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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
(Rule 14a-101)
Schedule 14A Information
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant
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Filed by a Party other than the Registrant
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Check the appropriate box:
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Preliminary Proxy Statement
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
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Definitive Proxy Statement
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Definitive Additional Materials
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Soliciting Material Pursuant to §240.14a-12
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OfficeMax Incorporated
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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Payment of Filing Fee (Check the appropriate box):
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No fee required.
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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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(1)
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Title of each class of securities to which transaction applies:
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Aggregate number of securities to which transaction applies:
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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):
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Proposed maximum aggregate value of transaction:
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(5)
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Total fee paid:
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Fee paid previously with preliminary materials.
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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.
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(1)
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Amount Previously Paid:
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Form, Schedule or Registration Statement No.:
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Filing Party:
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Date Filed:
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Notice and
Proxy Statement
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OfficeMax Incorporated
Annual Meeting of Stockholders
Naperville, Illinois
Wednesday, April 23, 2008
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OFFICEMAX INCORPORATED
NOTICE OF ANNUAL MEETING
Wednesday, April 23, 2008
10:00 a.m., Central Daylight Time
Holiday
Inn Select
1801 N. Naper Blvd.
Naperville, Illinois 60563
March 10,
2008
Dear
Stockholder:
On
behalf of the board of directors, it is my pleasure to invite you to our 2008 annual meeting of stockholders to:
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elect
eight directors;
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approve
the appointment of KPMG LLP as our independent registered public accounting firm for 2008;
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approve
an amendment to the 2003 OfficeMax Incentive and Performance Plan to increase the number of shares of stock available for issuance under the plan to make certain
other changes to the plan and re-approve the material terms of the performance goals under the plan; and
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conduct
other business properly brought before the meeting.
Stockholders
who owned stock at the close of business on February 28, 2008 can vote at the meeting.
Your
vote is important regardless of the number of shares of stock you own. Whether you plan to attend or not, please review our proxy materials and request a proxy card to sign, date,
and return or submit your proxy or voting instruction card, as applicable, by telephone or through the internet. Instructions for each type of voting are included in the Notice of Internet
Availability of Proxy Materials that you received and in this proxy statement. If you attend the meeting and prefer to vote at that time, you may do so.
Thank
you for your ongoing support of and continued interest in OfficeMax.
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Sincerely yours,
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Sam K. Duncan
Chairman of the Board and
Chief Executive Officer
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Table of Contents
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OfficeMax Incorporated
OfficeMax Incorporated ("OfficeMax," the "company," or "we") is a leader in both business-to-business office products
solutions and retail office products. We provide office supplies and paper, in-store print and document services, technology products and solutions and furniture to consumers, and to
large, medium and small businesses. Our customers are served by approximately 35,000 associates through direct sales, catalogs, the Internet and a network of retail stores located throughout the
United States, Canada, Australia, New Zealand and Mexico. Our common stock is traded on the New York Stock Exchange ("NYSE") under the ticker symbol OMX. Our corporate headquarters is located at 263
Shuman Boulevard, Naperville, Illinois 60563, and our website address is www.officemax.com.
Annual Meeting Information
Proxy Statement
This proxy statement summarizes information we must provide to you under the rules of the Securities and Exchange Commission ("SEC"). It is
designed to assist you in voting your shares of stock. We have provided this proxy statement in connection with the solicitation of proxies by our board of directors for the 2008 annual meeting of
stockholders. We will begin mailing notice of the availability of these proxy materials on or about March 10, 2008.
Voting
You can vote your shares of stock by requesting a proxy card to sign, date, and return or submitting your vote by telephone or through the
internet. Please see the Notice of Internet Availability of Proxy Materials we sent to you or this proxy statement for specific instructions on how to cast your vote by any of these methods.
If
your shares of stock are registered directly in your name, you are considered a stockholder of record and will receive your Notice of Internet Availability of Proxy Materials directly
from us. If you hold your shares of stock through a broker, bank, or other financial institution, you are considered the beneficial owner of stock held in street name and will receive your notice from
your broker, bank or other institution.
For
stockholders of record, voting instructions submitted via mail, telephone or the Internet must be received by Broadridge, our independent tabulator, by 11:59 p.m. Eastern Time
on April 22, 2008. Submitting your vote via mail, telephone or the Internet will not affect your right to vote in person should you decide to attend the annual meeting.
The
Internet and telephone voting procedures available to you are designed to authenticate stockholders' identities, to allow stockholders to give their voting instructions and to
confirm that stockholders' instructions have been recorded properly. We have been advised that the Internet and telephone voting procedures that have been made available to you are consistent with the
requirements of applicable law. Stockholders voting via the Internet or telephone should understand that there may be costs associated with voting in this manner, such as usage charges from Internet
access providers and telephone companies, that must be borne by the stockholder.
Stockholders
of record can vote by:
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returning
a completed proxy card by mail to our independent tabulator, Broadridge, by 11:59 p.m. Eastern Time on April 22, 2008;
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submitting
voting instructions via the Internet or telephone by 11:59 p.m. Eastern Time on April 22, 2008; or
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completing
a ballot and returning it to the inspector of election during the annual meeting.
If
you hold your stock in street name, you can vote by submitting a voting instruction card to your broker or other institution that sent your Notice of Internet Availability of Proxy
Materials to you in accordance with their procedures.
Please
see the next section "Employees Who Are Stockholders" for information regarding voting shares of stock held in our Employee Stock Ownership Plan fund or the OfficeMax common stock
fund in the OfficeMax Savings Plan.
If
you submit a valid proxy card or validly vote your proxy via the Internet, and you do not subsequently revoke your proxy, the individuals named on the card, as your proxies, will vote
your shares of stock in accordance with your instructions. If you do not indicate instructions, your shares of stock will be voted
for
the:
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election
of the eight nominees to serve on our board of directors;
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appointment
of KPMG LLP as our independent registered public accounting firm for 2008; and
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approval
of an amendment to the 2003 OfficeMax Incentive and Performance Plan (the "OMIPP") to increase the number of shares of stock available for issuance under the plan
and to make certain other changes to the plan and re-approval of the material terms of the performance goals under the plan.
If
you are a stockholder of record, you may revoke or change your proxy instructions at any time prior to the vote at the annual meeting. To do so:
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subsequently
submit a new proxy to the independent tabulator by mail, telephone or through the Internet prior to 11:59 p.m. Eastern Time on April 22, 2008; or
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attend
the annual meeting and vote in person by ballot.
If
you hold your stock in street name, you may revoke or change your proxy instructions at any time prior to the vote at the annual meeting by submitting new voting instructions to your
broker or other institution in accordance with their procedures.
Each
share of OfficeMax stock is entitled to one vote. As of February 28, 2008 (the record date for determining stockholders entitled to vote at the meeting), we had the following
shares of stock outstanding and entitled to vote:
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Type/Series of Stock
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Number of Shares Outstanding
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Common stock
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75,904,885
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Convertible preferred stock, Series D (ESOP)
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1,061,160
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Employees Who Are Stockholders
If you are a current or former employee of OfficeMax or one of its subsidiaries and you participate in the Employee Stock Ownership Plan ("ESOP")
fund or the OfficeMax common stock fund in the OfficeMax Savings Plan ("Savings Plan"), you may instruct the plans' trustees how to vote the shares of stock allocated to you under these plans. You can
instruct the voting of your stock by requesting a voting instruction card to sign, date, and return or submitting your vote by telephone or through the internet. Please see the Notice of Internet
Availability of Proxy Materials we sent to you or this proxy statement for specific instructions on how to provide voting instructions by any of these methods. Please note that your voting
instructions for stock you hold in the ESOP fund or the Savings Plan must be returned by 11:59 p.m. Eastern Time on April 18, 2008.
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The
plans' trustees will vote any shares in the plans for which instructions are not received or that are not allocated to an account in the same proportion as shares of stock voted by
the plan participants generally, subject to the Trustees' fiduciary obligations under applicable law.
Confidential Voting Policy
We have a confidential voting policy. Stockholders' votes will not be disclosed to us other than in limited situations. The tabulator will
collect, tabulate, and retain all proxies and will forward any comments written on the proxy cards or otherwise received by the tabulator to management. Our confidential voting policy will not apply
in the event of a contested solicitation.
Votes Necessary for Action to be Taken
A quorum is necessary to hold a valid meeting. A quorum will exist if stockholders holding a majority of the shares of stock issued and
outstanding and entitled to vote at the meeting are present in person or by proxy. The election inspector will treat abstentions and "broker non-votes" as shares of stock that are present
and entitled to vote for purposes of determining the presence of a quorum. A "broker non-vote" occurs when a broker holding stock for a beneficial owner does not vote on a particular
proposal because the broker does not have discretionary voting power for that particular item and has not received instructions from the beneficial owner.
Brokers
will not have discretionary voting power with respect to the proposal to amend our OMIPP to increase the number of shares of stock available for issuance under the plan and to
make certain other changes to the plan. Abstentions and withheld votes, including broker non-votes, do not count as votes cast either for or against any of the proposals.
The
eight nominees who receive the greatest number of votes at the annual meeting will be elected as directors.
The
proposal for appointing KPMG LLP as our independent registered public accounting firm for 2008 will be approved if the number of votes cast in favor of the proposal exceeds
the number of votes cast against the proposal.
The
proposal to amend our OMIPP to increase the number of shares of stock available for issuance under the plan and to make certain other changes to the plan and re-approve
the material terms of the performance goals under the plan will be approved if the number of votes cast in favor of the proposal exceeds the number of votes cast against the proposal.
Proxy Solicitation
We pay the expenses of soliciting proxies. OfficeMax has retained D.F. King & Company ("D.F. King") to assist in the solicitation of
proxies. D.F. King will receive an aggregate fee of $18,500, plus out-of-pocket expenses. In addition to the solicitation of proxies by use of the mail, employees of D.F. King,
and our directors, officers and regular employees, may solicit the return of proxies by personal interview, mail, electronic mail, facsimile, telecopy, telegram, telephone, and internet. Our officers
and employees will not receive additional compensation. Brokerage houses and other custodians, nominees and fiduciaries will be requested to forward solicitation material to the beneficial owners of
stock. OfficeMax has agreed to indemnify D.F. King against certain liabilities arising out of or in connection with this engagement.
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Items You May Vote On
1. Election of Directors
Each member of our board of directors is elected each year for a one year term.
The
persons named in the enclosed proxy intend to vote the proxy for the election of each of the eight nominees, unless you indicate on the proxy card that your vote should be withheld
from any of the nominees.
Our
board of directors has proposed eight nominees for election as directors with terms expiring in 2009 at the annual meeting: Dorrit J. Bern, Warren F. Bryant, Joseph M. DePinto, Sam
K. Duncan, Rakesh Gangwal, Francesca Ruiz de Luzuriaga, William J. Montgoris and David M. Szymanski. Detailed information on all the nominees is provided beginning on page 15. We expect that
all nominees will be able to serve if elected. If any nominee is not able to serve, either we will vote the proxies for another nominee recommended by our Governance and Nominating Committee and
nominated by the board of directors or the board may reduce the number of directors to be elected at the meeting.
Each
nominee elected as a director will continue in office until his successor has been elected and qualified, or until earlier termination of his or her service.
Our board of directors unanimously recommends
a vote "FOR" each of these nominees.
2. Appointment of Independent Registered Public Accounting Firm
Our Audit Committee appointed KPMG LLP to serve as our independent registered public accounting firm for 2008, subject to stockholder
approval. Representatives of KPMG LLP will be present at the annual meeting to answer questions. They will also have the opportunity to make a statement if they desire to do so.
The
following table sets out the various fees for services provided by KPMG LLP in 2006 and 2007. The Audit Committee pre-approved all of these services.
Annual Fees for 2006 and 2007
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Amounts
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Description
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2007
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2006
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Audit Fees (1)
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$
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3,757,365
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$
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3,971,635
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Audit-Related Fees (2)
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250,339
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262,000
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Tax Fees (3)
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9,168
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60,930
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All Other Fees
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(1)
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Audit
fees relate to professional services rendered in conjunction with the audit of our annual financial statements, the review of our quarterly financial statements, the audit of
our internal controls over financial reporting, statutory filings and other services pertaining to SEC matters.
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(2)
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Audit-related
fees relate to attestation and other services traditionally performed by companies' independent accountants, such as audits of our employee benefit plans, special
procedures required to meet certain regulatory requirements and other miscellaneous assurance services.
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(3)
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Tax
fees relate to tax compliance services surrounding transactions that have already occurred. We use these services to document, compute, and obtain government approval for amounts
to be included in tax filings.
KPMG LLP's
full-time, permanent employees conducted the services described in the chart above. Leased personnel were not employed with respect to the domestic audit
engagement.
The
Audit Committee is responsible for recommending, for stockholder approval, our independent registered public accounting firm. Should stockholders fail to approve the appointment of
KPMG LLP, the Audit Committee would undertake the task of reviewing the appointment. Nevertheless, given the difficulty and expense of changing independent accountants mid-way
through the year, there is no assurance that a firm other than KPMG LLP could be secured to deliver any or all of the company's independent auditing services required in 2008. The Audit
Committee, however, would take the lack of stockholder approval into account when recommending an independent registered public accounting firm for 2009.
Our board of directors unanimously recommends a vote "FOR" the approval of
KPMG LLP as our independent registered public accounting firm for 2008.
3. Approval of an Amendment to Our OfficeMax Incentive and Performance Plan to Increase the Number of Shares of Stock
Available for Issuance under the Plan and to Make Certain Other Changes to the Plan and Re-approve the Material Terms of the Performance Goals under the Plan
In 2003, our board of directors adopted and our stockholders approved the 2003 OfficeMax Incentive and Performance Plan (the "OMIPP"). The board
believes the OMIPP is essential to maintain a balanced and competitive compensation program. A total of 7,000,000 shares of our common stock had been reserved for issuance under the plan. On
February 14, 2008, the board amended and restated the plan, subject to stockholder approval, effective as of April 23, 2008 (the "Effective Date"), to increase the number of shares of
stock available for issuance under the plan by 5,800,000 shares (from 7,000,000 to 12,800,000), to extend the term of the plan to April 23, 2018 and to make certain other amendments to the
plan.
As
of February 27, 2008, 4,162,993 shares were reserved for issuance under the OMIPP in connection with 1,593,195 outstanding stock options (with a weighted average exercise price
of $31.84 and a weighted average remaining term of 3.974 years) and 2,569,798 outstanding shares to be issued pursuant to other awards made pursuant to the OMIPP (including restricted stock
units). As of February 27, 2008, 2,269,796 shares remained available for future issuance under the plan.
Proposed Plan Amendments
At the meeting, stockholders will be requested to consider and approve the proposed amendment to the OMIPP to increase the number of shares of our
common stock reserved for issuance as of the Effective Date under the plan from 7,000,000 to 12,800,000, to extend the term of the plan to April 23, 2018 and to make certain other amendments to
the plan, including the following:
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amendment
to provide for a "fungible pool" method of accounting for awards;
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amendment
to allow the Executive Compensation Committee to make changes to the plan and award agreements as necessary to comply with applicable foreign laws;
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amendment
to include a minimum vesting period of no less than one year for options and stock appreciation rights, except with respect to substitute awards for grants made
under a plan of an acquired business entity;
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amendment
to include a restriction period for restricted stock and restricted stock units of three years for time-based awards in excess of 5% of the number of
shares of stock available for awards under the plan;
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amendment
to include a minimum performance period of no less than one year for share-based or cash-based performance awards (excluding annual incentive awards);
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amendment
to provide that stock bonuses are made only in payment of earned incentive compensation;
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amendment
to provide an increased annual limit on incentive awards, but remove the ability to defer amounts over such limit;
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amendment
to allow participants to make transfers to tax-exempt charitable organizations and remove the Executive Compensation Committee's ability to approve
transfers to other individuals or entities;
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amendment
to modify the change in control provisions, other than for annual incentive awards, to require (unless otherwise provided in an applicable agreement) both a
"change in control" and a "qualified termination" (as such terms are defined in the OMIPP or other applicable agreement) before acceleration of vesting, except in cases where an acquiring entity
does not assume the awards, in which case only a change in control is required and not a qualified termination. In the event of a change in control, annual incentive awards will be deemed to be earned
on a pro rata basis;
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amendment
to provide that, in the event of a change in control (unless otherwise provided in an applicable agreement), performance goals will be deemed achieved at target
levels and all other terms and conditions met with award payout prorated for the portion of the performance period completed as of the date of the qualifying termination or change in control and that
awards of performance shares and performance units will be prorated similarly;
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amendment
to provide for a method to satisfy withholding equal to a fractional share; and
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amendment
of certain provisions to comply with changes to the Internal Revenue Code of 1986, as amended (the "Code") and other applicable rules and regulations.
The
board of directors believes that an increase in the number of shares of stock available under the OMIPP is advisable to enable the company to continue to grant equity-based awards.
The board further believes that the other amendments to the OMIPP are consistent with emerging market practices and are important to allow us to attract, motivate, reward and retain the broad-based
talent critical to achieving our business goals.
Approval
of the amended OMIPP will also serve to re-approve the material terms of the performance goals under the OMIPP as necessitated under Section 162(m) of the
Internal Revenue Code, including the eligible class of employees, performance criteria and maximum amounts payable pursuant to performance-based awards, as described below. The effectiveness of the
2003 stockholder approval of the material terms of the OMIPP's performance goals expires at the annual stockholder meeting. Therefore, if the amended OMIPP and underlying performance goals are not
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approved,
some of the compensation paid to the company's senior executives may not be deductible, resulting in additional taxable income for the company.
Our board of directors therefore unanimously recommends approval of the amendment, including
re-approval of the material terms of the performance goals under the plan.
History and Operation of the OMIPP
The OMIPP is intended to:
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attract,
motivate, reward and retain the management talent critical to achieving our business goals;
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link
a portion of each participant's compensation to our performance; and
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encourage
ownership of our common stock by participants.
The
OMIPP permits grants of annual incentive awards, stock, restricted stock, restricted stock units, performance stock, performance units, stock appreciation rights and stock options.
The
OMIPP provides flexibility to shape incentive awards that align stockholder interests with those of our employees and non-employee directors. A summary description of the
material features of the OMIPP (as it is proposed to be amended) follows. This summary is qualified in its entirety by reference to the terms and conditions of the OMIPP, a copy of which (as it is
proposed to be amended) is attached to this Proxy Statement as Appendix A.
Material Features of the OMIPP
There are generally eight types of awards that may be granted under the OMIPP:
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stock
options (including both incentive stock options within the meaning of Section 422 of the Internal Revenue Code and nonqualified stock options, which are options
that do not qualify as incentive stock options);
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stock
appreciation rights ("SARs");
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restricted
stock;
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restricted
stock units;
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performance
units;
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performance
shares;
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annual
incentive awards; and
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stock
bonus awards.
A
total of 12,800,000 shares of our common stock are reserved for issuance under the OMIPP. These shares of stock are subject to adjustment upon the occurrence of any stock dividend or
other distribution, recapitalization, stock split, subdivision, reorganization, merger, consolidation, combination, share repurchase, share exchange or other similar corporate transaction or event.
Any shares of stock that may be granted under the OMIPP to any person pursuant to an option or SAR grant will be counted against this limit as one share for every one share granted. All other shares
of stock granted under the OMIPP will be counted against this limit as two and one-quarter (2.25) shares for every one share granted. Shares of stock that are subject to an award that is
cancelled, expired, forfeited, or otherwise settled without the issuance of shares of stock (including awards
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granted
prior to the Effective Date and awards granted under the 1984 Key Executive Stock Option Plan) will be available for issuance under the OMIPP. Shares of stock reserved for issuance upon grant
of an option or SAR will be added back to the reserve as one share for every one share cancelled or forfeited. All other shares of stock granted under the OMIPP will be added back to the reserve as
two and one-quarter (2.25) shares for every one share cancelled or forfeited. Substitute awards for grants made under a plan of an acquired entity will not reduce the shares of stock
available for issuance under the OMIPP.
As
of February 20, 2008, approximately 31 of our executive officers, 778 key employees and 8 nonemployee directors are eligible to receive awards under the OMIPP at the discretion
of the Executive Compensation Committee of the board of directors. The OMIPP restricts the number of stock options, stock appreciation rights, restricted stock, restricted stock units and performance
shares that can be granted to a participant during any fiscal year, subject to adjustment for changes in capitalization as outlined above. In addition, the OMIPP also limits the amount that may be
paid to a participant pursuant to annual incentive awards or performance units granted in a single fiscal year.
The
OMIPP is intended to provide performance-based compensation within the meaning of Section 162(m) of the Internal Revenue Code. Section 162(m) generally limits the
deduction by an employer of annual compensation paid to each covered employee (i.e., the chief executive officer and the next three highest paid executive officers employed at the end of the
year, other than the chief financial officer) to $1 million. The Section 162(m) limitations do not apply to performance-based compensation if specific requirements are met, including
obtaining stockholder approval of the compensation plan. If our stockholders approve the amended and restated OMIPP and other Section 162(m) conditions relating to performance-based
compensation are satisfied, compensation of covered employees pursuant to awards under the OMIPP will continue to be unaffected by the Section 162(m) limitations, other than for restricted
stock and restricted stock units that vest solely on continued employment. However, if our stockholders do not approve the amended and restated OMIPP, including the material terms of the performance
goals, some of the compensation paid to the company's senior executives may not be deductible, resulting in additional taxable income for the company.
Awards
will become exercisable or otherwise vest at the times and upon the conditions that the Executive Compensation Committee may determine, as reflected in the applicable award
agreement, provided that the plan provides for minimum vesting or performance periods for certain awards as detailed below. The Executive Compensation Committee may also make any or all awards
performance-based, which means the award will be paid out based on the attainment of specified performance goals, in addition to any other conditions the committee may establish.
The
following is a summary of the types of awards that may be granted under the OMIPP:
Stock options entitle the holder to purchase shares of our common stock during a specified period at a purchase price set by the Executive Compensation Committee.
Except for substitute awards for grants made under a plan of an acquired entity, the purchase price may not be less than 100% of the fair market value of the common stock on the grant date (with
respect to incentive stock options, 110% of the fair market value on the date of grant for any participant who owns, within the meaning of Code Section 424(d), stock of the company possessing
more than 10% of the total combined voting power of all classes of stock of the company, any subsidiary or any affiliate). Each option granted under the OMIPP will be exercisable for a period of seven
years from the date of grant or for a lesser period if the Executive Compensation Committee so determines. Participants exercising an option may pay the exercise price by any lawful method permitted
by the
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Executive
Compensation Committee. The vesting period for stock options must be no less than one year, except with respect to substitute awards for grants made under a plan of an acquired business
entity. Incentive stock options may not be granted under the OMIPP on or after April 23, 2018. No participant may receive more than 1,500,000 stock options in any fiscal year. Without
stockholder approval, the exercise price of stock options may not be reduced, stock options may be not be cancelled and replaced with either other stock options with a lower exercise price or another
award under the OMIPP or another company plan and, except in the event of a change in control, stock options may not be cancelled for a cash payment.
A stock appreciation right is the right, denominated in shares of stock, to receive upon exercise, without payment to us, an amount equal to the excess of the
fair market value of our stock on the exercise date over the fair market value of our stock on the grant date. Payment may be made in cash, our stock or a combination of cash and stock. The Executive
Compensation Committee may grant stock appreciation rights to participants as either freestanding awards or as awards related to stock options. For stock appreciation rights related to an option, the
terms and conditions of the
grant will be substantially the same as the terms and conditions applicable to the related option, and exercise of either the stock appreciation right or the option will cause the cancellation of the
other, unless otherwise determined by the Executive Compensation Committee. The Executive Compensation Committee will determine the terms and conditions applicable to awards of freestanding stock
appreciation rights, except that the term of a stock appreciation right may not exceed seven years from the date of grant. The vesting period for stock appreciation rights must be no less than one
year, except with respect to substitute awards for grants made under a plan of an acquired business entity. No participant may receive more than 1,500,000 stock appreciation rights in any fiscal year.
Without stockholder approval, the exercise price of stock appreciation rights may not be reduced, stock appreciation rights may be not be cancelled and replaced with either other stock appreciation
rights with a lower exercise price or another award under the OMIPP or another company plan, and, except in the event of a change in control, stock appreciation rights may not be cancelled for a cash
payment.
Restricted stock is our stock that is transferred or sold by us to a participant and that is subject to a substantial risk of forfeiture and to restrictions on
sale or transfer for a period of time. The Executive Compensation Committee will determine the amounts, terms and conditions (including the attainment of performance goals) of any grant of restricted
stock. Except for substitute awards for grants made under a plan of an acquired entity, the restriction period for time-based awards in excess of 5% of the total number of shares of stock
available for awards under the plan shall not be less than three years (with restrictions lapsing on a pro-rata basis) and for performance goal-based awards the performance
period may not be less than one year. Except for restrictions on transfer (and any other restrictions that the Executive Compensation Committee may impose), participants will have all the rights of a
stockholder with respect to the restricted stock. Unless the Executive Compensation Committee determines otherwise, a participant's termination of employment during the restricted period will result
in forfeiture of all shares of stock subject to restrictions. No participant may receive more than 1,500,000 shares of restricted stock in any fiscal year.
9
Restricted stock units are similar to restricted stock, except that the shares of stock are not issued to the participant until after the end of the restriction
period or achievement of performance criteria and upon satisfaction of any other applicable conditions. Except for substitute awards for grants made under a plan of an acquired entity, the restriction
period for time-based awards in excess of 5% of the total number of shares of stock available for awards under the plan shall not be less than three years (with restrictions lapsing on a
pro-rata basis) and for performance goal-based awards the performance period may not be less than one year. Restricted stock units may also be paid in cash rather than stock or
in a combination of cash and stock. No participant may receive more than 1,500,000 restricted stock units in any fiscal year.
Performance units, which are the right to receive a payment upon the attainment of specified performance goals, may also be awarded by the Executive Compensation
Committee. The Executive Compensation Committee will establish the applicable performance goals at the time the units are awarded. The performance period for award of performance units shall be not
less than one year. Payment may be made in cash, our stock or a combination of cash and stock, at the Executive Compensation Committee's discretion. The maximum amount that may be paid to a
participant for performance units granted in a single fiscal year is $4,000,000.
Performance shares represent the right to receive a payment at a future date based on the value of our common stock in accordance with the terms of the grant and
upon the attainment of specified performance goals. The Executive Compensation Committee will establish the performance goals and all other terms applicable to the grant. The performance period for
award of performance
shares shall not be less than one year. Payment may be made in cash, our stock or a combination of cash and stock, at the Executive Compensation Committee's discretion. No participant may receive more
than 1,500,000 performance shares in any fiscal year.
Annual incentive awards are payments based on the attainment of performance goals specified by the Executive Compensation Committee. Awards are calculated as a
percentage of salary, based on the extent to which the performance goals are met during the year, as determined by the Executive Compensation Committee. Awards are paid in cash, unless the Executive
Compensation Committee determines otherwise. The maximum amount of an annual incentive award that may be paid to a participant in a single fiscal year is $5,000,000.
Stock bonus awards, consisting of our common stock, in payment of earned incentive compensation, may be made at the discretion of the Executive Compensation
Committee upon the terms and conditions, if any, determined by the committee.
Awards of restricted stock, performance units, performance shares, annual incentive awards and other awards under the OMIPP may be subject to the attainment of
performance goals relating to one or more business criteria within the meaning of Section 162(m) of the Internal Revenue Code. These goals may include or be based upon, without limitation:
sales; gross revenue; gross margins; internal rate of return; ratio of debt to debt plus equity; profit before tax; earnings before
10
interest
and taxes; earnings before interest, taxes, depreciation and amortization; earnings per share; operating earnings; economic value added; ratio of operating earnings to capital spending; cash
flow; free cash flow; net operating profit; net income; net earnings; net sales or net sales growth; price of our common stock; return on capital, net assets, equity or stockholders' equity; segment
income; market share; productivity ratios; expense targets; working capital targets; or total return to stockholders. Performance goals may be used to measure our performance as a whole or the
performance of any Subsidiary (as defined in the OMIPP), business unit or segment, may include or exclude (or be adjusted to include or exclude) extraordinary items, the impact of charges for
restructurings, discontinued operations and other unusual and non-recurring items, and the cumulative effects of tax or accounting changes, each as defined by generally accepted accounting
principles and as identified in the financial statements, notes to the financial statements, management's discussion and analysis or other SEC filings, and may reflect absolute entity performance or a
relative comparison of entity performance to the performance of a peer group, index or other external measure.
The OMIPP is administered by the Executive Compensation Committee of our board of directors, each of whom is a "non-employee director" under
Rule 16b-3 under the Securities Exchange Act of 1934, an "outside director" under Section 162(m) of the Code and an "independent director" under the rules of the New York
Stock Exchange. The Executive Compensation Committee has the authority to determine the terms and conditions of awards, and to interpret and administer the OMIPP. The Executive Compensation Committee
also has the authority to modify the OMIPP or adopt sub-plans as desirable or necessary to comply with laws of foreign countries in which the OMIPP is offered. The Executive Compensation
Committee may delegate the right to make awards and otherwise take action on its behalf under the OMIPP to our employees and, to the extent permitted by law, the Executive Compensation Committee may
give authority to executive officers to make awards to employees who are not directors or executive officers.
The board of directors may amend the OMIPP at any time and may make adjustments to the OMIPP and outstanding options, without stockholder approval, to reflect a
stock split, stock dividend, recapitalization, merger, consolidation or other corporate events. Our stockholders must approve amendments that:
-
-
change
the number of shares of stock subject to the OMIPP;
-
-
decrease
the grant or exercise price of any stock-based award to less than the fair market value of our common stock on the date of grant;
-
-
materially
increase the cost of the OMIPP to the company or the benefits to participants;
-
-
allow
for the exercise price of stock options or stock appreciation rights to be reduced, stock options or stock appreciation rights to be cancelled and replaced with either
a new award of stock options or stock appreciation rights with a lower exercise price or another award, or cancelled for a cash payment (other than in connection with a change in control); or
-
-
are
required by applicable law to be approved by our stockholders.
The
board of directors may terminate the OMIPP at any time. The OMIPP, however, will remain in effect as awards may extend beyond that time in accordance with their terms.
11
Except as otherwise provided in an employment agreement, award agreement or change in control agreement, upon both a "change in control" and a "qualifying
termination" (as such terms are defined in the OMIPP or applicable agreement) the vesting of all outstanding awards (other than annual incentive awards) will be accelerated, except in cases where an
acquiring entity does not assume the awards, in which case only a change in control is required and not a qualified termination. This means that, in general, upon a change in control and a qualifying
termination with respect to a participant in the OMIPP, all outstanding stock options and stock appreciation rights held by that participant will vest and become fully exercisable; the restriction
period applicable to outstanding shares of restricted stock and restricted stock units will lapse; and all performance goals will be deemed attained and prorated for the portion of the performance
period completed prior to the change in control or qualifying termination, as applicable. Upon an acceleration due only to a change in control, each annual incentive award will be payable at the
greater of target or the actual award amount determined by year-to-date performance, in either case prorated for the portion of the performance period completed prior to the
change in control.
A participant's rights in an award granted under the OMIPP may be assigned or transferred in the event of death, subject to certain conditions. In addition,
subject to applicable law, the Executive Compensation Committee's approval and any specified conditions, a participant may elect to transfer an award under the OMIPP to immediate family members
(including a trust for the benefit of immediate family members or a partnership in which immediate family members are the only partners) or a qualified tax-exempt charitable organization,
provided that no transfer may be made in exchange for consideration.
If our outstanding shares of common stock are changed by reason of any recapitalization, stock split, reverse stock split, reorganization, merger, consolidation,
spin-off, combination, share repurchase, share exchange, reclassification, or other similar corporate transaction or event, the appropriate adjustments will be made in the maximum number
or kind of securities that may be issued under the OMIPP and to any participate within the fiscal year and in the terms of certain outstanding awards, including the number of shares or securities
subject to awards and the exercise price or other stock price or share-related provisions of awards.
The following discussion covers the principal United States federal income tax consequences with respect to awards that may be granted under the OMIPP. It is a
brief summary only. This summary does not describe state, local or foreign tax consequences of an individual's participation in the OMIPP.
A participant does not realize taxable income upon the grant of a nonqualified stock option. Upon the exercise of a nonqualified stock option, a participant will
realize ordinary income equal to the difference between the fair market value of the common stock being purchased and the exercise price. The company will generally be entitled to take a federal
income tax deduction in the amount of ordinary income recognized by the participant.
If
a participant exercises a nonqualified stock option and subsequently sells the shares of stock received on exercise, any appreciation will be taxed as capital gain in an amount equal
to the
12
excess
of the sale proceeds for the shares of stock over the participant's basis in the shares. The participant's basis in the shares of stock will generally be the amount paid for the stock plus the
amount included in the participant's ordinary income upon exercise.
A
participant granted an incentive stock option has no income tax consequences at the time of grant or exercise (except for purposes of computing liability for alternative minimum tax,
if any), and the company is not entitled to take a deduction. Upon sale of the underlying stock after satisfying applicable holding period requirements, any amount realized in excess of the exercise
price paid will be taxed to the participant as capital gain. If the holding periods are not satisfied, the participant will realize ordinary income equal to the difference between the fair market
value of the common stock purchased and the exercise price. The company will also be entitled to a deduction in the amount of ordinary income realized by the participant.
The tax treatment of a stock appreciation right is essentially the same as for a nonqualified stock option. Thus, a participant will realize no income upon the
grant of a stock appreciation right. Upon the exercise of a stock appreciation right, a participant will realize ordinary income equal to the amount of cash and/or the fair market value of the common
stock received. The company will generally be entitled to take a federal income tax deduction in the amount of ordinary income recognized by the participant.
A participant will not recognize any income upon the receipt of restricted stock unless the participant elects under Section 83(b) of the Internal Revenue
Code, within 30 days of receipt, to recognize ordinary income equal to the fair market value of the restricted stock at the time of receipt, less any amount paid for the stock. If the election
is made, the holder will not be allowed a deduction for amounts subsequently required to be returned to the company. If the election is not made, then on the date that the restrictions to which the
restricted stock are subject terminate, the holder will generally recognize ordinary income in an amount equal to the fair market value of the stock on that date, less any amount paid for the stock.
At the time the holder recognizes ordinary income, the company generally will be entitled to a deduction in the same amount.
Generally,
upon a sale or other disposition of restricted stock with respect to which the holder has previously made a Section 83(b) election or with respect to which the
restrictions were previously terminated, and the holder has, therefore, recognized ordinary income, the holder will recognize capital gain or loss in an amount equal to the difference between the
amount realized on the sale or other disposition and the holder's basis in the stock. The holder's basis will equal the fair market value of the stock at the time the restrictions were removed or, in
the case of a Section 83(b) election, the fair market value of the stock on the date of grant.
Upon the payment of an award of restricted stock units, performance shares, or performance units, or an annual incentive award or stock bonus, the participant
will recognize ordinary income equal to the amount of cash received and the fair market value of any stock received. The company generally will be entitled to a federal income tax deduction in the
same amount.
Additional Information
As of February 28, 2008, the aggregate numbers of shares of common stock subject to options granted to the following persons under the
OMIPP are as follows: (i) Sam K. Duncan, Chairman of the Board and Chief Executive Officer, 250,000 shares; (ii) Don Civgin, Executive Vice President,
13
Finance
and Chief Financial Officer, 50,200 shares; (iii) Phillip P. DePaul, Senior Vice President, Controller and Chief Accounting Officer, zero shares; (iv) Sam Martin,
Executive Vice President and Chief Operating Officer, 35,000 shares, (v) Michael D. Rowsey, former President, Contract, zero shares; (vi) Ryan T. Vero, Executive Vice
President and Chief Merchandising Officer, zero shares; (vii) all current executive officers as a group, 335,200 shares; (viii) all current directors (who are not executive officers) as
a group, 58,383 shares; and (ix) all employees (including all current officers who are not executive officers) as a group, 1,381,659 shares. The number of any other awards that will be granted
to participants under the OMIPP are not currently determinable. The closing sale price per share of our Common Stock on The New York Stock Exchange on February 28, 2008 was $22.37.
4. Other Matters to be Presented at the Meeting
We do not know of any other matters to be voted on at the meeting. If, however, other matters are presented for a vote at the meeting, the persons
named on the enclosed proxy card will vote your properly submitted proxy according to their judgment on those matters.
14
Board of Directors
Structure
Upon the Governance and Nominating Committee's recommendation, the board recommends eight directors for election in 2008, each to hold office
until the annual meeting of stockholders in 2009 or until the earlier termination of his or her service. Stockholders have previously elected Messrs. Bryant, DePinto, Duncan, Gangwal,
Szymanski, Ms. Ruiz de Luzuriaga and Ms. Bern to the board of directors. William J. Montgoris, appointed by the board as a director in 2007, has not previously been elected by
stockholders.
We
prepared the following director summaries using information furnished to us by the nominees:
|
|
Dorrit J. Bern
, 57, joined our board of directors in 2006. Ms. Bern has been the chairman, president and chief executive officer of Charming Shoppes, Inc., a multichannel specialty
women's apparel retailer, since 1997. Ms. Bern also serves as a member of the board of directors of Southern Company, an electric energy producer.
|
|
|
Warren F. Bryant
, 62, joined our board of directors in 2004. In 2002, Mr. Bryant became a director and the president and chief executive officer of Longs Drug Stores Corporation, a
retail drug store chain on the West Coast and in Hawaii. He became the chairman of the board of Longs Drug Stores in 2003. Mr. Bryant served as senior vice president of The Kroger Co., a retail grocery chain, from 1999 to 2002. From 1996 to
1999, he served as president and chief executive officer of Dillon Companies, Inc., a retail grocery chain and subsidiary of The Kroger Co. Mr. Bryant also serves as the director, vice chairman and treasurer of The National Association
of Chain Drug Stores.
|
|
|
Joseph M. DePinto
, 45, joined our board of directors in 2006. Mr. DePinto has been the president and chief executive officer of 7-Eleven, Inc., a convenience retailer, since
December 2005. Prior to joining 7-Eleven, Inc., Mr. DePinto served as the president of GameStop Corp., a video game and entertainment software retailer, beginning in March 2005. Mr. DePinto was the vice president of operations of
7-Eleven from March 2002 until he joined GameStop Corp. in March 2005. Prior to March 2002, Mr. DePinto was senior vice president and chief operating officer of Thornton Quick Café & Market.
|
|
|
Sam K. Duncan,
56, joined our board of directors in 2005. Mr. Duncan became the chairman and chief executive officer of the company in 2005. Prior to his election as chief executive
officer of the company, Mr. Duncan was president and chief executive officer of ShopKo Stores, Inc., a multi-department retailer, from October 2002 to April 2005. From 1992 to 2002, Mr. Duncan held various merchandising and executive
positions with Fred Meyer, Inc. (a division of The Kroger Co.) a grocery retailer, including: president of Fred Meyer from February 2001 to October 2002 and president of Ralph's Supermarkets from 1998 to 2001. Mr. Duncan began his
retail career in the supermarket industry in 1969 with Albertson's, Inc., where he held various merchandising positions until 1992. Mr. Duncan currently serves on the Board of Trustees of North Central College. He is also a director of
Nash-Finch Company.
|
15
|
|
Rakesh Gangwal,
54, joined our board of directors in 1998. From June 2003 to August 2007, Mr. Gangwal was the chairman, president, and chief executive officer of Worldspan Technologies,
Inc., a provider of travel technology and information services to the travel and transportation industry. From 2002 to 2003, Mr. Gangwal was involved in various personal business endeavors, including private equity projects and consulting
projects. He was the president and chief executive officer of US Airways Group, Inc., the parent corporation for US Airways' mainline jet and express divisions as well as several related companies, from 1998 until his resignation in 2001.
Mr. Gangwal was also the president and chief executive officer of US Airways, Inc., the main operating arm of US Airways Group, from 1998 until his resignation. He was the president and chief operating officer of US Airways Group, Inc.,
and US Airways, Inc., from 1996 to 1998. On August 11, 2002, US Airways Group, Inc., and its seven domestic subsidiaries, including its principal operating subsidiary, US Airways, Inc., filed voluntary petitions for relief under
Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the Eastern District of Virginia. US Airways Group, Inc., and its subsidiaries emerged from bankruptcy protection under the First Amended Joint Plan
of Reorganization of US Airways Group, Inc., and Affiliated Debtors and Debtors-in-Possession, as Modified, which became effective on March 31, 2003. Mr. Gangwal is also a director of PetSmart, Inc.
|
|
|
William J. Montgoris,
61, joined our board of directors in July 2007. Mr. Montgoris was the chief operating officer of The Bear Stearns Companies Inc., a leading global investment
banking, securities trading and brokerage firm, from 1993 until his retirement in 1999. Prior to holding this position, he served Bear Stearns as its chief financial officer from 1987 to 1993 and as a senior managing director from 1985 to 1987.
Mr. Montgoris currently serves on the Board of Trustees of The Reserve Funds, a family of money market mutual funds, and the Board of Trustees of Covenant House, Hackensack Medical Center and St. John's University. He is also a director of
Carters, Inc. and Stage Stores, Inc.
|
|
|
Francesca Ruiz de Luzuriaga,
53, joined our board of directors in 1998. From 1999 to 2000, Ms. Luzuriaga served as the chief operating officer of Mattel Interactive, a business unit of
Mattel, Inc., one of the major toy manufacturers in the world. Prior to holding this position, she served Mattel as its executive vice president, worldwide business planning and resources, from 1997 to 1999 and as its chief financial officer
from 1995 to 1997. Since leaving Mattel in 2000, Ms. Luzuriaga has been working as an independent business development consultant. Until October 2005 she was also a director of Providian Financial Corporation.
|
|
|
David M. Szymanski,
51, joined our board of directors in 2004. Dr. Szymanski is the JCPenney Chair of Retailing Studies at Texas A&M University, where he has served since 1987.
Dr. Szymanski served as the Director of the Center for Retailing Studies at Texas A&M University from 2000 to 2006. He has held senior positions at the University since 1987. Dr. Szymanski is also a director of Zale
Corporation.
|
16
Director Independence
The board has determined that, except for Mr. Duncan, the nominees for election as directors are, and all members of the board in 2007
were, independent within the meaning of the rules of the New York Stock Exchange ("NYSE").
For
a director to be considered independent under the NYSE rules, our board must determine that he or she does not have any material relationship with OfficeMax. To assist in making this
determination, our board adopted the NYSE's independence standards. For purposes of these standards, an "immediate family member" includes a spouse, parents, children, siblings, mothers and
fathers-in-law, sons and daughters-in-law, brothers and sisters-in-law, and anyone (other than domestic employees) who shares
the director's home.
The
board will presume a director is independent if, during the last three years, he or she has
not
:
-
-
been
an OfficeMax employee or an immediate family member of an executive officer of OfficeMax, other than in the capacity as a former interim chairman, chief executive
officer or other executive officer;
-
-
been
affiliated with or employed by (or is an immediate family member of a person who is affiliated with or employed in a professional capacity by) the present or former
internal or external auditor of OfficeMax;
-
-
been
employed (or had an immediate family member employed) as an executive officer by another company whose compensation committee includes one or more current executives of
OfficeMax;
-
-
received
(or had an immediate family member who has received) more than $100,000 per year in direct compensation from OfficeMax other than director and committee fees or
pension or other deferred compensation for prior services; and
-
-
been
an executive officer or an employee of, or an immediate family member of a person who is an executive officer of, a company that makes payments to or receives payments
from OfficeMax for property or services, which, in any fiscal year, exceeded the greater of $1 million or 2% of the other company's consolidated gross revenues.
In
addition, our board will consider a director independent for purposes of serving on our Audit Committee only if he or she:
-
-
has
not accepted, directly or indirectly, any consulting, advisory, or other compensatory fees from OfficeMax, other than compensation for service as a director; and
-
-
is
not an "affiliated person" of OfficeMax or any of its subsidiaries, as that term is defined by the SEC.
Our
board will determine the independence of any director who has any other relationship with OfficeMax that is not covered by these standards. In particular, the board has considered
the following relationships:
In
2007, a number of companies for which our directors also serve as officers or directors purchased office supplies from OfficeMax in the ordinary course of business. None of these
sales accounted individually for more than the greater of $1 million or 2% of our revenues or the purchasing entity's revenues in 2007.
Additionally
in 2007, we purchased a variety of goods and services from companies for which our directors also serve as officers or directors. These purchases were made in the ordinary
course of business. None of these purchases accounted for more than the greater of $1 million or 2% of
17
our
revenues or the selling entity's revenues in 2007, and none of these purchases were material to our business.
All
of the transactions described above were entered into in the ordinary course of business and involved the purchase or provision of goods or services on a non-exclusive
basis and at arms-length negotiated rates. Our board has determined that these transactions are not material relationships under the NYSE's Corporate Governance Listing Standards and do
not otherwise impair the independence of our directors.
Related Transactions
In addition, our Governance and Nominating Committee is required by its charter to review all related person transactions required to be disclosed
by SEC rules on an ongoing basis, and all such transactions must be approved or ratified by the committee. In conducting its review, the Governance and Nominating Committee's charter states that the
committee will consider the following factors: the nature of the related person's interest in the transaction; whether the transaction involves standard prices, rates or charges or is otherwise on
terms consistent with arms-length dealings with unrelated third parties; the materiality of the transaction to each party; the reasons for the company entering into the transaction with
the related person (such as the absence of a similarly qualified unrelated party); whether the transaction might affect the status of a director as independent under the independence standards of the
NYSE; and any other factors the committee may deem relevant with respect to the particular transaction. Any member of the Governance and Nominating Committee who is a related person with respect to a
transaction is recused from the review of the transaction.
Our board of directors unanimously recommends a vote "FOR" the election of the Board's nominees identified
above.
18
Director Compensation
The following table presents compensation information for the current independent members of our board of directors: Ms. Dorrit J. Bern and
Ms. Francesca Ruiz de Luzuriaga, and Messrs. Warren F. Bryant, Joseph M. DePinto, Rakesh Gangwal, William J. Montgoris and David M. Szymanski. In addition, the table also includes
compensation information for Mr. Brian C. Cornell, who resigned from the board in February 2008, Mr. Gary G. Michael, who is not standing for re-election in April 2008 and
Mr. Monte R. Haymon, who resigned from the board in January 2007. Compensation for Mr. Sam K. Duncan, our Chief Executive Officer, is set forth in the "Summary Compensation Table" on
page 51. Mr. Duncan does not receive compensation for service as a director.
DIRECTOR COMPENSATION
FOR FISCAL YEAR ENDED DECEMBER 29, 2007
|
Name
(a)
|
|
Fees Earned or Paid in Cash ($)
(b)
|
|
Stock Awards ($) (3)
(c)
|
|
Change in Pension Value and Nonqualified Deferred Compensation Earnings
($) (4)
(f)
|
|
All Other Compensation ($)
(g)
|
|
Total
($)
(h)
|
|
Dorrit J. Bern (1)
|
|
$
|
89,000
|
|
$
|
75,006
|
|
|
|
|
|
|
|
$
|
164,006
|
Warren F. Bryant (1)
|
|
$
|
103,384
|
|
$
|
75,006
|
|
$
|
1,423
|
|
|
|
|
$
|
179,813
|
Brian C. Cornell (1)
|
|
$
|
93,000
|
|
$
|
75,006
|
|
$
|
3,920
|
|
|
|
|
$
|
171,926
|
Joseph M. DePinto (1)
|
|
$
|
96,000
|
|
$
|
75,006
|
|
|
|
|
|
|
|
$
|
171,006
|
Rakesh Gangwal (1)
|
|
$
|
101,616
|
|
$
|
75,006
|
|
|
|
|
|
|
|
$
|
176,622
|
Monte R. Haymon (2)(5)
|
|
$
|
5,257
|
|
|
|
|
|
|
|
$
|
62,271
|
|
$
|
67,528
|
Gary G. Michael
|
|
$
|
115,000
|
|
$
|
75,006
|
|
$
|
9,970
|
|
|
|
|
$
|
199,976
|
William J. Montgoris (2)
|
|
$
|
42,500
|
|
$
|
75,006
|
|
|
|
|
|
|
|
$
|
117,506
|
Francesca Ruiz de
Luzuriaga
|
|
$
|
126,000
|
|
$
|
75,006
|
|
$
|
2,730
|
|
|
|
|
$
|
203,736
|
David M. Szymanski
|
|
$
|
118,000
|
|
$
|
75,006
|
|
|
|
|
|
|
|
$
|
193,006
|
|
-
(1)
-
Ms. Bern
and Messrs. Bryant, Cornell, DePinto, and Gangwal elected to receive a percentage of their cash fees in the form of restricted stock units ("RSUs") pursuant to
the OMIPP. For each director, the number of RSUs issued in lieu of fees was determined by dividing the amount of cash fees foregone by $20.66, the closing price of our common stock as reported on the
consolidated tape of the New York Stock Exchange on the last trading day of the calendar year. On December 31, 2007, Ms. Bern was issued 4,307 RSUs in lieu of $89,000 in fees;
Mr. Bryant was issued 2,395 RSUs in lieu of $49,500 in fees; Mr. Cornell was issued 4,501 RSUs in lieu of $93,000 in fees; Mr. DePinto was issued 2,323 RSUs in lieu of $48,000 in
fees; and Mr. Gangwal was issued 5,130 RSUs in lieu of $106,000 in fees. The difference between the fees foregone and the value of the RSUs issued was paid in cash in lieu of issuing fractional
RSUs.
-
(2)
-
William
J. Montgoris joined the board in July 2007. Monte R. Haymon resigned from the board in January 2007.
19
-
(3)
-
The
figures in this column represent the aggregate dollar amount of compensation cost recognized with respect to share based payments. Each non-employee director was
granted 2,229 RSUs under the OMIPP on July 26, 2007. These RSUs vested on January 26, 2008. The RSUs are payable in common stock six months following a director's date of termination of
board service for any reason. The grant date fair value of each award is $75,006. See Note 15 "Shareholders' Equity" to Notes to Consolidated Financial Statements in the company's Annual Report
on Form 10-K for the year ended December 29, 2007 for a discussion of the assumptions used by the company to calculate share based compensation expense in accordance with the
provisions of SFAS No. 123R, "Share Based Payment" ("SFAS No. 123R"). As of December 29, 2007, the directors had the following outstanding option and stock awards. All vesting
requirements have been met with respect to these outstanding securities:
Name
|
|
Outstanding Option Awards (a)
|
|
Outstanding Stock Awards (b)
|
Dorrit J. Bern
|
|
|
|
3,580
|
Warren F. Bryant
|
|
|
|
6,181
|
Brian C. Cornell
|
|
|
|
6,511
|
Joseph M. DePinto
|
|
|
|
3,580
|
Rakesh Gangwal
|
|
12,500
|
|
6,181
|
Monte R. Haymon
|
|
|
|
|
Gary G. Michael
|
|
|
|
6,181
|
William J. Montgoris
|
|
|
|
2,229
|
Francesca Ruiz de Luzuriaga
|
|
12,500
|
|
6,181
|
David M. Szymanski
|
|
|
|
6,511
|
-
(a)
-
This
column does not include options elected to be received by a director in lieu of cash fees.
-
(b)
-
This
column does not include RSUs elected to be received by a director in lieu of cash fees.
-
(4)
-
The
figures in this column represent above market interest earned by directors who had balances in the Director Deferred Compensation Plan.
-
(5)
-
Mr. Haymon
resigned from the board shortly prior to January 28, 2007, the vesting date of these restricted stock units. In February 2007, the Executive Compensation
Committee of the board granted Mr. Haymon a cash payment of $60,225.26, which was approximately equal to the pro rata value of his forfeited restricted stock units. Mr. Haymon also
received a cash payment of $2,046 for dividends accrued on his RSUs.
20
Description of Director Compensation
Our current board members, except Mr. Duncan, receive compensation for board service. In 2007, that compensation included:
Annual Retainer:
|
|
$51,000
|
Attendance Fees:
|
|
$2,000 for each board meeting
$1,000 for each committee meeting
Expenses related to attendance
|
Equity Based Compensation Award:
|
|
$75,000 annually
|
Directors
who serve on the board for a portion of a year receive a prorated portion of the annual retainer, attendance fees for the meetings they attend and an equity based compensation
award as described below under "OfficeMax Incentive and Performance Plan."
In
addition to the compensation described above, the chair of each committee of the board receives an additional retainer as compensation for his or her role as chair. In 2007, retainers
for service as committee chairs were paid as follows:
|
Committee
|
|
Committee Chair Retainer
|
|
Chairman
|
|
Audit
|
|
$
|
30,000
|
|
Ms. Ruiz de Luzuriaga
|
Executive Compensation
|
|
$
|
20,000
|
|
Dr. Szymanski
|
Governance and Nominating
|
|
$
|
10,000
|
|
Mr. Bryant (1)
|
Outside Directors
|
|
$
|
20,000
|
|
Mr. Michael (2)
|
|
-
(1)
-
Mr. Bryant
was appointed chairman of the Governance and Nominating Committee beginning in July 2007. Prior to that, Mr. Gangwal was the chairman. Each of
Mr. Bryant and Mr. Gangwal received a pro rated portion of the retainer in the amount of $4,384 and $5,616, respectively.
-
(2)
-
Mr. Michael
decided not to stand for reelection to the board in 2008. As a result, he will no longer be the chair of the Committee of Outside Directors following the
stockholders' meeting.
For
2008, the Governance and Nominating Committee of the board reviewed the compensation received by our directors against the compensation received by directors of the same peer group
companies listed herein under "Compensation Discussion and AnalysisManagement Consultant" on page 32 and recommended no change in the compensation of board members in 2008. The
board accepted the recommendation of the Governance and Nominating Committee.
OfficeMax Incentive and Performance Plan
Through our stockholder-approved OMIPP, each non-employee director annually receives a form of long-term equity
compensation approved by our Governance and Nominating Committee. Individuals who are non-employee directors at the time of the board meeting held in July receive the award on the regular
grant date. Non-employee directors appointed between the July board meeting and December 31 receive the full grant on the first business day after joining our board. In 2007, each
non-employee director was to receive a grant of RSUs with a target fair market value of $75,000. On July 26, 2007, the grant date, the company's closing stock price was $33.65,
which resulted in an actual grant of RSUs with a fair market value of $75,006 because fractional shares of stock are not issued. The RSUs vested six months after the date of grant and are payable six
months following the date of termination of board service for any reason (or immediately upon
21
death
or disability). RSUs are paid in shares of our common stock. Directors holding RSUs are not entitled to any voting rights with respect to the RSUs, but are entitled to receive notional dividends
on the RSUs. These notional dividends are accumulated and paid in cash at the time the RSUs are paid.
Additional Director Compensation Plans
Our non-employee directors may choose to receive their cash compensation (meeting and retainer fees) in one of the following three
ways:
-
-
in
cash;
-
-
in
cash deposited in the Director Deferred Compensation Plan; or
-
-
in
RSUs (awarded through the OMIPP).
Non-employee
directors must specify by December 31 of each year how much of their cash compensation for the following year they wish to receive in each available
payment form.
Our Director Deferred Compensation Plan allows each non-employee director to defer all or a portion of the cash compensation he or she receives for
services as a director. Non-employee directors may defer from a minimum of $5,000 to a maximum of 100% of their cash compensation in a calendar year. Amounts deferred under this plan are
credited with interest at a rate equal to 130% of Moody's Composite Average of Yields on Corporate Bonds. Participants elect the form and timing of distributions of their deferred compensation
balances under this plan at the time the decision to defer compensation under the plan is made. Participants will receive payment in cash, in a lump sum or in annual installments, following the
termination of their service on the board. In the event of a change in control of the company, as defined in the plan, a trust may pay our obligations under the Director Deferred Compensation Plan.
For more information on this trust, see "Other Compensation and Benefit PlansDeferred CompensationDeferred Compensation and Benefits Trust" beginning on page 62. One
of the ten eligible non-employee directors, Mr. Michael, participated in the plan in 2007 and 1 of the 9 eligible non-employee directors, Mr. Bryant, has elected
to participate in the plan in 2008.
Through our stockholder-approved Director Stock Compensation Plan, non-employee directors could elect in 2006 to receive part or all of their cash
compensation in the form of stock options rather than cash. None of the thirteen eligible non-employee directors participated in the Director Stock Compensation Plan in 2006, and none of
the ten eligible non-employee directors elected to participate in this plan in 2007. As a result of an amendment to the plan approved at the meeting of the Executive Compensation Committee
in February 2007, no further stock options grants will be made under the plan.
22
Restricted Stock Units in lieu of salary (awarded through the OfficeMax Incentive and Performance Plan)
Through our stockholder approved OMIPP, non-employee directors can elect to receive part or all of their cash compensation in RSUs. Under this plan,
RSUs are granted to participating directors on the last trading day of each calendar year. The number of RSUs granted to a participating director is determined by dividing the amount of cash
compensation he or she elected to receive in RSUs by the closing price of our common stock as reported on the consolidated tape of the New York Stock Exchange on the last trading day of the calendar
year. The RSUs are payable immediately after termination of a participating director's service on the board. RSUs are paid in shares of our common stock. Directors holding RSUs are not entitled to any
voting rights with respect to the RSUs, but are entitled to receive notional dividends on the RSUs, which notional dividends are accumulated and paid in cash when the RSUs are paid. Five of the eight
eligible directors, Ms. Bern and Messrs. Bryant, Cornell, DePinto and Gangwal, elected to receive all or a portion of their cash compensation in RSUs in 2007 and 4 of the 9 eligible
directors, Messrs. Bryant, Cornell, DePinto and Gangwal, have elected to receive all or a portion of their cash compensation in RSUs in 2008.
Meetings of the Board
During 2007, our board of directors met nine times. In addition to meetings of the full board, directors also attended meetings of board
committees. Overall, our directors had an attendance rate of 95%. All of the directors attended at least 76% of the meetings of the board and the committees on which they served.
While
we do not have a formal policy requiring them to do so, we encourage our directors to attend our annual meeting. Eight of our nine directors attended our 2007 annual meeting of
stockholders.
The
standing committees of the board of directors, with the membership indicated, are set forth in the table below. Mr. Duncan, as the only director who is not independent, does
not serve on any committee of the board.
The Board of Directors and Committee Membership
Director
|
|
Committee of Outside Directors
|
|
Executive Compensation Committee
|
|
Audit Committee
|
|
Governance and Nominating Committee
|
Dorrit J. Bern *
|
|
X
|
|
X
|
|
X
|
|
|
Warren F. Bryant *
|
|
X
|
|
X**
|
|
X
|
|
X**(C)
|
Joseph M. DePinto *
|
|
X
|
|
X**
|
|
X
|
|
X**
|
Rakesh Gangwal *
|
|
X
|
|
X
|
|
|
|
X(C)
|
Gary G. Michael *
|
|
X(C)
|
|
X
|
|
|
|
X
|
William J. Montgoris *
|
|
X
|
|
X
|
|
X
|
|
|
Francesca Ruiz de Luzuriaga *
|
|
X
|
|
|
|
X(C)
|
|
X
|
David M. Szymanski *
|
|
X
|
|
X(C)
|
|
|
|
X
|
2007 Meetings
|
|
2
|
|
11
|
|
9
|
|
8
|
-
(*)
-
Independent
director within the definition used by the NYSE.
-
(**)
-
Effective
in July 2007, Mr. DePinto joined the Executive Compensation Committee and ceased to serve on the Governance and Nominating Committee and Mr. Bryant joined the
Governance and Nominating Committee and ceased to serve on the Executive Compensation Committee.
23
-
(C)
-
Committee
Chair. Mr. Bryant was appointed chairman of the Governance and Nominating Committee beginning in July 2007. Prior to that, Mr. Gangwal was the chairman.
Committee of Outside Directors
The Committee of Outside Directors is comprised solely of our independent directors and meets outside the presence of Mr. Duncan (our only
management director). The Committee of Outside Directors reviews and evaluates our chief executive officer's performance against his individual and corporate goals and strategies. The Committee of
Outside Directors meets at least twice each year on a formal basis. The Committee of Outside Directors also meets on an ad hoc basis in conjunction with regularly scheduled board meetings.
The
chair of our Committee of Outside Directors acts as the lead independent director for our board. Our lead independent director is responsible for:
-
-
convening
and presiding at all meetings of the board at which the chairman is not present, including executive sessions of the independent directors;
-
-
coordinating
the activities of our independent directors;
-
-
facilitating
communications between the chairman of the board, chief executive officer, and other board members;
-
-
reviewing
meeting agendas and schedules, as well as board materials, prior to board meetings;
-
-
consulting
with the chairman of the board to assure that appropriate topics are being discussed with sufficient time allocated for each; and
-
-
reviewing
the results of the chief executive officer's performance evaluation with the chief executive officer and with the chair of the Executive Compensation Committee.
When
performing these duties, our lead independent director consults with the chairs of our other board committees, as needed, to avoid any dilution of their authority or responsibility.
You
may contact our independent directors in the manner set forth under "Governance and Nominating CommitteeCommunications with Directors" on page 26.
Executive Committee
In accordance with our Bylaws, the Executive Committee has and may exercise all powers the board may legally delegate. The committee is convened
when circumstances do not allow the time, or when it is otherwise not practicable, for the entire board to meet. The committee consists of the chairman of the board and the chairs of the Audit
Committee, Executive Compensation Committee, Governance and Nominating Committee, and the Committee of Outside Directors. In 2007, the Executive Committee did not meet.
Governance and Nominating Committee
The Governance and Nominating Committee, comprised entirely of directors meeting the independence requirements of the NYSE, is responsible for:
-
-
assisting
the board in identifying and recommending qualified individuals for board membership;
-
-
recommending
nominees for election at the annual meeting of stockholders;
24
-
-
reviewing
the structure of each board committee and recommending the composition of each committee;
-
-
developing
our corporate governance guidelines;
-
-
reviewing
director compensation and benefits;
-
-
recommending
responses to stockholder proposals;
-
-
overseeing
the evaluation of our senior management, except our chief executive officer;
-
-
reviewing
related person transactions; and
-
-
developing
and recommending to the board an annual self-evaluation process of the board and its committees.
Qualifications for Directors
The Governance and Nominating Committee has established qualifications for directors, including the ability to apply good and independent judgment
in a business situation and the ability to represent the interests of all our stockholders and constituencies. A director also must be free from any conflicts of interest that would interfere with his
or her loyalty to our stockholders and us. In evaluating board candidates, the Governance and Nominating Committee considers these qualifications as well as several other factors, including but not
limited to:
-
-
demonstrated
maturity and experience;
-
-
geographic
balance;
-
-
expertise
in business areas relevant to OfficeMax;
-
-
background
as an educator in business, economics, or the sciences; and
-
-
diversity.
The
Governance and Nominating Committee identifies nominees by first evaluating the current members of the board willing to continue in service. Current members of the board with skills
and experience relevant to our business and who are willing to continue in service are considered for re-nomination. If any member of the board does not wish to continue in service or if
the Governance and Nominating Committee decides not to nominate a member for reelection, the committee will review the desired skills and experience of a new nominee in light of the criteria set forth
above or may choose to recommend reduction in the number of board members.
The
Governance and Nominating Committee relies on management and director recommendations and the use of independent search firms when identifying potential board candidates. We also
consider director candidates recommended by our stockholders.
The
Governance and Nominating Committee does not have a written policy regarding stockholder nominations for directors. In accordance with our Bylaws, however, the committee will
consider stockholder nominations for directors (see "Other InformationStockholder Nominations for Directors" beginning on page 78). OfficeMax has not received any stockholder
nominations or recommendations for director in connection with our 2008 annual meeting.
Governance Guidelines and Committee Charters
We maintain a corporate governance page on our website that includes key information about our corporate governance initiatives. That information
includes our Corporate Governance Guidelines, Code of Ethics, and charters for our Audit, Executive Compensation, and Governance
25
and
Nominating Committees, as well as our Committee of Outside Directors. The corporate governance page can be found at
www.officemax.com
by clicking on
"About Us," then "Investors," and then "Corporate Governance." You also may obtain copies of these policies and codes by contacting our Investor Relations Department, 263 Shuman Boulevard, Naperville,
Illinois 60563, or by calling 630/864-6800.
Our
policies and practices reflect corporate governance initiatives that comply with the NYSE listing requirements and the corporate governance requirements of the Sarbanes-Oxley Act,
including:
-
-
our
board of directors adopted clear corporate governance policies, including standards for determining director independence;
-
-
with
the exception of Mr. Duncan, our chairman of the board and chief executive officer, OfficeMax's board has determined that all of our directors meet the
independence requirements of the NYSE;
-
-
all
members of our Audit, Executive Compensation, and Governance and Nominating Committees are independent;
-
-
our
board committee charters clearly establish their respective roles and responsibilities;
-
-
our
non-management directors meet at least twice a year without management present, under the direction of our lead independent director;
-
-
we
have a Code of Ethics that applies to all OfficeMax directors, officers, employees, associates, and agents and to any company that we own or manage;
-
-
our
internal audit function maintains critical oversight over the key areas of our business, financial processes, and controls, and reports regularly to the chair of our
Audit Committee;
-
-
we
have a toll-free reporting service available that permits employees to report violations of our Code of Ethics or other issues of significant concern on a
confidential basis; and
-
-
callers
on our toll-free reporting service may request that an issue relating to accounting, internal accounting, internal controls, or auditing be reported to
the Audit Committee.
Communications with Directors
Stockholders and other interested parties may send correspondence to our board of directors or to any individual director through the following
address: OfficeMax Incorporated,
Attention
Corporate Secretary, 263 Shuman Boulevard, Naperville, Illinois 60563. You also may correspond with our
directors by email at
boardofdirectors@officemax.com
. You should direct concerns about accounting controls or auditing matters to the chair of the Audit
Committee at the same address. We will forward all communications to the person(s) to whom they are addressed. All correspondence will also be referred to our lead director. While we do not screen
these communications, copies also will be forwarded to our general counsel and our corporate secretary.
Audit Committee Report
The Audit Committee of the board of directors oversees our accounting and financial reporting processes, audits of OfficeMax's financial
statements, the system of internal controls established by management related to accounting, financial reporting, disclosure, and ethics and the integrity of OfficeMax's financial statements. The
Audit Committee also assists the board in the oversight of OfficeMax's compliance with legal and regulatory requirements; the evaluation of the independence, performance, and qualifications of the
independent public accounting firm; and the performance of
26
OfficeMax's
internal audit function. It is comprised entirely of independent directors as required by the NYSE listing standards and by its own written charter. All of the Audit Committee members are
"financially literate," and Ms. Ruiz de Luzuriaga, the committee chair, Ms. Bern, and Mr. Montgoris qualify as "audit committee financial experts" as defined by the SEC. See
"Board of Directors" for a description of the experience of each Audit Committee member.
The
Audit Committee, formed in 1969, has had a charter since 1973. The Audit Committee periodically reviews and updates that charter based on changes in its responsibilities and changes
in SEC regulations or NYSE listing standards.
Audit Committee Responsibilities
The Audit Committee's responsibilities include:
-
-
discussing
with management and the independent registered public accounting firm OfficeMax's annual audited financial statements and unaudited quarterly financial
statements, including matters required for review under applicable legal, regulatory, or NYSE requirements, and recommending to the board whether the annual audited financial statements should be
included in OfficeMax's Annual Report on Form 10-K;
-
-
discussing
with management and the independent registered public accounting firm, as appropriate, earnings press releases, analyst and rating agency guidance, and other
financial information provided to the public;
-
-
recommending,
for stockholder approval, the independent registered public accounting firm to examine OfficeMax's accounts, controls, and financial statements. The Audit
Committee has the sole authority and responsibility to select, terminate, and determine the compensation of the independent registered public accounting firm. The independent registered public
accounting firm reports directly to the Audit Committee and the Audit Committee is directly responsible for oversight of the work of the independent registered public accounting firm, including
resolution of disagreements between company management and the independent registered public accounting firm regarding financial reporting;
-
-
discussing
with management and the independent registered public accounting firm, as appropriate, any audit problems or difficulties and management's response, as well as
OfficeMax's risk assessment and risk management policies, including OfficeMax's major financial risk exposure and steps taken by management to monitor and mitigate such exposure;
-
-
reviewing
OfficeMax's financial reporting and accounting standards and principles, significant changes in those standards or principles or in their application, and the key
accounting decisions affecting OfficeMax's financial statements, including alternatives to, and the rationale for, the decisions made;
-
-
reviewing
and approving OfficeMax's internal corporate audit staff functions, including (i) purpose, authority, and organizational reporting lines and
(ii) annual audit plan, budget, and staffing;
-
-
reviewing,
with the chief financial officer, the controller, the director of internal corporate audit functions, or such other persons as the Audit Committee deems
appropriate, OfficeMax's internal system of audit, financial, and disclosure controls and the results of internal audits;
-
-
obtaining
and reviewing at least annually a written report from the independent registered public accounting firm delineating: the accounting firm's internal quality control
procedures; any material issues raised within the preceding five years by the accounting firm's internal
27
quality-control
review, by peer reviews of the firm, or by any governmental or other inquiry or investigation relating to any audit conducted by the firm. The Audit Committee also reviews steps taken
by the accounting firm to address any findings in any of the foregoing reviews;
-
-
assessing
the external auditor's independence and the absence of conflicts of interest, by reviewing at least annually all relationships between the independent registered
public accounting firm and OfficeMax;
-
-
preparing
and publishing an annual committee report in OfficeMax's proxy statement;
-
-
setting
policies for hiring employees or former employees of OfficeMax's independent registered public accounting firm;
-
-
reviewing
and investigating matters pertaining to the integrity of management, including conflicts of interest or adherence to codes of ethics as required in OfficeMax's
policies. In connection with these reviews, the Audit Committee will meet, as deemed appropriate, with the general counsel and other OfficeMax officers and employees; and
-
-
establishing
procedures concerning the submission, receipt, retention, and treatment of complaints and concerns regarding accounting, internal accounting controls, or audit
matters.
The
Audit Committee, or an authorized committee member, must also preapprove any audit and permitted nonaudit services provided to OfficeMax by its independent registered public
accounting firm, KPMG LLP.
Audit, Audit-Related, and Other Nonaudit Services
Consistent with SEC policies regarding auditor independence, the Audit Committee has responsibility for appointing, setting compensation and
overseeing the work of KPMG LLP. In recognition of this responsibility, the Audit Committee has established a policy to pre-approve all audit and permissible non-audit
services provided by KPMG LLP.
Prior
to engagement of KPMG LLP for the next year's audit, management or KPMG LLP will submit to the Audit Committee for approval a list of services and related fees
expected to be rendered during that year within each of four categories of services.
-
1.
-
Audit
services include audit work performed on the financial statements and internal control over financial reporting, as well as work
that generally only KPMG LLP can reasonably be expected to provide, including comfort letters, statutory audits, and discussions surrounding the proper application of financial accounting
and/or reporting standards.
-
2.
-
Audit-Related
services are for assurance and related services that are traditionally performed by KPMG LLP, including employee
benefit plan audits, and special procedures required to meet certain regulatory requirements.
-
3.
-
Tax
services include all services performed by KPMG LLP's tax personnel except those services specifically related to the audit
of the financial statements, including tax analysis, assisting with the coordination of tax-related activities, supporting other tax-related regulatory requirements, and tax
compliance and reporting.
-
4.
-
All Other
services are those services not captured in the audit, audit-related or tax categories. OfficeMax generally does not request
such services from KPMG LLP.
28
Prior to engagement, the Audit Committee considers whether proposed services would impair KPMG LLP's independence before approving any services within each category. The fees are
budgeted and the Audit Committee requires KPMG LLP and management to report actual fees versus the budget periodically throughout the year by category of service.
During
the year, circumstances may arise when it becomes necessary to engage KPMG LLP for additional services not contemplated in the original pre-approval categories.
In those instances, the Audit Committee requires specific pre-approval before engaging KPMG LLP. To ensure prompt handling of unexpected matters, the Audit Committee has delegated
to its chair the authority to amend or modify the list of approved permissible audit and nonaudit services and fees. For informational purposes only, the chair reports any action taken pursuant to
this authority at the next Audit Committee meeting. The Audit Committee believes this approach results in an effective procedure to pre-approve services to be performed by KPMG LLP.
OfficeMax
did not use KPMG LLP for any of the following nonaudit services in 2007:
-
-
bookkeeping
or other services related to our accounting records or financial statements;
-
-
financial
information systems design and implementation;
-
-
appraisal
or valuation services, fairness opinions, or contribution-in-kind reports;
-
-
actuarial
services;
-
-
internal
audit outsourcing services;
-
-
management
functions or human resources;
-
-
broker
or dealer, investment adviser, or investment banking services; or
-
-
legal
services and expert services unrelated to the audit.
Based
on its review, the Audit Committee believes that KPMG LLP's provision of nonaudit services is compatible with maintaining its independence.
Financial Statement Recommendation
The Audit Committee is responsible for recommending to the board that OfficeMax's audited financial statements be included in its
Form 10-K. The Audit Committee took a number of steps in making this recommendation for 2007, including discussing with KPMG LLP the:
-
-
conduct
of the audit, including information regarding the scope and results of the audit, as required by the Statement on Auditing Standards No. 61, Communication
with Audit Committees;
-
-
auditors'
independence, including receipt of a letter from KPMG LLP regarding its independence, as required by Independence Standards Board Standard No. 1,
Independence Discussions with Audit Committees; and
-
-
audit
of management's assessment of the effectiveness of internal control over financial reporting and KPMG LLP's own audit of the effectiveness of internal controls
over financial reporting.
As
the final step in this procedure, the Audit Committee reviewed and discussed with KPMG LLP and management OfficeMax's audited consolidated balance sheet at December 29,
2007, and its audited consolidated statements of income (loss), cash flows, and shareholders' equity for the year ended December 29, 2007.
29
Based
on the discussions with OfficeMax's management regarding the audited financial statements and with KPMG LLP regarding its audit and independence, the Audit Committee
recommended to the board that these financial statements be included in OfficeMax's 2007 Form 10-K.
Audit Committee of the Board of Directors
Francesca
Ruiz de Luzuriaga, Chair
Dorrit J. Bern
Warren F. Bryant
Joseph M. DePinto
William J. Montgoris
Executive Compensation Committee Report
The Executive Compensation Committee of the board of directors (throughout this section, the "committee") operates under a written charter and is
comprised entirely of directors meeting the independence requirements of the New York Stock Exchange. The members of the committee are appointed by the Board on the recommendation of the Governance
and Nominating Committee and may be removed by the Board in its discretion.
The
Board established the committee to discharge the Board's responsibilities relating to compensation of the company's chief executive officer and each of the company's other executive
officers. The committee has overall responsibility for decisions relating to all compensation plans, policies, and benefit programs as they affect the chief executive officer and other executive
officers.
Committee Authority and Responsibilities
-
-
The
committee annually reviews and approves corporate goals and objectives relevant to chief executive officer compensation. Together with the Board's Committee of Outside
Directors, the committee annually evaluates the CEO's performance in light of those goals and objectives and determines and approves the CEO's overall compensation levels based on this evaluation.
-
-
The
committee annually reviews and approves the annual base salaries and annual incentive opportunities of the company's elected officers.
-
-
Periodically
and when appropriate, the committee reviews and approves the following as they affect the CEO and the company's elected officers:
-
-
All
other incentive awards and opportunities including both cash-based and equity-based awards and opportunities;
-
-
Any
employment agreements and severance arrangements;
-
-
Any
change-in-control agreements and change-in-control provisions affecting any elements of compensation and benefits; and
-
-
Any
special or supplemental compensation and benefits.
-
-
The
committee receives periodic reports on the company's compensation programs as they affect all employees.
-
-
The
committee is responsible for producing a committee report for inclusion in the company's proxy statement.
30
-
-
The
committee reviews and discusses the Compensation Discussion and Analysis section of the proxy with management. Based on this review and discussion, the committee
determines whether to recommend to the Board that the section be included in the company's annual report or proxy statement.
-
-
The
committee periodically reviews executive succession plans for management.
Committee Procedure
-
-
The
committee reviews and reassesses its Charter annually and recommends any proposed changes to the Board.
-
-
The
committee has at least three regularly scheduled meetings annually but will meet as often as necessary to carry out its responsibilities. The meetings may be called by
the committee chair, the chairman of the Board, or the CEO.
-
-
The
committee keeps minutes and reports its activities to the Board.
-
-
The
committee annually reviews its own performance.
-
-
The
committee has the sole authority to retain and terminate any compensation consultant to be used to assist it in the evaluation of CEO or elected officer compensation and
has sole authority to approve the consultants' fees and the other terms and conditions of the consultants' retention. The committee also has authority to obtain advice and assistance from internal or
external legal, accounting, or other advisors as it deems appropriate.
-
-
The
committee may form and delegate authority to subcommittees.
The
Executive Compensation Committee has reviewed and discussed the information appearing below under the heading "Compensation Discussion and Analysis", beginning on page 31,
with management and, based on that review and discussion, has recommended to the board of directors that the "Compensation Discussion and Analysis" section be included in this proxy statement.
Executive Compensation Committee of the Board of Directors
David
M. Szymanski, Chair
Dorrit J. Bern
Joseph M. DePinto
Rakesh Gangwal
Gary G. Michael
William J. Montgoris
Compensation Discussion and Analysis
Overview
The Executive Compensation Committee (referred to as the committee in the remainder of this section) and management base their executive
compensation policies and decisions with respect to our named executive officers on achievement of the following objectives:
-
-
align
compensation with our performance on both a short-term and long-term basis;
-
-
attract,
motivate, reward, and retain management talent critical to achieving our business goals; and
31
-
-
encourage
ownership of our common stock to create commonality of interest between executive officers and stockholders.
In
order to achieve these objectives, the committee and management have implemented a compensation program that generally includes the following material components:
-
-
base
salary;
-
-
annual
performance-based incentive compensation;
-
-
long-term
performance-based incentive compensation; and
-
-
other
compensation and benefit plans.
In
designing compensation programs, management and the committee place a heavy emphasis on performance, and consequently a substantial portion of each executive officer's total annual
compensation is "at-risk" and tied to our annual and long-term financial performance, as well as to the enhancement of stockholder value.
We
describe each of these components in more detail below, including their relationship to the objectives outlined above.
Independent Consultant to the Executive Compensation Committee
The committee has the authority under its charter to directly retain compensation consultants to assist the committee. In accordance with this
authority, the committee engages Frederic W. Cook & Co. (referred to in the rest of this section as Cook) as its independent outside compensation consultant to advise it on matters
related to chief executive officer and other executive compensation. The committee has the sole authority to retain and terminate Cook. Cook only interacts with management with the express permission
of the committee. At the request of the committee, Cook assisted management in formulating its proposal to increase the shares of stock available for issuance under the OMIPP. In its capacity as
advisor to the committee, Cook is available to meet with the committee and management when requested and regularly attends the committee meetings. Representatives of Cook attended eight committee
meetings in 2007. The services provided to the committee by Cook include but are not limited to: reviewing proposals prepared by management; advising on the design of incentive plans, including the
structure of the plans, the selection of performance metrics and the setting of performance goals; advising on the design of the indirect elements of the total compensation program, such as change in
control severance benefits, stock ownership policy and perquisites; assisting the committee in making changes to Mr. Duncan's compensation and in determining his annual payout, if any, under
the annual incentive plan as well as his annual long-term incentive award; providing periodic updates on emerging trends and best practices with regard to compensation design and policy;
assisting with preparation of the annual proxy statement and other matters related to disclosure of executive compensation; reviewing an annual competitive analysis of compensation rates for the
company's executive officers; conducting an annual competitive analysis of aggregate equity compensation expense for the company as a whole; and recommending an annual equity compensation budget based
on both stock usage and economic cost.
Management Consultant
The executive vice president and senior vice president of human resources engage consultants as needed in order to provide executive compensation
recommendations, market data and calculations. To provide a market-based foundation for executive compensation decisions, management annually engages a consultant to conduct a survey of compensation
paid by a peer group of companies (referred to in the rest of this section as the compensation survey). The
32
compensation
survey provides information on base salaries, short-term incentives, annual targeted total cash compensation, long-term incentives, and annual targeted total
direct compensation paid by the peer group. This information is used by management to benchmark the compensation recommendations that management provides to the committee. Cook reviews management's
recommendations and provides feedback to the committee on those recommendations. In 2006 and 2007, this compensation survey was produced by Hewitt Associates (referred to in the rest of this section
as Hewitt). In 2008, this compensation survey was produced by the Hay Group (referred to in the rest of this section as Hay).
Peer Group
The peer group is reviewed and approved annually by the committee. Management, together with the consultant producing the compensation survey
initially propose a peer group of companies drawn from the consultant's database. The peer group is finalized after discussions with the committee chair and the committee. The committee consults with
Cook on the composition of the peer group. The peer group includes competitors, leading retailers, and business to business distributors that have submitted their compensation data to the consultant
producing the compensation survey. We believe these companies have certain characteristics, such as business model or size, which are comparable to us and are likely to compete with us for executive
talent. Because consultant databases are limited in the number of same-sized companies participating in their surveys, companies that are smaller or larger than us are included in the peer
group so that a reasonable number of companies is available for statistical analysis. The compensation data is then adjusted for company size to control for compensation differences that would arise
from company size differences alone. The peer group used by Hewitt in evaluating 2007 compensation levels consisted of the following companies:
Auto Zone, Inc.
|
|
Newell Rubbermaid Inc.
|
CDW Corporation
|
|
Office Depot, Inc.
|
Charming Shoppes, Inc.
|
|
The Pantry Inc.
|
Corporate Express, Inc.
|
|
Petco Animal Supplies, Inc.
|
Dollar General Corporation
|
|
The Sports Authority, Inc.
|
Federal-Mogul Corporation
|
|
Toys R Us, Inc.
|
J. C. Penney Company
|
|
Staples, Inc.
|
Kohl's Corporation
|
|
United Stationers, Inc.
|
L. L. Bean Incorporated
|
|
Williams-Sonoma, Inc.
|
Linens'n Things, Inc.
|
|
W. W. Grainger, Inc.
|
Longs Drug Stores, Inc.
|
|
|
In
late 2007, the committee decided to engage Hay to produce the 2008 compensation study because of its extensive survey database and consulting experience in the retail and services
sectors. The set of companies available for peer group comparisons was therefore restricted to the companies that submit their data to Hay. During the annual review of the peer group, the committee
approved the criteria, set forth below, to use in evaluating the companies to include in the peer group. From Hay's Retail Industry Total Remuneration Report, which contains information on nearly 100
retail organizations, a peer group was developed by management and Hay applying these criteria. The committee then reviewed the proposed peer group and approved a revised peer group whose constituents
meet some or all of the following criteria:
-
-
peer
competes with OfficeMax for business
-
-
peer
has a similar business model to OfficeMax
-
-
peer
competes with OfficeMax for talent
33
-
-
peer
recruits talent from OfficeMax
-
-
peer
sets compensation trends in OfficeMax's hiring market
-
-
peer
has similar revenues to OfficeMax
The
2008 peer group includes 26 companies and has changed as follows:
Companies Added
|
|
Companies Retained
|
|
Companies Removed
|
Ace Hardware Corporation
|
|
Auto Zone, Inc.
|
|
CDW Corporation
|
Advance Auto Parts, Inc.
|
|
Dollar General Corporation
|
|
Charming Shoppes, Inc.
|
Big Lots, Inc.
|
|
Kohl's Corporation
|
|
Corporate Express
|
Blockbuster Inc.
|
|
Linens'n Things, Inc.
|
|
Federal-Mogul Corporation
|
The Bon-Ton Stores, Inc.
|
|
Office Depot, Inc.
|
|
J.C. Penney Company
|
Borders Group Inc.
|
|
Staples, Inc.
|
|
L.L. Bean Incorporated
|
Crate & Barrel
|
|
Williams-Sonoma, Inc.
|
|
Longs Drug Stores, Inc.
|
Dollar Tree Stores Inc.
|
|
|
|
Newell Rubbermaid Inc.
|
Family Dollar Stores, Inc.
|
|
|
|
The Pantry Inc.
|
FedEx Kinko's Office and Print Center
|
|
|
|
Petco Animal Supplies, Inc.
|
Gap Inc.
|
|
|
|
The Sports Authority, Inc.
|
Limited Brands, Inc.
|
|
|
|
Toys R Us, Inc.
|
Meijer, Inc.
|
|
|
|
United Stationers, Inc.
|
Payless ShoeSource
|
|
|
|
W. W. Grainger, Inc.
|
PetSmart, Inc.
|
|
|
|
|
RadioShack Corporation
|
|
|
|
|
ShopKo Stores, Inc.
|
|
|
|
|
TJX Companies, Inc.
|
|
|
|
|
Winn-Dixie Stores, Inc.
|
|
|
|
|
Base Salary
The committee and management believe that competitive base salaries are necessary to attract and retain management talent critical to achieving our business
goals. The committee and management annually review the salary range and salary grades for all elected officer positions, referring to the compensation survey to provide insight into appropriate
levels. Cook reviews this analysis on behalf of the committee and provides independent data as requested by the committee. The target salary for officers in a salary grade is the midpoint of the
range. The midpoint represents the approximate median salary for equivalent positions at the peer group companies, after adjusting for differences in job content, including company size, business
complexity and responsibilities of the roles compared to similar jobs in the market. The committee and management also make comparisons to similar OfficeMax positions in circumstances where the
executive position does not exist in the peer group.
Annually, the executive vice president and senior vice president of human resources recommend a salary for each elected officer (except for the chief executive
officer). With respect to elected officers reporting directly to the chief executive officer, the compensation survey information and recommended salaries are presented to the chief executive officer.
With respect to elected officers not reporting directly to the chief executive officer the process is the same, except the supervising elected officer reviews and provides input to the executive vice
president of human
34
resources
prior to the presentation of the recommended salaries to the chief executive officer. After reviewing this information, the chief executive officer may make modifications based on his own
assessment of individual performance, and then makes salary recommendations to the committee. Cook is present at the committee meeting to provide input on the recommendations. The committee approves
the base salary for each of the named executive officers and all other elected officers. In establishing base salaries, the committee considered the executive's length of employment, individual
performance, relation to internal peers, and compensation survey data. Similarly, variance from salary range midpoint and compensation survey median base salaries is considered based on annual
performance results, individual experience, expertise, skill, leadership qualities, level of responsibility, placement within company succession planning, overall value to the company and
considerations of fairness and comparability within the company. The committee also reviews and may adjust salaries at the time of promotions or other significant increases in executive
responsibilities based on the considerations described above.
Mr. Duncan's
target base salary is established in the same way as it is for other elected officers, except that no recommendation is made by management with respect to his
compensation. In
addition, each year, Mr. Duncan provides the committee and the Committee of Outside Directors with a list of his goals and priorities or strategies for the upcoming fiscal year. The Committee
of Outside Directors provides Mr. Duncan with a performance review each year, which includes consideration of the financial performance of the company for the year as well as
Mr. Duncan's performance. The committee joins the Committee of Outside Directors when it conducts this review so that it can take the results into consideration when it sets Mr. Duncan's
compensation for the year.
The
base salaries for all named executive officers other than the chief executive officer and the chief financial officer were established following the procedures described above and
are set forth in the "Summary Compensation Table" on page 51. The salary approved for Mr. DePaul was above the midpoint of his salary range, but still below the compensation survey
median for his position. The base salaries of Messrs. Duncan, Civgin, Martin and Vero were lower than the midpoint of their salary range and below the compensation survey median for their
position.
Mr. Duncan's base salary was initially established at $850,000 in April 2005, when he joined the company, pursuant to the terms of his employment
agreement. In February 2006, the committee approved an increase in Mr. Duncan's base salary to $900,000, effective in April 2006. This resulted in Mr. Duncan's base salary remaining
below the midpoint of the salary range for chief executive officers of peer companies in the Hewitt survey. The committee approved the 2006 increase in recognition of Mr. Duncan's impact on the
strategic direction of the company and our improved operating results. In February 2007, following a discussion of Mr. Duncan's then current salary, as well as the other items of compensation
that have been granted to Mr. Duncan, the committee approved an increase in Mr. Duncan's salary to $1,000,000, effective as of April 1, 2007, in recognition of Mr. Duncan's
impact on the company's operating results, which improved significantly in 2006, and his implementation of a complicated turnaround plan for the company in a short time frame. With this increase,
Mr. Duncan's salary was still below the midpoint of the salary range for chief executive officers of peer companies in the Hewitt survey. Although the procedure to set Mr. Duncan's
salary differs from the procedure to set the other named executive officer salaries (in that no recommendation is made to the committee with respect to his salary), his target salary is benchmarked in
the same way as the other named executive officers, and that benchmark information is provided to the committee.
In
February 2008, Cook provided a recommendation to the committee with respect to Mr. Duncan's salary and other compensation based on market data prepared by Hay. The
35
committee
reviewed Cook's recommendation and Mr. Duncan's performance in 2007. In view of his accomplishments in continuing to drive the company's turnaround plan, the committee approved an
increase in Mr. Duncan's salary to $1,030,000, effective March 30, 2008.
Our
chief financial officer, Mr. Civgin, joined the company in October 2005, at which time his base salary was set at $475,000. In February 2006, the committee awarded
Mr. Civgin a 2.1% increase in base salary to $485,000 in recognition of his performance. In February 2007, the committee approved an increase in Mr. Civgin's salary to $520,000,
effective as of April 1, 2007. The chief executive officer recommended this increase for Mr. Civgin based on his accomplishments during his first year, including achievement of goals in
the management of our finance function and his impact on our improved operating results. In February 2008, the committee reviewed Mr. Civgin's performance in 2007. In view of his
accomplishments and continued leadership within the company, the committee approved an increase in Mr. Civgin's salary to $546,000, effective March 30, 2008.
Our
chief operating officer, Mr. Martin, joined the company in September 2007 at which time his base salary was set at $620,000. This base salary was below the midpoint of the
salary range for chief operating officers of peer companies in the compensation survey. The committee approved this base salary because of Mr. Martin's prior experience and the responsibilities
he would take on as chief operating officer. In February 2008, the committee approved an increase in Mr. Martin's salary to $640,000 in recognition of his performance effective March 30,
2008.
The
committee also approved increases for Messrs. DePaul, Rowsey and Vero to $313,500, $538,000 and $518,000, respectively, effective April 1, 2007, in recognition of their
performance in 2006. The committee approved increases for Messrs. DePaul and Vero to $327,600 and $533,540, respectively, effective March 30, 2008, in recognition of their performance in
2007.
Annual Incentive Compensation (Bonus)
The committee establishes annual incentive compensation in the form of cash bonuses in order to tie a significant portion of annual compensation to our annual
financial performance. Each year the committee establishes objective performance criteria that must be met by the company in order for bonuses to be paid (establishing minimum, target and maximum
payout levels for each type of performance criteria), a bonus target for each executive officer that is expressed as a percentage of salary, and other terms and conditions of awards under the bonus
program. Each of these components is described below. No annual incentive awards are earned or paid unless the minimum performance criteria are achieved and the company has net income. The committee
may
determine that special one-time or extraordinary gains or losses should or should not be included in the calculation of the performance criteria. The committee typically approves annual
incentive bonus criteria in February, in order to comply with the provisions of Section 162(m) of the Internal Revenue Code of 1986, as amended (referred to in the rest of this section as
Section 162(m)), which requires that performance metrics be set within 90 days of the commencement of the performance period. Compliance with Section 162(m) enables the awards to
qualify as "performance-based" compensation and allows the awards granted to the CEO and other named executive officers (other than our chief financial officer whose compensation is not subject to the
deduction limitations of Section 162(m)) to be tax deductible by us if the compensation to any named executive officer exceeds $1 million for any fiscal year.
In 2006, the committee approved the following performance criteria applicable to all named executive officers to receive a bonus payment at target: company return
on sales of 2%, same
36
location
sales growth of 3.9%, and earnings before interest and taxes (which we refer to as EBIT Dollars) of $185 million. These financial measures were weighted as follows for 2006: EBIT
Dollars 50%, return on sales 25%, and same location sales growth 25%. The performance criteria set for 2006 were aligned with our 2006 strategic plan. These measures and the individual weightings were
selected by the committee to ensure an appropriate focus on growth and profitability, with EBIT Dollars weighted most heavily because it was most indicative of our success in executing our strategic
plan and reinforced the objective of increasing our overall profitability. Return on sales measures the efficiency of our execution and sales growth promotes positive marketplace expansion of the
business, each of which are critical to achieving sustained and profitable growth as well as the efficient use of capital. Given our 2005 performance, the committee felt it important to place greater
relative emphasis on EBIT Dollars in 2006 and therefore weighted EBIT Dollars more heavily. The committee chose targets for each measure which would be obtainable if executive officers executed the
strategies articulated by the company and produced material improvements in operating results and which the committee believed would increase stockholder value when met. The improvement in operating
results required to reach the targets was significantly in excess of 2005 operating results and was dependent on successful completion of numerous initiatives designed to increase efficiency, reduce
cost, and deliver a better customer experience.
In
February 2007, the committee approved the performance criteria, bonus targets and design for the 2007 annual incentive compensation plan. For the reasons stated above, the committee
retained EBIT Dollars, return on sales, and same location sales growth as objective performance criteria. Because the same location sales growth goal was not met in 2006, the committee increased the
relative weighting of that goal to one-third, increased the weighting of the return on sales goal to one-third and reduced the weighting of the EBIT Dollars goal to
one-third, to emphasize the equal importance attached to achievement of sales growth and to create greater management focus on achieving targeted goals. In order to achieve a payment at
target, the company had to achieve EBIT Dollars of $379.2 million, return on
sales of 4% and same location sales growth of 4.1%. The performance criteria and the weighting of those criteria were intended to motivate and reward eligible officers to strive for continued
financial improvement for the company, consistent with increasing stockholder value. The committee chose targets which required, in part, revenue growth that was in excess of expected U.S. baseline
economic growth. In addition, as with our 2006 targets, achievement of the 2007 targets required an improvement in our operating results in excess of our 2006 results, and which the committee believed
would increase stockholder value when met, while taking into account that further year over year incremental improvement in operating results becomes more difficult as operating results improve. As
was the case in 2006, achievement of the 2007 targets was dependent on the successful completion of numerous initiatives designed to increase efficiency, reduce costs, and deliver a better customer
experience. To receive an award, participants must have been employed by the company on or before September 30 of the plan year, must have been employed by the company for a minimum of
90 days during the plan year and, subject to certain exceptions, must have been employed by the company at the time of award payment. In addition, no award will be earned or paid if the company
does not have net income for the award period or the participant is performing at an unsatisfactory performance level.
In
2006 and 2007, no named executive officer's annual incentive required accomplishment of individual performance measures.
The committee establishes a target bonus for each executive officer. Target bonus amounts are specified as a percentage of the elected officer's base salary. In
2006 and 2007, target bonus amounts for our named executive officers ranged from 50% to 100% of base salary, depending on
37
position,
and were payable in cash. The Executive Vice President of Human Resources and the Senior Vice President of Human Resources recommend a target bonus for each executive officer to the
committee, that is aligned with the median rate for equivalent positions at peer group companies shown in the compensation survey. Depending on the achievement of the objective performance goals, an
elected officer's actual payout is typically either above or below the targeted amount. The maximum potential award for any participant, including the named executive officers, was 225% of base
salary. See the table "Grants of Plan-Based Awards for Fiscal Year Ended December 29, 2007" on page 54 for the minimum, target and maximum awards for each of our named
executive officers. The committee also has the discretion to reduce or eliminate an award regardless of whether the performance goals applicable to the elected officer's bonus have been achieved. The
committee did not exercise this discretion in 2006 or 2007.
Mr. Duncan's
annual incentive compensation is determined in the same manner as all other named executive officers, except that, under his employment agreement, his annual target
bonus must be
at least 100% of his annual base salary in effect at the beginning of the applicable fiscal year, with a maximum potential award equal to 225% of his annual base salary. In both 2006 and 2007, his
target was 100% of his salary. In addition, notwithstanding the performance goals, Mr. Duncan's agreement provided that, for 2005 only, he was to receive a minimum award of 100% of his base
salary. Following 2005, however, Mr. Duncan, like the other named executive officers, receives a bonus only when the minimum performance goals are achieved and the company has net income.
Mr. Civgin's
annual target bonus must equal at least 55% of his annual base salary in effect at the beginning of the applicable fiscal year pursuant to the terms of his initial
offer letter.
Mr. Martin's
annual target bonus must equal at least 70% of his annual base salary in effect at the beginning of the applicable fiscal year pursuant to the terms of his initial
offer letter. Notwithstanding the company performance goals, Mr. Martin's offer letter provided that, for 2007 only, he was to receive a minimum award of 70% of his base salary, prorated to
reflect the commencement date of his employment.
The
2007 annual target bonuses for Messrs. Vero, Rowsey and DePaul were established based on the median short-term award granted by our peers as reflected in the compensation
survey.
In 2006, we exceeded the target return on sales goal and the target EBIT Dollar goal; but the minimum same location sales growth goal was not achieved. The table
below indicates the 2006 bonus target as well as the actual bonus received by each named executive officer, shown as a percentage of target, as a percentage of his salary and in dollars:
|
Name
|
|
Target
(as % of base Salary)
|
|
Actual bonus (as % of base)
|
|
% of Target
|
|
Amount Earned ($)
|
|
Sam Duncan
|
|
100
|
%
|
156
|
%
|
156
|
%
|
$
|
1,404,000
|
Don Civgin
|
|
55
|
%
|
86
|
%
|
156
|
%
|
$
|
416,130
|
Phillip DePaul
|
|
50
|
%
|
78
|
%
|
156
|
%
|
$
|
234,000
|
Michael Rowsey
|
|
65
|
%
|
101
|
%
|
156
|
%
|
$
|
527,280
|
Ryan Vero
|
|
55
|
%
|
86
|
%
|
156
|
%
|
$
|
429,000
|
|
38
In 2007, we achieved 78% of the target return on sales goal and 64% of the target EBIT Dollar goal; but the minimum same location sales growth goal was not achieved. The table below
indicates the 2007 bonus target as well as the actual bonus received by each named executive officer, shown as a percentage of target, as a percentage of his salary and in dollars:
|
Name
|
|
Target
(as % of base Salary)
|
|
Actual bonus (as % of base)
|
|
% of Target
|
|
Amount Earned ($)
|
|
Sam Duncan
|
|
100
|
%
|
47
|
%
|
47.30
|
%
|
$
|
473,000
|
Don Civgin
|
|
55
|
%
|
26
|
%
|
47.30
|
%
|
$
|
135,278
|
Phillip DePaul
|
|
50
|
%
|
24
|
%
|
47.30
|
%
|
$
|
74,143
|
Sam Martin (1)
|
|
70
|
%
|
20
|
%
|
100.00
|
%
|
$
|
124,000
|
Michael Rowsey (2)
|
|
|
|
|
|
|
|
|
|
Ryan Vero
|
|
55
|
%
|
26
|
%
|
47.30
|
%
|
$
|
134,758
|
|
-
(1)
-
By
agreement, Mr. Martin received a minimum award of 70% of his base salary, prorated to reflect the commencement of his employment.
-
(2)
-
Mr. Rowsey
was not eligible for a 2007 annual incentive award because he was no longer employed by the company as of December 29, 2007.
In February 2008, the committee approved the performance criteria, bonus targets and design for the 2008 annual incentive compensation plan. The performance
criteria and weighting chosen are: company EBIT dollars (50%), return on sales (30%) and same location sales growth (20%). These are the same performance criteria applied in 2006 and 2007, but the
weightings have changed, reflecting the continuing importance of these criteria in the company's strategic plan but the increasing difficulty of attaining sales targets given current economic
conditions. The performance criteria and the weighting of those criteria are intended to motivate and reward eligible officers to strive for continued financial improvement for the company, consistent
with increasing stockholder value. The committee strives to establish targets with a level of difficulty that it expects, at the time the targets are set, will result in a 60% likelihood of
achievement of the target by the company, with the understanding that the company's actual results are likely to vary based on a number of factors, including the impact of domestic and foreign
economic conditions. As was the case in 2007, achievement of the 2008 targets will be dependent on the successful completion of numerous initiatives designed to increase efficiency, reduce costs, and
offset the effect of economic conditions in 2008.
The
chart below sets forth the historical achievement of the short-term incentive goals over the previous three years.
|
|
|
|
EBIT Dollars
|
|
Return on Sales
|
|
Same Location Sales
Growth
|
|
Year
|
|
Goal
|
|
Actual
|
|
Goal
|
|
Actual
|
|
Goal
|
|
Actual
|
|
|
|
2005
|
|
$
|
208,500,000
|
|
$
|
151,400,000
|
|
2.2
|
%
|
1.7
|
%
|
5.1
|
%
|
1.7
|
%
|
2006
|
|
$
|
185,000,000
|
|
$
|
308,700,000
|
|
2.0
|
%
|
3.4
|
%
|
3.9
|
%
|
1.0
|
%
|
2007
|
|
$
|
379,200,000
|
|
$
|
344,200,000
|
|
4.0
|
%
|
3.8
|
%
|
4.1
|
%
|
0.9
|
%
|
|
|
2008
annual incentive targets were approved in the following amounts for our named executive officers: Sam Duncan, 100%; Don Civgin, 55%; Phillip DePaul, 50%; Sam Martin, 70%; and Ryan
Vero, 55%. The targets approved are the same as the targets approved in 2007 and are in line with and in some instances below the median rate for equivalent positions at peer group companies in the
compensation survey.
39
Long-Term Incentive Compensation (Equity Awards)
The committee provides long-term incentives in the form of various types of equity awards, in order to serve several of the compensation objectives.
First, the committee believes that equity awards, in tandem with our executive stock ownership guidelines described below, encourage ownership of our common stock by elected officers, which in turn
aligns the interest of those officers with our stockholders. In addition, the vesting provisions applicable to the awards help retain eligible officers and reward the achievement of
long-term business objectives that benefit our stockholders.
The
OMIPP was adopted by our stockholders. The OMIPP permits the grant of annual incentive awards, stock, restricted stock, restricted stock units, performance stock, performance units,
stock appreciation rights (SARs), traditional stock options, and a variety of performance-based stock options. This plan gives the committee flexibility in choosing among these awards to provide
competitive long-term incentive compensation. See "Approval of an Amendment to Our OfficeMax Incentive and Performance Plan to Increase the Number of Shares of Stock Available for Issuance
under the Plan and to Make Certain other Changes to the Plan and Re-approve the Material Terms of the Performance Goals under the Plan" on page 5 for a description of amendments
proposed with respect to the OMIPP.
Annually,
the committee approves the plan design of the long-term incentive program for the upcoming year. Management discusses the initial program elements prior to
presenting them to our chief executive officer for further review and recommendation to the committee for approval. This includes the type of equity award to be granted as well as the size of the
award for elected officers. In determining the type and aggregate size of awards to be provided, as well as the performance metrics that will apply, the committee considers the strategic goals of the
company, trends in corporate governance, accounting impact, tax-deductibility, cash flow considerations, the impact on the company's earnings per share and the number of shares of stock
that would be required to be allocated for the award. Throughout the process, Cook is informed and provides ongoing feedback to the committee and management (at the committee's request).
After
consideration of the long-term incentive award data presented in the compensation survey, the committee approves long-term incentive award targets for the
upcoming fiscal year, expressed as a percentage of salary. The committee generally attempts to align the award target for each elected officer with the median rate for equivalent positions at peer
group companies. The salary multiple is then applied to the elected officer's base salary to determine the size of the award. The committee considers whether the awards are comparable to similar
awards provided by the peer group as well as similar awards previously offered by the company, each of which are important criteria in ensuring a competitive program that supports attraction and
retention objectives and also results in a reasonable and sustainable level of potential share dilution and cost. On the date on which the awards are granted, each elected officer receives that number
of the securities that have been selected for issuance under the long-term incentive program equal to his or her salary multiplied by his or her award target percentage divided by the
closing price of company stock on the date of grant. No action may be taken by the officer with respect to the securities underlying the award until the securities vest. The number of securities that
actually vest will depend on achievement of the objective performance criteria established by the committee. An elected officer's actual vested number of shares of company stock is likely to be either
above or below the targeted amount.
In
general, the committee grants long-term incentive compensation awards one time per year, typically in February, in order to comply with the provisions of
Section 162(m), which requires that performance metrics be set within 90 days of the commencement of the performance period.
40
Compliance
with Section 162(m) enables the awards to qualify as "performance-based" compensation and thereby allow awards granted to the CEO and other named executive officers to be tax
deductible by us.
For 2006, management recommended and the committee approved a grant of performance-based restricted stock units as the only type of long-term
incentive compensation award. The grant was designed to support the company's strategic plan and reward elected officers if our financial performance improves over a two-year period. In
addition, performance-based restricted stock units support our financial efficiency objectives as their cost is variable and is only incurred by us to the extent operating goals are achieved. Receipt
of the restricted stock units pursuant to the awards is based on the company's achievement of a minimum return on net asset measure for fiscal years 2006 and 2007 and a two-year cumulative
EBIT measure for
fiscal years 2006 and 2007 with the final amounts adjusted based on company return on sales for fiscal years 2006 and 2007. The final number of restricted stock units issued was adjusted based on
company return on sales for each of the fiscal years 2006 and 2007. Return on sales for both 2006 and 2007 exceeded the targets and participants will receive 150% of the initial award granted. Fifty
percent of the increased award vested on February 8, 2008 and the remainder of the grant will vest on February 8, 2009.
The
three metrics chosen, EBIT Dollars, return on net assets and return on sales, were recommended by management and approved by the committee. The committee believed that these
performance metrics were aligned with our 2006 strategic plan. In consideration of the difficulty of setting multi-year targets with precision during our restructuring activities, the
committee approved a 24-month combined performance period with specific measures applicable to each of the two 12-month performance periods. The delayed distribution of a
portion of the earned restricted stock units following the performance period enhances the retention value of the compensation program. The committee chose targets for each measure which would be
obtainable if executive officers executed the strategies articulated by the company and produced material improvements in operating results and which the committee believed would increase stockholder
value when met. The improvement in operating results required to reach the targets was significantly in excess of 2005 operating results and was dependent on successful completion of numerous
initiatives designed to increase efficiency, reduce costs, and deliver a better customer experience.
For
2007, management recommended and the committee approved a grant of performance-based restricted stock units as the only type of long-term incentive compensation award.
Receipt of the restricted stock units pursuant to the awards is based on the company's achievement of a minimum return on net asset measure for fiscal years 2007 and 2008 and a two-year
cumulative EBIT measure for fiscal years 2007 and 2008 with the final amounts adjusted based on company return on sales for fiscal years 2007 and 2008. The committee chose targets which require, in
part, revenue growth that is in excess of expected U.S. baseline economic growth. In addition, as with our 2006 targets, achievement of the 2007 targets required an improvement in our operating
results in excess of our 2006 results, and which the committee believes will increase stockholder value when met, while taking into account that further year over year incremental improvement in
operating results becomes more difficult as operating results improve. As was the case in 2006, achievement of the 2007 targets was dependent on the successful completion of numerous initiatives
designed to increase efficiency, reduce costs, and deliver a better customer experience. If paid, one half of the units will vest and be paid in February 2009 and the remaining half of the units will
vest and be paid in February 2010. Units are paid in shares of company common stock. The form of the RSU Award Agreement provides that participants must be employed by the company in order for the
restricted stock units to vest (subject to exceptions in certain circumstances including involuntary termination, death, disability or retirement, in which case a pro rata amount of restricted
41
stock
units will vest on termination if the participant was employed with the company for a minimum of six months during fiscal years 2007 or 2008). Units may not be sold or transferred prior to
vesting. In addition, recipients of the units do not receive dividends and do not have voting rights until the units vest.
The
committee believes that performance metrics applicable to long-term incentive awards are particularly critical to encourage forward planning for our success. The
committee intends to continue to align the metrics for future long-term incentive compensation programs with our strategic goals as they evolve.
In
2006 and 2007, no named executive officer's long-term incentive required accomplishment of individual performance measures.
The committee establishes a target long-term incentive award for each executive officer. Target long-term incentive amounts are specified
as a percentage of the elected officer's base salary. The Executive Vice President of Human Resources and the Senior Vice President of Human Resources recommend a target long-term
incentive award for each executive officer to the committee, that is aligned with the median rate for equivalent positions at peer group companies shown in the compensation survey. For 2006 and 2007,
target long-term incentive awards for our executive officers ranged from 100% to 350% of base salary. The executive's actual payout can vary from the targeted amount depending on the
achievement of the objective performance goals, as well as changes in the value of the shares of stock underlying the grant that occur between the grant date and payout. The maximum potential award
for any participant, including the named executive officers, was 150% of the target award, expressed as a number of shares of stock.
Mr. Duncan's
long-term incentive compensation is determined in the same manner as all other named executive officers, except that under his employment agreement, we
are required to grant Mr. Duncan for each subsequent year he is employed during the term of his agreement, long-term incentive compensation awards with a present value (as
determined by the committee) approximately equal to 350% of Mr. Duncan's then-current annual base salary. In both 2006 and 2007, his target was 350% of his salary. The committee
believes these awards appropriately emphasize the importance of long-term performance and align Mr. Duncan's interests with those of our stockholders, while taking into account the
other elements of his compensation. Pursuant to his offer letter, Mr. Martin received a grant of 36,540 RSUs as a 2007 long-term incentive award, which was based on the compensation
survey data for his position and pro-rated based on his commencement date of employment. For each of our named executive officers, see the table "Grants of Plan-Based Awards
for Fiscal Year Ended December 29, 2007" on page 54 for the minimum, target and maximum
awards. The target awards were based on the compensation survey data and took the company's turnaround status into consideration.
On February 20, 2008, the committee approved the 2008 Long-Term Incentive Program under which the company's named executive officers will be
awarded RSUs pursuant to the OMIPP. Each named executive officer will receive an award that is divided evenly between RSUs that vest upon company achievement of certain performance criteria (including
EVA®
(1)
Improvement, described below) within specified time periods and RSUs that vest solely upon the elapsing of a time period. EVA® Improvement is a new performance metric for the company.
Because of the uncertainty inherent in new and complex performance metrics, the committee chose to structure one half of the award in RSUs that vest solely upon the elapsing of a time period in order
to increase the retention
-
(1)
-
EVA®
is a registered trademark of Stern Stewart & Co.
42
value
of the awards. The committee established an EVA® Improvement target based on the same company performance expectations that were used to establish the 2008 annual incentive targets,
with similar expectations regarding the level of difficulty inherent in attaining such targets. This year, the target value of long-term incentive awards was decreased for our named
executive officers to align with the median rate for equivalent positions at peer group companies. Mr. Duncan voluntarily reduced his percentage of salary for this 2008 grant to 300% from 350%,
despite contractual entitlement to the larger amount, in order to receive a reduction in award commensurate with the other executive officers. Awards of RSUs were approved at the following percentage
of salary for the following named executive officers of the company: Sam Duncan, 300% of salary; Don Civgin, 125% of salary; Phillip DePaul, 80% of salary; Sam Martin, 150% of salary; and Ryan Vero,
125% of salary.
Awards
of performance based RSUs were approved in the following amounts for the following executive officers of the company: Sam Duncan, 63,210 RSUs; Don Civgin, 13,700 RSUs; Phillip
DePaul, 5,290 RSUs; Sam Martin, 19,600 RSUs; and Ryan Vero, 13,640 RSUs. The number of RSUs was determined based on the closing price of company common stock on February 20, 2008. Receipt of
the performance based RSUs is based on the company's achievement of a two-year cumulative EBIT measure for fiscal years 2008 and 2009. If the EBIT target is achieved, then the final
amounts received will be adjusted as follows: one half will be adjusted based on company Economic Value Added ("EVA®") Improvement for fiscal year 2008 and one half will be adjusted based
on company EVA® Improvement for fiscal year 2009. EVA® Improvement means improvement in the dollar value of the company's EVA® for the most recently completed
fiscal year compared to the dollar value of the company's EVA® for the next preceding fiscal year. If paid, one half of the award will vest and be paid in February 2010 and the remaining
half of the award will vest and be paid in February 2011. Awards are paid in shares of company common stock.
Awards
of time based RSUs were approved in the following amounts for the following executive officers of the company: Sam Duncan, 63,210 RSUs; Don Civgin, 13,700 RSUs; Phillip DePaul,
5,290 RSUs; Sam Martin, 19,600 RSUs; and Ryan Vero, 13,640 RSUs. The number of RSUs was determined based on the closing price of company common stock on February 20, 2008. On the third
anniversary of the grant date, 100% of the time based RSUs shall vest and be paid in company common stock.
Retention Programs
In March 2005, the committee implemented a retention program because of extraordinary events at the company, including the Boise Cascade
Corporation acquisition of OfficeMax, Inc. in late 2003, the divestiture of the forest products assets of Boise Cascade Corporation in late 2004 (after which our name was changed from Boise
Cascade Corporation to OfficeMax Incorporated), a financial investigation and the departures of our chief executive officer, chief financial officer and president of retail operations in late 2004 and
early 2005. This program was designed to retain key executives in order to provide stability within the organization. Each retention award included two elements, a cash award paid in 2006, and an
award of time-vesting restricted stock that vested on March 16, 2007. The committee determined the type and size of the awards by:
-
-
taking
into account each individual's salary range and responsibilities;
-
-
analyzing
peer group companies' competitive compensation; and
-
-
considering
Cook's recommendations.
The
magnitude of the total award was intended to be significant in comparison to each elected officer's salary to ensure a meaningful incentive to remain employed. The cash component was
intended to ensure retention of executives over the near-term and the restricted stock component
43
was
intended to promote longer-term retention and tie the value of the award to changes in stockholder value.
To
implement the first element of the retention award, the committee adopted the OfficeMax Cash Incentive Plan (the "CIP") and approved grants of cash incentive awards to certain of the
elected officers. These awards vested on March 11, 2006, for those elected officers still employed by us on that date. Upon vesting, the awards were paid in cash. Mr. Duncan and
Mr. Civgin did not receive any awards because they were hired after the program commenced. The following named executive officers received payouts under the CIP in 2006 as follows:
Mr. DePaul, $122,500, Mr. Rowsey $412,500 and Mr. Vero $297,000.
The
second element of the retention program was the issuance of time-vesting restricted stock under the OMIPP in March 2005.
The
2005 restricted stock unit grants vested 100% on March 16, 2007, the second anniversary of the grant date, for participants who were employed by the company on that date. Upon
vesting, the units were distributed in shares of company common stock.
The
retention program was a key component in retaining the management critical to the success of the company. We currently have no plans to grant additional retention awards.
Other Compensation Arrangements
On April 14, 2005, we entered into an employment agreement with Mr. Duncan, who became our chief executive officer on
April 18, 2005. Mr. Duncan was subsequently appointed chairman of our board of directors on June 30, 2005. Mr. Duncan was hired at a time when the company was
experiencing a number of challenges. In December 2003, Boise Cascade Corporation (the company's former name) completed its purchase of OfficeMax, Inc. Prior to December 2003, the company sold
and distributed office products to businesses as one of its lines of business but had no retail presence. In November 2004, the company sold all lines of business other than its office products
distribution businesses and changed its name to OfficeMax Incorporated. As a result, the company went through a major restructuring, including adding many new executives to the management team. In
December 2004, the company commenced an internal investigation into claims by a vendor to its retail business that certain employees acted inappropriately in requesting promotional payments and in
falsifying supporting documentation. In January 2005 the president of the company's retail business and its chief financial officer resigned. In February 2005, the company's chief executive officer
resigned and the company announced a restatement arising from its internal investigation. In April 2005, as the company was finalizing its employment arrangements with Mr. Duncan, it was
threatened with a proxy contest. As a result of all the challenges and uncertainty with respect to the company, it was crucial to chief executive officer recruitment efforts to be able to offer a
competitive package that provided some certainty to the candidate. The committee believed that Mr. Duncan's initial overall compensation, as well as each element of his compensation, was
reasonable when compared to relevant benchmark data, taking into account the circumstances of his recruitment and his relevant experience. Most of the aspects of Mr. Duncan's employment that
are different than those paid to other named executive officers stem from the initial terms of his employment agreement, which were critical to Mr. Duncan's decision to join the company. The
other named executive officers do not have employment agreements. You can read more about Mr. Duncan's agreement throughout "Compensation Discussion and Analysis" beginning on page 31
and under "Estimated Termination BenefitsMr. Duncan" beginning on page 66.
44
On September 19, 2005, we entered into an offer letter with Mr. Civgin effective October 3, 2005, to serve as our executive vice president, finance and to assume the
position of chief financial officer. You can read more about Mr. Civgin's offer letter throughout "Compensation Discussion and Analysis" beginning on page 31 and under "Estimated
Termination BenefitsMr. Civgin" beginning on page 69.
On
September 12, 2007, we entered into an offer letter with Mr. Martin effective September 17, 2007, to serve as our executive vice president and chief operating
officer. You can read more about Mr. Martin's offer letter throughout "Compensation Discussion and Analysis" beginning on page 31 and under "Estimated Termination
BenefitsMr. Martin" beginning on page 71.
In
2005, the committee awarded Mr. Duncan 50,000 restricted stock units and stock options to purchase 250,000 shares of our common stock. Also in 2005, the committee awarded
Mr. Civgin 38,000 restricted stock units and stock options to purchase 50,200 shares of our common stock. In 2007, the committee awarded Mr. Martin 11,150 restricted stock units and
stock options to purchase 35,000 shares of our common stock. Each of these awards was made pursuant to the officer's agreement or offer letter with us. These additional items of compensation were part
of the packages offered to these officers before they joined the company. The terms applicable to these restricted stock units and stock options are discussed in the "Award Tables" beginning on
page 53.
In
addition, pursuant to employment agreements entered into by Messrs. Vero and DePaul upon joining us at the time of the OfficeMax, Inc. acquisition in 2003, each received
cash retention payments in 2004, 2005 and 2006. The purpose of the incentives was to encourage these individuals to remain with us during the transition period following the acquisition.
Mr. Vero received $130,000, $130,000 and $390,000 in 2004, 2005 and 2006, respectively, pursuant to these provisions, and Mr. DePaul received $39,000, $39,000 and $117,000 in 2004, 2005
and 2006, respectively. The agreements terminated on December 10, 2006. Payments pursuant to the agreements were separate from and in addition to the retention awards described on
page 43 under "Retention Programs."
In
2007, the company entered into a Tuition Reimbursement Agreement with Mr. DePaul in order for him to attain his MBA and use the additional skills he gains in his role as
company controller. Pursuant to the agreement, the company will pay or reimburse Mr. DePaul for expenses incurred in connection with Mr. DePaul's enrollment in the Executive MBA Program
at Notre Dame. Under the agreement, the company will have no obligation to pay or reimburse Mr. DePaul for the expenses of the program if he (a) voluntarily terminates his employment
with the company within a specified time
frame, (b) fails to complete a course, (c) fails to achieve a passing grade, or (d) his employment is involuntarily terminated (subject to certain exceptions). In addition,
Mr. DePaul would be required to reimburse the company for some or all program expenses (based on the date of termination) paid by the company if his employment with the company is terminated
due to a reason described in (a) or (d) in the preceding paragraph or if he terminates his participation in the program or otherwise fails to successfully complete the program within a
specified time frame.
Other Benefit Programs
We provide our elected officers with limited perquisites and other benefits. The committee believes that these programs are competitive within our
industry and the expense of these programs is offset by their attraction and retention value.
Officers
with the title of senior vice president and selected elected officers are eligible to participate in our Executive Life Insurance Program, which was adopted by the committee in
February 2005. Participants receive a life insurance policy with an insurance amount equal to two times their base salary from a designated insurance carrier (or three times base salary, in the case
of the chief executive officer). Policy premiums, subject to some limitations, will be paid by us and
45
will
be treated as taxable compensation to the participants. Upon termination of the participant's employment, the policy remains in force until the end of the current policy period but we will not
renew the policy on the next anniversary date.
Officers
with the title of senior vice president or higher and selected elected officers participate in the Officer Annual Physical Program, which was adopted by the committee in 2005.
Under the current program, we reimburse participating officers for the costs of an annual physical examination. Reimbursements will be treated as taxable income to the officer but will be grossed up
for applicable taxes.
Officers
with the title of senior vice president or higher and selected elected officers are eligible to participate in our Financial Counseling Program, which the committee adopted in
2005. Under the program, we reimburse participating officers for investment planning, tax preparation, tax planning and compliance, and estate planning. Participants may be reimbursed up to a maximum
of $5,000 each calendar year. In addition, unused amounts up to $5,000 may carry forward from year to year. Reimbursements will be treated as taxable income to the officer and will be grossed up for
applicable taxes (subject to the $5,000 overall annual maximum). The committee believes that these programs are competitive within our industry and the expense of these programs is offset by their
attraction and retention value.
Stock Ownership Guidelines
The committee has established stock ownership guidelines for certain officers. The guidelines are intended to increase the stake these officers hold in us and to
more closely align their interests with those of our stockholders. The guidelines provide that:
-
-
the
chief executive officer should acquire and maintain stock ownership equal in value to five times his base salary;
-
-
the
president and each executive vice president should acquire and maintain stock ownership equal in value to three times his or her base salary;
-
-
each
senior vice president should acquire and maintain stock ownership equal in value to twice his or her base salary; and
-
-
each
vice president should acquire and maintain stock ownership equal in value to his or her base salary.
In
determining the appropriate stock ownership levels, the committee consulted market studies by Hewitt and Cook detailing best practices among a peer group and general industry
practices regarding stock ownership guidelines. Stock held directly, vested restricted stock, and stock units held indirectly through our Savings Plan and under our deferred compensation plan are
taken into consideration when calculating whether an officer has met his or her stock ownership guidelines. Unvested restricted stock units and stock options are not included in determining ownership
levels. Annually, management provides a report to the committee regarding the number and value of the shares of stock held by each officer subject to the guidelines. All of the officers subject to the
guidelines are making progress toward satisfying the applicable guideline. Following the vesting of restricted stock units or the exercise of options, officers subject to the guidelines who have not
met the guidelines are expected to retain at least 50% of the net value of shares of stock received (after payment of income tax withholding and, if applicable, exercise price). This policy applies to
grants made in 2005 and later for named executive officers. As of December 29, 2007 our chief executive officer held 59.81% of his salary, our chief financial officer held 85.66% of his salary,
and the other
46
named
executive officers, Mr. DePaul, Mr. Martin and Mr. Vero, held 45.18%, 0%, and 59.33% of their respective salaries.
In 2005, the Governance and Nominating Committee established stock ownership guidelines for directors. These guidelines are intended to increase the directors'
stake in the company and more closely align their interests with those of the OfficeMax stockholders. These guidelines provide that over a four-year period directors should acquire and
maintain stock ownership equal to three times the annual retainer amount. The amount of stock required to be held will adjust whenever the retainer for directors is adjusted. All shares of stock owned
outright by a director, unvested restricted stock, and stock options with an exercise price of $2.50 per share issued under former director stock plans are taken into consideration in determining
whether a director has met these guidelines. In April each year, the Governance and Nominating Committee of the board of directors will review the progress of each director towards achievement of the
guidelines. The committee will apply OfficeMax's stock price on March 31 to each director's securities on that date to determine each director's level of compliance with the guidelines. Stock
options will be valued at the excess of the market price of the underlying stock over the exercise price. Once a director has met these guidelines, he or she shall be deemed to continue to meet the
guidelines and shall be exempt from review in future periods until such director reduces the number of securities he or she holds. Once a director reduces his or her holdings, such director will be
subject to review each successive April for compliance with the guidelines.
Deferral Plans
Our Non-Qualified Executive Savings Deferral Plan and our 2005 Deferred Compensation Plan are each described beginning on
page 60. The purpose of these plans is to permit participants to defer amounts that would otherwise be payable in cash and taxable on an immediate basis and to provide matching contributions
that are not permissible under our Qualified Savings Plan as a result of IRS limits. The plans thereby support attraction and retention objectives by providing a competitive benefit that is
tax-efficient to the participant. The plans also support our succession planning strategy by enabling participants to accumulate sufficient retirement savings, thereby promoting an orderly
succession of management talent, which is particularly important as a result of the freezing of our pension plans.
Pension Plans
Our pension plan for salaried employees, described on page 63, was frozen as of December 31, 2003, and employees hired on or after
November 1, 2003 are not eligible to participate in the plan. Only one of our named executive officers, Mr. Rowsey, was eligible to participate in this plan, and his benefits were frozen
at approximately $30,000 annually upon reaching retirement age, which would have been 65 years. The plan was frozen because it represented a significant expense to the company and was not a
benefit generally provided by competitors in our industry, and therefore was not necessary for attracting or retaining executive talent. Overall, management and the committee agree that a defined
benefit pension plan provides the company less value in attracting and retaining talent, and so we have redirected that investment to other forms of compensation.
As
described on page 63, Mr. Duncan's employment agreement provides that if he is employed by us on the fifth anniversary of his first day of employment, his supplemental
pension benefit will vest. His benefit will generally equal a percentage of his average cash compensation (salary and bonus) over the five years prior to termination of employment. The percentage will
be equal to two
47
percent
for every full year of employment. This special arrangement was negotiated at the time Mr. Duncan was hired, and in approving this benefit, the committee determined that this was an
appropriate replacement for a similar benefit from his previous employer that Mr. Duncan forfeited when he joined us.
For
more information on our pension plans, see "Other Compensation and Benefit PlansPension Benefits" on page 61.
Change in Control Agreements
Mr. Duncan and each of the other named executive officers are parties to change in control agreements with us, the principal terms of which
are described beginning on page 64. Under the change in control agreements, the officer will receive the benefits provided under the agreement if, after a change in control, the officer's
employment is terminated other than for cause or disability (as defined in the agreement) or if the officer terminates employment after actions (as specified in the agreement) that adversely affect
the officer are taken. Under the agreement, the officer must remain employed with us for six months following the first potential change in control.
The
committee's overall objective in implementing the change in control policy was to encourage the company's most senior executives to review and consider possible change in control
transactions in an independent and objective manner without the influence of self-interest or fear of economic loss associated with the possible loss of their positions. In support of this
objective, the policy is intended to provide reasonable and competitive severance benefits to executives who lose their jobs as a result of a change in control and to avoid windfall payments
associated with completing a transaction. For this reason, benefits under the policy are provided only upon the occurrence of a "double trigger" event, which is defined as completion of a change in
control followed by a qualifying termination of employment. In the absence of a reasonable change in control policy, an incentive may exist for senior executives to oppose transactions that are in
stockholders' best interests, and conversely, an inappropriately designed program that provides benefits without loss of employment could incent management to pursue transactions that are not
necessarily in stockholders' best interests. The committee believes the amounts to be paid upon termination following a change in control are market competitive and have an aggregate potential cost
that falls within reasonable competitive parameters, drawing on input received from Cook, including Cook's review of the proposed agreement and analysis of potential change in control costs for the
executives covered by the agreements. Cook advised the committee that the overall cost of the program was reasonable in relation to the company's market capitalization at the time of approval and that
the specific design provisions supported the objectives described above and were consistent with best practice. In addition to governance and peer group trends, the committee considered the specific
competitive circumstances of the company and its industry in approving these agreements. In approving these payments, the committee also reviewed data from Hewitt regarding the average characteristics
of change in control agreements among Fortune 200 companies.
Severance
The desire to provide reasonable and competitive severance benefits to executives who lose their jobs also affected the decision to include the
severance provisions reflected in our executive severance policy and in the employment agreements of Mr. Duncan, Mr. DePaul and Mr. Vero. Mr. Duncan's agreement is
described throughout "Compensation Discussion and Analysis" beginning on page 31 and the severance arising from his agreement is described in the section entitled "Estimated Termination
BenefitsEstimated Current Value of Potential Payments to Mr. Duncan Upon Termination" on page 68. The severance provisions pertaining to Mr. Vero and
48
Mr. DePaul
terminated when their agreements terminated on December 31, 2006. We believed that the severance provisions of the agreements with Mr. DePaul and Mr. Vero were
important in retaining the services of those officers following the OfficeMax, Inc. acquisition. The severance provisions in Mr. Duncan's agreement were also an important factor in his
recruitment to the company.
Our
executive officer severance policy applies to all elected officers (unless they have a superseding individual agreement) and provides, among other things, for payment in a lump sum
of an amount equal to 12 months' salary if the officer's employment is terminated without cause. We may also, at our discretion, continue health, vision and dental group insurance coverage at
the associate rate for up to twelve months following the officer's date of termination. We believe this severance policy is similar to policies of many of the other companies with which we compete for
management talent, and is therefore a valuable recruiting tool that also helps us to retain management.
We
recognize that our severance provisions and change in control provisions can at times overlap. Therefore all agreements or policies providing for such payments require that payments
under one type of provision be appropriately adjusted downward if payments are made under a similar provision of another agreement or policy.
Relationship Among the Different Components of Compensation
In order to ensure that named executive officers are held most accountable for our performance and changes in stockholder value, management and
the committee generally allocate total compensation such that the portion of compensation attributable to fixed elements, such as salary
and benefits, decreases with increasingly higher levels of responsibility, and the portion attributable to variable, performance-based elements increases.
As
described above, the compensation survey provides data on the annual targeted total cash compensation and the annual targeted total direct compensation paid by the companies in the
compensation survey. Management and the committee generally allocate annual compensation for each executive officer among the components described above on a basis consistent with the results of the
compensation survey, although the total compensation paid to an elected officer may be above or below the median based on the survey for that individual's position, based on his or her level of
responsibility, performance against annual performance goals, years of experience, and considerations of fairness and comparability within the company. The majority of named executive officers have
aggregate targeted compensation that is below the targeted median benchmark rate for that executive's position. No named executive officer's aggregate targeted compensation exceeds the targeted median
for that executive's position by more than 15%.
The
committee consults with Cook to ensure the resulting outcome supports strategic objectives related to attraction and retention of critical talent, alignment of management interests
with those of stockholders, and overall affordability from cost and share dilution perspectives. In addition to the considerations described in the description of each component above, management and
the committee are also guided by the compensation survey in deciding between the types of awards available in our annual and long-term incentive compensation programs. We believe that each
component of our compensation program serves an important role, and that together these components combine to enable us to attract and retain talented management, provide management with appropriate
incentives to continuously improve the company's performance, and to reward improvement when it occurs.
We
believe our base salaries are competitive and our bonus plans emphasize performance-based compensation. We provide our executives the opportunity to significantly increase their
annual cash compensation through our bonus program by improving the company's performance
49
in
each of the relevant financial areas on an annual basis. We also expect that as those improvements are maintained and built upon, the company's stock price will reflect these improvements, and we
therefore use equity awards to reward the long-term efforts of management. These equity awards serve the additional purpose of increasing the ownership stake of our management in the
company, further aligning their interests with those of our other stockholders.
In
summary, we are confident that the total compensation components provided to each of our named executive officers are competitive with the market and are aligned with the strategic
goals of the company.
Recapture Policy
On July 26, 2007, the committee approved a policy that provides that the board shall take such action as it deems necessary against any
officer with a title of executive vice president or higher whose misconduct contributes to a financial restatement. The board may (a) require reimbursement of any bonus or incentive
compensation awarded to such officer after July 26, 2007, (b) cancel any stock awards granted to such officer after July 26, 2007, and/or (c) require the repayment of stock
proceeds.
Tax Impact and Financial Implications
Under Section 162(m), certain items of compensation paid to the chief executive officer and to each of the named executive officers, other
than Mr. Civgin ("Covered Employees") in excess of $1,000,000 annually are not deductible for federal income tax purposes unless the compensation is awarded under a performance-based plan
approved by the stockholders. The committee believes that it is in our best interest to preserve maximum tax deductibility for compensation paid to the Covered Employees under Section 162(m),
although, to maintain flexibility in compensating executive officers in a manner designed to promote varying corporate goals, the committee has not adopted a policy that all compensation must be
deductible. The compensation plans reflect the committee's intent and general practice to pay compensation that we can deduct for federal income tax purposes. Executive compensation decisions,
however, are multifaceted. The committee reserves the right to pay amounts that are not tax deductible to meet the design goals of our executive compensation program. In 2007, Mr. Duncan's
salary was his only item of compensation that was not performance based. His compensation exceeded, by approximately $15,000, the $1,000,000 non-performance based compensation threshold
for 2007. In order to preserve deductibility, Mr. Duncan was required to defer receipt of certain of his shares of stock that vested. In addition, as a result of the vesting of his RSUs granted
in 2005, which did not constitute performance based compensation, Mr. Vero had $486,075 in compensation that was in excess of the $1,000,000 non-performance based compensation
threshold for 2007. He was not required to defer receipt of the shares of stock. See the "Option Exercises and Stock Vested Table for Fiscal Year Ended December 29, 2007" on page 60.
The
committee also considers other financial implications when developing and implementing the company's compensation program, including tax and accounting effects, the impact on our
financial statements and tax returns, cash flow impact, potential share dilution and the risk arising from fluctuations in the value of the compensation.
Recommendation
As set forth in the "Executive Compensation Committee Report" on page 30, the committee has reviewed this Compensation Discussion and
Analysis, and recommended its inclusion in this proxy statement.
50
Executive Compensation Committee Interlocks and Insider Participation
Ms. Bern and Messrs. Szymanski, Bryant, DePinto, Gangwal, Haymon, Montgoris and Michael served on our Executive Compensation
Committee during the last completed fiscal year. None of the members of our Executive Compensation Committee is now or was previously an officer or employee of the company. None of our executive
officers serves as a member of the board of directors or compensation committee of any entity that has one or more executive officers serving on our board of directors or our Executive Compensation
Committee.
Summary Compensation Table
The following tables present compensation information for Mr. Duncan, our Chief Executive Officer, Mr. Civgin, our Chief Financial
Officer, Messrs. DePaul, Martin, and Vero, our three next most highly
compensated executive officers serving on December 29, 2007 and Mr. Rowsey, who departed from the company effective May 17, 2007.
|
Name and Principal Position
(a)
|
|
Year
(b)
|
|
Salary ($)
(c)
|
|
Bonus
($) (1)
(d)
|
|
Stock
Awards
($) (2)
(e)
|
|
Option
Awards
($) (3)
(f)
|
|
Non-Equity
Incentive Plan
Compensation
($) (4)
(g)
|
|
Change in
Pension
Value and
Nonqualified
Deferred
Compensation
Earnings
($) (5)
(h)
|
|
All Other
Compensation
($) (6)
(i)
|
|
Total ($)
(j)
|
|
Sam K. Duncan
Chairman of the Board and
Chief Executive Officer
|
|
2007
2006
|
|
$
$
|
975,000
887,500
|
|
|
|
|
$
$
|
2,871,840
2,128,235
|
|
$
$
|
359,178
598,235
|
|
$
$
|
473,000
1,404,000
|
|
$
$
|
315,739
426,817
|
|
$
$
|
114,853
127,554
|
|
$
$
|
5,109,610
5,572,341
|
Don Civgin
Executive Vice President,
Finance and Chief
Financial Officer
|
|
2007
2006
|
|
$
$
|
511,250
482,500
|
|
|
|
|
$
$
|
978,221
1,027,871
|
|
$
$
|
83,829
165,680
|
|
$
$
|
135,278
416,130
|
|
|
|
|
|
|
|
$
$
|
1,708,578
2,092,181
|
Phillip P. DePaul
Senior Vice President,
Controller and Chief
Accounting Officer
|
|
2007
2006
|
|
$
$
|
310,125
293,050
|
|
$
|
239,500
|
|
$
$
|
266,923
263,364
|
|
|
|
|
$
$
|
74,143
234,000
|
|
|
|
|
$
|
10,357
|
|
$
$
|
661,548
1,029,914
|
Sam Martin
Executive Vice President
and Chief Operating Officer
|
|
2007
|
|
$
|
181,231
|
|
|
|
|
$
|
188,965
|
|
$
|
46,666
|
|
$
|
124,000
|
|
|
|
|
$
|
64,667
|
|
$
|
605,529
|
Michael D. Rowsey
President, Contract
|
|
2007
2006
|
|
$
$
|
202,423
515,000
|
|
$
|
412,500
|
|
$
$
|
305,837
924,784
|
|
|
|
|
$
|
527,280
|
|
($
$
|
182,722
42,093
|
)
|
$
$
|
356,459
15,373
|
|
$
$
|
681,997
2,437,030
|
Ryan T. Vero
Executive Vice President
and Chief Merchandising Officer
|
|
2007
2006
|
|
$
$
|
513,500
497,500
|
|
$
|
687,000
|
|
$
$
|
798,741
737,368
|
|
|
|
|
$
$
|
134,758
429,000
|
|
|
|
|
$
$
|
90,547
80,473
|
|
$
$
|
1,537,546
2,431,342
|
|
-
(1)
-
Includes
payments to Messrs. DePaul, Rowsey and Vero of $122,500, $412,500 and $297,000, respectively, made in accordance with the OfficeMax Cash Incentive Plan as discussed on
page 40. Also included are retention incentive bonus payments to Mr. DePaul and Mr. Vero of $117,000 and $390,000, respectively, pursuant to their 2003 employment agreements
described on page 45.
-
(2)
-
The
figures in this column represent the aggregate dollar amount of compensation cost of stock awards recognized for the defined service period. See Note 15 "Shareholders'
Equity" of the Notes to Consolidated Financial Statements in the company's Annual Report on Form 10-K for the year ended December 29, 2007, for a discussion of the
51
assumptions used by the company to calculate share based employee compensation expense in accordance with the provisions of SFAS No. 123R. Certain 2004
grants of restricted stock units were forfeited in 2006 but there was no expense recorded during 2006.
-
(3)
-
The
figures in this column represent the aggregate dollar amount of compensation cost recognized for the defined service period for the options granted to Messrs. Duncan and
Civgin in 2005 and Mr. Martin in 2007. See Note 15 "Shareholders' Equity" of the Notes to Consolidated Financial Statements in the company's Annual Report on Form 10-K
for the year ended December 29, 2007, for a discussion of the assumptions used by the company to calculate share based employee compensation expense in accordance with the provisions of SFAS
No. 123R.
-
(4)
-
Annual
incentive bonus payments for each of the named executive officers earned based on company performance in the fiscal year indicated. See "Compensation Discussion and
AnalysisAnnual Incentive Compensation (Bonus)" as discussed on page 36.
-
(5)
-
The
amounts shown for Mr. Duncan represent the change in his pension value in the fiscal year indicated. In 2007 for Mr. Rowsey $20,779 represents above market interest
earnings on his balance in the 2001 Key Executive Deferred Compensation Plan and ($203,501) represents the change in his pension value in the fiscal year indicated. An explanation of the majority of
this decrease is included in the footnotes to the Pension Benefits table. In 2006 for Mr. Rowsey, $32,910 represents the change in his pension value in the fiscal year indicated and $9,183
represents above market interest earnings on his balance in the 2001 Key Executive Deferred Compensation Plan.
-
(6)
-
Includes
the following items paid:
|
|
|
Year
|
|
Payments Made
in Accordance
with Relocation
Agreements
(a)
|
|
Personal Use
of Company
Aircraft
(b)
|
|
Reimbursements
under Our
Financial
Counseling
Program
(c)
|
|
Policy Premiums
Paid Pursuant to
Our Executive
Life Insurance
Program (d)
|
|
Company Matching
Contributions Made
Under Our Qualified
Savings Plan and
Non-Qualified
Deferred
Compensation
Plan (e)
|
|
Other/
Severance
(f)
|
|
Total
|
|
Sam K. Duncan
|
|
2007
2006
|
|
$
|
6,607
|
|
$
$
|
90,920
94,920
|
|
$
$
|
5,000
10,000
|
|
$
$
|
17,808
16,027
|
|
$
|
1,125
|
|
|
|
|
$
$
|
114,853
127,554
|
Don Civgin
|
|
2007
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Phillip DePaul
|
|
2007
2006
|
|
|
|
|
|
|
|
|
|
|
$
|
3,607
|
|
$
|
6,750
|
|
|
|
|
$
|
10,357
|
Sam Martin
|
|
2007
2006
|
|
$
|
64,667
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
64,667
|
Michael D. Rowsey
|
|
2007
2006
|
|
|
|
|
$
|
2,480
|
|
$
|
8,340
|
|
$
$
|
6,511
6,293
|
|
$
$
|
6,750
6,600
|
|
$
|
334,858
|
|
$
$
|
356,459
15,373
|
Ryan T. Vero
|
|
2007
2006
|
|
$
$
|
83,922
58,850
|
|
|
|
|
$
|
10,000
|
|
$
$
|
5,500
5,697
|
|
$
$
|
1,125
5,926
|
|
|
|
|
$
$
|
90,547
80,473
|
|
-
(a)
-
Under
relocation agreements entered into in the year in which an executive relocates (2006 for Messrs. Duncan and Vero and 2007 for Mr. Martin), payments may include a
relocation allowance, the cost of transportation of household goods, and temporary living expenses. These relocation payments included payments to offset the tax costs of that portion of the payment
that is not tax deductible to the executive (in 2006, $2,177 to Mr. Duncan and $349 to Mr. Vero and in 2007, $13,001 to Mr. Martin and $4,178 to Mr. Vero). In addition, in
2006, $17,184 and in 2007, $35,147 of Mr. Vero's relocation payment was intended to offset a portion of the mortgage interest he otherwise would have paid.
-
(b)
-
The
payments shown for personal use of company aircraft are calculated based on an hourly rate of $2,400. The hourly rate represents the incremental cost to us of aircraft use
calculated based on the average cost of fuel and aircraft maintenance, and trip related landing fees, hangar and parking costs, and other immaterial variable costs. Incremental cost excludes fixed
costs which do not change based on usage of the plane, including pilot salaries.
-
(c)
-
Officers
of the company with the title of senior vice president or higher and selected elected officers are eligible to participate in our Financial Counseling Program. Under the
program, we reimburse participating officers for investment planning, tax preparation, tax planning and compliance, and estate planning. Participants may be reimbursed up to a maximum of $5,000 each
calendar year. In addition, unused amounts up to $5,000 may carry forward from year to year. Reimbursements will be treated as taxable income to the officer and will be grossed up for applicable taxes
(subject to the $5,000 overall annual maximum). In 2006, for each of Mr. Duncan and Mr. Vero, the $10,000 reimbursement includes a $6,100 reimbursement for financial counseling and a
$3,900 payment to offset the tax costs of the reimbursement. In 2007, for Mr. Duncan, the $5,000 reimbursement includes a $3,050 reimbursement for financial counseling and a $1,950 payment to
offset the tax cost of the reimbursement. For Mr. Rowsey, the $8,340
52
reimbursement includes a $5,087 reimbursement for financial counseling and a $3,253 payment to offset the tax cost of the reimbursement.
-
(d)
-
Officers
with the title of senior vice president or higher and selected elected officers are eligible to participate in our Executive Life Insurance Program, which was adopted by the
committee in February 2005. Participants receive a life insurance policy with an insurance amount equal to two times their base salary from a designated insurance carrier (or three times base salary,
in the case of the chief executive officer). Policy premiums, subject to some limitations, will be paid by us and will be treated as taxable compensation to the participants. Upon termination of the
participant's employment, the policy remains in force until the end of the current policy period but we will not renew the policy on the next anniversary date. The figures in this column are the
policy premiums paid.
-
(e)
-
For
a description of our Non-Qualified Deferred Compensation Plan, see page 66. Under our Qualified Savings Plan and our Non-Qualified Deferred
Compensation Plan, we match amounts contributed at a rate of 50% of the amount contributed up to a maximum annual aggregate limit ($6,600 under the Internal Revenue Code applicable in 2006 and $6,750
in 2007). A participant may only receive matching payments on contributions up to 6% of the participant's combined annual salary and bonus. All of our named executive officers are limited by
provisions of the Internal Revenue Code in the amount they can contribute to our Qualified Savings Plan.
-
(f)
-
As
a result of his departure from the company, in 2007 Mr. Rowsey received severance pay of $331,077 and dividends in the amount of $3,781 accrued on the funds he had deferred
into the 2001 Key Executive Deferred Compensation Plan.
Award Tables
The following three tables set forth information regarding awards granted by OfficeMax to the named executive officers during the last fiscal year
and the status of existing awards. The "Grants of Plan-Based Awards" table on page 54 provides additional information about the plan-based compensation disclosed in the
"Summary Compensation Table" on page 51.
53
Grants of Plan-Based Awards
GRANTS OF PLAN-BASED AWARDS
FOR FISCAL YEAR ENDED DECEMBER 29, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All
Other
Stock
Awards:
Number
of shares
of Stock
or Units
(#)
(i)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Other
Option
Awards:
Number of
Securities
Underlying
Options
(#)
(j)
|
|
|
|
|
|
|
|
|
Estimated Future Payouts Under
Non-Equity Incentive Plan Awards
|
|
Estimated Future Payouts Under
Equity Incentive Plan Awards
|
|
Exercise
or Base
Price of
Option
Awards
($/share)
(k)
|
|
Grant Date
Fair Value
of Equity
Incentive
Plan Awards
(#) (3)
(l)
|
Name
(a)
|
|
Grant
Date
(b)
|
|
Threshold
($) (1)
(c)
|
|
Target
($) (1)
(d)
|
|
Maximum
($) (1)
(e)
|
|
Threshold
(#) (2)
(f)
|
|
Target
(#) (2)
(g)
|
|
Maximum
(#) (2)
(h)
|
|
Sam Duncan
|
|
2/14/07
2/14/07
|
|
$250,000
|
|
$1,000,000
|
|
$2,250,000
|
|
29,650
|
|
59,300
|
|
88,950
|
|
|
|
|
|
|
|
|
$
|
3,150,016
|
Don Civgin
|
|
2/14/07
2/14/07
|
|
$71,500
|
|
$286,000
|
|
$643,500
|
|
7,990
|
|
15,980
|
|
23,970
|
|
|
|
|
|
|
|
|
$
|
848,858
|
Phillip DePaul
|
|
2/14/07
2/14/07
|
|
$39,188
|
|
$156,750
|
|
$352,688
|
|
2,825
|
|
5,650
|
|
8,475
|
|
|
|
|
|
|
|
|
$
|
300,128
|
Sam Martin
|
|
9/17/07
9/17/07
9/17/07
9/17/07
|
|
$124,000
|
|
$124,000
|
|
$278,986
|
|
18,270
|
|
36,540
|
|
54,810
|
|
11,150
|
|
35,000
|
|
$
|
31.39
|
|
$
$
$
|
1,146,991
349,999
278,250
|
Michael Rowsey
|
|
2/14/07
2/14/07
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ryan Vero
|
|
2/14/07
2/14/07
|
|
$71,225
|
|
$284,900
|
|
$641,025
|
|
8,235
|
|
16,470
|
|
24,705
|
|
|
|
|
|
|
|
|
$
|
874,886
|
|
-
(1)
-
Includes
annual incentive bonus opportunities for each of the named executive officers awarded in 2007. See "Compensation Discussion and AnalysisAnnual Incentive
Compensation (Bonus)" beginning on page 36. Actual bonus payments for the fiscal year reported are listed in column (g) of the "Summary Compensation Table" on page 51.
-
(2)
-
Reflects
long-term incentive awards in the form of performance-based RSUs granted to Messrs. Duncan, Civgin, DePaul and Vero on February 14, 2007 and
Mr. Martin on September 17, 2007 in accordance with the OMIPP as discussed in "Compensation Discussion and AnalysisLong-Term Incentive Compensation (Equity
Awards)" beginning on page 40. These awards are also listed in column (i) of the "Outstanding Equity Awards at Fiscal Year-End" table on page 56 and the compensation
cost recognized over the defined service period of these awards, as well as awards granted in prior years, is disclosed in columns (e) and (f) of the "Summary Compensation Table" on
page 51. The closing stock price on the date the committee approved the 2007 long-term incentive program (February 14, 2007) of $53.12 was used to determine the number of
RSUs awarded to Messrs. Duncan, Civgin, DePaul and Vero. The closing stock price on September 17, 2007 ($31.39) was used to determine the number of RSUs awarded to Mr. Martin.
-
(3)
-
Grant
date fair value of long-term incentive awards in the form of performance-based restricted stock units granted to each named executive officer on February 14,
2007 and September 17, 2007 and the RSUs and options awarded to Mr. Martin at inception of employment in accordance with the OMIPP as discussed below. See Note 15 "Shareholders'
Equity" to Notes to Consolidated Financial Statements in the company's Annual Report on Form 10-K for the year ended December 29, 2007 for a discussion of the assumptions
used by the company to calculate the grant date fair value of share based employee compensation in accordance with the provisions of SFAS No. 123R.
These awards have a two-year performance period. We must achieve a cumulative two-year EBIT Dollar threshold and return on net asset
target before elected officers will be eligible to receive restricted stock units pursuant to the awards. The final number of restricted stock units issued will be adjusted based on return on sales
for each of the fiscal years 2007 and 2008. If the EBIT Dollar and return on net asset goals are achieved, one half of the awards will vest on February 13, 2009, subject to adjustment based on
2007 return on sales, and the other half will vest on February 13,
54
2010,
subject to adjustment based on 2008 return on sales. The executive's actual payout can vary from the targeted amount depending on the achievement of the objective performance goals, as well as
changes in the value of the shares of stock underlying the grant that occur between the grant date and payout.
The
form of the performance-based RSU Award Agreement used to grant these awards provides that participants must be employed by us on the vesting date in order for the units to vest,
subject to exceptions in certain circumstances. The named executive officers are not entitled to any voting rights with respect to the restricted stock units and are not entitled to receive dividends
on the restricted stock units.
On September 17, 2007, Mr. Martin received an award of 11,150 RSUs. This grant is subject to the terms of a Restricted Stock Unit Award Agreement
dated September 17, 2007 between the company and Mr. Martin. Pursuant to the terms of the award agreement, 33
1
/
3
% of the RSUs shall vest and be paid in company common
stock on each of the first three anniversaries of the grant date, subject to possible deferral in the circumstances described in the award agreement. The award is also subject to the terms of the
OMIPP. If Mr. Martin terminates employment for any reason prior to the third anniversary of the grant date, the RSUs which have not vested will be forfeited. In the event of a change in
control, as defined in the award agreement, the vesting of the RSUs may accelerate under certain circumstances described in the Award Agreement. The RSUs may not be sold, assigned or encumbered prior
to vesting, without the consent of the company. Mr. Martin will not receive dividends or have voting rights with respect to the RSUs.
In
addition, on September 17, 2007, the company granted Mr. Martin a stock option to purchase 35,000 shares of company common stock at a price of $31.39 per share (the
closing price of the company's common stock on September 17, 2007). This grant is subject to the terms of a Nonstatutory Stock Option Award Agreement dated September 17, 2007 between the
company and Mr. Martin. On each of the first three anniversaries of the award date, the option shall become exercisable with respect to 33
1
/
3
% of the shares of stock subject to
the stock option agreement. The award is also subject to the terms of the OMIPP. If Mr. Martin terminates employment for any reason prior to the third anniversary of the award date, the portion
of the stock option which has not vested will be forfeited. The stock option must be exercised on or before the earliest of (a) the tenth anniversary of the award date; (b) one year
after Mr. Martin retires (after attaining age 55 and completing 10 years of service with the company), dies, or becomes totally and permanently disabled, provided that Mr. Martin
has not, as of the date of the exercise of the stock option, commenced employment with any competitor of the company (as defined in the stock option agreement); and (c) three months after
Mr. Martin terminates employment for any other reason. The option will be cancelled immediately if Mr. Martin is terminated for disciplinary reasons as defined in the stock option
agreement. In the event of a change in control, as defined in the stock option agreement, the vesting of the option may accelerate under certain circumstances described in the stock option agreement.
The
following table sets forth outstanding options, unvested stock awards and outstanding equity incentive plan awards for each of our named executive officers at December 29,
2007.
55
Outstanding Equity Awards
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
FOR FISCAL YEAR ENDED DECEMBER 29, 2007
|
|
|
Option Awards
|
|
Stock Awards
|
Name
(a)
|
|
Number of
Securities
Underlying
Unexercised
Options
Exercisable
(#) (1)
(b)
|
|
Number of
Securities
Underlying
Unexercised
Options
Unexercisable
(#) (1)
(c)
|
|
Equity Incentive
Plan Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options (#)
(d)
|
|
Option
Exercise
Price ($)
(e)
|
|
Option
Expiration
Date
(f)
|
|
Number
of Shares
or Units
of Stock
That
Have Not
Vested
(#) (2)
(g)
|
|
Market
Value of
Shares or
Units of
Stock That
Have Not
Vested
($) (3)
(h)
|
|
Equity
Incentive
Plan
Awards:
Number of
Unearned
Shares,
Units or
Other Rights
That Have
Not Vested
(#) (4)
(i)
|
|
Equity
Incentive Plan
Awards:
Market or
Payout Value
of Unearned
Shares, Units
or Other
Rights That
Have Not
Vested
($) (3)
(j)
|
|
Sam K. Duncan
|
|
46,666
72,000
|
|
23,334
108,000
|
|
|
|
$
$
|
32.66
32.66
|
|
4/18/2015
4/18/2015
|
|
11,667
9,000
|
|
$
$
|
239,640
184,860
|
|
166,830
|
|
$
|
3,426,688
|
Don Civgin
|
|
33,466
|
|
16,734
|
|
|
|
$
|
30.70
|
|
10/4/2015
|
|
12,667
|
|
$
|
260,180
|
|
45,770
|
|
$
|
940,116
|
Phillip P. DePaul
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,510
|
|
$
|
318,575
|
Sam Martin
|
|
|
|
35,000
|
|
|
|
$
|
31.39
|
|
9/17/2017
|
|
11,150
|
|
$
|
229,021
|
|
36,540
|
|
$
|
750,532
|
Michael D. Rowsey
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,667
|
|
$
|
383,420
|
Ryan T. Vero
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
47,200
|
|
$
|
969,488
|
|
-
(1)
-
Includes
options granted to Mr. Duncan on April 18, 2005 pursuant to his employment agreement as described beginning on page 44, to Mr. Civgin on
October 4, 2005 pursuant to his offer letter described beginning on page 45 and to Mr. Martin on September 17, 2007 pursuant to his offer letter described beginning on
page 45. Mr. Duncan's remaining unvested option to purchase 23,334 shares of stock will become exercisable on April 18, 2008 and his remaining unvested option to purchase 108,000
shares of stock will become exercisable with respect to 36,000 shares per year over the next three years. Mr. Civgin's remaining unvested option to purchase 16,734 shares of stock will become
exercisable on October 4, 2008. Mr. Martin's unvested option to purchase 35,000 shares of stock will become exercisable with respect to 11,667 shares on each of September 17, 2008
and September 17, 2009 and with respect to 11,666 shares on September 17, 2010.
-
(2)
-
Includes
restricted stock units granted to Mr. Duncan on April 18, 2005 pursuant to his employment agreement as described beginning on page 44, to
Mr. Civgin on October 4, 2005 pursuant to his offer letter described beginning on page 45 and to Mr. Martin on September 17, 2007 pursuant to his offer letter
described beginning on page 45. Mr. Duncan's remaining unvested award of 11,667 restricted stock units will vest on April 18, 2008. Mr. Duncan's remaining unvested award of
9,000 restricted stock units will vest with respect to 3,000 units per year over the next three years on April 18
th
of each year. Mr. Civgin's remaining unvested
award of 12,667 restricted stock units will vest on October 4, 2008. Mr. Martin's unvested award of 11,150 restricted stock units will vest with respect to 3,717 shares on each of
September 17, 2008 and September 17, 2009 and with respect to 3,716 shares on September 17, 2010.
-
(3)
-
Based
on the closing price of our common stock on the New York Stock Exchange at December 28, 2007 of $20.54 per share.
-
(4)
-
Includes
performance-based restricted stock units awarded on February 14, 2007 and February 9, 2006 for Messrs. Duncan, Civgin, DePaul, Rowsey and Vero and on
September 17, 2007 for Mr. Martin in accordance with the OMIPP. One half of the 2007 awards will vest on February 13, 2009 and the remaining amount will vest on
February 13, 2010, in each case only if certain performance measures are met for each of the fiscal years 2007 and 2008 as discussed in "Compensation Discussion and
AnalysisLong-Term Incentive Compensation (Equity Awards)" beginning on page 40. One half of the 2006 awards will vest on February 8, 2008 and the remaining
amount will vest on February 8, 2009, in each case only if certain performance measures are met for each of the fiscal years 2006 and 2007 as discussed in "Compensation Discussion and
AnalysisLong-Term Incentive Compensation (Equity Awards)". The named executive officers are not entitled to any voting rights with respect to the restricted stock units and
are not entitled to receive dividends on the restricted stock units. The 2007 awards are also listed in column (g) of the "Grants of Plan-Based Awards" table on page 54 and
the compensation expense recognized in 2007 for these awards, as well as awards granted in previous years, is disclosed in columns (e) and (f) of the "Summary Compensation Table" on
page 51.
56
Pursuant to his employment agreement, on April 18, 2005, Mr. Duncan was granted a ten-year nonqualified option (the "Initial Option") to
purchase 70,000 shares of the company's common stock. The Initial Option has an exercise price equal to $32.66 per share. The Initial Option has vested with respect to 46,666 shares of stock. On the
next anniversary of the grant date, the Initial Option will vest with respect to the remaining 23,334 shares. In the event that Mr. Duncan is involuntarily terminated not for Cause (as defined
in the employment agreement) or terminates employment as a result of death or Disability or voluntarily for Good Reason (each as defined in the employment agreement) prior to April 18, 2008
(each, a "Proration Event"), then a pro rata amount of unvested shares of common stock subject to the Initial Option will become exercisable as described in the Initial Option Agreement. Upon
Mr. Duncan's termination for any other reason prior to April 18, 2008, he will forfeit all of his unvested options. Mr. Duncan must exercise the Initial Option on or before the
earliest of:
-
-
April 18,
2015;
-
-
one
year after termination of employment as a result of retirement, death, or Disability, provided that Mr. Duncan has not, as of the date of the exercise of the
Initial Option, commenced employment with any competitor (as defined in the Initial Option Agreement);
-
-
one
year after termination of employment as a result of any of the Proration Events, provided that Mr. Duncan has not, as of the date of the exercise of the Initial
Option, commenced employment with any competitor (as defined in the Initial Option Agreement); or
-
-
one
year after termination of Mr. Duncan's employment for any other reason. The Initial Option shall be cancelled immediately if Mr. Duncan is terminated for
disciplinary reasons, as defined in the company's executive officer severance pay policy.
The
Initial Option will become fully vested and exercisable immediately upon a change in control prior to April 18, 2008 if the Initial Option is not continued or replaced
following such change in control or if Mr. Duncan is terminated in a qualifying termination, as defined in the pertinent agreement. The Initial Option is governed by the provisions of the OMIPP
and the Initial Option Agreement.
Pursuant
to his employment agreement, on April 18, 2005, Mr. Duncan was also granted an additional 10-year nonqualified option (the "Other Option") to purchase
180,000 shares of the company's common stock. The Other Option has a per share exercise price equal to $32.66 per share. The Other Option has vested with respect to 72,000 shares of stock. On each of
the next three anniversaries of the grant date, the Other Option will vest with respect to 36,000 shares. In the event that Mr. Duncan is involuntarily terminated not for Cause (as defined in
the employment agreement) or terminates employment as a result of death or Disability or voluntarily for Good Reason (as defined in the employment agreement) prior to April 18, 2010, then a pro
rata amount of unvested shares of common stock subject to the Other Option will become exercisable as described in the Other Option Agreement. Upon Mr. Duncan's termination for any other reason
prior to April 18, 2010, all his unvested options will be forfeited. In all other respects, the terms of the Other Option are the same as the terms of the Initial Option described above. The
Other Option is governed by the provisions of the OMIPP and the Other Option Agreement.
Pursuant
to his employment agreement, on April 18, 2005, Mr. Duncan was granted 35,000 restricted stock units ("Initial Restricted Stock Units"), of which 23,333 have
vested. On the next anniversary of the grant date, 11,667 Initial Restricted Stock Units will vest. Vested Initial Restricted Stock Units will be paid in shares of OfficeMax common stock. In the event
that Mr. Duncan is involuntarily terminated not for Cause (as defined in the employment agreement) or terminates employment as a result of death or Disability or voluntarily for Good Reason (as
defined in the
57
employment
agreement) prior to April 18, 2008, then a pro rata amount of unvested Initial Restricted Stock Units shall vest as described in the Award Agreement. Upon Mr. Duncan's
termination for any other reason prior to April 18, 2008, all of his unvested Initial Restricted Stock Units will be forfeited. The Initial Restricted Stock Units will become fully vested
immediately upon a change in control (as defined in the OMIPP) prior to April 18, 2008 if the award is not continued or replaced following the change in control or if Mr. Duncan is
terminated in a qualifying termination, as defined in the pertinent agreement. The Initial Restricted Stock Units may not be sold, assigned, pledged or otherwise encumbered prior to vesting.
Mr. Duncan will not receive dividends or be entitled to vote with respect to the Initial Restricted Stock Units. The Initial Restricted Stock Units are subject to the provisions of the OMIPP
and the Restricted Stock Unit Award Agreement.
Pursuant
to his employment agreement, on April 18, 2005, Mr. Duncan was granted an additional aggregate of 15,000 restricted stock units under the OMIPP (the "Other
Restricted Stock Units"), of which 6,000 have vested. On each of the next three anniversaries of the grant date, 3,000 Other Restricted Stock Units will vest. In the event that Mr. Duncan is
involuntarily terminated not for Cause (as defined in the employment agreement) or terminates employment as a result of death or Disability or voluntarily for Good Reason (as defined in the employment
agreement) prior to April 18, 2010, then a pro rata amount of unvested Other Restricted Stock Units would vest as described in the Award Agreement. Upon Mr. Duncan's termination for any
other reason prior to April 18, 2010, all of his unvested Other Restricted Stock Units will be forfeited. In all other respects, the terms of the Other Restricted Stock Units are the same as
the terms of the Initial Restricted Stock Units described above. The Other Restricted Stock Units are subject to the provisions of the OMIPP and the Restricted Stock Unit Award Agreement.
For
additional information, see the Estimated Current Value of Change in Control Benefits Table on page 66.
On October 4, 2005, we entered into a Restricted Stock Unit Award Agreement (the "RSU Award Agreement") with Mr. Civgin in order to grant restricted
stock units (the "Award") pursuant to the OMIPP. The Award consists of 38,000 restricted stock units, of which 25,333 of the restricted stock units have vested. The remaining 12,667 restricted stock
units will vest and be paid on October 4, 2008, subject to possible deferral in the circumstances described in the RSU Award Agreement. In the event of a change in control, as defined in the
RSU Award Agreement, the restricted stock units will become fully vested immediately upon a change in control (as defined in the OMIPP) if the award is not continued or replaced following the change
in control or if Mr. Civgin is terminated in a qualifying termination, as defined in the pertinent agreement. If Mr. Civgin terminates employment for any other reason prior to
October 4, 2008, his restricted stock units that have not vested will be forfeited. For additional information, see the Estimated Current Value of Change in Control Benefits Table on
page 66.
On
October 4, 2005, we entered into a Nonstatutory Stock Option Award Agreement (the "Stock Option Agreement") with Mr. Civgin in order to grant a stock option pursuant to
the OMIPP. The Stock Option Agreement provides Mr. Civgin the right to purchase 50,200 shares of company common stock at a price of $30.70 per share. The option has vested with respect to
33,466 of the shares. On October 4, 2008, the option shall become exercisable with respect to the remaining 16,734 shares.
If
Mr. Civgin terminates employment for any reason prior to October 4, 2008, he will forfeit the portion of the stock option which has not vested. The stock option must be
exercised on or before the earliest of:
58
-
-
five
years after Mr. Civgin retires (after attaining age 55 and completing 10 years of service with the company), dies, or becomes totally and permanently
disabled, provided that Mr. Civgin has not, as of the date of the exercise of the stock option, commenced employment with any competitor of the company (as defined in the Stock Option
Agreement); and
-
-
three
months after Mr. Civgin terminates employment for any other reason.
The
option will be cancelled immediately if Mr. Civgin is terminated for disciplinary reasons as defined in the Stock Option Agreement.
On September 17, 2007, Mr. Martin received an award of 11,150 restricted stock units. 3,717 of the restricted stock units will vest and be paid on
each of September 17, 2008 and September 17, 2009 and 3,716 of the restricted stock units will vest and be paid on September 17, 2010, subject to possible deferral in the
circumstances described in the RSU Award Agreement. The award is also subject to the terms of the OMIPP. If Mr. Martin terminates employment for any reason prior to the third anniversary of the
grant date, the RSUs which have not vested will be forfeited. In the event of a change in control, as defined in the Award Agreement, the vesting of the RSUs may accelerate under certain circumstances
described in the Award Agreement. The RSUs may not be sold, assigned or encumbered prior to vesting, without the consent of the company. Mr. Martin will not receive dividends or have voting
rights with respect to the RSUs.
On
September 17, 2007, Mr. Martin received a stock option to purchase 35,000 shares of company common stock at a price of $31.39 per share (the closing price of the
company's common stock on September 17, 2007). This grant is subject to the terms of a Nonstatutory Stock Option Award Agreement (the "Stock Option Agreement") dated September 17, 2007
between the company and Mr. Martin. On each of September 17, 2008 and September 17, 2009, the option will become exercisable with respect to 11,667 of the shares and on
September 17, 2010, the option will become exercisable with respect to 11,666 of the shares subject to the Stock Option Agreement. The award is also subject to the terms of the OMIPP. If
Mr. Martin terminates employment for any reason prior to the third anniversary of the award date, the portion of the stock option which has not vested will be forfeited. The stock option must
be exercised on or before the earliest of:
-
-
the
tenth anniversary of the award date;
-
-
one
year after Mr. Martin retires (after attaining age 55 and completing 10 years of service with the company), dies, or becomes totally and permanently
disabled, provided that Mr. Martin has not, as of the date of the exercise of the stock option, commenced employment with any competitor of the company (as defined in the Stock Option
Agreement); and
-
-
three
months after Mr. Martin terminates employment for any other reason.
The
option will be cancelled immediately if Mr. Martin is terminated for disciplinary reasons as defined in the Stock Option Agreement. In the event of a change in control, as
defined in the Stock Option Agreement, the vesting of the option may accelerate under certain circumstances described in the Stock Option Agreement.
59
Option Exercises and Vested Stock
The following table describes the number of shares of stock acquired and the dollar amounts realized by named executive officers during the most
recent fiscal year on the exercise of stock options and on the vesting of restricted stock units:
OPTION EXERCISES AND STOCK VESTED
FOR FISCAL YEAR ENDED DECEMBER 29, 2007
|
|
|
Stock Awards
|
Name
(a)
|
|
Number of Shares
Acquired on Vesting (#)
(d)
|
|
Value Realized on
Vesting ($) (1)
(e)
|
|
Sam K. Duncan
|
|
14,667
|
|
$
|
782,191
|
Don Civgin
|
|
12,666
|
|
$
|
422,411
|
Phillip P. DePaul
|
|
7,410
|
|
$
|
364,720
|
Sam Martin
|
|
|
|
|
|
Michael D. Rowsey
|
|
24,930
|
|
$
|
1,227,055
|
Ryan T. Vero
|
|
17,950
|
|
$
|
883,499
|
|
-
(1)
-
We
have estimated the value realized by multiplying the number of shares of stock received by the closing price per share on the vesting date for Mr. Duncan ($53.33 on
4/18/07), for Mr. Civgin ($33.35 on 10/4/07) and for Messrs. DePaul, Rowsey and Vero ($49.22 on 3/16/07). To preserve our tax deduction under Section 162(m) of the Internal
Revenue Code, described above in the "Compensation Discussion and AnalysisTax Impact and Financial Implications" on page 50, Mr. Duncan was required to defer receipt of some
of the shares of stock that vested. Under the terms of his award agreement, Mr. Duncan will not receive the deferred shares of stock until six months and one day after his termination of
employment with the company. Dividends accrue on the deferred shares and will be paid out in cash at the time of release of the shares.
Other Compensation and Benefit Plans
OfficeMax has established retirement and savings programs, health and welfare programs, and other executive benefit programs as part of providing
a competitive compensation program. These programs are summarized below. The 2005 Deferred Compensation Plan, OfficeMax Pension Plan
for Salaried Employees, and Supplemental Early Retirement Plan are not available to officers of OfficeMax Incorporated hired after December 2003. These are plans that existed prior to (or were created
as a result of programs that existed prior to) Boise Cascade Corporation's acquisition of OfficeMax, Inc., in December 2003. The Executive Savings Deferral Plan is available to all elected
officers of OfficeMax Incorporated.
60
Deferred Compensation
NONQUALIFIED DEFERRED COMPENSATION
|
Name
(a)
|
|
Executive
Contributions
in Last FY ($)(1)
(b)
|
|
Registrant
Contributions
in Last FY ($)(2)
(c)
|
|
Aggregate
Earnings
in Last FY ($)
(d)
|
|
Aggregate
Withdrawals/
Distributions ($)
(e)
|
|
Aggregate
Balance
at Last FYE ($)
(f)
|
|
Sam K. Duncan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Don Civgin (3)
|
|
$
|
3,731
|
|
$
|
1,865
|
|
$
|
296
|
|
|
|
$
|
5,893
|
Phillip P. DePaul (3)
|
|
$
|
13,500
|
|
$
|
5,625
|
|
($
|
10,156
|
)
|
|
|
$
|
74,770
|
Sam Martin
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael D. Rowsey (4)
|
|
$
|
184,408
|
|
$
|
5,625
|
|
$
|
66,874
|
|
|
|
$
|
1,020,584
|
Ryan T. Vero
|
|
|
|
|
|
|
|
$
|
7,663
|
|
|
|
$
|
131,671
|
|
-
(1)
-
The
executive contributions are included in the base salaries shown in the "Summary Compensation Table" on page 51 for the named executive officers who participated in the plan
in 2007.
-
(2)
-
For
Messrs. Civgin, DePaul and Rowsey, the amounts reported in this column are also reported as compensation to the named executive officer in column (i) of the "Summary
Compensation Table" on page 51.
-
(3)
-
Messrs. Civgin
and DePaul participated in the Executive Savings Deferral Plan only.
-
(4)
-
Mr. Rowsey
participated in the 2005 Deferred Compensation Plan only.
On December 9, 2004, the Executive Compensation Committee of our board of directors adopted the Executive Savings Deferral Plan. Our executive officers are
eligible to participate in the plan. Participants may defer a percentage of their salary and short-term incentive award. The deferral election must be made prior to the commencement of the
deferral period and pursuant to Section 409A of the Internal Revenue Code. The percentage may not exceed 50% of the participant's salary and 90% of the participant's short-term
incentive award, subject to the limitations described in the plan. We will make a matching credit to the participant's account in an amount equal to 50% of the compensation deferred by the participant
(up to 6% of the participant's compensation, and subject to other limitations). A participant will not be vested in his or her matching contributions until such participant has completed three years
of service with us. Each participant must allocate amounts credited to his or her account among various investment funds, which include a company stock fund. Amounts deferred will be distributed, as
more specifically described in the plan, at the time elected by the participant. The plan provides for payment in cash in a lump sum or in monthly installments, subject to minimum plan balance limits,
as elected by the participant. Our competitors have similar plans in place. All of our named executive officers are eligible to participate in the plan and Messrs. Civgin and DePaul elected to
participate in 2007.
On December 9, 2004, the Executive Compensation Committee of our board of directors adopted the 2005 Deferred Compensation Plan. Participation in this plan
is limited to senior managers and highly compensated employees who were former participants in our legacy deferred compensation plans. Participants may defer a percentage of their salary and bonus.
The percentage must be a minimum of 6% of the participant's compensation, and cannot exceed the
61
percentage
such participant was deferring under our 2001 Key Executive Deferred Compensation Plan as of December 31, 2004. We will make a matching credit to the participant's account in an
amount equal to 50% of the compensation deferred by the participant (up to 6% of the participant's compensation, and subject to other limitations). Amounts deferred under this plan were credited with
interest at a rate equal to 110% of Moody's Composite Average of Yields on Corporate Bonds in 2007. Amounts deferred will be distributed, as more specifically described in the plan, at the time
elected by the participant. No additional deferrals will be permitted under this plan after December 31, 2007. The plan provides for payment in cash in a lump sum or in monthly installments, as
elected by the participant. Of our named executive officers, only Mr. Rowsey was eligible and elected to participate in the plan in 2007.
We have established a deferred compensation and benefits trust that is intended to ensure that any successor company honors deferred compensation obligations
following a change in control. The trust will not increase the benefits to which any individual participant is entitled under the covered plans and agreements, which include the two deferred
compensation plans described above. If a potential change in control or an actual change in control of the company (as defined in the plans and the agreements) occurs, the trust will be funded at the
discretion of our Executive Compensation Committee. If the trust is, in fact, funded, it will pay benefits to participants and beneficiaries under our nonqualified and unfunded deferred compensation
plans and the executive officer agreements in accordance with the plans and agreements. The trustee will receive fees and expenses either from us or from the trust assets. If we become bankrupt or
insolvent, the trust assets will be accessible to the claims of the company's creditors.
Pension Benefits
The following table reflects the pension benefits of our named executive officers:
PENSION BENEFITS
|
Name
(a)
|
|
Plan Name
(b)
|
|
Number of
Years of Credited
Service (#)
(c)
|
|
Present
Value of
Accumulated
Benefit ($) (4)
(d)
|
|
Sam K. Duncan (1) (2)
|
|
Supplemental pension benefit in Mr. Duncan's employment agreement
|
|
3
|
|
$
|
1,089,575
|
Don Civgin (1)
|
|
|
|
|
|
|
|
Phillip P. DePaul (1)
|
|
|
|
|
|
|
|
Sam Martin (1)
|
|
|
|
|
|
|
|
Michael D. Rowsey (3)
|
|
OfficeMax Pension Plan for Salaried Employees
|
|
18.085
|
|
$
|
179,270
|
Ryan T. Vero (1)
|
|
|
|
|
|
|
|
|
-
(1)
-
Messrs. Duncan,
Civgin, DePaul, Martin and Vero are not eligible to participate in the OfficeMax Pension Plan for Salaried Employees.
-
(2)
-
Mr. Duncan
is eligible to receive a supplemental pension benefit pursuant to the terms of his employment agreement as described on page 63.
-
(3)
-
Pension
benefits for Mr. Rowsey under the OfficeMax Pension Plan for Salaried Employees were frozen as of December 31, 2003.
62
-
(4)
-
For
Mr. Duncan, these figures assume he would retire at age 58. This value represents three years of accrued benefits. For Mr. Rowsey, these figures assume that he would
retire at age 65. The decrease in Mr. Rowsey's pension value resulted from his departure from the company prior to full eligibility for the OfficeMax Pension Plan for Salaried Employees which
caused a forfeiture of his benefit from this plan.
Mr. Rowsey is the only named executive officer eligible to participate in this plan. The OfficeMax Pension Plan for Salaried Employees entitles each vested
employee, including executive officers, to receive a pension benefit at normal retirement equal to:
-
-
1.25%
of the average of the highest five consecutive years of compensation (as defined in the plan) out of the last 10 years of employment, multiplied by the
participant's years of service through December 31, 2003,
plus
-
-
a
special transition benefit for Boise Office Solutions employees eligible for the Pension Plan for Salaried Employees and employed by OfficeMax on January 1, 2004.
Benefits
under the plan were frozen as of December 31, 2003 for all eligible participants, with one additional year of service granted to those participants on January 1,
2004, based on a 1% (rather than a 1.25%) formula. Effective November 1, 2003, new employees, rehired employees, and hourly employees who transferred to a full-time position were
not eligible to participate in the plan. Under the plan, "compensation" is the employee's base salary plus any amounts earned under the company's variable incentive compensation programs (only
"Salary" and "Non-Equity Incentive Plan Compensation" from the "Summary Compensation Table" on page 51). As of December 29, 2007, the average of the highest five consecutive
years of compensation for 1997 through 2007 is approximately $236,000 and the years of service for Mr. Rowsey is 18.085. This includes 13.085 years earned from 1979 to 1992, when
Mr. Rowsey terminated employment with the company, and five years earned from 2000 to 2004 after Mr. Rowsey rejoined the company.
Benefits
are computed on a straight-life annuity basis and are not offset by social security or other retirement-type benefits. An eligible employee is 100%
vested in his or her pension benefit after five years of service, not including breaks in service.
Pursuant to the terms of Mr. Duncan's employment agreement, on April 18, 2010, Mr. Duncan (if employed by us on that date) will vest in a
supplemental pension benefit (the "Supplemental Pension Benefit") in an annual amount equal to the product of (A) two percent (2%) of the sum of (1) the average amount of annual base
salary earned by Mr. Duncan with respect to the five most recently completed years of Mr. Duncan's employment with us plus (2) the average amount of the annual cash bonuses earned
by Mr. Duncan for the company's five completed fiscal years immediately preceding the termination of Mr. Duncan's employment and (B) the number of completed full years of
Mr. Duncan's employment with us (provided that Mr. Duncan will be deemed to have completed a full calendar year of employment with us for 2005). The amount of Mr. Duncan's
Supplemental Pension Benefit will be offset by any amounts payable to Mr. Duncan under any of our qualified or nonqualified pension plans and by the amount of Mr. Duncan's benefit from
Social Security.
63
Indemnification
To the extent that Delaware law permits, we will indemnify our directors and officers against liabilities they incur in connection with actual or
threatened proceedings to which they are or may become parties and that arise from their status as directors and officers. We have entered into indemnification agreements with each of our directors,
and we insure, within stated limits, directors and officers against such liabilities.
Change in Control Agreements
Except with respect to Mr. Duncan, all of our employees, including our executive officers, are employed at the will of the company. Some of
our executive officers, and all of our named executive officers, however, have change in control agreements that formalize their severance benefits if the executive officer is terminated under the
circumstances discussed below after a change in control of the company (as defined in the agreement). The agreements provide severance benefits and protect other benefits that the officers have
already earned or reasonably expect to receive under our employee benefit plans. See "Compensation Discussion and AnalysisChange in Control Agreements" on page 48 for additional
information regarding the change in control agreements.
Under
the change in control agreement, an officer will receive the benefits provided under the agreement if, after the change in control, the officer's employment is terminated unless
such termination is by the company for cause or disability (as defined in the agreement) or by the officer for other than good reason.
Under
the agreements, a "change in control" would include any of the following events:
-
-
any
"person", as defined in the Securities Exchange Act of 1934, as amended, acquiring 25% or more of our voting securities, unless that person acquires all such securities
directly from the company;
-
-
during
a two-year period, a majority of our directors being replaced under certain circumstances;
-
-
a
merger or consolidation of the company with any other corporation (other than a merger or consolidation where a majority of the company's directors continue as directors
of the combined entity and the outstanding voting securities of the company immediately prior to such an event continue to represent more than 50% of the combined voting power after such event or a
merger or consolidation implementing a recapitalization approved by the board where no person acquires 25% or more of the company's voting securities); and
-
-
approval
by our stockholders to liquidate or dissolve the company or to sell all or substantially all of the company's assets in certain circumstances.
These
agreements help ensure that we will have the benefit of these officers' services without distraction in the face of a potential change in control. The board of directors believes
that the agreements are in the best interests of our stockholders and the company. See "Compensation Discussion and AnalysisChange in Control Agreements" on page 48.
The
principal benefits under the agreements include:
-
-
the
officer's salary through the termination date;
-
-
severance
pay equal to a multiple of the officer's annual base salary and target incentive pay (one time for vice presidents, other than executive vice presidents and the
controller, two times for presidents, executive vice presidents and the controller and three times for the chief
64
executive
officer). For terminations occurring prior to March 1, 2008, target incentive pay will be 80% of the officer's target annual incentive. For terminations occurring on or after
March 1, 2008, target incentive pay will be the average annual incentive earned during the three years preceding termination. This severance payment will be in lieu of any severance pay to
which the officer would be entitled under the severance pay policy for executive officers; and
-
-
pay
for accrued but unused time off.
The
agreements provide four additional benefits. First, we will maintain for up to one year (two years for the chief executive officer) all employee benefit plans and programs in which
the officer was entitled to participate immediately prior to termination at substantially the same cost to the officer, or we will substitute similar arrangements at substantially the same cost to the
officer, or we will pay the officer a sum equal to 150% of twelve times (or twenty-four times for the chief executive officer) the monthly group premium, less the employee contribution
amount, for such plans and programs. Second, if the officer is eligible to participate in our Executive Life Insurance Program, we will pay premiums for the plan for one year (two years for the chief
executive officer) following termination. Third, if there is a dispute regarding the agreement, we will
pay reasonable legal fees and expenses that the officer incurs to enforce his or her rights or benefits under the agreement. Fourth, we will increase the officer's total payments under the agreement
to cover any excise taxes imposed by the Internal Revenue Service as a result of such payments, provided that if the value of the payments subject to excise taxes is not more than 110% of the value of
payments that could be provided without triggering excise taxes, then the value of payments to the officer will be reduced to the amount that can be provided without triggering excise taxes.
Each
agreement is effective for two years. On January 1 of each year, the agreement will automatically extend so as to terminate on the 2
nd
anniversary of
such date, unless we notify the officers by September 30 of the preceding year that we do not wish to extend the agreements.
For
one year after termination of employment, each change in control agreement prohibits the recipient from directly or indirectly soliciting or inducing any managerial level employee of
the company to leave employment in order to accept employment with any other entity. Following termination of employment, each change in control agreement requires its recipient to refrain from making
any public statements that disparage the company, its employees, products or services. For a period of 12 months after termination of employment with the company, each change in control
agreement states that its recipient will not, directly as an employee or indirectly as a consultant or contractor, be employed in the same or similar capacity as he was employed by the company
immediately prior to his termination of employment, by a seller or distributor of office supplies, office furniture, computer consumables or related office products or services in North America. If a
recipient of severance and other payments pursuant to the company's change in control agreements were to breach these negative covenants, the agreements provide the company with the right to seek
equitable relief in a court of competent jurisdiction in connection with the enforcement of the covenants. Payment is not wholly or partially conditioned on adherence to the covenants. However,
payment of the benefits provided in the change in control agreements is conditioned upon the recipient's execution and delivery to the company of a customary general release of claims.
Estimated Current Value of Change in Control Benefits
The table below reflects the estimated amount of payments and other benefits (not including legal fees, if any) each named executive officer would
receive under the change in control agreements, assuming that a change in control occurred on December 28, 2007 and based on our closing stock price as of that date of $20.54. The figures below
assume that the officer was
65
terminated
and that options and restricted stock units were not continued or replaced. Actual payments made under the agreements at any future date would vary, depending in part upon what the
executive has accrued under the variable compensation plans and benefit plans and upon the market price of our common stock. We recognize that our severance provisions and change in control provisions
can at times overlap. Therefore all agreements or policies providing for such payments require that payments under one type of provision be appropriately adjusted downward if payments are made under a
similar provision of another agreement or policy.
|
Name
|
|
Accrued But
Unpaid
Bonus (1)
|
|
Severance
Amount (2)
|
|
Early Vesting
of Stock
Options (3)
|
|
Early Vesting
of Restricted
Stock (4)
|
|
Other (5)
|
|
Estimated Tax
Gross Up (6)
|
|
Total
|
|
Sam K. Duncan
|
|
$
|
1,000,000
|
|
$
|
5,400,000
|
|
|
|
$
|
3,426,688
|
|
$
|
52,828
|
|
$
|
3,968,230
|
|
$
|
13,929,886
|
Don Civgin
|
|
$
|
135,278
|
|
$
|
1,497,600
|
|
|
|
$
|
940,116
|
|
$
|
19,242
|
|
|
|
|
$
|
2,614,992
|
Phillip P. DePaul
|
|
$
|
74,143
|
|
$
|
877,800
|
|
|
|
$
|
318,575
|
|
$
|
15,711
|
|
|
|
|
$
|
1,293,760
|
Sam Martin
|
|
$
|
124,000
|
|
$
|
1,934,400
|
|
|
|
$
|
750,532
|
|
$
|
3,806
|
|
|
|
|
$
|
2,812,737
|
Ryan T. Vero
|
|
$
|
134,758
|
|
$
|
1,440,000
|
|
|
|
$
|
969,488
|
|
$
|
17,699
|
|
|
|
|
$
|
2,637,259
|
|
-
(1)
-
Includes
annual incentive bonus earned in 2007 and paid following termination.
-
(2)
-
Assumes
severance pay equal to a multiple of the sum of the officer's annual base salary and 80% target incentive pay. The multiple will be three times for the chief executive
officer, two times for presidents, the controller and executive vice presidents, and one time for senior vice presidents (other than the controller). Severance is payable in a lump sum amount.
-
(3)
-
Although
options will become fully vested and exercisable immediately upon a change in control occurring prior to full vesting if they are not continued or replaced following such
change in control or if the executive is terminated in a qualifying termination, as defined in the pertinent agreement, the value of the options is zero because the difference between our closing
stock price as of December 28, 2007 and the option exercise prices is negative.
-
(4)
-
These
restricted stock units become fully vested immediately upon a change in control if the awards are not continued or replaced following such change in control or if the executive
is terminated in a qualifying termination, as defined in the pertinent agreement. The number shown represents the value determined by multiplying the number of restricted stock units by our closing
stock price as of December 28, 2007.
-
(5)
-
Includes
the cost of (a) continuation of all life (other than the Executive Life Insurance Program), disability, accident and healthcare insurance plans, programs, or
arrangements, and financial counseling services at substantially the same cost to the executive following the date of termination, for a 24 month period for the chief executive officer or a
12 month period for other executives; and (b) continued payment of the company-paid premium under the Executive Life Insurance Program for a 24 month period for the
CEO or a 12 month period for other executives following the date of termination. In lieu of these payments, the company has the discretion to pay a lump sum payment equal to 150% of the cost of
these benefits.
-
(6)
-
Under
the change in control agreements described on page 64, we will increase the officer's total payments under the agreement to cover any excise taxes imposed by the Internal
Revenue Service as a result of such payments, provided that if the value of the payments subject to excise taxes is not more than 110% of the value of payments that could be provided without
triggering excise taxes, then the value of payments to the officer will be reduced to the amount that can be provided without triggering excise taxes.
Estimated Termination Benefits
Mr. Duncan
On April 14, 2005, we entered into an employment agreement with Mr. Duncan to serve as our chief executive officer. The employment
agreement provides that Mr. Duncan's employment commenced on April 18, 2005 (the "Effective Date") and will end on April 17, 2008 (the "Term"). On the last date of the Term, and
on each anniversary thereof, the Term shall be automatically extended for an additional one-year period, unless either party provides the other party at least 90 days prior written
notice of non-renewal. No notice of termination has been provided to Mr. Duncan and his agreement will automatically renew. During the Term, Mr. Duncan will be based at the
company's headquarters.
66
During the Term, Mr. Duncan will receive an annual base salary, payable in accordance with the company's regular payroll practices for senior executives, subject to periodic
review by the Executive Compensation Committee of the company's board of directors for possible increase. On February 10, 2006, the board of directors approved an increase in
Mr. Duncan's salary to $900,000, effective April 2, 2006. On February 14, 2007, the board of directors approved an increase in Mr. Duncan's salary to $1,000,000, effective
April 1, 2007. Mr. Duncan's salary was increased to $1,030,000 effective March 30, 2008.
During
the Term, Mr. Duncan will participate in the company's annual cash incentive compensation plans. Awards under these plans are described in "Compensation Discussion and
AnalysisAnnual Incentive Compensation (Bonus)" on page 36.
For
the company's 2007 fiscal year, Mr. Duncan received long-term compensation awards. See "Compensation Discussion and AnalysisLong-Term
Incentive Compensation (Equity Awards)", page 42.
If,
during the Term, the company terminates Mr. Duncan's employment for any reason other than Cause (as defined in the employment agreement), death or Disability, or
Mr. Duncan terminates his employment for Good Reason, subject to the terms of the employment agreement, we will pay to Mr. Duncan, not later than 30 days following the date of
termination:
-
-
a
lump sum in cash equal to two times the sum of Mr. Duncan's annual base salary immediately prior to the date of termination, plus the greater of
(A) Mr. Duncan's annual target bonus for the fiscal year in which the date of termination occurs or (B) the annual target bonus described in the employment agreement; and
-
-
any
portion of Mr. Duncan's annual base salary and previously earned but unpaid bonus through the date of termination that has not yet been paid.
In
addition, the company shall pay or provide to Mr. Duncan all compensation and benefits payable to Mr. Duncan under the terms of the company's compensation and benefit
plans, programs or arrangements as in effect immediately prior to the date of termination.
If
Mr. Duncan's employment is terminated by reason of Mr. Duncan's death or Disability during the Term, the company shall pay to Mr. Duncan, his designated
beneficiary or his estate, within 30 days following the date of termination, a lump sum in cash equal to the sum of any portion of Mr. Duncan's annual base salary earned but unpaid
through the date of termination and previously earned but unpaid bonus through the date of termination. In addition, the company shall pay or provide to Mr. Duncan all compensation and benefits
payable to Mr. Duncan under the terms of the company's compensation and benefits plans, programs or arrangements as in effect immediately prior to the date of termination.
If
Mr. Duncan's employment is terminated by the company for Cause or Mr. Duncan voluntarily terminates employment other than for Good Reason (as defined in the employment
agreement) during the Term, Mr. Duncan shall be entitled to a lump sum in cash within 30 days after the date of termination equal to any portion of Mr. Duncan's annual base salary
and bonus earned but unpaid through the date of termination. In addition, the company shall pay or provide to Mr. Duncan all compensation and benefits payable to Mr. Duncan under the
terms of the company's compensation and benefits plans, programs or arrangements as in effect immediately prior to the date of termination.
Mr. Duncan
and the company entered into a change in control agreement substantially similar to those available to other senior executives and the payments and benefits he would be
entitled to under that agreement are set forth in the "Estimated Current Value of Change in Control Benefits" table on page 65. If Mr. Duncan's employment is terminated under
circumstances entitling him to
67
severance
benefits under the employment agreement and the Change in Control Agreement, the severance payments due under the employment agreement shall be offset by similar payments and benefits
provided under the Change in Control Agreement.
During
the Term, Mr. Duncan will be entitled to participate in the company's retirement plans, its fringe benefit and perquisite programs and welfare benefit plans and programs on
the same terms as other senior officers of the company.
Mr. Duncan's
employment agreement contains customary confidentiality, non-solicitation, nondisparagement and noncompetition provisions. Following termination of
employment, Mr. Duncan's agreement requires him to refrain from using or disclosing any confidential information relating to the company. For one year after termination of employment,
Mr. Duncan's agreement prohibits him from directly or indirectly soliciting or inducing any managerial level employee of the company to leave employment in order to accept employment
with any other entity. Following termination of employment, Mr. Duncan's agreement requires him to refrain from making any public statements that disparage the company, its employees, products
or services. For a period of 12 months after termination of employment with the company Mr. Duncan's agreement states that he will not, directly as an employee or indirectly as a
consultant or contractor, be employed in the same or similar capacity as he was employed by the company immediately prior to his termination of employment, by another business entity or person
deriving more than 10% of its gross revenues in North America from the sale or distribution of office supplies, office furniture, computer consumables or related office products or services.
Pursuant to Mr. Duncan's employment agreement and other arrangements described above, we would be required to provide compensation to him in the event of
termination of his employment under certain circumstances. The table below reflects the estimated amount of payments and other benefits Mr. Duncan would receive upon his termination in each
situation assuming that such event occurred on December 28, 2007 and based on our closing stock price as of that date of $20.54. Actual payments made under the agreement at any future date
would vary, depending in part upon what Mr. Duncan has accrued under the variable compensation plans and benefit plans and upon the market price of our common stock. The table below does not
include any payments or benefits to which Mr. Duncan would be entitled upon a change in control of the company. Such amounts are set forth in the "Estimated Current Value of Change in Control
Benefits" table on page 65. If Mr. Duncan's employment is terminated under circumstances entitling him to severance benefits under the employment agreement and the Change in Control
Agreement, the severance payments due under the employment agreement shall be offset by similar payments and benefits provided under the Change in Control Agreement.
|
Benefits and
Payments Upon Termination
|
|
Involuntary not for
Cause termination, or
termination for Good Reason
|
|
Death or Disability
|
|
For Cause or Voluntary
termination other than for
Good Reason
|
|
Accrued But Unpaid Bonus
|
|
$
|
1,000,000
|
(1)
|
$
|
473,000
|
|
$
|
473,000
|
Severance Amount
|
|
$
|
3,000,000
|
(2)
|
|
|
|
|
|
Early Vesting of Stock Options
|
|
$
|
|
|
|
|
|
|
|
Early Vesting of Restricted Stock
|
|
$
|
2,451,805
|
(3)
|
$
|
2,451,805
|
|
|
|
Total
|
|
$
|
6,451,805
|
|
$
|
2,924,805
|
|
$
|
473,000
|
|
-
(1)
-
Annual
target bonus for the year in which the termination occurs.
-
(2)
-
This
amount would be paid in a lump sum in cash equal to two times the sum of Mr. Duncan's annual base salary prior to the date of termination plus the greater of
(A) Mr. Duncan's annual
68
target
bonus for the fiscal year in which the date of termination occurs or (B) the annual target bonus described in the employment agreement.
-
(3)
-
16,637
restricted stock units subject to Mr. Duncan's award of Initial Restricted Stock and Other Restricted Stock and 102,730 units of restricted stock arising from
Mr. Duncan's 2006 and 2007 Long-Term Incentive award, for a total of 119,367 units, which constitute a pro rata amount of his unvested restricted stock units, would vest. The number
shown represents the value determined by multiplying the number of restricted stock units by our closing stock price as of December 28, 2007.
Mr. Civgin
On September 19, 2005, we entered into an offer letter with Don Civgin, effective October 3, 2005, to serve as our executive vice
president, finance and to assume the title of chief financial officer.
On
October 3, 2005, we entered into a change in control agreement (the "Change in Control Agreement") with Mr. Civgin that is substantially similar to change in control
agreements available to the company's other senior executives and the payments and benefits he would be entitled to under that agreement are set forth in the "Estimated Current Value of Change in
Control Benefits" table on page 65.
On
October 3, 2005, we entered into a nondisclosure and noncompetition agreement (the "Agreement") with Mr. Civgin. This Agreement requires Mr. Civgin to refrain
from divulging confidential information of the company during the course of his employment, except as is necessary to discharge his duties, and after termination of employment. Mr. Civgin may
not be employed by a seller or distributor of office supplies, office furniture, computer consumables or related office products or services in North America in the same or similar capacity as he was
employed by OfficeMax during the term of his employment and for a period of 12 months thereafter. During employment and for two years after termination, Mr. Civgin agrees not to solicit
current or certain former customers, current or certain former employees or suppliers of the company. The Agreement also contains a standard non-disparagement clause.
Mr. Civgin
will be eligible to receive twelve months of severance under the company's severance policy applicable to executive officers, if he is terminated involuntarily, and not
for disciplinary reasons. Mr. Civgin is entitled to participate in the company's benefit plans and programs on the same terms as other senior officers of the company.
Pursuant to Mr. Civgin's offer letter and other arrangements described above, the company would be required to provide compensation to him in the event of
termination of his employment under certain circumstances. The table below reflects the estimated amount of payments and other benefits Mr. Civgin would receive upon his termination in each
situation assuming that such event occurred on December 28, 2007 and based on our closing stock price as of that date of $20.54. Actual payments made at any future date would vary, depending in
part upon what Mr. Civgin has accrued under the variable compensation plans and benefit plans and upon the market price of our common stock. The table below does not include any payments or
benefits to which Mr. Civgin would be entitled upon a change in control of the company. Such amounts are set forth in the "Estimated Current Value of Change in Control Benefits" table on
page 65. If Mr. Civgin's employment is terminated under circumstances entitling him to severance benefits under his offer letter and the change in control agreement, the severance
payments due under the employment
69
agreement
shall be offset by similar payments and benefits provided under the change in control agreement.
|
Benefits and
Payments Upon Termination
|
|
Involuntary not for Cause
termination, or termination
for Good Reason
|
|
Death or Disability
|
|
For Cause or Voluntary
termination other than
for Good Reason
|
|
Accrued But Unpaid Bonus (1)
|
|
$
|
135,278
|
|
$
|
135,278
|
|
|
Severance Amount (2)
|
|
$
|
520,000
|
|
|
|
|
|
Early Vesting of Restricted Stock (3)
|
|
$
|
581,364
|
|
$
|
581,364
|
|
|
Total
|
|
$
|
1,236,642
|
|
$
|
716,642
|
|
|
|
-
(1)
-
Annual
incentive bonus for the fiscal year in which the date of termination occurs.
-
(2)
-
Twelve
months of severance under the company's severance policy applicable to executive officers.
-
(3)
-
28,304
restricted stock units, which constitutes a pro rata amount of his unvested restricted stock units, would vest. The number shown represents the value determined by multiplying
the number of restricted stock units by our closing stock price as of December 28, 2007.
Mr. DePaul
On December 10, 2003, and in connection with the acquisition by Boise Cascade Corporation of OfficeMax, Inc., we also entered into
an employment agreement with Phillip P. DePaul, Senior Vice President and Controller. The agreement terminated in accordance with its terms on December 10, 2006.
During
the term of the agreement, we paid Mr. DePaul a base salary of no less than $275,000 per year. He was also eligible to participate in the annual and long-term
incentive programs available to certain employees and in the company's other life, disability and accident insurance plans. The company also paid cash retention incentives to Mr. DePaul in the
amount of $39,000, $39,000, and $117,000 at the end of the 12, 24, and 36 month period, respectively, of the three year term, for an aggregate retention incentive of $195,000. The $117,000
retention incentive paid to Mr. DePaul under this agreement in 2006 is included in the "Summary Compensation Table" on page 51.
The
committee approved an amendment to Mr. DePaul's Change in Control (Severance) Agreement as a result of Mr. DePaul's previous election to the position of Chief
Accounting Officer. If severance payments were made pursuant to the agreement, Mr. DePaul was previously entitled to a lump sum severance payment equal to the sum of his annual base salary plus
his Target Bonus (as defined in the agreement). The amendment increases Mr. DePaul's lump sum severance payment to two times the sum of his annual base salary plus his Target Bonus.
The company would be required to provide compensation to Mr. DePaul in the event of termination of his employment under certain circumstances. The table
below reflects the estimated amount of payments and other benefits Mr. DePaul would receive upon his termination in each situation assuming that such event occurred on December 28, 2007
and based on our closing stock price as of that date of $20.54. Actual payments made at any future date would vary, depending in part upon what Mr. DePaul has accrued under the variable
compensation plans and benefit plans and upon the market price of our common stock. The table below does not include any payments or benefits to which Mr. DePaul would be entitled upon a change
in control of the
70
company.
Such amounts are set forth in the "Estimated Current Value of Change in Control Benefits" table on page 65. If Mr. DePaul's employment is terminated under circumstances
entitling him to severance benefits under the change in control agreement, the severance payments due under the severance pay policy for Executive Officers shall be offset by similar payments and
benefits provided under the change in control agreement.
|
Benefits and Payments Upon
Termination
|
|
Involuntary not for Cause
termination, or termination
for Good Reason
|
|
Death or Disability
|
|
For Cause or Voluntary
termination other than for
Good Reason
|
|
Accrued But Unpaid Bonus (1)
|
|
$
|
74,143
|
|
$
|
74,143
|
|
|
Severance Amount (2)
|
|
$
|
313,500
|
|
|
|
|
|
Early Vesting of Restricted Stock (3)
|
|
$
|
194,966
|
|
$
|
194,966
|
|
|
Total
|
|
$
|
582,609
|
|
$
|
269,109
|
|
|
|
-
(1)
-
Annual
incentive bonus for the fiscal year in which the date of termination occurs.
-
(2)
-
Twelve
months of severance under the company's severance policy applicable to executive officers.
-
(3)
-
9,492
restricted stock units, which constitutes a pro rata amount of his unvested restricted stock units, would vest. The number shown represents the value determined by multiplying
the number of restricted stock units by our closing stock price as of December 28, 2007.
Mr. Martin
On September 12, 2007, we entered into an offer letter with Sam Martin, effective September 17, 2007, to serve as our chief
operating officer.
On
September 17, 2007, we entered into a change in control agreement (the "Change in Control Agreement") with Mr. Martin that is substantially similar to change in control
agreements available to the company's other senior executives and the payments and benefits he would be entitled to under that agreement are set forth in the "Estimated Current Value of Change in
Control Benefits" table on page 65.
On
September 13, 2007, we entered into a nondisclosure and noncompetition agreement (the "Agreement") with Mr. Martin. This Agreement requires Mr. Martin to refrain
from divulging confidential information of the company during the course of his employment, except when such disclosure is a necessary part of a merchandise sale negotiation with a customer, and after
termination of employment. Mr. Martin may not be employed by or contract with a seller or distributor of office supplies, office furniture, computer consumables or related office products or
services in North America in the same or similar capacity as he was employed by OfficeMax for a period of 12 months after termination of employment. During employment and for two years after
termination, Mr. Martin agrees not to solicit current or certain former customers, current or certain former employees or current or certain former suppliers of the company. The Agreement also
contains a standard non-disparagement clause.
Mr. Martin
will be eligible to receive twelve months of severance under the company's severance policy applicable to executive officers, if he is terminated involuntarily, and not
for disciplinary reasons. Mr. Martin is entitled to participate in the company's benefit plans and programs on the same terms as other senior officers of the company.
71
Pursuant to Mr. Martin's offer letter and other arrangements described above, the company would be required to provide compensation to him in the event of
termination of his employment under certain circumstances. The table below reflects the estimated amount of payments and other benefits Mr. Martin would receive upon his termination in each
situation assuming that such event occurred on December 28, 2007 and based on our closing stock price as of that date of $20.54. Actual payments made at any future date would vary, depending in
part upon what Mr. Martin has accrued under the variable compensation plans and benefit plans and upon the market price of our common stock. The table below does not include any payments or
benefits to which Mr. Martin would be entitled upon a change in control of the company. Such amounts are set forth in the "Estimated Current Value of Change in Control Benefits" table on
page 65. If Mr. Martin's employment is terminated under circumstances entitling him to severance benefits under his offer letter and the change in control agreement, the severance
payments due under the employment
agreement shall be offset by similar payments and benefits provided under the change in control agreement.
|
Benefits and Payments Upon
Termination
|
|
Involuntary not for Cause
termination, or termination
for Good Reason
|
|
Death or Disability
|
|
For Cause or Voluntary
termination other than for
Good Reason
|
|
Accrued But Unpaid Bonus (1)
|
|
$
|
124,000
|
|
$
|
124,000
|
|
|
Severance Amount (2)
|
|
$
|
620,000
|
|
|
|
|
|
Early Vesting of Restricted Stock
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
744,000
|
|
$
|
124,000
|
|
|
|
-
(1)
-
Annual
incentive bonus for the fiscal year in which the date of termination occurs.
-
(2)
-
Twelve
months of severance under the company's severance policy applicable to executive officers.
Mr. Rowsey
The table below shows the compensation paid by the company to Mr. Rowsey upon his departure on May 17, 2007.
|
Benefits and Payments Upon
Termination
|
|
|
|
Severance Amount (1)
|
|
$
|
538,000
|
Early Vesting of Restricted Stock (2)
|
|
$
|
840,202
|
Total
|
|
$
|
1,378,202
|
|
-
(1)
-
Twelve
months of severance under the company's severance policy applicable to executive officers.
-
(2)
-
18,667
restricted stock units, which constituted a pro rata amount of his unvested restricted stock units, vested. The number shown represents the value determined by multiplying the
number of restricted stock units by our closing stock price of $45.01 as of May 17, 2007.
Mr. Vero
On December 10, 2003, and in connection with the acquisition by Boise Cascade Corporation of OfficeMax, Inc., we also entered into
an employment agreement with Ryan T. Vero, Executive
72
Vice
PresidentMerchandising. The agreement terminated in accordance with its terms on December 10, 2006.
During
the term of the agreement, we paid Mr. Vero a base salary of no less than $350,000 per year. He was also eligible to participate in the annual and long-term
incentive programs available to certain employees and in the company's other life, disability, and accident insurance plans. The company also paid cash retention incentives to Mr. Vero in the
amount of $130,000, $130,000, and $390,000 at the end of the 12, 24, and 36 month period, respectively, of the three year term, for an aggregate retention incentive of $650,000. The $390,000
retention incentive paid to Mr. Vero under this agreement in 2006 is included in the "Summary Compensation Table" on page 51.
The company would be required to provide compensation to Mr. Vero in the event of termination of his employment under certain circumstances. The table
below reflects the estimated amount of payments and other benefits Mr. Vero would receive upon his termination in each situation assuming that such event occurred on December 28, 2007
and based on our closing stock price as of that date of $20.54. Actual payments made at any future date would vary, depending in part upon what Mr. Vero has accrued under the variable
compensation plans and benefit plans and upon the market price of our common stock. The table below does not include any payments or benefits to which Mr. Vero would be entitled upon a change
in control of the company. Such amounts are set forth in the "Estimated Current Value of Change in Control Benefits" table on page 65. If Mr. Vero's employment is terminated under
circumstances entitling him to severance benefits under the change in control agreement, the severance payments due under the severance pay policy for
Executive Officers shall be offset by similar payments and benefits provided under the change in control agreement.
|
Benefits and Payments Upon
Termination
|
|
Involuntary not for Cause
termination, or termination
for Good Reason
|
|
Death or Disability
|
|
For Cause or Voluntary
termination other than for
Good Reason
|
|
Accrued But Unpaid Bonus (1)
|
|
$
|
134,758
|
|
$
|
134,758
|
|
|
Severance Amount (2)
|
|
$
|
518,000
|
|
|
|
|
|
Early Vesting of Restricted Stock (3)
|
|
$
|
599,604
|
|
$
|
599,604
|
|
|
Total
|
|
$
|
1,252,362
|
|
$
|
734,362
|
|
|
|
-
(1)
-
Annual
incentive bonus for the fiscal year in which the date of termination occurs.
-
(2)
-
Twelve
months of severance under the company's severance policy applicable to executive officers.
-
(3)
-
29,192
restricted stock units, which constitutes a pro rata amount of his unvested restricted stock units, would vest. The number shown represents the value determined by multiplying
the number of restricted stock units by our closing stock price as of December 28, 2007.
73
Stock Ownership
Directors and Executive Officers
The directors, nominees for director, and executive officers furnished the following information to us regarding the shares of our common stock
that they beneficially owned on December 31, 2007.
Ownership of OfficeMax Common Stock
|
|
Name of Beneficial Owner
|
|
Amount and Nature of
Beneficial Ownership
|
|
Percent of Class
|
|
Directors (1)
|
|
|
|
|
Dorrit J. Bern
|
|
|
|
*
|
Warren F. Bryant
|
|
387
|
|
*
|
Brian C. Cornell
|
|
4,501
|
|
*
|
Joseph M. DePinto
|
|
|
|
*
|
Sam K. Duncan
|
|
171,713
|
|
*
|
Rakesh Gangwal
|
|
19,287
|
|
*
|
Gary G. Michael
|
|
12,731
|
|
*
|
William J. Montgoris
|
|
|
|
*
|
Francesca Ruiz de Luzuriaga
|
|
16,497
|
|
*
|
David M. Szymanski
|
|
|
|
*
|
Other Named Executive Officers (2)
|
|
|
|
|
Don Civgin
|
|
69,795
|
|
*
|
Phillip P. DePaul
|
|
11,467
|
|
*
|
Sam M. Martin
|
|
|
|
*
|
Michael D. Rowsey
|
|
51,661
|
|
*
|
Ryan T. Vero
|
|
31,184
|
|
*
|
All directors, nominees for director, and executive officers as a group (1)(2)(3)
|
|
389,223
|
|
*
|
|
-
*
-
Less
than 1% of class
(1)
Beneficial
ownership for the directors includes all shares held of record or in street name, plus options granted but unexercised under the Director Stock Compensation Plan ("DSCP"),
Director Stock Option Plan ("DSOP"), and OfficeMax Incentive and Performance Plan ("OMIPP"), described beginning on page 19 under "Director Compensation." The number of shares subject to
options under the DSCP included in the beneficial ownership table is as follows: Ms. Ruiz de Luzuriaga, 3,997 shares; and Messrs. Bryant, 387 shares; Gangwal, 6,787 shares; and directors
as a group, 11,171 shares. The number of shares subject to options under the DSOP included in the beneficial ownership table is as follows: Ms. Ruiz de Luzuriaga, 9,500 shares;
Mr. Gangwal, 9,500 shares; and directors as a group, 19,000 shares. The number of shares subject to options under the OMIPP included in the beneficial ownership table is as follows:
Ms. Ruiz de Luzuriaga, 3,000 shares; Mr. Gangwal, 3,000 shares; and directors as a group, 6,000 shares. The number of shares/units granted under the OMIPP in lieu of retainer fee and
included in the beneficial ownership table is 4,501 shares owned by Mr. Cornell.
(2)
The
beneficial ownership for these named executive officers includes all shares held of record or in street name; plus shares held in our Dividend Reinvestment and Employee Stock
Purchase Plan; restricted stock and restricted stock units granted under the OMIPP;
74
unexercised,
vested option shares; deferred stock units held under the 2001 Key Executive Deferred Compensation Plan; and interests in shares of common stock held in the OfficeMax Common Stock Fund by
the trustee of the OfficeMax Savings Plan, a defined contribution plan qualified under Section 401(a) of the Internal Revenue Code. The restricted stock units do not have voting rights. For
further information regarding the restricted stock, restricted stock units and the option shares, see the "Award Tables" beginning on page 53. The following table indicates the nature of each
named executive's stock ownership and also shows the number of unexercised, unvested option shares; the allocation of contributions to the Executive Savings Deferral Plan's company stock fund; and
shares of convertible preferred stock, Series D, held in the Employee Stock Ownership Plan ("ESOP") fund of the Savings Plan, which are not included in the beneficial ownership table. Shares
are considered beneficially owned, for purposes of this table only, if the person has a right to acquire beneficial ownership within 60 days of December 29, 2007, unless otherwise
indicated in these footnotes.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Shares Owned
|
|
Dividend Reinvestment and Employee Stock Purchase Plan
|
|
Restricted Stock Units **
|
|
Unexercised, Vested Option Shares
|
|
Executive Savings Deferral Plan
|
|
Deferred Stock Units
|
|
Savings Plan Shares
|
|
Unexercised, Unvested Option Shares
|
|
ESOP (Preferred Stock)
|
|
Sam K. Duncan
|
|
|
|
|
|
53,046
|
|
118,667
|
|
|
|
|
|
|
|
131,333
|
|
|
Sam Martin
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
35,000
|
|
|
Don Civgin
|
|
18,304
|
|
|
|
18,024
|
|
33,467
|
|
|
|
|
|
|
|
16,733
|
|
|
Phillip P. DePaul
|
|
5,998
|
|
|
|
5,045
|
|
|
|
474
|
|
|
|
424
|
|
|
|
|
Michael D. Rowsey
|
|
28,587
|
|
|
|
19,650
|
|
|
|
|
|
3,424
|
|
|
|
|
|
13
|
Ryan T. Vero
|
|
14,113
|
|
|
|
16,165
|
|
|
|
|
|
|
|
906
|
|
|
|
|
Executive officers as
a group*
|
|
67,002
|
|
|
|
111,930
|
|
152,134
|
|
474
|
|
3,424
|
|
1,330
|
|
183,066
|
|
13
|
|
-
*
-
This
group at December 30, 2006, included all of our named executive officers except Mr. Rowsey.
-
**
-
Does
not include 29,120 restricted stock units owned by Mr. Duncan and 3,297 restricted stock units owned by Mr. Civgin, each of which were required to defer receipt of
such restricted stock units. See the Option Exercises and Stock Vested Table on page 60.
-
(3)
-
Our
executive officers (individually or as a group) do not own more than 1% of the company's Series D Preferred Stock (ESOP).
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires our directors and named executive officers, and any person who owns more than
10% of a registered class of our equity securities, to file reports of holdings and transactions in OfficeMax stock with the SEC and the NYSE. Based on a review of Forms 3, 4 and 5 and any
amendments thereto, we believe that in 2007 our directors and
reporting officers met all applicable SEC filing requirements, except for Phillip DePaul, who inadvertently omitted filing Forms 4 with respect to the allocation of his contributions to the
Executive Savings Deferral Plan's company stock fund. No shares of common stock are ever actually issued to participants pursuant to the Executive Savings Deferral Plan.
75
Ownership of More Than 5% of OfficeMax Stock
As of December 31, 2007, the table below describes each person or entity that we know (based on filings on Schedule 13G or 13D with
the SEC) to be the beneficial owner of more than 5% of any class of our voting securities.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Voting Power
|
|
Investment Power
|
|
Total Amount of Beneficial Ownership
|
|
|
|
Name and Address of Beneficial Owner
|
|
Percent of Class
|
|
|
Sole
|
|
Shared
|
|
Sole
|
|
Shared
|
|
|
|
Common Stock, $2.50 Par Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Joint filing by:
Barclays Global Investors, NA
Barclays Global Fund Advisors
Barclays Global Investors, LTD
Barclays Global Investors Canada Limited
Barclays Global Investors Japan Limited
45 Fremont Street
San Francisco, CA 94105
|
|
4,375,330
|
|
|
|
5,008,232
|
|
|
|
5,008,232
|
|
6.64
|
%
|
Joint filing by:
Edward C. Johnson 3d
FMR LLC
82 Devonshire Street
Boston, MA 02109
|
|
2,603,596
|
|
|
|
11,232,257
|
|
|
|
11,232,257
|
|
14.897
|
%
|
Lord, Abbett & Co. LLC
90 Hudson Street
Jersey City, NJ 07302
|
|
9,150,016
|
|
|
|
9,524,416
|
|
|
|
9,524,416
|
|
12.63
|
%
|
Joint filing by:
Maverick Capital Ltd.
Maverick Capital Management, LLC
Lee S. Ainslie III
300 Crescent Court
18th Floor
Dallas, TX 75201
|
|
6,597,459
|
|
|
|
6,597,459
|
|
|
|
6,597,459
|
|
8.8
|
%
|
Oppenheimer Funds, Inc.
Two World Financial Center
225 Liberty Street
New York, NY 10281
|
|
|
|
4,941,097
|
|
|
|
4,941,097
|
|
4,941,097
|
|
6.55
|
%
|
Convertible Preferred Stock, Series D (1)
State Street Bank and Trust Company,
as Trustee for the OfficeMax
Incorporated Employee Stock Ownership
Plan (ESOP)
State Street Financial Center
One Lincoln Street
Boston, MA 02110
|
|
|
|
1,107,505
|
|
|
|
1,107,505
|
|
1,107,505
|
|
100
|
%
|
|
|
-
(1)
-
The
shares of preferred stock held by the ESOP represent approximately 1.5% of the company's voting securities outstanding as of December 31, 2007.
76
Equity Compensation Plan Information
Our stockholders have approved all of the company's equity compensation plans, including the Director Stock Compensation Plan and the OfficeMax
Incentive and Performance Plan. The following table summarizes the number of shares of our common stock that may be issued under our equity compensation plans as of December 29, 2007.
|
|
Equity Compensation Plan Information
|
|
|
|
|
|
Plan Category
|
|
Number of Securities to Be
Issued Upon Exercise of
Outstanding Options,
Warrants, and Rights
(#)
|
|
Weighted-Average
Exercise Price of
Outstanding Options,
Warrants, and Rights
($)
|
|
Number of Securities Remaining
Available for Future Issuance
Under Equity Compensation
Plans (Excluding Securities
Reflected in the First Column)
(#)
|
|
|
|
Equity compensation plans approved by security holders
|
|
3,320,576
|
(1)
|
$
|
15.30
|
|
3,187,582
|
(2)
|
Equity compensation plans not approved by security holders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
3,320,576
|
|
$
|
15.30
|
|
3,187,582
|
|
|
|
-
(1)
-
Includes
11,171 shares issuable under our Director Stock Compensation Plan, 19,000 shares issuable under our Director Stock Option Plan, 1,214,924 shares issuable under our Key
Executive Stock Option Plan, and 2,075,481 shares issuable under the OMIPP. The Director Stock Option Plan and Key Executive Stock Option Plan have been replaced by the OMIPP. None of the following
are included in this chart: (a) interests in shares of common stock in the OfficeMax Common Stock Fund held by the trustee of the company's 401(k) Savings Plan, (b) Series D
Preferred Stock in the Employee Stock Ownership Plan (ESOP) fund (c) the deferred stock unit components of the company's 2001 Key Executive Deferred Compensation Plan or (d) interests in
the company stock fund of the Executive Savings Deferral Plan.
-
(2)
-
As
of December 29, 2007, 53,491 shares were issuable under the Director Stock Compensation Plan and 3,134,091 shares were issuable under the OMIPP.
77
Other Information
Legal Proceedings Involving Directors
On April 25, 2005, a putative derivative action,
Homstrom v. Harad, et al.
, was filed in
the Circuit Court of Cook County, Illinois. The
Homstrom
complaint names as defendants the following current and former officers and directors of
OfficeMax Incorporated: George J. Harad, Christopher C. Milliken, Theodore Crumley, Gary J. Peterson, Brian P. Anderson, Warren F. Bryant, Claire S. Farley, Rakesh Gangwal, Edward E. Hagenlocker, Gary
G. Michael, A. William Reynolds, Francesca Ruiz De Luzuriaga, Jane E. Shaw, Carolyn M. Ticknor, Ward W. Woods, Brian C. Cornell, David M. Szymanski, Richard R. Goodmanson, Donald N. MacDonald, and
Frank A. Schrontz. The complaint also names the following former directors of OfficeMax, Inc. as defendants: Michael Feuer, Lee Fisher, Edwin J. Holman, Jerry Sue Thornton, Burnett W. Donoho,
Michael F. Killeen, Ivan J. Winfield, and Jacqueline Woods. OfficeMax Incorporated is named as a nominal defendant. The complaint purports to assert, among other things, various common law derivative
claims against the individual defendants including breach of fiduciary duty and unjust enrichment. The complaint seeks an award in favor of OfficeMax and against the individual defendants of an
unspecified amount of damages, disgorgement of benefits and compensation, equitable or injunctive relief, costs, including attorneys' fees, and such other relief as the court deems just and proper.
Pursuant to provisions of company's bylaws, fees and other expenses incurred in connection with the foregoing derivative action are being advanced on behalf of those present and former officers and
directors by the company.
Stockholder Proposals for the 2009 Annual Meeting
If you wish to submit a proposal to be included in our 2009 proxy statement, we must receive it no later than November 10, 2008.
All
other proposals to be presented at the meeting must be delivered to our corporate secretary, in writing, no later than January 23, 2009. According to our Bylaws, your notice
must include:
-
-
a
brief description of the business you wish to bring before the meeting and the reasons for conducting the business at the meeting;
-
-
your
name and address;
-
-
the
class and number of shares of our stock that you beneficially own; and
-
-
any
material interest you have in the business to be brought before the meeting.
The
chairperson of the meeting may disregard any business not properly brought before the meeting according to our Bylaws.
Stockholder Nominations for Directors
If you wish to suggest a nominee for the Governance and Nominating Committee's consideration, write to OfficeMax Incorporated,
Attention
Corporate Secretary, 263 Shuman Boulevard, Naperville, Illinois 60563. You should describe in detail your proposed nominee's qualifications
and other
relevant biographical information and indicate whether the proposed nominee is willing to accept nomination.
The
Governance and Nominating Committee will consider director nominees proposed by stockholders for election at the annual stockholders meeting if our corporate secretary receives a
78
written
nomination not less than 30 days nor more than 60 days in advance of the meeting. According to our Bylaws, your notice of nomination must include:
-
-
your
name and address;
-
-
each
nominee's name, age, and address;
-
-
each
nominee's principal occupation or employment;
-
-
the
number of shares of our stock that the nominee beneficially owns;
-
-
the
number of shares of our stock that you beneficially own;
-
-
any
other information that must be disclosed about nominees in proxy solicitations under Regulation 14A of the Securities Exchange Act of 1934; and
-
-
each
nominee's executed consent to serve as our director if elected.
The
chairperson of the meeting may disregard any nomination not made in accordance with the above procedures.
OfficeMax's Annual Report on Form 10-K
We made our Annual Report on Form 10-K for the year ended December 29, 2007 available online with this proxy statement.
Paper copies of our Annual
Report on Form 10-K can be obtained at no charge from our Investor Relations Department, 263 Shuman Boulevard, Naperville,
Illinois 60563, (630) 864-6800
. You can find our SEC filings, including our 2007 Form 10-K, on our website at
www.officemax.com
, by clicking on "About Us," then
"Investors," and then "SEC Filings," or through the SEC's website at
www.sec.gov
.
We request that you promptly request a proxy card to sign, date, and return or vote your proxy over the telephone or through the Internet so that your vote will
be included at the meeting.
|
|
Susan Wagner-Fleming
Vice President
and Corporate Secretary
|
March 10, 2008
|
|
|
79
APPENDIX A
OfficeMax Incentive and Performance Plan, as proposed to
be amended
2003 OFFICEMAX INCENTIVE AND PERFORMANCE PLAN
(Amended and restated effective as of April 23, 2008)
Table of Contents
|
|
|
|
Page
|
1.
|
|
Purpose and Establishment
|
|
A-1
|
2.
|
|
Definitions
|
|
A-1
|
3.
|
|
Stock Subject to the Plan
|
|
A-5
|
4.
|
|
Administration of the Plan
|
|
A-6
|
5.
|
|
Eligibility
|
|
A-8
|
6.
|
|
Awards under the Plan; Agreement
|
|
A-8
|
7.
|
|
Options
|
|
A-8
|
8.
|
|
Stock Appreciation Rights
|
|
A-9
|
9.
|
|
Restricted Stock
|
|
A-11
|
10.
|
|
Restricted Stock Units
|
|
A-12
|
11.
|
|
Performance Units
|
|
A-13
|
12.
|
|
Performance Shares
|
|
A-14
|
13.
|
|
Annual Incentive Awards
|
|
A-14
|
14.
|
|
Stock Bonuses
|
|
A-15
|
15.
|
|
Rights as a Shareholder
|
|
A-15
|
16.
|
|
Employment Not Guaranteed
|
|
A-15
|
17.
|
|
Securities Matters
|
|
A-15
|
18.
|
|
Withholding Taxes
|
|
A-15
|
19.
|
|
Amendment and Termination
|
|
A-16
|
20.
|
|
Transfers Upon Death; Nonassignability
|
|
A-16
|
21.
|
|
Expenses and Receipts
|
|
A-16
|
22.
|
|
Deferral of Awards
|
|
A-16
|
23.
|
|
Short-Term Deferral; Deferred Compensation
|
|
A-16
|
24.
|
|
Change in Control Provisions
|
|
A-17
|
25.
|
|
Claims Procedure
|
|
A-18
|
26.
|
|
Claims Review Procedure
|
|
A-19
|
27.
|
|
Lawsuits; Venue; Applicable Law
|
|
A-19
|
28.
|
|
Participant Rights
|
|
A-19
|
29.
|
|
Leave of Absence or Transfer
|
|
A-19
|
30.
|
|
Unsecured General Creditor
|
|
A-19
|
31.
|
|
No Fractional Shares
|
|
A-19
|
32.
|
|
Beneficiary
|
|
A-19
|
33.
|
|
Section 162(m)
|
|
A-20
|
34.
|
|
Form of Communication
|
|
A-20
|
35.
|
|
Severability
|
|
A-20
|
i
2003 OFFICEMAX INCENTIVE AND PERFORMANCE PLAN
1.
Purpose and Establishment.
1.1
Purpose
. The 2003 OfficeMax Incentive and Performance Plan (the "Plan") is intended to promote the interests
of the Company and its shareholders by (a) attracting, motivating, rewarding, and retaining the broad-based management talent critical to achieving the Company's business goals;
(b) linking a portion of each Participant's compensation to the performance of both the Company and the individual Participant; and (c) encouraging ownership of Company common stock by
Participants. The Plan has been adopted and approved by the Board of Directors (defined below).
1.2
Successor Plan.
This Plan shall be the successor plan to the 1984 Key Executive Stock Option Plan (the "1984
KESOP"). No further grants shall be made under the 1984 KESOP on or after January 1, 2003. All awards outstanding under the 1984 KESOP on December 31, 2002 ("Prior Awards"), are
incorporated into this Plan and shall be treated as awards under this Plan; however, the Prior Awards shall continue to be governed solely by the terms and conditions of the written instrument
evidencing the grant or issuance. Except as expressly provided, no provision of this Plan shall affect or otherwise modify the rights or obligations of holders of Prior Awards. Shares of Stock
reserved for issuance under the 1984 KESOP in excess of the number of shares as to which awards have been made as of December 31, 2002, shall no longer be available for issuance on or after
January 1, 2003.
1.3
Original Effective Date and Term of Plan.
The Plan's original effective date was January 1, 2003, as
approved by the shareholders of the Company. The Plan shall be amended and restated effective as of April 23, 2008, subject to approval by the shareholders of the Company. The Plan will expire
on April 23, 2018. The Board of Directors or the Committee may terminate the Plan at any time prior to April 23, 2018. Awards outstanding at the expiration or termination of the Plan
shall remain in effect according to their terms and the provisions of the Plan.
2.
Definitions.
As used in the Plan, the following definitions apply to the terms indicated below:
2.1 "Agreement"
means either the written agreement between the Company and a Participant evidencing an Award and setting forth the terms and conditions applicable to the
Award or a statement issued by the Company to a Participant describing the terms and conditions of an Award.
2.2 "Affiliate"
means any corporation or other entity (including, but not limited to, a partnership or limited liability company) that is affiliated with the Company through
stock or equity ownership such that it controls or is controlled by, or is under common control with, the Company.
2.3 "Annual
Incentive Award" means an Award granted under Section 13.
2.4 "Award"
means any Option, Stock Appreciation Right, Restricted Stock, Restricted Stock Unit, Performance Unit, Performance Share, Annual Incentive Award, or Stock Bonus
granted pursuant to the terms of the Plan.
2.5 "Board
of Directors" means the Board of Directors of the Company.
2.6 A
"Change in Control" means (i) the same definition for "Change in Control" as set forth in any employment agreement, Award Agreement or change in control
agreement between the Participant and the Company, Subsidiary and/or Affiliate in effect when the
A-1
event(s)
occur, or, (ii) in the absence of such agreements, a "Change in Control" shall be deemed to have occurred if:
(a) Any
Person is or becomes the Beneficial Owner, directly or indirectly, of securities of the Company representing 25% or more of either the then outstanding shares of
common stock of the Company or the combined voting power of the Company's then outstanding securities; provided, however, if such Person acquires securities directly from the Company, such securities
shall not be included unless such Person acquires additional securities which, when added to the securities acquired directly from the Company, exceed 25% of the Company's then outstanding shares of
common stock or the combined voting power of the Company's then outstanding securities, and provided further that any acquisition of securities by any Person in connection with a transaction described
in Section 2.5(c)(i) shall not be deemed to be a Change in Control of the Company; or
(b) The
following individuals cease for any reason to constitute at least a majority of the number of directors then serving: individuals who, on the date hereof, constitute
the Board and any new director (other than a director whose initial assumption of office is in connection with an actual or threatened election contest, including but not limited to a consent
solicitation, relating to the election of directors of the Company) whose appointment or election by the Board or nomination for election by the Company's stockholders was approved by a vote of at
least 2/3rds of the directors then still in office who either were directors on the date hereof or whose appointment, election, or nomination for election was previously so approved (the "Continuing
Directors"); or
(c) The
consummation of a merger or consolidation of the Company (or any direct or indirect subsidiary of the Company) with any other corporation other than (i) a
merger or consolidation which would result in both (a) Continuing Directors continuing to constitute at least a majority of the number of directors of the combined entity immediately following
consummation of such merger or consolidation, and (b) the voting securities of the Company outstanding immediately prior to such merger or consolidation continuing to represent (either by
remaining outstanding or by being converted into voting securities of the surviving entity or any parent thereof) more than 50% of the combined voting power of the voting securities of the Company or
such surviving entity or any parent thereof outstanding immediately after such merger or consolidation, or (ii) a merger or consolidation effected to implement a recapitalization of the Company
(or similar transaction) in which no Person is or becomes the Beneficial Owner, directly or indirectly, of securities of the Company representing 25% or more of either the then outstanding shares of
common stock of the Company or the combined voting power of the Company's then outstanding securities; provided that securities acquired directly from the Company shall not be included unless the
Person acquires additional securities which, when added to the securities acquired directly from the Company, exceed 25% of the Company's then outstanding shares of common stock or the combined voting
power of the Company's then outstanding securities; and provided further that any acquisition of securities by any Person in connection with a transaction described in Section 2.6(c)(i) shall
not be deemed to be a Change in Control of the Company; or
(d) The
stockholders of the Company approve a plan of complete liquidation or dissolution of the Company or the consummation of an agreement for the sale or disposition by
the Company of all or substantially all of the Company's assets, other than a sale or disposition by the Company of all or substantially all of the Company's assets to an entity, more than 50% of the
combined voting power of the voting securities of which are owned by Persons in substantially the same proportions as their ownership of the Company immediately prior to such sale.
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A
transaction described in Section 2.6(c) which is not a Change in Control of the Company solely due to the operation of Subsection 2.6(c)(i)(a) will nevertheless
constitute a Change in Control of the Company if the Board determines, prior to the consummation of the transaction, that there is not a reasonable assurance that, for at least two years following the
consummation of the transaction, at least a majority of the members of the board of directors of the surviving entity or any parent will continue to consist of Continuing Directors and individuals
whose election or nomination for
election by the shareholders of the surviving entity or any parent would be approved by a vote of at least two-thirds of the Continuing Directors and individuals whose election or
nomination for election has previously been so approved.
For
purposes of Sections 2.6 and 2.21, "Beneficial Owner" shall have the meaning set forth in Rule 13d-3 under the Securities Exchange Act of 1934, as amended
(the "Exchange Act").
For
purposes of Sections 2.6 and 2.21, "Person" shall have the meaning given in Section 3(a)(9) of the Exchange Act, as modified and used in Sections 13(d) and 14(d)
thereof, except that "Person" shall not include (i) the Company or any of its subsidiaries, (ii) a trustee or other fiduciary holding securities under an employee benefit plan of the
Company or any of its subsidiaries, (iii) an underwriter temporarily holding securities pursuant to an offering of such securities, (iv) a corporation owned, directly or indirectly, by
the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company, or (v) an individual, entity or group that is permitted to and does report its
beneficial ownership of securities of the Company on Schedule 13G under the Exchange Act (or any successor schedule), provided that if the individual, entity or group later becomes required to
or does report its ownership of Company securities on Schedule 13D under the Exchange Act (or any successor schedule), then the individual, person or group shall be deemed to be a Person as of
the first date on which the individual, person or group becomes required to or does report its ownership on Schedule 13D.
2.7 "Code"
means the Internal Revenue Code of 1986, as amended from time to time, and any regulations promulgated thereunder.
2.8 "Committee"
means the Executive Compensation Committee of the Board of Directors or any successor to the Committee, which shall consist of three or more persons, each of
whom, unless otherwise determined by the Board of Directors, is (i) an "outside director" within the meaning of Code Section 162(m), (ii) a "nonemployee director" within the
meaning of Rule 16b-3 and (iii) satisfies the requirements of the New York Stock Exchange for independent directors.
2.9 "Company"
means OfficeMax Incorporated (formerly Boise Cascade Corporation), a Delaware corporation.
2.10 "Director"
means any individual who is a member of the Board of Directors of the Company and who is not an employee of the Company.
2.11 "Exchange
Act" means the Securities Exchange Act of 1934, as amended from time to time.
2.12 "Fair
Market Value" of a share of Stock means the closing price of the Stock as reported by the consolidated tape of the New York Stock Exchange on the date in
question. Notwithstanding the foregoing, the Committee may, in its sole discretion, specify that Fair Market Value of a share of Stock shall be defined as the average of the high and low selling
prices of the Stock on the New York Stock Exchange on the date in question. If there are no
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Stock
transactions on a particular date, the Fair Market Value shall be determined as of the immediately preceding date on which there were Stock transactions.
2.13 "Full
Value Award" means a grant of Restricted Stock, Restricted Stock Units, Performance Shares, Performance Units, an Annual Incentive Award or Stock Bonus that
provides for a Participant to receive shares of Stock without payment of an amount at least equal to the Fair Market Value of the Stock at the time of grant.
2.14 "Incentive
Stock Option" means an Option that is an "incentive stock option" within the meaning of Code Section 422, or any successor provision, and that is
designated by the Committee as an Incentive Stock Option.
2.15 "Nonqualified
Stock Option" means an Option other than an Incentive Stock Option.
2.16 "Option"
means the right to purchase a stated number of shares of Stock at a stated price for a stated period of time, granted pursuant to Section 7.
2.17 "Participant"
means an employee or Director of the Company or a Subsidiary to whom an Award is granted pursuant to the Plan, or upon the death of the Participant, his
or her successors, heirs, executors, and administrators, as the case may be.
2.18 "Performance
Goals" means the objectives established by the Committee in its sole discretion with respect to any performance-based Awards that relate to one or more
business criteria within the meaning of Code Section 162(m). Performance Goals may include or be based upon, without limitation: sales; gross revenue; gross margins; internal rate of return;
cost; ratio of debt to debt plus equity; profit before tax; earnings before interest and taxes; earnings before interest, taxes, depreciation, and amortization; earnings per share; operating earnings;
economic value added; ratio of operating earnings to capital spending; cash flow; free cash flow; net operating profit; net income; net earnings; net sales or net sales growth; price of Stock; return
on capital, net assets, equity, or shareholders' equity; segment income; market share; productivity ratios; expense targets; working capital targets; or total return to shareholders. Performance Goals
may (a) be used to measure the performance of the Company as a whole or any Subsidiary, business unit or segment
of the Company, (b) include or exclude (or be adjusted to include or exclude) extraordinary items, the impact of charges for restructurings, discontinued operations and other unusual and
non-recurring items, and the cumulative effects of tax or accounting changes, each as defined by generally accepted accounting principles and as identified in the financial statements,
notes to the financial statements, management's discussion and analysis or other Securities and Exchange Commission filings, and/or (c) reflect absolute entity performance or a relative
comparison of entity performance to the performance of a peer group, index, or other external measure, in each case as determined by the Committee in its sole discretion.
2.19 "Performance
Share" means an Award of a number of shares granted to a Participant pursuant to Section 12 which is initially valued according to Fair Market Value
and is paid out based on the achievement of stated Performance Goals during a stated period of time.
2.20 "Performance
Unit" means an Award granted to a Participant pursuant to Section 11, denominated in units, the value of which at the time it is payable is
determined as a function of the extent to which corresponding performance criteria or Performance Goals, as applicable, have been achieved.
2.21 A
"Potential Change in Control" shall be deemed to have occurred if (a) the Company enters into an agreement, the consummation of which would result in the
occurrence of a Change in Control of the Company; (b) the Company or any Person publicly announces
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an
intention to take or to consider taking actions which if consummated would constitute a Change in Control of the Company; (c) any Person becomes the Beneficial Owner, directly or indirectly,
of securities of the Company representing 9.5% or more of either the then outstanding shares of common stock of the Company or the combined voting power of the Company's then outstanding securities,
provided that securities acquired directly from the Company shall not be included unless the Person acquires additional securities which, when added to the securities acquired directly from the
Company, exceed 9.5% of the Company's then outstanding shares of common stock or the combined voting power of the Company's then outstanding securities; or (d) the Board adopts a resolution to
the effect that a Potential Change in Control has occurred.
2.22 "Restricted
Stock" means an Award of Stock granted in accordance with the terms of Section 9 and the other provisions of the Plan, and which is nontransferable
and subject to a substantial risk of forfeiture. Stock shall cease to be Restricted Stock when, in accordance with the terms hereof and the applicable Agreement, they become transferable and free of a
substantial risk of forfeiture.
2.23 "Restricted
Stock Units" means an Award granted to a Participant pursuant to Section 10, denominated in units, providing a Participant the right to receive
payment at a future date after the lapse of restrictions or achievement of performance criteria or Performance Goals, as applicable.
2.24 "Rule 16b-3"
means Rule 16b-3 promulgated under the Exchange Act, as amended from time to time.
2.25 "Securities
Act" means the Securities Act of 1933, as amended from time to time.
2.26 "Stock"
means the common stock of the Company, par value $2.50 per share.
2.27 "Stock
Appreciation Right" or "SAR" means the right to receive an amount calculated as provided in and granted pursuant to Section 8.
2.28 "Stock
Bonus" means a bonus payable in shares of Stock granted pursuant to Section 14.
2.29 "Subsidiary"
means (i) in the case of an Incentive Stock Option, any company during any period in which it is a "subsidiary corporation" (as that term is defined
in Code Section 424(f)), and (ii) in the case of all other Awards, in addition to a "subsidiary corporation" as defined above, a partnership, limited liability company, joint venture or
other entity in which the Company has fifty percent (50%) or more of the voting power or equity interests.
3.
Stock Subject to the Plan.
3.1
Shares Available for Awards.
On and after the effective date of this amendment and restatement of the Plan,
the maximum number of shares of Stock available for grant of Awards under the Plan shall be 12,800,000 shares (subject to adjustment as provided herein). Shares may be authorized but unissued Stock or
authorized and issued Stock held in the Company's treasury. All shares of Stock reserved with respect to Awards granted under the Plan shall be available for any Awards, including Options and Stock
Appreciation Rights. The maximum number of shares of Stock under the Plan that may be issued as Incentive Stock Options shall be 12,800,000. Shares subject to an Award (including a Prior Award, as
that term is defined in Section 1.2 or Full Value Award, as that term is defined in Section 2.13) which is cancelled, expired, terminated, forfeited, surrendered, or otherwise settled
without the issuance of any Stock shall again be available for Awards under the Plan. If shares covered by a Full Value Award are again available for grants pursuant to this subsection 3.1, the
number of Shares that again becomes eligible for grants shall also be multiplied by 2.25. Shares under substitute
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awards
for grants made under a plan of an acquired business entity shall not reduce the maximum number of shares that may be issued under the Plan.
3.2
Accounting for Awards; Fungible Shares.
For purposes of this Section 3, on and after the effective
date of this amendment and restatement of the Plan, an Award other than a Full Value Award shall reduce the aggregate number of shares of Stock available for grants under the Plan by the total number
of shares covered by the Award, without reduction for shares that are withheld for payment of the exercise price or withholding taxes. A Full Value Award shall reduce the aggregate number of shares
available for grants under the Plan by the number of shares covered by the Full Value Award multiplied by 2.25.
3.3
Performance-Based Award Limitation.
Awards that are designed to comply with the performance-based exception
from the tax deductibility limitation of Code Section 162(m) shall be subject to the following rules:
(a) The
number of shares of Stock that may be granted in the form of Options in a single fiscal year to a Participant may not exceed 1,500,000, as adjusted pursuant to
Section 3.4.
(b) The
number of shares of Stock that may be granted in the form of SARs in a single fiscal year to a Participant may not exceed 1,500,000, as adjusted pursuant to
Section 3.4.
(c) The
number of shares of stock that may be granted in the form of Restricted Stock in a single fiscal year to a Participant may not exceed 1,500,000, as adjusted pursuant
to Section 3.4.
(d) The
number of Restricted Stock Units that may be granted in a single fiscal year to a Participant may not exceed 1,500,000, as adjusted pursuant to Section 3.4.
(e) The
number of shares of Stock that may be granted in the form of Performance Shares in a single fiscal year to a Participant may not exceed 1,500,000, as adjusted
pursuant to Section 3.4.
(f) The
maximum amount that may be paid to a Participant for Performance Units granted in a single fiscal year to the Participant may not exceed $4,000,000.
3.4
Adjustment for Change in Capitalization.
In the event of any recapitalization, stock split, reverse stock
split, reorganization, merger, consolidation, spin-off, combination, share repurchase, share exchange, reclassification, or other similar corporate transaction or event (a) the
number and kind of shares of stock which may thereafter be issued in connection with Awards; (b) the number and kind of shares of stock or other property issued or issuable in respect of
outstanding Awards; (c) the exercise price, grant price, or purchase price relating to any Award; and
(d) the maximum number of shares subject to Awards which may be awarded to any employee during any fiscal year of the Company shall be equitably adjusted as necessary to prevent the dilution or
enlargement of the rights of Participants; provided that, with respect to Incentive Stock Options, adjustments shall be made in accordance with Code Section 424.
4.
Administration of the Plan.
4.1
Authority and Delegation.
The Committee shall have final discretion, responsibility, and authority to
administer and interpret the Plan. This includes the discretion and authority to determine all questions of fact, eligibility, or benefits relating to the Plan. The Committee may also adopt any rules
it deems necessary to administer the Plan. Any interpretation, determination, decision, or other action made or taken by the Committee shall be final and
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binding
on Participants. The Committee's responsibilities for administration and interpretation of the Plan shall be exercised by Company employees who have been assigned those responsibilities by the
Company's management. Unless limited by the Committee in writing, any Company employee exercising responsibilities relating to the Plan in accordance with this section shall be deemed to have been
delegated the discretionary authority vested in the Committee with respect to those responsibilities, subject to the requirements of Rule 16b-3, Code Section 162(m) and the
New York Stock Exchange. Executive officers designated by the Committee shall have the authority to grant Awards to non-executive officers and non-Directors. Subject to
Section 19, the Committee shall have the authority to adopt modifications and amendments to this Plan or any Agreement necessary to comply with the law of the countries in which the Company,
its Affiliates and/or Subsidiaries operate.
4.2
Employees in Foreign Countries.
The Committee shall have the authority to adopt such modifications,
procedures, appendices and sub-plans as may be necessary or desirable to comply with provisions of the laws of foreign countries in which the Company or any Subsidiary may operate to
assure the viability of the benefits from Awards granted to Employees employed in such countries and to meet the objectives of the Plan.
4.3
Terms and Conditions of Awards.
The Committee shall have final discretion, responsibility, and authority to:
(a) grant
Awards;
(b) determine
the Participants to whom and the times at which Awards shall be granted;
(c) determine
the type and number of Awards to be granted, the number of shares of Stock to which an Award may relate, and the applicable terms, conditions, and
restrictions, including the length of time for which any restriction shall remain in effect;
(d) establish
and administer Performance Goals relating to any Award;
(e) establish
the rights of Participants with respect to an Award upon termination of employment or service as a Director;
(f) determine
whether, to what extent, and under what circumstances an Award may be settled, cancelled, forfeited, exchanged, or surrendered;
(g) make
adjustments in the Performance Goals in recognition of unusual or nonrecurring events affecting the Company or the financial statements of the Company, or in
response to changes in applicable laws, regulations, or accounting principles;
(h) determine
the terms and provisions of Agreements;
(i) provide
for forfeiture of outstanding awards and recapture of realized gains and other realized value in such events as determined by the Committee, which include, but
are not limited to, a breach of restrictive covenants or an intentional or negligent misstatement of financial records; and
(j) make
all other determinations deemed necessary or advisable for the administration of the Plan.
The
Committee may solicit recommendations from the Company's management with respect to any or all of the items listed above.
The
Committee shall determine the terms and conditions of each Award at the time of grant. The Committee may establish different terms and conditions for different Participants, for
different Awards, and for the same Participant for each Award the Participant may receive, whether or not granted at different times.
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5.
Eligibility.
The persons who shall be eligible to receive Awards pursuant to the Plan shall be employees
of
the Company and its Subsidiaries and Affiliates (including officers of the Company, whether or not they are directors of the Company), selected by the Committee from time to time, and Directors. The
grant of an Award at any time to any person shall not entitle that person to a grant of an Award at any future time.
6.
Awards under the Plan; Agreement.
Awards that may be granted under the Plan consist of Options, Stock
Appreciation Rights, Restricted Stock, Restricted Stock Units, Performance Units, Performance Shares, Annual Incentive Awards, and Stock Bonuses, all as described below.
Each
Award granted under the Plan, except unconditional Stock Bonuses, shall be evidenced by an Agreement which shall contain such provisions as the Committee may, in its sole
discretion, deem necessary or desirable. On and after the effective date of this amendment and restatement of the Plan, if there is any inconsistency between the terms of the Plan and an Agreement,
the terms of the Plan shall control unless the Agreement explicitly states that an exception to the Plan is being made. By accepting an Award, a Participant agrees that the Award shall be subject to
all of the terms and provisions of the Plan and the applicable Agreement.
7.
Options.
7.1
Terms and Agreement.
Subject to the terms of the Plan, Options may be granted to Participants at any time as
determined by the Committee. The Committee shall determine, and the Agreement shall reflect, the following for each Option granted:
(a) the
number of shares subject to each Option;
(b) duration
of the Option (provided that no Option shall have an expiration date later than the day after the 7th anniversary of the date of grant);
(c) vesting
requirements which specify a vesting period of no less than one year, except with respect to substitute awards for grants made under a plan of an acquired
business entity;
(d) whether
the Option is an Incentive Stock Option or a Nonqualified Stock Option;
(e) the
amount and duration of related Stock Appreciation Rights, if any, and any conditions upon their exercise;
(f) the
exercise price for each Option, which, except with respect to substitute awards complying with Code Section 424 and regulations thereunder, shall not be less
than the Fair Market Value on the date of the grant (with respect to Incentive Stock Options, 110% of the Fair Market Value on the date of grant for any Participant who owns, within the meaning of
Code Section 424(d), stock of the Company possessing more than 10% of the total combined voting power of all classes of stock of the Company, any Subsidiary, or any Affiliate);
(g) the
permissible method(s) of payment of the exercise price;
(h) the
rights of the Participant upon termination of employment or service as a Director; and
(i) any
other terms or conditions established by the Committee.
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7.2
Exercise of Options.
(a) Options
shall be exercisable at such times and subject to such restrictions and conditions as the Committee, in its sole discretion, deems appropriate, which need not be
the same for all Participants.
(b) An
Option shall be exercised by delivering written notice as specified in the Agreement on the form of notice provided by the Company. Options may be exercised in whole
or in part.
For
a Participant who is subject to Section 16 of the Exchange Act, the Company may require that the method of payment comply with Section 16 and the rules and regulations
thereunder. Any payment in shares of Stock, if permitted, shall be made by delivering the shares to the secretary of the Company, duly endorsed in blank or accompanied by stock powers duly executed in
blank, together with any other documents and evidence as the secretary shall require.
(c) Certificates
for shares of Stock purchased upon the exercise of an Option shall be issued in the name of or for the account of the Participant or other person entitled
to receive the shares and delivered to the Participant or other person as soon as practicable following the effective date on which the Option is exercised.
7.3
Incentive Stock Options.
Notwithstanding anything in the Plan to the contrary, no term 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 Code
Section 422, or, without the consent of any affected Participant, to cause any Incentive Stock Option previously granted to fail to qualify for the federal income tax treatment afforded under
Code Section 421. Incentive Stock Options shall not be granted to Directors. Incentive Stock Options shall not be granted under the Plan on or after January 1, 2013.
7.4
Reduction in Price or Reissuance.
In no event shall the Committee cancel any outstanding Option for the
purpose of (i) providing a replacement award under this or another Company plan, or (ii) cashing out an Option, unless such cash-out occurs in conjunction with a Change in
Control. Additionally, in no event shall the Committee, without first receiving shareholder approval, (a) cancel any outstanding Option for the purpose of reissuing the Option to the
Participant at a lower exercise price or (b) reduce the exercise price of a previously issued Option.
7.5
Notification of Disqualifying Disposition.
If any Participant shall make any disposition of Shares issued
pursuant to the exercise of an Incentive Stock Option under the circumstances described in Code Section 421(b) (relating to certain disqualifying dispositions), such Participant shall notify
the Company of such disposition within ten (10) calendar days thereof.
8.
Stock Appreciation Rights.
8.1
Terms and Agreement.
Subject to the terms of the Plan, Stock Appreciation Rights may be granted to
Participants at any time as determined by the Committee. The grant price of the SAR shall be at least equal to one hundred percent (100%) of the Fair Market Value of Stock as determined on the date of
the grant, except with respect to substitute awards complying with Code Section 424 and regulations thereunder. The Committee shall determine, and the Agreement shall reflect, the following for
each SAR granted:
(a) the
number of shares subject to each SAR;
(b) whether
the SAR is a Related SAR or a Freestanding SAR;
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(c) duration
of the SAR (provided that no SAR shall have an expiration date later than the day after the 7th anniversary of the date of grant);
(d) vesting
requirements which specify a vesting period of no less than one year, except with respect to substitute awards for grants made under a plan of an acquired
business entity;
(e) rights
of the Participant upon termination of employment or service as a Director; and
(f) any
other terms or conditions established by the Committee.
8.2
Related and Freestanding SARs.
A Stock Appreciation Right may be granted in connection with an Option,
either at the time of grant or at any time thereafter during the term of the Option (a "Related SAR"), or may be granted unrelated to an Option (a "Freestanding SAR").
8.3
Surrender of Option.
A Related SAR shall require the holder, upon exercise, to surrender the Option with
respect to the number of shares as to which the SAR is exercised, in order to receive payment. The Option will, to the extent surrendered, cease to be exercisable.
8.4
Reduction in Number of Shares Subject to Related SARs.
For Related SARs, the number of shares subject to the
SAR shall not exceed the number of shares subject to the Option. For example, if the SAR covers the same number of shares as the Option, the exercise of a portion of the Option shall reduce the number
of shares subject to the SAR to the number of shares remaining under the Option. If the Related SAR covers fewer shares than the Option, the exercise of a portion of the Option shall reduce the number
of shares subject to the SAR to the extent necessary so that the number of remaining shares subject to the SAR is not more than the remaining shares under the Option.
8.5
Exercisability.
Subject to Section 8.7 and to any rules and restrictions imposed by the Committee, a
Related SAR will be exercisable at the time or times, and only to the extent, that the Option is exercisable and will not be transferable except to the extent that the Option is transferable. A
Freestanding SAR will be exercisable as determined by the Committee but in no event after 10 years from the date of grant.
8.6
Payment.
Upon the exercise of a Stock Appreciation Right, the holder will be entitled to receive payment of
an amount determined by multiplying:
(a) The
excess of the Fair Market Value on the date of exercise over the Fair Market Value on the date of grant, by
(b) The
number of shares with respect to which the SAR is being exercised.
The
Committee may limit the amount payable upon exercise of a Stock Appreciation Right. Any limitation must be determined as of the date of grant and noted on the Agreement evidencing
the grant.
Payment
may be made in cash, Stock, or a combination of cash and Stock, in the Committee's sole discretion.
8.7
Reduction in Price or Reissuance.
In no event shall the Committee cancel any outstanding Stock Appreciation
Right for the purpose of (i) providing a replacement award under this or another Company plan, or (ii) cashing out a Stock Appreciation Right, unless such cash-out occurs in
conjunction with a Change in Control. Additionally, in no event shall the Committee, without first receiving shareholder approval, (a) cancel any outstanding Stock Appreciation Right for the
purpose of reissuing the Stock Appreciation Right to the Participant
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at
a lower exercise price or (b) reduce the exercise price of a previously issued Stock Appreciation Right.
8.8
Additional Terms.
The Committee may impose additional conditions or limitations on the exercise of a Stock
Appreciation Right as it may deem necessary or desirable to secure for holders the benefits of Rule 16b-3, or any successor provision, or as it may otherwise deem advisable.
9.
Restricted Stock.
9.1
Terms and Agreement.
Subject to the terms of the Plan, shares of Restricted Stock may be granted to
Participants at any time as determined by the Committee. The Committee shall determine, and the Agreement shall reflect, the following for the Restricted Stock granted:
(a) the
number of shares of Restricted Stock granted;
(b) the
purchase price, if any, to be paid by the Participant for each share of Restricted Stock;
(c) the
restriction period established pursuant to Subsection 9.2 which, except with respect to substitute awards for grants made under a plan of an acquired business
entity:
(i) for
time-based Awards in excess of 5% of the number of shares available for Awards pursuant to Section 3.1, shall not be less than three
(3) years, with restrictions lapsing on a pro rata basis; and
(ii) for
Performance Goal-based Awards, shall be based upon a performance period of at least one (1) year;
(d) any
requirements with respect to elections under Code Section 83(b);
(e) rights
of the Participant upon termination of employment or service as a Director; and
(f) any
other terms or conditions established by the Committee.
9.2
Restriction Period.
At the time of the grant of Restricted Stock, the Committee shall establish a
restriction period for the shares granted, which may be time-based, based on the achievement of specified Performance Goals, a combination of time- and Performance
Goal-based, or based on any other criteria the Committee deems appropriate. The Committee may divide the shares into classes and assign a different restriction period for each class. The
Committee may impose additional conditions or restrictions upon the vesting of the Restricted Stock as it deems fit in its sole discretion. If all applicable conditions are
satisfied, then upon the termination of the restriction period with respect to a share of Restricted Stock, the share shall vest and the restrictions of Section 9.3 shall lapse. To the extent
required to ensure that a Performance Goal-based Award of Restricted Stock to an executive officer is deductible by the Company pursuant to Code Section 162(m), any such Award shall
vest only upon the Committee's determination that the Performance Goals applicable to the Award have been attained.
9.3
Restrictions on Transfer Prior to Vesting.
Prior to the vesting of Restricted Stock, the Participant may not
sell, assign, pledge, hypothecate, transfer, or otherwise encumber the Restricted Stock. Upon any attempt to transfer rights in a share of Restricted Stock, the share and all related rights shall
immediately be forfeited by the Participant. Upon the vesting of a share of Restricted Stock, the transfer restrictions of this section shall lapse with respect to that share.
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9.4
Rights as a Shareholder.
Except for the restrictions set forth here and unless otherwise determined by the
Committee, the Participant shall have all the rights of a shareholder with respect to shares of Restricted Stock, including but not limited to the right to vote and the right to receive dividends,
provided that the Committee, in its sole discretion, may require that any dividends paid on shares of Restricted Stock be held in escrow until all restrictions on the shares have lapsed.
9.5
Issuance of Certificates.
(a) Following
the date of grant, the Company shall issue a stock certificate, registered in the name of or for the account of the Participant to whom the shares of
Restricted Stock were granted, evidencing the shares. Each stock certificate shall bear the following legend:
The
transferability of this certificate and the shares of stock represented hereby are subject to the restrictions, terms, and conditions (including forfeiture provisions and restrictions against
transfer) contained in the 2003 OfficeMax Incentive and Performance Plan and an Agreement entered into between the registered owner of the shares and the Company.
This
legend shall not be removed until the shares vest pursuant to the terms stated.
(b) Each
certificate, together with the stock powers relating to the shares of Restricted Stock evidenced by the certificate, shall be held by the Company unless the
Committee determines otherwise.
(c) Following
the date on which a share of Restricted Stock vests, the Company shall cause to be delivered to the Participant to whom the shares were granted, a certificate
evidencing the share free of the legend stated in subsection (a) above.
9.6
Section 83(b) Election.
The Committee may provide in the Agreement that the Award is conditioned upon
the Participant making or not making an election under Code Section 83(b). If the Participant makes an election pursuant to Code Section 83(b), the Participant shall be required to
file a copy of the election with the Company within ten (10) calendar days.
10.
Restricted Stock Units.
10.1
Terms and Agreement.
Subject to the terms of the Plan, Restricted Stock Units may be granted to
Participants at any time as determined by the Committee. The Committee shall determine, and the Agreement shall reflect, the following for the Restricted Stock Units granted:
(a) the
number of Restricted Stock Units awarded:
(b) the
purchase price, if any, to be paid by the Participant for each Restricted Stock Unit;
(c) the
restriction period established pursuant to Subsection 10.2 which, except with respect to substitute awards for grants made under a plan of an acquired
business entity:
(i) for
time-based Awards in excess of 5% of the number of shares available for Awards pursuant to Section 3.1, shall not be less than three
(3) years, with restrictions lapsing on a pro rata basis; and
(ii) for
Performance Goal-based Awards, shall be based on a performance period of no less than one (1) year;
(d) whether
dividend equivalents will be credited with respect to Restricted Stock Units, and, if so, any accrual, forfeiture or payout restrictions on the dividend
equivalents;
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(e) rights
of the Participant upon termination of employment or service as a Director; and
(f) any
other terms or conditions established by the Committee.
To
the extent a Restricted Stock Unit Award constitutes "deferred compensation" within the meaning of Code Section 409A, the Committee shall establish Agreement terms and
provisions that comply with Code Section 409A and regulations thereunder.
10.2
Restriction Period.
At the time of the grant of Restricted Stock Units, the Committee shall establish a
restriction period, which may be time-based, based on the achievement of specified Performance Goals, a combination of time- and Performance Goal-based, or based on
any other criteria the Committee deems appropriate. The Committee may divide the awarded units into classes and assign a different restriction period for each class. The Committee may impose any
additional conditions or restrictions upon the vesting of the Restricted Stock Units as it deems fit in its sole discretion. If all applicable conditions are satisfied, then upon the termination of
the restriction period with respect to a Restricted Stock Unit, the Unit shall vest. To the extent required to ensure that a Performance Goal-based Award of Restricted Stock Units to an
executive officer is deductible by the Company pursuant to Code Section 162(m), any such Award shall become vested only upon the Committee's determination that the Performance Goals applicable
to the Award, if any, have been attained.
10.3
Payment.
Upon vesting of a Restricted Stock Unit, the Participant shall be entitled to receive payment of
an amount equal to the Fair Market Value of one share of Stock. Payment may be made in cash, Stock, or a combination of cash and Stock, in the Committee's sole discretion.
11.
Performance Units.
11.1
Terms and Agreement.
Subject to the terms of the Plan, Performance Units may be granted to Participants at
any time as determined by the Committee. The Committee shall determine, and the Agreement shall reflect, the following for the Performance Units granted:
(a) the
number of Performance Units awarded;
(b) the
initial value of a Performance Unit;
(c) the
rights of the Participant upon termination of employment or service as a Director (which may be different based on the reason for termination);
(d) the
performance period, which shall not be less than one (1) year, and Performance Goals applicable to the Award; and
(e) any
other terms or conditions established by the Committee.
To
the extent an Award constitutes "deferred compensation" within the meaning of Code Section 409A, the Committee shall establish Agreement terms and provisions that comply with
Code Section 409A and regulations thereunder.
11.2
Payment.
After the applicable performance period has ended, the Committee will review the Performance Goals
and determine the amount payable with respect to the Award, based upon the extent to which the Performance Goals have been attained within the performance period and any other applicable terms and
conditions. Payment of earned Performance Units may be made in cash, Stock, or a combination of cash and Stock, in the Committee's sole discretion.
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12.
Performance Shares.
12.1
Terms and Agreement.
Subject to the terms of the Plan, Performance Shares may be granted to Participants at
any time as determined by the Committee. The Committee shall determine, and the Agreement shall reflect, the following for the Performance Shares granted:
(a) the
number of Performance Shares awarded;
(b) the
performance period, which shall not be less than one (1) year, and Performance Goals applicable to the Award;
(c) whether
dividend equivalents will be credited with respect to Performance Shares, and if so, any accrual, forfeiture, or payout restrictions on the dividend equivalents;
(d) the
rights of the Participant upon termination of employment or service as a Director (which may be different based on the reason for termination); and
(e) any
other terms or conditions established by the Committee.
To
the extent an Award constitutes "deferred compensation" within the meaning of Code Section 409A, the Committee shall establish Agreement terms and provisions that comply with
Code Section 409A and regulations thereunder.
12.2
Initial Value.
The initial value of each Performance Share shall be the Fair Market Value on the date of
grant.
12.3
Payment.
After the applicable performance period has ended, the Committee will review the Performance Goals
and determine the amount payable with respect to the Award, based upon the extent to which the Performance Goals have been attained within the performance period and any other applicable terms and
conditions. Payment of earned Performance Shares may be made in cash, Stock, or a combination of cash and Stock, as determined by the Committee in its sole discretion.
13.
Annual Incentive Awards.
13.1
Award Period and Performance Goals.
The award period for Annual Incentive Awards is a fiscal year, which
may be a calendar year. Within 90 days of the beginning of each award period, the Committee shall establish the specific Performance Goals to be achieved in order for Participants to earn an
Annual Incentive Award. The Committee shall establish a mathematical formula pursuant to which an Award equal to a specified percentage of a Participant's salary shall be earned upon the attainment of
specific levels of the applicable Performance Goals. This formula may take into account Performance Goals achieved in prior years. The Performance Goals and formula, once established, shall continue
for subsequent years unless modified by the Committee. The Performance Goals applicable to an Award Period, and the formula pursuant to which Award
amounts shall be determined, shall be selected and published within 90 days from the beginning of the award period. Notwithstanding the foregoing, nothing in this Plan shall be construed to
mean that an Award that does not satisfy Code Section 162(m) performance-based compensation requirements does not constitute performance-based compensation for other purposes, including Code
Section 409A.
To
the extent an Annual Incentive Award constitutes "deferred compensation" within the meaning of Code Section 409A, the Committee shall establish Award terms and provisions that
comply with Code Section 409A and regulations thereunder.
13.2
Payment.
As soon as practical after the conclusion of each year, the Committee shall review and evaluate
the Performance Goals applicable to that year in light of the Company's performance measured in accordance with the goals and shall determine whether
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the
goals have been satisfied. If satisfied, the Committee shall so certify in a written statement and shall apply the criteria to determine the amount of the Award for each Participant, subject to
the Committee's right to reduce or eliminate the amount of any Award under Section 33. Payment of earned Annual Incentive Awards may be made in cash, Stock, or a combination of cash and Stock,
in the Committee's sole discretion. No Award may be paid to a Participant in excess of $5,000,000 for any single year.
14.
Stock Bonuses.
Subject to the terms of the Plan, a Stock Bonus may be granted to Participants at any time as
determined by the Committee in payment of earned incentive compensation. If the Committee grants a Stock Bonus, a certificate for the shares of Stock constituting the Stock Bonus shall be issued in
the name of the Participant to whom the grant was made and delivered as soon as practicable after the date on which the Stock Bonus is payable.
15.
Rights as a Shareholder.
Except as otherwise provided in Section 9.4 with respect to Restricted
Stock, no person shall have any rights as a shareholder with respect to any shares of Stock covered by or relating to an Award until the date of issuance of a stock certificate with respect to the
shares. Except as otherwise provided in Sections 3.4 and 12.1, no adjustment to any Award shall be made for dividends or other rights for which the record date occurs prior to the date the
stock certificate is issued.
16.
Employment Not Guaranteed.
This Plan is not intended to and does not create a contract of employment in any
manner. Employment with the Company is at will, which means that either the employee or the Company may end the employment relationship at any time and for any reason. Nothing in this Plan changes, or
should be construed as changing, that at-will relationship.
17.
Securities Matters.
17.1
Delivery of Stock Certificates.
To the extent that this Plan provides for issuance of certificates to
reflect the transfer of Stock, the transfer of such Stock may be effected on a non-certificated basis, to the extent not prohibited by applicable laws. Notwithstanding anything in this
Plan to the contrary, the Company shall not be obligated to issue or deliver any certificates evidencing shares of Stock unless and until (a) the Company is advised by its counsel that the
issuance and delivery of certificates is in compliance with all applicable laws, regulations of governmental authority, and the requirements of any securities exchange on which the Stock is traded;
and (b) any governmental approvals the Company deems necessary or advisable have been obtained. The Committee may require, as a condition of the issuance and delivery of certificates, that the
recipient make any agreements and representations and that the certificates bear any legends as the Committee, in its sole discretion, deems necessary or desirable.
17.2
When Transfer is Effective.
The transfer of any shares of Stock shall be effective only when counsel to the
Company has determined that the issuance and delivery of the shares is in compliance with all applicable laws, regulations, and the requirements of any securities exchange on which shares of Stock are
traded. The Committee may, in its sole discretion, defer the effectiveness of any transfer of shares of Stock in order to allow the issuance of the shares to be made pursuant to registration or an
exemption from registration or other methods for compliance available under federal, state, or foreign securities laws. The Committee shall inform the Participant in writing of its decision to defer
the effectiveness of a transfer. During the period of deferral in connection with the exercise of an Option, the Participant may, by written notice, withdraw the exercise and obtain the refund of any
amount paid in connection with the exercise.
18.
Withholding Taxes.
When cash is to be paid pursuant to an Award, the Company may deduct an amount sufficient
to satisfy any federal, state or other taxes required by law to be
A-15
withheld.
When shares of Stock are to be delivered pursuant to an Award, the Company may require the Participant to remit to the Company in cash an amount sufficient to satisfy any federal, state, and
foreign taxes required by law to be withheld. With the Committee's approval, a Participant may satisfy the foregoing requirement by electing to have the Company withhold from delivery shares of Stock
having a value equal to the minimum amount of required tax to be withheld. The shares shall be valued at Fair Market Value on the date the amount of tax to be withheld is determined. To the extent a
fractional share is required to satisfy the minimum amount of required tax to be withheld, the Committee may provide either that (i) shares withheld shall be rounded up to the next whole share,
or (ii) fractional amounts shall be settled in cash.
19.
Amendment and Termination.
The Board of Directors may, at any time, amend or terminate the Plan. In
addition, the Committee shall have the authority to adopt modifications and amendments to this Plan or any Agreement necessary to comply with the law of the countries in which the
Company, its Affiliates and/or Subsidiaries operate. Notwithstanding the foregoing, no amendment shall be made without shareholder approval if approval is required under applicable law or if the
amendment would (a) amend Sections 7.4 or 8.7 (other than in connection with a Change in Control), (b) increase the total number of shares of Stock available under the Plan, or
(c) materially increase the cost of the Plan to the Company or the benefits to Participants. Any amendment or termination shall not adversely affect the vested or accrued rights or benefits of
any Participant without the Participant's prior consent.
20.
Transfers Upon Death; Nonassignability.
Upon the death of a Participant, outstanding Awards granted to the
Participant may be exercised only by the executor or administrator of the Participant's estate or by a person who has acquired the right to exercise by will or the laws of descent and distribution. No
transfer of an Award by will or the laws of descent and distribution shall be effective to bind the Company unless the Committee has been furnished with (a) written notice and a copy of the
will and/or such evidence as the Committee may deem necessary to establish the validity of the transfer, and (b) an agreement by the transferee to comply with all the terms and conditions of
the Award that would have applied to the Participant and to be bound by the acknowledgments made by the Participant in connection with the grant of the Award.
Subject
to applicable law, the Committee's approval, and any conditions that the Committee may prescribe, a Participant may, upon providing written notice to the secretary of the
Company, elect to transfer an Award to (i) a member or members of his or her immediate family (including, but not limited to, children, grandchildren, and spouse, or a trust for the benefit of
immediate family members or a partnership in which immediate family members are the only partners) or (ii) a qualified tax-exempt charitable organization; provided, however, that no
transfer by any Participant may be made in exchange for consideration.
21.
Expenses and Receipts.
The expenses of the Plan shall be paid by the Company. Any proceeds received by the
Company in connection with any Award may be used for general corporate purposes.
22.
Deferral of Awards.
A Participant may elect to defer or the Committee may require the deferral of receipt of
all or any portion of any Award to a future date as provided in and subject to the terms of the Company's 2001 Key Executive Deferred Compensation Plan or any successor plan, the Agreement, and rules
and procedures established by the Committee regarding Award deferrals. All such deferrals shall be made in accordance with Code Section 409A and regulations issued thereunder.
23.
Short-Term Deferral; Deferred Compensation.
23.1
Short-Term Deferral.
Unless the Participant has made a valid election to defer receipt of all
or any portion of a payment under the Plan in accordance with the terms of a
A-16
Company
nonqualified deferred compensation plan, payment of awards hereunder shall be made no later than the later of (i) the date that is 2
1
/
2
months from the end of the
Participant's first taxable year in which the amount is no longer subject to a substantial risk of forfeiture, or (ii) the date that is 2
1
/
2
months from the end of the Company's
first taxable year in which the amount is no longer subject to a substantial risk of forfeiture.
23.2
Deferred Compensation.
Notwithstanding any provision in the Plan or any Agreement to the contrary, to the
extent an Award (i) constitutes "deferred compensation" within the meaning of Code Section 409A, (ii) is not exempt from the application of Code Section 409A and
(iii) is payable to a specified employee (as determined in accordance with Code Section 409A(a)(2)(B) and applicable regulations) due to separation from service (as such term is defined
under Code Section 409A), payment shall be delayed for a minimum of six (6) months from the date of such separation from service.
If
any Award granted under the Plan is considered deferred compensation as defined under Code Section 409A, and if this Plan or the terms of an Award fail to meet the requirements
of Code Section 409A with respect to such Award, then such Award shall remain in effect and be subject to taxation in accordance with Code Section 409A. In this circumstance, the
Committee may accelerate distribution or settlement of an Award in accordance with Code Section 409A. The Company shall have no liability for any tax imposed on a Participant under Code
Section 409A, and if any tax is imposed on a Participant, the Participant shall have no recourse against the Company for payment of any such tax. Notwithstanding the foregoing, if any
modification of an Award causes the Award to be deferred compensation under Code Section 409A, the Committee may rescind such modification in accordance with Code Section 409A.
24.
Change in Control Provisions.
24.1
Vesting and Exercisability.
Except as otherwise provided in any employment agreement, Award Agreement or
change in control agreement between the Participant and the Company, Subsidiary and/or Affiliate in effect when a Change in Control occurs (i) upon a "qualifying termination" in connection with
a Change in Control, or (ii) in the event an acquiring company does not assume Plan Awards:
(a) all
outstanding Option and Stock Appreciation Rights shall become fully vested and exercisable;
(b) all
Performance Goals shall be deemed achieved at target levels and all other terms and conditions met, with Award payout prorated for the portion of the performance
period completed as of the "qualifying termination" or Change in Control, as applicable;
(c) all
restrictions and conditions applicable to any Restricted Stock shall lapse;
(d) all
restrictions and conditions applicable to any Restricted Stock Units shall lapse and the Restricted Stock Units shall be paid out as promptly as practicable;
(e) all
Performance Shares shall be prorated for the portion of the performance period completed as of the date of the "qualifying termination" or Change in Control, as
applicable, and delivered;
(f) all
Performance Units shall be prorated for the portion of the performance period completed as of the date of the "qualifying termination" or Change in Control, as
applicable and paid out as promptly as practicable; and
(g) all
other Awards shall be delivered or paid.
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Notwithstanding
any Plan provision to the contrary, in the event of a Change in Control, (i) all Annual Incentive Awards for calendar years ended prior to the Change in Control
which have not yet been paid out shall be paid out immediately in cash upon a Change in Control, and (ii) for Annual Incentive Awards for the calendar year during which the Change in Control
occurs, all Participants shall be deemed to have achieved a pro rata Award equal to either (a) the Participant's target Annual Incentive Award or (b) the actual Annual Incentive Award as
determined by year-to-date performance through the last day of the month prior to the month in which the Change in Control occurs, in either case multiplied by a fraction, the
numerator of which is the number of days which have elapsed from the beginning of the year to the date on which the Change of Control occurs, and the denominator of which is 365, and the Awards shall
be paid in cash within 10 days after the Change in Control.
For
purposes of this Section 24.1, "qualifying termination" means (i) the same definition for "qualifying termination" as set forth in any employment agreement, Award
Agreement or change in control agreement between the Participant and the Company, Subsidiary and/or Affiliate in effect when the Change in Control occurs, or, (ii) in the absence of such
agreement, a "qualifying termination" shall be any involuntary termination by the Company, Subsidiary and/or Affiliate for any reason, other than disciplinary reasons, within 24 months of the
date of the Change in Control.
24.2
Termination Prior to Change in Control.
Any Participant, whose employment is involuntarily terminated for
any reason other than disciplinary reasons within three months prior to the date of the Change in Control, shall be treated, solely for purposes of this Plan, as continuing in the Company's employment
until the occurrence of the Change in Control, and to have been terminated immediately thereafter.
24.3
No Amendment.
Notwithstanding Section 19, upon a Potential Change in Control, the provisions of this
Plan may not be amended in any manner that would reduce or alter the rights of Participants to any benefit under this Plan without the consent of each affected Participant. Furthermore,
notwithstanding Section 19, upon a Change in Control, the provisions of this Section 24 may not be amended in any respect for three years following a Change in Control but may be amended
thereafter.
25.
Claims Procedure.
Claims for benefits under the Plan shall be filed in writing, within 90 days after
the event giving rise to a claim, with the Company's compensation manager, who shall have absolute discretion to interpret and apply the Plan, evaluate the facts and circumstances, and make a
determination with respect to the claim in the name and on behalf of the Company. The claim
shall include a statement of all facts the Participant believes relevant to the claim and copies of all documents, materials, or other evidence that the Participant believes relevant to the claim.
Written notice of the disposition of a claim shall be furnished to the Participant within 90 days after the application is filed. This 90-day period may be extended an additional
90 days for special circumstances by the compensation manager, in his or her sole discretion, by providing written notice of the extension to the claimant prior to the expiration of the
original 90-day period. If the claim is denied, the compensation manager shall notify the claimant in writing. This written notice shall:
(a) state
the specific reasons for the denial;
(b) refer
to Plan provisions on which the determination is based;
(c) describe
any additional material or information necessary for the claimant to perfect the claim and explain why the information is necessary; and
A-18
26.
Claims Review Procedure.
Any Participant, former Participant, or beneficiary of either, who has been denied
a benefit claim, shall be entitled, upon written request, to access to or copies of all documents and records relevant to his or claim and to a review of his or her denied claim. A request for review,
together with a written statement of the claimant's position and any other comments, documents, records, or information that the claimant believes relevant to his or her claim, shall be filed no later
than 60 days after receipt of the written notification provided for in Section 25 and shall be filed with the Company's compensation manager. The manager shall promptly inform the
Company's senior human resources officer. The senior human resources officer shall make his or her decision, in writing, within 60 days after receipt of the claimant's request for review. This
60-day period may be extended an additional 60 days if, in the senior human resources officer's sole discretion, special circumstances warrant the extension and if the senior human
resources officer provides written notice of the extension to the claimant prior to the expiration of the original 60-day period. The written decision shall be final and binding on all
parties and shall state the facts and specific reasons for the decision and refer to the Plan provisions upon which the decision is based.
27.
Lawsuits; Venue; Applicable Law.
No lawsuit claiming entitlement to benefits under this Plan may be filed
prior to exhausting the claims and claims review procedures described in Sections 25 and
26. Any lawsuit must be initiated no later than (a) one year after the event(s) giving rise to the claim occurred, or (b) 60 days after a final written decision was provided to
the claimant under Section 26, whichever is sooner. Any legal action involving benefits claimed or legal obligations relating to or arising under this Plan may be filed only in Federal District
Court in the city of Chicago, Illinois. Federal law shall be applied in the interpretation and application of this Plan and the resolution of any legal action. To the extent not preempted by federal
law, the laws of the state of Delaware shall apply.
28.
Participant Rights.
No Participant shall have any claim to be granted any Award under the Plan, and there is
no obligation to treat Participants uniformly.
29.
Leave of Absence or Transfer.
Transfer between the Company and any Subsidiary or between Subsidiaries, or a
leave of absence duly authorized by the Company, shall not be deemed a termination of employment.
30.
Unsecured General Creditor.
Participants and their beneficiaries, heirs, successors, and assigns shall have
no legal or equitable rights, interest, or claims in any property or assets of the Company. The assets of the Company shall not be held under any trust for the benefit of Participants, their
beneficiaries, heirs, successors, or assigns, or held in any way as collateral security for the fulfilling of the obligations of the Company under this Plan. Any and all Company assets shall be, and
remain, the general, unpledged, unrestricted assets of the Company. The Company's obligation under the Plan shall be an unfunded and unsecured promise of the Company.
31.
No Fractional Shares.
No fractional shares of Stock shall be issued or delivered pursuant to the Plan. The
Committee shall determine whether cash, other Awards, or other property shall be issued or paid in lieu of any fractional shares or whether fractional shares or any rights to fractional shares shall
be forfeited or otherwise eliminated.
32.
Beneficiary.
A Participant who is an executive officer or Director may file with the Committee a written
designation of a beneficiary on the form prescribed by the Committee and may, from time to time, amend or revoke the designation. If no designated beneficiary survives the
A-19
Participant,
the executor or administrator of the Participant's estate shall be deemed to be the Participant's beneficiary.
33.
Section 162(m).
The Plan is designed and intended, and all provisions shall be construed in a manner,
to comply, to the extent applicable, with Code Section 162(m) and the regulations thereunder. To the extent permitted by Code Section 162(m), the Committee shall have sole
discretion to reduce, eliminate or defer payment of the amount of any Award which might otherwise become payable upon attainment of a Performance Goal.
34.
Form of Communication.
Any election, application, claim, notice, or other communication required or
permitted to be made by a Participant to the Committee or the Company shall be made in writing and in such form as the Company may prescribe. Any communication shall be effective upon receipt by the
Company's compensation manager at OfficeMax, 263 Shuman Boulevard, Naperville, IL 60563, USA.
35.
Severability.
If any provision of the Plan is held to be invalid or unenforceable, the other provisions of
the Plan shall not be affected.
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OfficeMax is a registered trademark of OMX, Inc.
IMPORTANT
Your vote is important. Please take a moment to vote via telephone or the Internet or REQUEST, SIGN, DATE and promptly MAIL a proxy card. If your shares of stock
are held in the name of a brokerage firm, bank, nominee or other institution, please provide voting instructions to that institution in accordance with their directions. If you have any questions or
need assistance in voting your stock, please call:
D. F. King & Co., Inc.
48 Wall Street
New York, NY 10005
Phone: 1-800-735-3591
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Important Notice
Regarding the Availability of Proxy Materials for the Shareholder Meeting to
be held on 04/23/08.
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This communication presents only an overview of the more
complete proxy materials that are available to you on the Internet. We encourage
you to access and review all of the important information contained in the
proxy materials before voting.
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The following materials
are available for view:
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Notice
and Proxy Statement and Annual Report
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To view this material,
have the 12-digit Control #(s) available and visit:
www.proxyvote.com
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If
you want to receive a paper or e-mail copy of the above listed documents you
must request one. There is no charge to you for requesting a copy. To
facilitate timely delivery please make the request as instructed below on or
before 04/03/08.
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To request material:
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Internet
:
www.proxyvote.com
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Telephone
: 1-800-579-1639
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**Email
: sendmaterial@proxyvote.com
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B
A
R
C
O
D
E
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**If requesting material
by e-mail please send a blank e-mail with the
12-digit Control# (located on the following page)
in the
subject line.
Requests, instructions and other inquiries will NOT be forwarded to your
investment advisor.
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OFFICEMAX INCORPORATED
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Vote In Person
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C/O
Wells Fargo Shareowner Services
P.O. BOX 64945
St.
Paul, Minnesota 55164-0945
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Many shareholder
meetings have attendance requirements including, but not limited to, the
possession of an attendance ticket issued by the entity holding the meeting.
Please check the meeting materials for any special requirements for meeting
attendance. At the Meeting you will need to request a ballot to vote these
shares.
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Vote By Internet or Telephone
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1-BROADRIDGEXXXXXXXXXXXXXXXXXXXXXXXXXX40
2-FINANCIAL
SOLUTIONSXXXXXXXXXXXXXXXXXX40
3-ATTENTION:XXXXXXXXXXXXXXXXXXXXXXXXXX40
4-TEST PRINT
5-51 MERCEDES WAY
6-EDGEWOOD,
7-NY
8-11717
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To vote
now
by Internet or
telephone, go to
WWW.PROXYVOTE.COM.
Use the Internet or the telephone
to transmit your voting instructions and for electronic delivery of
information up until 11:59 P.M. Eastern Time on April 22, 2008.
Have your notice in hand when you access the web site and follow the
instructions.
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PAGE A
(OF DUPLEX A/B)
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Meeting Location
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The Annual Meeting for holders as of 02/28/08
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is to be held on 04/23/08 at 10:00 a.m. Central
Daylight Time
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at: Holiday Inn Select
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1801 N. Naper Blvd.
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Naperville, IL 60563
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Holiday Inn Select
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1801 N. Naper Blvd.
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Naperville, Illinois 60563
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630-505-4900
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From OHare Airport
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- Follow 190 out of the airport to 294 south
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- Follow 294 south to I-88 west
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- Follow I-88 west to Naperville Road Exit
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The Holiday Inn Select will be a right turn after you
exit.
|
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|
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From Midway Airport
|
|
- Follow Cicero Avenue north to I-55 south
|
|
- Follow I-55 south to I-355 north
|
|
- Follow I-355 north to I-88 west
|
|
- Follow I-88 west to Naperville Road Exit
|
|
|
|
The Holiday Inn Select will be a right turn after you
exit.
|
|
|
|
From Downtown Chicago
|
|
- Follow I-290 west out of downtown to The I-294
split
|
|
- Stay westward as I-290 will flow into I-88 west
|
|
- Follow I-88 west to Naperville Road Exit
|
|
|
|
The Holiday Inn Select will be a right turn after you
exit.
|
|
|
|
Please visit the hotel website for more information:
|
|
www.naperselect.com
|
|
|
|
|
|
|
|
|
|
THIS AREA RESERVED FOR LANGUAGE
PERTAINING TO HOUSEHOLDING
IF APPLICABLE.
|
P99999-010
12
15
# OF
#
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PAGE B (OF DUPLEX A/B)
|
|
|
Voting items
|
|
|
The
Board of Directors unanimously recommends
you vote FOR PROPOSALS 1, 2 and 3
below.
|
|
1.
|
Election of Directors
|
|
|
|
|
Nominees:
|
|
|
|
|
|
01)
|
Dorrit J. Bern
|
05)
|
Rakesh Gangwal
|
|
|
|
|
02)
|
Warren F. Bryant
|
06)
|
Francesca Ruiz de Luzuriaga
|
|
|
|
|
03)
|
Joseph M. DePinto
|
07)
|
William J. Montgoris
|
|
|
|
|
04)
|
Sam K. Duncan
|
08)
|
David M. Szymanski
|
|
B
|
|
|
A
|
|
|
R
|
|
2.
|
Appointment of KPMG LLP as independent registered
public accounting firm for 2008.
|
|
C
|
|
|
O
|
|
|
D
|
|
3.
|
Approval of an amendment
to the 2003 OfficeMax Incentive and Performance Plan to increase the number
of shares of stock available for issuance under the plan and to make certain
other changes to the plan and reapprove the material terms of the performance
goals under the plan.
|
|
E
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|
|
CONTROL #
|
0000 0000 0000
|
|
|
|
BROADRIDGEXXXXXXXXXXXXXXXXXXXXXXXXXXX-40
FINANCIAL SOLUTIONS
ATTENTION:
TEST PRINT
51 MERCEDES WAY
EDGEWOOD, NY
11717
|
|
|
|
|
|
|
|
|
Acct
#XXXXXXXXXXXXX
|
|
|
SHARESXXXXXXXXXXX
|
|
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|
Cusip
P99999-010
12
15
# OF #
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Important Notice
Regarding the Availability of Proxy Materials for the Shareholder Meeting to
be held on 04/23/08.
|
|
|
This communication presents only an overview of the more
complete proxy materials that are available to you on the Internet. We
encourage you to access and review all of the important information contained
in the proxy materials before voting.
|
|
|
The following materials
are available for view:
|
|
|
|
Notice and Proxy Statement and
Annual Report
|
|
|
|
To view this material,
have the 12-digit Control #(s) available and visit:
www.proxyvote.com
|
|
|
|
If
you want to receive a paper or e-mail copy of the above listed documents you
must request one. There is no charge to you for requesting a copy. To
facilitate timely delivery please make the request as instructed below on or
before 04/03/08.
|
|
|
|
To request material:
|
Internet
:
www.proxyvote.com
|
Telephone
: 1-800-579-1639
|
**Email
: sendmaterial@proxyvote.com
|
|
B
A
R
C
O
D
E
|
|
**If requesting material
by e-mail please send a blank e-mail with the
12-digit Control# (located on the following page)
in the
subject line.
Requests, instructions and other inquiries will NOT be forwarded to your
investment advisor.
|
|
|
|
|
|
OFFICEMAX INCORPORATED
|
Vote In Person
|
|
|
OFFICEMAX
SAVINGS PLAN
C/O WELLS FARGO SHAREOWNER SERVICES
P.O. BOX 64945
ST. PAUL, MINNESOTA 55164-0945
|
|
Many shareholder
meetings have attendance requirements including, but not limited to, the
possession of an attendance ticket issued by the entity holding the meeting.
Please check the meeting materials for any special requirements for meeting
attendance. At the Meeting you will need to request a ballot to vote these
shares.
|
|
|
Vote By Internet or Telephone
|
|
|
|
|
|
1-BROADRIDGEXXXXXXXXXXXXXXXXXXXXXXXXXX40
2-FINANCIAL
SOLUTIONSXXXXXXXXXXXXXXXXXX40
3-ATTENTION:XXXXXXXXXXXXXXXXXXXXXXXXXX40
4-TEST PRINT
5-51 MERCEDES WAY
6-EDGEWOOD,
7-NY
8-11717
|
|
|
To vote
now
by Internet or telephone, go to
WWW.PROXYVOTE.COM.
Use the Internet
or the telephone to transmit your voting instructions and for electronic
delivery of information up until 11:59 P.M. Eastern Time on
April 18, 2008. Have your notice in hand when you access the web site
and follow the instructions.
|
|
|
|
|
|
|
|
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|
|
PAGE A
(OF DUPLEX A/B)
|
|
|
|
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|
|
|
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|
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|
|
|
|
Meeting Location
|
|
The Annual Meeting for holders as of 02/28/08
|
|
is to be held on 04/23/08 at 10:00 a.m. Central
Daylight Time
|
|
at: Holiday Inn Select
|
|
1801 N. Naper Blvd.
|
|
Naperville, IL 60563
|
|
|
|
|
Holiday Inn Select
|
|
1801 N. Naper Blvd.
|
|
Naperville, Illinois 60563
|
|
630-505-4900
|
|
|
|
From OHare Airport
|
|
- Follow 190 out of the airport to 294 south
|
|
- Follow 294 south to I-88 west
|
|
- Follow I-88 west to Naperville Road Exit
|
|
The Holiday Inn Select will be a right turn after you
exit.
|
|
From Midway Airport
|
|
- Follow Cicero Avenue north to I-55 south
|
|
- Follow I-55 south to I-355 north
|
|
- Follow I-355 north to I-88 west
|
|
- Follow I-88 west to Naperville Road Exit
|
|
|
|
The Holiday Inn Select will be a right turn after you
exit.
|
|
|
|
From Downtown Chicago
|
|
- Follow I-290 west out of downtown to The I-294
split
|
|
- Stay westward as I-290 will flow into I-88 west
|
|
- Follow I-88 west to Naperville Road Exit
|
|
|
|
The Holiday Inn Select will be a right turn after you
exit.
|
|
|
|
Please visit the hotel website for more information:
|
|
www.naperselect.com
|
|
|
|
|
|
|
THIS AREA RESERVED FOR LANGUAGE
PERTAINING TO HOUSEHOLDING
IF APPLICABLE.
|
P99999-010
12
15
# OF
#
|
|
|
|
|
|
|
|
|
PAGE B (OF DUPLEX A/B)
|
|
|
Voting items
|
|
|
The
Board of Directors unanimously recommends
you vote FOR PROPOSALS 1, 2 and 3
below.
|
|
1.
|
Election of Directors
|
|
|
|
|
Nominees:
|
|
|
|
|
01)
|
Dorrit J. Bern
|
05)
|
Rakesh Gangwal
|
|
|
|
|
02)
|
Warren F. Bryant
|
06)
|
Francesca Ruiz de Luzuriaga
|
|
|
|
|
03)
|
Joseph M. DePinto
|
07)
|
William J. Montgoris
|
|
|
|
|
04)
|
Sam K. Duncan
|
08)
|
David M. Szymanski
|
|
B
|
|
|
A
|
|
|
R
|
|
2.
|
Appointment of KPMG LLP as independent registered
public accounting firm for 2008.
|
|
C
|
|
|
O
|
|
|
D
|
|
3.
|
Approval of an amendment
to the 2003 OfficeMax Incentive and Performance Plan to increase the number
of shares of stock available for issuance under the plan and to make certain
other changes to the plan and reapprove the material terms of the performance
goals under the plan.
|
|
E
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CONTROL #
|
0000 0000 0000
|
|
|
|
BROADRIDGEXXXXXXXXXXXXXXXXXXXXXXXXXXX-40
FINANCIAL SOLUTIONS
ATTENTION:
TEST PRINT
51 MERCEDES WAY
EDGEWOOD, NY
11717
|
|
|
|
|
|
|
|
|
Acct
#XXXXXXXXXXXXX
|
|
|
SHARESXXXXXXXXXXX
|
|
|
|
Cusip
P99999-010
12
15
# OF #
|
|
|
|
|
|
|
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|
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|
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|
|
|
|
|
C/O WELLS FARGO SHAREOWNER SERVICES
P.O. BOX 64945
ST. PAUL, MINNESOTA 55164-0945
|
|
VOTE BY
INTERNET -
www.proxyvote.com
Use the Internet to transmit
your voting instructions and for electronic delivery of information up until
11:59 P.M. Eastern Time on April 22, 2008. Have your proxy card in
hand when you access the web site and follow the instructions to obtain your
records and to create an electronic voting instruction form.
ELECTRONIC
DELIVERY OF FUTURE SHAREHOLDER COMMUNICATIONS
If you would like to reduce
the costs incurred by OfficeMax Incorporated in mailing proxy materials, you
can consent to receiving all future proxy statements, proxy cards and annual
reports electronically via e-mail or the Internet. To sign up for electronic
delivery, please follow the instructions above to vote using the Internet
and, when prompted, indicate that you agree to receive or access shareholder
communications electronically in future years.
VOTE BY
PHONE - 1-800-690-6903
Use any touch-tone telephone
to transmit your voting instructions up until 11:59 P.M. Eastern Time on
April 22, 2008. Have your proxy card in hand when you call and then
follow the instructions.
VOTE BY
MAIL
Mark, sign and date your proxy card and return it in the postage-paid
envelope we have provided or return it to OfficeMax Incorporated, c/o
Broadridge, 51 Mercedes Way, Edgewood, NY 11717.
|
TO VOTE, MARK BLOCKS BELOW
IN BLUE OR BLACK INK AS FOLLOWS:
|
|
OFFMX3
|
|
KEEP
THIS PORTION FOR YOUR RECORDS
|
|
|
|
|
DETACH AND RETURN THIS PORTION ONLY
|
THIS PROXY CARD IS
VALID ONLY WHEN SIGNED AND DATED.
|
OFFICEMAX INCORPORATED
|
|
|
|
|
The
Board of Directors unanimously recommends you vote FOR PROPOSALS 1, 2 and 3
below.
|
|
|
|
|
|
|
|
For
|
Withhold
|
For All
|
To withhold authority to vote for any
|
|
All
|
All
|
Except
|
individual nominee(s), mark
For All
|
Vote On Directors
|
|
Except and write the
number(s) of the
|
|
1.
|
Election of Directors
|
|
nominee(s) on the line
below.
|
|
|
Nominees:
|
o
|
o
|
o
|
|
|
|
|
01)
|
Dorrit J. Bern
|
|
05)
|
Rakesh Gangwal
|
|
|
02)
|
Warren F. Bryant
|
|
06)
|
Francesca Ruiz de Luzuriaga
|
|
|
03)
|
Joseph M. DePinto
|
|
07)
|
William J. Montgoris
|
|
|
04)
|
Sam K. Duncan
|
|
08)
|
David M. Szymanski
|
|
|
|
|
|
|
Vote On
Proposals
|
|
For
|
Against
|
Abstain
|
|
|
|
|
|
|
|
2.
|
Appointment of KPMG LLP as independent registered
public accounting firm for 2008.
|
o
|
o
|
o
|
|
|
|
|
|
|
|
3.
|
Approval of an amendment to the 2003 OfficeMax
Incentive and Performance Plan to increase the number of shares of stock available
for issuance under the plan and to make certain other changes to the plan and
reapprove the material terms of the performance goals under the plan.
|
o
|
o
|
o
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Yes
|
No
|
|
|
|
|
|
|
|
|
|
|
Please indicate if you
would like to keep your vote confidential under the current policy
|
o
|
o
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Signature [PLEASE SIGN
WITHIN BOX]
|
Date
|
|
Signature (Joint Owners)
|
Date
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dear Shareholder:
OfficeMax Incorporated
will hold its annual meeting of shareholders at the Holiday Inn Select in
Naperville, Illinois, at 10:00 a.m., Central Daylight Time, on April 23,
2008. Please take a moment to vote your shares of stock for the upcoming annual
meeting of shareholders.
Your vote is important.
Broadridge, an
independent tabulator, will receive and tabulate the proxy cards.
If you also hold shares
of stock through a bank, brokerage firm or other nominee, you will receive
separate proxy card(s) or voting instruction card(s) to vote those
shares. To be sure that all of your
shares of stock are voted at the meeting, follow the instructions on each
separate proxy/voting instruction card that you receive.
Important
Notice Regarding Internet Availability of Proxy Materials for the Annual
Meeting:
The Notice and Proxy
Statement and Annual Report are available at www.proxyvote.com.
|
|
|
|
|
|
PROXY CARD
|
OFFICEMAX
INCORPORATED
|
|
ANNUAL
MEETING OF SHAREHOLDERS
|
|
APRIL
23, 2008
|
|
|
SOLICITED
ON BEHALF OF THE BOARD OF DIRECTORS OF OFFICEMAX
INCORPORATED
|
|
The shareholder
signing this card appoints Matthew R. Broad, Susan M. Wagner-Fleming and John
S. Jennings as proxies, each with the power to appoint a substitute. They are directed to vote (as indicated on
the reverse side of this card) all of the shareholders OfficeMax
Incorporated stock held on February 28, 2008 at the companys annual
meeting to be held on April 23, 2008, and at any adjournment or
postponement of that meeting. They are
also given discretionary authority to vote on any other matters that may
properly be presented at the meeting.
All previous proxies are hereby revoked.
|
|
This proxy will be
voted according to your instructions.
If
you sign and return the card but do not vote on these matters, then the
nominees and proposals 2 and 3 will receive FOR votes.
|
|
|
|
OFFICEMAX SAVINGS PLAN
C/O WELLS FARGO SHAREOWNER SERVICES
P.O. BOX 64945
ST. PAUL, MINNESOTA 55164-0945
|
|
VOTE BY
INTERNET -
www.proxyvote.com
Use the Internet to transmit
your voting instructions and for electronic delivery of information up until
11:59 P.M. Eastern Time on April 18, 2008. Have your voting
instruction card in hand when you access the web site and follow the
instructions to obtain your records and to create an electronic voting
instruction form.
ELECTRONIC
DELIVERY OF FUTURE SHAREHOLDER
COMMUNICATIONS
If you would like to reduce
the costs incurred by OfficeMax Incorporated in mailing proxy materials, you
can consent to receiving all future proxy statements, voting instruction
cards, proxy cards and annual reports electronically via e-mail or the
Internet. To sign up for electronic delivery, please follow the instructions
above to vote using the Internet and, when prompted, indicate that you agree
to receive or access shareholder communications electronically in future
years.
VOTE BY PHONE
- 1-800-690-6903
Use any touch-tone telephone
to transmit your voting instructions up until 11:59 P.M. Eastern Time on
April 18, 2008. Have your voting instruction card in hand when you call
and then follow the instructions.
VOTE BY
MAIL
Mark, sign and date your
voting instruction card and return it in the postage-paid envelope we have
provided or return it to OfficeMax Incorporated, c/o Broadridge, 51 Mercedes
Way, Edgewood, NY 11717.
|
TO VOTE, MARK BLOCKS BELOW
IN BLUE OR BLACK INK AS FOLLOWS:
|
|
OFFMX1
|
|
KEEP
THIS PORTION FOR YOUR RECORDS
|
|
|
|
|
DETACH AND RETURN THIS PORTION ONLY
|
THIS VOTING INSTRUCTION CARD IS VALID ONLY WHEN SIGNED AND
DATED.
|
OFFICEMAX INCORPORATED
|
|
|
|
|
The Board of Directors unanimously recommends you vote
FOR PROPOSALS 1, 2 and 3 below.
Vote On Directors
|
|
|
|
|
For
All
|
Withhold
All
|
For All
Except
|
To withhold authority to
vote for any individual nominee(s), mark For All Except and write the number(s) of the nominee(s) on the line below.
|
|
|
|
|
1.
|
Election of Directors
|
|
|
|
|
|
|
|
|
|
|
|
Nominees:
|
o
|
o
|
o
|
|
|
|
|
01)
|
Dorrit J. Bern
|
|
05)
|
Rakesh Gangwal
|
|
|
02)
|
Warren F. Bryant
|
|
06)
|
Francesca Ruiz de Luzuriaga
|
|
|
03)
|
Joseph M. DePinto
|
|
07)
|
William J. Montgoris
|
|
|
04)
|
Sam K. Duncan
|
|
08)
|
David M. Szymanski
|
|
|
|
|
|
|
Vote On
Proposals
|
|
For
|
Against
|
Abstain
|
|
|
|
|
|
|
|
2.
|
Appointment of KPMG LLP as independent registered
public accounting firm for 2008.
|
o
|
o
|
o
|
|
|
|
|
|
|
|
3.
|
Approval of an amendment to the 2003 OfficeMax
Incentive and Performance Plan to increase the number of shares of stock available
for issuance under the plan and to make certain other changes to the plan and
reapprove the material terms of the performance goals under the plan.
|
o
|
o
|
o
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Yes
|
No
|
|
|
|
|
|
|
|
|
|
|
Please indicate if you would
like to keep your vote confidential under the current policy
|
o
|
o
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Signature [PLEASE SIGN
WITHIN BOX]
|
Date
|
|
Signature (Joint Owners)
|
Date
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dear Plan Participant:
OfficeMax Incorporated
will hold its annual meeting of shareholders at the Holiday Inn Select in
Naperville, Illinois, at 10:00 a.m., Central Daylight Time, on April 23,
2008. Please take a moment to vote your shares of stock for the upcoming annual
meeting of shareholders.
Your vote is important.
As a participant in the Employee Stock Ownership Plan or the OfficeMax
Incorporated common stock fund of the OfficeMax Savings Plan (the Plans) you
can vote by using this voting instruction card to instruct the Plans trustees
(the Trustees) on how to vote the shares of stock allocated to you under the
Plans. The Trustees will vote any shares of stock in the Plans for which
instructions are not received or that are not allocated to an account in the
same proportion as the shares of stock voted by the participants generally,
subject to the Trustees fiduciary obligations under applicable law.
Broadridge, an
independent tabulator, will receive and tabulate the voting instruction cards.
If you also hold shares
of stock in registered form or through a bank, brokerage firm or other nominee,
you will receive a separate proxy card to vote those shares. To be sure
that all of your shares of stock are voted at the meeting, follow the
instructions on each separate proxy/voting instruction card that you receive.
Important
Notice Regarding Internet Availability of Proxy Materials for the Annual
Meeting:
The Notice and Proxy
Statement and Annual Report are available at www.proxyvote.com.
|
|
|
|
|
|
VOTING INSTRUCTION CARD
|
OFFICEMAX
INCORPORATED
|
|
ANNUAL
MEETING OF SHAREHOLDERS
|
|
APRIL
23, 2008
|
|
|
SOLICITED
ON BEHALF OF THE BOARD OF DIRECTORS OF OFFICEMAX
INCORPORATED
|
|
The shares of
stock allocated to your account will be voted according to your instructions.
If you sign and return the card but do not
vote on these matters, then the nominees and proposals 2 and 3 will receive
FOR votes.
As a participant
in the Employee Stock Ownership Plan or the OfficeMax Incorporated common
stock fund of the OfficeMax Savings Plan (the Plans) you can vote by using
this voting instruction card to instruct the Plans trustees (the Trustees)
on how to vote the shares of stock allocated to you under the Plans. The
Trustees will vote any shares of stock in the Plans for which instructions
are not received or that are not allocated to an account in the same
proportion as the shares of stock voted by the participants generally,
subject to the Trustees fiduciary obligations under applicable law.
|
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