar years 1986, 1987
and 1988), plus .5% of that average annual compensation in excess of the
individual's "covered compensation" (a particular dollar amount which increases
depending on the year of birth to 1950), multiplied by (ii) the number of years
of benefit service prior to December 1, 1989. The normal retirement benefit
for each year and fractional year of benefit service subsequent to December 1,
1989, is the sum (a) 1% of annual compensation for the year, plus (b) an
additional .5% of annual compensation in excess of the "covered compensation"
for the year. Benefits from the Retirement Plan are included in the annual
benefits listed in the table above.
As of the end of the last fiscal year, years of service credited
pursuant to the Retirement Plan are as follows: Mr. Stanley 15, Ms. Stanton
12, Mr. Butler 3, Mr. Lightstone 12 and Mr. Buchen 21. Benefits shown are
computed as a straight single life annuity beginning at age 62 and have
been reduced for Social Security benefits.
<PAGE> 18
CERTAIN BENEFICIAL OWNERSHIP
The table below sets forth certain information, as of January 10,
1995, regarding the beneficial ownership of the Company's Common Stock, Non-
Voting Common Stock and Preferred Stock by (i) each of the Company's directors
and nominees, (ii) each person known by the Company to be the beneficial owner
of 5% or more of each class of the Company's voting securities, (iii) each of
the executive officers named in the table entitled "Summary Compensation Table"
above and (iv) all of the Company's directors and executive officers as a
group. As required by a rule of the Securities and Exchange Commission,
the number of shares of Common Stock beneficially owned includes shares as to
which a right to acquire ownership exists within 60 days, such as through the
exercise of employee stock options and conversion of convertible securities.
<TABLE>
<CAPTION>
Name and Address Shares Beneficially
of Beneficial Owner Owned Percent of Class
- ------------------- ------------------- ----------------
<C> <C> <C>
Common Stock
David Stanley (1) 305,932 .8%
Susan M. Stanton (2) 112,896 .3%
Ronald H. Butler (3) 44,418 .1%
Stephen A. Lightstone (4) 102,490 .3%
Gerald M. Buchen (5) 42,194 .1%
Harold Cohen (6) 136,658 .4%
Larry P. Kunz (7) 146,264 .4%
Wayne B. Lyon (8) 7,956 (9)
Scott G. Fossel (10) 12,956 (9)
William A. Hall (11) 8,956 (9)
George Latimer (12) 8,956 (9)
Gary D. Rose (13) 124,896 .3%
Louis W. Smith 5,000 (9)
Ralph Strangis (14) 12,956 (9)
John H. Weitnauer, Jr. (15) 15,956 (9)
<PAGE> 19
Ariel Capital Management, 5,288,190 14.1%
Inc. (16)
307 North Michigan Ave.
Chicago, IL 60601
Alliance Capital Management 3,289,000 8.7%
L.P. (17)
1345 Avenue of the Americas
New York, NY 10105
The Goldman Sachs Group, 3,821,446 10.2%
L. P. (18)
85 Broad Street
New York, NY 10004
State of Wisconsin Investment 3,519,500 9.4%
Board (19)
121 E. Wilson St., 2nd Floor
Madison, WI 53703
All Directors and Executive 1,243,231 3.2%
Officers as a group (18
Persons)(20)
Class A Non-Voting Common
Court Square Capital Limited 2,250,000 100.0%
399 Park Avenue
New York, NY 10043
Preferred Stock
Masco Capital Corporation 406,000 100.0%
21001 Van Born Road
Taylor, MI 48180
<FN>
(1) Includes 265,605 shares subject to options, 5,000 shares of restricted
stock, 7,000 shares owned by Mr. Stanley's wife, 1,000 shares owned by a
trust for the benefit of Mr. Stanley's daughter for which Mr. Stanley acts
as trustee, 2,000 shares owned by two trusts for the benefit of Mr.
Stanley's stepchildren for which Mr. Stanley does not act as trustee and
2,000 shares owned by Mr. Stanley's stepchildren. Mr. Stanley disclaims
beneficial ownership of such 12,000 shares.
(2) Includes 77,935 shares subject to options, 3,900 shares of restricted
stock and 2,000 shares held in Ms. Stanton's father's marital
trust for which Ms. Stanton acts as co-trustee.
(3) Includes 35,912 shares subject to options and 2,400 shares of restricted
stock.
(4) Includes 75,228 shares subject to options, 2,400 shares of restricted
stock and 2,000 shares owned by Mr. Lightstone's wife.
(5) Includes 39,494 shares subject to options, 2,200 shares of
restricted stock, 100 shares owned by Mr. Buchen's wife, 100 shares
owned by each of Mr. Buchen's two minor daughters and 100 shares owned by
each of Mr. Buchen's two minor sons.
(6) Includes 84,008 shares subject to options.
(7) Includes 146,164 shares subject to options.
(8) Includes 7,956 shares subject to options. Mr. Lyon is President and Chief
Operating Officer of Masco, which owns Masco Capital Corporation ("Masco
Capital"), and disclaims beneficial ownership of shares of Preferred Stock
beneficially owned by Masco Capital.
(9) Less than 0.1%.
(10) Includes 7,956 shares subject to options.
(11) Includes 7,956 shares subject to options.
(12) Includes 7,956 shares subject to options.
<PAGE> 20
(13) Includes 7,956 shares subject to options and 106,940 shares subject to
Warrants to purchase Common Stock. Mr. Rose is a limited partner of The
Goldman Sachs Group, L.P. As a limited partner, Mr. Rose may be deemed to
be the beneficial owner of shares beneficially owned or held by The
Goldman Sachs Group, L.P. referenced in Footnote 18. Mr. Rose
disclaims beneficial ownership of such shares except to the extent of
pecuniary interest therein.
(14) Includes 7,956 shares subject to options.
(15) Includes 7,956 shares subject to options.
(16) Based on a Questionnaire dated January 10, 1995 Ariel Capital
Management, Inc. owns 5,288,190 shares of Common Stock.
Ariel Capital Management, Inc., in its capacity as investment advisor,
has sole voting power of 4,049,950 shares, shared voting power of
313,790 shares, and sole investment discretion for 5,288,190 shares.
Ariel Capital Management, Inc. claims no beneficial interest in any of
the shares.
(17) Based on a Schedule 13G filed with the Securities and Exchange Commission
on February 9, 1994, represents shares of Common Stock owned by Alliance
Capital Management L.P. which has sole voting power of 2,796,500 shares
and sole disposition power of 3,289,000 shares.
(18) Based on a Questionnaire dated January 10, 1995, The Goldman Sachs
Group, L.P. owns 3,821,446 shares of Common Stock. The Goldman Sachs
Group, L.P. has shared voting power and shared disposition power of such
3,821,446 shares.
(19) Based on a Questionnaire dated January 10, 1995, State of Wisconsin
Investment Board owns 3,519,500 shares of Common Stock.
(20) Includes 909,435 shares subject to options, 106,940 shares subject to
Warrants, 22,500 shares of restricted stock and 62 shares held indirectly
by an executive officer (who is not a named executive officer) in a 401(k)
plan. Excludes shares held by The Goldman Sachs Group, L.P. Mr. Gary
Rose, a director of Payless and a limited partner of The Goldman Sachs
Group, L.P., expressly disclaims beneficial ownership of all such shares.
</TABLE>
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and executive officers and persons who beneficially own
more than 10 percent of a registered class of the Company's equity
securities to file, with the Securities and Exchange Commission and the New
York Stock Exchange, initial reports of ownership and reports of changes in
ownership of Common Stock and other equity securities of the Company.
Officers, directors and beneficial owners of more than 10 percent of the
Company's equity securities are required by regulation to furnish the
Company with copies of all Section 16(a) forms they file. To the Company's
knowledge, based solely on review of the copies of such reports and written
representations that no other reports were required during 1994, all section
16(a) filing requirements applicable to its officers, directors and
beneficial owners of more than 10 percent of the Company's equity securities
were complied with, except that one report on Form 3 for Gerald M. Buchen
was inadvertently filed 10 days later than required.
<PAGE> 21
2. OTHER BUSINESS
As of the date of delivery of the text of this Proxy Statement to the
printer, management knew of no other business that will be presented for action
at the Annual Meeting. In the event that any other business should properly
come before the meeting, it is the intention of the persons designated as
proxies on the proxy card to take such action as shall be in accordance with
his and/or her best judgment.
OTHER INFORMATION, SHAREHOLDER PROPOSALS
The Board of Directors, on the recommendation of the Audit Committee,
has selected the firm of KPMG Peat Marwick LLP as independent auditor to
examine the financial statements of the Company and its subsidiary for
the fiscal year 1995. Representatives of KPMG Peat Marwick LLP will be present
at the Annual Meeting, will have an opportunity to make a statement if they so
desire, and will be available to respond to appropriate questions.
Shareholder proposals requested for inclusion in the Proxy Statement
for the Company's Annual Meeting in 1996 must be received by the Company's
Secretary on or before October 27, 1995. The Company currently plans to hold
the 1996 Annual Meeting in Kansas City, Missouri, on April 18, 1996.
Management will appropriately consider all proposals from shareholders.
When adoption of a proposal is clearly in the best interests of the Company and
the shareholders generally, and does not require shareholder approval, the
Board of Directors will usually adopt the proposal, if appropriate, rather
than including the proposal in the Proxy Statement.
Pursuant to the Company policy and Rules and Regulations of the
Securities and Exchange Commission, shareholder proposals requested for
inclusion in the Company's Proxy Statement must meet the following criteria:
(1) the proponent must be a record or beneficial owner of at least 1% or
$1,000 in market value of securities entitled to be voted on the
proposal and must have held such securities for at least one year; (2) the
proponent may submit no more than one proposal; (3) the proposal and any
supporting statement together shall not exceed 500 words; (4) proposals must
be received by the Company's Secretary on or before the date provided in the
Proxy Sstatement, or as may otherwise be provided by the Board of Directors;
and (5) the proposal must contain the name of the proposing shareholder(s)
and a contact address.
The Corporate Governance and Nominating Committee will also consider
persons recommended by Shareholders as director nominees recommended by
shareholders. In order to be eligible for nomination as a director by the
Corporate Governance and Nominating Committee, a director nominee must be under
the age of 70 at the date of the Annual Meeting of Shareholders at which such
director would be elected. All letters of nomination should be sent to the
Secretary and should include the nominee's name and qualifications and a
statement from the nominee that he or she consents to being named in the Proxy
statement and will serve as a director if elected. In order for any nominee to
be considered by the Corporate Governance and Nominating Committee and, if
accepted, to be included in the Proxy Statement, letters of nomination must be
received by the Secretary on or before October 27, 1995.
In addition to the solicitation of proxies by mail, officers or other
employees of the Company, without extra remuneration, may solicit proxies by
telephone or personal contact. The Corporation also will request brokerage
houses, nominees, custodians and fiduciaries to forward soliciting material to
beneficial owners of stock held of record and will pay such persons for
forwarding the material. All costs for the solicitation of proxies by the
Board of Directors will be paid by the Company.
<PAGE> 22
The Company's Annual Report to Shareholders, including financial
statements for the year ended November 26, 1994, is enclosed with this Proxy
Statement.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Linda J. French
Linda J. French
Senior Vice President - General Counsel/Secretary
February 24, 1995
<PAGE>
<PAGE> 1
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PROXY PAYLESS CASHWAYS, INC.
2300 Main, Kansas City, Missouri 64108
This Proxy is Solicited on Behalf of the Board of Directors
The undersigned hereby appoints LINDA J. FRENCH and STEPHEN A.
LIGHTSTONE, or either of them, as Proxy/Proxies, and hereby authorizes them
to represent and to vote, as designated below, all the shares of Common
Stock of Payless Cashways, Inc. held of record by the undersigned on February
15, 1995, at the Annual Meeting of Shareholders to be held on April 20, 1995,
or any adjournment thereof.
1. ELECTION OF DIRECTORS
/ / FOR all nominees listed below / / WITHHOLD AUTHORITY to vote
(except as marked to the contrary for all nominees listed
below) below
GARY D. ROSE, JOHN H. WEITNAUER, JR., WILLIAM A. HALL, LOUIS W. SMITH
(INSTRUCTION: To withhold authority to vote for any individual nominee
write that nominee's name on the space provided below.)
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2. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
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<PAGE> 2
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This proxy when properly executed will be voted in the manner directed
herein by the undersigned shareholder. If no direction is made, this proxy
will be voted for Proposals 1 and 2.
Please sign exactly as name appears below. When shares are held by joint
tenants, both should sign. When signing as attorney, as executor,
administrator, trustee or guardian, please give full title as such; if a
corporation, please sign in full corporate name by President or other
authorized officer. If a partnership, please sign in partnership name by
authorized person.
Dated:____________________________, 1995
______________________________________
Signature
______________________________________
Signature if held jointly
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| |
| PLEASE MARK, SIGN, DATE AND |
| RETURN THE PROXY CARD |
| PROMPTLY USING THE ENCLOSED |
| ENVELOPE. |
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