OfficeMax 2005 Annual Report Download - page 98

stock units with a 25% Company allocation of stock units. The value of deferred stock unit accounts
is paid in shares of the Company’s common stock when an officer retires or terminates
employment. At December 31, 2005, 110,429 stock units were allocated to the accounts of these
executive officers.
Stock Options
In addition to the 2003 DSCP and the 2003 Plan (discussed above), the Company has the
following shareholder-approved stock option plans: the Key Executive Stock Option Plan
(‘‘KESOP’’), the Director Stock Option Plan (‘‘DSOP’’) and the Director Stock Compensation Plan
(‘‘DSCP’’). No further grants will be made under the KESOP, DSOP and DSCP.
The KESOP provided for the grant of options to purchase shares of common stock to key
employees of the Company. The exercise price of awards under the KESOP was equal to the fair
market value of the Company’s common stock on the date the options were granted. Options
granted under the KESOP expire, at the latest, ten years and one day following the grant date.
The DSOP, which was available only to nonemployee directors, provided for annual grants of
options. The exercise price of awards under the DSOP was equal to the fair market value of the
Company’s common stock on the date the options were granted. The options granted under the
DSOP expire upon the earlier of three years after the director ceases to be a director or ten years
after the grant date.
The DSCP permitted nonemployee directors to elect to receive grants of options to purchase
shares of the Company’s common stock in lieu of cash compensation. The difference between the
$2.50-per-share exercise price of DSCP options and the market value of the common stock subject
to the options was intended to offset the cash compensation that participating directors elected not
to receive. Options granted under the DSCP expire three years after the holder ceases to be a
director.
Under the KESOP and DSOP, options may not, except under unusual circumstances, be
exercised until one year following the grant date. Under the DSCP, options may be exercised six
months after the grant date.
A summary of stock option activity for the years ended December 31, 2005, 2004 and 2003 is
presented in the table below:
2005 2004 2003
Wtd. Avg. Wtd. Avg. Wtd. Avg.
Shares Ex. Price Shares Ex. Price Shares Ex. Price
Balance at beginning of year .... 6,963,462 $32.62 8,457,888 $32.16 8,916,550 $31.95
Options granted ............. 310,200 32.38 9,032 2.50 48,477 19.05
Options exercised ............ (883,817) 33.00 (1,202,308) 27.56 (319,139) 23.41
Options forfeited and expired .... (630,300) 41.20 (301,150) 38.95 (188,000) 33.68
Balance at end of year ......... 5,759,545 32.39 6,963,462 32.62 8,457,888 32.16
Exercisable at end of year ...... 5,449,345 6,954,430 8,409,411
Weighted average fair value of
options granted (Black-Scholes) . $ 7.21 $ 27.63 $ 13.00
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