<PAGE> 1
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the registrant X
-----
Filed by a party other than the registrant _____
Check the appropriate line:
___ Preliminary proxy statement
_X_ Definitive proxy statement
___ Definitive additional materials
___ Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
Staples, Inc.
------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
Staples, Inc.
------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate line):
_X_ $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or
14a-6(j)(2).
___ $500 per each party to the controversy pursuant to Exchange
Act Rule 14a-6(i)(3).
___ Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
---------------------------------------------------
<PAGE> 2
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11.
---------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
---------------------------------------------------
---- Check if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by
registration statement number, or the form of schedule and the date
of its filing.
(1) Amount previously paid:
(2) Form schedule or registration statement no.:
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(4) Date filed:
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<PAGE> 3
STAPLES, INC.
100 Pennsylvania Avenue
Framingham, Massachusetts 01701
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS TO BE HELD
ON THURSDAY, JUNE 29, 1995
The Annual Meeting of Stockholders of Staples, Inc. will be held at the
Hotel Meridien, 250 Franklin Street, Boston, Massachusetts, on Thursday, June
29, 1995 at 2:30 p.m., local time, to consider and act upon the following
matters:
(1) To elect three Class 1 Directors to serve for a three-year term.
(2) To ratify the selection of Ernst & Young, LLP as Staples' independent
auditors for the current fiscal year.
(3) To transact such other business as may properly come before the meeting
or any adjournment thereof.
Stockholders of record at the close of business on May 8, 1995 will be
entitled to notice of and to vote at the meeting or any adjournment thereof.
The stock transfer books will remain open.
By Order of the Board of Directors,
Peter M. Schwarzenbach,
Secretary
Framingham, Massachusetts
May 25, 1995
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE AND SIGN
THE ENCLOSED PROXY AND MAIL IT PROMPTLY IN THE ENCLOSED ENVELOPE IN ORDER
TO ENSURE REPRESENTATION OF YOUR SHARES. NO POSTAGE NEED BE AFFIXED IF THE
PROXY IS MAILED IN THE UNITED STATES.
<PAGE> 4
STAPLES, INC.
100 Pennsylvania Avenue
Framingham, Massachusetts 01701
PROXY STATEMENT
FOR THE ANNUAL MEETING OF STOCKHOLDERS
ON JUNE 29, 1995
This Proxy Statement is furnished in connection with the solicitation
of proxies by the Board of Directors of Staples, Inc. for use at the Annual
Meeting of Stockholders to be held on June 29, 1995 and at any adjournment of
that meeting. All proxies will be voted in accordance with the stockholders'
instructions, and if no choice is specified, the proxies will be voted in
favor of the matters set forth in the accompanying Notice of Meeting. Any
proxy may be revoked by a stockholder at any time before its exercise by
delivery of written revocation or a subsequently dated proxy to the Secretary
or by voting in person at the Annual Meeting.
At the close of business on May 8, 1995, the record date for the
determination of stockholders entitled to notice of and to vote at the Annual
Meeting, there were outstanding and entitled to vote 63,174,557 shares of
Common Stock (constituting all of the voting stock of Staples). Holders of
Common Stock are entitled to one vote per share. All references in this Proxy
Statement to historical transactions in Common Stock reflect the three- for-two
stock splits effected in the form of 50% stock dividends distributed on
December 13, 1993 and October 28, 1994.
Staples' Annual Report for the fiscal year ended January 28, 1995 was
mailed to stockholders, along with these proxy materials, on or about May 25,
1994.
VOTES REQUIRED
The affirmative vote of the holders of a plurality of the shares of
Common Stock voting on the matter is required for the election of Directors.
The holders of a majority of the shares of Common Stock outstanding and
entitled to vote at the Annual Meeting shall constitute a quorum for the
transaction of business at the Annual Meeting. Shares of Common Stock
represented in person or by proxy will be counted for purposes of determining
whether a quorum is present at the Annual Meeting. Shares which abstain from
voting as to a particular matter will be treated as shares that are present and
entitled to vote for purposes of determining the number of shares present and
entitled to vote with respect to any particular matter, but will not be counted
as a vote cast on such matter. If a broker or nominee holding stock in "street
name" indicates on a proxy that it does not have discretionary authority to
vote as to a particular matter, those shares will not be considered as present
and entitled to vote with respect to such matter and will not be counted as a
vote cast on such matter. Accordingly, abstentions and "broker non-votes" will
have no effect on the voting for election of directors.
<PAGE> 5
ELECTION OF DIRECTORS
Staples' Board of Directors is divided into three classes, with members
of each class holding office for staggered three-year terms (in all cases
subject to the election and qualification of their successors and to their
earlier death, resignation or removal). The persons named in the enclosed proxy
will vote to elect W. Lawrence Heisey, Martin Trust and Paul F. Walsh as Class
1 Directors for terms expiring at the 1998 Annual Meeting, unless authority to
vote for the election of any or all of the nominees is withheld by marking the
proxy to that effect. Each of Messrs. Heisey, Trust and Walsh is currently a
Class 1 Director of Staples. All of the nominees have indicated their
willingness to serve, if elected, but if any should be unable or unwilling to
stand for election, proxies may be voted for a substitute nominee designated by
the Board of Directors.
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Board of Directors, at the recommendation of the Audit Committee,
has selected the firm of Ernst & Young, LLP as Staples' independent auditors
for the current fiscal year. Ernst & Young has served as Staples' independent
auditors since Staples' inception. Although stockholder approval of the Board
of Directors' selection of Ernst & Young is not required by law, the Board of
Directors believes that it is advisable to give stockholders an opportunity to
ratify this selection. If this proposal is not approved at the Annual Meeting,
the Board of Directors may reconsider its selection.
Representatives of Ernst & Young are expected to be present at the
Annual Meeting and will have the opportunity to make a statement if they desire
to do so and will also be available to respond to appropriate questions from
stockholders.
OTHER MATTERS
The Board of Directors does not know of any other matters which may
come before the Annual Meeting. However, if any other matters are properly
presented to the Annual Meeting, it is the intention of the persons named in
the accompanying proxy to vote, or otherwise act, in accordance with their
judgment on such matters.
All costs of solicitation of proxies will be borne by Staples. In
addition to solicitations by mail, Staples' Directors, officers and regular
employees, without additional remuneration, may solicit proxies by telephone,
telegraph and personal interviews. Brokers, custodians and fiduciaries will be
requested to forward proxy soliciting material to the owners of stock held in
their names, and Staples will reimburse them for their out-of-pocket expenses
in this connection.
Proposals of stockholders intended to be presented at the 1996 Annual
Meeting of Stockholders must be received by Staples at its principal office in
Framingham, Massachusetts not later than January 26, 1996 for inclusion in the
proxy statement for that meeting.
THE BOARD OF DIRECTORS ENCOURAGES STOCKHOLDERS TO ATTEND THE MEETING.
WHETHER OR NOT YOU PLAN TO ATTEND, YOU ARE URGED TO COMPLETE, DATE, SIGN AND
RETURN THE ENCLOSED PROXY IN THE ACCOMPANYING ENVELOPE. PROMPT RESPONSE WILL
GREATLY FACILITATE ARRANGEMENTS FOR THE MEETING AND YOUR COOPERATION WILL BE
APPRECIATED. STOCKHOLDERS WHO ATTEND THE MEETING MAY VOTE THEIR STOCK
PERSONALLY EVEN THOUGH THEY HAVE SENT IN THEIR PROXIES.
2
<PAGE> 6
<TABLE>
BENEFICIAL OWNERSHIP OF COMMON STOCK
The following table sets forth the beneficial ownership of Staples'
Common Stock as of February 28, 1995 (i) by each person who is known by Staples
to beneficially own more than 5% of the outstanding shares of Common Stock,
(ii) by each Director, (iii) by each of the Senior Executives named in the
Summary Compensation Table set forth under the caption "Executive Compensation"
below, and (iv) by all current Directors and executive officers as a group:
<CAPTION>
NUMBER OF SHARES PERCENTAGE OF
BENEFICIALLY OUTSTANDING
BENEFICIAL OWNER OWNED (1) COMMON STOCK (2)
- ---------------- --------- ----------------
<S> <C> <C>
5% Stockholders
- ---------------
FMR Corp. (3) 8,955,500 14.24%
82 Devonshire Street
Boston, MA 02109
Jundt Associates, Inc. (4) 3,803,599 6.05%
1550 Utica Avenue South
Suite 950
Minneapolis, MN 55416
Directors
- ---------
Thomas G. Stemberg (5) 1,439,445 2.27%
Martin Trust (6) 1,011,703 1.61%
Leo Kahn (7) 453,824 *
Robert C. Nakasone 162,588 *
David G. Lubrano (8) 150,010 *
Rowland Moriarty (9) 97,268 *
Paul F. Walsh 44,624 *
W. Mitt Romney (10) 42,649 *
Stephen T. Westerfield 20,501 *
Mary Elizabeth Burton 6,696 *
W. Lawrence Heisey 2,250 *
Other Senior Executives
- -----------------------
Martin E. Hanaka -------- *
John B. Wilson 126,816 *
Louis R. Pepi 147,076 *
Joseph S. Vassalluzzo 183,270 *
All Current Directors and Executive 5,843,892 9.06%
Officers as a Group (22 persons) (1)
<FN>
- -----------------------
* Less than 1%
(1) Each person has sole investment and voting power with respect to the
shares indicated, except as otherwise noted. The inclusion herein of any
shares as beneficially owned does not constitute an admission of
beneficial ownership. For purposes of this table and the following
footnotes, each of the following persons is deemed to beneficially own
any shares issuable upon the exercise of stock options that are currently
exercisable or exercisable within 60 days after February 28, 1995 or upon
conversion of Staples' 5% Convertible Subordinated Debentures due 1999
(the "Debentures"): Mr. Stemberg 613,125 shares; Mr. Trust 18,750
shares; Mr. Kahn 24,374 shares; Mr. Nakasone 24,374 shares; Mr. Lubrano
34,374 shares; Mr. Moriarty 24,374 shares; Mr. Walsh 41,249 shares; Mr.
Romney 24,374 shares; Mr. Westerfield 20,479 shares; Ms. Burton 6,696
shares; Mr. Wilson 123,750 shares; Mr. Pepi 139,186 shares; and Mr.
Vassalluzzo 181,050 shares; all Directors and executive officers as a
group 1,611,215 shares.
</TABLE>
3
<PAGE> 7
(2) Number of shares deemed outstanding includes 62,874,582 shares
outstanding as of February 28, 1995, any shares subject to stock options
held by the person or entity in question, and any shares issuable upon
conversion of the Debentures held by the person or entity in question.
(3) Based on a Schedule 13G filed with the Securities and Exchange Commission
on February 13, 1995.
(4) Based on a Schedule 13G filed with Securities and Exchange Commission on
February 8, 1995.
(5) Includes 96,525 shares owned by the Thomas G. Stemberg Family Trust and
1,125 shares owned by his wife.
(6) Includes 967,081 shares owned by Trust Investments, Inc., with which
Mr. Trust is affiliated. Mr. Trust has shared investment and voting
control of these shares. Also includes 3,375 shares held by Mr. Trust's
wife.
(7) Includes 51,750 shares owned of record and beneficially by a trust for
the benefit of Mr. Kahn's wife.
(8) Includes 15,750 shares held by the Jean Lubrano Trust, of which
Mr. Lubrano is a trustee.
(9) Includes 12,450 shares held by trusts for the benefit of Mr. Moriarty's
children. Mr. Moriarty is not a trustee of the trusts for the benefit of
his children.
(10) Includes 9,118 shares subject to stock options held by The Bain
Capital Fund Limited Partnership, and 1,007 shares subject to stock
options held by The Bain Capital Fund Limited Partnership II. Mr. Romney
is a general partner of The Bain Capital Fund Limited Partnership and The
Bain Capital Fund Limited Partnership II and has shared investment and
voting power with respect to these shares.
DIRECTORS AND EXECUTIVE OFFICERS OF STAPLES
Set forth below are the names and certain information with respect to
each Director and executive officer of Staples, including the three nominees for
re-election as Class 1 Directors.
Class 1 Directors holding office for term expiring at the 1995 Annual Meeting:
W. LAWRENCE HEISEY*, age 64, has been a Director since November 1994.
Mr. Heisey has served as Chairman Emeritus of Harlequin Enterprises Limited of
Toronto, Canada since May 1990 and was a Director of The Business Depot, Ltd.
prior to its acquisition by Staples in August 1994.
MARTIN TRUST*, age 60, has been a Director since June 1987. Mr. Trust
has served as President and Chief Executive Officer of Mast Industries, Inc., a
contract manufacturer, importer and wholesaler of women's apparel, and
wholly-owned subsidiary of The Limited, Inc., since 1970. Mr. Trust is a
Director of The Limited, Inc.
PAUL F. WALSH*, age 45, has been a Director since December 1990. Mr.
Walsh has served as President and Chief Executive Officer of Wright Express
Corporation, an information and financial services company, since February 1995.
From January 1990 to February 1995 he was Chairman of BancOne Diversified
Services Corporation, a financial services company.
STEPHEN T. WESTERFIELD, age 52, has been a Director since September
1992. Mr. Westerfield has been President and Chief Executive Officer of STW
International, a retail consulting firm, since October 1992. From June 1989 to
October 1992 he was President and Chief Executive Officer of Office Mart
Holdings Corp., the operator of WORKplace office product stores, which was
acquired by Staples in 1992.
Class 2 Directors holding office for term expiring at the 1996 Annual Meeting:
DAVID G. LUBRANO, age 64, has been a Director since February 1987. Mr.
Lubrano has been a private investor and business consultant since January 1990.
ROWLAND T. MORIARTY, age 48, has been a Director since March 1986. Mr.
Moriarty has been Chairman and Chief Executive Officer of Cubex Corporation, a
consulting company, since September
- -----------------------------------
* Candidate for election term expiring at 1998 Annual Meeting.
4
<PAGE> 8
1992. He was a professor at Harvard Business School from September 1981 to
September 1992. Mr. Moriarty is a Director of Capital American Financial Corp.
W. MITT ROMNEY, age 48, has been a Director since January 1986. Since
May 1992, Mr. Romney has been the Chief Executive Officer of Bain Capital, Inc.,
a firm which manages certain venture capital funds. Mr. Romney has been a
general partner and the managing partner of Bain Capital Partners, and of Bain
Venture Capital, both general partners of venture capital limited partnerships,
since September 1984 and October 1987, respectively. Mr. Romney served as CEO
of Bain & Company, Inc., a management consulting firm, from 1991 to 1993, and
now serves as a director of such firm. Mr. Romney is a Director of Marriott
International, Inc., The Sports Authority, Inc., and Neostar Retail Group, Inc.
MARY ELIZABETH BURTON, age 43, has been a Director since June 1993. Ms.
Burton has served as Chief Executive Officer at BB Capital, Inc., an investment
company, since June 1994. From August 1992 to June of 1994 she was Chairman and
Chief Executive Officer of Supertans, Inc., a chain of tanning salons. From
July 1991 to July 1992 she was Chairman and Chief Executive Officer of Postal
Instant Press, a chain of business printers, and from September 1987 to June
1991 Ms. Burton was Chairman and Chief Executive Officer of Supercuts, Inc., a
chain of haircare salons. She is a Director of Gantos, Inc.
Class 3 Directors holding office for term expiring at the 1997 Annual Meeting:
LEO KAHN, age 78, is a co-founder of Staples and has been a Director
since January 1986. Mr. Kahn has been a partner in United Properties Group, a
real estate partnership, since April 1985. Mr. Kahn is a Director of Grossman's,
Inc.
ROBERT C. NAKASONE, age 47, has been a Director since January 1986. Mr.
Nakasone has served as President and Chief Operating Officer of Toys "R" Us,
Inc., a retail store chain, since January 1994. From January 1989 to January
1994, Mr. Nakasone served as Vice Chairman and President of Worldwide Toy Stores
of Toys "R" Us. Mr. Nakasone is a Director of Toys "R" Us.
THOMAS G. STEMBERG, age 46, is a co-founder of Staples and has been a
Director since January 1986. Mr. Stemberg has served as Staples' Chairman of the
Board of Directors and Chief Executive Officer since February 1988. Mr. Stemberg
is a Director of PETsMART, Inc. and Duane Reade, Inc.
Executive Officers
In addition to Mr. Stemberg, the following are the executive officers of
Staples:
MARTIN E. HANAKA, age 46, has served as President and Chief Operating
Officer of Staples since August 1994. From October 1992 to August 1994 he was
President and Chief Operating Officer and Executive Vice President of Lechmere,
Inc. Prior to joining Lechmere, Inc., he was with Sears Roebuck & Co. where,
since 1990, he served in various capacities including Vice President-Brand
Central, Region Manager - Mid-South and General Manager-Sears Travel.
JACK C. BINGLEMAN, age 52, has served as President-North American
Superstores since August 1994. He was President of The Business Depot, Ltd. from
its founding in 1990 until its acquisition by Staples in August 1994.
TODD J. KRASNOW, age 37, has served as Executive Vice President - Sales
& Marketing of Staples since April 1994. Previously he served as Senior Vice
President - Sales & Marketing from November 1993 until April 1994, and from May
1992 until November 1993 he served as Senior Vice President - Joint Ventures.
Prior to holding that position, he was Vice President - Marketing & Systems,
California Operations from April 1990 until May 1992.
5
<PAGE> 9
LOUIS R. PEPI, age 51, has served as Executive Vice President - Human
Resources of Staples since August 1994. Mr. Pepi joined Staples in October 1990
and served as Executive Vice President - Operations until April 1993, and
thereafter until August 1994 as President of the "Staples, The Office
Superstore" division. Prior to joining Staples, he had been President of the
Ohio Valley Division of Super Value Stores, Inc., a wholesale food distributor.
RONALD L. SARGENT, age 39, has served as President - Staples Contract &
Commercial since June 1994. From September 1991 until June 1994 he served as
Vice President - Staples Direct and Executive Vice President - Contract &
Commercial. Mr. Sargent joined Staples in March 1989 and served as Regional Vice
President - Operations until June 1990. From June 1990 to September 1991, he
served as Vice President - Administration, Research and Properties of Staples.
JOSEPH S. VASSALLUZZO, age 47, has served as Executive Vice President -
Global Growth & Development of Staples since November 1993. Mr. Vassalluzzo
joined Staples in September 1989 and served as Executive Vice President - Growth
& Development until April 1993. From April 1993 until November 1993 he served as
Executive Vice President - Growth and Support Services.
JOHN B. WILSON, age 35, has served as Executive Vice President - Finance
& Strategy and Chief Financial Officer of Staples since November 1992. He was
Senior Vice President, Corporate Planning of NWA, Inc., the parent company of
Northwest Airlines, Inc., from October 1990 to October 1992. From June 1986 to
October 1990, Mr. Wilson was an employee of Bain & Company, Inc., where he held
positions ranging from Consultant to Vice President.
JAMES E. FLAVIN, age 52, has served as Senior Vice President - Finance
and Corporate Controller of Staples since joining Staples in February 1995.
Prior to joining Staples, he was with Filene's in various capacities, most
recently as Senior Vice President Finance & MIS of the Filene's Division of May
Department Stores Co.
HENRY P. EPSTEIN, age 59, has served as Vice President - Contract
Development & Operations of Staples since April 1994. Since April 1970, Mr.
Epstein has been the Chairman of Spectrum Office Products Inc., which became a
subsidiary of Staples in March 1994.
ROBERT S. FRIED, age 46, has served as Vice President and Chief
Technology Officer of Staples since joining Staples in February 1993. From
December 1987 to January 1993 he served as Director, European Information
Systems of Honeywell, Inc., an automation and control company.
EVAN P. STERN, age 53, since November 1994 has served as President of
National Office Supply Company, Inc. which became a subsidiary of Staples in
February 1994. Prior to that he served as President and Chief Operating Officer
of National Office Supply Company, Inc.
Staples' Chairman of the Board of Directors is elected by the Board of
Directors for a one-year term and serves at the discretion of the Board. All
other executive officers of Staples are appointed by the Board of Directors and
serve at the Board's discretion. No family relationships exist between any of
the executive officers or Directors of Staples.
BOARD AND COMMITTEE MEETINGS
The Audit Committee of the Board of Directors provides the opportunity
for direct contact between Staples' independent auditors and the Board. The
Audit Committee reviews the auditors' performance in the annual audit and, in
assignments unrelated to the audit, reviews auditors' fees, discusses Staples'
internal accounting control policies and procedures and considers and recommends
the selection of Staples' independent auditors. The Audit Committee met four
times during the fiscal year ended January 28, 1995. The current Audit
Committee members are Messrs. Walsh (Chairman), Lubrano and Westerfield and Ms.
Burton.
6
<PAGE> 10
The Compensation Committee of the Board of Directors sets the
compensation levels of executive officers (subject to review by the Board of
Directors), provides recommendations to the Board regarding compensation
programs, administers Staples' stock option, stock purchase and other employee
benefit plans and authorizes option grants under the 1987 and 1992 Stock Option
Plans. The Compensation Committee met five times during the fiscal year ended
January 28, 1995. The current members of the Compensation Committee are Messrs.
Nakasone (Chairman), Kahn, Trust and Lubrano.
The Nominating Committee of the Board of Directors provides
recommendations to the Board regarding nominees for director. The Nominating
Committee will consider nominees recommended by stockholders. Stockholders who
wish to recommend nominees for Director should submit recommendations to the
Secretary who will forward them to the Nominating Committee for consideration.
The Nominating Committee met four times during the fiscal year ended January 28,
1995. The current members of the Nominating Committee are Messrs. Moriarty
(Chairman), Romney and Walsh.
The Board of Directors met seven times during the fiscal year ended
January 28, 1995. Each incumbent Director attended at least 75% of the aggregate
number of Board meetings and meetings of committees on which he or she then
served, with the exception of Mr. Romney and Mr. Trust. At its meeting on
February 3, 1994, the Board of Directors voted to excuse Mr. Romney from
attending Board and committee meetings in 1994 due to his plans to seek election
as a United States Senator from Massachusetts.
DIRECTOR COMPENSATION
Each non-employee Director receives a fee of $1,000 for each Board of
Directors meeting attended and $300 for each Committee meeting attended. All
Directors are reimbursed for certain company-related travel expenses.
The 1990 Director Stock Option Plan of Staples (the "Director Plan")
provides for the annual grant of an option to purchase 5,000 shares of Common
Stock, at an exercise price equal to the fair market value of the Common Stock
on the date of grant, to each non-employee Director who attends during a fiscal
year at least 75% of the total number of Board of Directors meetings held while
he or she was a Director (excluding meetings held by telephone conference on
less than seven days notice, of which there were two in 1994) and meetings of
committees of the Board of Directors on which he or she then served during the
fiscal year. The Director Plan provides for a pro rata reduction in the number
of shares subject to the option granted to a director for the fiscal year in
which he or she was initially elected to the Board based on the number of Board
meetings held during the fiscal year following his or her election to the Board.
Pursuant to this provision and with respect to the fiscal year ended January 28,
1995, on March 16, 1995 each of Messrs. Kahn, Lubrano, Moriarty, Nakasone,
Trust, Walsh, Westerfield, and Ms. Burton was granted an option to purchase
5,000 shares of Common Stock and Mr. Heisey was granted an option to purchase
833 shares of Common Stock, each at an exercise price of $28.125 per share.
In addition, the Director Plan provides for the grant to each non-
employee Director, upon his or her initial election as a Director, of an option
to purchase 10,000 shares of Common Stock at an exercise price equal to the fair
market value of the Common Stock on the date of grant. On November 29, 1994 Mr.
Heisey was granted an option to purchase 10,000 shares of Common Stock at an
exercise price of $22.50 per share.
All stock options granted under the Director Plan become exercisable on
a cumulative basis in four equal annual installments, commencing on the first
anniversary of the date of grant. In the event of a "Change in Control" of
Staples (as defined in the Director Plan), all options outstanding under the
Director Plan automatically become exercisable in full, unless the Board of
Directors expressly determines that the "Change in Control" provisions of the
Director Plan should not be triggered. An optionee generally may exercise an
option granted under the Director Plan, to the extent exercisable, only while he
or she is a
7
<PAGE> 11
Director of Staples and for up to six months thereafter. Unexercised options
expire ten years after the date of grant.
<TABLE>
EXECUTIVE COMPENSATION
Summary Compensation
The following table sets forth certain information concerning the
compensation for each of the last three fiscal years of Staples' Chief Executive
Officer and Staples' four other most highly compensated executive officers
during the fiscal year ended January 28, 1995 (the "Senior Executives").
SUMMARY COMPENSATION TABLE
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION (1) AWARDS
------------------------------- ------------
NAME AND FISCAL ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS (2) OPTIONS COMPENSATION (3)
------------------ ---- ------ --------- ------- ----------------
<S> <C> <C> <C> <C> <C>
Thomas G. Stemberg 1994 $349,167 $300,888 213,750 $ 1,324
Chairman and CEO 1993 296,000 0 180,000 19,922
1992 251,100 188,841 900,000 816
Martin E. Hanaka 1994 163,333(4) 241,175(4) 162,499 0
President and COO 1993
1992
John B. Wilson 1994 282,083 192,053 58,500 76,682(6)
Exec. V.P. - Finance & 1993 250,000 125,000(5) 135,000 113,325
Strategy and CFO 1992 53,225 0 180,000 17,760
Joseph S. Vassalluzzo 1994 247,083 186,849 37,500 1,086
Exec. V.P. - Global 1993 209,792 0 135,000 12,308
Growth & Development 1992 173,875 87,307 22,500 575
Louis R. Pepi 1994 259,167 116,493 37,500 0
Exec. V.P. - Human 1993 226,250 0 146,250 16,738
Resources 1992 164,167 82,565 11,250 535
<FN>
- -------------------
(1) In accordance with the rules of the Securities and Exchange
Commission, other compensation in the form of perquisites and other
personal benefits has been omitted because such perquisites and other
personal benefits constituted less than the lesser of $50,000 or 10% of
the total annual salary and bonus for the Senior Executive.
(2) Except as noted below, represents amounts paid under Staples'
executive bonus plan for the relevant fiscal year.
(3) Except as noted below, represents the full dollar amount of insurance
premiums paid by Staples with respect to life insurance for the benefit of
the Senior Executive.
(4) Mr. Hanaka joined Staples in August 1994. Bonus payment for 1994 was
calculated based on the full year results and Mr. Hanaka's annualized
salary of $350,000 pursuant to his offer of employment.
(5) Mr. Wilson joined Staples in November, 1992. Payment reflects a
guaranteed minimum bonus payment for the first full year of employment
pursuant to Mr. Wilson's offer of employment.
(6) Includes $76,030, $102,810 and $17,760 for reimbursement of
relocation expenses in fiscal 1994, 1993 and 1992, respectively.
</TABLE>
8
<PAGE> 12
<TABLE>
Option Grants
The following table sets forth certain information concerning grants of
stock options during the fiscal year ended January 28, 1995 to each of the
Senior Executives.
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
------------------------------------------------
PERCENT OF POTENTIAL REALIZABLE VALUE AT ASSUMED
TOTAL OPTIONS ANNUAL RATE OF STOCK PRICE
NUMBER OF GRANTED TO EXERCISE APPRECIATION FOR OPTION TERM (3)
OPTIONS EMPLOYEES IN PRICE PER EXPIRATION -------------------------------
NAME GRANTED(1) FISCAL YEAR SHARE (2) DATE 0% 5% 10%
---- ---------- ----------- --------- ---- -- -- ---
<S> <C> <C> <C> <C> <C> <C> <C>
Thomas G. Stemberg 213,750 6.13% $19.75 9/23/04 $0 $2,654,918 $6,728,083
Martin E. Hanaka 87,499 2.51% $17.67 8/15/04 0 $972,338 $2,464,096
75,000 2.15% $19.75 9/23/04 0 $931,552 $2,360,730
John B. Wilson 58,500 1.68% $19.75 9/23/04 0 $726,611 $1,841,369
Louis R. Pepi 37,500 1.07% $19.75 9/23/04 0 $465,776 $1,180,365
Joseph S. Vassalluzzo 37,500 1.07% $19.75 9/23/04 0 $465,776 $1,180,365
<FN>
- ------------------
(1) Each of the options granted becomes exercisable in full on the third
anniversary of the date of grant, provided that the optionee continues to
be employed by Staples on such date. The exercisability of the options is
accelerated under certain circumstances. See "Employment Contracts,
Termination of Employment and Change-in-Control Agreements with Senior
Executives."
(2) The exercise price is equal to the fair market value per share of
Common Stock on the date of grant.
(3) In accordance with the rules of the Securities and Exchange Commission,
the amounts shown on this table represent hypothetical gains that
could be achieved for the respective options if exercised at the end
of the option term. These gains are based on assumed rates of stock
appreciation of 0%, 5% and 10% compounded annually from the date the
respective options were granted to their expiration date. The gains shown
are net of the option exercise price, but do not include deductions for
taxes or other expenses associated with the exercise. Actual gains, if
any, on stock option exercises will depend on the future performance of
the Common Stock, the optionholders' continued employment through the
option period, and the date on which the options are exercised.
</TABLE>
9
<PAGE> 13
<TABLE>
Option Exercises and Holdings
The following table sets forth certain information concerning each
exercise of a stock option during the fiscal year ended January 28, 1995 by each
of the Senior Executives and the number and value of unexercised options held by
each of the Senior Executives on January 28, 1995.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
<CAPTION>
NO. OF SHARES NUMBER OF SHARES OF COMMON
OF COMMON STOCK UNDERLYING VALUE OF UNEXERCISED
STOCK UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
ACQUIRED VALUE FISCAL YEAR END FISCAL YEAR END (2)
NAME ON EXERCISE REALIZED (1) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- ----------- ------------ ------------------------- -------------------------
<S> <C> <C> <C> <C>
Thomas G. Stemberg 0 $ 0 613,125 / 826,875 $6,331,420 / $6,947,052
Martin E. Hanaka 0 0 0 / 162,499 $0 / $913,532
John B. Wilson 0 0 123,750 / 249,750 $1,200,942 / $2,261,070
Louis R. Pepi 35,000 496,967 169,186 / 158,439 $2,909,098 / $1,589,629
Joseph S. Vassalluzzo 52,500 623,312 181,050 / 155,625 $2,859,160 / $1,540,161
<FN>
- -----------------
(1) Represents the difference between the exercise price and the fair
market value of the Common Stock on the date of exercise.
(2) Based on the fair market value of the Common Stock on January 27,
1995 ($24.25 per share), less the option exercise price.
</TABLE>
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
AGREEMENTS WITH SENIOR EXECUTIVES
In May 1995, Staples entered into Severance Benefit Agreements (the
"Severance Agreements") with its executive officers, including the Senior
Executives, which superseded the employment agreements and employee retention
agreements previously in place with each Senior Executive. Under the
Severance Agreements, which expire May 31, 2000, the Senior Executives would be
entitled to continuation of salary and other benefits for (i) 18 months in the
case of Messrs. Stemberg and Hanaka, (ii) 12 months in the case of Messrs.
Wilson and Vassalluzzo, and (iii) 6 months in the case of Mr. Pepi, following
termination of employment by Staples without cause (or "constructive
discharge" as provided in the Severance Agreements). Each Senior Executive
would receive such benefits for an additional period of 6 months if such
termination occurred within two years following a "change in control" of
Staples (as defined in the Severance Agreements). A change in control of
Staples also results in an acceleration of the exercisability of options held
by Senior Executives pursuant to the terms of such options.
Pursuant to his offer of employment, Mr. Hanaka was granted the
opportunity to earn a bonus for 1994 based on his annualized base salary; in
addition, the exercisability of Mr. Hanaka's options to purchase shares
granted on August 15, 1994 and September 23, 1994 accelerates if his
employment is terminated without cause.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Each of Messrs. Kahn, Lubrano, Nakasone and Trust, non-employee
Directors of Staples, served on the Compensation Committee for the entire
fiscal year ended January 28, 1995.
10
<PAGE> 14
Staples leases its Tysons Corner, Virginia store from Toys "R" Us. Mr.
Nakasone is President and Chief Operating Officer of Toys "R" Us. Under the
terms of the lease, which commenced on February 1, 1988, Staples was required to
pay Toys "R" Us annual rent in the amount of $374,000 for each of the first
five years of the lease term and is required to pay the amount of $430,100 for
each of the succeeding five years. The term of the lease is ten years and
Staples may renew the lease for an additional ten-year period at an increased
rent. In addition, Staples has proposed to purchase an assignment of a lease
for a store in Escondido, California from Kids "R" Us, a subsidiary of Toys "R"
Us, for $525,717.
Mr. Kahn is a Trustee of Atlas-Danvers Realty Trust. In 1991, Staples
entered into a lease with Atlas-Danvers Realty Trust for space in Danvers,
Massachusetts for an initial term of 15 years at an initial base annual rent of
$212,100. In addition, Mr. Kahn is a partner in United Properties Group. In
1990, Staples entered into a lease with United Properties Group for space in
Seekonk, Massachusetts for a term of 10 years at an initial base annual rent of
$154,000 for the first five years and $171,000 thereafter.
In September 1993, Staples entered into an agreement with Super Office,
Ltd., an Israeli corporation. Pursuant to this agreement Staples agreed to sell
office products to Super Office for sale in Israel for a period of three years.
During the fiscal year ended January 28, 1995, Super Office paid Staples
$318,145 under this agreement. Mr. Kahn is currently a Director and holder of
approximately 12% of the common stock of Super Office.
CERTAIN TRANSACTIONS
Mr. Romney, a Director of Staples, was Chief Executive Officer of Bain &
Company, Inc. ("Bain"), a management consulting firm, until November 1993. He
currently serves as a Director of Bain. Staples from time to time has engaged
Bain to provide consulting services on several major projects, some of which
remain active. During the fiscal year ended January 28, 1995, Staples paid
$505,807 to Bain for services in connection with several consulting projects.
In connection with Staples' acquisition of the stock of National Office
Supply Company, Inc. ("NOS"), Staples acquired leases between NOS and certain
partnerships of which Evan Stern is a partner in Chicago, Illinois and
Hackensack, New Jersey. Annual rental payments in 1994 were $680,000 and
$532,432, respectively. In addition, Staples' subsidiary, Spectrum Office
Products Inc., leases its facility in Rochester, New York from a partnership of
which Henry Epstein is partner. Rental payments in fiscal 1994 amounted to
$570,515. Each of the above transactions was entered into prior to the
acquisition of such by companies by Staples.
See "Compensation Committee Interlocks and Insider Participation" above
for information relating to certain transactions between Staples and entities in
which either Mr. Kahn or Mr. Nakasone, Directors of Staples, have an interest.
Staples has a policy that transactions and loans, if any, between
Staples and its officers, Directors and affiliates will be on terms no less
favorable to Staples than could be obtained from unrelated third parties and
will be approved by a majority of the members of the Board of Directors and by a
majority of the disinterested members of the Board of Directors. In addition,
this policy mandates that Staples may make loans to such officers, Directors and
affiliates for bona fide business purposes only. In accordance with Staples'
policy, each of the above transactions was approved by both the Board of
Directors and the disinterested members of the Board of Directors. In the case
of each of the lease transactions, Staples believes that the terms are no less
favorable than could be obtained from unrelated third parties.
11
<PAGE> 15
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Staples' executive compensation program is administered by the
Compensation Committee composed of the four non-employee directors listed
below. Staples' executive compensation program is designed to retain and
reward executives who are responsible for leading Staples in achieving its
business objectives. All decisions by the Compensation Committee relating to
the compensation of Staples' executive officers are reviewed by the full Board.
This report is submitted by the Compensation Committee and addresses Staples'
compensation policies for the fiscal year ended January 28, 1995 ("fiscal
1994") as they affected the Chief Executive Officer and the other executive
officers of Staples.
Compensation Philosophy
The objectives of the executive compensation program are to (i) align
compensation with business objectives, individual performance and the interests
of Staples' stockholders, (ii) motivate and reward high levels of performance,
(iii) recognize and reward the achievement of team and/or individual goals and
(iv) enable Staples to attract, retain and reward executive officers who
contribute to the long-term success of Staples.
In furtherance of these objectives, the Committee's executive
compensation philosophy is that a significant portion of executive
compensation should be tied to the performance of Staples. The base salaries
paid to executives are targeted by the Committee to fall below the median of the
base salary believed to be paid to comparable executives of comparable
companies. Staples seeks, however, to provide its executives with
opportunities for compensation substantially higher than base salary through
performance-based bonuses and stock options. The Committee believes that bonus
awards tied to achievement of pre-approved, budgeted sales, earnings and
customer service goals serve as an influential motivator to its executives and
help to align the executives' interests with those of the stockholders of
Staples. The Committee also believes that a substantial portion of the
compensation of Staples' executives should be linked through Staples' stock
option program to the success of Staples' stock in the marketplace. Stock
options further align the interests of management and stockholders and assist in
the retention of valued executives.
During fiscal 1994, Staples engaged the international compensation and
human resources consulting firm of The Wyatt Company to evaluate Staples'
compensation program, compare it to other relevant companies, and make
recommendations consistent with Staples' objectives and philosophy. In
compiling the comparative information, Wyatt utilized public and proprietary
information regarding executive compensation for retail companies and companies
in other markets believed by Wyatt to be relevant to Staples. Certain of these
companies are included in the Standard and Poor's Retail Composite Index
contained in the stock performance graph on page 14.
Implementation of Compensation Program
Based on the information in the Wyatt study and consistent with Staples'
objectives and philosophy, the Committee targeted total annual compensation - -
consisting of the three principal elements of salary, cash bonus and stock
options -- to fall above total annual compensation for similar positions in the
group of companies used in the Wyatt study.
- -- SALARIES: The Compensation Committee targeted base annual salary for
executives to be slightly below the average of annual base salary for
comparable positions in the Wyatt study group.
- -- BONUS: Each of Staples' executives, including the Senior Executives, was
eligible to participate in Staples' executive bonus plan in fiscal 1994
("Bonus Plan"). The Bonus Plan provided for the payment of cash bonuses
based on Staples' attainment of objectives relating to annual sales and
earnings before taxes, with equal weighting given to sales and earnings.
Bonuses for the Chief Executive Officer, Chief Operating Officer and Chief
Financial Officer were based on company-wide sales and
12
<PAGE> 16
earnings goals, while objectives for certain other executives also contained
goals for the particular business unit over which such executive exercised
responsibility. The sales and earnings objectives for fiscal 1994 were
determined by the Committee, and approved by the Board, at the beginning of
fiscal 1994 based on Staples' budget. The Committee established target
bonuses for executives in an attempt to bring the cash portion of total
annual compensation (base salary plus target bonus) to approximately the
median of the cash compensation paid to the Wyatt comparison group. The
Bonus Plan also contained a component providing for the potential to earn up
to an additional 15% of the sales/earnings bonus if Staples met certain
customer service and customer retention goals.
For fiscal 1994, Staples met or exceeded its sales and earnings objectives
on a company-wide basis and for certain business units. Bonuses paid to
Senior Executives ranged from 87% to 146% of targeted amounts with an
additional 3% of earned bonus paid for achievement of certain customer
service goals.
- -- STOCK OPTIONS: In addition to base salary and bonus, Staples' executives
also were granted performance-based long-term incentives represented by
stock options, which were valued by Wyatt using a modified Black-Scholes
methodology. The exercise price of all options granted was the fair market
value of the Common Stock on the date of grant. The options granted under
the option program since September 1, 1994 vest in full on the third
anniversary of the date of grant to further encourage retention and promote
identity of interest with Staples stockholders. Prior to September 1994,
certain executives were granted additional options as an inducement to join
Staples or in recognition of promotions or special achievement, which
options vest on a cumulative annual basis over a three or four year period.
Mr. Stemberg, Staples' Chief Executive Officer, is eligible to
participate in the same executive compensation program available to Staples
executives and his total annual compensation, including compensation derived
from Staples' bonus program and stock option program, was set by the Committee
in accordance with the same criteria. Mr. Stemberg's annual salary was increased
in fiscal 1994 from $300,000 to $400,000 which was below the minimum amount of
the base salary range recommended by Wyatt for Staples' CEO position and at the
low end of the range of the Wyatt comparison group. Under the Bonus Plan, Mr.
Stemberg was paid a bonus of $300,888, placing his total cash compensation at
approximately the median of the Wyatt Comparison group. In fiscal 1994, the
Committee granted Mr. Stemberg an option to purchase 142,500 shares of Common
Stock (adjusted to 213,750 shares following the 50% stock dividend effected
October 28, 1994). This grant was valued and based on the same factors the
Committee considered in fixing the size of other executive stock option grants.
Using the Wyatt valuation for options, total annual compensation to Mr. Stemberg
in fiscal 1994 placed him above the median of the Wyatt comparison group.
Tax Considerations
Under the Internal Revenue Code of 1986, as amended, certain executive
compensation in excess of $1 million paid to a public company's five most
highly-paid executives is not deductible for federal income tax purposes unless
the executive compensation is awarded under a performance-based plan approved by
the stockholders. Although the Committee believes that the ability to claim such
tax deductions is of value to Staples, it has decided not to submit its bonus
plan for stockholder approval at this time because the Committee has determined
that cash compensation to any executive is unlikely to exceed $1 million in the
near future. However, the Committee has structured Staples' stock option plan so
that options granted to its executives comply with the performance-based
requirements of the tax law.
COMPENSATION COMMITTEE: Robert C. Nakasone, Chairman
Leo Kahn
David G. Lubrano
Martin Trust
13
<PAGE> 17
<TABLE>
STOCK PERFORMANCE GRAPH
The following graph compares the cumulative total stockholder return on
the Common Stock of Staples between January 27, 1990 and January 28, 1995 (the
end of fiscal 1994) with the cumulative total return of (i) Standard & Poor's
500 Composite Index and (ii) the Standard & Poor's Retail Store Composite Index.
This graph assumes the investment of $100.00 on January 27, 1990 in Staples'
Common Stock, the Standard & Poor's 500 Composite Index and the Standard &
Poor's Retail Store Composite Index, and assumes dividends are reinvested.
Measurement points are January 26, 1991, February 1, 1992, January 30, 1993,
January 29, 1994 and January 28, 1995 (Staples' last five fiscal year ends).
TOTAL RETURN TO SHAREHOLDERS
DIVIDENDS REINVESTED
[LINE GRAPH]
<CAPTION>
27-Jan-90 26-Jan-91 1-Feb-92 30-Jan-93 29-Jan-94 28-Jan-95
--------- --------- -------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
SPLS 100.00 112.71 318.73 366.22 392.31 519.06
S & P Retail Composite 100.00 107.02 157.49 184.65 171.82 159.26
S & P 500 100.00 103.15 125.47 134.68 146.93 144.38
</TABLE>
14
<PAGE> 18
STAPLES, INC.
PROXY FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON JUNE 29, 1995
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY
The undersigned, revoking all prior proxies, hereby appoint(s) Thomas G.
Stemberg, John B. Wilson and Peter M. Schwarzenbach, and each of them, with full
power of substitution, as proxies to represent and vote, as designated herein,
all shares of Common Stock of Staples, Inc. (the "Company") which the
undersigned would be entitled to vote if personally present at the Annual
Meeting of Stockholders of the Company to be held at the Hotel Meridien, 250
Franklin Street, Boston, Massachusetts, on Thursday, June 29, 1995 at 2:30 p.m.,
local time, and at any adjournment thereof.
IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER
MATTERS AS MAY PROPERLY COME BEFORE THE MEETING OR ANY ADJOURNMENT THEREOF.
This proxy, when properly executed, will be voted in the manner directed
by the undersigned stockholder(s). IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE
VOTED FOR PROPOSALS 1 AND 2. Attendance of the undersigned at the meeting or
any adjournment thereof will not be deemed to revoke this proxy unless the
undersigned shall revoke this proxy in writing or affirmatively indicate the
intent to vote in person.
-------------
CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE
-------------
<PAGE> 19
/ X / Please mark
votes as in
this example
1. To elect W. Lawrence Heisey, Martin Trust and Paul F. Walsh as Class 1
Directors (except as marked below).
FOR WITHHELD
/ / / /
/ / --------------------------------------
For all nominees except as noted above
2. To ratify the selection of Ernst & Young LLP as the Company's
independent auditors for the current year.
FOR AGAINST ABSTAIN
/ / / / / /
/ / MARK HERE MARK HERE / /
IF YOU PLAN FOR ADDRESS
TO ATTEND CHANGE AND
THE MEETING NOTE AT LEFT
Please sign exactly as name appears hereon. When shares are held by joint
owners, both should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give title as such. If a corporation or a
partnership, please sign by authorized person.
Signature: Date:
--------------------------- -------------------------------
Signature: Date:
--------------------------- -------------------------------
