<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the Registrant /X/
Filed by a Party other than the Registrant ___
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
Payless Cashways, Inc.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box)
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1)Title of each class of securities to which transaction applies:
(2)Aggregate number of securities to which transaction applies:
(3)Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was
determined):
(4)Proposed maximum aggregate value of transaction:
(5)Total fee paid:
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1)Amount Previously Paid:
(2)Form, Schedule or Registration Statement No.:
(3)Filing Party:
(4)Date Filed:
<PAGE>
[PAYLESS LETTERHEAD]
March 3, 1999
To Our Stockholders:
It is my pleasure to invite you to our 1999 annual meeting of
stockholders. This year it will be held on Wednesday, April 21, 1999, at 10:00
a.m., at the Kansas City Marriott Downtown, located at 200 West 12th Street,
Kansas City, Missouri.
With this letter, you will find the formal notice of the 1999 annual
meeting, our 1998 Annual Report and our Proxy Statement for the 1999 annual
meeting. When you have finished reading the Proxy Statement, please promptly
mark, sign, and return to us the enclosed proxy card, to ensure that your shares
will be represented. This year for the first time, you may also vote by
telephone as indicated on the proxy card instructions.
We appreciate the continuing interest of our stockholders in Payless
Cashways, Inc., and we look forward to seeing many of you at the annual meeting.
Very truly yours,
/s/ Millard E. Barron
----------------------
Millard E. Barron
President and Chief Executive Officer
<PAGE>1
[PAYLESS LOGO]
BUILDING MATERIALS
2300 Main
Kansas City, Missouri 64108
--------------------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
OF
PAYLESS CASHWAYS, INC.
To Be Held April 21, 1999
To the Stockholders of PAYLESS CASHWAYS, INC.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Payless
Cashways, Inc. will be held at the Kansas City Marriott Downtown, 200 West 12th
Street, Kansas City, Missouri, on Wednesday, April 21, 1999 at 10:00 a.m. for
the following purposes:
1. To elect two Class II directors to a term 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 22,
1999, as the record date for the determination of stockholders entitled to
notice of and to vote at the meeting.
Dated: March 3, 1999
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Gary D. Gilson
-------------------
Gary D. Gilson, 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. You may also vote by
telephone as indicated on the proxy card instructions. If you later desire to
revoke your proxy, you may do so at any time before it is exercised.
- --------------------------------------------------------------------------------
<PAGE>2
General Information for Stockholders
In order to provide every stockholder with an opportunity to vote on
all matters scheduled to come before the Annual Meeting, whether or not the
stockholder attends in person, proxies are solicited from stockholders 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 stockholder's directions. Stockholders 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. You may also vote by telephone by following the instructions included
with your proxy card.
If your shares are held in "street name," you will need to follow the
voting instructions on the form you receive from your broker or other nominee.
The availability of telephone voting will depend on their voting processes.
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 the
proxy, either by signing the proxy card or voting by telephone, 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 as to which the Company did not have
notice prior to February 14, 1999.
Any stockholder executing a proxy, by mail or telephone, may revoke
that proxy or submit a revised proxy at any time before it is voted. A
stockholder may also vote by ballot at the Annual Meeting, thereby canceling any
proxy previously returned as to any matter voted on by ballot. A stockholder
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 stockholder 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
(the "Common Stock") at the close of business on February 22, 1999, 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 19,995,027 shares of Common Stock were outstanding. Each share of
Common Stock is entitled to one vote 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 stockholders on or about March 3, 1999.
<PAGE>3
Background on the Company's Emergence from Bankruptcy
On July 21, 1997, the Company filed a voluntary petition to reorganize
under Chapter 11 of the United States Bankruptcy Code in the United States
Bankruptcy Court for the Western District of Missouri. From that date until
December 2, 1997, the Company operated as a debtor-in-possession, subject to the
jurisdiction of the Court.
On November 19, 1997, the Bankruptcy Court entered an order confirming
the Company's First Amended Plan of Reorganization, as modified (the "Plan of
Reorganization"). In connection with the Plan of Reorganization, a new Board of
Directors of the Company was appointed effective December 2, 1997. None of the
current members of the Board of Directors was a member of the Company's Board of
Directors prior to December 2, 1997. In addition, the Company's previously
outstanding shares of common stock, par value $0.01 per share (the "Old Common
Stock"), and series A cumulative preferred stock, par value $1.00 per share (the
"Old Preferred Stock" and, collectively, with the Old Common Stock, the "Old
Stock"), were canceled, and up to 20,000,000 shares of Common Stock of the
reorganized Company was, or will be, issued to the holders of the Old Stock and
to certain of the Company's creditors. In connection with the Plan of
Reorganization, Payless Cashways, Inc., an Iowa corporation, was merged into a
wholly-owned subsidiary to effect a reincorporation of the Company in Delaware,
with the surviving entity continuing under the name, "Payless Cashways, Inc."
Matters to be Considered at the Annual Meeting
1. Proposal No. 1 - Election of Directors
The business and affairs of the Company are to be managed by or under the
direction of a Board of Directors. Pursuant to the Certificate of Incorporation
of the Company, the terms of the directors are divided into three classes,
designated Class I, Class II and Class III. Each class consists, as nearly as
may be possible, of one-third the total number of directors constituting
the entire Board of Directors, which currently is eight. There are currently two
Class II directors standing for election. The current terms of the
Class II directors, Class III directors and Class I directors expire in 1999,
2000 and 2001, respectively. 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 Stockholders in 1999, two Class II directors are to
be elected. The nominees listed below have been 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 the nominees set forth below. In order to be elected a director, a
nominee must receive a plurality of the votes of the shares present in person or
represented by proxy at the Annual Meeting and entitled to vote in the election
of directors. 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.
<PAGE>4
The nominees have consented to being named nominees and have agreed to serve
if elected. In case the nominees are 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 substitutes 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>
Max D. Hopper 64 Founder and principal of Max D. Hopper Associates, Inc., a consulting
First designated as a director: firm specializing in the strategic use of advanced information systems;
1997 retired Chairman of The SABRE Technology Group and served as Senior Vice
Class II President for American Airlines, both units of AMR Corporation; and
currently a director of Gartner Group, Inc., Metrocall, Inc., USDATA
Corporation, Inc., United Stationers, Inc., VTEL Corporation, Worldtalk
Corporation and Exodus Communications, Inc. Mr. Hopper is a member of the
Corporate Governance and Nominating Committee and the Finance Committee
of the Payless Board of Directors.
Peter M. Wood 60 Former Managing Director of J.P. Morgan & Co., Incorporated from 1986
First designated as a director: until 1996;and currently a director of Middlesex Mutual Assurance Company
1997 and Stone & Webster, Incorporated. Mr. Wood is Chairman of the
Class II Corporate Governance and Nominating Committee and a member of the Audit
Committee of the Payless Board of Directors.
</TABLE>
The Board of Directors unanimously recommends a vote "FOR" the proposal to
elect the nominees as Class II directors of the Company.
Information regarding the five directors who were previously designated
and will continue to serve their terms is set forth below.
<PAGE>5
<TABLE>
<CAPTION>
Principal Occupation and
Name Age Five-Year Employment History
- -------------------------------------- --------- -------------------------------------------------------------------------
<S> <C> <C>
Peter G. Danis 66 Non-Executive Chairman of the Board of Payless since December 1997; Chief
First designated as a director: Executive Officer of Boise Cascade Office Products Corporation and
1997 Executive Vice President of Boise Cascade Corporation from 1995 to April
Class III 1998; President of Boise Cascade Office Products Corporation from 1995 to
February 1998; served in various upper management positions with both
Boise Cascade Corporation and Boise Cascade Office Products Corporation
since 1968; and currently a director of Boise Cascade Office Products
Corporation. Mr. Danis is a member of the Compensation Committee of the
Payless Board of Directors.
David G. Gundling 48 President and Chief Executive Officer of Hagemeyer Foods N.A., Inc. since
First designated as a director: 1997; President and Chief Operating Officer of Richfood Pennsylvania,Inc.
1997 from 1996 to 1997 and Executive Vice President and a director of Super
Class III Rite Corporation from 1987 to 1996. Mr. Gundling is Chairman of the
Compensation Committee and a member of the Finance Committee of the
Payless Board of Directors.
Donald E. Roller 61 Acting Chief Executive Officer of Payless from January 1998 until June
First designated as a director: 1998; Executive Vice President - North American Gypsum USG Corporation
1997 from January 1996 to November 1996; President and Chief Executive Officer
Class III of United States Gypsum Company from January 1993 to November 1996; and
currently a director of Boise Cascade Office Products Corporation. Mr.
Roller is Chairman of the Finance Committee and a member of the
Compensation Committee of the Payless Board of Directors.
</TABLE>
<PAGE>6
<TABLE>
<CAPTION>
Principal Occupation and
Name Age Five-Year Employment History
- -------------------------------------- --------- -------------------------------------------------------------------------
<S> <C> <C>
Millard E. Barron 49 President and Chief Executive Officer of Payless since June 1998;
First designated as a director: President of Zellers, Inc. and Executive Vice President of Hudson's Bay
1998 Company from September 1996 to February 1998; Senior Vice President and
Class I Chief Operating Officer of the International Division of Wal-Mart Stores,
Inc. from August 1994 to September 1996; and Vice President - Operations
of Wal-Mart Stores, Inc. from November 1992 to August 1994.
H.D. Cleberg 60 President and Chief Executive Officer of Farmland Industries, Inc. since
Elected a director: 1991. Mr. Cleberg is Chairman of the Audit Committee and a member of the
1997 Corporate Governance and Class I Nominating Committee of the Payless
Board of Directors. Ms. Renae Gonner, the Company's Vice President-
Marketing and Advertising, is Mr. Cleberg's daughter.
</TABLE>
The current Board of Directors (with the exception of Mr. Barron) took
office December 2, 1997. Mr. Barron took office on June 17, 1998. During fiscal
1998, there were nine meetings and four telephonic meetings of the Board of
Directors. During fiscal 1998, each director attended 75% or more of all
meetings of the Board of Directors and of the committees on which he served
during the time he served on the Board of Directors, except for Mr. Hopper who
attended eleven of fifteen meetings. 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 of Directors has four 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. The Audit Committee serves as the conduit for communication
between the Board of Directors and external and internal auditors. The Audit
Committee recommends to the Board of Directors the independent public
accountants to conduct the annual examination of financial statements and also
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 two
times during fiscal 1998. The members of the Company's Audit Committee are H.D.
Cleberg, Chairman; and Peter M. Wood.
<PAGE>7
Compensation - The Compensation Committee reviews the compensation (wages,
salaries, supplemental compensation and benefits) of the employees of the
Company, approves compensation and benefit policies and plans, approves direct
and indirect executive officer compensation, administers stock programs, and
oversees 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. During fiscal 1998, there
were four meetings and two telephonic meetings of the Compensation Committee.
The members of the Compensation Committee are David G. Gundling, Chairman; Peter
G. Danis; and Donald E. Roller.
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 one time during fiscal 1998. The members of the
Company's Corporate Governance and Nominating Committee are Peter M. Wood,
Chairman; H.D. Cleberg; and Max D. Hopper.
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 two times during fiscal 1998. The
members of the Company's Finance Committee are Donald E. Roller, Chairman; David
G. Gundling; and Max D. Hopper.
Compensation of Directors
The Company pays each non-employee director (i) an annual directors' fee
of $25,000, except that the Non-Executive Chairman is paid an annual fee of
$100,000, payable quarterly, (ii) $1,000 for each meeting of the Board of
Directors attended by the director, (iii) $1,000 for each committee meeting
attended by the director and (iv) a $2,000 per diem for special matters
undertaken on behalf of the Company at the request of the Chairman or the CEO.
Committee chairs are paid an additional annual fee of $3,500.
In January 1998, the Non-Executive Chairman (Peter G. Danis) and the
acting Chief Executive Officer (Donald E. Roller) were each granted options to
purchase 120,000 shares of Common Stock and H.D. Cleberg, David G. Gundling, Max
D. Hopper and Peter M. Wood were each granted options to purchase 60,000 shares
of Common Stock pursuant to the Payless Cashways, Inc. 1998 Omnibus Incentive
Plan (discussed in the section entitled, "Report on Executive Compensation"). In
October 1998, the Non-Executive Chairman was granted options to purchase an
additional 30,000 shares of Common Stock and H.D. Cleberg, David G. Gundling,
<PAGE>8
Max D. Hopper, Donald E. Roller and Peter M. Wood were each granted options to
purchase 15,000 shares of Common Stock pursuant to the Plan. All such options
have an exercise price equal to the fair market value of the Common Stock on the
date of grant, and are subject to a four-year vesting schedule with one-fourth
of the grant vesting on each anniversary from the grant date.
Compensation Committee Interlocks and Insider Participation
Members of the Compensation Committee of the Company's Board of
Directors during all but the first three days of fiscal 1998 were David M.
Chamberlain, Chairman (until September 1998); David G. Gundling, Chairman
(during the remainder of fiscal 1998); Peter G. Danis; and Donald E. Roller.
Members of the Compensation Committee of the Company's Board of Directors during
the first three days of fiscal 1998 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 Partner of Goldman Sachs Group L.P. 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 Capital Corporation ("Masco") until August 1996, and he continues to serve
as a director of Masco. During fiscal 1998, 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 fiscal 1999. Payless believes that the terms
and conditions of its relationship with Masco are as favorable as those that
could have been obtained from arm's-length negotiations with unassociated third
parties.
Performance Graph
The graph set forth below compares the indexed total return on an
investment in the Company's Common Stock against the Russell 2000, the Standard
and Poor's Retail (Building Materials) Index ("S&P Building Materials Index")
and two other indices, as explained below. The graph is based on stock
performance and assumes the reinvestment of any dividends. The period covered is
December 2, 1997 (the date on which the Common Stock was first traded) through
the Company's 1998 fiscal year end or the nearest practicable date.
For the past several years, the Company has used the Standard and Poor's
Composite 500 Stock Index ("S&P 500") as a broad equity market index against
which to compare the total return of the Company's Old Common Stock, which was
traded on the New York Stock Exchange. Now that the Company's Common Stock is
traded on the Over-The-Counter Bulletin Board and given the Company's current
market capitalization, the S&P 500 is no longer an appropriate index under the
regulations promulgated by the Securities and Exchange Commission ("SEC").
Accordingly, the Company has decided to compare its Common Stock against the
Russell 2000, which the Company has concluded is a more appropriate broad equity
market index.
<PAGE>9
The Company also has changed the published industry index against which the
total return of the Common Stock is compared. Specifically, the Company has
replaced the Standard and Poor's Retail (Specialty) Index ("S&P Specialty
Index") with the S&P Building Materials Index, which the Company believes is
more representative of the Company's peers.
In compliance with SEC regulations, both former and current indices are
presented in the following graph this year.
[GRAPHIC OMITTED]
<TABLE>
<CAPTION>
As of As of As of As of As of
12/02/97 02/28/98 05/31/98 08/31/98 11/30/98
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Payless Cashways, Inc. (1)...........................$ 100.00 $ 86.73 $ 106.12 $ 54.07 $ 46.92
Russell 2000.........................................$ 100.00 $ 106.79 $ 105.58 $ 78.14 $ 91.97
S&P Building Materials Index.........................$ 100.00 $ 116.31 $ 143.00 $ 134.94 $ 171.58
S&P 500 .........................................$ 100.00 $ 107.68 $ 112.26 $ 98.52 $ 119.75
S&P Specialty Index..................................$ 100.00 $ 108.66 $ 123.81 $ 112.12 $ 137.65
<FN>
(1) Fiscal quarters and year end on a Saturday, therefore closest
available date is utilized.
</FN>
</TABLE>
The closing price on February 15, 1999 was $2.03 per share.
Report on Executive Compensation
The members of the Compensation Committee of the Board of Directors prior
to September 1998 were David M. Chamberlain, Chairman; David G. Gundling; and
Peter G. Danis. Mr. Chamberlain resigned from the Board of Directors on
September 4, 1998, Mr.Gundling became Chairman and Donald E. Roller became
a member of the Compensation Committee. The current members of the Compensation
Committee are Mr. Gundling, Chairman; Mr. Danis; and Mr. Roller.
The Compensation Committee is composed entirely of directors who are not
executive officers of the Company (1). The Committee is responsible, on behalf
of the Board of Directors, for
- -----------
[FN]
(1) Mr. Roller served as acting Chief Executive Officer of the Company from
January 1998 until June 1998, prior to becoming a member of the Compensation
Committee.
</FN>
<PAGE>10
reviewing the compensation (wages, salaries, supplemental compensation and
benefits)of the Company's executive officers, 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.
The Compensation Committee believes that it is in the best interest of the
Company's stockholders 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 stockholder value.
The Committee reviews its executive officer compensation program each
year. Every two years, the Committee has engaged an independent, executive
compensation consulting 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 material retailers,
similarly-sized companies, and other retail companies). In connection with the
study, the consulting firm reviews national industry data obtained from national
compensation surveys in which the Company participates, including an annual
compensation study published by an executive compensation consulting firm. In
years in which a formal study is not completed, the conclusions of the most
recent study are updated based on a survey of retail compensation trends
published by executive compensation consulting firms, published wage and salary
surveys, and inflation indices.
During fiscal 1998, the Committee's historical approach to determining
executive officer compensation was supplemented with considerations related to
the Company's emergence from bankruptcy. During and after the Company's 1997
bankruptcy proceeding, reductions in force occurred. Many of the positions
vacated as a result of the reductions in force were filled by promotions from
within the Company. Compensation was determined for each new executive officer
based on the existing salary structure, the importance of the officer's position
to the success of the Company and the officer's experience.
Each year the Committee reviews the performance of the Company andapproves
an annual base salary and an annual incentive bonus opportunity for each
executive officer consistent with the objectives set forth below. When
appropriate, incentive compensation awards are made pursuant to the Company's
1998 Omnibus Incentive Plan.
Annual Base Salary
The Compensation Committee believes that annual base salaries of the
Company's executive officers should be maintained at levels that are competitive
with salaries at comparable companies. As a result, the Committee historically
has 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
comparable companies and determines pay adjustments, as appropriate. The
performance criteria used by the Compensation Committee include the reporting
responsibilities of each executive officer and
<PAGE>11
corporate performance in terms of sales, earnings before interest, taxes,
depreciation and amortization ("EBITDA"), income, operating goals 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 employment agreements with executive officers (discussed in the
section entitled "Summary Compensation Table"), the annual base salaries under
the agreements were established consistent with these criteria.
Corporate Management Incentive Plan
Annual incentive bonus opportunities are established by the Committee
pursuant to the Company's Corporate Management Incentive Plan and predicated
upon the Company's annual performance measured by 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 bonus opportunity) 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. During fiscal 1998, no
incentives were paid (except to Messrs. Roller and Barron, as discussed below)
because the minimum EBITDA target was not achieved.
1998 Omnibus Incentive Plan
In January 1998, the Board of Directors adopted the Payless Cashways, Inc.
1998 Omnibus Incentive Plan (the "Plan") for the purposes of (i) giving the
Company and its affiliates a competitive advantage in attracting, motivating and
retaining employees and outside directors; (ii) more closely aligning the
interests of the Company's employees with the interests of the Company's
stockholders; and (iii) motivating the Company's employees to enhance the
Company's value for the benefit of its stockholders. The Plan was amended and
restated in February 1999. The Plan authorizes the Compensation Committee to
grant employees and outside directors options (non-qualified stock options and,
upon stockholder approval, incentive stock options), limited rights, dividend
equivalents, restricted stock, performance shares, performance units (including
performance-based cash awards), and other rights, interests or options relating
to 2,400,000 shares of the Company's Common Stock. The Plan also authorizes the
Committee to provide reload options in connection with options granted under the
Plan.
Chief Executive Officer Compensation
During fiscal 1998, the Board of Directors determined the compensation of
Mr. Roller (in his capacity as acting Chief Executive Officer between January
1998 and June 1998) and
<PAGE>12
Mr. Barron (in his capacity as Chief Executive Officer from and after June 1998)
using the criteria described above.
Based on criteria relating to (i) the Company's sales, EBITDA, income,
operating goals and similar factors, (ii) Mr. Roller's contribution to the
strategic direction of the Company, (iii) Mr. Roller's experience, (iv)
development of senior executives, (v) the annual base salaries for executives in
similar positions at comparable companies, and (vi) the fact that Mr. Roller
would be serving as both Chief Executive Officer and Chief Operating Officer,
the Board of Directors determined that Mr. Roller's compensation during his term
as acting Chief Executive Officer should consist of (a) an annual base salary of
$650,000, (b) a guaranteed bonus equal to $325,000 per year, prorated to reflect
months of service, and (c) such other benefits and incentives, including options
to purchase stock of the Company, as may be available under the benefit and
incentive plans of the Company. Under the 1998 Omnibus Incentive Plan discussed
above, Mr. Roller also received options to purchase 135,000 shares of Common
Stock in his capacity as a director of the Company.
Based on (i) arm's length negotiations between the Company and Mr. Barron,
(ii) annual base salaries for executives in similar positions at comparable
companies, (iii) information gained during the executive search process, and
(iv) the fact that Mr. Barron would be serving as both Chief Executive Officer
and Chief Operating Officer, the Company determined that Mr. Barron's
compensation should consist of (a) an annual base salary of $450,000, (b) an
annual incentive cash bonus equal to $270,000 based on achievement of certain
performance goals, and (c) options to purchase 350,000 shares of the Company's
Common Stock under the 1998 Omnibus Incentive Plan discussed above. For the
period ending December 31, 1998 only, Mr. Barron's incentive cash bonus was
guaranteed and prorated to reflect months of service.
Other Information
Section 162(m) of the Internal Revenue Code generally limits deductions by
publicly held corporations for federal income tax purposes to $1 million of
compensation paid to each of the executive officers listed in the corporation's
summary compensation table unless such excess compensation is "performance
based" as defined in Section 162(m). The Company does not anticipate that any
executive officer's compensation for fiscal 1999 will exceed $1 million for
purposes of Section 162(m). Thus, it is the current intention of the Committee
that all compensation paid under the executive compensation program will be tax
deductible to the Company no later than in the year paid to each executive
officer.
The Committee will review from time to time the potential impact of
Section 162(m) on the deductibility of executive compensation. However, the
Committee intends to maintain the flexibility to take actions that it considers
to be in the best interests of the Company and its stockholders and which may be
based on considerations in addition to tax deductibility.
The Compensation Committee: David G. Gundling - Chairman
Peter G. Danis
Donald E. Roller
<PAGE>13
Summary Compensation Table
The following table sets forth the compensation during each of the last
three completed fiscal years for the Company's named executive officers who held
the positions listed in fiscal 1998:
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION AWARDS
----------------------------------------------- ------------------------------
(a) (b) (c) (d) (e) (f) (g) (h)
Restricted Securities
Name and Other Annual Stock Underlying All Other
Principal Position Year Salary($) Bonus($)(1) Compensation($)(2) Awards($)(3) Options/ SARs(#) Compensation($)(4)
- ------------------- ------- ---------- ----------- ----------------- ------------- ---------------- ------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Millard E. Barron- 1998 246,412 83,819 8,654 --- 350,000 ---
President, Chief
Executive Officer
and Director (5)
Donald E. Roller- 1998 562,500 --- --- --- 135,000 ---
Acting Chief
Executive Officer
and Director(5)
David Stanley- 1998 67,500 97,500 --- --- --- 864,928
Chief Executive 1997 650,000 277,500 --- --- --- 1,748
Officer and 1996 650,000 --- 9,497 --- --- 2,314
Director(5)
Stanley K. Boyd- 1998 275,480 37,500 --- --- 137,500 ---
Senior Vice 1997 125,000 122,500 9,268 3,425 30,000 ---
President-Store
Operations(5)
Robert S.Islinger- 1998 230,769 27,750 --- --- 110,000(6) 2,160
Senior Vice 1997 185,000 87,750 --- --- --- 1,934
President-Strategic 1996 166,412 --- --- 3,250 3,600(6) 2,250
Planning and
Marketing(5)
Richard G.Luse- 1998 219,808 27,000 --- --- 137,500 7,027
Senior Vice 1997 180,173 87,000 --- --- --- 1,757
President-Finance 1996 171,000 --- --- --- --- 2,354
David J.Krumbholz- 1998 206,424 28,800 --- --- 100,000 2,700
Vice President- 1997 192,000 78,800 --- --- --- 1,901
President-Professional 1996 186,500 --- --- --- --- 2,469
Business
<FN>
(1) The amounts reflected in column (d) above represent the retention
bonuses and success bonuses that were paid in December 1997 and June
1998, which are more fully described in the text below this table.
(2) The amounts reflected in column (e) above for 1998 and 1997 for Mr.
Barron and Mr. Boyd, respectively, reflect relocation allowances and,
for Mr. Boyd, includes a sale-of-home incentive.
The amount reflected in column (e) above for 1996 for Mr. Stanley
represents the above-market interest earnings under the Wealth-Op
Deferred Compensation Plan and the 1988 Deferred Compensation Plan.
These plans have been terminated and amounts deferred under these plans
as of July 21, 1997, were treated as unsecured claims in the Company's
1997 Chapter 11 proceedings.
The Wealth-Op Deferred Compensation Plan and the 1988 Deferred
Compensation Plan were non-qualified deferred compensation plans which
allowed certain employees to elect to defer compensation for a
<PAGE>14
period of four or eight years. The plans provided 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 1998.
(3) No annual restricted stock award was made to the named executive
officers in fiscal 1998, and there were no restricted stock holdings by
any of the named executive officers at the end of fiscal 1998. Each
restricted stock award listed above is based upon the closing fair
market value of the stock on the date of grant. The restricted stock
awards were issued pursuant to the long-term stock incentive program,
which has been terminated. The restricted stock awards were subject to
a three-year-cliff vesting schedule from the date of the award, but all
previously unvested shares fully vested on the effective date of the
Plan of Reorganization (December 2, 1997). All restricted stock awards
were Old Common Stock. Dividends were payable on the shares if and to
the extent paid on the Company's Old Common Stock generally.
(4) All other compensation for fiscal 1998 consists of payments for
vacation balances for Mr. Stanley and Mr. Luse in the amounts of
$62,500 and $4,327, respectively. In addition, all other compensation
for Mr. Stanley includes a severance payment of $750,000, a lump sum
payment for the present value of his pension accrual for the period
January 14, 1998 through March 1, 1999 of $29,548 and a payment in lieu
of 401(k) plan participation and consideration of a release in the
amount of $20,000. The Employee Savings Plan estimated contributions
are $2,880, $2,160, $2,700 and $2,700 for Mr. Stanley, Mr. Islinger,
Mr.
Luse and Mr. Krumbholz, respectively.
(5) Messrs. Barron and Roller were not employed by the Company in fiscal
1997 or 1996 and Mr. Boyd was not employed by the Company in fiscal
1996. Mr. Stanley served as the Company's Chief Executive Officer until
his resignation on January 6, 1998. Mr. Roller served as the Company's
Acting Chief Executive Officer from January 6, 1998 until June 17,
1998, and Mr. Barron has been serving as the Company's Chief Executive
Officer since June 17, 1998. Mr. Islinger served as the Company's
Senior Vice President Strategic Planning and Marketing until his
resignation in the first month of fiscal 1999.
(6) Upon Mr. Islinger's termination of employment in fiscal 1999, his
outstanding options were cancelled.
</FN>
</TABLE>
Millard E. Barron, Richard G. Luse, Stanley K. Boyd and David J.
Krumbholz (the "Executives") have entered into amended and restated employment
agreements with the Company (the "Employment Agreements") as of December 1,
1998. The term of each Employment Agreement is one year unless sooner terminated
pursuant to the terms of the Employment Agreement; provided, however that each
Employment Agreement will be automatically renewed for an additional term of one
year at the end of the initial term and each succeeding term, unless either the
Company or the Executive serves notice on the other at least ninety (90) days
prior to the expiration of the term, in accordance with certain specified
procedures, that the party giving notice intends to end the Employment Agreement
at the conclusion of the then-current term.
If the Company terminates an Executive's Employment Agreement for
"Cause" (as such term is defined in the respective Employment Agreement), the
Employment Agreement and the Company's obligation to make further base salary
and Incentive Compensation payments thereunder shall thereupon terminate. If (i)
the Executive terminates his Employment Agreement for "Good Reason" (as such
term is defined in the respective Employment Agreement), (ii) the Company
terminates the Employment Agreement without "Cause," or (iii) the Employment
Agreement terminates due to expiration, the Executive shall be entitled to the
following severance benefits: (a) the Company shall continue to pay the
Executive the Executive's base salary for a period of one year after the date
the Executive's employment with the Company is terminated (the
<PAGE>15
"Severance Period"); (b) in the event the Compensation Committee determines that
Incentive Compensation is to be paid in the year in which the Executive's
employment is terminated, then the Executive will receive Incentive Compensation
prorated for the time during which services were rendered in the year of
termination, to the extent provided by the Compensation Committee; (c)during the
Severance Period, the Company shall provide the Executive with medical, dental,
vision and regular and supplemental life insurance coverage substantially
similar to the coverage that the Executive was receiving or entitled to receive
immediately prior to the date of termination of the Executive's employment; and
(d) the Company, at its expense, will provide to the Executive outplacement
services. If, however, the Executive's employment is terminated within twelve
months without "Cause" as a result of a "Change of Control" (as defined in
the respective Employment Agreement), and if the Executive is not offered a
comparable position by the Company, then the Severance Period shall be extended
to the second anniversary of the date of the termination of employment, and
the Executive shall be entitled to receive continued payments of base salary
during the second year of the Severance Period. All severance benefits other
than continued payments of base salary shall cease on the first anniversary
of the termination of employment in the event of a Change of Control.
Notwithstanding the foregoing, however, the Company is not required to provide
base salary continuation or other severance benefits if the Executive violates
his confidentiality, non-solicitation, non-disparagement or non-competition
obligations.
In the event of the Executive's death or if the Executive should become
unable to perform the essential functions of his position, with or without
reasonable accommodation by the Company, the Executive's Employment Agreement
shall terminate, and the Executive shall not be entitled to receive severance
benefits.
Employment agreements with David Stanley and Robert J. Islinger were
terminated in connection with their resignations in January 1998 and November
1998, respectively.
In connection with the Company's Plan of Reorganization, and because of the
difficulty of recruiting key employees to a debtor in a bankruptcy
proceeding and the difficulty in general of recruiting in a tight labor market,
the Company presented for the Bankruptcy Court's approval, and the Bankruptcy
Court approved, an Amended Reorganization Retention Plan (the "Retention Plan")
with respect to approximately 350 key employees, including David Stanley,
Stanley K. Boyd, Robert S. Islinger, Richard G. Luse and David J. Krumbholz.
Pursuant to the Retention Plan, these employees were eligible for a retention
bonus (the "Retention Bonus") if they (i) were employed by the Company on the
date of payment, and (ii) had performed at expectations measured against
performance standards for their position. The Retention Bonus was paid in two
equal installments on December 2, 1997 and June 5, 1998. Pursuant to the
Retention Plan, certain executive officers, including David Stanley, Stanley K.
Boyd, Robert S. Islinger, Richard G. Luse and David J. Krumbholz, were also
eligible for an additional discretionary bonus (the "Success Bonus") on the
effective date of the Plan of Reorganization. The purpose of the Success Bonus
was to give these executive officers an incentive to cause the effective date of
the Plan of Reorganization to occur as early as possible, and the maximum total
amount of the Success Bonus pool was designed to decrease in steps if the
effective date did not occur by specified dates.
<PAGE>16
<TABLE>
Option/SAR Grants in Last Fiscal Year
<CAPTION>
Potential Realizable Value at
Assumed Annual Rates of Stock
Individual Grants Price Appreciation of Option
Term(3)
----------------------------------------------------------------- -----------------------------
(a) (b) (c) (d) (e) (f) (g)
Number of Percent of Total
Securities Options/SARs
Underlying Granted to Exercise or
Options/SARs Employees in Base Price
Name Granted (#)(1) Fiscal Year ($ / Share)(2) Expiration Date 5% ($) 10% ($)
- ----------------- -------------- ----------- -------------- --------------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Millard E. Barron 250,000 13.51% 3.0313 06/17/08 476,572 1,207,745
100,000 5.41% 1.0000 10/14/08 62,889 159,374
Donald E. Roller 120,000 6.49% 2.9688 01/15/08 224,047 567,780
15,000 .81% 1.0000 10/14/08 9,433 23,906
David Stanley --- --- --- --- --- ---
Stanley K. Boyd 110,000 5.95% 2.9688 01/15/08 205,377 520,465
27,500 1.49% 1.0000 10/14/08 17,295 43,828
Robert S. Islinger(4) 110,000 5.95% 2.9688 01/15/08 205,377 520,465
Richard G. Luse 60,000 3.24% 2.9688 01/15/08 112,024 283,890
50,000 2.70% 2.5000 02/09/08 78,612 199,218
27,500 1.49% 1.0000 10/14/08 17,295 43,828
David J. Krumbholz 60,000 3.24% 2.9688 01/15/08 112,024 283,890
20,000 1.08% 2.9375 06/30/08 36,948 93,632
20,000 1.08% 1.0000 10/14/08 12,578 31,875
<FN>
(1) The options were granted pursuant to the Plan. Additional Plan
information is described in the section entitled, "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 the 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 the 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.
(4) Upon Mr. Islinger's termination of employment in fiscal 1999, his
outstanding options were cancelled.
</FN>
</TABLE>
<PAGE>17
<TABLE>
Aggregated Option/SAR Exercises in Last Fiscal Year
and Fiscal Year-End Option/SAR Values
<CAPTION>
(a) (b) (c) (d) (e)
Number of Securities Value of Unexercised
Shares Acquired on Underlying Unexercised In-the-Money Options/
Name Exercise (#) Value Realized ($) Options/ SARs at FY-End (#)(1) SARs at FY-End ($)(1)(2)
- ---------------- ------------ ------------------ ------------------------------ ------------------------
<S> <C> <C> <C> <C>
Millard E. Barron --- --- 350,000 43,750
Donald E. Roller --- --- 135,000 6,563
David Stanley --- --- --- ---
Stanley K. Boyd --- --- 137,500 12,031
Robert S. Islinger --- --- 110,000(3) ---
Richard G. Luse --- --- 137,500 12,031
David J. Krumbholz --- --- 100,000 8,750
<FN>
(1) None of the options outstanding at the end of fiscal 1998 was
exercisable.
(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.
(3) Upon Mr. Islinger's termination of employment in fiscal 1999, his
outstanding options were cancelled.
</FN>
</TABLE>
Retirement Program
Pension Benefits
At the end of fiscal 1998, Payless maintained a non-qualified supplemental
pension plan for executive officers, the Payless Supplemental Retirement Plan
(the "Supplemental Retirement Plan"), which provided benefits that would
otherwise be denied participants in the Retirement Plan (defined below)by reason
of certain Internal Revenue Code limitations on qualified plan benefits. Mr.
Stanley, Mr. Boyd, Mr. Islinger, Mr. Luse and Mr. Krumbholz were participants
in the Supplemental Retirement Plan and had entered into Supplemental Retirement
Agreements with Payless. Obligations under the Supplemental Retirement Plan were
discharged in connection with the Plan of Reorganization and executive officers
due amounts pursuant to the Supplemental Retirement Plan were treated as
unsecured creditors to the extent of the amounts owed them. Executive officers
were entitled to receive Common Stock in settlement of such claims. On December
15, 1997, and June 30, 1998, distributions on allowed, unsecured claims of
creditors were made by the Company, including claims under the Supplemental
Retirement Plan, for which Mr. Stanley, Mr. Boyd, Mr. Islinger, Mr. Luse and
Mr. Krumbholz received 69,850; 6,678; 4,645;
<PAGE>18
6,530 and 3,735 shares of Common Stock, respectively, valued on the distribution
dates at $170,943; $16,343; $11,367; $15,981 and $9,141, respectively.
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 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), 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.
As of the end of fiscal 1998, years of service credited pursuant to the
Retirement Plan were as follows: Mr. Barron: 0, Mr. Roller: 0, Mr. Stanley: 18,
Mr. Boyd: 18, Mr. Islinger: 4, Mr. Luse: 11 and Mr. Krumbholz: 23. The estimated
monthly benefits payable at age 65 under the Retirement Plan (computed as a
straight single life annuity), based on actual credited service and
compensation, is as follows for the executive officers named in the Summary
Compensation Table above: Mr. Barron: $0, Mr. Roller: $0, Mr. Stanley: $8,784,
Mr. Boyd:$3,218, Mr. Islinger: $719, Mr. Luse: $1,907 and Mr. Krumbholz: $2,995.
Certain Transactions
Canadian Imperial Bank of Commerce and its affiliates ("CIBC"),
BankAmerica Corporation and its affiliates ("BankAmerica"), and Van Kampen
American Capital Prime Rate Income Trust ("Van Kampen"), each of which
beneficially owns in excess of 5% of the outstanding Common Stock, are or have
been parties to the Amended and Restated Credit Agreement, dated as of December
2, 1997, as amended (the "Credit Agreement"). The Credit Agreement provides for
a term loan facility in the original principal amount of approximately $283
million and a revolving credit and letter of credit facility of $150 million.
CIBC, BankAmerica and Van Kampen each received amounts substantially in excess
of $60,000 in facility, advisory and agency fees under those agreements. In
addition, pursuant to the terms of those agreements, CIBC, BankAmerica and Van
Kampen have been paid interest, commitment fees and letter of credit fees.
Certain Beneficial Ownership
The table below sets forth certain information, as of January 15, 1999,
regarding the beneficial ownership of the Company's Common Stock by (i) each of
the Company's directors and
<PAGE>19
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 SEC, the number of shares of Common Stock
beneficially owned includes shares as to which a right to acquire ownership
within 60 days exists, 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
- ------------------- -------------------- ----------------
<S> <C> <C>
Millard E. Barron 54,000 0.3%
Donald E. Roller (1) 35,000 0.2%
David Stanley 0 *
Stanley K. Boyd (2) 34,238 0.2%
Robert S. Islinger 2,007 *
Richard G. Luse (2) 27,500 0.1%
David J. Krumbholz (3) 16,302 *
H. D. Cleberg (4) 16,663 *
Peter G. Danis (1) (5) 30,000 0.1%
David G. Gundling (3) 20,000 *
Max D. Hopper (3) 15,000 *
Peter M. Wood (3) (6) 35,000 0.2%
BankAmerica Corporation(7)
100 North Tryon Street 1,782,650 8.9%
Charlotte, NC 28255
Canadian Imperial Bank
of Commerce(8)
Commerce Court 1,257,340 6.3%
Toronto, Ontario M5L 1A2
Van Kampen American Capital
Prime Rate Income Trust(9) 1,024,159 5.1%
One Park View Plaza
Oakbrook Terrace, IL 60181
All Directors and Executive Officers 329,821 1.6%
as a group (17 persons)(10)
- ----------------------------
<FN>
(1) Includes 30,000 shares subject to options.
(2) Includes 27,500 shares subject to options.
<PAGE>20
(3) Includes 15,000 shares subject to options.
(4) Includes 15,000 shares subject to options and 1,663 shares owned by a
trust for the benefit of Mr. Cleberg's wife of which he is trustee. As
of February 19, 1999, this trust had purchased an additional 2,000
shares, which are not reflected in the table.
(5) As of February 19, 1999, Mr. Danis had purchased an additional 7,000
shares, which are not reflected in the table.
(6) As of February 19, 1999, Mr. Wood had purchased an additional 5,000
shares, which are not reflected in the table.
(7) Based on an amended Schedule 13G filed with the Securities and Exchange
Commission on January 29, 1999. As a result of the merger of
BankAmerica Corporation with and into NationsBank Corporation,
BankAmerica Corporation succeeded to the assets and liabilities of both
NationsBank and old BankAmerica, including the 1,782,650 shares and
1,780,970 shares over which BankAmerica Corporation shares voting power
and dispositive power, respectively, with Bank of America NT & SA, NB
Holdings Corporation and NationsBank NA.
(8) Based on a Questionnaire dated January 11, 1999, Canadian Imperial Bank
of Commerce has sole voting power and sole dispositive power with
respect to 1,257,340 shares.
(9) Based on a Schedule 13G filed with the Securities and Exchange
Commission on February 18, 1998, Van Kampen American Capital Prime Rate
Income Trust has sole voting power and sole dispositive power with
respect to 1,024,159 shares.
(10) Includes 235,000 shares subject to options.
* Less than 0.1%.
</FN>
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange
Act") 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 SEC, initial reports of ownership and
reports of changes in ownership of 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 of directors and executive officers that no other reports were
required during 1998, 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, except that
Mr. Barron's initial report on Form 3 was filed a few days late.
<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 their best
judgment.
Other Information, Stockholder Proposals
The Board of Directors, on the recommendation of the Audit Committee, has
selected the firm of KPMG LLP as independent auditor to examine the
financial statements of the Company for the fiscal year 1999. Representatives of
KPMG 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.
The Company currently plans to hold the 2000 Annual Meeting in Kansas City,
Missouri, on or around April 19, 2000. Management will appropriately
consider all proposals from stockholders meeting the requirements set forth in
the following paragraphs. When adoption of a proposal is clearly in the best
interests of the Company and the stockholders generally, and does not require
stockholder approval, the Board of Directors will usually adopt the proposal, if
appropriate, rather than including the proposal in the Proxy Statement.
A stockholder proposal may be considered at the Company's Annual
Meeting in 2000 only if it meets the following requirements. First, the
stockholder making the proposal must be a stockholder of record on the record
date for such Annual Meeting, must continue to be a stockholder of record at the
time of such meeting, and must be entitled to vote thereat. Second, the
stockholder must deliver or cause to be delivered a written notice to the
Company's Secretary. Such notice must be received by the Secretary no later than
February 21, 2000. The notice shall specify (i) the name and address of the
stockholder as they appear on the books of the Company, (ii) the number of
shares of the Company which are beneficially owned by the stockholder; (iii) any
material interest of the stockholder in the proposed business described in the
notice; (iv) if such business is a nomination for director, each nomination
sought to be made, together with the reasons for each nomination, a description
of the qualifications and business or professional experience of each proposed
nominee and a statement signed by each nominee indicating his or her willingness
to serve if elected, and disclosing the information about him or her that is
required by the Exchange Act, and the rules and regulations promulgated
thereunder to be disclosed in the proxy materials for the meeting involved if he
or she were a nominee of the Company for election as one of its directors; (v)
if such business is other than a nomination for director, the nature of the
business, the reasons why it is sought to be raised and submitted for a vote of
the stockholders and if and why it is deemed by the stockholder to be beneficial
to the Company, and (vi) if so requested by the Company, all other information
that would be required to be filed with the SEC if, with respect to the business
proposed to be brought before the meeting, the person proposing such business
was a participant in a solicitation subject to Section 14 of the Exchange Act.
Notwithstanding satisfaction of the above, the proposed business may be deemed
not properly
<PAGE>22
brought before the meeting if, pursuant to state law or any rule or regulation
of the SEC, it was offered as a stockholder proposal and was omitted from the
proxy materials for the meeting.
Pursuant to the Rules and Regulations of the SEC, stockholder proposals
requested for inclusion in the Company's Proxy Statement must meet the following
criteria: (i) the proponent must be a record or beneficial owner of at least 1%
or $2,000 in market value of securities entitled to be voted on the proposal and
must have held such securities for at least one year; (ii) the proponent may
submit no more than one proposal; (iii) the proposal and any supporting
statement together shall not exceed 500 words; (iv) proposals must be received
by the Company's Secretary on or before the date provided in the Proxy
Statement; and (v) the proposal must contain the name of the proposing
stockholder(s) and a contact address. For stockholder proposals to be considered
for inclusion in the Company's proxy materials for the 2000 Annual Meeting of
Stockholders, such proposals must be received by the Secretary of the Company on
or before November 4, 1999.
The Corporate Governance and Nominating Committee will consider persons
recommended by stockholders 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 Stockholders at which such director would be elected. All letters of
nomination should be sent to the Secretary of the Company 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
Company's Proxy Statement, letters of nomination must be received by the
Secretary of the Company on or before November 4, 1999.
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 stockholders, 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.
The Company's Annual Report to Stockholders, including financial
statements for the year ended November 28, 1998, is enclosed with this Proxy
Statement.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Gary D. Gilson
Gary D. Gilson, Secretary
March 3, 1999
<PAGE>
FRONT
PAYLESS CASHWAYS, INC.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
YOUR VOTE IS IMPORTANT!
You can vote one of two ways:
1. Vote by Phone.
2. Vote by Mail.
VOTE BY TELEPHONE
Your Telephone vote is quick, easy and immediate. Just follow these easy steps:
1. Read the accompanying Proxy Statement.
2. Using a Touch-Tone Telephone, call Toll Free 1-800-758-6973 and follow the
instructions.
3. When instructed, enter the fourteen digit Control Number, which is printed
on the lower right-hand corner of your proxy card below.
4. Follow the simple recorded instructions.
Your telephone vote authorizes the named proxies to vote your shares to the same
extent as if you marked, signed, dated, and returned the proxy card.
If you vote by telephone, please do not return your proxy by mail.
VOTE BY MAIL
To vote by mail, complete, sign and date the proxy card below. Detach the card
and return it in the envelope provided herein.
IF YOU ARE NOT VOTING BY TELEPHONE, DETACH PROXY CARD AND RETURN.
---
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PAYLESS CASHWAYS, INC.
2300 Main, Kansas City, Missouri 64108
This Proxy is Solicited on Behalf of the Board of Directors
The undersigned hereby appoints Richard G. Luse and Timothy R. Mertz,
or either of them, as Proxy/Proxies, with the power to appoint his substitute,
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 22, 1999 at the Annual Meeting of Stockholders to be
held on April 21, 1999, or any adjournment or postponement thereof. This Proxy
revokes all prior Proxies given by the undersigned.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL 1.
1. ELECTION OF DIRECTORS
FOR the nominees listed below WITHHOLD AUTHORITY
(except as marked to the to vote for all nominees
contrary below) listed below
Nominees: 01 Max D. Hopper
02 Peter M. Wood
(Instruction: To withhold authority to vote for any individual nominee,
write that nominee's name on the space provided below.)
- --------------------------------------------------------------------------------
In their discretion, the Proxies are authorized to vote upon such
other business as may properly come before the meeting and all matters incident
to the conduct of the meeting.
[Control Number]
<PAGE>
BACK
- --------------------------------------------------------------------------------
This proxy, when properly executed, will be voted in the manner
directed herein by the undersigned stockholder. If no direction is made, this
proxy will be voted for Proposal 1.
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 an authorized
person.
Dated: ____________________________________, 1999
-----------------------------------------
Signature
-----------------------------------------
Signature if held jointly
----------------------------------
PLEASE MARK, SIGN, DATE AND RETURN
THE PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE.
----------------------------------
<PAGE>
[Payless Letterhead]
March 3, 1999
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 22, 1999 to be voted at the
Company's Annual Meeting of Stockholders scheduled for April 21, 1999. The only
matter proposed in the Company's Proxy Statement to be voted upon at the Annual
Meeting is the election of two directors.
Enclosed are the following materials for you to consider and act upon:
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 1998.
After reviewing the enclosed materials, please complete, sign and
return the enclosed Voting Instructions card to Securities Transfer Division,
UMB Bank, N.A., P.O. Box 410064, Kansas City, MO 64179-0013 in the enclosed
prepaid return envelope. UMB 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
16, 1999.
Sincerely,
/s/ Louise R. Iennaccaro
- ------------------------
Louise R. Iennaccaro, Chairman of the Plan Committee
<PAGE>
FRONT
PAYLESS CASHWAYS, INC.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
YOUR VOTE IS IMPORTANT!
You can vote one of two ways:
1. Vote by Phone.
2. Vote by Mail.
VOTE BY TELEPHONE
Your Telephone vote is quick, easy and immediate. Just follow these easy steps:
1. Read the accompanying Proxy Statement.
2. Using a Touch-Tone Telephone, call Toll Free 1-800-758-6973 and follow the
instructions.
3. When instructed, enter the fourteen digit Control Number, which is printed
on the lower right-hand corner of your proxy card below.
4. Follow the simple recorded instructions.
Your telephone vote authorizes the named proxies to vote your shares to the same
extent as if you marked, signed, dated, and returned the proxy card.
If you vote by telephone, please do not return your proxy by mail.
VOTE BY MAIL
To vote by mail, complete, sign and date the proxy card below. Detach the card
and return it in the envelope provided herein.
IF YOU ARE NOT VOTING BY TELEPHONE, DETACH PROXY CARD AND RETURN.
---
- --------------------------------------------------------------------------------
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 Stockholders of the Company to
be held April 21, 1999, or at any adjournment of such meeting, in accordance
with the instructions below, to vote upon Proposal 1.
1. ELECTION OF DIRECTORS
01 Max D. Hopper For Withhold
02 Peter M. Wood For Withhold
- --------------------------------------------------------------------------------
<PAGE>
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:______________________, 1999
--------------------------------
Participant's Signature
----------------------------------
PLEASE MARK, SIGN, DATE AND RETURN
THE PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE.
----------------------------------
</TABLE>
