Notes to Consolidated Financial Statements

Note 12:
Common Stock

As of January 30, 1999 and January 31, 1998 there were 104,142,637 and 142,392,845 common shares outstanding, respectively (after giving effect to the repurchases of common stock in fiscal year 1998 and the three-for-two stock split effected in the form of a stock dividend in January 1997). Pursuant to the Dutch Auction tender offer, the Company purchased 35,000,000 shares at a price of $10.75 per share. Subsequent share repurchases made in the open market totaled 4,635,681 shares at an average price of $10.36 per share. The 39,635,681 treasury shares resulting from these transactions are reflected on the balance sheet at cost of $427,282,000 including applicable fees and expenses. The Company has terminated its share repurchase program.

On January 31, 1997, a 50% share dividend of approximately 39,979,000 shares of common stock was distributed to shareholders of record as of January 24, 1997.

On January 14, 1998, the Board of Directors of the Company adopted a Shareholder Rights Plan, pursuant to which the Company distributed a dividend consisting of one right for each share of Common Stock to holders of record on January 30, 1998. The rights, which are to purchase newly created Series A Junior Participating Preferred Stock, become exercisable only in the event, with certain exceptions that include a permitted waiver by the Board of Directors, that a party accumulates 15% or more of the Company's Common Stock. The rights expire ten years from the issuance date. In addition, upon the occurrence of certain events, holders of the rights are entitled to purchase either the Company's Common Stock or stock in an "acquiring entity" at half the market value. The Company is entitled to redeem the rights at $0.01 per right at any time until a certain time following the acquisition of a 15% position in its voting stock.

The Company has authorized 3,000,000 shares of Non-Voting Common Stock, par value $.0002 per share. No shares of the Non-Voting Common Stock are issued or outstanding at January 30, 1999, January 31, 1998 or March 1, 1997. In addition, the Company has authorized 25,000,000 shares of Preferred Stock, par value $.0001 per share. No shares of Preferred Stock are issued or outstanding at January 30, 1999, January 31, 1998 or March 1, 1997.

Stock-Based Compensation Plans:

Stock Options

1992 Stock Option Plan. In February 1992, the Company adopted the Corporate Express, Inc. 1992 Stock Option Plan (the "1992 Stock Option Plan"). The 1992 Stock Option Plan was approved by the Company's shareholders in May 1992 and amended in January 1994. Options were granted under the 1992 Stock Option Plan at the fair market value at the time of grant as determined by the Board of Directors or the Compensation Committee, based on recent stock transactions. Options granted under the 1992 Stock Option Plan typically vest in equal monthly installments over a five-year period, beginning on the month after the first anniversary of the grant date. The options generally expire on the seventh anniversary of the grant date.

Executive Plan. In June 1994, the Board of Directors adopted the 1994 Executive Stock Option Plan (the "Executive Plan") which permits the grant of stock options to the Company's executive officers. The Compensation Committee administers the plan and establishes the terms of the options granted, including the number of shares, the exercise price, vesting schedule and termination provisions. The particular terms of each grant are set forth in separate stock option agreements entered into between the Company and the executive officer. The maximum aggregate number of shares of common stock for which options may be granted under this plan originally was 3,375,000 and was increased to 5,625,000 in August 1995, which increase was approved by shareholders in August 1996, and no single executive officer may be granted options covering more than 1,000,000 shares of common stock in any calendar year. Vesting accelerates upon occurrence of certain conditions, including increases in the Company's stock price and changes in control of the Company. The options generally expire ten years from the date of grant.

1994 Stock Option Plan. The 1994 Stock Option and Incentive Plan (the "1994 Stock Option Plan") was adopted by the Board of Directors and approved by shareholders in August 1994. This plan replaced, for future grants, the 1992 Stock Option Plan. The 1994 Stock Option Plan permits the Company to grant incentive stock options and nonqualified stock options. The maximum aggregate number of shares of common stock which may be issued under the 1994 Stock Option Plan was 2,812,500, was increased to 9,562,500 in March 1996 and approved by the shareholders in August 1996 and increased to 13,562,500 and approved by the shareholders in July 1997. Options granted under the 1994 Stock Option Plan vest as specified in individual stock option agreements, which typically provide vesting in equal monthly installments over a period of five years, beginning in the month after the first anniversary of the grant date. The options generally expire on the seventh anniversary of the grant date. Options and awards that expire, terminate or are cancelled or forfeited will again be available for grant or award under the plan.

Delivery Plan. Delivery had a stock option plan which was approved by its shareholders in January 1994. On March 1, 1996, effective with the merger with Corporate Express, all Delivery options became vested and were exercisable into shares of common stock, as adjusted to reflect the exchange ratio as defined in the merger agreement.

UT Plan. UT had stock option plans which, effective with the merger with Corporate Express on November 8, 1996, became vested and were exercisable into shares of common stock, as adjusted to reflect the exchange ratio as defined in the merger agreement.

Directors Plan. The 1996 Stock Option Plan for Outside Directors (the "Directors Plan") was adopted by the Board of Directors and approved by shareholders in August 1996. The maximum aggregate number of shares of common stock for which options may be granted under this plan is 375,000. Initial options granted under the Directors Plan vest at 40% on the first anniversary of the date of grant, 40% on the second anniversary and the remaining 20% on the third anniversary. All other stock options shall become exercisable at 50% on the first anniversary of the date of grant and the remaining 50% on the second anniversary of the date of grant. Each eligible director who first becomes a member of the Board shall automatically be granted stock options to purchase 37,500 shares on the date of his or her selection or election to the Board. Each eligible director shall also automatically be granted stock options to purchase 15,000 shares on each anniversary of the date of such initial grant (beginning on the second such anniversary).

Supplemental Plan. The 1996 Supplemental Stock Option Plan (the "Supplemental Plan") was adopted by the Board of Directors in December 1996. The maximum aggregate number of shares of common stock for which options may be granted under this plan is 10,000,000. Option grants under the Supplemental Plan and the terms of the grants are identical to the 1994 Stock Option Plan.

Other Plans. Distribution Resources Company, Computer Software and DDI had stock option plans which, effective with the mergers with Corporate Express in fiscal 1997, became vested and were exercisable into shares of common stock, as adjusted to reflect the exchange ratio as defined in the merger agreements.

During fiscal 1998 the Company twice offered employees the opportunity to cancel existing stock options in exchange for fewer replacement stock options priced at market value on the date of the new grant (in February and December). Approximately 15,252,000 total stock options were canceled, and new grants totaling approximately 10,237,000 stock options were issued for replacement stock options.

The summary of the status of the Company's fixed stock option plans, including merged plans, as of January 30, 1999, January 31, 1998, and March 1, 1997, and changes during the years ending on those dates is presented below:

The following table summarizes information about fixed stock options outstanding as of January 30, 1999:

The Company applies APB Opinion 25 and related interpretations in accounting for the above plans. Accordingly, no compensation cost has been recognized for its fixed stock-based plans with the exception of certain awards that were modified during fiscal 1998 resulting in a charge of approximately $1,479,000. The fair value of each option grant was estimated on the date of grant using the Black-Scholes option-pricing model with the following assumptions for 1998, 1997 and 1996: risk-free interest rates ranging from 4.5% to 6.75% expected life of four years; volatility of 40%, 35% and 35% for 1998, 1997 and 1996, respectively; and dividend yield of 0%. The fair value of ESPP awards was estimated on the date of grant using the Black-Scholes option-pricing model with the following assumptions for 1998, 1997, and 1996: risk-free rates ranging from 4.5% to 6.75%; expected life of 1/2 year, one year, and one year for 1998, 1997 and 1996, respectively; and volatility of 45%. Had compensation cost been determined based on the fair value at the grant dates for stock option grants under those plans consistent with the method of FASB Statement 123, the Company's net income and net income per common share would have been reduced to the pro forma amounts indicated below. Pro forma disclosures include the effects of the 1994 Employee Stock Purchase Plan and employee and non-employee director stock options granted during the year ended March 1, 1997, the eleven months ended January 31, 1998 and the year ended January 30, 1999.

(1)Net income and net income per common share as reported represent pro forma net income and pro forma net income per common share as adjusted for the effects of pro forma S Corporation taxes as more fully described in Note 14.

Warrants

As of January 30, 1999, warrants to purchase 562,500 shares of common stock were outstanding with an exercise price of $4.89 per share. The warrants expire on January 31, 2002. The exercise price assigned to the 562,500 of warrants was based on the fair market value of the Company's common stock at the dates of issuance of such warrants, which occurred in late fiscal 1993. The estimated fair market value for the Company's common stock was determined by the board of directors, which then included independent sophisticated investors, based upon recent cash sales of the Company' equity to third parties.

Warrants were assumed by the Company in connection with the DDI and Delivery mergers and were converted to warrants for Corporate Express, Inc. common stock based upon the exchange ratio applicable to the respective mergers. As of January 30, 1999, outstanding warrants to purchase Delivery common stock are vested and exercisable into 19,500 shares of Corporate Express common stock at a price of $9.44 per share and outstanding warrants to purchase DDI common stock were vested and exercisable into 123,101 shares of Corporate Express stock.