-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, ECNnaFbp8XdO4lH+lUnFwAyRE4cbPjQvyfB+075E2awlZ+c54wJRCMt5NTk/X0ZV n85M5LcQJ5PPYe2ZJZgfhg== 0000076744-00-000004.txt : 20000310 0000076744-00-000004.hdr.sgml : 20000310 ACCESSION NUMBER: 0000076744-00-000004 CONFORMED SUBMISSION TYPE: DEF 14A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20000419 FILED AS OF DATE: 20000309 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PAYLESS CASHWAYS INC CENTRAL INDEX KEY: 0000076744 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-LUMBER & OTHER BUILDING MATERIALS DEALERS [5211] IRS NUMBER: 420945849 STATE OF INCORPORATION: DE FISCAL YEAR END: 1130 FILING VALUES: FORM TYPE: DEF 14A SEC ACT: SEC FILE NUMBER: 001-08210 FILM NUMBER: 564479 BUSINESS ADDRESS: STREET 1: 800 NW CHIPMAN ROAD STREET 2: P O BOX 648001 CITY: LEES SUMMIT STATE: MO ZIP: 64064-8001 BUSINESS PHONE: 8163476000 DEF 14A 1 PROXY/SCH 14A DATED APRIL 19, 2000 [PAYLESS LETTERHEAD] March 10, 2000 To Our Stockholders: It is my pleasure to invite you to our 2000 annual meeting of stockholders. This year it will be held on Wednesday, April 19, 2000, at 10:00 a.m., at the Payless Cashways, Inc. Store Support Center, located at 800 N.W. Chipman Road, Suite 5900, Lee's Summit, Missouri. With this letter, you will find the formal notice of the 2000 annual meeting, our 1999 Annual Report and our Proxy Statement for the 2000 annual meeting. When you have finished reading the Proxy Statement, please promptly mark, sign, and return to us the enclosed proxy card, to ensure that your shares will be represented. This year, you may also vote by telephone or over the Internet as indicated on the proxy card instructions. Please be advised that this year's format will be substantially different from our past meetings. As you may know, in the interest of saving time and expense, many public companies have moved the annual meeting location and simplified the meeting content as well. This year we will meet at our Store Support Center offices, eliminate all management presentations, and conduct only the formal business required at this meeting, the election of directors. Of course, if you have any questions, we will be available at the meeting, or throughout the year via the telephone or our web site: www.payless.cashways.com. We appreciate your continuing interest in our Company. Thank you, /S/Millard E. Barron Millard E. Barron President and Chief Executive Officer 1 [PAYLESS LOGO] BUILDING MATERIALS 800 N.W. Chipman Road, Suite 5900 Lee's Summit, Missouri 64063-5717 ------------------------------------ NOTICE OF ANNUAL MEETING OF STOCKHOLDERS OF PAYLESS CASHWAYS, INC. To Be Held April 19, 2000 To the Stockholders of PAYLESS CASHWAYS, INC.: NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Payless Cashways, Inc. will be held at the offices of Payless Cashways, Inc., 800 N.W. Chipman Road, Suite 5900, Lee's Summit, Missouri, on Wednesday, April 19, 2000 at 10:00 a.m. for the following purposes: 1. To elect three Class III directors to a term of three years each as set forth in the Proxy Statement. 2. To transact such other and further business as may properly come before the meeting. The Board of Directors has fixed the close of business on February 21, 2000, as the record date for the determination of stockholders entitled to notice of and to vote at the meeting. Dated: March 10, 2000 BY ORDER OF THE BOARD OF DIRECTORS /S/Gary D. Gilson Gary D. Gilson, Secretary - -------------------------------------------------------------------------------- You are cordially invited to attend the meeting. However, whether or not you plan to be personally present at the meeting, please date and sign the enclosed proxy and return it promptly in the enclosed envelope. You may also vote by telephone or over the Internet as indicated on the proxy card instructions. If you later desire to revoke your proxy, you may do so at any time before it is exercised. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2 General Information for Stockholders In order to provide every stockholder with an opportunity to vote on all matters scheduled to come before the Annual Meeting, whether or not the stockholder attends in person, proxies are solicited from stockholders by the Board of Directors of Payless Cashways, Inc. ("Payless" or the "Company"). When the enclosed proxy card is properly executed and returned or your proxy is given by phone or over the Internet, the shares represented will be voted by the persons designated as proxies, in accordance with the stockholder's directions. Stockholders may vote on a matter by marking the appropriate box on the card or, if no box is marked for a specific matter, the shares will be voted as recommended by the Board of Directors on that matter. You may also vote by telephone or over the Internet by following the instructions included with your proxy card. If your shares are held in "street name," you will need to follow the voting instructions on the form you receive from your broker or other nominee. The availability of telephone or Internet voting will depend on their voting processes. Management knows of no matters other than those set forth on the proxy card that will be presented for action at the Annual Meeting. Execution of the proxy, either by signing the proxy card, voting by telephone or over the Internet, confers on each of the persons designated as proxies the discretionary authority to vote the shares represented in accordance with their best judgment on any other business that may properly come before the meeting as to which the Company did not have notice prior to January 18, 2000. Any stockholder executing a proxy, by mail, by telephone or over the Internet, may revoke that proxy or submit a revised proxy at any time before it is voted. A stockholder may also vote by ballot at the Annual Meeting, thereby canceling any proxy previously returned as to any matter voted on by ballot. A stockholder wishing to name as his or her proxy someone other than those designated on the proxy card may do so by crossing out the names of the designated proxies and inserting the name(s) of the person(s) he or she wishes to have act as his or her proxy. In such case, it will be necessary that the proxy be delivered by the stockholder to the person(s) named, and that the person(s) named be present and vote at the meeting. Proxy cards on which alternate proxies have been named should not be mailed directly to the Company. Holders of the Common Stock, par value $.01 per share, of the Company (the "Common Stock") at the close of business on February 21, 2000, the record date for the Annual Meeting (the "Record Date"), are entitled to receive notice of, and to vote at, the Annual Meeting. At the close of business on such date, a total of 20,000,000 shares of Common Stock were outstanding. Each share of Common Stock is entitled to one vote on each matter to be presented at the Annual Meeting. It is expected that this Proxy Statement and the enclosed form of proxy will be mailed to the stockholders on or about March 10, 2000. Matters to be Considered at the Annual Meeting 1. Proposal No. 1 - Election of Directors The business and affairs of the Company are to be managed by or under the direction of a Board of Directors. Pursuant to the Certificate of Incorporation of the Company, the terms of the directors are divided into three classes, designated Class I, Class II and Class III. Each class consists, as nearly as may be possible, of one-third the total number of directors constituting the entire Board of Directors, which currently is eight with one vacancy. There are currently three Class III directors standing for election. The current terms of the Class III directors, Class I directors and Class II directors expire in 2000, 2001 and 2002, respectively. At each Annual Meeting, successors to the class of directors whose terms expire at that Annual Meeting are elected for a 3-year term. At the Annual Meeting of Stockholders in 2000, three Class III directors are to be elected. The nominees listed below have been approved by the Board of Directors. It is the intention of the persons named as proxies in the accompanying form of proxy, unless such authority is withheld, to vote for the election of the nominees set forth below. In order to be elected a director, a nominee must receive a plurality of the votes of the shares present 3 in person or represente by proxy at the Annual Meeting and entitled to vote in the election of directors. The abstention or failure to vote shares present at an Annual Meeting and broker nonvotes do not have the effect of a vote "for" or "against" a nominee. The nominees have consented to their nomination and have agreed to serve if elected. In case the nominees are not available for election for reasons not presently known to the Company, discretionary authority will be exercised by the proxies named in the enclosed form of proxy to vote for substitutes selected by the Board of Directors. Information regarding the nominees is set forth below. Principal Occupation and Name Age Five-Year Employment History Peter G. Danis 67 Non-Executive Chairman of the Board of First designated as Payless since December 1997;Chief Executive a director: 1997 Officer of Boise Cascade Office Products Class III Corporation and Executive Vice President of Boise Cascade Corporation from 1995 to April 1998; President of Boise Cascade Office Products Corporation from 1995 to February 1998; served in various upper management positions with both Boise Cascade Corporation and Boise Casca Office Products Corporation since 1968; and currently a director of Boise Cascade Office Products Corporation. Mr.Danis is a member of the Compensation Committee of the Payless Board of Directors. David G. Gundling 49 President and Chief Executive Officer of First designated as Hagemeyer P.P.S. North America, Inc. since a director: 1997 1997; President and Chief Operating Officer Class III of Richfood Pennsylvania, Inc. from 1996 to 1997 and Executive Vice President and a director of Super Rite Corporation from 1987 to 1996. Mr. Gundling is Chairman of the Compensation Committee of the Payless Board of Directors. Donald E. Roller 62 Acting Chief Executive Officer of Payless First designated as from January 1998 until June 1998; Executive a director: 1997 Vice President - North American Gypsum USG Class III Corporation from January 1996 to November 1996; President and Chief Executive Officer of United States Gypsum Company from January 1993 to November 1996; and currently a director of Boise Cascade Office Products Corporation and Jacksonville Saving Bank. Mr. Roller is Chairman of the Audit and Finance Committee member of the Compensation Committee of the Payless Board of Directors. The Board of Directors unanimously recommends a vote "FOR" the proposal to elect the nominees as Class III directors of the Company. Information regarding the four directors who were previously designated and will continue to serve their terms is set forth below. Principal Occupation and Name Age Five-Year Employment History Millard E. Barron 50 President and Chief Executive Officer of First designated as Payless since June 1998; President of a director: 1998 Zellers, Inc. and Executive Vice Class I President of Hudson's Bay Company from September 1996 to February 1998; Senior Vice President and Chief Operating Officer o the International Division of Wal-Mart Stores, Inc. from August 1994 to September 1996; Vice President - Operations of Wal-Mart Stores, Inc. from November 1992 to August 1994; and currently a director of American Homestar Corporation. 4 Principal Occupation and Name Age Five-Year Employment History H.D. Cleberg 61 President and Chief Executive Officer of First designated as Farmland Industries, Inc. since 1991. a director: 1997 Mr. Cleberg is a member of the Audit Class I and Finance Committee and a member of the Corporate Governance and Nominating Committee of the Payless Board of Directors. Ms. Renae Gonner, the Company's VicePresident-Marketing and Advertising, is Mr. Cleberg's daughter. Max D. Hopper 65 Founder and principal of Max D. Hopper First designated as Associates, Inc., a consulting firm a director: 1997 specializing in the strategic use of Class II advanced information systems, since January 1995; retired Chairman of The SABRE Technology Group and Senior Vice President for American Airlines, both units of AMR Corporation; and currently a director of Gartner Group, Inc., Metrocall, Inc., USDATA Corporation, Inc., United Stationers, Inc., Exodus Communications, Inc., and Accrue Software, Inc. Mr. Hopper is a member of the Corporate Governance and Nominating Committee and the Audit and Finance Committee of the Payless Board of Directors. Peter M. Wood 61 Former Managing Director of J.P. Morgan First designated as & Co., Incorporated from 1986 until 1996; a director: 1997 and currently a director of Middlesex Class II Mutual Assurance Company and Stone & Webster, Incorporated. Mr. Wood is Chairman of the Corporate Governanc and Nominating Committee and a member of the Audit and Finance Committee of the Payless Board of Directors. The current Board of Directors (with the exception of Mr. Barron) took office December 2, 1997. Mr. Barron took office on June 17, 1998. During fiscal 1999, there were seven meetings of the Board of Directors. During fiscal 1999, each director attended 75% or more of all meetings of the Board of Directors and of the committees on which he served, except for Mr. Gundling who attended seven of ten meetings. In addition to attending Board of Directors and committee meetings during the year, the directors conferred with officers regarding corporate matters, performed independent research and analysis, and reviewed material submitted by management to the Board of Directors and committees for consideration and action. Committees of the Board The Board of Directors currently has three standing committees. Their functions are described below: Compensation - The Compensation Committee reviews the compensation (wages, salaries, supplemental compensation and benefits) of the employees of the Company, approves compensation and benefit policies and plans, approves direct and indirect executive officer compensation, administers stock programs, and oversees the Company's executive development plan. The Committee also makes recommendations to the Board of Directors regarding election of executive officers and compensation and benefits for directors. During fiscal 1999, there was one meeting and one special meeting of the Compensation Committee. The members of the Compensation Committee are David G. Gundling, Chair; Peter G. Danis; and Donald E. Roller. Corporate Governance and Nominating - The Corporate Governance and Nominating Committee reviews the size, composition and effectiveness of the Board of Directors, including retention, tenure and retirement policies, criteria for selection of nominees to the Board of Directors, qualifications of candidates, and membership and structure of Board Committees. The Committee also reviews developments in corporate governance generally and makes appropriate recommendations to the Board of Directors. The Corporate Governance and Nominating Committee met one time during fiscal 1999 and recommended to the Board of 5 Directors the combination of the Audit and Finance Committees. The members of the Company's Corporate Governance and Nominating Committee are Peter M. Wood, Chair; H.D. Cleberg; and Max D. Hopper. Audit and Finance - In April of 1999, the Audit and the Finance Committees were combined to form the Audit and Finance Committee. This Committee monitors and reviews the adequacy of financial, operating and system controls, financial reporting, compliance with legal, ethical and regulatory requirements, and the performance of the external and internal auditors. The Committee serves as the conduit for communication between the Board of Directors and external and internal auditors. The Committee recommends to the Board of Directors the independent public accountants to conduct the annual examination of financial statements and also reviews the proposed scope and fees of the examination, as well as its results, and any significant, non-audit services and fees. The Committee also considers the financing requirements of the Company, reviews and makes recommendations to the Board of Directors with respect to acquisitions, divestitures, extraordinary capital expenditure requests, and significant changes in the capital structure of the Company, including the incurrence/defeasance of long-term indebtedness and the issuance/redemption of equity securities, and other major financial transactions. The Audit and Finance Committee met two times during fiscal 1999. The members of the Audit and Finance Committee are Donald E. Roller, Chair; H.D. Cleberg; Peter M. Wood; and Max D. Hopper. Prior to April, 1999, the Audit Committee, comprised of H. D.Cleberg, Chair; and Peter M. Wood, met one time. The Finance Committee was comprised of Donald E. Roller, Chair; David G. Gundling; and Max D. Hopper. Compensation of Directors The Company pays each non-employee director (i) an annual directors' fee of $25,000, except that the Non-Executive Chairman is paid an annual fee of $100,000, payable quarterly, (ii) $1,000 for each meeting of the Board of Directors attended by the director, (iii) $1,000 for each committee meeting attended by the director and (iv) a $2,000 per diem for special matters undertaken on behalf of the Company at the request of the Chairman or the CEO. Committee chairs are paid an additional annual fee of $3,500. In October 1999, Non-Executive Chairman Peter G. Danis was granted options to purchase 30,000 shares of Common Stock and H.D. Cleberg, David G. Gundling, Max D. Hopper, Donald E. Roller and Peter M. Wood were each granted options to purchase 15,000 shares of Common Stock pursuant to the Payless Cashways, Inc. 1998 Omnibus Incentive Plan (discussed in the section entitled, "Report on Executive Compensation"). All such options have an exercise price equal to the fair market value of the Common Stock on the date of grant, and are subject to a four-year vesting schedule with one-fourth of the grant vesting on each anniversary from the grant date. Compensation Committee Interlocks and Insider Participation Members of the Compensation Committee of the Company's Board of Directors during fiscal 1999 were David G. Gundling, Chair; Peter G. Danis; and Donald E. Roller. During a portion of fiscal 1998, Mr. Roller served as Acting Chief Executive Officer of the Company. 6 Performance Graph The graph set forth below compares the indexed total return on an investment in the Company's Common Stock against the Russell 2000 and the Standard and Poor's Retail (Building Materials) Index ("S&P Building Materials Index"). The graph is based on stock performance and assumes the reinvestment of any dividends. The period covered is December 2, 1997 (the date on which the Common Stock was first traded) through the Company's 1999 fiscal year end or the nearest practicable date. The current indices are presented in the following graph. [GRAPHIC OMITTED]
As of As of As of As of As of As of As of As of As of 12/2/97 2/28/98 5/31/98 8/31/98 11/30/98 2/28/99 5/31/99 8/31/99 11/26/99 ------ ------- ------- ------- -------- ------- ------- ------- -------- S> Payless Cashways, Inc.(1).......$100.00....$86.73 $106.12 $54.07 $46.92 $73.47 $69.39 $57.14 $49.96 Russell 2000....................$100.00...$106.79 $105.58 $78.14 $91.97 $90.70 $101.43 $98.92 $104.99 S&P Building Materials Index....$100.00...$116.31 $143.00 $134.94 $171.58 $207.96 $197.53 $202.45 $252.79 (1) Fiscal quarters and year end on a Saturday, therefore closest available date is utilized.
The closing price on February 18, 2000 was $2.31 per share. Report on Executive Compensation The Compensation Committee is composed entirely of directors who are not executive officers of the Company. The members of the Compensation Committee are Mr. Gundling, Chair; Mr. Danis; and Mr. Roller. The Committee is responsible, on behalf of the Board of Directors, for reviewing the compensation (wages, salaries, supplemental compensation and benefits) of the Company's executive officers, including approval of compensation and benefit policies, approval of direct and indirect executive officer compensation, administration of stock incentive programs, and oversight of the Company's executive development plan. The Compensation Committee believes that it is in the best interest of the Company's stockholders to attract, retain and motivate top quality executive officers by offering a competitive compensation package that establishes a relationship between executive pay and the enhancement of stockholder value. The Committee reviews its executive officer compensation program each year. Periodically, the Committee has engaged an independent, executive compensation consulting firm to conduct a formal study to determine whether the Company's compensation program is competitive with executive compensation programs of comparable companies (including building Material retailers, similarly-sized companies, and other retail companies). In connection with these studies, the consulting firm has reviewed industry data obtained from national compensation survey in which the Company participates, including an annual compensation study 7 published by an executive compensation consulting firm. In years in which a formal study is not completed, the conclusions of the mostrecent study are updated based on a survey of retail compensation trends published by executive compensation consulting firms, published wage and salary surveys, and inflation indices. Each year the Committee reviews the performance of the Company and approves an annual base salary and an annual incentive bonus opportunity for each executive officer consistent with the objectives set forth below. When appropriate, the Committee recommends incentive compensation awards pursuant to the Company's 1998 Omnibus Incentive Plan. Annual Base Salary The Compensation Committee believes that annual base salaries of the Company's executive officers should be maintained at levels that are competitive with salaries at comparable companies. As a result, the Committee historically has set annual base salaries at approximately the 50th percentile of annual base salaries for executives in similar positions at comparable companies. Prior to the beginning of each fiscal year, the Committee reviews the performance of the Company and base salaries of executive officers, compares base salaries against those of comparable companies and determines pay adjustments, as appropriate. The performance criteria used by the Compensation Committee include the reporting responsibilities of each executive officer and corporate performance in terms of sales, earnings before interest, taxes, depreciation and amortization ("EBITDA"), income, operating goals and similar factors. The Compensation Committee does not employ any specific weighting of the performance criteria and application of the criteria is also dependent upon the position of the particular executive officer. When the Company entered into employment agreements with executive officers (discussed in the section entitled "Summary Compensation Table"), the annual base salaries under the agreements were established consistent with these criteria. Corporate Management Incentive Plan The Committee establishes annual incentive bonus opportunities pursuant to the Company's Corporate Management Incentive Plan. Under the program, executive officers are entitled to receive bonus payments based upon the Company's achievement of EBITDA targets, as follows: (i) if the Company achieves 110% or more of the EBITDA target, then executive officers may receive as much as 150% of their incentive levels; (ii) if the Company achieves a minimum of 100% of the EBITDA target, then executive officers are entitled to receive 100% of their incentive levels; (iii) if the Company achieves a minimum of 90% of the EBITDA target, then executive officers may receive 50% of their incentive levels; and (iv) if the Company fails to achieve a minimum of 90% of the EBITDA target, then the Company will not pay any portion of the incentive levels. The Committee sets incentive levels for executive officers based on salary grade. Total cash compensation (base salary plus annual incentive bonus opportunity) for executive officers is intended to exceed the Company's established competitive levels (50th percentile of base salaries and incentives for executives in similar positions at comparable companies) when superior performance levels are achieved, i.e., performance which exceeds 100% EBITDA. During fiscal 1999, no incentives were paid because the minimum EBITDA target was not achieved. 1998 Omnibus Incentive Plan In January 1998, the Board of Directors adopted the Payless Cashways, Inc. 1998 Omnibus Incentive Plan (the "Plan") for the purposes of (i) giving the Company and its affiliates a competitive advantage in attracting, motivating and retaining employees and outside directors; (ii) more closely aligning the interests of the Company's employees with the interests of the Company's stockholders; and (iii) motivating the Company's employees to enhance the Company's value for the benefit of its stockholders. The Plan was amended and restated in February 1999. The Plan authorizes the Compensation Committee to grant employees and outside directors options (non-qualified stock options and, upon stockholder approval, incentive stock options), limited rights, dividend equivalents, restricted stock, performance shares, performance units (including performance-based cash awards), and other rights, interests or options relating to 2,400,000 shares of the Company's Common Stock. The Plan also authorizes the Committee to provide reload options in connection with options granted under the Plan. 8 Chief Executive Officer Compensation During fiscal 1999, the Board of Directors determined the compensation of Mr. Barron (in his capacity as Chief Executive Officer) using the criteria described above. The compensation of Mr. Barron, Chief Executive Officer of the Company consists of (a) an annual base salary, (b) an annual incentive cash bonus based on achievement of certain performance goals, and (c) options to purchase shares of the Company's Common Stock under the 1998 Omnibus Incentive Plan discussed above. In June 1999, based on annual base salaries for executives in similar positions at comparable companies, and based on objective and subjective evaluation of his accomplishment or progress toward accomplishment of short term and long term strategic and business plan goals, the Committee recommended and the Board of Directors approved an increase in Mr. Barron's annual base salary to $550,000 and a grant of options to purchase 60,000 shares of Common Stock. No adjustments were made to Mr. Barron's annual bonus. Other Information Section 162(m) of the Internal Revenue Code generally limits deductions by publicly held corporations for federal income tax purposes to $1 million of compensation paid to each of the executive officers listed in the corporation's summary compensation table unless such excess compensation is "performance based" as defined in Section 162(m). The Company does not anticipate that any executive officer's compensation for fiscal 1999 will exceed $1 million for purposes of Section 162(m). Thus, it is the current intention of the Committee that all compensation paid under the executive compensation program will be tax deductible to the Company no later than in the year paid to each executive officer. The Committee will review from time to time the potential impact of Section 162(m) on the deductibility of executive compensation. However, the Committee intends to maintain the flexibility to take actions that it considers to be in the best interests of the Company and its stockholders and which may be based on considerations in addition to tax deductibility. The Compensation Committee: David G. Gundling - Chair Peter G. Danis Donald E. Roller 9 Summary Compensation Table The following table sets forth the compensation during each of the last three completed fiscal years for the Company's named executive officers who held the positions listed in fiscal 1999:
ANNUAL COMPENSATION LONG-TERM COMPENSATION AWARDS ----------------------------------------------- -- ------------------------------ ----------------- (a) (b) (c) (d) (e) (f) (g) (h) Restricted Securities Name and Other Annual Stock Underlying All Other Principal Position Year Salary($) Bonus($)(1) Compensation($)(2) Awards ($) Options/ SARs(#) Compensation($)(3) ------------------ ---- --------- ----------- ------------------ ---------- ---------------- ------------------ Millard E. Barron- 1999 498,077 --- --- --- 60,000 --- President, Chief 1998 246,412 83,819 8,654 --- 350,000 --- Executive Officer and Director (4) David J. Krumbholz- 1999 212,000 --- --- --- 20,000 7,077 Vice 1998 206,424 28,800 --- --- 100,000 2,004 President-Store 1997 192,000 78,800 --- --- --- 1,901 Operations Kelly R. Abney- 1999 207,000 --- --- --- 20,000 6,981 Vice President- 1998 192,135 25,500 --- --- 100,000 2,095 Logistics, 1997 134,692 94,625 13,613 --- --- 2,909 Replenishment and Facilities Ronald D. Long - 1999 200,000 --- --- --- --- 10,692 Vice President- 1998 192,635 38,339 --- --- 75,000 2,065 Merchandising 1997 165,192 109,916 --- --- -- --- James L.Deats- Vice 1999 175,000 --- 14,922 --- 20,000 --- President-Infor- 1998 20,192 --- --- --- 60,000 --- mation Systems(4) (1) Except for $83,819 and $13,589, for Mr. Barron and Mr. Long in 1998, respectively, the amounts reflected in column (d) above represent the retention bonuses and success bonuses that were paid in December 1997 and June 1998, which are more fully described in the text below this table. (2) The amounts reflected in column (e) above reflect a relocation allowance for (i) Mr. Barron for 1998, (ii) Mr. Abney for 1997, and (iii) Mr. Deats for 1999. (3) All other compensation for fiscal 1999 consists of payments for vacation balances for Mr. Krumbholz, Mr. Abney and Mr. Long in the amounts of $4,077, $3,981 and $7,692, respectively. The Employee Savings Plan estimated contributions for 1999 are $3,000 for Mr. Krumbholz, Mr. Abney and Mr. Long, respectively. (4) Messrs. Barron and Deats were not employed by the Company in fiscal 1997.
Millard E. Barron, David J. Krumbholz, Kelly R. Abney, Ronald D. Long and James L. Deats (the "Executives") have entered into employment agreements with the Company (the "Employment Agreements") as of December 1, 1999. The term of each Employment Agreement is one year unless sooner terminated pursuant to the terms of the Employment Agreement; provided, however that each Employment Agreement will be automatically renewed for an additional term of one year at the end of the initial term and each succeeding term, unless either the Company or the Executive serves notice on the other at least ninety (90) days prior to the expiration of the term, in accordance with certain specified procedures, that the party giving notice intends to end the Employment Agreement at the conclusion of the then-current term. If the Company terminates an Executive's Employment Agreement for "Cause" (as such term is defined in the respective Employment Agreement), the Employment Agreement and the Company's obligation to make further base salary and Incentive Compensation payments thereunder shall thereupon terminate and no severance is owed. If (i) the Executive terminates his Employment Agreement for "Good Reason" (as such term is defined in the respective Employment Agreement), (ii) the Company terminates the Employment Agreement without 10 "Cause," or (iii)the Employment Agreement terminates due to expiration, the Executive shall be entitled to the following severance benefits: (a) the Company shall continue to pay the Executive the Executive's base salary for a period of one year after the date the Executive's employment with the Company is terminated (the "Severance Period"); (b) in the event the Compensation Commit- tee determines that Incentive Compensation is to be paid in the year in which the Executive's employment is terminated, then at the discretion of the Chief Executive Officer, the Executive may receive Incentive Compensation prorated for the time during which services were rendered in the year of termination, at the rate determined by the Compensation Committee for the calculation of Incentive Compensation for that year; (c) during the Severance Period, the Company shall provide the Executive with medical, dental, vision and regular and supplemental life insurance coverage substantially similar to the cover- age that the Executive was receiving or entitled to receive immediately prior to the date of termination of the Executive's employment unless the Executive receives similar benefits elsewhere; and (d) the Company, at its expense, will provide to the Executive outplacement services up to a maximum of $30,000. If, however, the Executive's employment is terminated within twelve months with- out "Cause" as a result of a "Change of Control" (as defined in the respec- tive Employment Agreement), and if the Executive is not offered a comparable position by the Company, then the Severance Period shall be extended to the second anniversary of the date of the termination of employment, and the Executive shall be entitled to receive continued payments of base salary during the second year of the Severance Period. All severance benefits other than continued payments of base salary shall cease on the first anniversary of the termination of employment in the event of a Change of Control. In no event, however, is the Company required to provide base salary continuation or other severance benefits if the Executive violates his confidentiality, non-solicitation, non-disparagement or non-competition obligations. In the event of the Executive's death or if the Executive should become unable to perform the essential functions of his position, with or without reasonable accommodation by the Company, the Executive's Employment Agreement shall terminate, and the Executive shall not be entitled to receive severance benefits. In connection with the Company's Plan of Reorganization, and because of the difficulty of recruiting key employees to a debtor in a bankruptcy proceeding and the difficulty in general of recruiting in a tight labor market, the Company presented for the Bankruptcy Court's approval, and the Bankruptcy Court approved, an Amended Reorganization Retention Plan (the "Retention Plan") with respect to approximately 350 key employees, including David J. Krumbholz, Kelly R. Abney and Ronald D. Long. Pursuant to the Retention Plan, these employees were eligible for a retention bonus (the "Retention Bonus") if they (i) were employed by the Company on the date of payment, and (ii) had performed at expectations measured against performance standards for their position. The Retention Bonus was paid in two equal installments on December 2, 1997 and June 5, 1998. Pursuant to the Retention Plan, certain executive officers, including David J. Krumbholz, Kelly R. Abney, and Ronald D. Long were also eligible for an additional discretionary bonus (the "Success Bonus") on the effective date of the Plan of Reorganization. The purpose of the Success Bonus was to give these executive officers an incentive to cause the effective date of the Plan of Reorganization to occur as early as possible, and the maximum total amount of the Success Bonus pool was designed to decrease in steps if the effective date did not occur by specified dates. 11 Option/SAR Grants in Last Fiscal Year
Potential Realizable Value at Individual Grants Assumed Annual Rates of Stock Price Appreciation of Option Term(3) -------------- ---------------- --------------- ------------ ------------- -------------- (a) (b) (c) (d) (e) (f) (g) Number of Percent of Total Securities Options/SARs Exercise or Underlying Granted to Base Price Options/SARs Employees in ($ / Expiration Name Granted (#)(1) Fiscal Year ($/Share)(2) Date 5%($) 10%($) ---- -------------- ------------ -------- ---- ------ ------ Millard E. Barron 60,000 12.90% 1.5938 10/13/09 60,140 152,406 David J. Krumbholz 20,000 4.30% 1.5938 10/13/09 20,047 50,802 Kelly R. Abney 20,000 4.30% 1.5938 10/13/09 20,047 50,802 Ronald D. Long --- --- --- --- --- --- James L. Deats 20,000 4.30% 1.5938 10/13/09 20,047 50,802 (1) The options were granted pursuant to the Plan. Additional Plan information is described in the section entitled, "Report on Executive Compensation." (2) The exercise prices are equal to the fair market value of the Company's Common Stock on the date of the grant. (3) The amounts listed under columns (f) and (g) illustrate values that might be realized upon exercise immediately prior to the expiration of the options' terms using 5 percent and 10 percent appreciation rates, compounded annually from the date of the grant to the stated expiration date of the options, and are not intended to forecast possible future appreciation, if any, of the Company's stock price.
Aggregated Option/SAR Exercises in Last Fiscal Year and Fiscal Year-End Option/SAR Values
(a) (b) (c) (d) (e) Number of Securities Value of Unexercised Shares Acquired on Underlying Unexercised In-the-Money Options/ Name Exercise (#) Value Realized ($) Options/ SARs at FY-End (#) SARs at FY-End ($)(1) ---- ------------ ------------------ --------------------------- ---------------- Exercisable Unexercisable Exercisable Unexercisable ----------- ------------- ----------- ------------- Millard E. Barron --- --- 87,500 322,500 13,250 39,750 David J. Krumbholz --- --- 25,000 95,000 2,650 7,950 Kelly R. Abney --- --- 25,000 95,000 2,650 7,950 Ronald D. Long --- --- 18,750 56,250 1,988 5,963 James L. Deats --- --- 15,000 65,000 9,825 29,475 (1) The value of unexercised in-the-money options is calculated by subtracting the exercise price from the closing price of the Company's Common Stock at fiscal year end, and multiplying the difference by the number of shares granted as options.
Retirement Program Pension Benefits The Payless Cashways Amended Retirement Plan ("Retirement Plan") (benefits under which were frozen June 17, 1999) is a defined benefit plan under which the annual pension benefits payable to employees, including officers, upon normal retirement age are based upon both service credit prior to December 1, 1989, and service after December 1, 1989 through June 17, 1999. The normal retirement benefit for service prior to December 1, 1989, is the greater of 1) the product of (i) 1.25% of average compensation (the average for the five calendar years ending December 31, 1983), plus .9% of that average annual compensation in excess of the individual's 12 "covered compensation" (a particular dollar amount which increases depending on the year of birth to 1950), multiplied by (ii) the number of years and fractional years of benefit service prior to December 1, 1983, or 2) the product of (i) 1% of average annual compensation (the average for calendar years 1986, 1987 and 1988), plus .5% of that average annual compensation in excess of the individual's "covered compensation" (a particular dollar amount which increases depending on the year of birth), multiplied by (ii) the number of years of benefit service prior to December 1, 1989. The normal retirement benefit for each year and fractional year of benefit service subsequent to December 1, 1989, through June 17, 1999, is the sum of (a) 1% of annual compen- sation for the year, plus (b) an additional .5% of annual compensation in excess of the "covered compensation" for the year. As of the end of fiscal 1999, years of service credited pursuant to the Retirement Plan were as follows: Mr. Barron: 0, Mr. Krumbholz: 24, Mr. Abney: 7, Mr. Long: 16 and Mr. Deats: 0. The estimated monthly benefits payable at age 65 under the Retirement Plan (computed as a straight single life annuity), based on actual credited service and compensation, is as follows for the executive officers named in the Summary Compensation Table above: Mr. Barron: $0, Mr. Krumbholz: $3,059, Mr. Abney: $850, Mr. Long: $1,481 and Mr. Deats: $0. Certain Transactions Canadian Imperial Bank of Commerce and its affiliates ("CIBC") and Van Kampen American Capital Prime Rate Income Trust ("Van Kampen"), each of which beneficially owns in excess of 5% of the outstanding Common Stock, are or have been parties to the Amended and Restated Agreement, dated as of December 2, 1997, as amended by that certain Second Amended and Restated Credit Agreement dated as of November 17, 1999 (the "Credit Agreement"). The Credit Agreement provides for a term loan facility in the principal amount of approximately $109 million. CIBC, as consideration for its role as Coordinating and Collateral Agent under the Credit Agreement, received amounts in excess of $60,000 in agency fees under the Credit Agreement. In addition, pursuant to the terms of the Credit Agreement, CIBC and Van Kampen and other Lenders thereunder have been paid interest, commitment fees and letter of credit fees. Certain Beneficial Ownership The table below sets forth certain information, as of January 14, 2000, regarding the beneficial ownership of the Company's Common Stock by (i) each of the Company's directors and nominees, (ii) each person known by the Company to be the beneficial owner of 5% or more of each class of the Company's voting securities, (iii) each of the executive officers named in the table entitled "Summary Compensation Table" above and (iv) all of the Company's directors and executive officers as a group. As required by the rules and regulations of the SEC, the number of shares of Common Stock beneficially owned includes shares as to which a right to acquire ownership within 60 days exists, such as through the exercise of employee stock options and conversion of convertible securities.
Name and Address Shares Beneficially of Beneficial Owner Owned Percent of Class - ------------------- ------------------- ---------------- Millard E. Barron(1) 141,500 0.7% David J. Krumbholz(2) 41,302 0.2% Kelly R. Abney(2) 40,543 0.2% Ronald D. Long(3)(4) 34,318 0.2% James L. Deats(5) 15,000 * H. D. Cleberg(6) 37,413 0.2% Peter G. Danis(7) 74,500 0.4% David G. Gundling(4) 38,750 0.2% Max D. Hopper (4)(8) 33,750 0.2% Donald E. Roller(9) 68,750 0.3% Peter M. Wood(4 58,750 0.3%
13
Name and Address Shares Beneficially of Beneficial Owner Owned Percent of Class - ------------------- ------------------- ---------------- Canadian Imperial Bank of Commerce(10) Commerce Court 1,257,340 6.3% Toronto, Ontario M5L 1A2 Van Kampen American Capital Prime Rate Income Trust(11) 1,024,159 5.1% One Parkview Plaza Oakbrook Terrace, IL 60181 All Directors and Executive Officers 658,331 3.3% as a group (15 persons)(12) - --------------------------- (1) Includes 87,500 shares subject to options. (2) Includes 40,000 shares subject to options. (3) Includes 18 shares held by the 401k plan. (4) Includes 33,750 shares subject to options. (5) Includes 15,000 shares subject to options. As of February 18, 2000, Mr. Deats had purchased an additional 5,000 shares, which are not reflected in the table. (6) Includes 33,750 shares subject to options and 3,663 shares owned by a trust for the benefit of Mr. Cleberg's wife of which he is trustee. As of February 18, 2000, Mr. Cleberg had purchased an additional 10,000 shares, which are not reflected in the table. (7) Includes 67,500 shares subject to options. (8) As of February 18, 2000, Mr. Hopper had purchased an additional 12,000 shares, which are not reflected in the table. (9) Includes 63,750 shares subject to options. (10) Based on a Questionnaire dated February 10, 2000, Canadian Imperial Bank of Commerce has sole voting power and sole dispositive power with respect to 1,257,340 shares. (11) Based on a Questionnaire dated January 18, 2000, Van Kampen American Capital Prime Rate Income Trust has sole voting power and sole dispositive power with respect to 1,024,159 shares. (12) Includes 546,250 shares subject to options. * Less than 0.1%.
Section 16(a) Beneficial Ownership Reporting Compliance Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act") requires the Company's directors and executive officers and persons who beneficially own more than 10 percent of a registered class of the Company's equity securities to file, with the SEC, initial reports of ownership and reports of changes in ownership of stock and other equity securities of the Company. Officers, directors and beneficial owners of more than 10 percent of the Company's equity securities are required by regulation to furnish the Company with copies of all Section 16(a) forms they file. To the Company's knowledge, based solely on review of the copies of such reports and written representations of directors and executive officers that no other reports were required during 1999, all Section 16(a) filing requirements applicable to its officers, directors and beneficial owners of more than 10 percent of the Company's equity securities were complied with on a timely basis. 2. Other Business As of the date of delivery of the text of this Proxy Statement to the printer, management knew of no other business that will be presented for action at the Annual Meeting. In the event that any other business should properly come before the meeting, it is the intention of the persons designated as proxies on the proxy card to take such action as shall be in accordance with their best judgment. 14 Other Information, Stockholder Proposals The Board of Directors, on the recommendation of the Audit and Finance Committee, has selected the firm of KPMG LLP as independent auditor to examine the financial statements of the Company for the fiscal year 2000. Representatives of KPMG LLP will be present at the Annual Meeting, will have an opportunity to make a statement if they so desire, and will be available to respond to appropriate questions. The Company currently plans to hold the 2001 Annual Meeting in the Kansas City, Missouri, metropolitan area on or around April 19, 2001. Management will appropriately consider all proposals from stockholders meeting the requirements set forth in the following paragraphs. When adoption of a proposal is clearly in the best interests of the Company and the stockholders generally, and does not require stockholder approval, the Board of Directors will usually adopt the proposal, if appropriate, rather than including the proposal in the Proxy Statement. A stockholder proposal may be considered at the Company's Annual Meeting in 2001 only if it meets the following requirements. First, the stockholder making the proposal must be a stockholder of record on the record date for such Annual Meeting, must continue to be a stockholder of record at the time of such meeting, and must be entitled to vote thereat. Second, the stockholder must deliver or cause to be delivered a written notice to the Company's Secretary. Such notice must be received by the Secretary no later than February 18, 2001. The notice shall specify (i) the name and address of the stockholder as they appear on the books of the Company, (ii) the number of shares of the Company which are beneficially owned by the stockholder; (iii) any material interest of the stockholder in the proposed business described in the notice; (iv) if such business is a nomination for director, each nomination sought to be made, together with the reasons for each nomination, a description of the qualifications and business or professional experience of each proposed nominee and a statement signed by each nominee indicating his or her willingness to serve if elected, and disclosing the information about him or her that is required by the Exchange Act, and the rules and regulations promulgated thereunder to be disclosed in the proxy materials for the meeting involved if he or she were a nominee of the Company for election as one of its directors; (v) if such business is other than a nomination for director, the nature of the business, the reasons why it is sought to be raised and submitted for a vote of the stockholders and if and why it is deemed by the stockholder to be beneficial to the Company, and (vi) if so requested by the Company, all other information that would be required to be filed with the SEC if, with respect to the business proposed to be brought before the meeting, the person proposing such business was a participant in a solicitation subject to Section 14 of the Exchange Act. Notwithstanding satisfaction of the above, the proposed business may be deemed not properly brought before the meeting if, pursuant to state law or any rule or regulation of the SEC, it was offered as a stockholder proposal and was omitted from the proxy materials for the meeting. Pursuant to the Rules and Regulations of the SEC, stockholder proposals requested for inclusion in the Company's Proxy Statement must meet the following criteria: (i) the proponent must be a record or beneficial owner of at least 1% or $2,000 in market value of securities entitled to be voted on the proposal and must have held such securities for at least one year; (ii) the proponent may submit no more than one proposal; (iii) the proposal and any supporting statement together shall not exceed 500 words; (iv) proposals must be received by the Company's Secretary on or before the date provided in the Proxy Statement; and (v) the proposal must contain the name of the proposing stockholder(s) and a contact address. For stockholder proposals to be considered for inclusion in the Company's proxy materials for the 2001 Annual Meeting of Stockholders, such proposals must be received by the Secretary of the Company on or before November 10, 2000. The Corporate Governance and Nominating Committee will consider persons recommended by stockholders as director nominees. In order to be eligible for nomination as a director by the Corporate Governance and Nominating Committee, a director nominee must be under the age of 70 at the date of the Annual Meeting of Stockholders at which such director would be elected. All letters of nomination should be sent to the Secretary of the Company and should include the nominee's name and qualifications and a statement from the nominee that he or she consents to being named in the Proxy Statement and will serve as a director if elected. In order for any nominee to be considered by the Corporate Governance and Nominating Committee and, if accepted, to be 15 included in the Company's Proxy Statement, letters of nomination must be received by the Secretary of the Company on or before November 10, 2000. In addition to the solicitation of proxies by mail, officers or other employees of the Company, without extra remuneration, may solicit proxies by telephone or personal contact. The Company may retain a firm to assist in the solicitation of proxies from individual stockholders, brokers, nominees, fiduciaries and other custodians. The Company also will request brokerage houses, nominees, custodians and fiduciaries to forward soliciting material to beneficial owners of stock held of record and will pay such persons for forwarding the material. All costs for the solicitation of proxies by the Board of Directors will be paid by the Company. The Company's Annual Report to Stockholders, including financial statements for the year ended November 27, 1999, is enclosed with this Proxy Statement. BY ORDER OF THE BOARD OF DIRECTORS /S/Gary D. Gilson Gary D. Gilson, Secretary March 10, 2000 FRONT PAYLESS CASHWAYS, INC. PROXY FOR ANNUAL MEETING OF STOCKHOLDERS YOUR VOTE IS IMPORTANT! You can vote one of three ways: 1. Vote by Telephone. 2. Vote by Internet. 3. Vote by Mail. VOTE BY TELEPHONE Your Telephone vote is quick, easy and immediate. Just follow these easy steps: 1. Read the accompanying Proxy Statement. 2. Using a Touch-Tone Telephone, call Toll Free 1-800-758-6973 and follow the instructions. 3. When instructed, enter the Control Number, which is printed on the lower right-hand corner of the back-side of your proxy card. 4. Follow the simple recorded instructions. Please note that all votes cast by Telephone must be made prior to 5:00 p.m. Central Time, April 18, 2000. Your telephone vote authorizes the named proxies to vote your shares to the same extent as if you marked, signed, dated, and returned the proxy card. If you vote by telephone, please do not return your proxy by mail. VOTE BY INTERNET Your Internet vote is quick, convenient and your vote is immediately submitted. Just follow these easy steps: 1. Read the accompanying Proxy Statement. 2. Visit our Internet voting site at http://www.umb.com/proxy and follow the instructions on the screen. Please note that all votes cast by Internet must be submitted prior to 5:00 p.m. Central Time, April 18, 2000. Your Internet vote authorizes the named proxies to vote your shares to the same extent as if you marked, signed, dated and returned the proxy card. If you vote by Internet, please do not return your proxy by mail. VOTE BY MAIL To vote by mail, read the accompanying Proxy Statement then complete, sign and date the proxy card below. Detach the card and return it in the envelope provided herein. IF YOU ARE NOT VOTING BY TELEPHONE OR INTERNET, DETACH PROXY CARD AND RETURN. - ------------------------------------------------------------------------------- PAYLESS CASHWAYS, INC. 800 N.W. Chipman Road, Lee's Summit, Missouri 64063 This Proxy is Solicited on Behalf of the Board of Directors The undersigned hereby appoints Millard E. Barron and Timothy R. Mertz, or either of them, as Proxy/Proxies, with the power to appoint their substitute, and hereby authorizes them to represent and to vote, as designated below, all the shares of common stock of Payless Cashways, Inc. held of record by the undersigned on February 21, 2000 at the Annual Meeting of Stockholders to be held on April 19, 2000, or any adjournment or postponement thereof. This Proxy revokes all prior Proxies given by the undersigned. THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL 1. 1. ELECTION OF DIRECTORS FOR the nominees listed below WITHHOLD AUTHORITY (except as marked to the to vote for all nominees contrary below) listed below Nominees: 01 Peter G. Danis 02 David G. Gundling 03 Donald E. Roller (Instruction: To withhold authority to vote for any individual nominee, write that nominee's name on the space provided below.) - -------------------------------------------------------------------------------- 2. In their discretion, the Proxies are authorized to vote upon such other business as may properly come before the meeting and all matters incident to the conduct of the meeting. BACK - -------------------------------------------------------------------------------- This proxy, when properly executed, will be voted in the manner directed herein by the undersigned stockholder. If no direction is made, this proxy will be voted for Proposal 1. Please sign exactly as name appears below. When shares are held by joint tenants, both should sign. When signing as attorney, executor, administrator, trustee or guardian, please give full title as such; if a corporation, please sign in full corporate name by President or other authorized officer. If a partnership, please sign in partnership name by an authorized person. Dated: __________________________________, 2000 ----------------------------------------- Signature ----------------------------------------- Signature if held jointly ----------------------------------------- PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE ----------------------------------------- [Control Number] [Payless Letterhead] March 10, 2000 Dear MoneyBuilder Participant: As a participant in the Payless Cashways, Inc. Employee Savings Plan (the "MoneyBuilder Plan"), you have the right to direct the Trustee of the MoneyBuilder Plan how you wish the shares of the Company's common stock allocated to your MoneyBuilder account on February 21, 2000 to be voted at the Company's Annual Meeting of Stockholders scheduled for April 19, 2000. The only matter proposed in the Company's Proxy Statement to be voted upon at the Annual Meeting is the election of three directors. Enclosed are the following materials for you to consider and act upon: 1. The Company's Proxy Statement for the Annual Meeting of Stockholders; 2. Voting Instructions card for you to give directions to the Trustee as to the voting of the shares allocated to your account; and 3. The Company's Annual Report for 1999. After reviewing the enclosed materials, please complete, sign and return the enclosed Voting Instructions card to Securities Transfer Division, UMB Bank, N.A., P.O. Box 410064, Kansas City, Missouri 64179-0013 in the enclosed prepaid return envelope. UMB Bank, N.A. will tabulate the votes in order to permit the Trustee to vote the shares allocated to your account as you direct. If you do not sign and return the enclosed Voting Instructions card, the shares in your account will be voted in the same proportion as the shares with respect to which timely directions are received by the Trustee. The shares allocated to your account can be voted at the meeting only by the Trustee pursuant to your instructions. In order for your instructions to be followed, the enclosed "Voting Instructions" card must be received by April 17, 2000. Sincerely, /s/ Louise R. Iennaccaro --------------------------------- Louise R. Iennaccaro Chairperson of the Plan Committee FRONT PAYLESS CASHWAYS, INC. PROXY FOR ANNUAL MEETING OF STOCKHOLDERS YOUR VOTE IS IMPORTANT! You can vote one of three ways: 1. Vote by Telephone. 2. Vote by Internet. 3. Vote by Mail. VOTE BY TELEPHONE Your Telephone vote is quick, easy and immediate. Just follow these easy steps: 1. Read the accompanying Proxy Statement. 2. Using a Touch-Tone Telephone, call Toll Free 1-800-758-6973 and follow the instructions. 3. When instructed, enter the Control Number, which is printed on the lower right-hand corner of the back-side of your proxy card. 4. Follow the simple recorded instructions. Please note that all votes cast by Telephone must be made prior to 5:00 p.m. Central Time, April 14, 2000. Your telephone vote authorizes the named proxies to vote your shares to the same extent as if you marked, signed, dated, and returned the proxy card. If you vote by telephone, please do not return your proxy by mail. VOTE BY INTERNET Your Internet vote is quick, convenient and your vote is immediately submitted. Just follow these easy steps: 1. Read the accompanying Proxy Statement. 2. Visit our Internet voting site at http://www.umb.com/proxy and follow the instructions on the screen. Please note that all votes cast by Internet must be submitted prior to 5:00 p.m. Central Time, April 14, 2000. Your Internet vote authorizes the named proxies to vote your shares to the same extent as if you marked, signed, dated and returned the proxy card. If you vote by Internet, please do not return your proxy by mail. VOTE BY MAIL To vote by mail, read the accompanying Proxy Statement then complete, sign and date the proxy card below. Detach the card and return it in the envelope provided herein. IF YOU ARE NOT VOTING BY TELEPHONE OR INTERNET, DETACH PROXY CARD AND RETURN. - ------------------------------------------------------------------------------- PAYLESS CASHWAYS, INC. EMPLOYEE SAVINGS PLAN VOTING INSTRUCTIONS Voting Instructions to: The Chase Manhattan Bank, N.A. as Trustee of the Payless Cashways, Inc. Employee Savings Plan I hereby direct that the voting rights pertaining to shares of Payless Cashways, Inc. held by the Trustee and attributable to my account in the above-described plan shall be exercised at the Annual Meeting of Stockholders of the Company to be held April 19, 2000, or at any adjournment of such meeting, in accordance with the instructions below, to vote upon Proposal 1. 1. ELECTION OF DIRECTORS 01 Peter G. Danis For Withhold 02 David G. Gundling For Withhold 03 Donald E. Roller For Withhold BACK - -------------------------------------------------------------------------------- (See reverse side for matters to be voted on) If you fail to give specific directions, or fail to return this instruction card, the shares allocated to your account will be voted by the Trustee in the same proportion as the shares for which timely directions are received by the Trustee and voted in such manner. Please sign exactly as name appears below. Dated:______________________, 2000 ---------------------------------- Participant's Signature ---------------------------------- PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE ---------------------------------- [Control Number] -----END PRIVACY-ENHANCED MESSAGE-----