EXHIBIT 99.1
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (the "Agreement") dated March 11, 2005 (the
"Effective Date") by and between Office Depot, Inc., a Delaware Corporation (the
"Company") and Xxxxx Xxxxxx (the "Executive").
WHEREAS, the Company desires to employ Executive and to enter into
an agreement embodying the terms of such employment;
WHEREAS, Executive desires to accept such employment and enter into
such an agreement;
In consideration of the premises and mutual covenants herein and for other good
and valuable consideration, the parties agree as follows:
1. Term of Employment. Subject to the provisions of Section 8 of
this Agreement, Executive shall be employed by the Company for a period
commencing on the Effective Date and ending the third anniversary thereof (the
"Employment Term") on the terms and subject to the conditions set forth in this
Agreement; provided, however, that commencing with such third anniversary and on
each subsequent anniversary, (each an "Extension Date"), the Employment Term
shall be automatically extended for an additional one-year period, unless the
Company or Executive provides the other party hereto 90 days prior written
notice before the next Extension Date (the "Notice Period") that the Employment
Term shall not be so extended.
2. Position.
a. During the Employment Term, Executive shall serve as the
Chief Executive Officer of the Company and the Chairman of the Board of
Directors of the Company (the "Board"). In such positions, Executive shall
report directly to the Board and shall have such duties and authority as shall
be customary for persons occupying such positions for companies of like size and
type. Executive shall initially be appointed as a member of the Board, and shall
be nominated to serve as a member of the Board during the Employment Term.
b. During the Employment Term, Executive shall devote
Executive's full business time and best efforts to the performance of
Executive's duties hereunder and will not engage in any other business,
profession or occupation for compensation or otherwise which would conflict or
interfere with the rendition of such services either directly or indirectly,
without the prior written consent of the Board; provided that, subject to the
prior approval of the Board, Executive may accept appointment to or continue to
serve on any board of directors or trustees of any business corporation or any
charitable organization and Executive may manage his personal investments,
provided in each case, and in the aggregate, that such activities do not
conflict or interfere with the performance of Executive's duties hereunder or
conflict with Section 9. Prior to the date hereof, Executive has disclosed all
such boards and organizations for which he serves, which the Board has
acknowledged do not conflict with and are not expected to interfere with
Executive's duties hereunder.
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3. Base Salary. During the Employment Term, the Company shall pay
Executive a base salary at the annual rate of $1,000,000, payable in regular
installments in accordance with the Company's usual payment practices for senior
executives. Executive shall be entitled to such increases (but no decreases) in
Executive's base salary, if any, as may be determined annually by the
Compensation Committee of the Board in its sole discretion. Executive's annual
base salary, as in effect from time to time, is hereinafter referred to as the
"Base Salary."
4. Bonus.
a. Replacement Bonus. The Executive shall receive $343,333 in
cash (the "Replacement Bonus") to replace a bonus payable by Executive's former
employer, with respect to the period commencing September 1, 2004 and ending
December 31, 2004, that was forfeited by Executive. The Replacement Bonus shall
be paid on the Effective Date and shall be repaid to the Company by Executive
if, prior to October 15, 2005, Executive's employment hereunder is terminated by
the Company for Cause or by Executive's resignation without Good Reason pursuant
to Section 8(a).
b. Annual Bonus. With respect to each full calendar year
during the Employment Term, Executive shall be eligible to earn an annual bonus
award (an "Annual Bonus"). Executive shall receive an Annual Bonus of 150% of
Executive's Base Salary (the "Target Bonus") if annual performance targets set
by the Compensation Committee of the Board (the "Performance Targets") are
achieved; provided, that Executive shall be eligible for an Annual Bonus of 70%
of Executive's Base Salary upon attainment of minimum annual performance targets
and not less than 200% of Executive's Base Salary upon achieving the maximum
Performance Targets. Performance Targets are established annually by the
Compensation Committee of the Board. Notwithstanding the foregoing provisions,
Executive shall be entitled to a minimum guaranteed Annual Bonus equal to the
Target Bonus (not prorated) for the 2005 fiscal year. Each Annual Bonus shall be
paid by March 15 of the following calendar year, unless otherwise agreed by the
Company and Executive.
5. Equity Arrangements. Beginning in calendar year 2006, Executive
shall be eligible to participate in all Company long-term equity incentive plans
and programs that cover senior executives of the Company. Executive shall also
be entitled to receive, on and as of the Effective Date, the equity awards set
forth below. For purposes of this Section 5, "Fair Market Value" shall mean the
mean between the high and low trading price of the Company's common stock as
traded on the New York Stock Exchange on the Effective Date. To the extent
necessary, any restricted stock awarded to Executive pursuant to this Section 5
shall be registered and listed on the New York Stock Exchange.
a. Time Vesting Restricted Stock. Upon the Effective Date,
Executive shall be granted 300,000 shares of "time-based" restricted common
stock of the Company (the "Time Restricted Stock"). The restrictions on the Time
Restricted Stock shall lapse with respect to one-third of the shares of the Time
Restricted Stock on each of the first, second and third anniversaries of the
Effective Date, provided that Executive is still employed by the Company on each
such date, except as otherwise provided pursuant to Section 8. The
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unvested portion of the Time Restricted Stock shall be forfeited without
consideration upon Executive's termination of employment, except as otherwise
provided pursuant to Section 8. The grant of Time Restricted Stock shall be
evidenced by a Time Restricted Stock Agreement substantially in the form
attached hereto as Exhibit A.
b. Performance Vesting Restricted Stock. Upon the Effective
Date, Executive shall be granted 300,000 shares of "performance-based"
restricted common stock of the Company (the "Performance Restricted Stock"). All
restrictions on the Performance Restricted Stock shall lapse with respect to
100% of the Performance Restricted Stock if, within the seven-year period
commencing on the Effective Date (the "Vesting Period"), the Fair Market Value
of a share of common stock of the Company shall equal or exceed the lower of (i)
133% of the Fair Market Value on the Effective Date or (ii) $24 per share, for a
period of at least ten consecutive trading days on the New York Stock Exchange
(subject to equitable adjustment in the event of any change in the outstanding
common stock of the Company by reason, other than due to a Change of Control as
provided at Section 5(d), of any stock dividend, stock split, reorganization,
recapitalization, merger, consolidation, spin-off, combination, transaction,
exchange of common stock or other corporate exchange or any extraordinary
distribution to shareholders of the Company), provided that Executive is still
employed by the Company on such date, except as otherwise provided pursuant to
Section 8. If the performance goals described in this Section 5(b) are not
achieved during the Vesting Period, the Performance Restricted Stock shall be
forfeited without consideration, except as otherwise provided pursuant to
Section 5(d). The grant of Performance Restricted Stock shall be evidenced by a
Performance Restricted Stock Agreement substantially in the form attached hereto
as Exhibit B.
c. Stock Options. Upon the Effective Date, Executive shall be
granted an option to purchase 2,000,000 shares of common stock of the Company
pursuant to and subject to the terms of the Company's Long-Term Equity Incentive
Plan (the "Option"). 50% of the shares constituting the Option shall have an
exercise price equal to the Fair Market Value on the Effective Date (the "FMV
Option") and 50% of the shares constituting the Option shall have an exercise
price equal to 120% of the Fair Market Value on the Effective Date (the "Premium
Option"). The FMV Option and the Premium Option will have a term of ten years
from the date of grant (subject to earlier termination in the event of
Executive's termination of employment), and will vest and become exercisable
with respect to one-third of all shares subject to the Option on each of the
first, second and third anniversaries of the Effective Date, provided that
Executive is still employed by the Company on each such date, except as
otherwise provided pursuant to Section 8. The unvested portion of the Option
shall be forfeited without consideration upon Executive's termination of
employment, except as otherwise provided pursuant to Section 8. The grant of the
Option shall be evidenced by a Stock Option Agreement substantially in the form
attached hereto as Exhibit C.
d. Change of Control. Upon the occurrence of a Change of
Control (as defined below), the Time Restricted Stock, Performance Restricted
Stock and the Option, as well as all other options, restricted stock and other
long-term equity or other long-term incentive awards then held by Executive,
shall fully vest as of the effective date of the Change of Control.
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6. Employee Benefits. During the Employment Term, Executive shall be
entitled to participate in the Company's pension and welfare benefit plans,
programs and arrangements (other than severance plans) generally made available
to other senior executives of the Company as in effect from time to time
(collectively "Employee Benefits"), except to the extent otherwise provided
herein. Executive shall be entitled to six weeks' vacation per year.
7. Business Expenses and Perquisites.
a. Business Expenses. During the Employment Term, reasonable
business expenses incurred by Executive in the performance of Executive's duties
hereunder shall be promptly reimbursed by the Company in accordance with Company
policies.
b. Perquisites.
(i) Executive shall be entitled to participate in the Company's
perquisite plans, programs and arrangements generally in effect from time to
time for senior executives of the Company, except to the extent otherwise
provided herein.
(ii) Executive shall be entitled to a $25,000 annual allowance
for all costs associated with Executive's ownership (or lease) and maintenance
of an automobile.
(iii) Executive shall be entitled to personal use of the
Company's private aircraft for up to a maximum of 100 hours annually. Executive
shall recognize imputed income for such use based upon applicable Treasury
Regulations in effect from time to time. Executive acknowledges that use of
Company aircraft for business purposes shall take priority over personal usage,
and he will work together with the Company's Chief Financial Officer (who has
oversight responsibility for Company aircraft) to ensure that his personal usage
is reasonably coordinated with business needs.
(iv) Executive shall be entitled to reimbursement for all
reasonable expenses, with due regard for Executive's particular circumstances,
incurred by Executive in relocating to Palm Beach County, Florida, or any
adjacent county, including, without limitation, expenses for: (A) packing and
moving (including transporting all vehicles); (B) temporary housing for 180
days; (C) travel for Executive and his family to search for a permanent
residence; (D) $25,000 of non-itemized incidental moving expenses; (E) closing
on the sale of Executive's current residence, including broker's fees; (F) loss
protection on the sale of Executive's current residence; and (G) closing on the
purchase of a permanent residence in Palm Beach County, Florida, or any adjacent
county. Executive shall also be entitled to have the amount of income and
employment taxes for which he is liable as a result of the provisions of this
Section 7(b)(iv) grossed up so that he will retain the full amount of the
reimbursements after taxes.
8. Termination. The Employment Term and Executive's employment
hereunder may be terminated by the Company or Executive at any time and for any
reason or by the Executive for Good Reason. Notwithstanding any other provision
of this Agreement, the provisions of this Section 8 shall exclusively govern
Executive's rights upon termination of employment with the Company and its
affiliates.
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a. Termination By the Company For Cause or By Executive's
Resignation Without Good Reason.
(i) The Employment Term and Executive's employment hereunder
may be terminated by the Company for Cause and shall terminate automatically
upon Executive's resignation without Good Reason.
(ii) For purposes of this Agreement, "Cause" shall mean (A) the
willful and continued failure of Executive to perform substantially Executive's
duties with the Company or one of its affiliates (other than any such failure
resulting from incapacity due to physical or mental illness), after a written
demand for substantial performance is delivered to Executive by the Board which
specifically identifies the manner in which the Board believes that Executive
has not substantially performed Executive's duties, (B) the willful engaging by
Executive in illegal conduct or gross misconduct which is materially and
demonstrably injurious to the Company, or (C) a willful and material violation
of a material provision of the Company's written policies, including, without
limitation, the Company's Code of Ethical Behavior; provided that no act, or
failure to act, on the part of Executive, shall be considered "willful" unless
it is done, or omitted to be done, by Executive in bad faith and without
reasonable belief that Executive's action or omission was in the best interest
of the Company; provided, further, that any act, or failure to act, based upon
authority given pursuant to a resolution duly adopted by the Board or based upon
the advice of counsel for the Company, shall be conclusively presumed to be
done, or omitted to be done, by Executive in good faith and in the best interest
of the Company. The termination of employment of Executive shall not be deemed
to be for Cause unless and until there shall have been delivered to Executive a
copy of a resolution duly adopted by the affirmative vote of not less than three
quarters of the entire membership of the Board at a meeting of the Board called
and held for such purpose (after reasonable notice is provided to Executive and
Executive is given an opportunity, together with counsel, to be heard before the
Board), finding that, in the good faith opinion of the Board, Executive is
guilty of the conduct described in clauses (A), (B) or (C) of this Section
8(a)(ii), and specifying the particulars thereof in detail.
(iii) If Executive's employment is terminated by the Company for
Cause, or if Executive resigns without Good Reason, Executive shall be entitled
to receive:
(A) the Base Salary through the date of termination;
(B) any Annual Bonus earned but unpaid as of the date of
termination for any previously completed fiscal year;
(C) reimbursement for any unreimbursed business expenses
properly incurred by Executive in accordance with Company policy, or
unreimbursed expenses under Section 7(b)(ii) or (iv) incurred, in
either case, prior to the date of Executive's termination;
(D) payment for accrued vacation unused as of the date of
termination;
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(E) such Employee Benefits, if any, as to which Executive may
be entitled under the employee benefit plans of the Company (the
amounts described in clauses (A) through (E) hereof being referred to
as the "Accrued Rights"); and
(F) any vested but unexercised portion of the Option shall
remain exercisable until the earlier of (x) 90 days following the
effective date of such termination and (y) the expiration of the
Option term.
Following such termination of Executive's employment by the Company
for Cause or resignation by Executive without Good Reason, except as set forth
in this Section 8(a)(iii), Executive shall have no further rights to any
compensation or any other benefits under this Agreement.
b. Termination Due to Disability or Death.
(i) The Employment Term and Executive's employment hereunder
shall terminate upon a termination of Executive's employment due to Executive's
death or Executive's disability (as defined under the Company's long-term
disability plan; such incapacity is hereinafter referred to as "Disability").
Any question as to the existence of the Disability of Executive as to which
Executive and the Company cannot agree shall be determined in writing by a
qualified independent physician mutually acceptable to Executive and the
Company. If Executive and the Company cannot agree as to a qualified independent
physician, each shall appoint such a physician and those two physicians shall
select a third who shall make such determination in writing. The determination
of Disability made in writing to the Company and Executive shall be final and
conclusive for all purposes of the Agreement.
(ii) Upon termination of Executive's employment hereunder for
either Disability or death, Executive or Executive's estate (as the case may be)
shall be entitled to receive:
(A) the Accrued Rights;
(B) the Target Bonus multiplied by a fraction, the numerator
of which shall equal the number of days Executive was employed by the
Company in the Company fiscal year in which Executive's termination of
employment occurs and the denominator of which shall equal 365;
(C) continuation of medical reimbursement coverage for
Executive and/or Executive's eligible dependents for a period of 2
years following Executive's termination of employment, at the same
rates applicable to active employees during such 2-year period;
provided, however, that if Executive becomes employed by a new
employer, continuing health insurance coverage from the Company will
cease if he is eligible for comparable medical reimbursement plan
coverage, and Executive's entitlement to COBRA continuation coverage
shall commence as of the date of Executive's termination of employment
(collectively, these shall be referred to as the "Health Benefits");
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(D) immediate, full vesting of all outstanding restricted
stock vesting on a time-basis, but not on a performance-basis, stock
options and all other long-term equity or other long-term incentive
awards vesting on a time-basis then held by Executive;
(E) the Performance Restricted Stock awarded to Executive
pursuant to Section 5(b) shall remain outstanding and the restrictions
thereon shall lapse if the performance goals set forth in Section 5(b)
are achieved during the Vesting Period; and
(F) all outstanding stock options then held by Executive shall
remain exercisable until the earlier of (x) 24 months following the
effective date of such termination and (y) the expiration of the
option term.
Following Executive's termination of employment due to death or
Disability, except as set forth in this Section 8(b)(ii), Executive shall have
no further rights to any compensation or any other benefits under this
Agreement.
c. Termination By the Company Without Cause or Resignation by
Executive for Good Reason, Prior to a Change of Control.
(i) The Employment Term and Executive's employment hereunder may
be terminated by the Company without Cause or by Executive's resignation for
Good Reason, in either case prior to a Change of Control.
(ii) For purposes of this Agreement, "Good Reason" shall mean, in
the absence of Executive's written consent:
(A) assignment to Executive of any duties materially
inconsistent with Executive's position(s) (including titles and
reporting requirements), authority, duties, responsibilities, or any
other action by the Company which results in a diminution in such
position(s), authority, duties or responsibilities, excluding for this
purpose an isolated, insubstantial and inadvertent action not taken in
bad faith and which is remedied by the Company promptly after receipt
of notice thereof given by Executive;
(B) failure to maintain Executive in the positions set forth
in Section 2 hereof (including, without limitation, a failure to elect
and re-elect Executive as a member of the Board);
(C) a material breach by the Company of a material provision
of this Agreement, in any case which has not been cured by the Company
within thirty (30) days after written notice of such action, breach or
noncompliance has been given by Executive to the Company;
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(D) requiring Executive to be based at any office or location
more than 35 miles from the Company's principal offices as currently
located in Palm Beach County, Florida;
(E) after a Change of Control, a termination by Executive for
any reason during the 30-day period immediately preceding the first
anniversary of the effective date of a Change of Control; or
(F) expiration of the Employment Term due to the Company's
provision of notice to Executive during the Notice Period that the
Employment Term shall not be extended pursuant to Section 1.
(iii) If Executive's employment is terminated by the Company
without Cause (other than by reason of death or Disability) or if Executive
resigns for Good Reason, in either case prior to a Change of Control, Executive
shall be entitled to receive:
(A) the Accrued Rights and the Health Benefits;
(B) a pro rata portion of the Annual Bonus, if any, that
Executive would have been entitled to receive pursuant to Section 4
hereof in respect of the fiscal year in which employment terminated,
based upon the percentage of the fiscal year that shall have elapsed
through the date of Executive's termination of employment, payable
when such Annual Bonus would have otherwise been payable had
Executive's employment not terminated;
(C) a lump-sum cash payment equal to 2 times the sum of (x)
the Base Salary and (y) the Target Bonus, payable within 30 days
following the date of Executive's termination of employment except as
otherwise required pursuant to Section 13(p);
(D) immediate, full vesting of all outstanding restricted
stock vesting on a time-basis, but not on a performance-basis, stock
options and all other long-term equity or other long-term incentive
awards vesting on a time-basis then held by Executive;
(E) the Performance Restricted Stock awarded to Executive
pursuant to Section 5(b) shall remain outstanding and the restrictions
thereon shall lapse if the performance goals set forth in Section 5(b)
are achieved during the Vesting Period; and
(F) all outstanding stock options then held by Executive shall
remain exercisable until the earlier of (x) 24 months following the
effective date of such termination and (y) the expiration of the
option term.
Following Executive's termination of employment by the Company
without Cause (other than by reason of Executive's death or Disability) or by
Executive's resignation for Good Reason, in either case prior to a Change of
Control, except as set forth in this Section 8(c)(iii), Executive shall have
no further rights to any compensation or any other benefits under this
Agreement.
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d. Termination By the Company Without Cause or Resignation by
Executive for Good Reason, Upon or After a Change of Control.
(i) The Employment Term and Executive's employment hereunder may
be terminated by the Company without Cause or by Executive's resignation for
Good Reason, in each case upon or after a Change of Control.
(ii) For purposes of this Agreement, a "Change of Control" shall
mean
(A) the acquisition by any individual, entity or group (within
the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act")) (a "Person") of
beneficial ownership (within the meaning of Rule 13d-3 promulgated
under the Exchange Act) of 20% or more of either (x) the
then-outstanding shares of common stock of the Company (the
"Outstanding Company Common Stock") or (y) the combined voting power
of the then-outstanding voting securities of the Company entitled to
vote generally in the election of directors (the "Outstanding Company
Voting Securities"); provided, however, that for purposes of this
subsection (A), the following acquisitions shall not constitute a
Change of Control: (1) any acquisition directly from the Company, (2)
any acquisition by the Company, (3) any acquisition by any employee
benefit plan (or related trust) sponsored or maintained by the Company
or any corporation controlled by the Company, or (4) any acquisition
by any corporation pursuant to a transaction which complies with
clauses (1), (2) and (3) of subsection (C) of this definition; or
(B) individuals who, as of the date hereof, constitute the
Board (the "Incumbent Board") cease for any reason to constitute at
least a majority of the Board; provided, however, that any individual
becoming a director subsequent to the date hereof whose election, or
nomination for election by the Company's shareholders, was approved by
a vote of at least a majority of the directors then comprising the
Incumbent Board shall be considered as though such individual were a
member of the Incumbent Board, but excluding, for this purpose, any
such individual whose initial assumption of office occurs as a result
of an actual or threatened election contest with respect to the
election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other
than the Board; or
(C) consummation of a reorganization, merger or consolidation
or sale or other disposition of all or substantially all of the assets
of the Company (a "Business Combination"), in each case, unless,
following such Business Combination, (1) all or substantially all of
the individuals and entities who were the beneficial owners,
respectively, of the Outstanding Company Common Stock and Outstanding
Company Voting Securities immediately prior to such Business
Combination beneficially own, directly or indirectly, more than 60%
of, respectively, the then-outstanding shares of common stock and the
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combined voting power of the then outstanding voting securities
entitled to vote generally in the election of directors, as the case
may be, of the corporation resulting from such Business Combination
(including, without limitation, a corporation which as a result of
such transaction owns the Company or all or substantially all of the
Company's assets either directly or through one or more subsidiaries)
in substantially the same proportions as their ownership, immediately
prior to such Business Combination of the Outstanding Company Common
Stock and Outstanding Company Voting Securities, as the case may be,
(2) no Person (excluding any corporation resulting from such Business
Combination or any employee benefit plan (or related trust) of the
Company or such corporation resulting from such Business Combination)
beneficially owns, directly or indirectly, 20% or more of,
respectively, the then-outstanding shares of common stock of the
corporation resulting from such Business Combination, or the combined
voting power of the then-outstanding voting securities of such
corporation except to the extent that such ownership existed prior to
the Business Combination and (3) at least a majority of the members
of the board of directors of the corporation resulting from such
Business Combination were members of the Incumbent Board at the time
of the execution of the initial agreement, or of the action of the
Board, providing for such Business Combination; or
(D) approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company.
(iii) If Executive's employment is terminated by the Company
without Cause (other than by reason of death or Disability) or if Executive
resigns for Good Reason, in either case upon or within the three-year period
immediately following a Change of Control, Executive shall be entitled to
receive:
(A) the Accrued Rights and the Health Benefits (such Health
Benefits to continue for a period of 3 years, instead of 2 years)
following Executive's termination of employment;
(B) a pro rata portion of the greater of (x) the Target Bonus
and (y) the highest Annual Bonus earned by Executive in respect of any
of the last three completed fiscal years prior to the Change of
Control (the "Highest Annual Bonus"), based upon the percentage of the
fiscal year that shall have elapsed through the date of Executive's
termination of employment, payable upon Executive's termination of
employment except as otherwise required pursuant to Section 13(p);
(C) a lump-sum cash payment equal to 2.99 times the sum of (x)
the Base Salary and (y) the greater of (1) the Target Bonus and (2)
the Highest Annual Bonus, payable within 30 days following the date of
Executive's termination of employment except as otherwise required
pursuant to Section 13(p); and
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(D) all outstanding stock options then held by Executive shall
remain exercisable until the earlier of (x) 24 months following the
effective date of such termination and (y) the expiration of the
option term.
Following Executive's termination of employment by the Company
without Cause (other than by reason of Executive's death or Disability) or by
Executive's resignation for Good Reason, in either case upon or within the
three-year period immediately following a Change of Control, except as set forth
in this Section 8(d)(iii), Executive shall have no further rights to any
compensation or any other benefits under this Agreement.
e. Notice of Termination. Any purported termination of
employment by the Company or by Executive (other than due to Executive's death)
shall be communicated by written Notice of Termination to the other party hereto
in accordance with Section 13(l) hereof. For purposes of this Agreement, a
"Notice of Termination" shall mean a notice which shall indicate the specific
termination provision in this Agreement relied upon and shall set forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of employment under the provision so indicated.
f. Board/Committee Resignation. Upon termination of
Executive's employment hereunder for any reason, Executive agrees to resign, as
of the date of such termination and to the extent applicable, from the Board
(and any committees thereof), the boards of directors (and any committees
thereof) of any of the Company's affiliates and any other positions with the
Company and its affiliates.
9. Non-Competition.
a. Executive acknowledges that in the course of Executive's
employment with the Company, Executive shall become familiar with the Company's
trade secrets and with other Confidential Information (as defined below)
concerning the Company and its subsidiaries and that Executive's services shall
be of special, unique and extraordinary value to the Company and its
subsidiaries. Therefore, and in consideration of the payments made to Executive
hereunder, Executive agrees as follows:
(i) During the Employment Term and, except as provided below, for
a period of two years following the date of termination of Executive's
employment with the Company (the "Restricted Period"), Executive shall not
directly, or indirectly through another entity, enter the employ of, or render
any services to, or own or have any interest in, manage, control, participate
in, consult with, or in any manner engage in any business for any Competitor, as
such Competitor's business exists or is in process on the date of the
termination of Executive's employment with the Company, within any geographical
area in which the Company or any of its subsidiaries engage in such businesses
on the date of termination of Executive's employment with the Company. A
"Competitor" shall be defined as an office products retailer, and (except as set
forth below) specifically excludes a retail business selling office products and
supplies as a minor portion of its business and any business that otherwise
would be a direct competitor if (A) average annual store or other organizational
unit sales from the sale of office products and supplies is less than 10% of
such sales of the Company and (B) the total annual sales of office products and
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supplies for any such business is less than 10% of such business' total
gross sales; provided, a Competitor shall include Staples, OfficeMax, Corporate
Express, Costco, BJs, Wal-Mart or Sam's Club; provided, further, that with
respect to Costco, BJs, Wal-Mart or Sam's Club, the applicable Restricted
Period shall be one year following the date of Executive's termination of
employment with the Company; and provided, further, that upon Executive's
termination of employment by the Company without Cause or by Executive's
resignation for Good Reason at any time, or Executive's termination of
employment for any reason after Executive has been employed by the Company
continuously for a 3-year period, Costco, BJs, Wal-Mart and Sam's Club shall
not be deemed a Competitor unless at the time such determination is made, any
of such companies otherwise meets the definition of Competitor as stated in
this subsection (i);
(ii) During the Restricted Period, Executive will not directly,
or indirectly through another entity:
(A) induce or attempt to induce any employee of the Company or
any subsidiary to leave the employ of the Company or such subsidiary,
or in any way interfere with the relationship between the Company or
any subsidiary and any employee thereof; or
(B) hire any person who was, at any time during the six-month
period prior to the date of termination of Executive's employment, an
employee of the Company or any subsidiary at any time during the
Employment Term; or
(C) induce or attempt to induce any customer, supplier,
licensee, licensor, franchisee or other business relation of the
Company or any subsidiary to cease doing business with the Company or
such subsidiary, or in any way interfere with the relationship between
any such customer, supplier, licensee or business relation and the
Company or any subsidiary (including, without limitation, making any
negative statements or communications about the Company or its
subsidiaries).
(iii) Nothing herein shall prohibit Executive from being a
passive owner of not more than 2% of the outstanding stock of any class of a
corporation that is publicly traded, so long as Executive has no active
participation in the business of such corporation.
b. It is expressly understood and agreed that although
Executive and the Company consider the restrictions contained in this Section 9
to be reasonable, if, at the time of enforcement of this Agreement, any court
shall hold that the duration, scope or geographical restrictions stated herein
are unreasonable under the circumstances then existing, the parties agree that
it is their mutual desire and intent that the Company shall be afforded the
maximum duration, scope or area reasonable under such circumstances, and each of
them hereby requests such court to reform this Agreement so that the maximum
duration, scope and geographical restrictions available under applicable law at
the time of enforcement of this Agreement shall be substituted by such court for
the stated duration, scope or geographical area stated herein and that the court
shall be allowed to revise the restrictions contained in this Agreement to such
provisions as are deemed reasonable by the court at the time such enforcement is
requested.
13
Alternatively, if any court of competent jurisdiction finds that any restriction
contained in this Agreement is unenforceable, and such restriction cannot be
amended so as to make it enforceable, such finding shall not affect the
enforceability of any of the other restrictions contained herein.
10. Confidentiality; Work Product.
a. Confidential Information.
(i) Executive acknowledges that the information, observations and
data obtained by Executive while employed by the Company and its subsidiaries
concerning the business or affairs of the Company or any subsidiary of the
Company ("Confidential Information") are the property of the Company or such
subsidiary. Therefore, Executive agrees that Executive shall not disclose to any
unauthorized person or use for Executive's own purposes any Confidential
Information without the prior written consent of the Company, unless and to the
extent that (i) such disclosure is necessary (in Executive's reasonable
judgment) for Executive to discharge Executive's duties set forth in Section 2
of this Agreement during the Employment Term or (ii) the aforementioned matters
become generally known to and available for use by the public other than as a
result of Executive's acts or omissions. Executive shall deliver to the Company
at the termination of Executive's employment, or at any other time the Company
may request, all memoranda, notes, plans, records, reports, computer tapes,
disks, printouts and software and other documents and data (and copies thereof)
relating to the Confidential Information, Work Product (as defined below) or the
business of the Company or any subsidiary which Executive may then possess or
have under Executive's control.
b. Work Product.
(i) Executive acknowledges that all inventions, innovations,
improvements, developments, methods, designs, analyses, drawings, reports and
all similar or related information (whether or not patentable) which relate to
the Company's or any of its subsidiaries' actual or anticipated business,
research and development or existing or future products or services and which
are conceived, developed or made by Executive while employed by the Company and
its subsidiaries ("Work Product") belong to the Company and/or such subsidiary.
Executive shall promptly disclose such Work Product to the Company and perform
all actions reasonably requested by the Company (whether during or after
employment) to establish and confirm such ownership (including, without
limitation, the execution of assignments, consents, powers of attorney and other
instruments).
(ii) Notwithstanding the obligations set forth in Section 9 and
this Section 10, after termination of Executive's employment with the Company,
Executive shall be free to use Residuals of the Company's Confidential
Information and Work Product for any purpose, subject only to its obligations
with respect to disclosure set forth herein and any copyrights and patents of
the Company. The term "Residuals" means information in non-tangible form that
may be retained in the unaided memory of Executive derived from the Company's
Confidential Information and Work Product to which Executive has had access
during his or her employment with the Company. Executive may not retain or use
the documents and other tangible materials containing the Company's
Confidential Information or Work Product after the termination of his or her
employment with the Company.
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c. The provisions of this Section 10 shall survive the
termination of Executive's employment for any reason.
11. Specific Performance. Executive acknowledges and agrees that the
Company's remedies at law for a breach or threatened breach of any of the
provisions of Section 9 or Section 10 would be inadequate and the Company would
suffer irreparable damages as a result of such breach or threatened breach. In
recognition of this fact, Executive agrees that, in the event of the breach or
any threatened breach by Executive of any of the provisions of Section 9 and
Section 10 of this Agreement, the Company, in addition and supplementary to any
and all other rights and remedies existing in its favor, may apply to any court
of law or equity of competent jurisdiction for specific performance and/or
injunctive or other relief in order to enforce this Agreement or to prevent any
violations or threatened violations of the provisions hereof and shall be
entitled to cease making any payments or providing any benefit otherwise
required by this Agreement (without being required to post any bond or other
security to secure such relief). In addition, in the event of any breach or
violation by Executive of the provisions of Section 9 and Section 10 of this
Agreement, the Restricted Period shall be tolled until such breach or violation
has been duly cured and thereafter the Restricted Period shall be extended for
an additional period of time equivalent to the time during which Executive was
in breach of this Agreement.
12. Gross-Up.
a. In the event it shall be determined that any payment,
benefit or distribution (or combination thereof) by the Company, any of its
affiliates, or one or more trusts established by the Company for the benefit of
its employees, to or for the benefit of Executive (whether paid or payable or
distributed or distributable pursuant to the terms of this Agreement, or
otherwise) (a "Payment") is subject to the excise tax imposed by Section 4999 of
the Internal Revenue Code of 1986, as amended ("Code") or any interest or
penalties are incurred by Executive with respect to such excise tax (such excise
tax, together with any such interest and penalties, hereinafter collectively
referred to as the "Excise Tax"), Executive shall be entitled to receive an
additional payment (a "Gross-Up Payment") in an amount such that after payment
by Executive of all taxes (including any interest or penalties imposed with
respect to such taxes), including, without limitation, all income and employment
taxes (and all interest and penalties imposed with respect thereto) and the
Excise Tax imposed upon the Gross-Up Payment, Executive retains an amount of the
Gross-Up Payment equal to the Excise Tax imposed upon the Payments.
b. All determinations required to be made under this Section
12, including whether and when a Gross-Up Payment is required and the amount of
such Gross-Up Payment and the assumptions to be utilized in arriving at such
determination, shall be made by a nationally recognized accounting firm selected
by the Company (the "Accounting Firm") which shall provide detailed supporting
calculations both to the Company and Executive within ten business days of the
receipt of notice from Executive that there has been a Payment, or such
15
earlier time as is requested by the Company; provided that for purposes of
determining the amount of any Gross-Up Payment, Executive shall be deemed to pay
federal income tax at the highest marginal rates applicable to individuals in
the calendar year in which any such Gross-Up Payment is to be made and deemed to
pay state and local income taxes at the highest effective rates applicable to
individuals in the state or locality of Executive's residence or place of
employment in the calendar year in which any such Gross-Up Payment is to be
made, net of the maximum reduction in federal income taxes that can be obtained
from deduction of such state and local taxes, taking into account limitations
applicable to individuals subject to federal income tax at the highest marginal
rates. All fees and expenses of the Accounting Firm shall be borne solely by the
Company. Any Gross-Up Payment, as determined pursuant to this Section 12, shall
be paid by the Company to Executive (or to the appropriate taxing authority on
Executive's behalf) when the applicable tax is due. If the Accounting Firm
determines that no Excise Tax is payable by Executive, it shall so indicate in a
written opinion addressed to Executive at least five days before any such Excise
Tax otherwise would be due and payable. Subject to the following provisions of
this Section 12 to the contrary, any determination by the Accounting Firm shall
be binding upon the Company and Executive. As a result of the uncertainty in the
application of Section 4999 of the Code, it is possible that the amount of the
Gross-Up Payment determined by the Accounting Firm to be due to (or on behalf
of) Executive was lower than the amount actually due ("Underpayment"). In the
event that the Company exhausts its remedies pursuant to Section 12(c) and
Executive thereafter is required to make a payment of any Excise Tax, the
Accounting Firm shall determine the amount of the Underpayment that has occurred
and any such Underpayment shall be promptly paid by the Company to or for the
benefit of Executive.
c. Executive shall notify the Company in writing of any claim
by the Internal Revenue Service that, if successful, would require the payment
by the Company of any Gross-Up Payment. Such notification shall be given as soon
as practicable but no later than ten business days after Executive is informed
in writing of such claim and shall apprise the Company of the nature of such
claim and the date on which such claim is requested to be paid. Executive shall
not pay such claim prior to the expiration of the thirty day period following
the date on which it gives such notice to the Company (or such shorter period
ending on the date that any payment of taxes with respect to such claim is due).
If the Company notifies Executive in writing prior to the expiration of such
period that it desires to contest such claim, Executive shall (i) give the
Company any information reasonably requested by the Company relating to such
claim, (ii) take such action in connection with contesting such claim as the
Company shall reasonably request in writing from time to time, including,
without limitation, accepting legal representation with respect to such claim by
an attorney reasonably selected by the Company, (iii) cooperate with the Company
in good faith in order to effectively contest such claim and (iv) permit the
Company to participate in any proceedings relating to such claim; provided,
however, that the Company shall bear and pay directly all costs and expenses
(including additional interest and penalties) incurred in connection with such
contest and shall indemnify and hold Executive harmless, on an after-tax basis,
for all Excise Tax, income and employment taxes (including interest and
penalties with respect thereto) imposed as a result of such representation and
payment of costs and expenses. Without limitation on the foregoing provisions of
this Section 12(c), the Company shall control all proceedings taken in
connection with such contest and, at its sole option, may pursue or forego
16
any and all administrative appeals, proceedings, hearings and conferences
with the taxing authority in respect of such claim and may, at its sole option,
either direct Executive to pay the tax claimed and xxx for a refund or contest
the claim in any permissible manner, and Executive agrees to prosecute such
contest to a determination before any administrative tribunal, in a court of
initial jurisdiction and in one or more appellate courts, as the Company shall
determine; provided, further, that if the Company directs Executive to pay such
claim and xxx for a refund, the Company shall advance the amount of such
payment to Executive, on an interest-free basis, and shall indemnify and hold
Executive harmless, on an after-tax basis, from all Excise Tax, income and
employment taxes (including interest or penalties with respect thereto) imposed
with respect to such advance or with respect to any imputed income with respect
to such advance; provided, further, that if Executive is required to extend the
statute of limitations to enable the Company to contest such claim, Executive
may limit this extension solely to such contested amount. The Company's control
of the contest shall be limited to issues with respect to which a Gross-Up
Payment would be payable hereunder and Executive shall be entitled to settle or
contest, as the case may be, any other issue raised by the Internal Revenue
Service or any other taxing authority.
d. If, after the receipt by Executive of an amount paid or
advanced by the Company pursuant to this Section 12, Executive becomes entitled
to receive any refund with respect to a Gross-Up Payment, Executive shall
(subject to the Company's complying with the requirements of Section 12(c))
promptly pay to the Company the amount of such refund received (together with
any interest paid or credited thereon after taxes applicable thereto). If, after
the receipt by Executive of an amount advanced by the Company pursuant to
Section 12(c), a determination is made that Executive shall not be entitled to
any refund with respect to such claim and the Company does not notify Executive
in writing of its intent to contest such denial of refund prior to the
expiration of thirty days after such determination, then such advance shall be
forgiven and shall not be required to be repaid and the amount of such advance
shall offset, to the extent thereof, the amount of the Gross-Up Payment required
to be paid.
13. Miscellaneous.
a. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Florida, without regard to
conflicts of laws principles thereof.
b. Entire Agreement/Amendments. This Agreement contains the
entire understanding of the parties with respect to the employment of Executive
by the Company. There are no restrictions, agreements, promises, warranties,
covenants or undertakings between the parties with respect to the subject matter
herein other than those expressly set forth herein. This Agreement may not be
altered, modified, or amended except by written instrument signed by the parties
hereto.
c. No Waiver. The failure of a party to insist upon strict
adherence to any term of this Agreement on any occasion shall not be considered
a waiver of such party's rights or deprive such party of the right thereafter to
insist upon strict adherence to that term or any other term of this Agreement.
17
d. Severability. In the event that any one or more of the
provisions of this Agreement shall be or become invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions of this Agreement shall not be affected thereby.
e. Assignment. This Agreement, and all of Executive's rights
and duties hereunder, shall not be assignable or delegable by Executive. Any
purported assignment or delegation by Executive in violation of the foregoing
shall be null and void ab initio and of no force and effect. This Agreement may
be assigned by the Company to a person or entity which is an affiliate or a
successor in interest to substantially all of the business operations of the
Company. Upon such assignment, the rights and obligations of the Company
hereunder shall become the rights and obligations of such affiliate or successor
person or entity.
f. Mitigation. Executive shall not be required to mitigate
damages or the amount of any payment provided for under this Agreement by
seeking other employment or otherwise, and, except with respect to the Health
Benefits, compensation earned from such employment or otherwise shall not reduce
the amounts otherwise payable under this Agreement. No amounts payable under
this Agreement shall be subject to reduction or offset in respect of any claims
which the Company or any of its subsidiaries (or any other person or entity) may
have against Executive.
g. Indemnification; Director's and Officer's Liability
Insurance. Executive shall be entitled to indemnification at all times during
and after the Employment Term to the maximum extent permitted under the
Company's Certificate of Incorporation or By-Laws and applicable law. The
Company shall maintain Director's and Officer's liability insurance on behalf of
Executive at all times during and after the Employment Term for acts and
omissions during the Employment Term to the same extent such coverage is
maintained for directors and other senior executives of the Company.
h. Resolution of Disputes. All disputes and controversies
arising under or in connection with this Agreement shall be settled by
arbitration conducted before one arbitrator sitting in Palm Beach County,
Florida, or such other location agreed by the parties hereto, in accordance with
the rules for expedited resolution of employment disputes of the American
Arbitration Association then in effect. The determination of the arbitrator
shall be made within thirty days following the close of the hearing on any
dispute or controversy and shall be final and binding on the parties. The
parties shall be entitled to take discovery in such proceedings, in accordance
with the Federal civil rules, including, without limitation, propounding
interrogatories, requests for admission and taking depositions of parties and
witnesses. Each party shall be entitled to present the testimony of one or more
expert witnesses in such arbitration. Judgment may be entered on the award of
the arbitrator in any court having proper jurisdiction.
i. Costs of Proceedings. The Company shall pay all reasonable
fees of professionals and experts and other costs and fees incurred by Executive
in connection with any arbitration relating to the interpretation or enforcement
of any provision of this Agreement if Executive prevails on any substantive
issue in such proceeding.
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j. Legal Fees. The Company shall pay all reasonable legal fees
incurred by Executive in connection with the negotiation and finalization of
this Agreement, subject to a maximum amount of $75,000 for such fees.
k. Successors; Binding Agreement. This Agreement shall inure
to the benefit of and be binding upon personal or legal representatives,
executors, administrators, successors, heirs, distributees, devisees and
legatees.
l. Notice. For the purpose of this Agreement, notices and all
other communications provided for in the Agreement shall be in writing and shall
be deemed to have been duly given when delivered by hand or overnight courier or
three days after it has been mailed by United States registered mail, return
receipt requested, postage prepaid, addressed to the respective addresses set
forth below in this Agreement, or to such other address as either party may have
furnished to the other in writing in accordance herewith, except that notice of
change of address shall be effective only upon receipt.
If to the Company:
Office Depot, Inc.
0000 Xxx Xxxxxxxxx Xxxx
Xxxxxx Xxxxx, XX 00000
Attention: General Counsel
If to Executive:
To the most recent address of Executive set forth in the personnel
records of the Company, with a copy to:
Vedder, Price, Xxxxxxx & Kammholz
000 Xxxxx XxXxxxx Xxxxxx
Xxxxx 0000
Xxxxxxx, XX 00000
Attention: Xxxxxx X. Xxxxxxx
m. Executive Representation. Executive hereby represents and
warrants to the Company that (i) the execution, delivery and performance of this
Agreement by Executive do not and shall not conflict with, breach, violate or
cause a default under any contract, agreement, instrument, order, judgment or
decree to which Executive is a party or by which Executive is bound, (ii)
Executive is not a party to or bound by any employment agreement, noncompete
agreement or confidentiality agreement with any other person or entity (other
than as specifically referenced in this Agreement) that has not been disclosed
by Executive to the Company and that prohibits or restricts the acceptance of
employment with the Company and the performance of Executive's duties hereunder
and (iii) upon the execution and delivery of this Agreement by the Company, this
Agreement shall be the valid and binding obligation of Executive, enforceable in
accordance with its terms. Executive hereby acknowledges and represents that
Executive has had an opportunity to consult with independent legal counsel
19
regarding Executive's rights and obligations under this Agreement and that
Executive fully understands the terms and conditions contained herein.
n. Prior Agreements. This Agreement supersedes all prior
agreements and understandings (including verbal agreements) between Executive
and the Company and/or its affiliates regarding the terms and conditions of
Executive's employment with the Company and/or its affiliates. In the event of
any conflict between any provision of this Agreement and any provision of any
other agreement, policy, plan or other document, the provision of this Agreement
shall control.
o. Cooperation. Executive shall provide Executive's reasonable
cooperation in connection with any action or proceeding (or any appeal from any
action or proceeding) which relates to events occurring during Executive's
employment hereunder. This provision shall survive any termination of this
Agreement. If occurring after termination of Executive's employment, the Company
shall advance to Executive all transportation, lodging, meal and other
reasonable costs incurred by Executive therefor.
p. Withholding Taxes and Deferral. The Company may withhold
from any amounts payable under this Agreement such Federal, state and local
taxes as may be required to be withheld pursuant to any applicable law or
regulation. Notwithstanding any other provision of this Agreement or certain
compensation and benefit plans of the Company, any payments or benefits due
under this Agreement or such plans upon or in connection with a termination of
Executive's employment that are subject to the provisions of Section 409A of the
Code shall be deferred and paid (or commence, as the case may be) on the first
day on which such payments may be made without subjecting Executive to taxation
pursuant to the provisions of Section 409A of the Code.
q. Survival. Any provision of this Agreement that, by its
terms, including but not limited to Sections 8, 9, 10, 11 and 12, survives the
termination of Executive's employment or the Employment Term hereunder shall
remain in full force and effect pursuant to such terms following any such
termination.
r. Counterparts. This Agreement may be signed in counterparts,
each of which shall be an original, with the same effect as if the signatures
thereto and hereto were upon the same instrument.
[Signature Page Follows]
20
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
as of the day and year first above written.
OFFICE DEPOT, INC.
/s/ Xxxx X. Austrian
__________________________
By: Xxxx X. Austrian
/s/ Xxxxx Xxxxxx
__________________________
Executive
EXHIBIT A
[FORM OF TIME RESTRICTED STOCK AGREEMENT]
RESTRICTED STOCK AWARD AGREEMENT
RESTRICTED STOCK AWARD AGREEMENT, entered into as of March 11, 2005,
between Office Depot, Inc. (the "Company") and Xxxxx Xxxxxx (the"Executive")
(the "Agreement");
WHEREAS, the Company and the Executive have entered into an
employment agreement dated as of the 11th day of March, 2005 (the "Employment
Agreement"), pursuant to which, among other things, the Company has determined
that, as an inducement material to the Executive's agreement to enter into
employment with the Company, in satisfaction of certain of the Company's
obligations under Section 5(a) of the Employment Agreement, and subject to the
restrictions stated below, the Executive should be granted shares of the
Company's common stock, par value $.01 (the "Common Stock"); and
WHEREAS, the Company desires to grant the Executive 300,000 shares
of restricted Common Stock (the "Restricted Shares");
NOW, THEREFORE, in consideration of the mutual covenants hereinafter
set forth and for other good and valuable consideration, the parties hereto do
hereby agree as follows:
1. Capitalized Terms. Capitalized terms not defined herein shall have
the definitions ascribed to such terms in the Employment Agreement.
2. Grant. Pursuant to Section 5(a) of the Employment Agreement, the
Executive is hereby granted, effective as of the Effective Date (the "Grant
Date") and subject to the terms and conditions of this Agreement, 300,000
Restricted Shares.
3. Custody of Shares. The Restricted Shares shall be held in the
custody of the Company or its designee for the Executive's benefit. The
Restricted Shares shall be subject to the restrictions described herein. Upon
the receipt of a copy of this Agreement containing Executive's signature, the
Company will register a certificate or certificates for the Restricted Shares in
Executive's name. Restricted Shares will be held in escrow by the Company on
Executive's behalf until the Restricted Shares vest or are forfeited.
4. Vesting.
a. The Restricted Shares shall vest in full and become free of
restrictions with respect to 33-1/3 percent of the Restricted Shares on each of
the first, second and third anniversaries of the Grant Date, provided that,
subject to Section 4(b), the Executive is employed by or rendering services to
the Company or a subsidiary or affiliate thereof as of each such
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respective date.
b. Notwithstanding the foregoing, all unvested Restricted Shares
shall immediately vest in full, and become free of restriction (i) upon the
occurrence of a Change of Control, or (ii) upon the termination of Executive's
employment (A) by the Company without Cause, (B) by the Executive for Good
Reason, or (C) by reason of the Executive's death or Disability.
5. Restrictions.
a. No portion of the Restricted Shares or rights granted
hereunder may be sold, transferred, assigned, pledged or otherwise encumbered or
disposed of by the Executive until such portion of the Restricted Shares becomes
vested in accordance with Section 4 of this Agreement, and any purported sale,
transfer, assignment, pledge, encumbrance or disposition shall be void and
unenforceable against the Company. The period of time between the Grant Date and
the date all Restricted Shares become vested is referred to herein as the
"Restriction Period."
b. If the Executive's employment with the Company terminates for
any reason that does not result in vesting of the Restricted Shares as provided
in Section 4 above, the balance of the Restricted Shares subject to the
provisions of this Agreement that have not vested at the time of the Executive's
termination of employment shall be forfeited by the Executive, and ownership
transferred back to the Company.
6. Executive Shareholder Rights. During the Restriction Period, the
Executive shall have all the rights of a shareholder with respect to the
Restricted Shares except for the right to transfer the Restricted Shares, as set
forth in Section 5 of this Agreement. Accordingly, the Executive shall have the
right to vote the Restricted Shares and to receive any ordinary cash dividends
paid to or made with respect to the Restricted Shares.
7. Changes in Stock. In the event of (a) a stock dividend, stock split,
reverse stock split, share combination, extraordinary dividend or
recapitalization or similar event of or by the Company (each, a "Share Change"),
or (b) a merger, consolidation, acquisition of property or shares, separation,
spinoff, reorganization, stock rights offering, liquidation, disaffiliation, or
similar event of or by the Company (each, a "Corporate Transaction"), in each
case, affecting the Common Stock, the Compensation Committee of the Board (the
"Committee") or the Board may make such substitutions or adjustments as are
equitable to adjust the number and kind of Restricted Shares, on a basis
consistent with the treatment of other outstanding grants of restricted stock to
senior executives of the Company. In the case of Corporate Transactions, (x)
unless otherwise determined by the Committee, if the Corporate Transaction
results in shareholders of Common Stock receiving cash, securities, property, or
any combination thereof in exchange for each share of Common Stock, such
consideration being exchanged for each share of Common Stock shall be
substituted for each Restricted Share subject to this Agreement, and (y) the
Committee may in its discretion make such alternative or additional
substitutions or adjustments as are equitable, including, without limitation,
(i) the cancellation of the Restricted Shares in exchange for payments
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of cash, property or a combination thereof having an aggregate value equal
to the value of the Restricted Shares (it being understood that in the case of
a Corporate Transaction with respect to which shareholders of Common Stock
receive consideration other than equity securities of the ultimate surviving
entity, any such determination by the Committee that the value of the
Restricted Shares shall for this purpose be deemed to equal the value of the
consideration being paid for each share of Common Stock pursuant to such
Corporate Transaction shall conclusively be deemed valid); and (ii) the
substitution of other property (including, without limitation, cash or other
securities of the Company and securities of entities other than the Company)
for the Restricted Shares. The reasonable good faith determination of the
Committee regarding any adjustment consistent with the foregoing provisions of
this Section 7 shall be final and conclusive.
8. Taxes. No later than the date as of which an amount first becomes
includible in the gross income of the Executive for federal income tax purposes
with respect to any Restricted Shares, the Executive shall pay to the Company,
or make arrangements satisfactory to the Company regarding the payment of, all
federal, state, local and foreign taxes that are required by applicable laws and
regulations to be withheld with respect to such amount. The Executive may direct
the Company, to the extent permitted by law, to deduct any such taxes from any
payment otherwise due to the Executive, including the delivery of the Restricted
Shares that gives rise to the withholding requirement.
9. Notices. Any notices required or permitted hereunder shall be
addressed to the Company at its corporate headquarters, attention: General
Counsel, or to the Executive at the address then on record with the Company, as
the case may be, and deposited, postage prepaid, in the United States mail.
Either party may, by notice to the other given in the manner aforesaid, change
his/her or its address for future notices.
10. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Florida without regard to its conflict
of laws principles.
11. Successor. This Agreement shall bind and inure to the benefit of the
Company, its successors and assigns, and the Executive and his or her personal
representatives and assigns.
12. Amendment. This Agreement may be amended or modified at any time by
an instrument in writing signed by the parties hereto.
13. Certificates. Certificates representing the Restricted Shares as
originally or from time to time constituted shall bear the following legend:
The shares represented by this stock certificate have been granted as
restricted stock under a Restricted Share Agreement between the registered
holder of these shares and the Company. The shares represented by this
stock certificate may not be sold, exchanged, assigned, transferred,
pledged, hypothecated or otherwise encumbered or disposed of until the
restrictions set forth in the Restricted Stock Award Agreement between the
registered holder of these shares and the Company shall have lapsed with
regard to such shares.
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As soon as administratively practicable after the lapsing of the restrictions
with respect to any Restricted Shares, the Company shall deliver to the
Executive or his or her personal representative, in book-entry or certificate
form, the formerly Restricted Shares that do not bear any restrictive legend
making reference to this Agreement. Such shares shall be free of restrictions,
except for any restrictions required under federal securities laws.
14. Laws and Regulations. No shares of Common Stock shall be issued
under this Agreement unless and until all legal requirements applicable to the
issuance of such shares have been complied with to the satisfaction of the
Committee. The Committee shall have the right to condition any issuance of
shares of Common Stock to the Executive hereunder on the Executive's undertaking
in writing to comply with such restrictions on the subsequent disposition of
such shares as the Committee shall deem necessary or advisable as a result of
any applicable law or regulation.
15. Listing and Registration. As soon as administratively practicable
after the Grant Date, the Company shall, at its expense, cause issuance of the
Restricted Shares and the resale thereof to be listed on the New York Stock
Exchange and to be registered under the Securities Act of 1933, as amended, and
registered or qualified under applicable state law, to be freely resold. The
Company shall thereafter maintain the effectiveness of such listing and
registration and qualification for so long as the Executive holds the Restricted
Shares (or any portion thereof) or any of the shares of Common Stock that were
previously Restricted Shares, or until such earlier date as such Restricted
Shares and shares of Common Stock, as applicable, may otherwise be freely sold
under applicable law.
16. Miscellaneous.
a. The Company shall not be required (i) to transfer on its books any
Restricted Shares which shall have been sold or transferred in violation of any
of the provisions set forth in this Agreement, or (ii) to treat as owner of such
shares or to accord the right to vote as such owner or to pay dividends to any
transferee to whom such shares shall have been so transferred.
b. This Agreement shall not be construed so as to modify or amend the
Employment Agreement or any employment agreement Executive may have with the
Company or to interfere with or limit in any way the right of the Company or any
of its affiliates to terminate Executive's employment at any time, or confer
upon Executive any right to continue in the employ of the Company or any of its
affiliates for any period of time or to continue Executive's present or any
other rate of compensation subject to the terms of any employment agreement
Executive may have with the Company. This Agreement shall not give Executive any
right to any awards under the Office Depot, Inc. Long-Term Equity Incentive Plan
or any other compensation plan the Company has adopted or may adopt.
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c. This Agreement may be executed in counterparts, which together shall
constitute one and the same original.
* * * * *
A-6
IN WITNESS WHEREOF, the Company has caused this Agreement to
be duly executed by its officer thereunder duly authorized and the Executive has
hereunto set his hand, all as of the day and year first set forth above.
OFFICE DEPOT, INC.
By: _______________________________
[NAME]
[TITLE]
ACCEPTED:
The undersigned hereby acknowledges having read this Restricted Stock Award
Agreement and hereby agrees to be bound by all provisions set forth herein.
___________________________________
EXECUTIVE
EXHIBIT B
[FORM OF PERFORMANCE RESTRICTED STOCK AGREEMENT]
RESTRICTED STOCK AWARD AGREEMENT
RESTRICTED STOCK AWARD AGREEMENT, entered into as of March 11, 2005,
between Office Depot, Inc. (the "Company") and Xxxxx Xxxxxx (the "Executive")
(the "Agreement");
WHEREAS, the Company and the Executive have entered into an
employment agreement dated as of the 11th day of March, 2005 (the "Employment
Agreement"), pursuant to which, among other things, the Company has determined
that, as an inducement material to the Executive's agreement to enter into
employment with the Company, in satisfaction of certain of the Company's
obligations under Section 5(b) of the Employment Agreement, and subject to the
restrictions stated below, the Executive should be granted shares of the
Company's common stock, par value $.01 (the "Common Stock"); and
WHEREAS, the Company desires to grant the Executive 300,000 shares
of restricted Common Stock (the "Restricted Shares");
NOW, THEREFORE, in consideration of the mutual covenants hereinafter
set forth and for other good and valuable consideration, the parties hereto do
hereby agree as follows:
1. Capitalized Terms. Capitalized terms not defined herein shall have
the definitions ascribed to such terms in the Employment Agreement.
2. Grant. Pursuant to Section 5(b) of the Employment Agreement, the
Executive is hereby granted, effective as of the Effective Date (the "Grant
Date") and subject to the terms and conditions of this Agreement, 300,000
Restricted Shares.
3. Custody of Shares. The Restricted Shares shall be held in the
custody of the Company or its designee for the Executive's benefit. The
Restricted Shares shall be subject to the restrictions described herein. Upon
the receipt of a copy of this Agreement containing Executive's signature, the
Company will register a certificate or certificates for the Restricted Shares in
Executive's name. Restricted Shares will be held in escrow by the Company on
Executive's behalf until the Restricted Shares vest or are forfeited.
4. Vesting.
a. The Restricted Shares shall vest in full and become free of
restrictions if, within the seven-year period commencing on the Grant Date, the
Fair Market Value of a share of Common Stock shall equal or exceed the lower of
(i) 133% of the Fair Market Value on the Effective Date or (ii) $24 per share,
for a period of at least ten consecutive trading days on the New York Stock
Exchange (subject to equitable adjustment as set forth in Section 7 of this
B-2
Agreement), provided that, subject to Section 4(b), the Executive is employed by
or rendering services to the Company or a subsidiary or affiliate thereof as of
each such respective date.
b. Notwithstanding the foregoing, (i) all unvested Restricted
Shares shall immediately vest in full, and become free of restriction, upon the
occurrence of a Change of Control, and (ii) this Agreement shall remain
effective, the Restricted Shares will continue to be held for the Executive's
benefit, and the Restricted Shares shall vest in full and become free of
restrictions if the performance goals set forth in Section 4(a) of this
Agreement are achieved within the seven-year period commencing on the Grant
Date, but following Executive's termination of employment (A) by the Company
without Cause, (B) by the Executive for Good Reason, or (C) by reason of the
Executive's death or Disability.
5. Restrictions.
a. No portion of the Restricted Shares or rights granted
hereunder may be sold, transferred, assigned, pledged or otherwise encumbered or
disposed of by the Executive until such portion of the Restricted Shares becomes
vested in accordance with Section 4 of this Agreement, and any purported sale,
transfer, assignment, pledge, encumbrance or disposition shall be void and
unenforceable against the Company. The period of time between the Grant Date and
the date all Restricted Shares become vested is referred to herein as the
"Restriction Period."
b. If the Executive's employment with the Company terminates for
any reason which does not result in vesting of the Restricted Shares as provided
in Section 4 above, the Restricted Shares subject to the provisions of this
Agreement which have not vested at the time of the Executive's termination of
employment shall be forfeited by the Executive, and ownership transferred back
to the Company.
6. Executive Shareholder Rights. During the Restriction Period, the
Executive shall have all the rights of a shareholder with respect to the
Restricted Shares except for the right to transfer the Restricted Shares, as set
forth in Section 5 of this Agreement. Accordingly, the Executive shall have the
right to vote the Restricted Shares and to receive any ordinary cash dividends
paid to or made with respect to the Restricted Shares.
7. Changes in Stock. In the event of (a) a stock dividend, stock split,
reverse stock split, share combination, extraordinary dividend or
recapitalization or similar event of or by the Company (each, a "Share Change"),
or (b) a merger, consolidation, acquisition of property or shares, separation,
spinoff, reorganization, stock rights offering, liquidation, disaffiliation, or
similar event of or by the Company (each, a "Corporate Transaction"), in each
case, affecting the Common Stock, the Compensation Committee of the Board (the
"Committee") or the Board may make such substitutions or adjustments as are
equitable to adjust the number and kind of Restricted Shares, on a basis
consistent with the treatment of other outstanding grants of restricted stock to
senior executives of the Company. In the case of Corporate Transactions, (x)
unless otherwise determined by the Committee, if the Corporate Transaction
results in shareholders of Common Stock receiving cash, securities, property, or
any combination thereof in exchange for each share of Common Stock, such
consideration being exchanged for each share of Common Stock shall
B-3
be substituted for each Restricted Share subject to this Agreement, and (y) the
Committee may in its discretion make such alternative or additional
substitutions or adjustments as are equitable, including, without limitation,
(i) the cancellation of the Restricted Shares in exchange for payments of cash,
property or a combination thereof having an aggregate value equal to the value
of the Restricted Shares (it being understood that in the case of a Corporate
Transaction with respect to which shareholders of Common Stock receive
consideration other than equity securities of the ultimate surviving entity,
any such determination by the Committee that the value of the Restricted Shares
shall for this purpose be deemed to equal the value of the consideration being
paid for each share of Common Stock pursuant to such Corporate Transaction
shall conclusively be deemed valid); and (ii) the substitution of other
property (including, without limitation, cash or other securities of the
Company and securities of entities other than the Company) for the Restricted
Shares. The reasonable good faith determination of the Committee regarding any
adjustment consistent with the foregoing provisions of this Section 7 shall be
final and conclusive.
8. Taxes. No later than the date as of which an amount first becomes
includible in the gross income of the Executive for federal income tax purposes
with respect to any Restricted Shares, the Executive shall pay to the Company,
or make arrangements satisfactory to the Company regarding the payment of, all
federal, state, local and foreign taxes that are required by applicable laws and
regulations to be withheld with respect to such amount. The Executive may direct
the Company, to the extent permitted by law, to deduct any such taxes from any
payment otherwise due to the Executive, including the delivery of the Restricted
Shares that gives rise to the withholding requirement.
9. Notices. Any notices required or permitted hereunder shall be
addressed to the Company at its corporate headquarters, attention: General
Counsel, or to the Executive at the address then on record with the Company, as
the case may be, and deposited, postage prepaid, in the United States mail.
Either party may, by notice to the other given in the manner aforesaid, change
his/her or its address for future notices.
10. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Florida without regard to its conflict
of laws principles.
11. Successor. This Agreement shall bind and inure to the benefit of the
Company, its successors and assigns, and the Executive and his or her personal
representatives and assigns.
12. Amendment. This Agreement may be amended or modified at any time by
an instrument in writing signed by the parties hereto.
13. Certificates. Certificates representing the Restricted Shares as
originally or from time to time constituted shall bear the following legend:
The shares represented by this stock certificate have been granted as
restricted stock under a Restricted Share Agreement between the registered
holder of these shares and the Company. The shares represented by this
stock certificate may not be sold, exchanged, assigned, transferred,
pledged, hypothecated or otherwise encumbered or disposed of
B-4
until the restrictions set forth in the Restricted Stock Award Agreement
between the registered holder of these shares and the Company shall have
lapsed with regard to such shares.
As soon as administratively practicable after the lapsing of the restrictions
with respect to any Restricted Shares, the Company shall deliver to the
Executive or his or her personal representative, in book-entry or certificate
form, the formerly Restricted Shares that do not bear any restrictive legend
making reference to this Agreement. Such shares shall be free of restrictions,
except for any restrictions required under federal securities laws.
14. Laws and Regulations. No shares of Common Stock shall be issued
under this Agreement unless and until all legal requirements applicable to the
issuance of such shares have been complied with to the satisfaction of the
Committee. The Committee shall have the right to condition any issuance of
shares of Common Stock to the Executive hereunder on the Executive's undertaking
in writing to comply with such restrictions on the subsequent disposition of
such shares as the Committee shall deem necessary or advisable as a result of
any applicable law or regulation.
15. Listing and Registration. As soon as administratively practicable
after the Grant Date, the Company shall, at its expense, cause issuance of the
Restricted Shares and the resale thereof to be listed on the New York Stock
Exchange and to be registered under the Securities Act of 1933, as amended, and
registered or qualified under applicable state law, to be freely resold. The
Company shall thereafter maintain the effectiveness of such listing and
registration and qualification for so long as the Executive holds the Restricted
Shares (or any portion thereof) or any of the shares of Common Stock that were
previously Restricted Shares, or until such earlier date as such Restricted
Shares and shares of Common Stock, as applicable, may otherwise be freely sold
under applicable law.
16. Miscellaneous.
a. The Company shall not be required (i) to transfer on its books any
Restricted Shares which shall have been sold or transferred in violation of any
of the provisions set forth in this Agreement, or (ii) to treat as owner of such
shares or to accord the right to vote as such owner or to pay dividends to any
transferee to whom such shares shall have been so transferred.
b. This Agreement shall not be construed so as to modify or amend the
Employment Agreement or any employment agreement Executive may have with the
Company or to interfere with or limit in any way the right of the Company or any
of its affiliates to terminate Executive's employment at any time, or confer
upon Executive any right to continue in the employ of the Company or any of its
affiliates for any period of time or to continue Executive's present or any
other rate of compensation subject to the terms of any employment agreement
Executive may have with the Company. This Agreement shall not give Executive any
right to any awards under the Office Depot, Inc. Long-Term Equity Incentive Plan
or any other compensation plan the Company has adopted or may adopt.
B-5
c. This Agreement may be executed in counterparts, which together shall
constitute one and the same original.
* * * * *
B-6
IN WITNESS WHEREOF, the Company has caused this Agreement to
be duly executed by its officer thereunder duly authorized and the Executive has
hereunto set his hand, all as of the day and year first set forth above.
OFFICE DEPOT, INC.
By: _______________________________
[NAME]
[TITLE]
ACCEPTED:
The undersigned hereby acknowledges having read this Restricted Stock Award
Agreement and hereby agrees to be bound by all provisions set forth herein.
___________________________________
EXECUTIVE
EXHIBIT C
[FORM OF STOCK OPTION AGREEMENT]
March __, 2005
_____________
[ADDRESS]
Re: NON-QUALIFIED STOCK OPTION
Dear Xxxxx:
We are pleased to advise you that the Compensation Committee of the
Company's Board of Directors (the "Committee") has granted you a stock option as
provided below, pursuant to the Office Depot, Inc. Long-Term Equity Incentive
Plan ("the Plan"). Capitalized terms used but not defined herein have the
meanings given to them in the Employment Agreement between you and the Company,
dated March 11, 2005 (the "Employment Agreement").
1. Option
Your option is to purchase up to 1,000,000 shares of the Company's common
stock, at an option price per share of $________ [FAIR MARKET VALUE ON THE
EFFECTIVE DATE], and up to 1,000,000 shares of the Company's common stock at an
option price per share of $________ [120% OF FAIR MARKET VALUE ON THE EFFECTIVE
DATE], (collectively, the "Option Shares"), payable upon exercise as set forth
below. Your option will expire at the close of business on the tenth anniversary
of the Effective Date (the "Expiration Date"), subject to earlier expiration
upon the termination of your employment as provided below. Your option is not
intended to be an "incentive stock option" within meaning of Section 422 of the
Internal Revenue Code.
2. Exercise
a. Normal Exercise. Your option shall be exercisable in three equal
installments as follows: on each of the first, second and third
anniversaries of the Effective Date, one-third of your option shares
will be exercisable if you are employed by the Company or any
subsidiary on such date.
b. Effect on Exercise of a Change of Control. Your option shall be
exercisable with respect to 100% of your Option Shares upon the
occurrence of a Change of Control.
NON-QUALIFIED STOCK OPTION C-2
Page 2
c. Effect on Exercise of a Termination of Employment. Notwithstanding
paragraph 2(a) above, the following special exercise rules will
apply if your employment with the Company terminates before you have
exercised your option for all of your Option Shares:
i) Termination of Employment Due to Death or Disability, or
Without Cause or For Good Reason. If your employment is
terminated (A) by the Company without Cause, (B) by your
resignation for Good Reason, or (C) due to your death or
Disability, then your option will be exercisable with
respect to all remaining Option Shares by your estate,
any person who acquired such option by bequest or
inheritance, you or your legal representative, at any
time until the earlier of (x) 24 months after the
effective date of such termination and (y) the
Expiration Date set forth in paragraph 1 above.
ii) Termination of Employment For Cause or Without Good
Reason. If your employment is terminated by the Company
for Cause or by your resignation without Good Reason,
your option will remain exercisable with respect to only
those Option Shares which are exercisable on the date of
such termination of employment pursuant to paragraph
2(a) above until the earlier of (x) 90 days after the
effective date of such termination and (y) the
Expiration Date set forth in paragraph 1 above. The
remainder of the option shall be immediately cancelled.
3. Expiration of Option
In no event shall any part of your option be exercisable after the
Expiration Date set forth in the paragraph 1 above.
4. No Rights as a Shareholder.
Neither you nor any other permitted holder of your option shall have any
of the rights of a shareholder of the Company's common stock (the "Common
Stock") with respect to the shares of Common Stock covered by your option until
any such shares are issued or transferred to you or such holder upon exercise of
your option.
5. Procedure for Exercise
a. You may exercise all or any portion of your option, to the extent it
has become exercisable and is outstanding, at any time and from time
to time prior to its expiration, by delivering written notice to the
Company and your written acknowledgment that you have read, and have
been afforded an opportunity to ask questions of management of the
Company regarding all financial and other
NON-QUALIFIED STOCK OPTION C-3
Page 3
information provided to you regarding the Company, together with
payment of the option price. As a condition to any exercise of your
option, you will permit the Company to deliver to you all financial
and other information regarding the Company it believes necessary to
enable you to make an informed investment decision.
b. Unless otherwise determined by the Committee, payment shall be made
(i) in cash (including check, bank draft or money order), (ii) by
delivery of outstanding shares of Common Stock with a Fair Market
Value (as defined below) on the date of exercise equal to the
aggregate exercise price payable with respect to the option's
exercise, (iii) by simultaneous sale through a broker reasonably
acceptable to the Committee of shares acquired on exercise, as
permitted under Regulation T of the Federal Reserve Board, (iv) by
any combination of the foregoing or (v) such other form of payment
as the Committee may permit in its discretion.
c. In the event you elect to pay the exercise price payable with
respect to your option pursuant to clause (ii) of Section 5(b)
above, (A) only a whole number of share(s) of Common Stock (and not
fractional shares of Common Stock) may be tendered in payment, (B)
you must present evidence acceptable to the Company that you have
owned any such shares of Common Stock tendered in payment of the
exercise price (and that such tendered shares of Common Stock have
not been subject to any substantial risk of forfeiture) for at least
six months prior to the date of exercise, and (C) Common Stock must
be delivered to the Company. Delivery for this purpose may, at your
election, be made either by (A) physical delivery of the
certificate(s) for all such shares of Common Stock tendered in
payment of the price, accompanied by duly executed instruments of
transfer in a form acceptable to the Company, or (B) direction to
your broker to transfer, by book entry, such shares of Common Stock
from your brokerage account to a brokerage account specified by the
Company. When payment of the exercise price is made by delivery of
Common Stock, the difference, if any, between the aggregate exercise
price payable with respect to your option being exercised and the
Fair Market Value of the share(s) of Common Stock tendered in
payment (plus any applicable taxes) shall be paid in cash. You may
not tender shares of Common Stock having a Fair Market Value
exceeding the aggregate exercise price payable with respect to the
option being exercised (plus any applicable taxes).
d. "Fair Market Value" for purposes of this option shall mean, as of
the date in question,
i) if the Common Stock is listed for trading on the New
York Stock Exchange, the mean of the highest and lowest
sale prices of the Common Stock on such date, 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 last day
NON-QUALIFIED STOCK OPTION C-4
Page 4
prior to such 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. NASDAQ National Market System
("NASDAQ/NMS"), the mean of the highest and lowest sale
price of the Common Stock on such date as reported on
such exchange or NASDAQ/NMS, or if no such reported sale
of the Common Stock shall have occurred on such date, on
the last day prior to such date on which there was such
a reported sale;
iii) if the Common Stock is not listed for trading on a
national securities exchange or authorized for quotation
on NASDAQ/NMS, the mean of the highest and lowest sale
prices of the Common Stock on such date 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 last day
prior to such date on which there was such a reported
sale.
6. Withholding
a. Participant Election. The Committee may provide that you may be
permitted to elect to deliver shares of Common Stock (or have the
Company withhold shares acquired upon exercise of your option) to
satisfy, in whole or in part, the amount the Company is required to
withhold for taxes in connection with the exercise of your option.
Such election must be made on or before the date the amount of tax
to be withheld is determined. Once made, the election shall be
irrevocable. The fair market value of the shares to be withheld or
delivered will be the Fair Market Value as of the date the amount of
tax to be withheld is determined. In the event you elect to deliver
shares of Common Stock pursuant to this provision, such delivery
must be made subject to the conditions and pursuant to the
procedures set forth in Section 5 above with respect to the delivery
of Common Stock in payment of the exercise price of your option.
b. Company Requirement. The Company may require, as a condition to any
exercise of your option, that you make provision for the payment to
the Company of any federal, state or local taxes of any kind
required by law to be withheld with respect to any delivery of
shares. The Company, to the extent permitted or required by law,
shall have the right to deduct from any payment of any kind
(including salary or bonus) otherwise due to you, an amount equal to
any federal, state or local taxes of any kind required by law to be
withheld with respect to any delivery of shares, or to retain or
sell without notice a sufficient number of the shares to be issued
to you to cover any such taxes, the payment of which has not
otherwise been provided for in accordance with the terms of the
Plan, provided
NON-QUALIFIED STOCK OPTION C-5
Page 5
that the Company shall not sell any such shares if such sale would
be considered a sale by you for purposes of Section 16 of the
Exchange Act that is not exempt from matching thereunder.
7. Adjustment
In the event of a reorganization, recapitalization, stock split, stock
dividend, combination of shares, merger, consolidation, distribution of assets,
or any other change in the corporate structure or shares of the Company, the
Committee shall make such adjustment as is equitable in the number and kind of
shares subject to your option, and in the exercise price of your option. Any
such reasonable adjustment by the Committee in good faith shall be final,
conclusive and binding for all purposes. Subject to Section 2(b), in the event
of any merger, consolidation or other reorganization in which the Company is not
the surviving or continuing corporation or in which a Change of Control is to
occur, all of the Company's obligations regarding the option granted hereunder
and that are outstanding on the date of such event shall, on such terms as may
be approved by the Committee prior to such event, be assumed by the surviving or
continuing corporation or canceled in exchange for property (including cash).
Without limitation of the foregoing, in connection with any transaction of the
type specified by clause (iii) of the definition of a Change of Control, the
Committee may, in its discretion, (i) cancel this option in consideration for
payment to you of an amount equal to the portion of the consideration that would
have been payable to you pursuant to such transaction if your option had been
fully exercised immediately prior to such transaction, less the aggregate
exercise price that would have been payable therefor, or (ii) if the amount that
would have been payable to you pursuant to such transaction if your option had
been fully exercised immediately prior thereto would be less than the aggregate
exercise price that would have been payable therefor, cancel the option for no
consideration or payment of any kind. Payment of any amount payable pursuant to
the preceding sentence may be made in cash or, in the event that the
consideration to be received in such transaction includes securities or other
property, in cash and/or securities or other property in the Committee's
discretion. The foregoing provisions of this Section 7 to the contrary
notwithstanding, any such equitable or other action by the Committee under this
Section 7 shall be consistent with the treatment of outstanding stock options
held by other senior executives of the Company.
8. Securities Laws Restrictions and Other Restrictions on Transfer of Option
Shares
You represent that when you exercise your option you will be purchasing
Option Shares for your own account and not on behalf of others. You understand
and acknowledge that federal and state securities laws govern and restrict your
right to offer, sell or otherwise dispose of any Option Shares unless your
offer, sale or other disposition thereof is registered under the Securities Act
of 1933 (the "1933 Act") and state securities laws, or in the opinion of the
Company's counsel, such offer, sale or other disposition is exempt from the
registration thereunder. You agree that you will not offer, sell or otherwise
dispose of any Option Shares in any manner which would: (i) require the Company
to file any registration statement (or similar filing under state law) with the
Securities and Exchange Commission or to amend or supplement any such filing,
(ii) violate or cause the Company to violate the 1933 Act, the rules and
NON-QUALIFIED STOCK OPTION C-6
Page 6
regulations promulgated thereunder or any other state or federal law, or (iii)
violate any restrictions contained in the Plan. You further understand that the
certificates for any Option Shares you purchase will bear such legends as the
Company deems necessary or desirable in connection with the 1933 Act or other
rules, regulations or laws.
9. Laws and Regulations
No shares of Common Stock shall be issued under your option unless and
until all legal requirements applicable to the issuance of such shares of Common
Stock have been complied with to the satisfaction of the Committee. The
Committee shall have the right to condition any issuance of shares to you
hereunder on your undertaking in writing to comply with such restrictions on the
subsequent disposition of such shares as the Committee shall deem necessary or
advisable as a result of any applicable law or regulation.
10. Non-Transferability of Option
Your option is personal to you and is not transferable by you other than
by will or the laws of descent and distribution. During your lifetime only you
(or your guardian or legal representative) can exercise your option.
11. Conformity with Plan
Your option is intended to conform in all respects with, and is subject
to, all applicable provisions of the Plan, which is incorporated herein by
reference. Inconsistencies between this letter and the Plan shall be resolved in
accordance with the terms of the Plan. Inconsistencies between this (i) letter
and the Plan and (ii) your Employment Agreement shall be resolved in accordance
with the terms of your Employment Agreement. By executing and returning the
enclosed grant acknowledgment form, you agree to be bound by all of the terms of
the Plan, and acknowledge availability and accessibility of the Plan document on
the Company's Intranet and/or the ability to obtain a copy by e-mailing or
calling the Compensation department at Office Depot (561-438-7935).
12. Employment and Successors
Nothing herein confers any right or obligation on you to continue in the
employ of the Company or any subsidiary or shall affect in any way your right or
the right of the Company or any subsidiary, as the case may be, to terminate
your employment at any time. The agreements contained in this letter shall be
binding upon and inure to the benefit of any successor of the Company.
13. Notices
Any notices required or permitted hereunder shall be addressed to the
Company at its corporate headquarters, attention: General Counsel, or to the
Executive at the address then on record with the Company, as the case may be,
and deposited, postage prepaid, in the United
NON-QUALIFIED STOCK OPTION C-7
Page 7
States mail. Either party may, by notice to the other given in the manner
aforesaid, change his/her or its address for future notices.
14. Governing Law
This Agreement shall be governed by and construed in accordance with the
laws of the State of Florida without regard to its conflict of laws principles.
15. Entire Agreement
The agreements contained in this letter constitute the entire
understanding between you and the Company, and supersede all other agreements,
whether written or oral, with respect to the acquisition by you of common stock
of the Company upon exercise of the option granted hereunder.
NON-QUALIFIED STOCK OPTION C-8
Page 8
Please execute the Stock Option Grant Acknowledgment Form and return it to the
Stock Option Administrator at the corporate offices to confirm your
understanding and acceptance of the agreements contained in this letter.
Very truly yours,
OFFICE DEPOT, INC.
By_____________________________
[NAME]
[TITLE]
enclosures: 1. Stock Option Grant Acknowledgment Form
