<PAGE> 1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] 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 sec.240.14a-11(c) or sec.240.14a-12
</TABLE>
OFFICEMAX, INC.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
N/A
(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)(4) 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> 2
[OfficeMax Logo]
------------------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 13, 1999
------------------------------------
To Our Shareholders:
Notice is hereby given that the 1999 Annual Meeting of Shareholders of
OfficeMax, Inc., an Ohio corporation (the "Company"), will be held at the
Company's International Headquarters, 3605 Warrensville Center Road, Shaker
Heights, Ohio 44122 on Thursday, May 13, 1999, at 10:00 a.m., local time. At the
meeting, shareholders will act on the following matters:
(1) Election of three Directors, each to serve a term of two years or until
his successor is duly elected and qualified; and
(2) Any other matters that properly come before the meeting or any
adjournment or postponement thereof.
Only shareholders of record at the close of business on March 26, 1999 are
entitled to notice of and to vote at the meeting or any adjournment or
postponement thereof.
By Order of the Board of Directors,
/s/ Ross H. Pollock
Ross H. Pollock
Secretary
April 8, 1999
Shaker Heights, Ohio
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE SIGN AND PROMPTLY RETURN
THE PROXY IN THE ENCLOSED ENVELOPE. IN ORDER TO AVOID THE ADDITIONAL EXPENSE TO
THE COMPANY OF FURTHER SOLICITATION, WE ASK YOUR COOPERATION IN MAILING IN YOUR
PROXY PROMPTLY.
<PAGE> 3
OfficeMax Logo
3605 Warrensville Center Road
Shaker Heights, Ohio 44122
------------------------
PROXY STATEMENT
------------------------
This proxy statement is furnished in connection with the solicitation of
proxies on behalf of the Board of Directors of OfficeMax, Inc., an Ohio
corporation (the "Company"), for use at the Annual Meeting of Shareholders to be
held on Thursday, May 13, 1999, at the Company's International Headquarters,
3605 Warrensville Center Road, Shaker Heights, Ohio 44122, at 10:00 a.m., local
time, and at any adjournment or postponement thereof. This statement and the
accompanying proxy, together with the Company's Annual Report to Shareholders
for the fiscal year ended January 23, 1999, are being mailed to shareholders on
or about April 8, 1999.
ABOUT THE MEETING
WHAT IS THE PURPOSE OF THE ANNUAL MEETING?
At the Company's annual meeting, shareholders will act upon the matters
outlined in the accompanying notice of meeting, including the election of
Directors. In addition, the Company's management will report on the performance
of the Company during fiscal 1998 and respond to questions from shareholders.
WHO IS ENTITLED TO VOTE?
Only shareholders of record at the close of business on the record date,
March 26, 1999, are entitled to receive notice of the annual meeting and to vote
the common shares that they held on that date at the meeting, or any
postponement or adjournment of the meeting. Each outstanding share entitles its
holder to cast one vote on each matter to be voted upon.
WHO CAN ATTEND THE MEETING?
All shareholders as of the record date, or their duly appointed proxies,
may attend the meeting. Registration will begin at 9:00 a.m.
WHAT CONSTITUTES A QUORUM?
The presence at the meeting, in person or by proxy, of the holders of a
majority of the common shares outstanding on the record date will constitute a
quorum, permitting business to be conducted at the meeting. As of the record
date, 114,149,353 common shares of the Company were outstanding, each of which
is entitled to one vote at the meeting. Proxies received but marked as
abstentions and broker non-votes will be included in the calculation of the
number of shares considered to be present at the meeting.
HOW DO I VOTE?
If you complete and properly sign the accompanying proxy card and return it
to the Company's transfer agent and registrar, it will be voted as you direct.
If you are a registered shareholder and attend the meeting, you
1
<PAGE> 4
may deliver your completed proxy card in person or you may vote in person.
"Street name" shareholders who wish to vote at the meeting must obtain a proxy
from the institution that holds their shares.
CAN I CHANGE MY VOTE OR REVOKE MY PROXY AFTER I RETURN MY PROXY CARD?
Yes. Even after you have submitted your proxy, you may change your vote at
any time before the proxy is exercised by filing with the Secretary of the
Company either a notice of revocation or a duly executed proxy bearing a later
date. The powers of the proxy holders will be suspended if you attend the
meeting in person and so request, although attendance at the meeting will not by
itself revoke a previously granted proxy.
HOW DO I VOTE MY 401(k) SHARES?
If you participate in the Company's 401(k) Savings Plan, you will receive a
proxy card which will include the number of common shares equivalent to the
value of the interest credited to your account. If you complete and properly
sign the proxy card and return it by May 10, 1999, the trustee of the plan will
vote your shares in accordance with your duly executed proxy. If you do not
return your proxy, the share equivalents credited to your account will be voted
by the trustee in the same proportion that it votes share equivalents for which
timely proxies were delivered.
WHAT ARE THE BOARD'S RECOMMENDATIONS?
Unless you give other instructions on your proxy card, the persons named as
proxy holders on the proxy card will vote in accordance with the recommendations
of the Board of Directors. The Board's recommendation for each item is set forth
together with the description of each item in this proxy statement. In summary,
the Board recommends a vote:
- FOR election of the nominated slate of Directors (see pages 4 and 5).
With respect to any other matter that properly comes before the meeting,
the proxy holders will vote as recommended by the Board of Directors, or if no
recommendation is given, using their own discretion.
WHAT VOTE IS REQUIRED TO APPROVE EACH ITEM?
- Election of Directors. The affirmative vote of a plurality of the votes
cast at the meeting is required for the election of Directors. A properly
executed proxy marked "WITHHOLD AUTHORITY" with respect to the election
of one or more Directors will not be voted with respect to the Director
or Directors indicated, although it will be counted for purposes of
determining whether there is a quorum.
- Other Items. For each other item, if any, the affirmative vote of the
holders of a majority of the shares represented in person or by proxy and
entitled to vote on the item will be required for approval. A properly
executed proxy marked "ABSTAIN" with respect to any such matter will not
be voted, although it will be counted for purposes of determining whether
there is a quorum. Accordingly, an abstention will have the effect of a
negative vote.
If you hold your shares in "street name" through a broker or other nominee,
your broker or nominee may not be permitted to exercise voting discretion with
respect to some of the matters to be acted upon. Thus, if you do not give your
broker or nominee specific instructions, your shares may not be voted on those
matters and will not be counted in determining the number of shares necessary
for approval. Shares represented by such "broker non-votes" will, however, be
counted in determining whether there is a quorum.
2
<PAGE> 5
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth, as to each beneficial owner of more than
five percent of the Company's common shares, information regarding common shares
owned at December 31, 1998.
<TABLE>
<CAPTION>
NUMBER OF
COMMON SHARES
BENEFICIALLY PERCENT
NAME OF BENEFICIAL OWNER OWNED OF CLASS
------------------------ ------------- --------
<S> <C> <C>
Putnam Investments, Inc..................................... 9,856,743(1) 8.6%
One Post Office Square
Boston, Massachusetts 02109
</TABLE>
-------------------------
(1) Based on information obtained from a Schedule 13G filed by Putnam
Investments, Inc. with the Securities and Exchange Commission on
or about January 26, 1999. Of the 9,856,743 shares shown as
beneficially owned by Putnam Investments, Inc.: (i) 8,170,398
shares are beneficially owned by Putnam Investment Management,
Inc.; and (ii) 1,686,345 shares are beneficially owned by The
Putnam Advisory Company, Inc. as a result of acting as investment
manager of institutional accounts.
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth, as to each Director, each executive officer
named in the Summary Compensation Table and all Directors and executive officers
as a group, information regarding the amount and nature of common shares
beneficially owned (unless otherwise indicated) at March 26, 1999.
<TABLE>
<CAPTION>
NUMBER OF
COMMON SHARES ACQUIRABLE
BENEFICIALLY WITHIN 60 PERCENT
NAME OWNED (1)(2) DAYS (3) OF CLASS
---- ------------- ---------- --------
<S> <C> <C> <C>
Michael Feuer............................................ 2,214,543 1,482,916 3.2%
Carl D. Glickman......................................... 60,051 -- *
Sydell L. Miller......................................... 33,880 -- *
James F. McCann.......................................... 28,280 -- *
Burnett W. Donoho........................................ 15,293 -- *
Raymond L. Bank.......................................... 15,019 -- *
Ivan J. Winfield......................................... 5,248 -- *
John C. Martin........................................... 111,310 241,171 *
Edward L. Cornell........................................ 55,713 225,462 *
Jeffrey L. Rutherford.................................... 7,256 50,000 *
Mark L. Keschl........................................... 108,488 136,417 *
All executive officers and Directors as a Group (12
persons)............................................ 2,499,890 2,155,966 4.2%
</TABLE>
- ---------------
* Less than 1%
(1) The number of shares shown includes shares that are individually or jointly
owned, as well as shares over which the individual has either sole or shared
investment or voting authority. Certain of the Company's executive officers
disclaim beneficial ownership of some of the shares included in the table as
follows:
- Mr. Feuer -- 3,225 shares owned by a trust for the benefit of Mr.
Feuer's son and 3,000 shares owned by a trust for the benefit of Mr.
Feuer's daughter, as to each of which trust Mr. Feuer's wife is the
trustee, and 1,500 shares owned directly by his wife; and
- Mr. Martin -- 1,800 shares owned by Mr. Martin's son.
3
<PAGE> 6
(2) For executive officers, the number of shares includes interests in the
Company's 401(k) Plan with respect to which participants have voting power
but no investment rights: Mr. Feuer -- 850 shares; Mr. Martin -- 642 shares;
Mr. Cornell -- 477 shares; Mr. Rutherford -- no shares; Mr. Keschl -- 265
shares; and all current executive officers as a group 2,345 shares.
(3) Reflects the number of shares that could be purchased by exercise of options
available at March 26, 1999 or within 60 days thereafter under the Company's
Equity-Based Award Plan.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive officers and Directors to file reports of beneficial ownership and
changes in beneficial ownership with the SEC and the New York Stock Exchange.
The Company believes that during the period from January 25, 1998 through
January 23, 1999, its executive officers and Directors complied with all
applicable Section 16(a) filing requirements. This conclusion is based solely on
a review of the copies of such forms furnished to the Company in accordance with
SEC regulations and certain written representations received by the Company from
its executive officers and Directors.
ITEM 1 -- ELECTION OF DIRECTORS
The Company's Board of Directors (the "Board") currently consists of seven
members, divided into one class of three members and one class of four members.
At the meeting, common shares represented by proxies, unless otherwise
specified, will be voted for the election of the three nominees hereinafter
named, each to serve for a term of two years or until his successor is duly
elected and qualified. If any nominee should not be available for election, the
proxies will be voted for the election of such substitute nominee as the Board
may propose. Proxies may not be voted at the annual meeting for more than three
persons.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR ALL THREE
NOMINEES.
Listed below is the name of each person nominated for election as a
Director of the Company (each is currently a Director of the Company), each
Director's age, his principal occupation, membership on the board of directors
of other public companies (which is shown parenthetically), the year in which he
first became a Director of the Company and the year in which each Director's
term as a Director will expire:
NOMINEES STANDING FOR ELECTION FOR TERM EXPIRING 2001
<TABLE>
<CAPTION>
DIRECTOR TERM
NAME AGE PRINCIPAL OCCUPATION (1) SINCE EXPIRES
---- --- ------------------------ -------- -------
<S> <C> <C> <C> <C>
Raymond L. Bank 45 President and Chief Operating Officer of 1994 1999
Merchant Development Corporation, a venture
capital and buy-out firm focusing on
consumer retail, direct marketing and
service companies (Regency Realty, Inc.)
Michael Feuer 54 Chairman and Chief Executive Officer of the 1988 1999
Company
Carl D. Glickman 72 President, The Glickman Organization, a 1995 1999
private investing firm (The Bear Stearns
Companies, Inc., Alliance Tire & Rubber
Company Ltd., Jerusalem Economic
Corporation Ltd., Lexington Corporate
Properties Trust, Kualacare, Inc. and
Infutech Inc.)
</TABLE>
4
<PAGE> 7
DIRECTORS CONTINUING IN OFFICE
<TABLE>
<CAPTION>
DIRECTOR TERM
NAME AGE PRINCIPAL OCCUPATION (1) SINCE EXPIRES
---- --- ------------------------ -------- -------
<S> <C> <C> <C> <C>
Burnett W. Donoho 59 Chairman and Chief Executive Officer of 1995 2000
Club Sports International, a privately held
group of up-scale health clubs and spas;
former Vice Chairman, Chief Operating
Officer of Macy's East, a chain of 60
department stores and a then division of
R.H. Macy & Co., Inc.; former Vice Chairman
and Chief Operating Officer of Montgomery
Ward & Co., Inc., a major retailer (Gtech
Corporation)
James F. McCann 47 President of 1-800-FLOWERS, Inc., a 1996 2000
national retail florist (Gateway 2000, Inc.
and Petco Animal Supplies, Inc.)
Sydell L. Miller 61 Private investor and consultant; former 1994 2000
Chairman of the Board and Chief Executive
Officer of Matrix Essentials, Inc., a
subsidiary of Bristol-Myers Squibb Company
Ivan J. Winfield 65 Retired Managing Partner of Coopers & 1998 2000
Lybrand; currently Associate Professor at
Baldwin-Wallace College, Cleveland, Ohio;
and Business Consultant (Boykin Lodging
Co., HMI Industries, Inc., Rainbow Rentals,
Inc. and International Total Services,
Inc.)
</TABLE>
- ---------------
(1) Each of the foregoing, except Ms. Miller and Messrs. Bank, Donoho and
Winfield, either has had the positions shown or has had other executive
positions with the same employer for more than five years. Ms. Miller has
been a private investor and consultant since September 1995. Prior to
September 1995, Ms. Miller served as Chairman of the Board and Chief
Executive Officer of Matrix Essentials, Inc., a manufacturer of professional
hair care, skin care and cosmetic products and a subsidiary of Bristol-Myers
Squibb Company. Mr. Bank has held his current position since July 1994. In
addition, since 1991, Mr. Bank has also served as President of Raymond L.
Bank & Associates, a retail and direct marketing consulting firm. From April
1992 until October 1992, Mr. Bank served as Vice President, New Business
Development for QVC Network, Inc. and from June 1984 until December 1991,
Mr. Bank served as an Associate, Special Partner and General Partner of New
Enterprise Associates, a venture capital firm. Mr. Bank also served as a
Director of the Company from May 1990 until the acquisition by Kmart
Corporation of 92.7% of the Company in November 1991. For approximately 11
months in 1997, Mr. Donoho served as Vice Chairman and Chief Operating
Officer of Montgomery Ward & Co., Inc. Mr. Donoho was an independent retail
consultant from January 1995 to February 1997. Mr. Donoho served as Vice
Chairman, Chief Operating Officer of Macy's East, a chain of 60 department
stores and a then division of R.H. Macy & Co., Inc. from July 1992 until
December 1994. Mr. Winfield has held his current position since September
1995. From 1970 until October 1994, Mr. Winfield was a partner with the
accounting firm of Coopers & Lybrand. Mr. Winfield served as a Managing
Partner of Coopers & Lybrand from July 1978 to October 1994.
MEETINGS AND COMMITTEES OF THE BOARD
During the fiscal year ended January 23, 1999, the Company's Board of
Directors held six meetings. Each Director attended at least 75% of the meetings
of the Board of Directors and committees on which he or she served, except Mr.
Donoho who was able to attend 50% of the meetings because of previous travel
commitments; however, Mr. Feuer and other members of senior management discussed
each agenda item with Mr. Donoho both before and after each meeting that he was
unable to attend.
5
<PAGE> 8
Messrs. Winfield (Chairman), Bank, Donoho and Glickman are the current
members of the Board's Audit Committee, which is empowered to exercise all
powers and authority of the Board of Directors with respect to the Company's
annual audit, accounting policies, financial reporting and internal controls.
The Audit Committee met twice and consulted informally on other occasions during
the last fiscal year.
Messrs. Glickman (Chairman) and Bank and Ms. Miller are the current members
of the Board's Compensation Committee, which is empowered to exercise all powers
and authority of the Board of Directors with respect to compensation of the
officers of the Company. The Compensation Committee met twice and consulted
informally on other occasions during the last fiscal year.
The Company's Board of Directors does not have a nominating committee.
COMPENSATION OF DIRECTORS
Directors who are not officers or employees of the Company receive an
annual retainer fee of $25,000 payable in restricted common shares of the
Company, and a fee of $1,000 for each quarterly meeting of the Board attended
and a fee of $500 for each Committee meeting of the Board attended, each of
which is payable in common shares of the Company.
EXECUTIVE COMPENSATION
The following Compensation Committee Report and the performance graph
included elsewhere in this Proxy Statement do not constitute soliciting material
and should not be deemed filed or incorporated by reference into any other
Company filings under the Securities Act of 1933 or the Securities Exchange Act
of 1934, except to the extent the Company specifically incorporates the report
or the performance graph by reference therein.
COMPENSATION COMMITTEE REPORT
The Company's compensation program is administered by the Compensation
Committee of the Board of Directors which has responsibility for reviewing all
aspects of compensation paid by the Company to its executive officers. The
Compensation Committee is comprised of the three Directors listed at the end of
this report.
The Compensation Committee's primary objective with respect to executive
compensation is to work with senior management of the Company to establish
programs which attract and retain key managers and align their compensation with
the Company's overall business strategies, values and performance. To this end,
the Compensation Committee has adopted an executive compensation philosophy
which includes the following considerations:
- A "pay-for-performance" orientation that differentiates compensation
based on corporate and individual performance;
- An emphasis on equity incentives as a significant component of total
compensation in order to align the interests of Company executives
closely with the long-term interests of shareholders;
- An emphasis on total compensation versus cash salary compensation,
under which base salaries are generally set at or somewhat below
competitive levels, but which motivates and rewards Company executives
with total compensation (including year-end bonuses) at or above
competitive levels if Company and individual performance reach
predetermined objectives;
- Recognition that, as an executive's level of responsibility increases,
a greater portion of his or her total compensation opportunity should
be based on equity and other performance incentives and less on
monthly salary; and
- An appropriate mix of short-term and long-term compensation which
facilitates retention of talented executives and encourages share
ownership and capital accumulation.
6
<PAGE> 9
The primary components of the Company's executive compensation program are:
(i) base salaries; (ii) annual bonuses; and (iii) long-term equity incentive
opportunities. Each component of compensation is discussed below:
Base Salaries. Base salaries for Company executives are subject to annual
review and adjustment on the basis of individual and Company performance, level
of responsibility, and competitive, inflationary, and internal equity
considerations. The Compensation Committee generally attempts to set base
salaries of executive officers at a level which is at or below the "market"
rate, as determined from information gathered by the Company from independent
compensation consulting firms and published surveys. With respect to the
$950,000 base salary established for Mr. Feuer in May 1997, the Compensation
Committee took into account the factors described above for other executive
officers as well as Mr. Feuer's expanded responsibilities associated with the
Company's rapid growth and the Company reaching or exceeding each of its
financial strategies and objectives for fiscal 1997. Although Mr. Feuer was
offered a salary increase for fiscal 1998, Mr. Feuer chose to forego an increase
in his salary and instead chose to receive more stock options than he would have
been granted if he had accepted a salary increase. This arrangement serves to
continue to align Mr. Feuer's interest with the long-term interests of the
Company's shareholders.
Annual Bonuses. Under the Company's Annual Incentive Bonus Plan, Company
executives are eligible to receive annual cash bonus awards to focus attention
on and provide a reward for achieving key individual and Company goals. Target
incentive bonus amounts for executives are established at the beginning of each
year either as a dollar amount or a percentage of the executive's salary,
depending upon each executive's level of responsibility and function.
Performance objectives are established for the Company at the beginning of each
fiscal year, and are designed to provide competitive bonuses on a
"pay-for-performance" basis. In the past, these objectives have included
specific targets for both earnings growth and overall profitability. In
addition, individual performance objectives are established for each executive,
which include both specific performance goals and other more qualitative and
developmental criteria. The actual amount of bonus payable is generally
expressed as a percentage of the executive's base salary and will vary depending
on the extent to which Company and individual performance goals have been
achieved.
Following the completion of each fiscal year, bonuses for executives are
paid based on two parameters: first, the Company must reach its minimum
established earnings before interest and taxes (EBIT) target, and second, the
executive must reach his or her personal performance objectives. In fiscal 1998,
the Company exceeded the EBIT target established by the Compensation Committee.
Accordingly, bonuses were awarded to officers and other management level
associates for fiscal 1998, based on if an individual achieved his or her
primary personal performance objectives.
Prior to the beginning of each fiscal year, all executives are required to
designate at least 20%, and may elect to designate up to 100%, of their annual
bonus to purchase restricted shares in accordance with the terms and conditions
of the Company's Management Share Purchase Plan (the "Management Share Purchase
Plan").
Long-Term Equity Incentives. The Company endeavors to foster an ownership
culture that encourages superior performance by its executive officers, and has
adopted the Equity-Based Award Plan to provide for common share ownership at all
levels of the Company. Pursuant to the Equity-Based Award Plan, the types of
awards that can be made range from ordinary stock options to grants of
restricted stock and stock appreciation rights.
The Company intends to make annual grants of equity awards to its
management personnel, including its executive officers. This annual grant
program is designed to provide Company managers, over a number of years, with
multiple stock options and related equity incentives. Each stock option will be
granted with an exercise price equal to the fair market of the common shares at
the time of grant. Individual option grants are determined by the Compensation
Committee based on a manager's current performance, potential for future
responsibility, and salary multiples designed to increase the portion of the
total compensation opportunity represented by equity incentives as a manager's
level of responsibility increases. The Compensation Committee intends to place
substantial emphasis on equity awards as a percentage of total compensation,
consistent with its philosophy that equity awards more closely align the
interests of Company managers with the long-term interests of shareholders.
7
<PAGE> 10
The annual grant of stock options to senior management personnel, including
executive officers, was approved by the Compensation Committee at the beginning
of fiscal 1998. These options vest in equal increments over a four-year period
from the date of grant. The annual grant of options is designed to align the
interests of the Company's senior management with those of the Company's
shareholders and to reward the Company's senior managers for performance which
directly increases shareholder value. In October 1998, the Compensation
Committee granted additional stock options to management personnel, including
executive officers, in order to provide long term incentives to retain key
management personnel. These options vest on the earlier of: (i) the date at any
time after October 9, 2000, on which the average daily closing price per share
is at least $13.375 for 15 consecutive trading days; or (ii) October 9, 2001. In
granting Mr. Feuer options in fiscal 1998, the Compensation Committee considered
the fact that Mr. Feuer chose to receive more stock options in lieu of a salary
increase and the degree to which Mr. Feuer's leadership is expected to affect
the Company's future share price.
Under the Management Share Purchase Plan, Company executives and other key
employees of the Company designated by the Compensation Committee are required
to designate in advance a minimum of 20%, and may designate up to 100%, of their
annual bonuses for the purchase of restricted shares at a 20% discount from fair
market value at the end of each fiscal year. Shares purchased under the
Management Share Purchase Plan are generally subject to forfeiture for three
years from the date of purchase. For fiscal 1998, Mr. Feuer and the other
officers of the Company designated approximately $700,000 of the approximately
$2,600,000 total bonus compensation payable to such executives for the purchase
of restricted shares.
Section 162(m). Section 162(m) of the Internal Revenue Code generally
disallows a tax deduction to public corporations for compensation over
$1,000,000 paid for any fiscal year to the corporation's chief executive officer
and the four other most highly compensated executive officers as of the end of
any fiscal year. However, the statute exempts qualifying performance-based
compensation from the deduction limit if certain requirements are met. The
Compensation Committee currently intends to structure performance-based
compensation, including stock option grants and annual bonuses, to executive
officers who may be subject to Section 162(m) in a manner that satisfies those
requirements.
The Board and the Compensation Committee reserve the authority to award
non-deductible compensation in other circumstances as they deem appropriate.
Further, because of ambiguities and uncertainties as to the application and
interpretation of Section 162(m) and the regulations issued thereunder, no
assurance can be given, notwithstanding the Company's efforts, that compensation
intended by the Company to satisfy the requirements for deductibility under
Section 162(m) will, in fact, satisfy such requirements.
Conclusion. In conclusion, the Company's executive compensation program is
designed to provide a significant link between total compensation and the
Company's performance and long-term share price appreciation consistent with the
compensation philosophies set forth above.
Members of the Compensation
Committee
Carl D. Glickman (Chairman)
Raymond L. Bank
Sydell L. Miller
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
None of the members of the Compensation Committee is or has been an officer
or employee of the Company.
8
<PAGE> 11
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
------------------------------- AWARDS
OTHER ------------------------ PAYOUTS ALL
ANNUAL RESTRICTED SECURITIES ------- OTHER
COMPEN- STOCK UNDERLYING LTIP COMPEN-
NAME AND FISCAL SALARY BONUS SATION AWARDS OPTIONS PAYOUTS SATION
PRINCIPAL POSITION YEAR(1) ($) ($) ($) ($)(2) (#) ($) ($)
------------------ ------- -------- -------- ------- ---------- ---------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Michael Feuer 1998 $950,000 $712,500 -- $73,101 700,000 -- --
Chairman and 1997 $851,923 $712,000 -- -- 300,000 -- --
Chief Executive Officer 1996 $638,462 -- -- $48,344 300,000 -- --
John C. Martin 1998 $423,077 $239,275 -- $29,644 300,000 -- --
President, Retail Stores 1997 $375,481 $175,000 -- -- 150,000 -- --
1996 $379,615 -- -- $10,321 225,000 -- --
Edward L. Cornell 1998 $274,785 $134,493 -- $11,222 125,000 -- --
Executive Vice President 1997 $259,998 $ 87,450 -- -- 50,000 -- --
New Business Development 1996 $255,000 -- -- -- 150,000 -- --
Jeffrey L. Rutherford(3) 1998 $253,462 $126,880 -- $41,143 275,000 -- --
Executive Vice President 1997 $158,173 $ 80,150 -- -- 75,000 -- --
Chief Financial Officer 1996 -- -- -- -- -- -- --
Mark L. Keschl 1998 $228,077 $ 94,990 -- $16,872 125,000 -- --
Senior Vice President 1997 $203,463 $ 93,890 -- -- 60,000 -- --
Real Estate 1996 $183,615 -- -- $12,838 90,000 -- --
</TABLE>
- ---------------
(1) Includes compensation earned, awarded or paid for the fiscal years ended
January 23, 1999 (fiscal 1998), January 24, 1998 (fiscal 1997), and January
25, 1997 (fiscal 1996), respectively.
(2) Amounts shown reflect the difference between the closing market price for
the common shares on the date of purchase and the purchase price paid by
each of the named executive officers for the purchase of restricted shares
under the Company's Management Share Purchase Plan. The aggregate restricted
share holdings and values (net of consideration paid) at January 23, 1999
for the named executive officers are as follows: (i) Mr. Feuer-- 27,849
shares, $(40,100); (ii) Mr. Martin -- 8,336 shares, $(10,509); (iii) Mr.
Cornell -- 1,911 shares, $(1,557); (iv) Mr. Rutherford -- 7,006 shares,
$(5,710); and (v) Mr. Keschl -- 7,107 shares, $(10,577). With respect to the
restricted shares so purchased, if employment is terminated by the executive
(other than as a result of death, disability or retirement after age 65) or
if employment is terminated by the Company for "cause" before the third
anniversary of the purchase date, the executive will receive unrestricted
shares having a value equal to the lesser of the current fair market value
for the common shares or the price paid initially for such restricted
shares. If the executive's employment is terminated by the Company without
cause before the third anniversary of the purchase date, the executive will
receive unrestricted shares, having a value equal to (i) the then current
fair market value of a percentage of the restricted shares (based on the
number of months of employment completed during the restricted period), plus
(ii) as to the balance of the restricted shares the lesser in value of the
restricted shares at their current fair market value or the price paid
initially for such restricted shares. Dividends, if any, will be paid on
restricted shares at the same rate as common shares.
(3) Mr. Rutherford joined the Company in February 1997.
9
<PAGE> 12
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS (1)
---------------------------------------------------
PERCENT OF POTENTIAL REALIZABLE VALUE AT
NUMBER OF TOTAL OPTIONS ASSUMED ANNUAL RATES OF
SECURITIES GRANTED TO STOCK PRICE APPRECIATION FOR
UNDERLYING EMPLOYEES EXERCISE OPTION TERM (3)
OPTIONS IN FISCAL PRICE EXPIRATION -----------------------------
NAME GRANTED(#) YEAR (2) ($/SHARE) DATE 5%($) 10%($)
---- ---------- ------------- --------- ---------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Michael Feuer.............. 400,000 14.0% $14.625 1/26/08 $3,679,034 $9,323,393
300,000 $6.6875 10/9/08 $1,261,720 $3,197,446
John C. Martin............. 100,000 6.0% $14.625 1/26/08 $ 919,758 $2,330,848
200,000 $6.6875 10/9/08 $ 841,147 $2,131,631
Edward L. Cornell.......... 50,000 2.5% $14.625 1/26/08 $ 459,879 $1,165,424
75,000 $6.6875 10/9/08 $ 315,430 $ 799,361
Jeffrey L. Rutherford...... 125,000 5.5% $14.625 1/26/08 $1,149,698 $2,913,560
150,000 $6.6875 10/9/08 $ 630,860 $1,598,723
Mark L. Keschl............. 50,000 2.5% $14.625 1/26/08 $ 459,879 $1,165,424
75,000 $6.6875 10/9/08 $ 315,430 $ 799,361
</TABLE>
- ---------------
(1) Options granted on January 26, 1998, vest in four equal installments on
January 26, 1999, 2000, 2001 and 2002. Options granted on October 9, 1998,
vest on the earlier of: (i) the date at any time after October 9, 2000, on
which the average daily closing price per share is at least $13.375 for 15
consecutive trading days; or (ii) October 9, 2001. The options are
transferable to members of the executive's family, to a trust or trusts for
the benefit of members of the executive's family or to a partnership or
partnerships of members of the executive's family.
(2) Based on approximately 5,000,000 options granted to all employees during the
fiscal year ended January 23, 1999.
(3) The dollar amounts under these columns are the result of the calculations at
the 5% and 10% rates set by the Securities and Exchange Commission and,
therefore, are not intended to forecast possible future appreciation, if
any, of the Company's stock price.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF
NUMBER OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
SHARES JANUARY 23, 1999 JANUARY 23, 1999(1)
ACQUIRED ------------------- -------------------
ON VALUE EXERCISABLE/ EXERCISABLE/
NAME EXERCISE REALIZED UNEXERCISABLE UNEXERCISABLE
---- -------- -------- ------------------- -------------------
<S> <C> <C> <C> <C>
Michael Feuer................... -- -- 1,282,916/1,200,000 $449,046/$1,181,250
John C. Martin.................. -- -- 166,171/625,000 $ 530,626/$787,500
Edward L. Cornell............... -- -- 196,296/308,334 $ 950,408/$295,313
Jeffrey L. Rutherford........... -- -- 9,375/340,625 $ 0/$590,625
Mark L. Keschl.................. -- -- 103,917/255,000 $ 200,045/$295,313
</TABLE>
- ---------------
(1) The value of unexercised in-the-money options is based on the difference
between the fair market value of the Company's common shares on January 23,
1999 ($10.625) and the option exercise price.
10
<PAGE> 13
EMPLOYMENT AGREEMENT
The Company and Mr. Feuer executed an Amended and Restated Employment
Agreement on October 13, 1998 (the "Employment Agreement"). The Employment
Agreement provides for the employment of Mr. Feuer on a rolling five-year
"evergreen" basis. Mr. Feuer's current salary is $950,000 per year and is
subject to increase at the discretion of the Compensation Committee.
If Mr. Feuer's employment is terminated for any reason (other than for
"cause" or death), Mr. Feuer is entitled to payment of his base salary and bonus
amounts equal to the greater of: (i) the bonus compensation paid or payable to
him in respect of the fiscal year immediately preceding the fiscal year during
which such termination occurred; or (ii) the average of the bonus compensation
paid or payable to him in respect of the three fiscal years immediately
preceding the fiscal year during which such termination occurred, plus
continuation of all other rights and benefits, for the remainder of the term.
The Employment Agreement also provides for the payment of a "gross-up" payment
with respect to excise taxes on the foregoing payments. "Cause" is defined as
fraud, commission of a felony or act that results in material injury to the
business reputation of the Company, or willful and repeated failure to perform
duties under, or a material breach of, the Employment Agreement.
In the event of a material change in Mr. Feuer's position, duties or
reporting relationship or a "change in control" of the Company, Mr. Feuer is
entitled to terminate the agreement and to treat the termination as a
termination by the Company without cause. "Change in control," as defined in the
Employment Agreement, may occur when any person or group of commonly controlled
persons controls 30% or more of the Company or any transaction results in a
change in ownership of 30% or more of the outstanding common shares or a sale or
disposition of all, or substantially all, of the Company's assets.
The Employment Agreement also contains provisions prohibiting Mr. Feuer
from competing with the Company, soliciting or hiring officers of the Company or
disclosing confidential information of the Company during the term of the
agreement, including any periods during which he is not providing services but
is receiving salary and bonus payments under the Employment Agreement.
SEVERANCE AGREEMENTS
To ensure continuity and the continued dedication of key executives during
any period of uncertainty caused by the possible threat of a takeover, the
Company has entered into severance agreements with certain key executives,
including each of the executive officers named in the Summary Compensation Table
(other than Mr. Feuer). If there is a Change in Control (as that term is defined
in the agreements) of the Company and the employment of the executive terminates
under certain conditions described in the agreements at any time during the 24
months following the Change in Control, the executive will continue to receive
the executive's monthly base pay for an agreed upon amount of time. Each
agreement also contains a covenant by the executive not to compete with the
Company for 12 months following termination of employment. If an executive
violates the covenant not to compete, the executive is no longer entitled to
receive the monthly severance payments described below.
For Messrs. Martin, Rutherford and Keschl, the severance agreements provide
that upon termination of employment by the Company (other than for Cause or
Disability (as such terms are defined in the agreements)) or by the executive
for Good Reason (as defined in the agreements), they will continue to receive
their monthly base salary as of such date for (i) 24 months if such termination
occurs within 24 months following a Change in Control or (ii) 12 months if such
termination does not occur within 24 months of a Change in Control.
For Mr. Cornell, the severance agreement provides that upon termination of
employment by the Company (other than for Cause or Disability) or by the
executive for Good Reason within 24 months following a Change in Control, he
will continue to receive his monthly base salary as of such date for 12 months.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In fiscal 1998, the Company provided collateralized loans to two of its
executive officers, Messrs. Martin and Keschl, for the purpose of meeting margin
calls with respect to their personal holdings of the Company's
11
<PAGE> 14
common shares. Interest is charged on these loans at the rate of 6% per annum.
The largest aggregate amount of indebtedness for each of Messrs. Martin and
Keschl was $165,000 and $232,000, respectively. As of March 26, 1999, Mr. Martin
was not indebted to the Company and the outstanding principal amount of Mr.
Keschl's loan was $52,000.
SHAREHOLDER PERFORMANCE GRAPH
Set forth below is a line graph comparing the cumulative total return on
the Company's common shares with the cumulative total return of the Standard &
Poor's Composite--500 Stock Index and an index based on a "line of business"
peer group of companies consisting of Office Depot, Inc. and Staples, Inc. The
graph assumes in each case an initial investment of $100 on November 1, 1994
(the date of the Company's initial public offering), with the peer group
investment weighted on the basis of market capitalization at November 1, 1994.
<TABLE>
<CAPTION>
OFFICEMAX, INC. PEER GROUP S&P 500
--------------- ---------- -------
<S> <C> <C> <C>
Nov-94 100 100 100
Jan-95 136 105 100
Jan-96 180 103 133
Jan-97 147 123 167
Jan-98 171 137 213
Jan-99 129 286 277
</TABLE>
INDEPENDENT AUDITORS
Representatives of PricewaterhouseCoopers LLP, the Company's current
independent auditors, are expected to be present at the meeting with the
opportunity to make a statement about the Company's financial condition, if they
desire to do so, and to respond to appropriate questions from shareholders.
OTHER MATTERS
As of the date of this proxy statement, the Company knows of no business
that will be presented for consideration at the annual meeting other than the
items referred to above. If any other matter is properly brought before the
meeting for action by shareholders, proxies in the enclosed form returned to the
Company will be voted in accordance with the recommendation of the Board of
Directors or, in the absence of such a recommendation, in accordance with the
judgment of the proxy holder.
12
<PAGE> 15
ADDITIONAL INFORMATION
SHAREHOLDER PROPOSALS FOR THE 2000 ANNUAL MEETING
Shareholder proposals must be received at the Company's headquarters, 3605
Warrensville Center Road, Shaker Heights, Ohio 44122, Attention: Senior Vice
President, General Counsel and Secretary, on or before December 9, 1999 in order
to be included in the proxy material relating to the 2000 Annual Meeting of
Shareholders. In addition, if the Company is not provided with written notice of
a shareholder proposal on or before February 22, 2000, proxies solicited by the
Board of Directors for the 2000 Annual Meeting of Shareholders will confer
discretionary authority to vote on the shareholder proposal if presented at such
Annual Meeting. In order to prevent any question as to the date on which a
proposal was received by the Company, it is suggested that proposals be
submitted by Certified Mail-Return Receipt Requested.
PROXY SOLICITATION COSTS
The solicitation of proxies is made by and on behalf of the Board of
Directors. The Company has retained Corporate Investor Communications, Inc.
("CIC") at an estimated cost of $5,000, plus reimbursement of expenses, to
assist in the solicitation of proxies from brokers, nominees, institutions and
individuals. In addition to solicitation by mail, CIC and regular employees of
the Company may solicit proxies by telephone, or by facsimile. Proxies may be
solicited by Directors, officers and employees of the Company without additional
compensation. The Company will, upon request, reimburse brokerage firms and
others for their reasonable expenses in forwarding solicitation materials to the
beneficial owners of shares.
By Order of the Board of Directors,
/s/ Ross H. Pollock
-----------------------------------
Ross H. Pollock
Secretary
April 8, 1998
13
<PAGE> 16
P OFFICEMAX, INC.
R
O PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
X THE COMPANY FOR THE ANNUAL MEETING
Y MAY 13, 1999
The undersigned constitutes and appoints Michael Feuer, Jeffrey L.
Rutherford and Ross H. Pollock, and each of them, his true and lawful
agents and proxies with full power of substitution in each, to represent
the undersigned at the annual meeting of shareholders of OfficeMax, Inc. to
be held at the Company's International Headquarters, 3605 Warrensville
Center Road, Shaker Heights, Ohio, on Thursday, May 13, 1999 at 10:00 a.m.
(local time) and at any adjournments thereof, on all matters coming before
said meeting.
Election of Directors, Nominees: (change of address)
Raymond L. Bank, Michael Feuer and ---------------------------------
Carl D. Glickman ---------------------------------
---------------------------------
*To withhold authority to vote for ---------------------------------
any individual nominee, write that (If you have written in the above
nominee's name where indicated on space, please mark the
the reverse side. corresponding box on the reverse
side of this card.)
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR THE ELECTION OF DIRECTORS.
SEE REVERSE
SIDE
- --------------------------------------------------------------------------------
DETACH CARD
<PAGE> 17
[X] PLEASE MARK YOUR 0925
VOTES AS IN THIS
EXAMPLE.
FOR WITHHELD
1. Election of Directors [ ] [ ]
(see reverse)
For, except vote withheld from the following nominee(s):
------------------------------------------------------------------------------
Please check if you have
indicated a change of address
on the reverse side. [ ]
Please check if you plan on
attending the annual meeting. [ ]
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY USING THE ENCLOSED
ENVELOPE.
Please sign exactly as your name appears hereon. Joint owners should each 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
an authorized officer. If a partnership, please sign in partnership name by an
authorized person.
----------------------------------------
----------------------------------------
SIGNATURE(S) DATE
- --------------------------------------------------------------------------------
DETACH CARD
