<PAGE> 1
FORM 10 - Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 27, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to ________.
Commission file number 1-13380
-------
OFFICEMAX, INC.
---------------
(Exact name of registrant as specified in its charter)
OHIO 34-1573735
---- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3605 Warrensville Center Road, Shaker Heights, Ohio 44122
---------------------------------------------------------
(Address of principal executive offices)
(zip code)
(216) 921-6900
--------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No .
----- -----
Title of Class Shares Outstanding As Of
-------------- August 23, 1996
Common Shares ---------------
(without par value) 123,624,879
1 of 21 total pages
Exhibit index located at page 13
<PAGE> 2
OFFICEMAX, INC.
INDEX
<TABLE>
<CAPTION>
Part I - Financial Information Page
- ------------------------------
<S> <C> <C>
Item 1. Financial Statements 3-7
Item 2. Management's Discussion and Analysis of Financial 8-10
Condition and Results of Operations
Part II - Other Information
- ---------------------------
Item 1. Legal Proceedings 11
Item 4. Submission of Matters to a Vote of Security Holders 11
Item 6. Exhibits and Reports on Form 8-K 11
Signatures 12
</TABLE>
2
<PAGE> 3
PART I - FINANCIAL INFORMATION
Item 1. - Financial Statements
OFFICEMAX, INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
<TABLE>
<CAPTION>
July 27, January 27,
1996 1996
----------- -----------
<S> <C> <C>
ASSETS
Current assets:
Cash and equivalents $ 202,633 $ 365,863
Accounts receivable, net of allowances
of $737 and $659, respectively 39,152 27,039
Merchandise inventories 780,916 636,211
Other current assets 23,979 20,009
----------- -----------
1,046,680 1,049,122
Property and equipment:
Buildings and land 10,949 5,966
Leasehold improvements 106,246 101,624
Furniture and fixtures 166,119 148,581
----------- -----------
283,314 256,171
Less accumulated depreciation and amortization (95,138) (75,795)
----------- -----------
188,176 180,376
Other assets and deferred charges 18,043 15,236
Goodwill, net of accumulated amortization
of $37,147 and $32,452, respectively 338,439 343,134
=========== ===========
$ 1,591,338 $ 1,587,868
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable - trade $ 388,437 $ 348,605
Accrued expenses and other liabilities 66,171 81,602
Accrued salaries and related expenses 29,024 33,482
Advertising payable 12,168 44,802
Taxes other than income taxes 40,211 41,222
----------- -----------
536,011 549,713
Other long-term liabilities 47,462 47,266
----------- -----------
Total liabilities 583,473 596,979
----------- -----------
Commitments and contingencies -- --
Shareholders' equity:
Common shares, without par value; 200,000,000 shares
authorized; 123,619,151 and 123,496,170 shares issued and
outstanding, respectively 852,168 850,557
Deferred stock compensation (1,029) (1,482)
Retained earnings 156,726 141,814
----------- -----------
1,007,865 990,889
=========== ===========
$ 1,591,338 $ 1,587,868
=========== ===========
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral part
of these balance sheets.
3
<PAGE> 4
OFFICEMAX, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
13 Weeks Ended 26 Weeks Ended
------------------------------ ------------------------------
July 27, 1996 July 22, 1995 July 27, 1996 July 22, 1995
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Sales $ 622,132 $ 482,460 $ 1,352,727 $ 1,040,333
Cost of merchandise sold, including
buying and occupancy costs 487,460 377,031 1,057,252 809,936
------------ ------------- ------------ ------------
Gross profit 134,672 105,429 295,475 230,397
Store operating and selling expenses 112,967 88,768 238,007 187,128
Pre-opening expenses 1,869 1,200 2,401 1,506
General and administrative expenses 15,215 11,587 30,100 23,356
Goodwill amortization 2,348 2,353 4,695 4,706
------------ ------------- ------------ ------------
Total operating expenses 132,399 103,908 275,203 216,696
------------ ------------- ------------ ------------
Operating income 2,273 1,521 20,272 13,701
Interest income (expense), net 1,635 (25) 4,425 1,261
------------ ------------- ------------ ------------
Income before income taxes and
equity income from affiliate 3,908 1,496 24,697 14,962
Equity income from affiliate -- 572 -- 1,016
------------ ------------- ------------ ------------
Income before income taxes 3,908 2,068 24,697 15,978
Income taxes 1,550 875 9,785 6,759
------------ ------------- ------------ ------------
Net income $ 2,358 $ 1,193 $ 14,912 $ 9,219
============ ============= ============ ============
EARNINGS PER COMMON SHARE DATA
(restated for 3:2 split on July 9, 1996)
Earnings per common share $ 0.02 $ 0.01 $ 0.12 $ 0.08
============ ============= ============ ============
Weighted average number of
common shares outstanding 125,707,000 116,223,000 125,654,000 116,013,000
============ ============= ============ ============
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral part
of these statements.
4
<PAGE> 5
OFFICEMAX, INC.
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
Common Shares Deferred
------------------------------- Stock Retained
Shares Amount Compensation Earnings Total
---------------- -------------- ----------------- ----------------- --------------
<S> <C> <C> <C> <C> <C>
Balance at January 27, 1996 123,496,170 $ 850,557 $ (1,482) $ 141,814 $ 990,889
Issuance of common shares
under director plan 3,234 49 (49) -- --
Exercise of stock options 48,285 269 -- -- 269
Sale of shares under employee
share purchase plan 71,462 1,293 -- -- 1,293
Amortization of deferred
compensation -- -- 502 -- 502
Net income -- -- -- 14,912 14,912
----------- ----------- ------------- ------------ -----------
Balance at July 27, 1996 123,619,151 $ 852,168 $ (1,029) $ 156,726 $ 1,007,865
=========== =========== ============= ============ ===========
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral part
of these statements.
5
<PAGE> 6
OFFICEMAX, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
<TABLE>
<CAPTION>
26 Weeks Ended
---------------------------------
July 27, 1996 July 22, 1995
------------- -------------
<S> <C> <C>
CASH PROVIDED BY (USED FOR):
OPERATIONS
Net income $ 14,912 $ 9,219
Adjustments to reconcile net income to net cash from
operating activities:
Depreciation and amortization 24,331 19,273
Deferred income taxes 169 1,494
Increase in other long-term liabilities 196 3,482
Increase (decrease) in other, net 511 (503)
Change in current assets and current liabilities:
Increase in inventories (144,706) (93,970)
Increase (decrease) in accounts payable 39,832 (40,147)
Decrease in other, net (72,574) (36,841)
--------- ---------
Net cash used for operations (137,329) (137,993)
--------- ---------
INVESTING
Capital expenditures (27,735) (15,146)
Decrease in cash on deposit with related party -- 141,017
Other, net 288 182
--------- ---------
Net cash provided by (used for) investing (27,447) 126,053
--------- ---------
FINANCING
Reduction in long-term debt and capital lease obligations (16) (218)
Net borrowings under revolving credit facility -- 15,000
Amount due from underwriters -- (110,177)
Proceeds from issuance of common stock 1,562 112,873
--------- ---------
Net cash provided by financing 1,546 17,478
--------- ---------
CASH AND CASH EQUIVALENTS
Net (decrease) increase for the period (163,230) 5,538
Balance, beginning of period 365,863 33,233
--------- ---------
Balance, end of period $ 202,633 $ 38,771
========= =========
SUPPLEMENTAL INFORMATION
Interest paid $ -- $ 155
========= =========
Income taxes paid $ 8,674 $ 19,131
========= =========
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral part
of these statements.
6
<PAGE> 7
OFFICEMAX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE 13 AND 26 WEEKS ENDED
JULY 27, 1996 AND JULY 22, 1995
Significant Accounting and Reporting Policies
- ---------------------------------------------
1. The accompanying consolidated financial statements have been prepared from
the financial records of OfficeMax, Inc. (the "Company" or "OfficeMax")
without audit and reflect all adjustments which are, in the opinion of
management, necessary to fairly present the results of the interim periods
covered in this report. The results for any interim period are not
indicative of the results to be expected for the full fiscal year. The
Company's business is somewhat seasonal, with sales generally higher in the
third and fourth quarters of each year and lowest during the second
quarter, primarily because of lower office supplies consumption during the
summer vacation period.
2. The Company's consolidated financial statements for the 13 weeks ended July
27, 1996 and July 22, 1995 included in this Quarterly Report on Form 10-Q,
have been prepared in accordance with the accounting policies described in
the Notes to Consolidated Financial Statements for the fiscal year ended
January 27, 1996 which were included in the Company's Annual Report on Form
10-K filed with the Securities Exchange Commission (File No. 1-13380) on
April 18, 1996. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted in accordance
with the rules and regulations of the Securities and Exchange Commission.
These financial statements should be read in conjunction with the financial
statements and the notes thereto included in the Form 10-K referred to
above. Certain reclassifications have been made to prior year amounts to
conform to the current presentation.
3. The Company's fiscal year ends on the Saturday prior to the last Wednesday
in January.
4. At July 27, 1996, the Company operated a chain of 493 office products
superstores in 194 markets, 43 states and Puerto Rico.
5. The Company's policy is to expense pre-opening expenses during the first
month of each new store's operation. Consequently pre-opening expense in
each period is generally a function of the number of new stores opened
during that period.
6. On May 8, 1995, the Company's Cash Management Agreement with Kmart
Corporation ("Kmart") expired and the Company activated its $100 million
revolving credit facility. As of July 27, 1996, there were no borrowings
outstanding under this facility.
7. On May 22, 1996, the Board of Directors declared a three-for-two share
split in the form of a 50% share dividend payable July 9, 1996 to
shareholders of record as of June 3, 1996. Average shares outstanding and
all per share amounts included in the accompanying consolidated financial
statements and notes thereto give retroactive effect to the share dividend.
8. The average common and common equivalent shares utilized in computing
earnings per share for the 13 and 26 weeks ended July 27, 1996 include
2,112,583 and 2,058,507 shares, respectively, resulting from the
application of the treasury stock method to outstanding stock options.
7
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
-----------------------------------------------
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
RESULTS OF OPERATIONS
- ---------------------
SALES for the 13 and 26 weeks ended July 27, 1996 increased 28.9% and 30.0% to
$622,132,000 and $1,352,727,000, respectively, from $482,460,000 and
$1,040,333,000 for the comparable periods a year earlier. These sales increases
were primarily attributable to a full period of sales from the 80 stores opened
during fiscal 1995, a comparable store sales increase of 13.3% and 14.4% for the
13 weeks and 26 weeks, respectively, and, to a lesser extent, the additional
sales from 18 and 25 new superstores and one and three new delivery centers
opened during the period. Included in these comparable store sales increases are
comparable store computer sales increases that range from 40% to 50% over the
same periods a year earlier. During the last nine days of the quarter, sales of
all merchandise categories were adversely affected by the record Olympic
television viewing audience, particularly during the evening hours as customers
stayed home to watch television rather than following normal shopping patterns.
This trend continued into the first week of the current third quarter until the
Olympics concluded.
COST OF MERCHANDISE SOLD, INCLUDING BUYING AND OCCUPANCY COSTS, increased as a
percentage of sales to 78.4% and 78.2% for the 13 and 26 weeks ended July 27,
1996, respectively, from 78.2% and 77.9% of sales for the same periods a year
earlier. Correspondingly, gross profit for the 13 and 26 weeks ended July 27,
1996, was 21.6% and 21.8%, respectively, compared to 21.8% and 22.1% for the
same periods a year earlier. These decreases in gross profit were primarily
attributable to increased lower margin computer sales as a percentage of the
total merchandise mix offset by continued leveraging of occupancy costs over
higher sales volume.
STORE OPERATING AND SELLING EXPENSES, which consist primarily of store payroll,
operating and advertising expenses, decreased to 18.2% and 17.6% for the 13 and
26 weeks ended July 27, 1996, respectively, from 18.4% and 18.0% of sales for
the same periods a year earlier. These decreases were primarily as a result of
leveraging of payroll expense over higher sales volumes and continued expense
control offset by increased noncapitalizable remodeling expense.
PRE-OPENING EXPENSE was $1,869,000 and $2,401,000 for the 13 and 26 weeks ended
July 27, 1996, respectively, from $1,200,000 and $1,506,000 for the same periods
a year earlier, reflecting the opening of 18 and 25 super stores during the 13
and 26 weeks ended July 27, 1996, compared to 16 and 20 for the same periods a
year earlier. Pre-opening expenses averaged approximately $75,000 per store for
both the current and prior year, consisting primarily of store payroll, supplies
and grand opening advertising. During the second quarter the Company also opened
nine FurnitureMaxes and five CopyMaxes, which pre-opening expenses average
approximately $25,000 and $35,000, respectively, per store.
GENERAL AND ADMINISTRATIVE EXPENSES were 2.5% and 2.2% for the 13 and 26 weeks
ended July 27, 1996, respectively, compared to 2.4% and 2.2% for the same
periods a year earlier. The increase during the quarter reflects the Company's
comprehensive program to ensure that it continues to expand its management team
to keep pace with its projected growth, both in the United States and abroad, as
well as with respect to new initiatives, such as FurnitureMax and CopyMax.
GOODWILL AMORTIZATION was $2,348,000 and $4,695,000 for the 13 and 26 weeks
ended July 27, 1996, respectively, as compared to $2,353,000 and $4,706,000 for
the comparable periods a year earlier. Goodwill is capitalized and amortized
over 40 years using the straight line method.
OPERATING INCOME increased to $2,273,000 and $20,272,000 or 0.4% and 1.5% of
sales, for the 13 and 26 weeks ended July 27, 1996, respectively, as compared to
operating income of $1,521,000 and $13,701,000, or 0.3% and 1.3% of sales, for
the same periods a year earlier.
INTEREST INCOME (EXPENSE), NET was $1,635,000 and $4,425,000 for the 13 and 26
weeks ended July 27, 1996, respectively, compare to $(25,000) and $1,261,000 for
the same periods a year earlier. Interest income for the 13 and 26 week periods
was primarily attributable to interest earned on cash received from both the
Company's July
8
<PAGE> 9
1995 public offering and the sale of its approximate 20% interest in Corporate
Express, Inc. ("Corporate Express") in September 1995.
EQUITY INCOME FROM AFFILIATE for the prior year 13 and 26 week periods were
$572,000 and $1,016,000, respectively, and represents the Company's
proportionate share of income reported by Corporate Express for the three and
six months ended July 22, 1995. The Company sold its entire interest in
Corporate Express on September 10, 1995.
INCOME TAXES were $1,550,000 and $9,785,000 for the 13 and 26 weeks ended July
27, 1996, respectively, as compared to $875,000 and $6,759,000 for same periods
a year ago. The effective tax rates for both periods are different from the
federal statutory income tax rate primarily as a result of non-deductible
goodwill amortization expense, tax exempt interest and state and local taxes.
NET INCOME as a result of the foregoing factors, was $2,358,000 and $14,912,000
for the 13 and 26 weeks ended July 27, 1996, respectively, as compared
$1,193,000 and $9,219,000 for the same periods a year earlier.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
Net cash used for operations for the 26 weeks ended July 27, 1996 was
$137,329,000. Funding required for working capital increased primarily due to
additional inventory relating to seasonal factors, the 25 new superstores and
three new delivery centers opened during the period, offset by higher accounts
payable. Net cash used for investing activities was $27,447,000 for the period,
principally as a result of the purchase of fixed assets. Net cash provided by
financing was $1,546,000 for the period, primarily from net proceeds received
from the sale of shares under the Company's share purchase plans.
The Company plans to open 25 new OfficeMax superstores, 14 new FurnitureMax
stores, 14 new CopyMax stores, two delivery centers and remodel 17 existing
superstores during the current quarter ending October 26, 1996. Management
estimates that the Company's cash requirements for these openings and remodels,
exclusive of pre-opening expenses, will be approximately $1,050,000, $215,000,
$335,000, $550,000 and $198,000, respectively, for each additional OfficeMax,
FurnitureMax, CopyMax, delivery center and store remodel. For an OfficeMax
superstore, the requirements include an average of approximately $450,000 for
leasehold improvements, fixtures, point-of-sales terminals and other equipment,
and approximately $600,000 for the portion of store inventory that is not
financed by accounts payable to vendors. Pre-opening expenses are expected to
average approximately $75,000 for an OfficeMax superstore, $35,000 for a CopyMax
store and $25,000 for a FurnitureMax store.
In order to finance its operations and capital requirements, including its
expansion strategy, the Company expects to use funds generated from operations
as well as its current cash reserves, and, to the extent necessary, seasonal
short-term borrowings. The Company has available through May 1999 a $100 million
revolving credit facility, of which no borrowings were outstanding as of July
27, 1996.
FORWARD-LOOKING STATEMENTS
- --------------------------
Certain statements in this Form 10-Q, in future filings by the Company with the
Securities and Exchange Commission (the "Commission"), in the Company's press
releases, and in oral statements made by or with the approval of an authorized
executive officer of the Company constitute "forward-looking statements" as that
term is defined under the Private Securities Litigation Reform Act of 1995 (the
"Act") and releases issued by the Commission. The words "believe," "expect,"
"anticipate," "intend," "estimate" and other expressions which are predictions
of or indicate future events and trends and which do not relate to historical
matters identify forward-looking statements. Reliance should not be placed on
forward-looking statements because they involve known and unknown risks,
uncertainties and other factors, which may cause the actual results, performance
or achievements of the Company to differ materially from anticipated future
results, performance or achievements expressed or implied by such
forward-looking statements. The Company undertakes no obligation to publicly
update or revise any forward-looking statement, whether as a result of new
information, future events or otherwise.
9
<PAGE> 10
The future operating results of the Company may be affected by a number of
factors, including without limitation the following:
The Company operates in the office products industry, which is highly
competitive. The Company competes with other high-volume, discount office
products superstore chains, such as Office Depot, Inc. and Staples, Inc. that
are similar to the Company in terms of store format, pricing strategy and
product selection. On September 4, 1996, Staples and Office Depot announced a
definitive agreement to merge, which will create a new entity that will have
sales exceeding $10 billion. Recognizing that the Company's two main competitors
plan to merge, and that they may have greater resources than the Company, no
assurance can be given that this merger will not have an adverse effect on the
Company's business. The Company's expansion into new geographic markets in which
its competitors are already established, and expansion of the Company's
competitors into markets in which the Company is currently operating, have had,
and may continue to have, an adverse effect on the Company's operations. In
addition, the Company believes that it will face increased competition in the
future as the Company and its competitors continue to expand their operations.
Any attempt by the Company or any of its competitors to reduce prices
systematically to gain market share or otherwise could result in industry wide
reduced prices and lower gross margins.
Over the last few years, the Company's rapid growth has resulted largely from
the Company's aggressive new store opening strategy. While the Company intends
to continue pursuing an aggressive new store expansion strategy by opening at
least 80 new superstores in each of fiscal 1996 and 1997 and by continuing to
consider strategic acquisitions, there is no guarantee that the Company's
historic growth rate can or will continue or that such new store openings or
acquisitions will occur. The Company's ability to open new superstores at its
planned rate is dependent on a number of factors, including the identification
and availability of suitable sites, the negotiation of acceptable leases for
these sites, the hiring, training and retention of skilled personnel, the
availability of adequate financing, and other factors, some of which are beyond
the control of the Company. In addition, the Company's expansion strategy
includes clustering new stores in existing markets, which results in some
transfer of sales from existing stores to the new locations. While management
believes that its aggressive expansion strategy will improve its overall market
position and, ultimately, its profitability, there can be no assurance that this
will occur.
The Company intends to continue to expand the operations of its related
businesses, CopyMax and FurnitureMax--initiatives which are still largely
unproven. The expansion of these related businesses requires the investment of
significant cash and resources, which may diminish the Company's overall success
and profitability. There is no guarantee that either CopyMax or FurnitureMax
ultimately will be profitable.
The Company is largely dependent on the services of Michael Feuer, the Company's
Co-Founder, Chairman and Chief Executive Officer, and its senior management. The
loss of Mr. Feuer or any of the Company's other senior management could have an
adverse impact on the Company.
The Company has entered into a joint venture agreement with locally-based
companies in Mexico and is in active negotiations with potential joint venture
partners in various countries in Asia. The Company is also exploring the
possibility of expansion into other international markets as well. There is no
guarantee that the Company will develop or maintain significant operations
internationally or that any such operations will be successful. Any
international operations established by the Company will be subject to risks
similar to those affecting its North American operations in addition to a number
of other risks, including lack of complete operating control, lack of local
business experience, foreign currency fluctuations, language and other cultural
barriers and political and economic instability.
The Company expects that its current cash and cash equivalents and funds
available under its revolving credit facility will be sufficient to fund its
planned store openings and other operating cash needs for at least the next 12
months. However, there can be no assurance that the Company will not require
additional sources of financing prior to that time as a result of unanticipated
cash needs, acquisitions or other opportunities or disappointing operating
results. There also can be no assurance that any additional funds required by
the Company will be available to the Company on satisfactory terms.
10
<PAGE> 11
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
- --------------------------
None.
Item 4. Submission of Matters to a Vote of Security Holders
- ------------------------------------------------------------
At the Annual Meeting of Shareholders of OfficeMax, Inc. held on May 22, 1996,
the nominees for election as Directors of the Corporation were elected without
opposition. The vote of the common stock, on a pre-split basis, with respect to
this election was:
<TABLE>
<CAPTION>
Nominee Number of Shares For
------- --------------------
<S> <C>
Term expiring in 1998:
Burnett W. Donoho 71,962,042
D. Dwayne Hoven 71,959,588
James W. McCann 71,958,586
Sydell L. Miller 71,964,006
</TABLE>
With respect to the proposed amendment to the 1994 Share Option Plan, the Board
of Directors adopted the proposed amendment as submitted by the votes indicated
below:
<TABLE>
<CAPTION>
Number of Shares
----------------
<S> <C>
For the proposal: 60,092,169
Against the proposal: 11,926,367
</TABLE>
The number of shares of broker non-votes for the above proposal was none.
With respect to the notification of the selection of Price Waterhouse LLP as the
Company's auditors for fiscal 1996, the Board of Directors adopted the proposed
amendment as submitted by the votes indicated below:
<TABLE>
<CAPTION>
Number of Shares
----------------
<S> <C>
For the proposal: 72,096,173
Against the proposal: 83,266
</TABLE>
The number of shares of broker non-voters for the above proposal was none.
Item 6. Exhibits and Reports on Form 8-K
- -----------------------------------------
Exhibits:
<TABLE>
<S> <C>
(a) Exhibits: 10.01 OfficeMax Equity-Based Award Plan (Amended and Restated
1994 Share Option Plan)
(b) Reports on Form 8-K: None.
</TABLE>
11
<PAGE> 12
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
<TABLE>
<S> <C>
OFFICEMAX, INC.
(Registrant)
Date: September 6, 1996 By: /s/ John C. Belknap
--------------------------------------------------
John C. Belknap
Executive Vice President, Chief Financial Officer
(Principal Financial Officer and
Principal Accounting Officer)
</TABLE>
12
<PAGE> 13
EXHIBIT INDEX
-------------
<TABLE>
<CAPTION>
Exhibit No. Description of Exhibit Sequential Page No.
- ----------- ---------------------- -------------------
<C> <C> <C>
10.01 Exhibits: 10.01 OfficeMax Equity-Based Award Plan (Amended and Restated 14
1994 Share Option Plan)
27 Financial Data Schedule
</TABLE>
13
<PAGE> 1
OFFICEMAX, INC. EXHIBIT 10.01
EQUITY-BASED AWARD PLAN
(AMENDED AND RESTATED 1994 SHARE OPTION PLAN)
SECTION 1. PURPOSE; DEFINITIONS.
The purpose of the OfficeMax, Inc. Equity-Based Award Plan (the "Plan") is to
enable OfficeMax, Inc. (the "Company") to attract, retain and reward key
employees of the Company and strengthen the mutuality of interests between those
key employees and the Company's shareholders by offering designated employees
equity or equity-based incentives.
For purposes of the Plan, the following terms are defined as follows:
(a) "Affiliate" means any entity (other than the Company and any
Subsidiary) that is designated by the Board as a participating employer
under the Plan.
(b) "Award" means any award of Stock Options, Share Appreciation Rights
or Restricted Shares under the Plan.
(c) "Board" means the Board of Directors of the Company.
(d) "Change in Control" has the meaning set forth in Section 8(b).
(e) "Change in Control Price" has the meaning set forth in Section
8(d).
(f) "Code" means the Internal Revenue Code of 1986, as amended from
time to time, and any successor thereto.
(g) "Committee" means the Committee referred to in Section 2 of the
Plan.
(h) "Company" means OfficeMax, Inc., an Ohio corporation, or any
successor corporation.
(i) "Disability" means disability as defined in Section 422(c)(6) of
the Code.
(j) "Disinterested Person" has the meaning set forth in Rule
16b-3(c)(2)(i) as promulgated by the Securities and Exchange Commission
under the Exchange Act, or any successor definition adopted by the
Securities and Exchange Commission.
(k) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(l) "Fair Market Value" means the closing selling price, regular way,
of the Shares on the New York Stock Exchange on the trading date
immediately preceding the date of grant (or, if the Shares no longer
trade on the New York Stock Exchange, any other national exchange). If
the Shares are no longer traded on any national exchange, then the Fair
Market Value of the Shares as of any date is the value determined for
that date by the Committee in good faith.
(m) "Incentive Stock Option" means any Stock Option intended to be and
designated as, and that otherwise qualifies as, an "Incentive Stock
Option," within the meaning of Section 422 of the Code or any successor
section thereto.
(n) "Non-Qualified Stock Option" means any Stock Option that is not an
Incentive Stock Option.
(o) "Outside Director" has the meaning set forth in Section 162(m) of
the Code and the regulations promulgated thereunder.
(p) "Plan" means the OfficeMax, Inc. Equity-Based Award Plan, as
amended from time to time.
(q) "Potential Change in Control" has the meaning set forth in Section
8(c).
(r) "Restricted Shares" means an award of shares that is granted
pursuant to Section 7 and is subject to restrictions.
(s) "Section 16 Participant" means a participant under the Plan who is
subject to Section 16 of the Exchange Act.
(t) "Share Appreciation Right" means an award of a right to receive an
amount from the Company that is granted pursuant to Section 6.
(u) "Shares" means the Common Shares, without par value, of the
Company.
(v) "Stock Option" or "Option" means any option to purchase Shares
(including Restricted Shares, if the Committee so determines) that is
granted pursuant to Section 5.
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(w) "Subsidiary" means any corporation (other than the Company) in an
unbroken chain of corporations beginning with the Company if each of
the corporations (other than the last corporation in the unbroken
chain) owns stock possessing 50% or more of the total combined voting
power of all classes of stock in one of the other corporations in that
chain.
SECTION 2. ADMINISTRATION.
The Plan shall be administered by the Compensation Committee of the Board (the
"Committee"). The Committee shall consist of not less than three directors of
the Company, all of whom shall be Disinterested Persons and Outside Directors.
Those directors shall be appointed by the Board and shall serve as the Committee
at the pleasure of the Board. The functions of the Committee specified in the
Plan shall be exercised by the Board if and to the extent that no Committee
exists that has the authority to so administer the Plan.
The Committee shall have full power to interpret and administer the Plan and
full authority to select the individuals to whom Awards will be granted and to
determine the type and amount of any Award to be granted to each participant,
the consideration, if any, to be paid for any Award, the timing of each Award,
the terms and conditions of any Award granted under the Plan and the terms and
conditions of the related agreements that will be entered into with
participants. As to the selection of and grant of Awards to participants who are
not Section 16 Participants, the Committee may delegate its responsibilities to
members of the Company's management in any manner consistent with applicable
law.
The Committee shall have the authority to adopt, alter and repeal such rules,
guidelines and practices governing the Plan as it shall, from time to time, deem
advisable; to interpret the terms and provisions of the Plan and any Award
issued under the Plan (and any agreement relating thereto); to direct employees
of the Company or other advisors to prepare such materials or perform such
analyses as the Committee deems necessary or appropriate; and otherwise to
supervise the administration of the Plan.
Any interpretation or administration of the Plan by the Committee, and all
actions and determinations of the Committee, shall be final, binding and
conclusive on the Company, its shareholders, Subsidiaries, Affiliates, all
participants in the Plan, their respective legal representatives, successors and
assigns, and all persons claiming under or through any of them. No member of the
Board or of the Committee shall incur any liability for any action taken or
omitted, or any determination made, in good faith in connection with the Plan.
SECTION 3. SHARES SUBJECT TO THE PLAN.
(a) Aggregate Shares Subject to the Plan. Subject to adjustment as
provided in Section 3(c), the total number of Shares reserved and
available for Awards under the Plan is 7,764,895 million (including
Shares issued under the Company's 1992 Nonqualified Stock Option Plan
from the reserved and available Shares under the 1992 Nonqualified
Stock Option Plan). Any Shares issued hereunder may consist, in whole
or in part, of authorized and unissued shares or treasury shares.
(b) Forfeiture or Termination of Awards of Shares. If any Shares
subject to any Award granted hereunder are forfeited or an Award
otherwise terminates or expires without the issuance of Shares, the
Shares subject to that Award shall again be available for distribution
in connection with future Awards under the Plan as provided in Section
3(a), unless the participant who had been awarded those forfeited
Shares or the expired or terminated Award has theretofore received
dividends or other benefits of ownership with respect to those Shares.
For purposes hereof, a participant shall not be deemed to have received
a benefit of ownership with respect to those Shares by the exercise of
voting rights, or by the accumulation of dividends that are not
realized because of the forfeiture of those Shares or the expiration or
termination of the related Award without issuance of those Shares.
(c) Adjustment. In the event of any merger, reorganization,
consolidation, recapitalization, share dividend, share split,
combination of shares or other change in corporate structure of the
Company affecting the Shares, such substitution or adjustment shall be
made in the aggregate number of Shares reserved for issuance under the
Plan, in the number and option price of shares subject to outstanding
options granted under the Plan, in the number of Share Appreciation
Rights granted under the Plan and in the number of shares subject to
Restricted Share Awards granted under the Plan as may be approved by
the Committee, in its sole discretion, but the number of shares subject
to any Award shall always be a whole number. In addition, in the event
of a merger or sale of the Company, the Committee will have the
authority to substitute Awards with similar awards of equity of the
surviving or acquiring entity. Any fractional shares shall be
eliminated.
(d) Annual Award Limit. No participant may be granted Stock Options or
other Awards under the Plan with respect to an aggregate of more than
500,000 Shares (subject to adjustment as provided in Section 3(c)
hereof) during any calendar year.
SECTION 4. ELIGIBILITY.
Officers and other key employees of the Company, and of its Subsidiaries and
Affiliates, if any, who are responsible for or contribute to the management,
growth or profitability of the business of the Company (or of its Subsidiaries
or Affiliates, if any), are eligible to be granted Awards under the Plan.
SECTION 5. STOCK OPTIONS.
(a) Grant. Stock Options may be granted alone, in addition to or in
tandem with other Awards granted under the Plan or cash awards made
outside the Plan. The Committee shall determine the individuals to
whom, and the time or times at which, grants of Stock Options will be
made, the number of Shares purchasable under each Stock Option and the
other terms and conditions of the Stock Options in addition to those
set forth in
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<PAGE> 3
Sections 5(b) and 5(c). Any Stock Option granted under the Plan shall
be in such form as the Committee may from time to time approve.
Stock Options granted under the Plan may be of two types which shall be
indicated on their face: (i) Incentive Stock Options and (ii)
Non-Qualified Stock Options. Subject to Section 5(c), the Committee
shall have the authority to grant to any participant Incentive Stock
Options, Non-Qualified Stock Options or both types of Stock Options.
(b) Terms and Conditions. Options granted under the Plan shall be
evidenced by Option Agreements, shall be subject to the following terms
and conditions and shall contain such additional terms and conditions,
not inconsistent with the terms of the Plan, as the Committee shall
deem desirable:
(1) Option Price. The option price per share of Shares
purchasable under a Non-Qualified Stock Option or an Incentive
Stock Option shall be determined by the Committee at the time
of grant and shall be not less than 100% of the Fair Market
Value of the Shares at the date immediately preceding the date
of grant (or, with respect to an incentive stock option, 110%
of the Fair Market Value of the Shares at the date of grant in
the case of a participant who at the date of grant owns Shares
possessing more than ten percent of the total combined voting
power of all classes of stock of the Company or its parent or
subsidiary corporations (as determined under Sections 424(d),
(e) and (f) of the Code)).
(2) Option Term. The term of each Stock Option shall be
determined by the Committee and may not exceed ten years from
the date the Option is granted (or, with respect to an
Incentive Stock Option, five years in the case of a
participant who at the date of grant owns Shares possessing
more than ten percent of the total combined voting power of
all classes of stock of the Company or its parent or
subsidiary corporations (as determined under Sections 424(d),
(e) and (f) of the Code)).
(3) Exercise. Stock Options shall be exercisable at such time
or times and shall be subject to such terms and conditions as
shall be determined by the Committee at or after grant; but,
except as provided in Section 5(b)(6) and Section 8, unless
otherwise determined by the Committee at or after grant, no
Stock Option shall be exercisable prior to six months and one
day following the date of grant. If any Stock Option is
exercisable only in installments or only after specified
exercise dates, the Committee may waive, in whole or in part,
such installment exercise provisions, and may accelerate any
exercise date or dates, at any time at or after grant based on
such factors as the Committee shall determine, in its sole
discretion.
(4) Method of Exercise. Subject to any installment exercise
provisions that apply with respect to any Stock Option, and
the six month and one day holding period set forth in Section
5(b)(3), that Stock Option may be exercised in whole or in
part, at any time during the option period, by the holder
thereof giving to the Company written notice of exercise
specifying the number of Shares to be purchased.
That notice shall be accompanied by payment in full of the
option price of the Shares for which the Option is exercised,
in cash or Shares or by check or such other instrument as the
Committee may accept. The value of each such Share surrendered
or withheld shall be 100% of the Fair Market Value of the
Shares on the date the option is exercised.
No Shares shall be issued on an exercise of an Option until
full payment has been made. A participant shall not have
rights to dividends or any other rights of a shareholder with
respect to any Shares subject to an Option unless and until
the participant has given written notice of exercise, has paid
in full for those Shares, has given, if requested, the
representation described in Section 11(a), and those Shares
have been issued to him.
(5) Non-Transferability of Options. No Stock Option shall be
transferable by any participant other than by will or by the
laws of descent and distribution or pursuant to a qualified
domestic relations order (as defined in the Code or the
Employment Retirement Income Security Act of 1974, as amended)
except that, if so provided in the Option Agreement, the
participant may transfer the Option during his lifetime to one
or more members of his family, to one or more trusts for the
benefit of one or more of his family, or to a partnership or
partnerships of members of his family, provided that no
consideration is paid for the transfer and that the transfer
would not result in the loss of any exemption under Rule 16b-3
of the Exchange Act with respect to any Option. The transferee
of an Option will be subject to all restrictions, terms and
conditions applicable to the Option prior to its transfer,
except that the Option will not be further transferable by the
transferee other than by will or by the laws of descent and
distribution.
(6) Termination by Death. Subject to Section 5(c), if any
participant's employment with the Company or any Subsidiary or
Affiliate terminates by reason of death, any Stock Option held
by that participant not previously exercised and vested will
become fully vested and exercisable, by the estate of the
participant (acting through its fiduciary), for a period of
one year from the date of that death (or such other period as
the Committee may specify at or after grant).
(7) Termination by Reason of Disability. Subject to Sections
5(b)(3) and 5(c), if a participant's employment with the
Company or any Subsidiary or Affiliate terminates by reason of
Disability, any Stock Option held by that participant not
previously exercised and vested will become fully vested and
exercisable by the participant or by the participant's duly
authorized legal representative if the participant is unable
to exercise the Option as a result of the participant's
Disability, for a period of one year from the date of such
termination of employment (or such other period as the
Committee
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<PAGE> 4
may specify at or after grant), but in no event may any such
Option be exercised prior to six months and one day from the
date of grant; and if the participant dies within that
one-year period (or such other period as the Committee shall
specify at or after grant), any unexercised Stock Option held
by that participant shall thereafter be exercisable by the
estate of the participant (acting through its fiduciary) to
the same extent to which it was exercisable at the time of
death, for a period of one year from the date of that
termination of employment.
(8) Other Termination. Unless otherwise determined by the
Committee at or after the time of granting any Stock Option,
if a participant's employment with the Company or any
Subsidiary or Affiliate terminates for any reason other than
death or Disability, all Stock Options held by that
participant shall terminate 90 days after the date employment
terminates.
(c) Incentive Stock Options. Notwithstanding Sections 5(b)(6) and (7),
an Incentive Stock Option shall be exercisable by (i) a participant's
authorized legal representative (if the participant is unable to
exercise the Incentive Stock Option as a result of the participant's
Disability) only if, and to the extent, permitted by Section 422 of the
Code and (ii) by the participant's estate, in the case of death, or
authorized legal representative, in the case of Disability, no later
than ten years from the date the Incentive Stock Option was granted (in
addition to any other restrictions or limitations that may apply).
Anything in the Plan to the contrary notwithstanding, no term or
provision of the Plan relating to Incentive Stock Options shall be
interpreted, amended or altered, nor shall any discretion or authority
granted under the Plan be exercised, so as to disqualify the Plan under
Section 422 of the Code, or, without the consent of the participants
affected, to disqualify any Incentive Stock Option under that Section
422 or any successor Section thereto.
(d) Buyout Provisions. The Committee may at any time buy out for a
payment in cash, Shares or Restricted Shares an Option previously
granted, based on such terms and conditions as the Committee shall
establish and agree upon with the participant, but no such transaction
involving a Section 16 Participant shall be structured or effected in a
manner that would result in any liability on the part of the
participant under Section 16(b) of the Exchange Act or the rules and
regulations promulgated thereunder.
SECTION 6. SHARE APPRECIATION RIGHTS.
(a) Grant. Share Appreciation Rights may be granted in connection with
all or any part of an Option, either concurrently with the grant of the
Option or, if the Option is a Non-Qualified Stock Option, by an
amendment to the Option at any time thereafter during the term of the
Option. Share Appreciation Rights may be exercised in whole or in part
at such times under such conditions as may be specified by the
Committee in the participant's Option Agreement.
(b) Terms and Conditions. The following terms and conditions will apply
to all Share Appreciation Rights that are granted in connection with
Options:
(1) Rights. Share Appreciation Rights shall entitle the
participant, upon exercise of all or any part of the Share
Appreciation Rights, to surrender to the Company unexercised
that portion of the underlying Option relating to the same
number of Shares as is covered by the Share Appreciation
Rights (or the portion of the Share Appreciation Rights so
exercised) and to receive in exchange from the Company an
amount (paid as provided in Section 6(b)(5)) equal to the
excess of (x) the Fair Market Value, on the date of exercise,
of the Shares covered by the surrendered portion of the
underlying Option over (y) the exercise price of the Shares
covered by the surrendered portion of the underlying Option.
The Committee may limit the amount that the participant will
be entitled to receive upon surrender of a Share Appreciation
Right.
(2) Surrender of Option. Upon the exercise of the Share
Appreciation Right and surrender of the related portion of the
underlying Option, the Option, to the extent surrendered, will
not thereafter be exercisable. The underlying Option may
provide that such Share Appreciation Rights will be payable
solely in cash. The terms of the underlying Option shall
provide a method by which an alternative fair market value of
the Shares on the date of exercise shall be calculated based
on one of the following: (x) the closing price of the Shares
on the national exchange on which they are then traded on the
business day immediately preceding the day of exercise; (y)
the highest closing price of the Shares on the national
exchange on which they have been traded, during the 90 days
immediately preceding the Change in Control; or (z) the
greater of (x) and (y).
(3) Exercise. In addition to any further conditions upon
exercise that may be imposed by the Committee, the Share
Appreciation Rights shall be exercisable only to the extent
that the related Option is exercisable, except that in no
event will a Share Appreciation Right held by a Section 16
Participant be exercisable within the first six months after
it is awarded even though the related Option is or becomes
exercisable, and each Share Appreciation Right will expire no
later than the date on which the related Option expires. A
Share Appreciation Right may only be exercised at a time when
the Fair Market Value of the Shares covered by the Share
Appreciation Right exceeds the exercise price of the Shares
covered by the underlying Option. No Share Appreciation Right
held by a Section 16 Participant shall be exercisable by its
terms within the first six months after it is granted, and a
Section 16 Participant may only exercise a Share Appreciation
Right during a period beginning on the third business day and
ending on the twelfth business day following the release for
publication of quarterly or annual summary statements of the
Company's sales and earnings.
(4) Method of Exercise. Share Appreciation Rights may be
exercised by the participant's giving written notice of the
exercise to the Company, stating the number of Share
Appreciation Rights he
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has elected to exercise and surrendering the portion of the
underlying Option relating to the same number of Shares as the
number of Share Appreciation Rights elected to be exercised.
(5) Payment. The manner in which the Company's obligation
arising upon the exercise of the Share Appreciation Right will
be paid will be determined by the Committee and shall be set
forth in the participant's Option Agreement. The Committee may
provide for payment in Shares or cash, or a fixed combination
of Shares or cash, or the Committee may reserve the right to
determine the manner of payment at the time the Share
Appreciation Right is exercised. Shares issued upon the
exercise of a Share Appreciation Right will be valued at their
Fair Market Value on the date of exercise.
SECTION 7. RESTRICTED SHARES.
(a) Grant. Restricted Shares may be issued alone, in addition to or in
tandem with other Awards under the Plan or cash awards made outside of
the Plan. The Committee shall determine the individuals to whom, and
the time or times at which, grants of Restricted Shares will be made,
the number of Restricted Shares to be awarded to each participant, the
price (if any) to be paid by the participant (subject to Section 7(b)),
the date or dates upon which Restricted Share Awards will vest and the
period or periods within which those Restricted Share Awards may be
subject to forfeiture, and the other terms and conditions of those
Awards in addition to those set forth in Section 7(b).
The Committee may condition the grant of Restricted Shares upon the
attainment of specified performance goals or such other factors as the
Committee may determine in its sole discretion.
(b) Terms and Conditions. Restricted Shares awarded under the Plan
shall be subject to the following terms and conditions and such
additional terms and conditions, not inconsistent with the provisions
of the Plan, as the Committee shall deem desirable. A participant who
receives a Restricted Share Award shall not have any rights with
respect to that Award, unless and until the participant has executed an
agreement evidencing the Award in the form approved from time to time
by the Committee and has delivered a fully executed copy thereof to the
Company, and has otherwise complied with the applicable terms and
conditions of that Award.
(1) The purchase price (if any) for Restricted Shares shall be
determined by the Committee at the time of grant.
(2) Awards of Restricted Shares must be accepted by executing
a Restricted Share Award agreement and paying the price (if
any) that is required under Section 7(b)(1).
(3) Each participant receiving a Restricted Share Award shall
be issued a stock certificate in respect of those Restricted
Shares. The certificate shall be registered in the name of the
participant, and shall bear an appropriate legend referring to
the terms, conditions and restrictions applicable to the
Award.
(4) The Committee shall require that the stock certificates
evidencing the Restricted Shares be held in custody by the
Company until the restrictions thereon shall have lapsed, and
that, as a condition of any Restricted Shares Award, the
participant shall have delivered to the Company a stock power,
endorsed in blank, relating to the Shares covered by that
Award.
(5) Subject to the provisions of this Plan and the Restricted
Share Award agreement, during a period set by the Committee
commencing with the date of any Award (the "Restriction
Period"), the participant shall not be permitted to sell,
transfer, pledge, assign or otherwise encumber the Restricted
Shares covered by that Award. The Restriction Period shall not
be less than six months and one day in duration ("Minimum
Restriction Period"). Subject to these limitations and the
Minimum Restriction Period requirement, the Committee, in its
sole discretion, may provide for the lapse of restrictions in
installments and may accelerate or waive restrictions, in
whole or in part, based on service, performance or such other
factors and criteria as the Committee may determine in its
sole discretion.
(6) Except as provided in this Section 7(b)(6), Section
7(b)(5) and Section 7(b)(7), the participant shall have, with
respect to the Restricted Shares awarded, all of the rights of
a shareholder of the Company, including the right to vote the
Shares, and the right to receive any dividends. The Committee,
in its sole discretion, as determined at the time of award,
may permit or require the payment of cash dividends to be
deferred and subject to forfeiture and, if the Committee so
determines, reinvested, subject to Section 11(f), in
additional Restricted Shares to the extent Shares are
available under Section 3, or otherwise reinvested. Unless the
Committee or Board determines otherwise, share dividends
issued with respect to Restricted Shares shall be treated as
additional Restricted Shares that are subject to the same
restrictions and other terms and conditions that apply to the
Shares with respect to which such dividends are issued.
(7) No Restricted Shares shall be transferable by a
participant other than by will or by the laws of descent and
distribution.
(8) If a participant's employment with the Company or any
Subsidiary or Affiliate terminates by reason of death, any
Restricted Shares held by that participant shall thereafter
vest and any restriction shall lapse.
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<PAGE> 6
(9) If a participant's employment with the Company or any
Subsidiary or Affiliate terminates by reason of Disability,
any Restricted Shares held by that participant shall
thereafter vest and any restriction shall lapse.
(10) Unless otherwise determined by the Committee at or after
the time of granting any Restricted Shares, if a participant's
employment with the Company or any Subsidiary or Affiliate
terminates for any reason other than death or Disability, the
Restricted Shares held by that participant that are unvested
or subject to restriction at the time of termination shall
thereupon be forfeited.
(c) Minimum Value. In order to better ensure that award payments
actually reflect the performance of the Company and service of the
participant, the Committee may provide, in its sole discretion, for a
tandem performance-based or other award designed to guarantee a minimum
value, payable in cash or Shares, to the recipient of a Restricted
Share Award, subject to such performance, future service, deferral and
other terms and conditions as may be specified by the Committee.
SECTION 8. CHANGE IN CONTROL PROVISION.
(a) Impact of Event. At any time during the 365 days commencing with
the date of either (1) a "Change in Control" as defined in Section 8(b)
or (2) a "Potential Change in Control" as defined in Section 8(c), a
majority of the "Continuing Directors" as defined in Section 8(e) (or
one of the two Continuing Directors if only two Continuing Directors
are then serving on the Board of Directors or the sole Continuing
Director if only one Continuing Director is then serving on the Board
of Directors) may cause the following provisions to take effect as
stated and as of the date set forth in a Written Action (the "Written
Action") adopted to that effect (that date, the "Accelerated Vesting
Date") and if there are no Continuing Directors, the following
provisions will automatically take effect:
(1) Any Stock Options awarded under the Plan not previously
exercisable and vested shall become fully exercisable and
vested;
(2) Any Share Appreciation Rights shall become immediately
exercisable;
(3) The restrictions applicable to any Restricted Shares
Awards shall lapse and such shares and awards shall be deemed
fully vested; and
(4) The value of all outstanding Awards, in each case to the
extent vested, shall, unless otherwise determined by the
Committee in its sole discretion at or after grant but prior
to any Change in Control or Potential Change in Control, be
paid to the participant in cash in exchange for the surrender
of those Awards on the basis of the "Change in Control Price"
as defined in Section 8(d) as of the Accelerated Vesting Date;
but the provisions of Sections 8(a)(1) through (3) shall not apply with
respect to Awards granted to any Section 16 Participant which have been
held by such participant for less than six months and one day as of the
Accelerated Vesting Date.
(b) Definition of Change in Control. For purposes of Section 8(a), a
"Change in Control" means the occurrence of any of the following: (i)
the Board or shareholders of the Company approve a consolidation or
merger that results in the shareholders of the Company immediately
prior to the transaction giving rise to the consolidation or merger
owning less than 50% of the total combined voting power of all classes
of stock entitled to vote of the surviving entity immediately after the
consummation of the transaction giving rise to the merger or
consolidation; (ii) the Board or shareholders of the Company approve
the sale of substantially all of the assets of the Company or the
liquidation or dissolution of the Company; (iii) any person or other
entity (other than the Company or a Subsidiary or any Company employee
benefit plan (including any trustee of any such plan acting in its
capacity as trustee)) purchases any Shares (or securities convertible
into Shares) pursuant to a tender or exchange offer without the prior
consent of the Board of Directors, or becomes the beneficial owner of
securities of the Company representing 30% or more of the voting power
of the Company's outstanding securities; or (iv) during any two-year
period, individuals who at the beginning of such period constitute the
entire Board of Directors cease to constitute a majority of the Board
of Directors, unless the election or the nomination for election of
each new director is approved by at least two-thirds of the directors
then still in office who were directors at the beginning of that
period.
(c) Definition of Potential Change in Control. For purposes of Section
8(a), a "Potential Change in Control" means the happening of any one of
the following:
(1) The approval by the shareholders of the Company of an
agreement by the Company, the consummation of which would
result in a Change in Control of the Company as defined in
Section 8(b); or
(2) The acquisition of beneficial ownership, directly or
indirectly, by any entity, person or group (other than the
Company or a Subsidiary or any Company employee benefit plan
(including any trustee of any such plan acting in its capacity
as trustee)) of securities of the Company representing 25% or
more of the combined voting power of the Company's outstanding
securities and the adoption by the Board of a resolution to
the effect that a Potential Change in Control of the Company
has occurred for purposes of this Plan.
(d) Change in Control Price. For purposes of this Section 8, "Change in
Control Price", means the greater of: (a) the highest price per share
paid in any transaction reported on the New York Stock Exchange
Composite
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Index (or, if the Shares are not then traded on the New York Stock
Exchange, the highest price paid as reported for any national exchange
on which the Shares are then traded) or paid or offered in any bona
fide transaction related to a Change in Control or Potential Change in
Control of the Company, at any time during the 60-day period
immediately preceding the occurrence of the Change in Control (or, when
applicable, the occurrence of the Potential Change in Control event),
and (b) the highest price per share paid in any transaction reported on
the New York Stock Exchange Composite Index (or, if the Shares are not
then traded on the New York Stock Exchange, the highest price paid as
reported for any national exchange on which the Shares are then
traded), at any time during the 60-day period immediately preceding the
date on which the Continuing Directors execute a Written Action
relating to that Change in Control or Potential Change in Control, in
each case as determined by the Committee.
(e) Definition of Continuing Director. For purposes of this Section 8,
a "Continuing Director" means an individual who was a member of the
Board of Directors immediately prior to the date of a Change in Control
or a Potential Change in Control and is a member of the Board of
Directors at the time a Written Action relating to that Change in
Control or Potential Change in Control is taken.
SECTION 9. AMENDMENTS AND TERMINATION.
The Board may at any time, in its sole discretion, amend, alter or discontinue
the Plan, but no such amendment, alteration or discontinuation shall be made
that would impair the rights of a participant under an Award theretofore
granted, without the participant's consent. Notwithstanding the foregoing, any
amendment to Section 8 hereof requires the affirmative vote of a majority of the
Continuing Directors (or one of the two Continuing Directors if only two
Continuing Directors are then serving on the Board of Directors or the sole
Continuing Director if only one Continuing Director is then serving on the Board
of Directors). The Company shall submit to the shareholders of the Company for
their approval any amendment to the Plan which is required by Section 16 of the
Exchange Act or the rules and regulations thereunder, or Section 162(m) of the
Code, to be approved by the shareholders.
The Committee may at any time, in its sole discretion, amend the terms of any
Award, but no such amendment shall be made that would impair the rights of a
participant under an Award theretofore granted, without the participant's
consent; nor shall any such amendment be made that would make the applicable
exemptions provided by Rule 16b-3 under the Exchange Act unavailable to any
Section 16 Participant holding the Award without the participant's consent.
Subject to the above provisions, the Board shall have all necessary authority to
amend the Plan to take into account changes in applicable securities and tax
laws and accounting rules, as well as other developments.
SECTION 10. UNFUNDED STATUS OF PLAN.
The Plan is intended to constitute an "unfunded" plan for incentive
compensation. With respect to any payment not yet made to a participant by the
Company, nothing contained herein shall give that participant any rights that
are greater than those of a general creditor of the Company.
SECTION 11. GENERAL PROVISIONS.
(a) The Committee may require each participant acquiring Shares
pursuant to an Award under the Plan to represent to and agree with the
Company in writing that the participant is acquiring the Shares without
a view to distribution thereof. The certificates for any such Shares
may include any legend which the Committee deems appropriate to reflect
any restrictions on transfer.
All Shares or other securities delivered under the Plan shall be
subject to such stop-transfer orders and other restrictions as the
Committee may deem advisable under the rules, regulations and other
requirements of the Securities and Exchange Commission, any stock
exchange upon which the Shares are then listed, and any applicable
federal or state securities laws, and the Committee may cause a legend
or legends to be put on any certificate for any such Shares to make
appropriate reference to those restrictions.
(b) Nothing contained in this Plan shall prevent the Board from
adopting other or additional compensation arrangements, subject to
shareholder approval if such approval is required, and such
arrangements may be either generally applicable or applicable only in
specific cases.
(c) Neither the adoption of the Plan, nor its operation, nor any
document describing, implementing or referring to the Plan, or any part
thereof, shall confer upon any participant under the Plan any right to
continue in the employ, or as a director, of the Company or any
Subsidiary or Affiliate, or shall in any way affect the right and power
of the Company or any Subsidiary or Affiliate to terminate the
employment, or service as a director, of any participant under the Plan
at any time with or without assigning a reason therefor, to the same
extent as the Company or any Subsidiary or Affiliate might have done if
the Plan had not been adopted.
(d) For purposes of this Plan, except as otherwise required with
respect to Incentive Stock Options, a transfer of a participant between
the Company and any Subsidiary or Affiliate shall not be deemed a
termination of employment.
(e) No later than the date as of which an amount first becomes
includable in the gross income of the participant for federal income
tax purposes with respect to any Award under the Plan, the participant
shall pay to the Company, or make arrangements satisfactory to the
Committee regarding the payment of, any federal, state or local taxes
or other items of any kind required by law to be withheld with respect
to that amount. Subject to the following sentence, unless otherwise
determined by the Committee, withholding obligations may be settled
with Shares, including unrestricted Shares previously owned by the
participant or Shares that are part of the Award that gives rise to the
withholding requirement. Notwithstanding the foregoing, any
20
<PAGE> 8
election by a Section 16 Participant to settle any tax withholding
obligation with Shares that are part of an Award shall be subject to
approval by the Committee, in its sole discretion. The obligations of
the Company under the Plan shall be conditional on those payments or
arrangements and the Company and its Subsidiaries and Affiliates shall,
to the extent permitted by law, have the right to deduct any such taxes
from any payment of any kind otherwise payable to the participant.
(f) The actual or deemed reinvestment of dividends or dividend
equivalents in additional Restricted Shares at the time of any dividend
payment shall only be permissible if sufficient Shares are available
under Section 3 for reinvestment (taking into account then outstanding
Stock Options).
(g) The Plan, all Awards made and actions taken thereunder and any
agreements relating thereto shall be governed by and construed in
accordance with the laws of the State of Ohio.
(h) All agreements entered into with participants pursuant to the Plan
shall be subject to the Plan.
(i) The provisions of Awards need not be the same with respect to each
participant.
SECTION 12. BOARD AND SHAREHOLDER APPROVAL.
The Plan was adopted by the Board on March 7, 1996 and is subject to approval by
the holders of the Company's outstanding Shares, in accordance with applicable
law.
SECTION 13. TERM OF PLAN.
No Award shall be granted pursuant to the Plan on or after March 7, 2006, but
Awards granted prior to that date may extend beyond that date.
21
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONSOLIDATED
BALANCE SHEETS AND CONSOLIDATED STATEMENTS OF OPERATIONS AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-25-1997
<PERIOD-START> JAN-28-1996
<PERIOD-END> JUL-27-1996
<CASH> 202,633
<SECURITIES> 0
<RECEIVABLES> 39,152
<ALLOWANCES> 737
<INVENTORY> 780,916
<CURRENT-ASSETS> 1,046,680
<PP&E> 283,314
<DEPRECIATION> 95,138
<TOTAL-ASSETS> 1,591,338
<CURRENT-LIABILITIES> 536,011
<BONDS> 0
<COMMON> 852,168
0
0
<OTHER-SE> 155,697
<TOTAL-LIABILITY-AND-EQUITY> 1,591,338
<SALES> 1,352,727
<TOTAL-REVENUES> 1,352,727
<CGS> 1,057,252
<TOTAL-COSTS> 1,057,252
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 24,697
<INCOME-TAX> 9,785
<INCOME-CONTINUING> 14,912
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 14,912
<EPS-PRIMARY> .12
<EPS-DILUTED> .12
</TABLE>
