<PAGE>
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/ No fee required. / / Fee computed on table below per Exchange Act
Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(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 (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 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>
February 28, 1997
To Our Shareholders:
It is my pleasure to invite you to our Annual Meeting. This year it
will be held on Thursday, April 17, 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 1996 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>
PAYLESS CASHWAYS, INC.
BUILDING MATERIALS
2300 Main
Kansas City, Missouri 64108
===========================
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
OF
PAYLESS CASHWAYS, INC.
To Be Held April 17, 1997
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 17, 1997 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 17,
1997, as the record date for the determination of shareholders entitled to
notice of and to vote at the meeting.
Dated: February 28, 1997
BY ORDER OF THE BOARD OF DIRECTORS
/s/ E. J. Holland, Jr.
E. J. Holland, Jr.
Senior Vice President-Human Resources/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>
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 THEIR 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 canceling 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 17, 1997, 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 37,709,028 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 28, 1997.
<PAGE>
MATTERS TO BE CONSIDERED AT THE ANNUAL MEETING
1. PROPOSAL NO. 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 1997, 4 Class I
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.
<TABLE>
<CAPTION>
Principal Occupation and
Name Age Five-Year Employment History
------- ----- --------------------------------------
<S> <C> <C>
Harold Cohen...............66 Chairman Emeritus of Somerville Lumber
First elected a director: and Supply Co., Inc. ("Somerville") from
1985 December 1993 to November 1995; Vice-
Class I Chairman of the Board of Payless from
October 1988 to 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.
Scott G. Fossel............ 44 President of Fossel Investments since
First elected a director: September 1994; Vice President of Court
1989 Square Capital Limited and Vice President of
Class I Citicorp Venture Capital Ltd., each an
indirect wholly-owned subsidiary of Citicorp,
from March 1986 to September 1994. Mr.
Fossel is Chairman of the Finance Committee
and a member of the Audit Committee and
Compensation Committee of Payless' Board
of Directors.
George Latimer.............61 Distinguished Visiting Professor of Urban
First elected a director: Affairs at Macalester College since January
1993 1996 and Chief Executive of The National
Class I Equity Fund since November 1995; Director,
Office of Special Actions, U. S. Department
of Housing and Urban Development from
July 1993 to November 1995; Special
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.
</TABLE>
<TABLE>
<CAPTION>
Principal Occupation and
Name Age Five-Year Employment History
- - ------- ------ ----------------------------------
<S> <C> <C>
Susan M. Stanton.........48 President and Chief Operating Officer of
First elected a director: Payless since November 1993; Senior
1993 Vice President -Merchandising of Payless
Class I from October 1989 to November 1993;
and currently a director of Western
Resources, Inc. Ms. Stanton is a member
of the Corporate Governance and
Nominating Committee of Payless' Board
of Directors.
</TABLE>
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A
VOTE "FOR" THE PROPOSAL TO ELECT THE NOMINEES AS CLASS I DIRECTORS OF THE
COMPANY.
Information regarding the 7 directors, who were previously elected
and will continue to serve their terms, is set forth below.
<TABLE>
<CAPTION>
Principal Occupation and
Name Age Five-Year Employment History
- - ------- ----- -----------------------------------
<S> <C> <C>
David Stanley..............61 Chairman of the Board and Chief
First elected a director: Executive Officer of Payless since August
1969 1986; and currently a director of Piper
Class III Jaffray Companies Inc., Digi International,
Inc. and Best Buy Co., Inc. Mr. Stanley is a
member of the Corporate Governance and
Nominating Committee and Finance
Committee of Payless' Board of Directors.
Ralph Strangis............. 60 Member of the law firm of Kaplan, Strangis
First elected a director: and Kaplan, P.A. for more than five years;
1983 (to 1988); and currently a director of Life USA Holding,
1993 Inc., Damark International, Inc. and TCF
Class III Financial Corporation. Mr. Strangis is the
Lead Director, Chairman of the Corporate
Governance and Nominating Committee
and a member of the Compensation
Committee and Finance Committee of
Payless' Board of Directors. As the Lead
Director, Mr. Strangis has been elected by
the non-management directors to address,
on behalf of the Board of Directors, various
governance matters.
William A. Hall............51 Assistant to the Chairman of Hallmark
First elected a director: Cards, Inc. for more than five years; and
1993 currently a director of Mercantile Bank
Class II Corporation. Mr. Hall is a member of the
Audit Committee, Corporate Governance
and Nominating Committee and Finance
Committee of Payless' Board of Directors.
Wayne B. Lyon......... ..64 Chairman, Chief Executive Officer and
First elected a director: President of LifeStyle Furnishings
1988 International Ltd. since August 1996;
Class III President and Chief Operating Officer of
Masco Corporation ("Masco") from August
1985 to August 1996; 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 of Payless' Board
of Directors.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Principal Occupation and
Name Age Five-Year Employment History
- - ------- ------ -------------------------------------------
<S> <C> <C>
Gary D. Rose...............51 Limited Partner of The Goldman Sachs
First elected a director: Group, L.P. since November 1994;
1985 General Partner of The Goldman Sachs
Class II 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 and Finance
Committee of Payless' Board of Directors.
Louis W. Smith.............54 President and Chief Operating Officer of
First elected a director: The Ewing Marion Kauffman Foundation
1995 since July 1995; President, Kansas City
Class II Division of AlliedSignal Inc. from April
1990 to May 1995; and currently a director
of Western Resources, Inc. and Commerce
Bank, N.A. Mr. Smith is a member of the
Compensation Committee of Payless' Board
of Directors.
John H. Weitnauer, Jr....70 Chairman and Chief Executive Officer of
First elected a director: Richway, a mass merchandising division
1993 of Federated Department Stores, Inc. from
Class II 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 Compensation
Committee of Payless' Board of Directors.
</TABLE>
During fiscal 1996, there were 6 regular meetings and 2 telephonic
meetings of the Board of Directors. During fiscal 1996, each director, with the
exception of Wayne B. Lyon and Louis W. Smith, 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 4 standing committees. Their functions are described
below:
AUDIT - The Audit Committee implements and supports the oversight
function of the Board by reviewing, on a periodic basis, the corporation's
processes for producing financial data, its internal controls, and the
independence of the corporation's external auditor. More specifically, 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 management's responses thereto, and any significant, non-audit services and
fees; reviews the appointment, replacement, any reports and management's
responses thereto, of the senior internal auditing executive; serves as the
conduit for communication between the Board of Directors and external and
internal auditors; reviews the corporation's annual financial statements;
considers, in consultation with the external auditor and the senior internal
auditing executive, the adequacy of the corporation's internal controls;
considers major changes and other major questions of choice with respect to the
appropriate auditing and accounting principles and practices; directs any
special investigations considered necessary relating to the accuracy of the
financial statements, adequacy of internal controls or compliance with
regulatory requirements; and retains outside counsel and other experts, as
appropriate. The Audit Committee met 2 times during 1996. Members of the Audit
Committee are Wayne B. Lyon, Chairman; Scott G. Fossel; William A. Hall; George
Latimer; and John H. Weitnauer, Jr.
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 and plans,
approval of direct and indirect executive officer compensation, administration
of stock programs, and oversight of the Company's executive development plan.
The Committee also makes recommendations to the Board of Directors regarding
election of executive officers and compensation and benefits for directors. The
Compensation Committee met 3 times during 1996. Members of the Compensation
Committee are Gary D. Rose, Chairman; Scott G. Fossel; Wayne B. Lyon; Louis W.
Smith; Ralph Strangis; and John H. Weitnauer, Jr.
<PAGE>
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. The Committee also
reviews developments in corporate governance generally and makes recommendations
to the Board of Directors, as appropriate. The Corporate Governance and
Nominating Committee met 3 times during 1996. Members of the Corporate
Governance and Nominating Committee are Ralph Strangis, Chairman; William A.
Hall; Gary D. Rose; David Stanley; and Susan M. Stanton.
FINANCE - The Finance Committee considers the financing requirements of
the Company, reviews and makes recommendations to the Board of Directors with
respect to acquisitions, divestitures, extraordinary capital expenditure
requests, and significant changes in the capital structure of the Company,
including the incurrence/defeasance of long-term indebtedness and the
issuance/redemption of equity securities, and other major financial
transactions. The Finance Committee met 9 times during 1996. Members of the
Finance Committee are Scott G. Fossel, Chairman; William A. Hall; Gary D. Rose;
David Stanley; and Ralph Strangis.
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 chairs are paid an additional annual fee of $1,500. All of the
non-employee directors have chosen to defer the payment of all or a portion of
their fees and to have such fees invested in the Company's Common Stock, under
the Payless Cashways, Inc. Deferred Compensation Plan for Directors. The
deferred amounts are deemed invested in Common Stock Equivalents (defined
below). An election to defer, once made, is irrevocable for the first calendar
year with respect to which the election is made, except in limited
circumstances. An election to defer, once made, shall continue to be effective
for succeeding calendar years until revoked or modified by the non-employee
director by written request prior to the beginning of the calendar year for
which fees would otherwise be deferred, provided that any election to receive
distribution in lump sum or installments may not be changed within the
twelve-month period prior to termination of services as a non-employee director.
The "Common Stock Equivalents" are phantom stock units, i.e., each Common Stock
Equivalent represents a hypothetical share of Common Stock which shall have a
value on any date equal to the Fair Market Value of one share of Common Stock on
that date. "Fair Market Value" will be based on the closing price of the Common
Stock on the New York Stock Exchange (or other stock exchange or stock quotation
system on which the Common Stock is then listed or quoted or, if none, the value
as determined by the Company's Board of Directors in good faith) on the
applicable date. Dividends and other distributions on Common Stock, if any, will
be credited to non-employee directors as if the Common Stock Equivalents were
outstanding shares of Common Stock. Such dividends will be converted into
additional Common Stock Equivalents. Any amount deferred by a non-employee
director will earn interest at 8% per annum from the date on which the fees are
deferred until the date the fees are converted into Common Stock Equivalents.
As soon as practicable following termination of services as a director,
a non-employee director will receive a distribution of a number of shares of
Common Stock equal to the number of Common Stock Equivalents then credited to
him or her under the Deferred Stock Compensation Plan, either in a lump sum or
in equal annual installments (not greater than five). Upon the death of a
non-employee director, shares will be issued to his or her beneficiary or
estate. Upon a "change in control" of the Company (as defined in the Deferred
Stock Compensation Plan), each non-employee director will receive a lump sum
distribution in shares equal to the value of his or her accumulated Common Stock
Equivalents. Cash will be paid in lieu of fractional shares upon any
distribution. Under limited circumstances in an "unforseeable emergency" (as
defined in the Deferred Stock Compensation Plan), a non-employee director may
receive all or a part of his or her accumulated Common Stock Equivalents in
shares; and in the event that the Internal Revenue Service should finally
determine that part or all of the value of a non-employee director's accumulated
Common Stock Equivalents are required to be included in the non-employee
director's gross income for federal and/or state income tax purposes, then that
portion includable in gross income will be distributed in shares to the
non-employee director in a lump sum as soon as practicable after such
determination. Each non-employee director or beneficiary will be an unsecured
general creditor of the Company with respect to any payments due and owing to
such non-employee director pursuant to the Deferred Stock Compensation Plan.
<PAGE>
The Deferred Stock Compensation Plan will remain effective until
October 20, 2005, unless sooner terminated by the Board of Directors. The Board
of Directors can amend or terminate the Deferred Stock Compensation Plan at any
time. However, amendments must be approved by the Company's shareholders if
shareholder approval is required in order for the Deferred Stock Compensation
Plan to meet applicable statutory or regulatory requirements; and a non-employee
director's consent must be obtained if an amendment would adversely affect such
non-employee director's rights pursuant to the Deferred Stock Compensation Plan.
A maximum of 250,000 shares of Common Stock will be available for issuance under
the Deferred Compensation Plan. Such shares will be authorized and unissued
shares or previously issued and outstanding shares of Common Stock reacquired by
the Company. The Senior Vice President of Human Resources and the Senior Vice
President of Finance of the Company (the Administrative Committee) will
administer the Deferred Stock Compensation Plan, but will have no discretion to
alter any terms or conditions specified in the Deferred Stock Compensation Plan.
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 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 from 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 is 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 1996 were: Gary D. Rose, Chairman; Scott G. Fossel; Wayne B.
Lyon; Louis W. Smith; Ralph Strangis; and John H. Weitnauer, Jr. Mr. Rose is a
Limited Partner of Goldman Sachs Group L.P. During 1996, Payless retained
Goldman, Sachs & Co., an affiliate of Goldman Sachs Group L. P., to provide
financial advisory services for an amount which was not greater than 5% of the
Company's or the firm's annual gross revenues. Goldman Sachs Capital Markets
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 was President and Chief Operating Officer and a director of Masco until
August, 1996, and he continues to serve as a director of Masco. In 1988, Payless
entered into a Supply Agreement with Masco, as a preferred supplier for certain
products. The Supply Agreement expired on December 31, 1995. During 1996,
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 1997.
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 1996, 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 1997. Payless believes that the terms and conditions of its
relationships with each of Goldman, Sachs & Co., Goldman Sachs Capital Markets
L.P., Masco and Kaplan, Strangis and Kaplan, P.A., are as favorable as those
that could have been obtained from arm's-length negotiations with unassociated
third parties.
<PAGE>
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 the Company's
1996 fiscal year end, 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 or the
closest available date. 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.
[GRAPHIC OMITTED]
<TABLE>
<CAPTION>
As of As of As of As of
11/27/93(1) 11/26/94(1) 11/25/95(1) 11/30/96(1)
<S> <C> <C> <C> <C>
Payless Cashways, Inc. $92.27 $58.60 $32.76 $12.97
S&P 500 $105.66 $100.40 $134.03 $167.60
S&P Retail Index $102.94 $99.50 $90.34 $107.80
<FN>
(1) Fiscal year ends on a Saturday, so closest available date is utilized.
</TABLE>
<PAGE>
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
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 periodically 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 include reporting responsibilities of each executive 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, pursuant to the Company's annual incentive bonus program, predicated upon
the Company's annual performance measured by attainment of established levels of
earnings before interest, taxes, depreciation and amortization ("EBITDA"). Under
the program, executive officers are entitled to receive 100% of their incentive
targets only if the Company achieves 100% of the EBITDA target; and based on the
Company's payout schedule, executive officers may receive 50% of their target
incentive for attainment of 90% of the EBITDA target, and as much as 150% of the
incentive target for attainment of 110% of the EBITDA target. No incentives are
paid if the Company fails to achieve a minimum of 90% of the EBITDA target.
Incentive levels are set for 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.,
performance which exceeds 100% EBITDA. For the purpose of determining the
achievement of the performance levels under the program, the Committee has the
authority in its discretion to adjust the actual EBITDA results to eliminate or
reduce the effect of unanticipated or non-recurring charges, events or
transactions such as special financing expenses or restructuring
<PAGE>
charges which were not taken into account in determining the EBITDA target and
which the Committee believes should be eliminated or reduced to reflect the
ongoing performance of the Company. During 1996, no incentives were paid under
the program since the minimum EBITDA target was not achieved.
LONG-TERM STOCK INCENTIVE PROGRAM
The Committee believes that it is essential for executive officers to
own significant amounts of Common Stock, thereby aligning the long-term
interests of executive officers with those of shareholders. The long-term stock
incentive program is also intended to provide a means of attracting and
retaining outstanding individuals as executive officers of the Company.
Long-term stock incentives may be awarded pursuant to the Payless
Cashways 1992 Incentive Stock Program, which was approved by the Company's
shareholders in July 1992, and are awarded by the Committee which, for purposes
of long-term stock incentives for executive officers, is comprised of
"non-employee directors" of the Committee, as such term is defined by Section 16
of the Securities Exchange Act of 1934. In June 1993, with the advice of an
independent executive compensation consulting firm, the Committee adopted
incentive stock program guidelines, which provide for annual grants of stock
options and annual restricted stock awards to executive officers of the Company.
It was anticipated that stock option grants would be made annually during the
four-year period 1993-1996 and that restricted stock awards would be made
annually during the five-year period 1994-1998. As originally designed, one
objective of the program and the guidelines was 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 executive
officers, the program and the guidelines were designed 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, calculated based upon a projection of
future net income and, therefore, earnings per share, was 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. Because the
actual stock price was substantially below the projected stock price, in June
1995, the Committee enhanced the option grant by allocating the full amount
allotted for 1995 and the majority of the options allotted for granting in 1996,
or approximately 36%, of their allocated portion of the shares subject to
options under the program. As a result, in 1996, no annual option grants were
made to executive officers, except option grants related to hiring or promotion.
The Committee reviews the program guidelines for stock options annually and
makes 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. The Committee considers the grant of additional stock options when an
executive officer is hired or 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 executive
officer in such a position. 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 executive officer of the Company has the
opportunity to receive an annual restricted stock award during the period
1994-1998 based on the extent of achievement of the previous year's specified
EBITD or EBITDA target and 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 executive officers under the program equals the
aggregate annual incentive cash bonuses earned by the executive officers for the
preceding year divided by the targeted stock price (as defined above). The
Committee determines whether awards will be made to the executive 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 executive 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
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. No annual restricted stock awards were made in
1996 and it is anticipated that no annual restricted stock awards will be made
in 1997.
<PAGE>
CHIEF EXECUTIVE OFFICER COMPENSATION
The Committee determines Mr. Stanley's compensation as Chief Executive
Officer using the criteria described above. Based on performance relating to (i)
the Company's sales, income, 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 remain at
$650,000 for 1996 and 1997. Mr. Stanley received no annual incentive cash bonus
for fiscal 1996 under the annual incentive cash bonus plan, described above, and
received no option grant or restricted stock award under the long-term stock
incentive program described above. During the 1997 fiscal year, Mr. Stanley will
receive no annual restricted stock award with respect to performance for the
fiscal year ending November 30, 1996.
COMPENSATION FOR THE OTHER NAMED EXECUTIVE 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. Based on performance criteria described above under "Chief
Executive Officer Compensation", the Committee determined that Ms. Stanton's
annual base salary should remain at $450,000 for 1996 and 1997. The annual base
salaries for Mr. Lightstone, Mr. Buchen, and Mr. Holland increased,
respectively, from $275,000, $255,000 and $235,000 in 1995 to $295,000, $275,000
and $242,000 in 1996, at which level such salaries will remain in 1997. The
other named executive officers received no bonuses for fiscal 1996 under the
annual incentive cash bonus plan since the EBITDA target, described above, was
not achieved, and received no stock option grants or restricted stock awards
under the long-term stock incentive program, described above. These compensation
elements for 1996 are reflected in the table entitled "Summary Compensation
Table". It is anticipated that, during the 1997 fiscal year, Ms. Stanton, Mr.
Lightstone, Mr. Buchen and Mr. Holland will not be granted an annual restricted
stock award with respect to performance for the fiscal year ending November 30,
1996 under the terms of the long-term stock incentive program.
OTHER INFORMATION
The Company does not anticipate that compensation to any executive
officer for 1997 will exceed $1 million for purposes of IRS Revenue Rule 162(m).
It is the current intention of the Committee that all compensation paid under
the executive compensation program will be tax deductible to the Company in the
year paid to the executive officer.
The Compensation Committee:
Gary D. Rose - Chairman
Scott G. Fossel
Wayne B. Lyon
Louis W. Smith
Ralph Strangis
John H. Weitnauer, Jr.
<PAGE>
Summary Compensation Table
The following table details the compensation during each of the last
three, completed fiscal years for the Company's named executive officers who
held the positions listed in 1996:
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
--------------
ANNUAL COMPENSATION Awards
------------------------------------------
(a) (b) (c) (d) (e) (f) (g) (i)
Securities
Other Restricted Underlying
Name and Annual Stock Options/ All Other
Principal Year Salary($) Bonus($) Compensa Awards SARs Compensa
Position ion($)(1) ($)(2) (#) tion($(3)
- - ---------- ---- --------- --------- --------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
David Stanley - 1996 650,000 --- 9,497 --- --- 2,370
Chairman of 1995 650,000 --- 8,643 73,000 30,800 2,538
the Board & 1994 650,000 260,000 5,400 95,000 17,600 2,909
Chief Executive
Officer
Susan M. Stanton-1996 450,000 --- 6,358 --- --- 2,370
President, 1995 450,000 --- 5,786 40,150 23,100 2,538
Chief Operating 1994 400,000 128,000 3,615 74,100 27,150 2,909
Officer
and Director
Stephen A. Lightstone- 1996 295,000 --- 6,644 --- --- 2,370
Senior Vice President- 1995 275,000 --- 6,350 20,988 10,900 3,060
Finance/Treasurer 1994 250,000 66,000 4,054 45,600 6,225 2,909
Gerald M. Buchen- 1996 275,000 --- 1,175 --- --- 11,069
Senior Vice 1995 255,000 --- 1,069 19,163 10,900 10,519
President-Store 1994 225,000 59,400 668 41,800 10,375 11,136
Operations
E. J. Holland, Jr. - 1996 242,000 --- --- --- --- 2,370
Senior Vice President- 1995 235,000 --- --- 19,163 10,900 2,538
Human Resources/ 1994 225,000 59,400 --- 41,800 6,225 2,909
Secretary
<FN>
(1) The amounts reflected in column (e) above represent the above-market
interest earnings under the Wealth-Op Deferred Compensation Plan and the 1988
Deferred Compensation Plan.
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 accounts at
bench-mark rates established in the Plans. None of the named officers deferred
compensation under the Plans in 1996.
(2) No annual restricted stock award was made in 1996. 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 fiscal year 1996
was as follows: David Stanley 13,000/$22,750; Susan M. Stanton 8,300/$14,525;
Stephen A. Lightstone 4,700/$8,225; Gerald M. Buchen 4,300/$7,525; and E. J.
Holland, Jr. 4,300/$7,525. The restricted stock awards are issued pursuant to
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.
<PAGE>
(3) All other compensation for 1996 consists of a trip award of $8,699 for
Mr. Buchen and the Employee Savings Plan contributions. The Employee Savings
Plan estimated contributions are as follows: $2,370 for Mr. Stanley, $2,370 for
Ms. Stanton, $2,370 for Mr. Lightstone, $2,370 for Mr. Buchen and $2,370 for Mr.
Holland.
</TABLE>
David Stanley, Susan M. Stanton, Stephen A. Lightstone and Gerald M.
Buchen (the "Executives") have entered into employment agreements (the
"Employment Agreements") with Payless. The term of the Employment Agreement for
Mr. Stanley expires either (a) on March 1, 1999, with a 1-year extension period
which is automatic unless either the Executive or Payless gives prior notice of
non-renewal, or (b) in the event a "Change of Control" (as defined in the
respective Employment Agreements) occurs, on the termination date stated in (a)
or one year and sixty days after the date of the Change of Control, whichever is
longer. The term of the Employment Agreement for each of Ms. Stanton, Mr.
Lightstone and Mr. Buchen expires either (a) on March 1, 1998, or (b) in the
event a Change of Control occurs, on the termination date stated in (a) or one
year and sixty days after the date of a Change of Control, whichever is longer.
Upon an Executive's termination of employment by Payless "without cause" or by
the Executive for "good reason" (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 during the Severance
Period (as defined below), (ii) 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
Severance Period and the period during which the Executive otherwise would have
received such benefits at Payless' expense, (iii) benefits under each of
Payless' pension plan and Payless' Supplemental Retirement Plan (defined below),
computed as if the Executive's employment continued through the Severance
Period, and (iv) all options and restricted stock grants which continue to vest
and be exercisable in accordance with their respective terms as if the Executive
continued to be employed during the Severance Period . Also, upon termination by
the Company "without cause" or by the Executive for "good reason", the
Employment Agreements for Mr. Stanley, Ms. Stanton and Mr. Lightstone provide
that each Executive will be entitled to receive 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;
and the Employment Agreement for Mr. Buchen provides that the Executive will be
entitled to receive unpaid Incentive Compensation owed for the preceding fiscal
year. Additionally, under Ms. Stanton's and Mr. Lightstone's Employment
Agreements, from March 1, 1997 through 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 by the Company "without
cause", by the Executive for "good reason" or after a Change of Control.
Further, the Employment Agreements for Mr. Stanley, Ms. Stanton, Mr. Lightstone
and Mr. Buchen permit the Executive to terminate her or his employment within a
specified period immediately following the first anniversary of a Change of
Control and receive the same benefits as a termination by the Company "without
cause" as described above; provided, however, 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. The term
"Severance Period" means either (a) the period from the date of termination of
the Executive's employment continuing for the longer of one year after the date
of termination or until March 1, 1998 in the case of Ms. Stanton, Mr.
Lightstone and Mr. Buchen, or in the case of Mr. Stanley, through March 1, 1999
(if termination occurs prior to December 1, 1998) or through March 1, 2000 (if
termination occurs after November 30, 1998) or (b) in the event of a
termination by the Company "without cause" after a Change of Control or a
termination by the Executive after a Change of Control in accordance
with the Employment Agreement, the period from the date of the termination
of the Executive's Employment continuing for two years after the date of
termination; provided that the Severance Period shall continue
regardless of the death or disability of the Executive subsequent to the date of
termination of employment.
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>
Aggregated Option/SAR Exercises in Last Fiscal Year
and Fiscal Year-End Option/SAR Values
<TABLE>
<CAPTION>
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options/SARs Options/SARs at
at FY-End (#) FY-End($)(1)
-------------- ---------------
(a) (b) (c) (d) (e)
Shares Value
Name Acquired on Realized Exercisable/ Exercisable/
Exercise(#) ($) Unexercisable Unexercisable
- - ------------ ------------- ---------- ------------- -------------
<S> <C> <C> <C> <C>
David Stanley --- --- 299,705/ ---/
40,700 ---
Susan M. Stanton --- --- 107,522/ ---/
44,014 ---
Stephen A. Lightstone --- --- 94,790/ ---/
24,401 ---
Gerald M. Buchen --- --- 46,718/ ---/
15,439 ---
E. J. Holland, Jr. --- --- 38,174/ ---/
14,401 ---
<FN>
(1) 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>
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.
Lightstone, Mr. Buchen and Mr. Holland 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:
Annual Benefits
Final Five-Year Exclusive of Social
Average Security Benefits
Annual (for participants
Pre-Retirement with 10 or more
Earnings years of service
--------------- -------------------
$ 100,000 $39,500
125,000 52,000
150,000 64,500
175,000 77,000
200,000 89,500
225,000 102,000
250,000 114,500
300,000 139,500
350,000 164,500
400,000 189,500
450,000 214,500
500,000 239,500
550,000 264,500
600,000 289,500
650,000 314,500
700,000 339,500
750,000 364,500
800,000 389,500
850,000 414,500
900,000 439,500
950,000 464,500
1,000,000 489,500
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 16, Ms. Stanton 11, Mr. Lightstone
13, Mr. Buchen 3, and Mr. Holland 4.
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 1) the 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 of birth to
1950), multiplied by (ii) the number of years and fractional years of benefit
service prior to
<PAGE>
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 17, Ms. Stanton 14, Mr.
Lightstone 14, Mr. Buchen 23 and Mr. Holland 4. Benefits shown are computed as a
straight single life annuity beginning at age 62 and have been reduced for
Social Security benefits.
<PAGE>
CERTAIN BENEFICIAL OWNERSHIP
The table below sets forth certain information, as of January 10, 1997,
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.
Name and Address Shares Beneficially
of Beneficial Owner Owned Percent of Class
- - ------------------------- -------------------------- -----------------
COMMON STOCK
David Stanley (1) 358,032 .9%
Susan M. Stanton (2) 162,371 .4%
Stephen A. Lightstone (3) 134,912 .4%
Gerald M. Buchen (4) 52,556 .1%
E. J. Holland, Jr.(5) 47,474 .1%
Harold Cohen (6) 28,650 .1%
Scott G. Fossel (7) 14,956 (8)
William A. Hall (9) 10,956 (8)
George Latimer (10) 10,956 (8)
Wayne B. Lyon (11) 9,956 (8)
Gary D. Rose (12) 19,956 .1%
Louis W. Smith (13) 29,003 .1%
Ralph Strangis (14) 14,956 (8)
John H. Weitnauer, Jr. (15) 17,956 (8)
The Crabbe Huson Group, Inc. (16) 3,910,500 10.4%
121 SW Morrison
Portland, OR 97204
Dimensional Fund Advisors, Inc. (17) 2,074,700 5.5%
1299 Ocean Ave.
Santa Monica, CA 90401-1038
<PAGE>
State of Wisconsin Investment Board (18) 2,808,200 7.5%
121 E. Wilson St., 2nd Floor
Madison, WI 53703
Summit Capital Appreciation Fund LP (19) 2,403,600 6.4%
900 2nd Avenue South
Minneapolis, MN 55402
All Directors and Executive 1,025,166 2.7%
Officers as a group (17 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
- - ---------------------
(1) Includes 299,705 shares subject to options, 13,000 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 121,010 shares subject to options, 8,300 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 104,790 shares subject to options, 4,700 shares of restricted
stock and 2,270 shares owned by Mr. Lightstone's wife.
(4) Includes 47,756 shares subject to options, 4,300 shares of restricted
stock, 100 shares owned by Mr. Buchen's wife, and 100 shares owned by
each of Mr. Buchen's four children.
(5) Includes 38,174 shares subject to options, 4,300 shares of restricted
stock and 5,000 shares held in a trust for the benefit of Mrs. Holland
for which Mr. Holland acts as Co-Trustee.
(6) Includes 3,000 shares subject to options.
(7) Includes 9,956 shares subject to options.
(8) Less than 0.1%.
(9) Includes 9,956 shares subject to options.
(10) Includes 9,956 shares subject to options.
(11) Includes 9,956 shares subject to options. Mr. Lyon was President and
Chief Operating Officer and a director of Masco until August, 1996,
and he continues to serve as a director. Masco owns Masco Capital
Corporation ("Masco Capital"). Mr. Lyon disclaims beneficial ownership
of shares of Preferred Stock beneficially owned by Masco Capital.
(12) Includes 9,956 shares subject to options.
(13) Includes 13,903 shares subject to options.
(14) Includes 9,956 shares subject to options.
(15) Includes 9,956 shares subject to options.
(16) Based on a Schedule 13G filed with the Securities and Exchange
Commission dated February 7, 1997, The Crabbe Huson Group, Inc.,
in its capacity as a registered investment advisor, shares voting and
dispositive power with respect to 3,910,500 shares owned by
approximately 30 of its clients. The Crabbe Huson Group, Inc.
disclaims beneficial ownership of all shares owned by the others and
also disclaims that a "group" within the meaning of Rule 13d-5(b)(1)
under the Securities Exchange Act of 1934 has been or will be formed.
(17) Based on information provided to the Company by Dimensional Fund
Advisors, Inc. ("Dimensional"), a registered investment advisor,
Dimensional is deemed to have beneficial ownership of 2,074,700 shares
as of September 30, 1996, all of which shares are held in portfolios
of DFA Investment Dimensions Group Inc., a registered open-end
investment company, or in series of The DFA
<PAGE>
Investment Trust Company, a Delaware business trust, or the DFA Group
Trust and the DFA Participating Group Trust, investment vehicles for
qualified employee benefit plans, all of which Dimensional Fund
Advisors, Inc. serves as investment manager. Dimensional disclaims
beneficial ownership of all such shares. Sole Voting Power = 1,424,000
shares*; Shared Voting Power = 0; Sole Dispositive Power = 2,074,700;
and Shared Dispositive Power = 0. *Persons who are officers of
Dimensional Fund Advisors, Inc. also serve as officers of DFA
Investment Dimensions Group Inc., (the "Fund") and The DFA Investment
Trust Company (the "Trust"), each an open-end management investment
company registered under the Investment Company Act of 1940. In their
capacity as officers of the Fund and the Trust, these persons vote
215,400 additional shares which are owned by the Fund and 435,300
shares which are owned by the Trust (both included in Sole Dispositive
Power above).
(18) Based on a Schedule 13D filed with the Securities and Exchange
Commission as of December 31, 1996.
(19) Based on a Schedule 13D filed with the Securities and Exchange
Commission on December 30, 1996 and a Questionnaire dated January 10,
1997, Okabena Partnership K has the sole voting power and dispositive
power of 700,000 shares; Summit Capital Appreciation Fund LP has the
sole voting power and dispositive power of 400,000 shares and shared
voting power of 453,600 shares; and NU Twins, LLC has the sole voting
and dispositive power of 850,000 shares.
(20) Included 784,481 shares subject to options, 53,400 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.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
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 1996, 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 on a timely basis.
<PAGE>
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 their
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 for the fiscal year 1997.
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 1998 must be received by the Company's
Secretary on or before October 31, 1997. The Company currently plans to hold the
1998 Annual Meeting in Kansas City, Missouri, on April 16, 1998. 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 Statement, 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. 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 31, 1997.
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 Company may retain a firm to assist in the
solicitation of proxies from individual shareholders, brokers, nominees,
fiduciaries and other custodians. The Company 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>
The Company's Annual Report to Shareholders, including financial
statements for the year ended November 30, 1996, is enclosed with this Proxy
Statement.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ E. J. Holland, Jr.
E. J. Holland, Jr.
Senior Vice President-Human Resources/Secretary
February 28, 1997
<PAGE>
February 27, 1997
Attn: Filer Support
U. S. Securities and Exchange Commission
Mail Stop 0-7
6432 General Green Way
Alexandria, VA 22312
Gentlemen:
The Proxy Statement of Payless Cashways, Inc. is being filed today, via Edgar,
and mailed to the shareholders on February 28, 1997, along with the glossy
Annual Report.
Very truly yours,
/s/ E. J. Holland, Jr.
E. J. Holland, Jr.
Senior Vice President-
Human Resources/Secretary
LJF:dd
Enclosures
cc: Mr. Robert F. Bartelmes, Esq.
Securities and Exchange Commission
<PAGE>
FRONT
- - -------------------------------------------------------------------------------
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 E. J. HOLLAND, JR. and STEPHEN A.
LIGHTSTONE, or either or 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 17, 1997 at
the Annual Meeting of Shareholders to be held on April 17, 1997, or any
adjournment thereof.
1. ELECTION OF DIRECTORS
/ / FOR all nominees listed below / / WITHHOLD AUTHORITY
(except as marked to the contrary to vote for all nominees listed
below) below
HAROLD COHEN, SCOTT G. FOSSEL, GEORGE LATIMER, SUSAN M. STANTON
(INSTRUCTION: To withhold authority to vote for any individual nominee write
that nominee's name on the space provided below.)
- - --------------------------------------------------------------------------------
2. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
- - --------------------------------------------------------------------------------
BACK
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, 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:______________________________, 1997
----------------------------------------
Signature
----------------------------------------
Signature if held jointly
/PLEASE MARK, SIGN, DATE AND RETURN/
/THE PROXY CARD PROMPTLY USING THE/
/ENCLOSED ENVELOPE./
- - --------------------------------------------------------------------------------
<PAGE>
FRONT
- - --------------------------------------------------------------------------------
PAYLESS CASHWAYS, INC. EMPLOYEE SAVINGS PLAN
VOTING INSTRUCTIONS
Voting Instructions to: The Chase Manhattan Bank, N.A. as Trustee of the Payless
Cashways, Inc. Employee Savings Plan
I hereby direct that the voting rights pertaining to shares of Payless
Cashways, Inc. held by the Trustee and attributable to my account in the
above-described plan shall be exercised at the Annual Meeting of Shareholders of
the Company to be held April 17, 1997, or at any adjournment of such meeting, in
accordance with the instructions below, to vote upon Proposals 1.
1. ELECTION OF DIRECTORS
a. HAROLD COHEN / / For / / Withhold
b. SCOTT G. FOSSEL / / For / / Withhold
c. GEORGE LATIMER / / For / / Withhold
d. SUSAN M. STANTON / / For / / Withhold
- - --------------------------------------------------------------------------------
BACK
(See reverse side for matters to be voted on)
If you fail to give specific directions, or fail to return this instruction
card, the shares allocated to your account will be voted by the Trustee in the
same proportion as the shares for which timely directions are received by the
Trustee and voted in such manner.
Please sign exactly as name appears below.
Dated:______________________________, 1997
----------------------------------------
Participant's Signature
/PLEASE MARK, SIGN, DATE AND RETURN/
/THE PROXY CARD PROMPTLY USING THE/
/ENCLOSED ENVELOPE./
- - --------------------------------------------------------------------------------
<PAGE>
{PAYLESS CASHWAYS LETTERHEAD}
February 28, 1997
Dear MoneyBuilder Participant:
As a participant in the Payless Cashways, Inc. Employee Savings Plan
(the " MoneyBuilder Plan"), you have the right to direct the Trustee of the
MoneyBuilder Plan how you wish the shares of the Company's common stock
allocated to your MoneyBuilder account on February 17, 1997 to be voted at the
Company's Annual Meeting of Stockholders scheduled for April 17, 1997. The
only matter proposed in the Company's Proxy Statement to be voted upon at the
Annual Meeting is the election of four directors.
Enclosed are the following materials for you to consider and act on:
1. The Company's Proxy Statement for the Annual Meeting of
Stockholders;
2. "Voting Instructions" card for you to give directions to the
Trustee as to the voting of the shares allocated to your account;
and
3. The Company's Annual Report for 1996.
After reviewing the enclosed materials, please complete, sign and
return the enclosed "Voting Instructions" card to Securities Transfer Division,
United Missouri Bank N.A., P. O. Box 410064, Kansas City, MO
64179-0013 in the enclosed prepaid return envelope. United Missouri Bank N.A.
will tabulate the votes in order to permit the Trustee to vote the shares
allocated to your account as you direct. If you do not sign and return the
enclosed "Voting Instructions" card, the shares in your account will be
voted in the same proportion as the shares with respect to which timely
directions are received by the Trustee.
The shares allocated to your account can be voted at the meeting only
by the Trustee pursuant to your instructions. In order for your instructions to
be followed, the enclosed "Voting Instructions" card must be received by April
14, 1997.
Sincerely,
/s/ E. J. Holland, Jr.
E. J. Holland, Jr.
Chairman of the Plan Committee
