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SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Office Depot, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/ / $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
/X/ Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
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OFFICE DEPOT, INC.
2200 OLD GERMANTOWN ROAD
DELRAY BEACH, FLORIDA 33445
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
The annual meeting of stockholders of Office Depot, Inc. will be held on
May 18, 1995, at 10:00 a.m. EDT, at Embassy Suites Hotel, 661 N.W. 53rd Street,
Boca Raton, Florida 33487, for the following purposes:
1. To elect nine directors to hold office until the next annual meeting of
stockholders or until their successors have been elected and qualified;
2. To adopt the Restated Certificate of Incorporation of Office Depot,
Inc.;
3. To approve the Office Depot, Inc. Omnibus Equity Plan;
4. To approve the 1994-1998 Office Depot, Inc. Designated Executive
Incentive Plan, including amounts payable thereunder with respect to the
1994 fiscal year;
5. To ratify the appointment of Deloitte & Touche LLP as independent public
accountants for the fiscal year ended December 30, 1995; and
6. To transact any other business that may come before the meeting.
Stockholders of record as of the close of business on April 7, 1995 are
entitled to notice of and to vote at the annual meeting of stockholders or any
adjournment thereof.
By order of the Board of Directors,
BARRY J. GOLDSTEIN
Secretary
April 20, 1995
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE MEETING REGARDLESS OF THE
NUMBER YOU OWN. THEREFORE, EVEN IF YOU EXPECT TO ATTEND THE MEETING, PLEASE SIGN
AND RETURN YOUR PROXY IN THE ENCLOSED RETURN ENVELOPE PROMPTLY.
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PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
OF
OFFICE DEPOT, INC.
2200 OLD GERMANTOWN ROAD
DELRAY BEACH, FLORIDA 33445
TELEPHONE (407) 278-4800
This Proxy Statement is being furnished in connection with the solicitation
of proxies by the Board of Directors (the "Board") of Office Depot, Inc.
("Office Depot" or the "Company") for use at the annual meeting of the Company's
stockholders to be held on May 18, 1995, at 10:00 a.m. EDT, at Embassy Suites
Hotel, 661 N.W. 53rd Street, Boca Raton, Florida 33487, and at any adjournment
of that meeting (the "Annual Meeting"). The purpose of the Annual Meeting is to
elect nine directors to the Board, to adopt the Restated Certificate of
Incorporation of Office Depot, Inc. (the "Restated Certificate"), to approve the
Office Depot, Inc. Omnibus Equity Plan (the "Omnibus Equity Plan"), to approve
the 1994-1998 Office Depot, Inc. Designated Executive Incentive Plan (the
"Designated Executive Plan"), including amounts payable thereunder with respect
to the 1994 fiscal year, and to ratify the appointment of Deloitte & Touche LLP
as independent public accountants for the fiscal year ending December 30, 1995.
If a proxy in the form distributed by the Company is properly executed and
returned to the Company, the shares represented by that proxy will be voted at
the Annual Meeting. Where a stockholder specifies a choice, the proxy will be
voted as specified. If no choice is specified, the shares represented by the
proxy will be voted for the election of all nominees, for adoption of the
Restated Certificate, for the approval of the Omnibus Equity Plan, for the
approval of the Designated Executive Plan, including payment of amounts due
thereunder with respect to the 1994 fiscal year, and for the ratification of the
appointment of Deloitte & Touche LLP as independent public accountants for the
Company.
The Company's management does not know of any matters other than those
discussed in this Proxy Statement that will be presented at the Annual Meeting.
If other matters are presented, all proxies will be voted in accordance with the
recommendations of the Company's management.
Solicitation of proxies will be made initially by mail. The Company's
directors, officers and employees may also solicit proxies in person or by
telephone without additional compensation. In addition, proxies may be solicited
by certain banking institutions, brokerage firms, custodians, trustees, nominees
and fiduciaries who will mail material to or otherwise communicate with the
beneficial owners of shares of the Company's Common Stock. The Company has also
engaged Corporate Investor Communications, Inc. to assist in communicating with
these institutions and forwarding solicitation materials for a fee of $5,500
plus the reimbursement of expenses. All expenses of solicitation of proxies will
be paid by the Company.
A proxy may be revoked at any time prior to its exercise at the Annual
Meeting by written notice delivered to the Corporate Secretary of the Company
prior to the Annual Meeting or by attending the Annual Meeting and voting by
ballot.
Holders of record of Common Stock as of the close of business on April 7,
1995, will be entitled to vote at the Annual Meeting. As of April 7, 1995, there
were 149,738,054 shares of Common Stock issued and
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outstanding. Each share of Common Stock is entitled to one vote on each matter
to come before the Annual Meeting. Pursuant to Delaware law, abstentions are
treated as present and entitled to vote and thus have the effect of a vote
against a matter. A broker non-vote on a matter is considered not entitled to
vote on that matter and thus (i) is not counted in determining whether a matter
requiring approval of a majority of the shares present and entitled to vote has
been approved or whether a plurality of the shares present and entitled to vote
has been voted and (ii) has the effect of a vote against a matter requiring
approval of a majority of all shares outstanding.
This Proxy Statement and the accompanying proxy are being sent to the
Company's stockholders on or about April 20, 1995.
ELECTION OF DIRECTORS
The Nominating Committee of the Board has nominated the following nine
persons for election to the Board at the Annual Meeting:
Mark D. Begelman John B. Mumford
Denis Defforey Michael J. Myers
David I. Fuente Peter J. Solomon
W. Scott Hedrick Cynthia Cohen Turk
Alan L. Wurtzel
Directors are to be elected at the Annual Meeting to serve until the next
Annual Meeting of Stockholders or until their successors are elected and
qualified. The nominees are willing to be elected and to serve. In the event
that any nominee is unable to serve or is otherwise unavailable for election,
which is not now contemplated, the incumbent Board may or may not select a
substitute nominee. If a substitute nominee is selected, all proxies will be
voted for the person selected. If a substitute nominee is not so selected, all
proxies will be voted for the election of the remaining nominees. Proxies will
not be voted for a greater number of persons than the number of nominees named.
Directors will be elected by a plurality of the shares present and voting
at the meeting.
YOUR BOARD OF DIRECTORS RECOMMENDS A
VOTE FOR ELECTION OF ALL NOMINEES AS DIRECTORS
ADOPTION OF THE RESTATED CERTIFICATE
In April 1995, the Board approved amending the Company's current
Certificate of Incorporation by restating it in the form of the Restated
Certificate of Incorporation of Office Depot, Inc. (the "Restated Certificate")
and directed that the Restated Certificate be submitted to the Company's
stockholders for approval at the Annual Meeting. The purpose of the Restated
Certificate is to increase the authorized capital stock of the Company. The full
text of the Restated Certificate appears as Annex A to this Proxy Statement, and
the new text therein appears in italics. The summary of the Restated Certificate
that appears below is qualified in its entirety by reference to the full text of
the Restated Certificate.
The Company is currently authorized to issue 200,000,000 shares of Common
Stock, par value $0.01 per share (the "Common Stock"), and 1,000,000 shares of
Preferred Stock, $0.01 par value per share (the
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"Preferred Stock"). As of April 7, 1995, there were 149,738,054 shares of Common
Stock issued and outstanding, 13,102,379 shares of Common Stock reserved for
issuance under the Company's employee benefit plans, 16,579,728 shares of Common
Stock reserved for issuance under the Liquid Yield Option Notes issued by the
Company and no shares of Preferred Stock issued and outstanding. The Restated
Certificate increases the authorized number of shares of Common Stock from
200,000,000 to 400,000,000.
Upon issuance, any newly issued shares of Common Stock will have voting and
other rights identical to the existing shares of Common Stock. Nonetheless, the
availability of additional shares of Common Stock may upon issuance make it more
difficult for a third party to gain control of the Company by diluting the
ownership of such party. The effect of rendering a change in control more
difficult may be to adversely impact stockholders who wish to participate in
such a transaction. The Board is not aware, however, of any particular effort to
gain control of the Company. Cumulative voting is not provided for in the
current certificate of incorporation, the Restated Certificate or the Company's
bylaws.
The Board recommends that the Restated Certificate be adopted because it
believes that the number of shares of Common Stock available for issuance does
not provide the Company with adequate flexibility to meet future business
opportunities, including possible mergers, acquisitions or other transactions,
such as a stock split. The Company examines acquisition and other growth
opportunities when and as they arise. The Company has in the past and may in the
future engage in transactions that require the issuance of shares of the
Company's Common Stock. Depending on the size of any such transaction,
stockholders may or may not have the right to vote with respect to the
transaction and any issuance of Common Stock in connection therewith.
An affirmative vote of a majority of the shares outstanding is required for
approval of adoption of the Restated Certificate.
YOUR BOARD OF DIRECTORS RECOMMENDS
A VOTE FOR ADOPTION OF THE RESTATED CERTIFICATE
APPROVAL OF THE OMNIBUS EQUITY PLAN
The Omnibus Equity Plan was established, subject to stockholder approval,
by the Executive Committee of the Board of Directors on April 4, 1995. The
purpose of the Omnibus Equity Plan is to provide officers, directors and
employees, including named executive officers, identified by the Compensation
Committee as key employees of the Company or its affiliates, and other
individuals similarly identified by the Compensation Committee as providing
significant services for the Company or its affiliates, with an equity-based
incentive to maintain and enhance the performance and profitability of the
Company. It is the further purpose of the Omnibus Equity Plan to grant options
and stock appreciation rights that may constitute performance-based compensation
for named executive officers as described under Section 162(m) ("Section
162(m)") of the Internal Revenue Code of 1986, as amended (the "Code"). The
Omnibus Equity Plan provides, in general, for grants of options, stock
appreciation rights related to options ("Related SARs"), stock appreciation
rights not related to options ("Unrelated SARs") and restricted stock
(collectively referred to as "Grants"). As Grants to be awarded under the
Omnibus Equity Plan are made entirely in the discretion of the Compensation
Committee, the recipients, amounts and values of future benefits to be received
pursuant to the Plan, and benefits that would have been awarded in the previous
fiscal year had the Plan been in effect, are not determinable.
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The following is a summary of the proposed features of the Omnibus Equity
Plan, which is qualified in its entirety by reference to the Omnibus Equity
Plan, a copy of which may be obtained from the Company at no charge.
Administration
The Omnibus Equity Plan is administered by a committee designated by the
Board of Directors that is intended to consist of at least two directors who
qualify as "disinterested persons" as defined in Rule 16b-3 of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and who meet or are
deemed to meet the "outside director" requirement of Section 162(m). The Board
of Directors has designated the Compensation Committee to administer the Omnibus
Equity Plan. Determinations of the Compensation Committee on all matters
relating to the Omnibus Equity Plan or any specific Grant shall be conclusive.
Shares Reserved
Subject to adjustments for certain changes in the number of issued shares
of Common Stock, a total of 4,725,000 shares of Common Stock shall be available
for issuance under the Omnibus Equity Plan; provided, however, that (i) Grants
of options and/or Unrelated SARs made to any continuing employee in any one year
shall not exceed 250,000 shares of Common Stock, (ii) Grants of options and/or
Unrelated SARs made to any individual for the year in which such individual
became an employee of the Company may not exceed 400,000 shares of Common Stock
and (iii) Grants of incentive stock options first exercisable by any person in
any one year shall not have an aggregate fair market value in excess of
$100,000. As a further limitation, the total number of shares of Common Stock
available for issuance with respect to restricted stock Grants shall not exceed
2 percent of the number of shares of Common Stock issued and outstanding on the
date the plan is initially approved by the stockholders, as adjusted for stock
splits, the payment of stock dividends, or other changes in capitalization
effected without consideration to the Company. The 4,725,000 shares of Common
Stock to be reserved under the Omnibus Equity Plan were previously reserved for
issuance under the Office Depot, Inc. Stock Option and Stock Appreciation Rights
Plan. Shares of Common Stock delivered under the Omnibus Equity Plan may be
either authorized and unissued shares, treasury shares, reacquired shares or any
combination thereof. As of April 7, 1995, the closing price of the Common Stock
as reported on the New York Stock Exchange Composite Tape was $23.50 per share.
Eligibility
Grants under the Omnibus Equity Plan may be made to any employee of the
Company or any of its affiliates who is designated by the Compensation Committee
as a key employee and to any other person who performs significant services for
the Company or any of its affiliates and is so designated by the Compensation
Committee. As of March 24, 1995, the Company employed approximately 26,000
persons.
Term of Grants
The term of each Grant shall be determined by the Compensation Committee,
except that an incentive stock option shall be exercisable for a period of not
more than 10 years from the Grant date or, in the case of a holder of stock
constituting more than 10 percent of the voting power of the Company, five years
from such date.
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Types of Grants
Options. The Omnibus Equity Plan provides for the Grants of incentive
stock options described in Code Section 422 ("Incentive Options") and other
options subject to the provisions of Code Section 83 ("Nonqualified Options"),
on such terms as the Compensation Committee may determine. The exercise price of
options (the "Option Price") may not be less than 100 percent of the fair market
value of a share of Common Stock on the Grant date, except that Incentive
Options held by a person who owns stock representing more than 10 percent of the
voting power of the Company may not be granted for less than 110 percent of the
fair market value of a share of Common Stock on such date.
Each option shall be exercisable during the period determined by the
Compensation Committee. The Omnibus Equity Plan permits payment of the purchase
price to be made: (i) in cash; (ii) in shares of Common Stock owned by the
grantee for at least six months or such other period as the Compensation
Committee may prescribe; (iii) through the simultaneous sale through a broker of
shares of unrestricted Common Stock acquired on exercise; (iv) with the consent
of the Compensation Committee in its sole discretion, by a full recourse
promissory note and agreement of the grantee providing for payment with interest
on the unpaid balance; or (v) any combination of the foregoing.
SARs. The Compensation Committee may grant Related or Unrelated SARs to
any eligible employee on such terms as the Compensation Committee may determine.
Related SARs shall become and remain exercisable to the same extent as the
options to which they relate. Unrelated SARs shall become and remain exercisable
under such terms as the Compensation Committee may determine. Unless otherwise
provided by the Compensation Committee, the exercise of Related SARs shall
result in the cancellation or forfeiture of the options to which they relate, to
the extent of such exercise.
Upon exercise of an SAR, a grantee will receive an amount equal to the
difference between: (i) the fair market value of a share of Common Stock on the
date of such exercise; and (ii) an amount equal to (A) in the case of a Related
SAR, the exercise price of the option to which it relates, unless the
Compensation Committee specifies a higher amount, or (B) in the case of an
Unrelated SAR, the fair market value of a share of Common Stock on the Grant
date of such SAR (the "base amount"), unless the Compensation Committee
specifies a higher amount. The benefit upon the exercise of an SAR shall be
payable in cash or Common Stock as determined by the Compensation Committee.
Termination of Options and SARs. Generally, all options and SARs held by a
grantee upon termination of such grantee's employment shall terminate, although
the Omnibus Equity Plan provides for certain exceptions depending on the
circumstances of the employee's termination. In the case of regular termination
(i.e., other than for cause, retirement or death), a grantee is allowed a period
of 90 days after termination in which to exercise all options and SARs that were
exercisable immediately prior to the termination. In the event of retirement, a
grantee is permitted 18 months after termination in which to exercise Grants
vested as of the date of termination. Upon death before regular termination, a
grantee's representative or beneficiary receives 18 months in which to exercise
all the grantee's options and SARs, whether or not such Grants were exercisable
at the time of death. Upon death after regular termination, a grantee's
representative or beneficiary has until 90 days after the date of such
termination to exercise the grantee's options and SARs that were exercisable
immediately prior to the date of death, and upon death after retirement, a
grantee's representative or beneficiary has until the earlier of (i) 12 months
after the date of death and (ii) 18 months after the date of retirement to
exercise the grantee's options and SARs that were exercisable immediately prior
to the date of
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death. In none of these cases, however, may options or SARs be exercised after
the date on which they would have expired pursuant to the terms of the Omnibus
Equity Plan and the related Plan agreement.
Restricted Stock. The Compensation Committee may grant shares of Common
Stock subject to such conditions and restrictions as the Compensation Committee
may determine ("Restricted Stock"). Restricted Stock may be awarded alone or in
tandem with other Grants. The vesting of a Grant of Restricted Stock may be
conditioned upon the completion of a specified period of employment with the
Company or any affiliate, the attainment of specified performance goals and/or
such other conditions as the Compensation Committee may determine. The unvested
portion of a grant of Restricted Stock that has not fully vested shall terminate
upon a grantee's termination of employment for any reason. Payment of any
purchase price for shares of Restricted Stock shall be made under such terms as
are determined by the Compensation Committee.
Non-transferability
No Grant awarded under the Omnibus Equity Plan shall be assignable or
transferable by the grantee other than by will or the laws of descent and
distribution or pursuant to a qualified domestic relations order (as defined by
the Code or ERISA), and all rights may be exercised during the grantee's
lifetime only by the grantee.
Adjustments of Grants
The Compensation Committee may not grant an option or SAR in substitution
for a previously granted option or SAR if the new option or SAR would have a
lower per share exercise price or base amount than the Grant it replaces. The
Compensation Committee is not precluded, however, from making an equitable
adjustment to the maximum number of shares of Common Stock that may be issued
under the Omnibus Equity Plan, the maximum number of options and Unrelated SARs
that may be awarded to any one person in any year, the number of shares subject
to Grants and the exercise price or base amount of Grants for any change in the
number of issued shares of Common Stock resulting from the subdivision or
combination of such shares, other capital adjustments or the payment of a stock
dividend or other change in such shares of Common Stock effected without receipt
of consideration by the Company. Fractional shares resulting from any such
adjustment shall be eliminated. No such adjustment shall be made in a manner
that causes an Incentive Option to fail to continue to qualify under Code
Section 422.
Amendment and Termination
The Board of Directors may from time to time in its discretion amend or
terminate the Omnibus Equity Plan, except that no such amendment or termination
shall impair any rights under any Grant made prior to the amendment's effective
date without the consent of the grantee, and provided that no such amendment
shall, without stockholder approval: (i) materially increase benefits accruing
to grantees; (ii) increase the maximum number of shares available under the plan
or that may be granted to any person in any year; (iii) materially modify the
class of employees eligible to receive Grants; (iv) provide for Grants of stock
options or SARs having an exercise price of less than 100 percent of fair market
value on the Grant date; or (v) extend the term of the plan beyond April 4,
2005. The Omnibus Equity Plan shall terminate on April 4, 2005 or on such
earlier date as the Board of Directors may determine.
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Certain Federal Income Tax Consequences of the Omnibus Equity Plan
The following discussion is intended only as a brief summary of the federal
income tax rules relevant to stock options issued under the Omnibus Equity Plan,
as based upon the Code as currently in effect. These rules are highly technical
and subject to change in the future. In particular, the discussion of Incentive
Options is based, in part, on proposed regulations that may be amended
substantially before they are adopted in final form. Because federal income tax
consequences will vary as a result of individual circumstances, optionees should
consult their personal tax advisors with respect to the tax consequences
associated with stock options. Moreover, the following summary relates only to
optionees' federal income tax treatment, and the state, local and foreign tax
consequences may be substantially different.
Nonqualified Options. An optionee does not recognize any taxable income,
and the Company is not entitled to a deduction, upon the grant of a Nonqualified
Option. Upon the exercise of a Nonqualified Option, the optionee recognizes
ordinary income (subject to wage and employment tax withholding) equal to the
excess of the fair market value of the shares acquired over the option exercise
price. The amount of such excess is generally determined by reference to the
fair market value of the Common Stock on the date of exercise. However, in the
case of an optionee subject to six month short-swing profit liability under
Section 16b of the Exchange Act (a "16b Person") (typically, officers, directors
and major stockholders of the Company), such excess is determined by using the
fair market value on the later of the date of exercise and the date six months
after the Grant date unless such optionee elects to be taxed based on the fair
market value of the Common Stock on the date of exercise by filing an
appropriate election with the Internal Revenue Service within 30 days after the
exercise date. An optionee's basis in the stock received is equal to such
stock's fair market value on the date of exercise (or on the date six months
after the Grant date, if later, in the case on an optionee who is a 16b Person
and who makes no such election). The Company is entitled to a deduction equal to
the compensation taxable to the optionee.
If an optionee sells shares acquired pursuant to the exercise of a
Nonqualified Option, such optionee will recognize capital gain or loss equal to
the difference between the selling price of the shares and the optionee's basis
in the shares. Such capital gain or loss is long- or short-term, depending on
whether the optionee has held the shares for more than one year. In the case of
an optionee who is a 16b Person and who does not make the election described
above, any such capital gain will be long-term only if the stock has been held
for more than one year after the later of the exercise date or the date six
months after the Grant date. The Company is not entitled to any deduction with
respect to any capital gain recognized by the optionee.
Capital losses on the sale of such shares may be used to offset capital
gains. The net capital gain of an individual taxpayer is subject to a maximum
tax rate of 28 percent. If capital losses exceed capital gains, then up to
$3,000 of the excess losses may be deducted from ordinary income. Remaining
capital losses may be carried forward to future tax years.
Incentive Options. An optionee does not recognize taxable income on the
grant or exercise of an Incentive Option. However, the excess of the stock's
fair market value on the exercise date (the fair market value on the exercise
date or six months after the Grant date, whichever is later, is likely to govern
in the case of a 16b Person) over the option exercise price will be included in
the optionee's alternative minimum taxable income and thereby may subject the
optionee to an alternative minimum tax. Such alternative minimum tax may be
payable even though the optionee receives no cash upon the exercise of his or
her Incentive Option with which to pay such tax. Upon the disposition of shares
of Common Stock acquired pursuant to the exercise of an Incentive Option (i)
more than one year after the date of exercise, and (ii) more than two years
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after the Grant date (the "Required Holding Periods"), the optionee recognizes
long-term capital gain or loss, as the case may be, measured by the difference
between the stock's selling price and the exercise price. The Company is not
entitled to any tax deduction by reason of the grant or exercise of an Incentive
Option, or a disposition of stock received upon the exercise of an Incentive
Option after the Required Holding Periods have been satisfied.
If an optionee disposes of the shares of stock acquired pursuant to the
exercise of an Incentive Option before the expiration of the Required Holding
Periods (a "Disqualifying Disposition"), the difference between the exercise
price of such shares and the lesser of (i) the fair market value of such shares
upon the date of exercise (the fair market value on the exercise date or six
months after the Grant date, whichever is later, is likely to govern in the case
of a 16b Person) or (ii) the selling price, will constitute compensation taxable
to the optionee as ordinary income. The Company is allowed a corresponding tax
deduction equal to the amount of compensation taxable to the optionee. If the
selling price of the stock exceeds the fair market value on the exercise date
(or six months after the Grant date, if later, in the case of a 16b Person), the
excess will be taxable to the optionee as capital gain (long-term or short-term,
depending upon whether the optionee held the stock for more than one year). The
Company is not allowed a deduction with respect to any such capital gain
recognized by the optionee.
Use of Common Stock to Pay Option Price. If an optionee delivers
previously acquired Common Stock, however acquired, in payment of all or part of
the option exercise price of a Nonqualified Option, the optionee will not, as a
result of such delivery, be required to recognize as taxable income or loss any
appreciation or depreciation in the value of the previously acquired Common
Stock after its acquisition date. The optionee's tax basis in, and holding
period for, the previously acquired stock surrendered carries over to an equal
number of the option shares received on a share-for-share basis. The fair market
value of the shares received in excess of the shares surrendered constitutes
compensation taxable to the optionee as ordinary income. Such fair market value
is determined on the date of exercise, except in the case of 16b Persons as
discussed above. The tax basis for such shares is equal to their fair market
value as so determined, and such shares' holding period begins on the date on
which the fair market value of such shares is determined. The Company is
entitled to a tax deduction equal to the compensation income recognized by the
optionee.
If an optionee delivers previously acquired Common Stock (other than stock
acquired upon exercise of an Incentive Option and not held for the Required
Holding Periods) in payment of all or part of the option price of an Incentive
Option, the optionee will not be required to recognize as taxable income or loss
any appreciation or depreciation in the value of the previously acquired Common
Stock after its acquisition date. The optionee's tax basis in, and holding
period (for capital gain, but not Disqualifying Disposition, purposes) for the
previously acquired stock surrendered carries over to an equal number of the
option shares received on a share-for-share basis. Shares received in excess of
the shares surrendered have a tax basis equal to the amount paid (if any) in
excess of the previously acquired shares used to pay the exercise price, and
such shares' holding period will begin on the date of exercise (with the
possible exception of 16b Persons). Proposed regulations provide that where an
Incentive Option is exercised using previously acquired stock, a later
Disqualifying Disposition of the shares received will be deemed to have been a
disposition of the shares having the lowest basis first.
If an optionee pays the exercise price of an Incentive Option in whole or
in part with previously acquired Common Stock that was acquired upon the
exercise of an Incentive Option and that has not been held for the Required
Holding Periods, the optionee will recognize ordinary income (but not capital
gain) under the rules applicable to Disqualifying Dispositions. The Company will
be entitled to a corresponding deduction. The
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optionee's basis in the shares received in exchange for the shares surrendered
will be increased by the amount of ordinary income the optionee recognizes.
One Million Dollar Compensation Limit. If an employee's total compensation
from the Company (including compensation related to options) exceeds $1,000,000
in any given year, such compensation in excess of $1,000,000 may not be tax
deductible by the Company under Section 162(m). Affected employees are generally
the Company's Chief Executive Officer and four other most highly compensated
executive officers at the end of the Company's taxable year. Excluded from the
calculation of total compensation for this purpose is compensation that is
"performance-based" within the meaning of Section 162(m). The Company intends
that compensation realized upon the exercise of an option or SAR granted under
the Omnibus Equity Plan will be regarded as "performance-based" under Section
162(m) and that such compensation may be deductible without regard to the limits
of Section 162(m).
APPROVAL REQUIRED
The affirmative vote of a majority of the votes cast by the holders of the
shares of Common Stock represented in person or by proxy at the meeting is
required for approval of the Omnibus Equity Plan. Approval of the Omnibus Equity
Plan is required for 16b Persons who receive shares of Common Stock pursuant to
the Plan to be exempt from potential liability under Rule 16b-3 promulgated
under the Exchange Act and for shares of Common Stock issued pursuant to the
Plan to be listed for trading on the New York Stock Exchange.
YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE
FOR APPROVAL OF THE OMNIBUS EQUITY PLAN.
APPROVAL OF THE DESIGNATED EXECUTIVE PLAN
In February 1994, the Board determined that the Company structure the
performance-based portion of the compensation of its senior executive officers
in a manner that complies with Section 162(m) of the Internal Revenue Code,
which took effect January 1, 1994 ("Section 162(m)"). Section 162(m) generally
disallows a tax deduction to public companies for compensation in excess of $1
million paid to the chief executive officer and the other four most highly
compensated executive officers. Compensation to such an executive officer in
excess of $1 million may be deductible, however, if such compensation qualifies
as performance-based compensation within the meaning of Section 162(m). As a
result, the Board of Directors approved the 1994-1998 Office Depot, Inc.
Designated Executive Incentive Plan (the "Designated Executive Plan"), and the
Board directed that the Designated Executive Plan, including amounts payable
thereunder with respect to the 1994 fiscal year, be submitted to the Company's
stockholders for approval at the Annual Meeting. The Board concluded that
adoption of the Designated Executive Plan was necessary to permit the Company to
deduct that portion of compensation in excess of $1 million paid to its chief
executive officer and other most highly compensated executive officers. The
summary of the Designated Executive Plan that appears below is qualified in its
entirety by reference to the full text of the Designated Executive Plan, a copy
of which may be obtained from the Company at no charge. As awards to be made
under the Designated Executive Plan are made entirely in the discretion of the
Compensation Committee, the recipients, amounts and values of future benefits to
be received pursuant to the Plan are not determinable. For fiscal 1994, Mr.
Fuente earned a bonus of $1,250,000 and Mr. Begelman earned a bonus of
$1,000,000 under the Designated Executive Plan, subject in each case to
stockholder approval of the plan.
9
12
The Designated Executive Plan provides for the payment of awards, which are
expressed as a percentage of base salary, to those key employees of the Company
designated by the Board each year. Awards under the Designated Executive Plan
are based upon the achievement of annual performance objectives which are
determined annually by the Compensation Committee and may be based upon one or
more of the following five measurements of the Company's performance for the
relevant period, as such measurements may be adjusted for merger costs as
presented on the Company's audited financial statements: pre-tax earnings, net
earnings, earnings per share, return on assets and return on equity. The maximum
award that any participant may receive in any single year under the Designated
Executive Plan is $2 million.
Executive officers of the Company, including participants in the Deferred
Compensation Plan, are also eligible to defer all or part of their awards under
the Designated Executive Plan in accordance with the Office Depot, Inc. Deferred
Compensation Plan (the "Deferred Compensation Plan"). Amounts so deferred will
give rise to a deduction by the Company, and will be included in compensation
subject to the $1 million cap, in the year in which they are paid out to the
participant. The Company has reserved the discretionary power under the Deferred
Compensation Plan to defer payments under such plan to the extent necessary to
prevent a participant's includible compensation from exceeding the $1 million
cap for any given year.
Administration
The Designated Executive Plan is administered by a committee of the Board,
which must consist of two or more outside directors of the Company within the
meaning of Section 162(m). The Compensation Committee, currently consisting of
Messrs. Hedrick and Wurtzel, administers the Designated Executive Plan. The
committee may adopt, amend and repeal such rules, guidelines and practices
governing the Designated Executive Plan as it deems advisable, and interprets
the terms and provisions of the Designated Executive Plan and the awards issued
thereunder. In addition, the committee may decrease or eliminate an award under
the Designated Executive Plan.
Eligibility
The committee is authorized to grant awards to such designated key
employees of the Company as the Committee selects each year. The employees
selected to participate in the Designated Executive Plan for the 1994 and 1995
fiscal years are the Company's Chief Executive Officer and its President.
Incentive Awards
Awards granted under the Designated Executive Plan are based on the
achievement of annual performance objectives, determined by the committee, but
may not exceed $2 million per participant in any single year. These performance
objectives are based on one or more of the following five measurements of the
Company's performance, as such measurements may be adjusted for merger costs as
presented on the Company's audited financial statements: pre-tax earnings, net
earnings, earnings per share, return on assets and return on equity. The annual
performance objectives and corresponding award levels for each participant are
determined by the committee each year within the first 90 days of such year.
For the 1994 and 1995 fiscal years, the Compensation Committee established
earnings per share targets as a basis for the payment of awards under the
Designated Executive Plan. Earnings per share for 1994 were $0.69, which
exceeded the "stretch" goal (the most aggressive target level) established by
the Compensation
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13
Committee for such year of a 50% increase in earnings per share, resulting in
premium bonuses for Messrs. Fuente and Begelman of twice their respective base
salaries for the period.
Termination
The Designated Executive Plan may be terminated by the Board at any time
and will terminate by its own terms at the end of the 1998 fiscal year. No
incentive award may be granted under the Designated Executive Plan after 1998.
Approval Required
An affirmative vote of a majority of the shares present and voting at the
meeting is required for approval of the Designated Executive Plan, and for
payment of amounts thereunder with respect to the 1994 fiscal year.
YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL
OF THE DESIGNATED EXECUTIVE PLAN, INCLUDING THE PAYMENT OF
AMOUNTS PAYABLE THEREUNDER WITH RESPECT TO THE 1994 FISCAL YEAR
RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board recommends that the stockholders ratify the appointment of
Deloitte & Touche LLP as independent public accountants to audit the Company's
consolidated financial statements for the fiscal year ending December 30, 1995.
Deloitte & Touche LLP has audited the consolidated financial statements of the
Company each year since 1990. Representatives of Deloitte & Touche LLP will be
present at the meeting with the opportunity to make a statement if they desire
to do so, and will be available to respond to appropriate questions. If the
stockholders do not ratify the appointment of Deloitte & Touche LLP, the Board
will select other independent accountants.
YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION
OF THE APPOINTMENT OF DELOITTE & TOUCHE LLP AS THE
COMPANY'S INDEPENDENT PUBLIC ACCOUNTANTS
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14
SECURITY OWNERSHIP
The following table sets forth certain information with respect to the
beneficial ownership of the Common Stock as of April 7, 1995 by (i) each
stockholder known by the Company to own beneficially more than five percent (5%)
of the outstanding Common Stock, (ii) each director of the Company, (iii) the
Company's Chief Executive Officer and four other most highly compensated
executive officers and (iv) all executive officers and directors of the Company
as a group. Beneficial ownership of less than one percent is indicated by an
asterisk. Except as otherwise indicated below, each of the entities named in the
table has sole voting and investment power with respect to all shares of Common
Stock beneficially owned by such entity as set forth opposite such entity's
name. No effect has been given to shares reserved for issuance under outstanding
stock options except where otherwise indicated.
NUMBER OF SHARES PERCENT OF CLASS
NAME OF INDIVIDUAL OR GROUP BENEFICIALLY OWNED OUTSTANDING
----------------------------------------------------- ------------------ ----------------
FMR Corp.(1) 11,133,942 7.30%
82 Devonshire Street
Boston, Massachusetts 02109
Provident Investment Counsel(2) 9,375,775 6.15%
300 North Lake Avenue
Pasadena, CA 91101
Fourcar B.V. 22,692,600 14.89%
Coolsingel 139
3012 AG Rotterdam
The Netherlands
Mark D. Begelman(3) 1,362,179 *
Richard M. Bennington(4) 227,949 *
Denis Defforey(5) 65,750 *
Gary D. Foss(6) 377,938 *
David I. Fuente(7) 1,069,528 *
Barry J. Goldstein(8) 328,105 *
W. Scott Hedrick(9) 54,468 *
John B. Mumford(10) 85,797 *
Michael J. Myers(11) 24,722 *
Peter J. Solomon(12) 97,250 *
Cynthia Cohen Turk(13) 668 *
Alan L. Wurtzel(14) 52,722 *
All Executive Officers and Directors as a Group (15 3,940,287 2.59%
persons)(15)
- ---------------
(1) Based solely upon a Schedule 13G dated February 13, 1995. Of the 11,133,942
shares shown as beneficially owned by FMR Corp: (i) 10,383,392 shares are
beneficially owned by Fidelity Management Research Company ("Fidelity
Research"), a wholly-owned subsidiary of FMR Corp. and investment
12
15
advisor to several investment companies, and (ii) 750,000 shares are
beneficially owned by Fidelity Management Trust Company ("Fidelity Trust"),
a wholly-owned subsidiary of FMR, as investment manager of institutional
accounts. FMR Corp. and its chairman, Edward C. Johnson 3rd, each has sole
power to dispose of the 10,383,392 shares owned by Fidelity Research, but
neither FMR Corp. nor Mr. Johnson has the sole power to vote or to direct
the voting of such shares. FMR Corp. and Mr. Johnson each have sole
dispositive power over the 750,550 shares owned by Fidelity Trust, and FMR
Corp. and Mr. Johnson each have sole power to vote or to direct the voting
of 253,950 of such shares.
(2) Based solely upon a Schedule 13G dated February 7, 1995, Provident
Investment Counsel ("Provident") and Robert M. Kommerstad, a shareholder of
Provident, share with each other (i) the power to dispose of 9,375,775
shares, and (ii) the power to vote 7,266,827 shares. No other person has
the power to vote such shares.
(3) Includes options to purchase 848,220 shares issued to Mr. Begelman pursuant
to the Office Depot, Inc. Stock Option and Stock Appreciation Rights Plan
(the "Option Plan"), 22,500 shares held of record by Mark Zwerner and Joel
Koeppel Trustees, Mark D. Begelman Irrevocable Trust f/b/o Matthew Bryan
Begelman and 22,500 shares held of record by Mark Zwerner and Joel Koeppel
Trustees, Mark D. Begelman Irrevocable Trust f/b/o Lauren Andrea Begelman.
(4) Includes options to purchase 227,504 shares issued to Mr. Bennington
pursuant to the Option Plan.
(5) Reflects options to purchase 65,750 shares issued to Mr. Defforey as a
director of the Company. Mr. Defforey is a director of the Company is also
a member of the oversight committee (but not the board of directors) of
Carrefour S.A. ("Carrefour"), which indirectly owns all of the outstanding
capital stock of Fourcar B.V. ("Fourcar").
(6) Includes options to purchase 235,618 shares issued to Mr. Foss pursuant to
the Option Plan.
(7) Includes options to purchase 699,272 shares issued to Mr. Fuente pursuant
to the Option Plan and 58,980 shares held of record by his sons, Alan D.
Fuente and Steven M. Fuente and his step-daughter, Rebecca Mishkin. Mr.
Fuente disclaims beneficial ownership of the shares held by his sons and
step-daughter.
(8) Includes options to purchase 244,107 shares issued to Mr. Goldstein
pursuant to the Option Plan.
(9) Includes options to purchase 21,947 shares issued to Mr. Hedrick as a
director of the Company.
(10) Includes options to purchase 21,947 shares issued to Mr. Mumford as a
director of the Company and 57,042 shares held of record by the John Brese
Mumford and Christine Joyce Mumford Family Trust dated October 13, 1983.
(11) Includes options to purchase 24,722 shares issued to Mr. Myers as a
director of the Company.
(12) Includes options to purchase 65,750 shares granted to Mr. Solomon as a
director of the Company.
(13) Includes 150 shares held of record by Ms. Turk's spouse. Ms. Turk disclaims
beneficial ownership of these shares.
(14) Includes options to purchase 34,722 shares issued to Mr. Wurtzel as a
director of the Company.
(15) Includes options to purchase 2,682,058 shares.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
Directors are elected at the Annual Meeting of Stockholders to serve during
the ensuing year or until a successor is duly elected and qualified. Executive
officers are elected annually by the Board and serve at the discretion of the
Board.
The following table sets forth certain information concerning each of the
Company's directors and executive officers:
NAME AGE POSITION
- -------------------------- --- ----------------------------------------------------
David I. Fuente........... 49 Chairman of the Board and Chief Executive Officer
Mark D. Begelman.......... 47 Director, President and Chief Operating Officer
Barry J. Goldstein........ 52 Executive Vice President -- Finance, Chief Financial
Officer and Secretary
F. Terry Bean............. 47 Executive Vice President -- Human Resources
Richard M. Bennington..... 54 Executive Vice President -- Retail Division
Gary D. Foss.............. 52 Executive Vice President -- Marketing
Harry S. Brown............ 48 Executive Vice President -- Merchandising
Judith A. Rogala.......... 53 Executive Vice President -- Business Services
Division
William P. Seltzer........ 56 Executive Vice President -- Systems and Distribution
Denis Defforey............ 69 Director
W. Scott Hedrick.......... 49 Director
John B. Mumford........... 51 Director
Michael J. Myers.......... 54 Director
Peter J. Solomon.......... 56 Director
Cynthia Cohen Turk........ 42 Director
Alan L. Wurtzel........... 61 Director
DAVID I. FUENTE has been Chairman of the Board and Chief Executive Officer
since he joined the Company in December 1987. For five years prior to that time,
he was employed by The Sherwin-Williams Co. ("Sherwin-Williams") as President of
its Paint Stores Group, a chain of over 1,800 paint stores. Prior positions
included Vice President of Marketing of the Paint Stores Group and Vice
President of Marketing, Consumer Division, and Vice President of Marketing,
Automotive Aftermarket Division of Sherwin-Williams. Mr. Fuente is a director of
National Vision Associates Ltd.
MARK D. BEGELMAN has been a director, President and Chief Operating Officer
since he joined the Company in April 1991. He has substantial experience in the
office products industry and over 20 years in retail merchandising. Prior to
joining the Company, he was Chairman of the Board of The Office Club, Inc.
("Office Club") from August 1990 until April 1991 and Chief Executive Officer of
Office Club from April 1986 until April 1991, when Office Club became a
subsidiary of the Company. From May 1981 to May 1986, he served as Senior Vice
President of John Bruener Company, a home furnishings retailer. From June 1976
to May 1981, Mr. Begelman was Divisional Merchandise Manager of Jordan Marsh
Stores Corporation, a general merchandise retailer.
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BARRY J. GOLDSTEIN has been Chief Financial Officer since he joined the
Company in May 1987, has served as Executive Vice President -- Finance since
July 1991 and has served as Secretary since January 1988. From May 1987 until
June 1991, he served as Vice President -- Finance. Prior to joining the Company,
he spent 22 years in public accounting, the most recent 18 of which were with
Grant Thornton, a national accounting firm. He became a partner of Grant
Thornton in 1976.
F. TERRY BEAN has been Executive Vice President -- Human Resources since he
joined the Company in January 1994. Prior to joining the Company, he was
employed by Roses Stores Inc., a mass merchandiser, as Senior Vice President of
Human Resources. From 1978 to 1989, he was employed by Federal Express Corp., a
shipping company, where he held the position of Vice President of Personnel
Services from 1982 through 1989. Prior to 1978, Mr. Bean held human resource
management positions with Eaton Corp. and Johnson & Johnson Corp.
RICHARD M. BENNINGTON has been Executive Vice President -- Retail Division
(formerly known as Store Operations) since July 1991. He joined the Company as a
store manager in June 1986 and has served as the Company's Executive Vice
President -- Office Depot Store Operations, Vice President -- Operations,
District Manager and Director of Store Operations. Prior to joining the Company,
he was employed for one year by Mr. How, a chain of home products stores, as a
Zone Manager and held various field operations positions with other specialty
and mass merchandise chains.
GARY D. FOSS has been Executive Vice President -- Marketing since February
1995 and from the time he joined the Company in April 1991 until March 1993. Mr.
Foss served as Executive Vice President -- Merchandising and Marketing from
April 1993 to February 1995. From July 1990 until April 1991, he was the
Executive Vice President -- Merchandising of Office Club, a subsidiary of the
Company since April 1991. From 1985 to 1990, he was Chief Executive Officer and
President of Home Express, Inc., a California-based home furnishing retailer.
From 1962 to 1985, Mr. Foss held various merchandising, marketing and management
positions with Dayton Hudson Corporation, including Chief Executive Officer and
President of the R.G. Brandens Home Store Division.
HARRY S. BROWN has been Executive Vice President -- Merchandising since he
joined the Company in February 1995. Prior to joining the Company, he was
employed by Marshall's, an off-price department store chain, where he served in
various senior merchandise management positions from 1989 until 1995, most
recently as Executive Vice President, Merchandising, Planning and Allocation.
From 1980 to 1989, he served in various merchandise management positions within
Macy's.
JUDITH ROGALA has been Executive Vice President -- Business Services
Division since she joined the Company in June 1994. Prior to joining the
Company, she served as President and Chief Executive Officer of EQ-The
Environmental Quality Company, a waste management company, from 1992 to 1994.
Ms. Rogala was President and Chief Executive of Flagship Express, Inc., an air
cargo business, from 1990 to 1992. From 1980 to 1990, she served as Senior Vice
President, Central Support Services and as a Regional Vice President of Federal
Express Corporation.
WILLIAM P. SELTZER has been Executive Vice President -- Systems and
Distribution since joining the Company in August 1992. Prior to joining the
Company, he was Senior Vice President -- Distribution and Systems of Revco D.S.
Inc. from November 1987 to July 1992. Mr. Seltzer was Vice President of Systems
for the H.E. Butt Grocery Company from 1977 to 1987, and was Corporate Manager
of Information Processing from 1972 to 1977 with SCM Corporation.
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DENIS DEFFOREY has been a director since April 1990. He is a member of the
oversight committee ("Conseil de Surveillance") of Carrefour, a French
hypermarket chain that he co-founded in 1959 and is a director of DeNoyange
S.A., the principal shareholder of Carrefour. Mr. Defforey is a director of
Editions, S.A. and PetsMart, Inc.
W. SCOTT HEDRICK has been a director since April 1991. From November 1986
until April 1991, he was a director of Office Club, a subsidiary of the Company
since April 1991. He was a founder and has been a general partner of InterWest
Partners, a venture capital fund, since 1979.
JOHN B. MUMFORD has been a director since April 1991. He was a co-founder
of Office Club, a subsidiary of the Company since April 1991. Mr. Mumford served
as Chairman of the Board of Directors of Office Club from its inception in
February 1986 to August 1990, and served as Vice Chairman of the Board of
Directors of Office Club from August 1990 until April 1991. He has been
president of Crosspoint Corporation, a venture capital firm, since 1972 and
managing general partner of Crosspoint Venture Partners, a venture capital fund,
since 1982. Mr. Mumford is Chairman of the Board of Photonics Corporation and a
director of INMAC Corporation.
MICHAEL J. MYERS has been a director since July 1987. He is the President
and a director of First Century Partners Management Company, an advisor to
private venture capital equity funds, and a director of Smith Barney Venture
Corp., a wholly-owned subsidiary of Smith Barney, Inc., which acts as the
managing general partner of two private venture capital equity funds. Until
January 1992, he was a Senior Vice President and Managing Director of Smith
Barney, Harris Upham & Co., Incorporated ("Smith Barney"). He joined Smith
Barney's venture capital group in 1972 and has had a senior operating
responsibility for that group since 1976. Prior to 1972, he spent three years
with J.H. Whitney & Co., a private venture capital firm. Mr. Myers is a director
of Vista Environmental Information, Inc.
PETER J. SOLOMON has been a director since April 1990. He is Chairman and
Chief Executive Officer of Peter J. Solomon Company Limited, an investment
banking firm which provided services to the Company in fiscal 1993. From 1985 to
1989, he was a Vice Chairman and a member of the board of directors of Shearson
Lehman Hutton Inc. ("Shearson"). From 1981 to 1985, he was a Managing Director
at Shearson. Mr. Solomon is a director of Centennial Cellular Corporation,
Century Communications, Inc., Monro Muffler/Brake, Inc., Phillips-VanHeusen
Corporation, Bradlees, Inc. and Culbro Corporation.
CYNTHIA COHEN TURK has been a director since July 1994. She is the
President of MARKETPLACE 2000, a marketing and strategy consulting firm. Prior
to founding the firm in 1990, she was a Partner of Deloitte & Touche. Ms. Turk
is a director of Loehmann's Holdings, Inc., L. Luria & Son, Inc., One Price
Clothing, Inc., Spec's Music Stores, Inc. and The Mark Group.
ALAN L. WURTZEL has been a director since February 1989. Since June 1994,
he has been the Vice Chairman of the Board of Circuit City Stores, Inc.
("Circuit City"), a large consumer electronics retailing chain. From 1986 to
1994, he served as Chairman of the Board of Circuit City, and prior to 1986, he
served in several other capacities with Circuit City, including Chief Executive
Officer, President and Vice President. From December 1986 to April 1988, he
served as President of Operation Independence, a nonprofit organization.
For fiscal 1994, Messrs. Bean, Bennington, Defforey, Foss, Goldstein,
Mumford, Seltzer, Solomon and Wurtzel, and Ms. Rogala and Ms. Turk failed to
file a Form 5 in a timely manner. John Schmidt, Vice
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President and Controller, failed to file a Form 4 and a Form 5 in a timely
manner and Ms. Rogala and Ms. Turk each failed to file a Form 3 in a timely
manner.
The Board met 6 times during the 1994 fiscal year. The Board has standing
Audit, Compensation, Executive and Nominating Committees. All directors attended
at least 75% of the aggregate of the total number of meetings of the Board and
the total number of meetings of all committees on which they served.
The Audit Committee is composed of four directors (currently Messrs.
Defforey, Mumford and Myers and Ms. Turk). This committee recommends to the
Board the appointment of the Company's independent accountants. The committee
meets with the independent accountants to discuss the scope of the audit, any
nonaudit related assignments, fees, the independence of the accountants, the
results of the audit and the effectiveness of the Company's internal accounting
controls. The committee reports to the Board. The independent accountants have
access to the committee, with or without advising management, to discuss
auditing and any other accounting matters. The Audit Committee met 3 times
during the 1994 fiscal year.
The Compensation Committee is currently composed of two directors
(currently Messrs. Hedrick and Wurtzel). This committee recommends action to the
Board regarding the salaries and incentive compensation of elected officers of
the Company. The committee also reviews the compensation of certain other
principal management employees and administers the Company's employee benefit
plans. The Compensation Committee met 4 times during the 1994 fiscal year.
The Executive Committee was established in February 1992 and is composed of
four directors (currently Messrs. Begelman, Fuente, Solomon and Wurtzel). This
committee handles matters arising between regularly scheduled meetings of the
Board. The Executive Committee did not meet during the 1994 fiscal year.
The Nominating Committee is composed of four directors (currently Messrs.
Begelman, Fuente, Solomon and Wurtzel). This committee evaluates the performance
of incumbent directors, considers nominees recommended by management or
stockholders of the Company and develops its own recommendations. The committee
will consider nominees recommended by stockholders, although it has not adopted
any procedures to be followed by stockholders in submitting such
recommendations. In February, 1994, the Nominating Committee adopted a charter
formalizing the duties of the Committee and evidencing the Company's commitment
to increasing the diversity of the Board. The Nominating Committee met once
during the 1994 fiscal year.
COMPENSATION
Directors Compensation. Until April 1994, directors who were not salaried
officers of the Company received $18,000 per year for serving on the Board and
were reimbursed for costs incurred in attending meetings. No additional amounts
were paid for attendance at special meetings or for service on any committee of
the Board. Directors who were not salaried officers of the Company also each
received a number of options equal to $150,000 divided by the fair market value
of Common Stock on the date of grant for their first year of service on the
Board after election by the Company's stockholders and a number of options equal
to $50,000 divided by the fair market value of Common Stock on the date of grant
for each subsequent year of service on the Board. Such options become
exercisable in equal proportions on the first, second and third anniversary of
the date of grant. Directors who were salaried officers of the Company received
no compensation other than their compensation for such service as officers.
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20
From April 1994 until March 1995, directors who were not salaried officers
of the Company received $8,000 per year plus $1,000 per Board meeting attended
for serving on the Board and were reimbursed for costs incurred in attending
meetings. No additional amounts were paid for service on any committee of the
Board. Directors who were not salaried officers of the Company also each
received options to purchase 7,500 shares of Common Stock per year, with an
exercise price per share of fair market value measured on the date of grant.
Such options become exercisable in equal proportions on the first, second and
third anniversary of their date of grant. Directors who were salaried officers
of the Company received no compensation other than their compensation for such
service as officers.
Effective April 1995, directors who are not salaried officers of the
Company receive $15,000 per year plus $2,000 per Board meeting attended and are
reimbursed for costs incurred in attending meetings. No additional amounts are
paid for service on any committee of the Board. Directors who are not salaried
officers of the Company also each receive options to purchase 7,500 shares of
Common Stock per year, with an exercise price per share of fair market value
measured on the date of grant. Such options become exercisable in equal
proportions on the first, second and third anniversary of their date of grant.
Directors who are salaried officers of the Company receive no compensation other
than their compensation for such service as officers.
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Executive Officers Compensation. The following table sets forth the
aggregate cash compensation paid by the Company for services rendered during the
1992, 1993 and 1994 fiscal years by the Company's Chief Executive Officer and
the Company's four other most highly compensated executive officers.
SUMMARY COMPENSATION TABLE
LONG-TERM COMPENSATION
-----------------------------------
AWARDS
------------------------
ANNUAL COMPENSATION SECURITIES
------------------------------------ UNDER- PAYOUTS
OTHER RESTRICTED LYING ------- ALL
ANNUAL STOCK OPTIONS/ LTIP OTHER
NAME AND SALARY BONUS COMPENSATION AWARD(S) SARS PAYOUTS COMPENSATION
PRINCIPAL POSITION YEAR ($) ($) ($)(1) ($) (#)(2) ($) ($)/(3)
- ---------------------------- ---- ------- --------- ------------ ---------- ---------- ------- ------------
David I. Fuente, 1994 625,000 1,250,000(4) -0- -0- 125,000 -0- 5,328
Chief Executive Officer 1993 550,000 864,981 -0- -0- 112,500 -0- 4,497
1992 475,000 335,350 -0- -0- 272,655 -0- 4,364
Mark D. Begelman, 1994 500,000 1,000,000(4) -0- -0- 100,000 -0- 4,545
President and Chief 1993 450,000 651,384 -0- -0- 90,000 -0- 4,497
Operating Officer 1992 400,000 256,000 -0- -0- 102,330 -0- 4,364
Gary D. Foss, 1994 300,000 408,000 -0- -0- 35,000 -0- 2,958
Executive Vice 1993 250,000 344,469 -0- -0- 52,500 -0- 4,322
President -- Marketing 1992 225,000 135,900 -0- -0- 61,537 -0- 1,211
Richard M. Bennington, 1994 300,000 396,000 -0- -0- 35,000 -0- 2,958
Executive Vice 1993 250,000 339,477 -0- -0- 52,500 -0- 4,355
President -- Retail 1992 225,000 128,250 -0- -0- 33,750 -0- 2,700
Division
Barry J. Goldstein, 1994 300,000 393,600 -0- -0- 35,000 -0- 2,958
Executive Vice 1993 250,000 335,483 -0- -0- 52,500 -0- 3,707
President -- Finance, 1992 225,000 131,400 -0- -0- 77,783 -0- 2,700
Chief Financial
Officer and Secretary
- ---------------
(1) Other Annual Compensation items for persons named in the summary
compensation table were not reportable in 1994, 1993 and 1992.
(2) Options granted have been adjusted to reflect a two-for-one stock split in
1992, a three-for-two stock split in 1993, and a three-for-two stock split
in 1994.
(3) Amounts reported represent matching contributions under the Company's
Retirement Savings Plan, a defined contribution plan.
(4) Subject to stockholder approval of the Designated Executive Plan presented
herein.
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22
The following table sets forth information with respect to all options
granted in fiscal 1994 under the Option Plan to the Company's Chief Executive
Officer and the Company's four other most highly compensated executive officers.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
- ------------------------------------------------------------------------------------------
NUMBER OF PERCENT OF
SECURITIES TOTAL GRANT DATE VALUE
UNDERLYING OPTIONS/SARS -----------------
OPTIONS/ GRANTED TO EXERCISE OR GRANT DATE
SARS EMPLOYEES IN BASE PRICE EXPIRATION PRESENT VALUE(2)
NAME GRANTED(1) FISCAL YEAR ($/SH) DATE ($)
- ------------------------------------ ---------- ------------ ----------- ---------- -----------------
David I. Fuente..................... 125,000 6.7 21.00 7/29/04 1,496,607
Mark D. Begelman.................... 100,000 5.4 21.00 7/29/04 1,197,286
Gary D. Foss........................ 35,000 1.9 21.00 7/29/04 419,050
Richard M. Bennington............... 35,000 1.9 21.00 7/29/04 419,050
Barry J. Goldstein.................. 35,000 1.9 21.00 7/29/04 419,050
- ---------------
(1) All options granted in fiscal 1994 vest in three equal installments on July
29, 1995, July 29, 1996 and July 29, 1997 and were not awarded with tandem
stock appreciation rights ("SARs"). In the event of a Sale of the Company
(as defined in the Option Plan), the committee administering the Option
Plan may stipulate in its sole discretion, that (i) outstanding options and
SARs will become immediately exercisable; (ii) outstanding options and SARs
shall be assumed by the successor corporation; or (iii) substantially
equivalent options and SARs shall be substituted by the successor
corporation. In order to prevent dilution or enlargement of rights under
the options, in the event of a reorganization, recapitalization, stock
split, stock dividend, combinations of shares, merger, consolidation or
other change in the Common Stock the number of shares available upon
exercise and the exercise price will be adjusted accordingly. The
Compensation Committee may, subject to specified limitations, advance (i)
the date on which an option shall become exercisable by the grantee and
(ii) the grantee's right to designate an Appreciation Date for any SAR.
(2) The Black-Scholes option pricing model was used to determine the grant date
present value of the stock options granted in 1994 by the Company to the
executive officers listed above. Under the Black-Scholes option pricing
model, the grant date present value of each stock option referred to in the
table was calculated to be $11.97. The following facts and assumptions were
used in making such calculation: (i) an exercise price of $21.00 for each
such stock option; (ii) a fair market value of $21.00 for one share of
Common Stock on the date of grant; (iii) a dividend yield of 0%; (iv) a
stock option term of 10 years; (v) a stock volatility of 27.87%, based on
an analysis of weekly stock closing prices of Common Stock during the
fourth quarter of 1994; and (vi) an assumed risk-free interest rate of
7.10%, which is equivalent to the yield on a ten-year treasury note on the
date of grant. No other discounts or restrictions related to vesting or the
likelihood of vesting of stock options were applied. The resulting grant
date present value of $11.97 for each stock option was multiplied by the
total number of stock options granted to each of the executive officers
listed above to determine the total grant date present value of such stock
options granted to each such executive officer, respectively.
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23
The following table sets forth information with respect to all options
exercised in fiscal 1994 and the year-end value of unexercised options held by
the Company's Chief Executive Officer and the Company's four other most highly
compensated executive officers.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION/SAR VALUES
VALUE OF
NUMBER OF SECURITIES UNEXERCISED
UNDERLYING IN-THE-MONEY
UNEXERCISED OPTIONS/SAR'S AT
OPTIONS/SARS AT FISCAL YEAR-END
FISCAL YEAR-END ----------------
SHARES ACQUIRED VALUE --------------------- EXERCISABLE/
ON EXERCISE REALIZED EXERCISABLE/ UNEXERCISABLE
NAME (#) ($) UNEXERCISABLE (#) (1) ($) (1)
- ---------------------------------- --------------- --------- --------------------- ----------------
David I. Fuente................... -0- -0- 699,272 10,590,889
290,885 1,653,485
Mark D. Begelman.................. 236,966 4,499,376 848,220 14,181,471
194,110 980,634
Gary D. Foss...................... 30,000 646,958 235,618 4,258,596
90,513 500,041
Richard M. Bennington............. -0- -0- 227,504 3,771,925
81,250 417,929
Barry J. Goldstein................ 9,000 174,250 244,107 3,773,162
95,928 548,043
- ---------------
(1) The first number shown for each officer represents exercisable options, and
the second number represents unexercisable options.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Board is comprised of two directors,
currently Messrs. Hedrick and Wurtzel. Neither of such directors is or was an
officer of the Company or any of its subsidiaries, no executive officer of the
Company serves or served on the compensation committee of another entity (i) one
of whose executive officers served on the compensation committee of the Company
or (ii) one of whose executive officers served as a director of the Company, and
no executive officer of the Company serves or served as a director of another
entity who has or had an executive officer serving on the compensation committee
of the Company.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Company's compensation philosophy is to motivate employees to enhance
shareholder value. The Company's compensation practices are designed to attract,
motivate and retain key personnel by recognizing individual contributions as
well as the achievement of specific pre-determined goals and objectives
primarily through the use of "at risk" compensation strategies.
The Company's compensation program for executive officers consists of three
main components: (1) competitive base salaries, (2) annual cash incentives based
on overall Company performance and, with respect to those executives who are not
eligible to participate in the Designated Executive Plan, individual
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performance, and (3) stock option awards intended to encourage the achievement
of superior results over time and to align executive officer and shareholder
interests. The second and third components constitute "at risk" elements of each
executive's total compensation. The Compensation Committee utilized the services
of an independent consultant to assist in the analysis of all three compensation
components for the 1994 fiscal year.
Base Salary. The Compensation Committee determines base salaries for
executive officers utilizing market data developed by its independent consultant
which focuses on other high performance and specialty retail companies. The
survey focused on companies with annual revenues in the $2-$4 billion range. A
number of the companies included in the comparison base for establishing
executive pay levels were included in the S&P Retail Stores Composite and in the
S&P 500, which the Company utilized in the performance graph elsewhere in this
proxy statement. The Committee targets the median level of the executive market
for comparably sized companies within these surveys in determining executive
base pay levels.
The base salary for Mr. Fuente, Chairman and Chief Executive Officer,
increased by $75,000, a 13.6% increase over his 1993 base salary. Salaries for
the next four highest compensated officers as a group rose by $200,000, or
16.7%, over 1993 base pay. These increases in salaries for the Chief Executive
Officer and next four highest compensated officers position these executives at
approximately the median for their peer group and reflect the increase in
responsibilities consistent with the Company's rapid growth.
Annual Bonus. The bonus compensation of the Company's executive officers
is determined pursuant to (i) the Office Depot, Inc. Management Incentive Plan
(the "Management Plan") or (ii) the Office Depot, Inc. Designated Executive
Incentive Plan, which is presented for stockholder approval herein (the
"Designated Executive Plan," and, together with the Management Plan, the
"Incentive Plans"). The Incentive Plans provide for cash awards to eligible
participants. Eligible participants under the Management Plan are generally
salaried employees, including executive officers, who have been employed by the
Company through the end of the related fiscal year. Under the Designated
Executive Plan, eligible participants are defined to include those key employees
of the Company who have been identified by the Compensation Committee. The
objective of the Incentive Plans is to enhance shareholder value by rewarding
employees for the attainment of the Company's financial objectives and, in the
case of the Management Plan, for the attainment of other specific individual
goals linked to specified strategic elements of the business. By extending
annual bonuses deep into the organization, all managerial employees are
motivated to help achieve the Company's profit objectives as well as other key
strategic initiatives of the Company.
Awards under the Incentive Plans are expressed as a percentage of base
salary. These awards are a function of (i) the participant's level of
responsibility, (ii) the Company's financial performance for the year, and (iii)
in the case of the Management Plan, the participant's individual performance for
the year, as measured by specified goals established for such participant. The
Company has reserved the discretionary power under the Management Plan to defer
payment under such plan for up to 24 months after the date payment would
otherwise be made to the extent necessary to prevent a participant's includible
compensation from exceeding the $1 million limit under Section 162(m) for any
given year.
Under the Management Plan, performance is measured in connection with
attainment of specific earnings per share objectives as well as individual goals
that are established by the participant and his or her immediate supervisor.
Individual goals include targets which are above and beyond the participant's
normal job functions. Under the Designated Executive Plan, performance is
measured in connection with attainment of specific objectives based on one or
more of the following five measurements of the Company's performance, as
determined by the Compensation Committee each year and as such measurements may
be adjusted for
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merger costs as presented on the Company's audited financial statements: pre-tax
earnings, net earnings, earnings per share, return on assets and return on
equity. The maximum bonus amount payable under the Designated Executive Plan in
any single year to any single officer is $2,000,000. The goals of and awards to
the Chief Executive Officer, the President, and the executive officers of the
Company under the Incentive Plans are approved by the Compensation Committee.
For 1994, the Compensation Committee determined that the actual Incentive
Plan awards, for executive officers only, could be as much as twice the maximum
award otherwise payable if the Company's earnings per share exceed the "stretch"
goal (the most aggressive target level) established by the Compensation
Committee by including a "performance premium" if earnings per share exceeded
the prior year by at least 50%. This goal was significantly above the Company's
earnings forecast at the time the objective was established. Actual 1994
earnings per share were $0.69 compared to $0.45 in 1993 (prior to restatement
for 1994 acquisitions accounted for on a pooling of interest basis), or an
increase of 53%, resulting in premium bonus payments for the executive officer
group under both the Management Plan and the Designated Executive Plan.
For 1994, Mr. Fuente, Chairman and Chief Executive Officer, earned a bonus
of $1,250,000 as a result of the performance premium related to the earnings per
share performance. This "at risk" portion was 66.7% of Mr. Fuente's 1994 total
cash compensation. For 1994, Mr. Begelman, President and Chief Operating
Officer, earned a bonus of $1,000,000 as a result of the performance premium
related to the earnings per share performance. This "at risk" portion was 66.7%
of Mr. Begelman's 1994 total cash compensation. Such awards were made pursuant
to the Designated Executive Plan, which is submitted for approval herein.
Approval of the Designated Executive Plan is required for the payment of amounts
payable thereunder with respect to the 1994 fiscal year.
For 1994, incentive awards to other executive officers pursuant to the
Management Plan were based on earnings per share objectives and specific
individual objectives as established by the Compensation Committee. The
incentive opportunities for the executive officers pursuant to the Management
Plan are calculated as a percentage of base salary, with an award of up to twice
the maximum award otherwise payable if the Company's earnings per share exceed
the "stretch" goal (the most aggressive target level) established by the
Compensation Committee. For 1994, the three highest paid officers (other than
Messrs. Fuente and Begelman) as a group earned bonuses pursuant to the
Management Plan totalling an aggregate of $1,197,600. The "at risk" portion was
an aggregate of 57.1% of total compensation for such executives.
Stock Based Incentive Program. The objective of stock option awards is to
motivate grantees to maximize long-term growth and profitability of the Company.
Grantees can recognize value from options granted only if the Company's stock
price increases after the date on which such options are granted, since the
exercise price of options granted must at least equal the fair market value of
the Company's stock on the date of grant. The award of options thus aligns the
long-range interests of the grantees with those of shareholders.
Grants of options to the Company's executive officers and other key
employees in fiscal 1994 were made pursuant to the Option Plan. Grants of
options under the Option Plan were generally made annually. The Compensation
Committee determined the grant levels for grants to the Chief Executive Officer,
the President, and the executive officers of the Company after taking into
consideration prior year's grants, the organizational impact of the participant
and the level of emphasis the Company placed on participant retention. Stock
option awards below the executive officer level are a function of position
within the organization.
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26
Awards granted to Mr. Fuente and the next four highest compensated
executives for 1994 appear in the table on page 20. Based on the Black-Scholes
option pricing model, the present value at date of grant of Mr. Fuente's 1994
stock options represents 44.3% of his total 1994 compensation. The total "at
risk" portion, stock options plus annual bonus, was 81.3% of total 1994
compensation.
Stock option awards granted to the next four highest compensated executives
for 1994 represent 40.5% of total 1994 compensation. The total "at risk"
portion, stock plus annual bonus, for the next four highest compensated
executives was 76.7% of total 1994 compensation.
This emphasis of "at risk" compensation is consistent with the Company's
compensation philosophy and supports continued creation of shareholder value.
Deferred Compensation Plan. The Company's executive officers and other key
employees are permitted to defer up to 25% of their base salaries and up to 100%
of their bonuses under the Office Depot, Inc. Deferred Compensation Plan.
Deferrals may generally be made for any period of time selected by the
executive, but the Company has the right to further defer payouts under the plan
in order to avoid exceeding the $1 million cap on executive compensation.
Although the plan allows the Company to make additional matching deferrals and
incentive contributions at its discretion, no such contributions were made under
the plan for 1994 and no such contributions are contemplated for 1995.
Split Dollar Life Insurance. Effective in April 1995, the Corporation
makes available to its executive officers the opportunity to purchase whole life
insurance policies, with the premiums payable by the Company. If the Company's
assumptions regarding mortality, dividends and other factors are realized, the
Company will recover all of its payment for premiums either from death benefits
or from the executive, if the policy is transferred to the executive.
Compliance with Internal Revenue Code Section 162(m). Section 162(m),
which took effect January 1, 1994, generally disallows a tax deduction to public
companies for compensation over $1 million paid to the corporation's Chief
Executive Officer and four other most highly compensated executive officers.
Qualifying performance-based compensation will not be subject to the
deduction limit if certain requirements are met. The Company currently intends
to structure the performance-based portion of the compensation of its executive
officers (which currently consists of stock option grants and annual bonus) in a
manner that complies with Section 162(m).
Report of Compensation Committee
Alan L. Wurtzel, Chairman
W. Scott Hedrick, member
24
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COMMON STOCK PERFORMANCE
The graph shown below compares the cumulative total shareholder return on
the Company's Common Stock since December 31, 1989 with the S&P 500 Index and
the S&P Retail Stores Composite Index.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
AMONG OFFICE DEPOT, INC., THE S&P 500 INDEX AND THE S&P RETAIL
STORES COMPOSITE INDEX
MEASUREMENT PERIOD
(FISCAL YEAR COVERED) ODP S&P 500 S&P RETAIL
12/31/89 100 100 100
12/31/90 87 97 100
12/31/91 281 126 159
12/31/92 376 136 186
12/31/93 560 150 179
12/31/94 588 152 163
CERTAIN TRANSACTIONS
On April 24, 1991, the Company entered into a Stock Purchase Agreement (the
"Stock Purchase Agreement") with Carrefour S.A., a societe anonyme organized
under the laws of France ("Carrefour"), pursuant to which the Company agreed to
sell to Carrefour 6,435,000 newly issued shares of the Company's Common Stock at
a price of $6.23 per share (the "Carrefour Transaction"). These shares are
currently held by an indirect wholly-owned subsidiary of Carrefour, Fourcar B.V.
The Carrefour Transaction was consummated on June 7, 1991 and resulted in
proceeds to the Company of $40,040,000. In connection with the Carrefour
Transaction, the Company has also granted Carrefour certain registration rights
and has agreed to nominate, and to use reasonable efforts to elect, a
representative of Carrefour to the Board so long as Carrefour and its affiliates
hold at least 10% of the Company's outstanding voting securities. Mr. Defforey
was nominated to the Board in accordance with this agreement. In addition,
Carrefour has agreed not to compete with the Company in the retail office
products supply business in a large volume, warehouse or discount store format
in North America.
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SHAREHOLDER PROPOSALS
Shareholder proposals for inclusion in proxy materials for the Company's
1996 Annual Meeting of Stockholders should be addressed to the Corporate
Secretary at the Company's principal executive offices, 2200 Old Germantown
Road, Delray Beach, Florida 33445, and must be received by the Company on or
before December 20, 1995.
OTHER MATTERS
It is not presently expected that any matters other than those discussed
herein will be brought before the Annual Meeting. If, however, other matters do
come before the meeting, it is the intention of the persons named as
representatives in the accompanying proxy to vote in accordance with the
recommendation of the Company's management.
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ANNEX A
RESTATED CERTIFICATE OF INCORPORATION
OF
OFFICE DEPOT, INC.
ARTICLE ONE
The name of the corporation is Office Depot, Inc.
ARTICLE TWO
The address of the Corporation's registered office in the State of Delaware
is Corporation Trust Center, 1209 Orange Street, in the City of Wilmington,
County of New Castle. The name of its registered agent at such address is the
Corporation Trust Company.
ARTICLE THREE
The nature of the business or purposes to be conducted or promoted is to
engage in any lawful act or activity for which corporations may be organized
under the General Corporation Law of the State of Delaware.
ARTICLE FOUR
4.1 Capital Stock. The total number of shares of capital stock which the
corporation has authority to issue is 400 million shares of Common Stock, par
value of $0.01 per share, and 1 million shares of Preferred Stock, par value of
$0.01 per share.
4.2 Common Stock. Except as otherwise provided by the General Corporation
Law of the State of Delaware, by this restated certificate of incorporation or
any amendments thereto or by resolutions adopted by the board of directors of
the corporation providing for the issuance of Preferred Stock, all of the voting
power of the corporation shall be vested in the holders of the Common Stock, and
each holder of Common Stock shall have one (1) vote for each share of Common
Stock held by such holder on all matters voted upon by the stockholders.
4.3 Preferred Stock. The board of directors of the corporation is
authorized, subject to the limitations prescribed by law and the provisions of
this restated certificate of incorporation, to provide for the issuance of
shares of the Preferred Stock in one or more series, to establish from time to
time the number of shares to be included in each such series and to fix the
designations, voting powers, preferences, rights and qualifications, limitations
or restrictions of the shares of the Preferred Stock of each such series.
ARTICLE FIVE
The Corporation is to have perpetual existence.
30
ARTICLE SIX
In furtherance and not in limitation of the powers conferred by statute,
the board of directors of the corporation is expressly authorized to make, alter
or repeal the by-laws of the corporation.
ARTICLE SEVEN
Meetings of stockholders may be held within or without the State of
Delaware, as the by-laws of the corporation may provide. The books of the
corporation may be kept outside the State of Delaware at such place or places as
may be designated from time to time by the board of directors of the corporation
or in the by-laws of the corporation. Election of directors need not be by
written ballot unless the by-laws of the corporation so provide.
ARTICLE EIGHT
To the fullest extent permitted by the General Corporation Law of the State
of Delaware as the same exists or may hereafter be amended, a director of this
corporation shall not be liable to the corporation or its stockholders for
monetary damages for a breach of fiduciary duty as a director. Any repeal or
modification of this ARTICLE EIGHT shall not adversely affect any right or
protection of a director of the corporation existing at the time of such repeal
or modification.
ARTICLE NINE
The corporation reserves the right to amend, alter, change or repeal any
provision contained in this certificate of incorporation in the manner now or
hereafter prescribed herein and by the laws of the State of Delaware, and all
rights conferred upon stockholders herein are granted subject to this
reservation.
ARTICLE TEN
The corporation has expressly elected not to be governed by Section 203 of
the General Corporation Law of the State of Delaware.
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APPENDIX A
OFFICE DEPOT, INC. OMNIBUS EQUITY PLAN
ARTICLE 1. GENERAL
1.1 Purpose. The purpose of the Office Depot, Inc. Omnibus Equity Plan
(the "Plan") is to provide for certain officers, directors and key personnel, as
defined in Section 1.3, of Office Depot, Inc. (the "Company") and certain of its
Affiliates, and individuals who provide significant services for the benefit of
the Company and certain of its Affiliates, with an equity-based incentive to
maintain and enhance the performance and profitability of the Company. It is the
further purpose of this Plan to permit the granting of options and stock
appreciation rights that will constitute performance-based compensation for
certain executive officers, as described in section 162(m) of the Internal
Revenue Code of 1986, as amended (the "Code"), and regulations promulgated
thereunder.
1.2 Administration. (a) The Plan shall be administered by the Compensation
Committee (the "Committee") of the Board of Directors of the Company (the
"Board"), which Committee shall consist of two or more directors. It is intended
that the directors appointed to serve on the Committee shall be "disinterested
persons" (within the meaning of Rule 16b-3 promulgated under the Securities
Exchange Act of 1934 (the "Act")) and "outside directors" (within the meaning of
Code section 162(m)), so long as satisfaction of such classifications is
required for the exemptions set forth in such Rule and section; provided,
however, that the mere fact that a Committee member shall fail to qualify under
either of these requirements shall not invalidate any award made by the
Committee which award is otherwise validly made under the Plan. The members of
the Committee shall be appointed by, and may be changed at any time and from
time to time in the discretion of, the Board.
(b) The determination of the Committee on all matters relating to the Plan
or any Plan agreement shall be conclusive.
(c) No member of the Committee shall be liable for any action or
determination made in good faith with respect to the Plan or any award
hereunder.
(d) Notwithstanding anything to the contrary contained herein: the Board
may, in its sole discretion, at any time and from time to time, resolve to
administer the Plan, in which case, the term Committee as used herein shall be
deemed to mean the Board.
(e) The Company shall bear all costs, including attorneys' and accountants'
fees and expenses, of administering the Plan.
1.3 Persons Eligible for Awards. Awards under the Plan may be made to such
officers, directors and executive, managerial or professional employees ("key
personnel") of the Company or its Affiliates, and individuals who provide
significant services for the benefit of the Company or its Affiliates, as the
Committee shall from time to time in its sole discretion select; provided, that
officers who are not employees of the Company or any of its Affiliates shall not
be eligible to receive awards under the Plan, and provided, further, that
directors who are not, and were not during the previous year, (i) a director of
the Company or any of its Affiliates who was granted or awarded equity
securities pursuant to the Office Depot, Inc. Stock Option and Stock
Appreciation Rights Plan or any other plan of the Company or any of its
Affiliates (other than the
32
Office Depot, Inc. Amended Directors Stock Option Plan or (ii) an officer or
employee of the Company or any of its Affiliates, shall not be eligible to
receive awards under the Plan.
1.4 Types of Awards Under Plan. (a) Awards may be made under the Plan in
the form of (i) stock options ("options"), (ii) stock appreciation rights
related to an option ("related stock appreciation rights"), (iii) stock
appreciation rights not related to any option ("unrelated stock appreciation
rights") and (iv) restricted stock awards ("restricted stock awards"), all as
more fully set forth in Sections 2 and 3.
(b) Options granted under the Plan may be either (i) "nonqualified" stock
options subject to the provisions of Code section 83 or (ii) options intended to
qualify for incentive stock option treatment described in Code section 422.
(c) All options when granted are intended to be nonqualified stock options,
unless the applicable Plan agreement explicitly states that the option is
intended to be an incentive stock option. If an option is intended to be an
incentive stock option, and if for any reason such option (or any portion
thereof) shall not qualify as an incentive stock option, then, to the extent of
such nonqualification, such option (or portion) shall be regarded as a
nonqualified stock option appropriately granted under the Plan, provided that
such option (or portion) otherwise meets the Plan's requirements relating to
nonqualified stock options.
1.5 Shares Available for Awards. (a) Subject to Section 4.5 (relating to
adjustments upon changes in capitalization), as of any date the total number of
shares of Common Stock with respect to which awards may be granted under the
Plan, shall equal the excess (if any) of 4,725,000 shares, over (i) the number
of shares of Common Stock subject to outstanding awards, (ii) the number of
shares in respect of which options and stock appreciation rights have been
exercised, and (iii) the number of shares issued subject to forfeiture
restrictions which have lapsed.
In accordance with (and without limitation upon) the preceding sentence,
awards may be granted in respect of the following shares of Common Stock: shares
covered by previously granted awards that have expired, terminated or been
canceled for any reason whatsoever (other than by reason of exercise or vesting)
and with respect to which shares a grantee has received no benefits of ownership
(other than voting rights and dividends that were forfeited on such expiration,
termination or cancellation).
As a further limitation in addition to the foregoing, the total number of
shares of Common Stock with respect to which restricted stock awards may vest
under the Plan shall not exceed (subject to adjustments under Section 4.5) 2
percent of the number of shares of Common Stock issued and outstanding on the
date the Plan is initially approved by the stockholders of the Company.
(b) In any calendar year, a continuing employee of the Company eligible for
awards under the Plan may not be granted options and/or unrelated stock
appreciation rights under the Plan covering a total of more than 250,000 shares
of Common Stock; and an employee of the Company eligible for awards under the
Plan who was not an employee of the Company prior to such year may not be
granted options and/or unrelated stock appreciation rights under the Plan
covering a total of more than 400,000 shares of Common Stock.
(c) The aggregate fair market value (as of the effective date of grant of
incentive stock options) of Common Stock with respect to which incentive stock
options granted to a grantee under the Plan are exercisable for the first time
by such grantee during any calendar year shall not exceed $100,000.
2
33
(d) Shares of Common Stock that shall be subject to issuance pursuant to
the Plan shall be authorized and unissued, treasury or reacquired shares of
Common Stock or any combination thereof.
(e) Without limiting the generality of the foregoing, the Committee may,
with the grantee's consent, cancel any award under the Plan and issue a new
award in substitution therefor upon such terms as the Committee may in its sole
discretion determine, provided that the substituted award shall satisfy all
applicable Plan requirements as of the date such new award is made; and further
provided, notwithstanding the foregoing or any other provision of this Plan,
that in no event shall an option or stock appreciation right be granted in
substitution for a previously granted option or stock appreciation right, with
the old award being canceled or surrendered as a condition of receiving the new
award, if the new award would have a lower option exercise price or stock
appreciation right appreciation base than the award it replaces. The foregoing
is not intended to prevent equitable adjustment of awards upon the occurrence of
certain events as herein provided, for example, without limitation, adjustments
pursuant to Section 4.5.
1.6 Definitions of Certain Terms. (a) The term "Affiliate" as used herein
means any person or entity which, at the time of reference, directly, or
indirectly through one or more intermediaries, controls, is controlled by, or is
under common control with, the Company.
(b) The term "Common Stock" as used herein means the shares of common stock
of the Company as constituted on the effective date of the Plan, and any other
shares into which such common stock shall thereafter be changed by reason of a
recapitalization, merger, consolidation, split-up, combination, exchange of
shares or the like.
(c) Except as otherwise determined by the Committee in its sole discretion,
the "fair market value" as of any date and in respect of any share of Common
Stock shall be:
(i) if the Common Stock is listed for trading on the New York Stock
Exchange, the closing price, regular way, of the Common Stock as reported
on the New York Stock Exchange Composite Tape, or if no such reported sale
of the Common Stock shall have occurred on such date, on the next preceding
date on which there was such a reported sale; or
(ii) if the Common Stock is not so listed but is listed on another
national securities exchange or authorized for quotation on the National
Association of Securities Dealers Inc.'s NASDAQ National Market System
("NASDAQ/NMS"), the closing price, regular way, of the Common Stock on such
exchange or NASDAQ/NMS, as the case may be, on which the largest number of
shares of Common Stock have been traded in the aggregate on the preceding
twenty trading days, or, if no such reported sale of the Stock shall have
occurred on such date on such exchange or NASDAQ/NMS, as the case may be,
on the preceding date on which there was such a reported sale on such
exchange or NASDAQ/NMS, as the case may be; or
(iii) if the Common Stock is not listed for trading on a national
securities exchange or authorized for quotation on NASDAQ/NMS, the average
of the closing bid and asked prices as reported by the National Association
of Securities Dealers Automated Quotation System ("NASDAQ") or, if no such
prices shall have been so reported for such date, on the next preceding
date for which such prices were so reported.
1.7 Agreements Evidencing Awards. (a) Options, stock appreciation rights
and restricted stock awards granted under the Plan shall be evidenced by written
agreements. Other awards granted under the Plan shall be evidenced by written
agreements to the extent the Committee may in its sole discretion deem necessary
or
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desirable. Any such written agreements shall (i) contain such provisions not
inconsistent with the terms of the Plan as the Committee may in its sole
discretion deem necessary or desirable and (ii) be referred to herein as "Plan
agreements."
(b) Each Plan agreement shall set forth the number of shares of Common
Stock subject to the award granted thereby.
(c) Each Plan agreement with respect to the granting of a related stock
appreciation right shall set forth the number of shares of Common Stock subject
to the related option which shall also be subject to the related stock
appreciation right granted thereby.
(d) Each Plan agreement with respect to the granting of an option shall set
forth the amount (the "option exercise price") payable by the grantee to the
Company in connection with the exercise of the option evidenced thereby. The
option exercise price per share shall not be less than the fair market value of
a share of Common Stock on the date the option is granted.
(e) Each Plan agreement with respect to a stock appreciation right shall
set forth the amount (the "appreciation base") over which appreciation will be
measured upon exercise of the stock appreciation right evidenced thereby. The
appreciation base per share of Common Stock subject to a stock appreciation
right shall not be less than (i) in the case of an unrelated stock appreciation
right, the fair market value of a share of Common Stock on the date the stock
appreciation right is granted, or (ii) in the case of a related stock
appreciation right, the option exercise price per share of Common Stock subject
to the related option.
ARTICLE 2. STOCK OPTIONS AND STOCK APPRECIATION RIGHTS
2.1 Grant of Stock Options. The Committee may grant options to purchase
shares of Common Stock in such amounts and subject to such terms and conditions
as the Committee shall from time to time in its sole discretion determine,
subject to the terms of the Plan.
2.2 Grant of Stock Appreciation Rights. (a) Related Stock Appreciation
Rights. The Committee may grant a related stock appreciation right in
connection with all or any part of an option granted under the Plan, either at
the time the related option is granted or any time thereafter prior to the
exercise, termination or cancellation of such option, and subject to such terms
and conditions as the Committee shall from time to time in its sole discretion
determine, subject to the terms of the Plan. The grantee of a related stock
appreciation right shall, subject to the terms of the Plan and the applicable
Plan agreement, have the right to surrender to the Company for cancellation all
or a portion of the related option granted under the Plan, but only to the
extent that such option is then exercisable, and to be paid therefor an amount
equal to the excess (if any) of (i) the aggregate fair market value of the
shares of Common Stock subject to such option or portion thereof (determined as
of the date of exercise of such stock appreciation right), over (ii) the
aggregate appreciation base (determined pursuant to Section 1.7(e)) of the
shares of Common Stock subject to such stock appreciation right or portion
thereof.
(b) Unrelated Stock Appreciation Rights. The Committee may grant an
unrelated stock appreciation right in such amount and subject to such terms and
conditions as the Committee shall from time to time in its sole discretion
determine, subject to the terms of the Plan. The grantee of an unrelated stock
appreciation right shall, subject to the terms of the Plan and the applicable
Plan agreement, have the right to surrender to the Company for cancellation all
or a portion of such stock appreciation right, but only to the extent that such
stock appreciation right is then exercisable, and to be paid therefor an amount
equal to the excess (if any) of:
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(i) the aggregate fair market value of the shares of Common Stock subject to
such stock appreciation right or portion thereof (determined as of the date of
exercise of such stock appreciation right); over (ii) the aggregate appreciation
base (determined pursuant to Section 1.7(e)) of the shares of Common Stock
subject to such stock appreciation right or portion thereof.
(c) Payment. Payment due to the grantee upon exercise of a stock
appreciation right shall be made in cash and/or in Common Stock (valued at the
fair market value thereof as of the date of exercise) as determined by the
Committee in its sole discretion.
2.3 Exercise of Related Stock Appreciation Right Reduces Shares Subject to
Option. Upon any exercise of a related stock appreciation right or any portion
thereof, the number of shares of Common Stock subject to the related option
shall be reduced by the number of shares of Common Stock in respect of which
such stock appreciation right shall have been exercised.
2.4 Exercisability of Options and Stock Appreciation Rights. Subject to
the other provisions of the Plan:
(a) Exercisability Determined by Plan Agreement. Each Plan agreement
shall set forth the period during which and the conditions subject to which
the option or stock appreciation right evidenced thereby shall be
exercisable, as determined by the Committee in its discretion.
(b) Exercise of Related Stock Appreciation Right. Unless the
applicable Plan agreement otherwise provides, a related stock appreciation
right shall be exercisable at any time during the period that the related
option may be exercised.
(c) Partial Exercise Permitted. Unless the applicable Plan agreement
otherwise provides, an option or stock appreciation right granted under the
Plan may be exercised from time to time as to all or part of the full
number of shares as to which such option or stock appreciation right shall
then be exercisable.
(d) Notice of Exercise; Exercise Date. (i) An option or stock
appreciation right shall be exercisable by the filing of a written notice
of exercise with the Company, on such form and in such manner as the
Committee shall in its sole discretion prescribe, and by payment in
accordance with Section 2.6.
(ii) Unless the applicable Plan agreement otherwise provides, or the
Committee in its sole discretion otherwise determines, the date of exercise
of an option or stock appreciation right shall be the date the Company
receives such written notice of exercise and payment.
2.5 Limitation on Exercise. Notwithstanding any other provision of the
Plan, no Plan agreement shall permit an incentive stock option to be exercisable
more than 10 years after the date of grant.
2.6 Payment of Option Price. (a) Tender Due Upon Notice of
Exercise. Unless the applicable Plan agreement otherwise provides or the
Committee in its sole discretion otherwise determines, any written notice of
exercise of an option shall be accompanied by payment of the full purchase price
for the shares being purchased.
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(b) Manner of Payment. Payment of the option exercise price shall be made
in any combination of the following:
(i) by certified or official bank check payable to the Company (or the
equivalent thereof acceptable to the Committee);
(ii) by personal check (subject to collection), which may in the
Committee's discretion be deemed conditional;
(iii) if and to the extent provided in the applicable Plan agreement,
by delivery of previously acquired shares of Common Stock owned by the
grantee for at least six months (or such other period as the Committee may
prescribe) having a fair market value (determined as of the option exercise
date) equal to the portion of the option exercise price being paid thereby,
provided that the Committee may require the grantee to furnish an opinion
of counsel acceptable to the Committee to the effect that such delivery
would not result in the grantee incurring any liability under Section 16(b)
of the Act and does not require any Consent (as defined in Section 4.2);
and
(iv) with the consent of the Committee in its sole discretion, by the
full recourse promissory note and agreement of the grantee providing for
payment with interest on the unpaid balance accruing at a rate not less
than that needed to avoid the imputation of income under Code section 7872
and upon such terms and conditions (including the security, if any,
therefor) as the Committee may determine.
(c) Cashless Exercise. Payment in accordance with Section 2.6(b) may be
deemed to be satisfied, if and to the extent provided in the applicable Plan
agreement, by delivery to the Company of an assignment of a sufficient amount of
the proceeds from the sale of Common Stock acquired upon exercise to pay for all
of the Common Stock acquired upon exercise and an authorization to the broker or
selling agent to pay that amount to the Company, which sale shall be made at the
grantee's direction at the time of exercise, provided that the Committee may
require the grantee to furnish an opinion of counsel acceptable to the Committee
to the effect that such delivery would not result in the grantee incurring any
liability under Section 16 of the Act and does not require any Consent (as
defined in Section 4.2).
(d) Issuance of Shares. As soon as practicable after receipt of full
payment, the Company shall, subject to the provisions of Section 4.2, deliver to
the grantee one or more certificates for the shares of Common Stock so
purchased, which certificates may bear such legends as the Company may deem
appropriate concerning restrictions on the disposition of the shares in
accordance with applicable securities laws, rules and regulations or otherwise.
2.7 Default Rules Concerning Termination of Employment. Subject to the
other provisions of the Plan and unless the applicable Plan agreement otherwise
provides:
(a) General Rule. All options and stock appreciation rights granted
to a grantee shall terminate upon the grantee's termination of employment
or ceasing to provide other significant services for any reason except to
the extent post-employment or other provision of service exercise of the
option or stock appreciation right is permitted in accordance with this
Section 2.7.
(b) Termination for Cause. All options and stock appreciation rights
granted to a grantee shall terminate and expire on the day a grantee's
employment or other provision of service is terminated for cause, the
grantee resigns or ceases to provide services for cause or the grantee has
committed an act or
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omission upon which the Company could have terminated the grantee's
employment or other provision of service for cause.
(c) Regular Termination; Leaves of Absence. If the grantee's
employment or other provision of service terminates for reasons other than
as provided in subsections (b), (d), or (f) of this Section 2.7, the
portion of options and stock appreciation rights granted to such grantee
which were exercisable immediately prior to such termination may be
exercised until the earlier of 90 days after the grantee's termination and
the date on which such options and stock appreciation rights terminate or
expire in accordance with the provisions of the Plan (other than this
Section 2.7) and the Plan agreement; provided, that the Committee may, in
its sole discretion, determine such other period for exercise in the case
of a grantee whose employment terminates solely because the grantee's
employer ceases to be an Affiliate or the grantee transfers employment with
the Company's consent to a purchaser of a business disposed of by the
Company. The Committee may, in its sole discretion, determine (i) whether
any leave of absence (including short-term or long-term disability or
medical leave) shall constitute a termination of employment for purposes of
the Plan, and (ii) the impact, if any, of any such leave on outstanding
awards under the Plan.
(d) Retirement. If a grantee's employment terminates by reason of
retirement (as defined in any tax-qualified defined benefit pension plan
maintained by the Company or any Affiliate in which the grantee
participates) the options and stock appreciation rights exercisable by the
grantee immediately prior to the grantee's retirement shall be exercisable
by the grantee until the earlier of 18 months after the grantee's
retirement and the date on which such options and stock appreciation rights
terminate or expire in accordance with the provisions of the Plan (other
than this Section 2.7) and the Plan agreement.
(e) Death After Termination. If a grantee's employment or other
provision of service terminates in the manner described in subsections (c)
or (d) of this Section 2.7 and the grantee dies within the period for
exercise provided for therein, the options and stock appreciation rights
exercisable by the grantee immediately prior to the grantee's death shall
be exercisable by the personal representative of the grantee's estate or by
the person to whom such options and stock appreciation rights pass under
the grantee's will (or, if applicable, pursuant to the laws of descent and
distribution) (i) in the case of death following termination of employment
described in subsection (c) of this Section 2.7, until the date on which
such options and stock appreciation rights terminate or expire in
accordance with the provisions of subsection (c) of this Section 2.7, or
(ii) in the case of death following termination of employment described in
subsection (d) of this Section 2.7, until the earlier of 12 months after
the grantee's death, and the date on which such options and stock
appreciation rights terminate or expire in accordance with the provisions
of subsection (d) of this Section 2.7.
(f) Death Before Termination. If a grantee dies while employed by or
providing other services for the Company or any Affiliate, all options and
stock appreciation rights granted to the grantee but not exercised before
the death of the grantee, whether or not exercisable by the grantee before
the grantee's death, shall immediately become and be exercisable by the
personal representative of the grantee's estate or by the person to whom
such options and stock appreciation rights pass under the grantee's will
(or, if applicable, pursuant to the laws of descent and distribution) until
the earlier of 18 months after the grantee's death and the date on which
such options or stock appreciation rights terminate or expire in accordance
with the provisions of the Plan (other than this Section 2.7) and the Plan
agreement.
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2.8 Special ISO Requirements. In order for a grantee to receive special
tax treatment with respect to stock acquired under an option intended to be an
incentive stock option, the grantee of such option must be, at all times during
the period beginning on the date of grant and ending on the day three months
before the date of exercise of such option, an employee of the Company or any of
the Company's parent or subsidiary corporations (within the meaning of Code
section 424), or of a corporation or a parent or subsidiary corporation of such
corporation issuing or assuming a stock option in a transaction to which Code
section 424(a) applies. If an option granted under the Plan is intended to be an
incentive stock option, and if the grantee, at the time of grant, owns stock
possessing more than 10 percent of the total combined voting power of all
classes of stock of the grantee's employer corporation or of its parent or
subsidiary corporation, then (i) the option exercise price per share shall in no
event be less than 110 percent of the fair market value of the Common Stock on
the date of such grant and (ii) such option shall not be exercisable after the
expiration of five years after the date such option is granted.
ARTICLE 3. AWARDS OTHER THAN STOCK OPTIONS AND STOCK APPRECIATION RIGHTS
3.1 Restricted Stock Awards. (a) Grant of Awards. The Committee may grant
restricted stock awards, alone or in tandem with other awards, under the Plan in
such amounts and subject to such terms and conditions as the Committee shall
from time to time in its sole discretion determine. The vesting of a restricted
stock award granted under the Plan may be conditioned upon the completion of a
specified period of employment with the Company or any Affiliate, upon the
attainment of specified performance goals, and/or upon such other criteria as
the Committee may determine in its sole discretion.
(b) Payment. Each Plan agreement with respect to a restricted stock award
shall set forth the amount (if any) to be paid by the grantee with respect to
such award. If a grantee makes any payment for a restricted stock award which
does not vest, appropriate payment may be made to the grantee following the
forfeiture of such award on such terms and conditions as the Committee may
determine.
(c) Forfeiture upon Termination of Employment. Unless the applicable Plan
agreement otherwise provides or the Committee otherwise determines, (i) if a
grantee's employment or other provision of service terminates for any reason
(including death) before all of his restricted stock awards have vested, the
unvested portion of such awards shall terminate and expire upon such
termination, and (ii) in the event any condition to the vesting of restricted
stock awards is not satisfied within the period of time permitted therefor, such
unvested shares shall be returned to the Company.
(d) Issuance of Shares. The Committee may provide that one or more
certificates representing restricted stock awards shall be registered in the
grantee's name and bear an appropriate legend specifying that such shares are
not transferable and are subject to the terms and conditions of the Plan and the
applicable Plan agreement, or that such certificate or certificates shall be
held in escrow by the Company on behalf of the grantee until such shares vest or
are forfeited, all on such terms and conditions as the Committee may determine.
Unless the applicable Plan agreement otherwise provides, no share of restricted
stock may be assigned, transferred, otherwise encumbered or disposed of by the
grantee until such share has vested in accordance with the terms of such award.
Subject to the provisions of Section 4.2, as soon as practicable after any
restricted stock award shall vest, the Company shall issue or reissue to the
grantee (or to the grantee's designated beneficiary in the event of the
grantee's death) one or more certificates for the Common Stock represented by
such restricted stock award.
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(e) Grantees' Rights Regarding Restricted Stock. Unless the applicable
Plan agreement otherwise provides: (i) a grantee may vote and receive dividends
on restricted stock awarded under the Plan; and (ii) any stock received as a
distribution with respect to a restricted stock award shall be subject to the
same restrictions as such restricted stock.
ARTICLE 4. MISCELLANEOUS
4.1 Amendment of the Plan; Modification of Awards. (a) Plan
Amendments. The Board may, without stockholder approval, at any time and from
time to time suspend, discontinue or amend the Plan in any respect whatsoever,
except that no such amendment shall impair any rights under any award
theretofore made under the Plan without the consent of the grantee of such
award. Furthermore, except as and to the extent otherwise permitted by Section
4.5 or 4.11, no such amendment shall, without stockholder approval:
(i) materially increase the benefits accruing to grantees under the
Plan;
(ii) increase the maximum number of shares which may be made subject
to awards to an individual as options or stock appreciation rights in any
year;
(iii) materially increase, beyond the amounts set forth in Section
1.5, the number of shares of Common Stock in respect of which awards may be
issued under the Plan;
(iv) materially modify the designation in Section 1.3 of the classes
of persons eligible to receive awards under the Plan;
(v) provide for the grant of stock options or stock appreciation
rights having an option exercise price or appreciation base per share of
Common Stock less than 100 percent of the fair market value of a share of
Common Stock on the date of grant; or
(vi) extend the term of the Plan beyond the period set forth in
Section 4.13.
(b) Award Modifications. Subject to the terms and conditions of the Plan
(including Section 4.1(a)), the Committee may amend outstanding Plan agreements
with such grantee, including, without limitation, any amendment which would (i)
accelerate the time or times at which an award may vest or become exercisable
and/or (ii) extend the scheduled termination or expiration date of the award,
provided, however, that no modification having a material adverse effect upon
the interest of a grantee in an award shall be made without the consent of such
grantee.
4.2 Restrictions. (a) Consent Requirements. If the Committee shall at any
time determine that any Consent (as hereinafter defined) is necessary or
desirable as a condition of, or in connection with, the granting of any award
under the Plan, the acquisition, issuance or purchase of shares or other rights
hereunder or the taking of any other action hereunder (each such action being
hereinafter referred to as a "Plan Action"), then such Plan Action shall not be
taken, in whole or in part, unless and until such Consent shall have been
effected or obtained to the full satisfaction of the Committee. Without limiting
the generality of the foregoing, the Committee shall be entitled to determine
not to make any payment whatsoever until Consent has been given if (i) the
Committee may make any payment under the Plan in cash, Common Stock or both, and
(ii) the Committee determines that Consent is necessary or desirable as a
condition of, or in connection with, payment in any one or more of such forms.
(b) Consent Defined. The term "Consent" as used herein with respect to any
Plan Action means (i) any and all listings, registrations or qualifications in
respect thereof upon any securities exchange or other
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self-regulatory organization or under any federal, state or local law, rule or
regulation, (ii) the expiration, elimination or satisfaction of any
prohibitions, restrictions or limitations under any federal, state or local law,
rule or regulation or the rules of any securities exchange or other
self-regulatory organization, (iii) any and all written agreements and
representations by the grantee with respect to the disposition of shares, or
with respect to any other matter, which the Committee shall deem necessary or
desirable to comply with the terms of any such listing, registration or
qualification or to obtain an exemption from the requirement that any such
listing, qualification or registration be made, and (iv) any and all consents,
clearances and approvals in respect of a Plan Action by any governmental or
other regulatory bodies or any parties to any loan agreements or other
contractual obligations of the Company or any Affiliate.
4.3 Nontransferability. No award granted to any grantee under the Plan or
under any Plan agreement shall be assignable or transferable by the grantee
other than by will or the laws of descent and distribution or pursuant to a
qualified domestic relations order as defined by the Code or Title I of the
Employee Retirement Income Security Act, as amended, or the rules thereunder.
During the lifetime of the grantee, all rights with respect to any award granted
to the grantee under the Plan or under any Plan agreement shall be exercisable
only by the grantee.
4.4 Withholding Taxes. (a) Whenever under the Plan shares of Common Stock
are to be delivered pursuant to an award, the Committee may require as a
condition of delivery that the grantee remit an amount sufficient to satisfy all
federal, state and other governmental withholding tax requirements related
thereto. Whenever cash is to be paid under the Plan (whether upon the exercise
of a stock appreciation right or otherwise), the Company may, as a condition of
its payment, deduct therefrom, or from any salary or other payments due to the
grantee, an amount sufficient to satisfy all federal, state and other
governmental withholding tax requirements related thereto or to the delivery of
any shares of Common Stock under the Plan.
(b) Without limiting the generality of the foregoing, (i) a grantee may
elect to satisfy all or part of the foregoing withholding requirements by
delivery of unrestricted shares of Common Stock owned by the grantee for at
least six months (or such other period as the Committee may determine) having a
fair market value (determined as of the date of such delivery by the grantee)
equal to all or part of the amount to be so withheld, provided that the
Committee may require, as a condition of accepting any such delivery, the
grantee to furnish an opinion of counsel acceptable to the Committee to the
effect that such delivery would not result in the grantee incurring any
liability under Section 16(b) of the Act and (ii) the Committee may permit any
such delivery to be made by withholding shares of Common Stock from the shares
otherwise issuable pursuant to the award giving rise to the tax withholding
obligation (in which event the date of delivery shall be deemed the date such
award was exercised).
4.5 Adjustments Upon Changes in Capitalization. If and to the extent
specified by the Committee, the number of shares of Common Stock which may be
issued pursuant to awards under the Plan, the maximum number of options and/or
unrelated stock appreciation rights which may be granted to any one person in
any year, the number of shares of Common Stock subject to awards, the 2 percent
limitation on the number of shares of Common Stock which may vest in respect of
restricted stock awards under Section 1.5(a) above, the option exercise price
and appreciation base of options and stock appreciation rights theretofore
granted under the Plan, and the amount payable by a grantee in respect of an
award, shall be appropriately adjusted (as the Committee may determine) for any
change in the number of issued shares of Common Stock resulting from the
subdivision or combination of shares of Common Stock or other capital
adjustments, or the payment of a stock dividend after the effective date of the
Plan, or other change in such shares of Common Stock effected
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without receipt of consideration by the Company; provided that any awards
covering fractional shares of Common Stock resulting from any such adjustment
shall be eliminated and provided further, that each incentive stock option
granted under the Plan shall not be adjusted in a manner that causes such option
to fail to continue to qualify as an "incentive stock option" within the meaning
of Code section 422. Adjustments under this Section shall be made by the
Committee, whose determination as to what adjustments shall be made, and the
extent thereof, shall be final, binding and conclusive.
4.6 Right of Discharge Reserved. Nothing in the Plan or in any Plan
agreement shall confer upon any person the right to continue in the employment
of the Company or an Affiliate or affect any right which the Company or an
Affiliate may have to terminate the employment of such person.
4.7 No Rights as a Stockholder. No grantee or other person shall have any
of the rights of a stockholder of the Company with respect to shares subject to
an award until the issuance of a stock certificate to him for such shares.
Except as otherwise provided in Section 4.5, no adjustment shall be made for
dividends, distributions or other rights (whether ordinary or extraordinary, and
whether in cash, securities or other property) for which the record date is
prior to the date such stock certificate is issued. In the case of a grantee of
an award which has not yet vested, the grantee shall have the rights of a
stockholder of the Company if and only to the extent provided in the applicable
Plan agreement.
4.8 Nature of Payments. (a) Any and all awards or payments hereunder shall
be granted, issued, delivered or paid, as the case may be, in consideration of
services performed for the Company or for its Affiliates by the grantee.
(b) No such awards and payments shall be considered special incentive
payments to the grantee or, unless otherwise determined by the Committee, be
taken into account in computing the grantee's salary or compensation for the
purposes of determining any benefits under (i) any pension, retirement, life
insurance or other benefit plan of the Company or any Affiliate or (ii) any
agreement between the Company or any Affiliate and the grantee.
(c) By accepting an award under the Plan, the grantee shall thereby waive
any claim to continued exercise or vesting of an award or to damages or
severance entitlement related to non-continuation of the award beyond the period
provided herein or in the applicable Plan agreement, notwithstanding any
contrary provision in any written employment contract with the grantee, whether
any such contract is executed before or after the grant date of the award.
4.9 Non-Uniform Determinations. The Committee's determinations under the
Plan need not be uniform and may be made by it selectively among persons who
receive, or are eligible to receive, awards under the Plan (whether or not such
persons are similarly situated). Without limiting the generality of the
foregoing, the Committee shall be entitled, among other things, to make
non-uniform and selective determinations, and to enter into non-uniform and
selective Plan agreements, as to (a) the persons to receive awards under the
Plan, (b) the terms and provisions of awards under the Plan, (c) the exercise by
the Committee of its discretion in respect of the exercise of stock appreciation
rights pursuant to the terms of the Plan, and (d) the treatment of leaves of
absence pursuant to Section 2.7(c).
4.10 Other Payments or Awards. Nothing contained in the Plan shall be
deemed in any way to limit or restrict the Company, any Affiliate or the
Committee from making any award or payment to any person under any other plan,
arrangement or understanding, whether now existing or hereafter in effect.
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4.11 Reorganization. (a) In the event that the Company is merged or
consolidated with another corporation and, whether or not the Company shall be
the surviving corporation, there shall be any change in the shares of Common
Stock by reason of such merger or consolidation, or in the event that all or
substantially all of the assets of the Company are acquired by another person,
or in the event of a reorganization or liquidation of the Company (each such
event being hereinafter referred to as a "Reorganization Event") or in the event
that the Board shall propose that the Company enter into a Reorganization Event,
then the Committee may in its discretion, by written notice to a grantee,
provide that any one or more of the following conditions shall apply: (a) the
options or stock appreciation rights shall become immediately exercisable by any
grantees who are employed by or provide services to the Company or any of its
Affiliates at the time of the Reorganization Event and that such options or
stock appreciation rights shall terminate if not exercised prior to the date of
the Reorganization Event or other prescribed period of time, (b) the options or
stock appreciation rights shall be assumed by the successor entity or a parent
of such successor entity or (c) substantially equivalent options or stock
appreciation rights shall be substituted by the successor entity or a parent of
such successor entity. The Committee also may in its discretion by written
notice to a grantee provide that all or some of the restrictions on any of the
grantee's awards may lapse in the event of a Reorganization Event upon such
terms and conditions as the Committee may determine.
(b) Whenever deemed appropriate by the Committee, the actions referred to
in Section 4.1 l(a) may be made conditional upon the consummation of the
applicable Reorganization Event.
4.12 Section Headings. The section headings contained herein are for the
purposes of convenience only and are not intended to define or limit the
contents of said sections.
4.13 Effective Date and Term of Plan. (a) The Plan shall be deemed adopted
and become effective upon the approval thereof by the Board or such other date
as the Board shall determine, in each case subject to the approval of a majority
of the Company's shareholders.
(b) The Plan shall terminate upon the earlier of (i) 10 years after the
earlier of the date on which it becomes effective or is approved by the
Company's shareholders, and no awards shall thereafter be made under the Plan
and (ii) such date as the Board shall determine. Notwithstanding the foregoing,
all awards made under the Plan prior to such termination date shall remain in
effect until such awards have been satisfied or terminated in accordance with
the terms and provisions of the Plan and the applicable Plan agreement.
4.14 Governing Law. The Plan shall be governed by the laws of the State of
Delaware without giving effect to any choice of laws provisions.
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APPENDIX B
1994-1998 OFFICE DEPOT, INC. DESIGNATED EXECUTIVE INCENTIVE PLAN
SECTION 1. Purpose. The purpose of the Plan is to advance the interests of
the Company and its stockholders by providing incentives to certain designated
key employees of the Company in order to attract, retain and reward such key
employees and to strengthen the existing mutuality of interests between such
designated key employees and the Company's stockholders.
SECTION 2. Definitions. (a) "Board" means the Board of Directors of the
Company.
(b) "Code" means the Internal Revenue Code of 1986, as amended, and any
successor thereto.
(c) "Committee" means a committee of the Board consisting of two or more
outside directors within the meaning of Section 162(m) of the Code.
(d) "Company" means Office Depot, Inc., a Delaware corporation, or any
successor corporation.
(e) "Incentive Award" means an award under Section 5 that is based on
achievement of annual performance objectives.
(f) "Participant" means the designated key employees of the Company
selected by the Committee each year to participate in the Plan.
(g) "Plan" means this 1994-1998 Office Depot, Inc. Designated Executive
Incentive Plan.
SECTION 3. Administration. The Plan shall be administered by the
Committee. The Committee shall determine the annual performance objectives for
the Incentive Awards for each Participant. The Committee shall have the
authority to adopt, amend and repeal such rules, guidelines and practices
governing the Plan as it shall, from time to time, deem advisable; to interpret
the terms and provisions of the Plan and any Incentive Award issued under the
Plan; and to otherwise supervise the administration of the Plan. All decisions
made by the Committee pursuant to the provisions of the Plan shall be made in
the Committee's sole discretion and shall be final and binding on all persons.
The Committee shall have the power to decrease or eliminate an Incentive Award.
SECTION 4. Eligibility. Key employees of the Company are eligible to be
granted Incentive Awards under the Plan.
SECTION 5. Incentive Awards. The Committee may grant Incentive Awards
based on achievement of annual performance objectives. These performance
objectives shall be based on one or more of the following criteria, as adjusted
for merger costs as presented on the Company's audited financial statements:
pre-tax earnings, net earnings, earnings per share, return on assets and return
on equity. The Committee shall determine the annual performance objectives and
the corresponding award levels for each Participant each year within the first
90 days of such year. An Incentive Award shall be paid out in cash and may be
paid only after the Committee has certified in writing that the corresponding
annual performance objective was achieved.
SECTION 6. Maximum Compensation. The maximum dollar amount that any
Participant may be paid in any single year under the Plan may not exceed
$2,000,000.
SECTION 7. Termination. The Board may terminate the Plan at any time.
44
Section 8. Effective Date of the Plan. The Plan shall be effective as of
January 1, 1994, subject to approval of the Plan by the Company's stockholders.
Any Incentive Awards made under the Plan prior to such approval shall be
effective when made, but shall be conditioned on, and subject to, such approval
of the Plan by such stockholders.
Section 9. Term of the Plan. No Incentive Award may be granted under the
Plan after 1998.
2
45
APPENDIX C
PROXY OFFICE DEPOT, INC.
2200 OLD GERMANTOWN ROAD
DELRAY BEACH, FL 33445
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints David I. Fuente, Mark D. Begelman and Barry
J. Goldstein as Proxies, each with the power to appoint his substitute, and
hereby authorizes them to represent and to vote as designated below all the
shares of common stock of Office Depot, Inc. held of record by the undersigned
on April 7, 1995, at the annual meeting of shareholders to be held on May 18,
1995 or any adjournment thereof.
1. ELECTION OF DIRECTORS
/ / FOR all of the nominees listed below / / WITHHOLD AUTHORITY
(except as marked in the space provided to vote for all of the nominees listed
below) below
Mark D. Begelman, Denis Defforey, David I. Fuente, W. Scott Hedrick, John B. Mumford, Michael J.
Myers, Peter J. Solomon, Cynthia Cohen Turk and Alan L. Wurtzel
(INSTRUCTION: To withhold authority to vote for any individual nominee write that nominee's name in
the space provided below.)
- --------------------------------------------------------------------------------
2. PROPOSAL TO ADOPT THE RESTATED CERTIFICATE OF INCORPORATION OF OFFICE DEPOT,
INC.:
/ / FOR / / AGAINST / / ABSTAIN
3. PROPOSAL TO ADOPT THE OFFICE DEPOT, INC. OMNIBUS EQUITY PLAN:
/ / FOR / / AGAINST / / ABSTAIN
(over)
4. PROPOSAL TO ADOPT THE 1994-1998 OFFICE DEPOT, INC. DESIGNATED EXECUTIVE
INCENTIVE PLAN, INCLUDING AMOUNTS PAYABLE THEREUNDER WITH RESPECT TO THE
1994 FISCAL YEAR:
/ / FOR / / AGAINST / / ABSTAIN
5. PROPOSAL TO RATIFY APPOINTMENT OF DELOITTE & TOUCHE LLP AS INDEPENDENT PUBLIC
ACCOUNTANTS:
/ / FOR / / AGAINST / / ABSTAIN
6. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
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 PROPOSALS 1, 2, 3, 4 AND 5.
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
authorized person.
-------------------------------------
Signature
-------------------------------------
Signature if held jointly
DATED: , 1995
-----------------------
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
