<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934
For the quarterly period ended: April 29, 1995
------------------------------------------------
Commission File Number: 0-17586
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STAPLES, INC.
(Exact name of registrant as specified in its charter)
Delaware 04-2896127
- - ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
100 Pennsylvania Avenue, Framingham, MA 01701-9328
---------------------------------------------------
(Address of principal executive office and zip code)
508-370-8500
----------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
---- ----
The registrant had 63,326,203 shares of Common Stock, par value $.0006,
outstanding as of May 31, 1995.
<PAGE> 2
FORM 10-Q
STAPLES, INC.
APRIL 29, 1995
TABLE OF CONTENTS
Page
Consolidated Balance Sheets . . . . . . . . . . . . . . . . . . . . . 3
Consolidated Statements of Income . . . . . . . . . . . . . . . . . . 4
Consolidated Statements of Cash Flows . . . . . . . . . . . . . . . . 5
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . 6
Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . . . . . 7-9
Part II . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Signature . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Page 2
<PAGE> 3
STAPLES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
April 29,
1995 January 28,
(Unaudited) 1995
----------- -----------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents....................................................... $41,897 $41,810
Short-term investments.......................................................... 29,553 29,204
Merchandise inventories......................................................... 511,388 463,493
Receivables, net of allowances of $1,006 and $908, respectively................. 88,092 75,910
Deferred income taxes........................................................... 21,758 19,360
Prepaid expenses and other current assets....................................... 16,710 9,956
---------- ----------
TOTAL CURRENT ASSETS.......................................................... 709,398 639,733
PROPERTY AND EQUIPMENT:
Land and building............................................................... 18,703 18,482
Leasehold improvements.......................................................... 133,693 124,000
Equipment....................................................................... 101,773 97,139
Furniture and fixtures.......................................................... 57,320 53,325
---------- ----------
TOTAL PROPERTY AND EQUIPMENT.................................................. 311,489 292,946
Less accumulated depreciation and amortization.................................. 90,141 80,301
---------- ----------
NET PROPERTY AND EQUIPMENT.................................................... 221,348 212,645
OTHER ASSETS:
Lease acquisition costs, net of amortization.................................... 40,786 41,470
Investment in affiliates........................................................ 29,529 23,733
Goodwill, net of amortization................................................... 67,592 70,144
Deferred income taxes........................................................... 14,576 14,086
Other........................................................................... 6,276 6,643
---------- ----------
TOTAL OTHER ASSETS............................................................ 158,759 156,076
---------- ----------
$1,089,505 $1,008,454
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable................................................................ $245,502 $212,341
Accrued expenses and other current liabilities.................................. 110,677 131,740
Debt maturing within one year................................................... 6,456 6,257
---------- ----------
TOTAL CURRENT LIABILITIES..................................................... 362,635 350,338
LONG-TERM DEBT ................................................................... 185,361 134,387
OTHER LONG-TERM OBLIGATIONS....................................................... 24,796 23,739
CONVERTIBLE DEBENTURES............................................................ 115,000 115,000
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value-authorized
5,000,000 shares; no shares issued ............................................
Common stock, $.0006 par value-authorized
200,000,000 shares; issued
63,170,816 shares at April 29, 1995 and
62,810,186 shares at January 28, 1995......................................... 37 36
Additional paid-in capital...................................................... 320,301 314,544
Cumulative foreign currency translation adjustments............................. 774 (2,205)
Unrealized gain (loss) on short-term investments................................ 16 (93)
Retained earnings .............................................................. 80,931 73,054
Less: 16,704 shares of treasury stock, at cost.................................. (346) (346)
---------- ----------
TOTAL STOCKHOLDERS' EQUITY.................................................... 401,713 384,990
---------- ----------
$1,089,505 $1,008,454
========== ==========
</TABLE>
See notes to consolidated financial statements.
Page 3
<PAGE> 4
STAPLES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
(Unaudited)
13 Weeks Ended
----------------------------------
April 29, April 30,
1995 1994
-------------- ----------
<S> <C> <C>
Sales................................................... $668,795 $397,530
Cost of goods sold and occupancy costs.................. 518,413 310,109
---------- ----------
GROSS PROFIT........................................ 150,382 87,421
Operating Expenses:
Operating and selling................................. 106,117 63,753
Pre-opening........................................... 962 737
General and administrative............................ 23,281 14,236
Amortization of goodwill.............................. 372 0
---------- ----------
TOTAL OPERATING EXPENSES............................ 130,732 78,726
---------- ----------
OPERATING INCOME.................................... 19,650 8,695
Other income (expense):
Interest expense, net................................. (3,921) (857)
Gain on sale of investment............................ 0 1,149
Merger related expense .............................. 0 (2,150)
Other ................................................ (65) 844
---------- ----------
TOTAL OTHER INCOME (EXPENSE)........................ (3,986) (1,014)
---------- ----------
INCOME BEFORE EQUITY IN LOSS OF
AFFILIATES AND INCOME TAXES....................... 15,664 7,681
Equity in loss of affiliates........................... (2,752) (2,346)
---------- ----------
INCOME BEFORE INCOME TAXES........................... 12,912 5,335
Income taxes............................................ 5,035 2,050
---------- ----------
NET INCOME........................................... $7,877 $3,285
========== ==========
NET INCOME PER COMMON SHARE............................. $0.12 $0.05
========== ==========
Number of shares used in computing net
income per common share............................ 65,440,598 60,469,101
========== ==========
</TABLE>
See notes to consolidated financial statements.
Page 4
<PAGE> 5
STAPLES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
(Unaudited)
13 Weeks Ended
------------------------------
April 29, April 30,
1995 1994
- - ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income ............................................................. $7,877 $3,285
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization........................................ 10,894 6,066
Equity in loss of affiliates......................................... 2,752 2,346
(Increase) decrease in assets:
Merchandise inventories .......................................... (45,513) (33,149)
Receivables ...................................................... (12,033) 1,314
Prepaid expenses and other assets................................. (2,129) (7,226)
Increase in accounts payable, accrued
expenses and other current liabilities............................ 8,081 36,868
Increase in other long-term obligations.............................. 1,044 759
-------- -------
(36,904) 6,978
-------- -------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES..................... (29,027) 10,263
INVESTING ACTIVITIES:
Acquisition of property and equipment................................... (17,412) (11,485)
Proceeds from sales and maturities of short-term investments............ 0 353
Purchase of short-term investments...................................... (349) 0
Investment in affiliates................................................ (7,244) (4,432)
Acquisition of lease rights............................................. (37) (354)
Other .................................................................. (266) 0
-------- -------
NET CASH USED IN INVESTING ACTIVITIES................................... (25,308) (15,918)
FINANCING ACTIVITIES:
Proceeds from sale of capital stock..................................... 2,858 680
Proceeds from borrowings................................................ 465,000 0
Payments on borrowings.................................................. (414,346) (1,012)
-------- -------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES..................... 53,512 (332)
Effect of exchange rate changes on cash................................. 910 0
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS.................... 87 (5,987)
Cash and cash equivalents at beginning of period......................... 41,810 37,976
-------- -------
CASH AND CASH EQUIVALENTS AT END OF PERIOD............................... $41,897 $31,989
======== =======
</TABLE>
See notes to consolidated financial statements.
Page 5
<PAGE> 6
STAPLES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Basis of Presentation
The accompanying interim unaudited consolidated financial statements include
the accounts of Staples, Inc. and its wholly owned subsidiaries (the
"Company"). All intercompany accounts and transactions are eliminated in
consolidation.
These financial statements have been prepared in accordance with generally
accepted accounting principles for interim financial information and with the
instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they
do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the
opinion of management, such interim statements reflect all adjustments
(consisting of normal recurring accruals) necessary to present fairly the
financial position and the results of operations and cash flows for the interim
periods presented. The results of operations for the interim period are not
necessarily indicative of the results to be expected for the full year. These
financial statements should be read in conjunction with the audited
consolidated financial statements and footnotes included in the Company's
Annual Report on Form 10-K dated April 27, 1995 for the year ended January 28,
1995.
Note 2 - Computation of Earnings Per Share
Average common and common equivalent shares utilized in computing earnings per
share include approximately 2,477,000 and 1,566,000 shares for the quarters
ended April 29, 1995 and April 30, 1994, respectively, as a result of applying
the treasury stock method to outstanding stock options. The number of shares
used in the earnings per share computation for the quarter ended April 30, 1994
as previously reported has been retroactively adjusted to reflect the
three-for-two split of the Company's common stock in October, 1994.
Page 6
<PAGE> 7
STAPLES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Sales. Sales increased 68% to $668,795,000 in the quarter ended April 29,
1995 from $397,530,000 in the quarter ended April 30, 1994. This growth is
attributable to an increase in the number of open stores, increased sales in
existing stores and increased sales in the delivery and contract stationer
segments. In addition, the quarter ended April 29, 1995 includes the results
of The Business Depot, Ltd., D.A. MacIsaac, Inc. and Philadelphia Stationers,
Inc., which were acquired under the purchase method of accounting during the
year ended January 28, 1995; due to the date of acquisition, the results for
these companies are not included in the consolidated results for the quarter
ended April 30, 1994. Comparable store and delivery hub sales (which represent
a comparison of sales between corresponding full months in the periods
compared) for the quarter ended April 29, 1995 increased 23% over the quarter
ended April 30, 1994. The Company had 368 stores open as of April 29, 1995
compared to 244 stores as of April 30, 1994 and 350 stores open as of January
28, 1995.
Gross Profit. Gross profit as a percentage of sales was 22.5% for the three
month period ended April 29, 1995 as compared to 22.0% for the same period last
year. The increase in gross profit rate is primarily due to the leveraging of
fixed occupancy and distribution center costs over a larger sales base, as well
as improved buying costs. This increase was partially offset by a decrease in
merchandise margin rate, as sales of computers and other capital goods items,
which generate a lower margin rate than other categories, increased as a
percentage of total sales for the quarter ended April 29, 1995 versus the
prior year. Total computer sales constituted approximately 5% of total Company
sales during the quarter ended April 29, 1995.
Operating and Selling Expenses. Operating and selling expenses, which consist
primarily of payroll and advertising expenses, decreased slightly as a
percentage of sales in the three months ended April 29, 1995 to 15.9% as
compared to 16.0% for the same period in the prior year. The decrease is
primarily due to the increased leveraging of fixed store payroll expense as
comparable store sales have increased. The improvements in store payroll have
been partially offset by costs incurred for the Company's store remodel program
in which significant investments have been made in store layouts and signing to
improve shopability and enhance customer service.
While most store expenses vary proportionately with sales, there is a fixed
cost component. Because new stores typically generate lower sales than the
Company average, the fixed cost component results in higher store operating and
selling expenses as a percentage of sales in these stores. During periods when
new store openings as a percentage of the base are lower, store operating and
selling expenses as a percentage of sales may decrease. In addition, as the
store base matures, the fixed cost component of operating expenses is leveraged
over an increased level of sales, resulting in a decrease in store operating
and selling expenses as a percentage of sales. The Company's strategy of
saturating markets results in some new stores attracting sales away from
existing stores. This also has the effect of detracting from the expected
leveraging of the fixed cost component.
Page 7
<PAGE> 8
Pre-opening Expenses. Pre-opening expenses relating to new store openings,
which consist primarily of salaries, supplies, marketing and occupancy costs,
are expensed by the Company as incurred and, therefore, fluctuate from period
to period depending on the timing and number of new store openings.
Pre-opening expenses averaged $52,000 per store for the three months ended
April 29, 1995, as compared to $56,000 per store for the same period in the
prior year.
General and Administrative Expenses. General and administrative expenses for
the three months ended April 29, 1995 decreased as a percentage of sales to
3.5% as compared to 3.6% for the same period in the prior year. This decrease
was primarily due to the Company's ability to increase sales without
proportionately increasing overhead expenses, and was offset in part by the
relatively higher general and administrative expenses associated with the
contract stationer acquisitions during fiscal 1994. The Company expects
general and administrative expenses to increase as the Company continues to
expand; however, these expenditures are expected to continue to decrease as a
percentage of sales.
Interest Expense, Net. Net interest expense for the three months ended April
29, 1995 was $3,921,000 as compared to $857,000 for the same period in the
prior year. The increase in net interest expense is primarily due to increased
borrowings under the Company's revolving credit facility which funded the
planned increase in store inventories, the acquisition of fixed assets for new
stores opened, and additional investments in joint venture affiliates.
Gain on Sale of Investment. During the three months ended April 30, 1994, the
Company received $1,149,000 from an escrow account established upon the sale of
its investment in a contract stationer during the year ended January 29, 1994,
which represents the resolution of a contingency related to the sale.
Merger Related Expense. During the three months ended April 30, 1994 the
Company charged $2,150,000 to expense for certain nonrecurring costs incurred
in connection with acquisitions of contract stationers related primarily to
investment banking, legal and accounting fees .
Other Income. Other income for the quarter ended April 30, 1994 primarily
relates to fees charged for administrative services performed by the Company
for its joint venture affiliates. The decrease in the quarter ended April 29,
1995 is due to the contractual reduction of these fees as the affiliates
perform more of their own administrative functions.
Equity in Loss of Affiliates. The Company's equity in loss of affiliates
increased to $2,752,000 for the three months ended April 29, 1995 as compared
to $2,346,000 for the same period in the prior year, primarily due to the
closure of one store in the Company's German joint venture, which required a
charge to cover the costs of inventory writedowns, write-off of fixed assets,
and lease termination.
Page 8
<PAGE> 9
LIQUIDITY AND CAPITAL RESOURCES
During the three months ended April 29, 1995, cash, cash equivalents and
short-term investments increased by $87,000. This increase was primarily due
to increased net borrowings of $50,654,000 from the Company's revolving line of
credit, offset by a use of $29,027,000 from operating activities (including a
$45,513,000 increase in merchandise inventories to improve in-stock positions),
acquisitions of property, plant and equipment of $17,412,000, and investment in
joint venture affiliates of $7,244,000.
The Company opened 18 stores during the quarter ended April 29, 1995, and
expects to open approximately 69 additional stores in the last three quarters
of fiscal year 1995. Management estimates that the Company's cash
requirements, including pre-opening expenses, will be approximately $1,200,000
for each new store (excluding the cost of any acquisitions of lease rights).
Accordingly, the Company expects to use approximately $83,000,000 for store
openings during this period. The Company will continue to make investments in
information systems, distribution centers and store remodels to improve
operational efficiencies and customer service, and may expend additional funds
to acquire businesses or lease rights from tenants occupying retail space that
is suitable for a Staples store.
On February 14, 1995, the Company replaced its existing revolving credit and
term loan facility with a new five-year revolving credit and term loan facility
with a syndicate of banks providing for financing of up to $300,000,000.
Borrowings made pursuant to this facility will bear interest at either the lead
bank's prime rate, the federal funds rate plus 0.50%, the LIBOR rate plus a
percentage spread based on certain defined ratios, or a competitive bid rate.
Borrowings outstanding at February 14, 1998 automatically convert into a term
loan, payable in eight installments due on the last day of each calendar
quarter. Term loan borrowings bear interest at either the lead bank's base
rate plus 0.25% or the Eurodollar lending rate plus 0.25%. This agreement,
among other conditions, contains certain restrictive covenants including net
worth maintenance, minimum interest coverage and limitations on indebtedness,
sales of assets, and dividends. As of April 29, 1995, available amounts
outstanding under the revolving credit facility totaled $135,000,000; total
cash, short-term investments and available revolving credit amounts totaled
$206,450,000.
The Company expects that its current cash and cash equivalents, funds
anticipated to be generated from operations, and funds available under its
revolving credit and term loan facility will be sufficient to fund its planned
store openings and other operating cash needs for at least the next twelve
months. However, the Company is continually evaluating financing
possibilities, and it may seek to raise additional funds through any one or a
combination of public or private debt or equity-related offerings dependent
upon market conditions, or through an additional commercial bank debt
arrangement.
Page 9
<PAGE> 10
PART II -- OTHER INFORMATION
Items 1 - 5 - Not applicable.
Item 6 - Exhibits and Reports on Form 8-K.
A. Exhibits.
10.1 Form of Agreement Not To Compete signed by executive officers of
the Company.
10.2 Form of Proprietary and Confidential Information Agreement
signed by executive officers of the Company.
10.3 Severance Benefits Agreement dated May 17, 1995 between the
Company and Jack C. Bingleman.
10.4 Severance Benefits Agreement dated May 15, 1995 between the
Company and James E. Flavin.
10.5 Severance Benefits Agreement dated June 4, 1995 between the
Company and Robert S. Fried.
10.6 Severance Benefits Agreement dated May 15, 1995 between the
Company and Martin E. Hanaka.
10.7 Severance Benefits Agreement dated June 2, 1995 between the
Company and Todd J. Krasnow.
10.8 Severance Benefits Agreement dated May 17, 1995 between the
Company and Louis R. Pepi.
10.9 Severance Benefits Agreement dated May 18, 1995 between the
Company and Ronald L. Sargent.
10.10 Severance Benefits Agreement dated June 7, 1995 between the
Company and Thomas G. Stemberg.
10.11 Severance Benefits Agreement dated May 31, 1995 between the
Company and Evan Stern.
10.12 Severance Benefits Agreement dated May 31, 1995 between the
Company and Joseph S. Vassalluzzo.
10.13 Severance Benefits Agreement dated May 22, 1995 between the
Company and John B. Wilson.
B. Reports on Form 8-K.
None.
Page 10
<PAGE> 11
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: June 12, 1995
------------------- /s/ John B. Wilson
----------------------------
John B. Wilson
Executive Vice President -
Finance and Strategy and
Chief Financial Officer
Page 11
<PAGE> 1
AGREEMENT NOT TO COMPETE
This AGREEMENT NOT TO COMPETE is dated as of _________________ by and
between STAPLES, INC., a Delaware Corporation having offices at 100 Pennsylvania
Avenue, Framingham, Massachusetts 01701 (hereinafter referred to as the
"Company"), and _________________ (hereinafter referred to "Executive").
W I T N E S S E T H:
WHEREAS, Executive is an officer and stock option-holder of the
Company; and
WHEREAS, such relationship creates a relationship of confidence and
trust between the parties; and;
WHEREAS, the Company, in reliance on this Agreement has and will
entrust Executive with information, knowledge and know-how which would be
detrimental to Company if Executive were to provide services or otherwise
participate in the operation of a competitor of the Company;
NOW, THEREFORE, in consideration of the premises and mutual covenants
and agreements herein contained, the parties hereto agree as follows:
1. In addition to compensation paid to Employee by the Company from
time to time, the Company shall pay to Executive the sum of One Dollar ($1.00),
receipt of which is hereby acknowledged, in exchange for Executive's promises as
set forth herein.
2. (a) For all periods beginning upon the date hereof and ending two
years from the date of termination of his/her employment with the Company,
Executive shall not directly or indirectly as owner, partner, joint ventures,
stockholder, employee, broker, agent, principal, trustee, corporate officer,
director, licenser, or in any capacity whatsoever engage in, become financially
interested in, be employed by or have any connection with, any business engaged
principally in the sale of office supplies in any country where the Company or
any of its subsidiaries is then engaged in such sales; provided, however, that
Executive may own any securities of any corporation which is engaged in such
business and is publicly owned and traded but in an amount not to exceed at any
one time one percent of class of stock or securities of such corporation.
(b) Executive agrees that for a period of two years following
termination of employment with the Company, he/she will not solicit or in any
manner encourage employees of the company to leave its employ. Executive further
agrees that during such period he/she will not offer or cause to be offered
employment to any person who is employed by the Company at any time during the
six months prior to the termination of his/her employment with the Company.
<PAGE> 2
(c) In case any one or more of the terms contained in
subparagraphs (a) or (b) or this Paragraph 2 shall for any reason become
invalid, illegal, or unenforceable, such invalidity, illegality or
unenforceability shall not affect any other terms herein, but such terms shall
be deemed deleted and such deletion shall not affect the validity of the other
terms of this Paragraph 2. In addition, if any one or more of the terms
contained in subparagraphs (a) or (b) of this Paragraph 2 shall for any reason
be held to be excessively broad with regard to time, duration, geographic scope
or activity that term shall be construed in a manner to enable it to be enforced
to the extent compatible with applicable law.
3. The parties agree that failure to comply with subparagraphs (a) or
(b) of Paragraph 2 cannot be reasonably or adequately compensated in damages in
an action at law and breach of these provisions of this Agreement will cause the
Company irreparable damage. Therefore, in addition to the other remedies which
may be available to it, in law or in equity, the Company shall be entitled to
injunctive relief without bond or other security with respect to the breach of
subparagraphs (a) or (b) of Paragraph 2.
4. The termination of Executive's employment with the Company shall not
affect the enforceability of this Agreement. Nothing in this Agreement shall be
deemed to imply any obligation of continued employment of Executive by the
Company which employment shall be "at will" unless otherwise specifically agreed
in writing.
5. This Agreement shall be binding upon the legal representatives,
heirs, successors and assigns of the parties hereto. It may not be changed
orally, but only by a writing signed by the party against whom enforcement of
any such change is sought. It is agreed that a waiver by either party of a
breach of any provisions of this Agreement shall not operate or be construed as
a waiver of any subsequent breach by that same party. This Agreement shall be
governed by the laws of the Commonwealth of Massachusetts.
STAPLES, INC.
By: __________________________
its:
EXECUTIVE:
______________________________
<PAGE> 1
STAPLES, INC.
PROPRIETARY AND CONFIDENTIAL INFORMATION AGREEMENT
I, ____________________, recognize that Staples, Inc., a Delaware
corporation (the "Company", which term includes any subsidiaries thereof), is
engaged in the distribution and sale of retail office supplies.
I understand that:
A. As part of my employment by the Company I am expected to make new
contributions of value to the Company.
B. My employment creates a relationship of confidence and trust between
me and the Company with respect to any information applicable to the business of
the Company and applicable to the business of any client or customer of the
Company, which may be made known to me by the Company or by any client or
customer of the Company, or learned by me during the period of my employment.
C. The Company possesses and will continue to possess information that
has been created or developed, or has otherwise become known to the Company
(including without limitation information created, developed or made known by or
to me during the period of or arising out of my employment by the Company),
which information has commercial value in the business in which the Company is
engaged. All of the aforementioned information is hereinafter called
"Proprietary Information." By way of illustration, but not limitation,
Proprietary Information includes trade secrets, marketing plans, strategies,
forecasts and customer lists.
D. As used herein, the period of my employment includes any time in
which I may be retained by the Company as a consultant.
In consideration of my employment or continued employment, as the case
may be, and the compensation received by me from the Company from time to time,
I hereby agree as follows:
1. All Proprietary Information shall be the sole property of the
Company and its assigns, and the Company and its assigns shall be the sole owner
of all rights in connection therewith. I hereby assign to the Company any rights
I may have or acquire in all Proprietary Information. At all times, both during
my employment by the Company and after its termination, I will keep in
confidence and trust all Proprietary Information or anything relating to it
without the written consent of the Company, except as may be necessary in the
ordinary course of performing my duties as an employee of the Company.
<PAGE> 2
2. I agree that during the period of my employment by the Company I
will not, without the Company's express written consent, engage in any
employment or activity in any competitive business, other than for the Company.
3. In the event of the termination of my employment by me or by the
Company for any reason, I will deliver to the Company all documents and
information of any nature pertaining to my work with the Company and I will not
take with me any documents or information of any description or any reproduction
of any description containing or pertaining to any Proprietary Information.
4. Prior to entering the employ of the Company I have terminated
employment with one or more prior employers. I represent that my performance of
all the terms of this Agreement and as an employee of the Company does not and
will not breach any agreement to keep in confidence proprietary information
acquired by me or in trust prior to my employment by the Company. I have not
entered into, and I agree I will not enter into, any agreement either written or
oral in conflict herewith.
5. I also understand that, in my employment with the Company, I am
not to breach any written obligations of confidentiality that I have to former
employers, and I agree that I shall fulfill all such obligations during my
employment with the Company. I agree to indemnify and hold harmless the Company,
its directors, officers and employees against any liabilities and expenses,
including amounts paid in settlement, incurred by any of them in connection with
any claim by any of my prior employers that the termination of my employment
with such employer, my employment by the Company, or use of any skills and
knowledge by the Company is a violation of contract or law.
6. I agree that in addition to any other rights and remedies
available to the Company for any breach by me of my obligations hereunder, the
Company shall be entitled to enforcement of my obligations hereunder by court
injunction.
7. If any provisions of this Agreement shall be declared invalid,
illegal or unenforceable, such provision shall be severed and all remaining
provisions shall continue in full force and effect.
8. This agreement shall be effective as of the first day of
employment by the Company, namely: August 26, 1994.
9. This agreement shall be binding upon me, my heirs, executors,
assigns and administrators and shall inure to the benefit of the Company, its
successors and assigns.
10. This Agreement shall be governed in all respects by the laws of
the Commonwealth of Massachusetts.
<PAGE> 3
Dated: By:_______________________
<PAGE> 1
STAPLES, INC.
Severance Benefits Agreement
Mr. Jack C. Bingleman
20 Rowes Wharf, Apartment 404
Boston, MA 02110
Dear Mr. Bingleman:
1. Officer Relationship. You are currently, or are about to become, an
officer of Staples, Inc. and/or one of its subsidiaries ("Staples"). In order to
induce you to remain or enter into its employ, Staples agrees that you shall
receive the severance benefits set forth in this letter agreement (the
"Agreement") in the event your employment with Staples is terminated under the
circumstances described below.
2. Term of the Agreement. The term of this Agreement (the "Term") shall
commence as of the date hereof and shall continue in effect until the later of
May 31, 2000 or 24 months after any Change of Control that may occur prior to
May 31, 2000. Notwithstanding the termination of your employment, any
obligations hereunder which by their terms continue (such as severance benefits)
shall survive such termination. This Agreement does not constitute a contract of
employment or impose on Staples any obligation to retain you as an employee, it
being acknowledged that your employment is "at will" and that both you and
Staples may terminate your employment at any time. Any termination of your
employment by Staples or by you during the Term shall be communicated by written
notice of termination ("Notice of Termination") to the other party hereto in
accordance with Section 7, which Notice of Termination shall specify the
provisions of this Agreement, if any, upon which such termination is based. The
"Date of Termination" shall mean the effective date of such termination as
specified in the Notice of Termination (provided that no such Notice of
Termination shall specify an effective date more than 180 days after the date of
such Notice of Termination).
3. Change in Employment Status. You shall be entitled to the benefits
provided in Section 4 if the following event (a "Qualified Termination") occurs:
your employment with Staples terminates for any reason, unless such termination
is (i) because of your death or Disability, (ii) by Staples for Cause, or (iii)
by you other than for Good Reason.
4. Compensation Upon Termination.
(a) In the event of a Qualified Termination, Staples will (i) pay to
you for a period of 12 months after the Date of Termination, in equal monthly
installments, severance payments at an annual rate equal to the sum of (i) your
annual base salary rate in effect immediately prior to the Qualified Termination
(or such higher rate as may
<PAGE> 2
have been in effect within the 90 days prior to the Notice of Termination) plus
(ii) an annualized amount equal to the average annual bonus paid to (or accrued
for) you by Staples during the three full fiscal years preceding such Qualified
Termination.
(b) In the event of a Qualified Termination, for a 12-month period
after the Date of Termination, Staples shall provide you with life, disability,
dental, accident and group health insurance benefits substantially similar to
those available to similarly situated officers. Notwithstanding the foregoing,
Staples shall not provide any such benefit if an equivalent benefit is actually
received by you during such period following your termination from another
party.
(c) Notwithstanding a Qualified Termination, the vesting schedule of
your then outstanding options to purchase Common Stock of Staples shall be
accelerated only to the extent specifically provided in the respective option
agreements; provided, however, that in the event of a termination of your
employment by Staples without Cause, the vesting of your initial stock options
granted on June 30, 1994 shall be accelerated such that such options shall be
immediately exercisable in full.
(d) If such Qualified Termination is within two years after a Change
in Control, you shall be entitled to the benefits provided in paragraphs (a) and
(b) above for an additional 6 months beyond the time period specified in such
paragraphs.
(e) The amount of any monthly payments to be made to you under
Section 4(a) shall be reduced by 50% of any cash compensation earned by or
accrued for you as a result of services rendered by you for a third party during
the month immediately preceding the date of such payment; provided, however,
that (i) this paragraph (e) shall not apply in the event of a Qualified
Termination occurring within 24 months after a Change of Control, and (ii)
nothing in this Agreement shall obligate you to seek to mitigate the amount of
any payments provided for in this Agreement by seeking alternative employment or
otherwise.
(f) The benefits payable under this Section 4 shall be conditioned
on none of the following events occurring: (i) a determination by the CEO and
COO of Staples within 60 days after your termination that your conduct prior to
your termination would have warranted a discharge for "Cause" as specified in
Section 5(c), or (ii) the CEO and COO of Staples determines that your conduct
after termination of employment fails to comply with the terms of any
non-competition or confidentiality provision contained in any employment,
consulting, advisory, non-disclosure, non-competition or other similar agreement
between you and Staples.
5. Certain Definitions.
As used herein, the following terms shall have the following respective
meanings:
<PAGE> 3
(a) Change in Control. A "Change in Control" shall occur or be deemed
to have occurred only if any of the following events occur:
(i) any "person," as such term is used in Sections 13(d) and 14(d) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), (other
than Staples, any trustee or other fiduciary holding securities under an
employee benefit plan of Staples, or any corporation owned directly or
indirectly by the stockholders of Staples in substantially the same proportion
as their ownership of stock of Staples) is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of Staples representing 30% or more of the combined voting power of
Staples's then outstanding securities;
(ii) individuals who, as of the date hereof, constitute the Board (as
of the date hereof, the "Incumbent Board") cease for any reason to constitute at
least a majority of the Board, provided that any person becoming a director
subsequent to the date hereof whose election, or nomination for election by
Staples's stockholders, was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board (other than an election or
nomination of an individual whose initial assumption of office is in connection
with an actual or threatened election contest relating to the election of the
directors of Staples, as such terms are used in Rule 14a-11 of Regulation 14A
under the Exchange Act) shall be, for purposes of this Agreement, considered as
though such person were a member of the Incumbent Board; or
(iii) the stockholders of Staples approve a merger or consolidation of
Staples with any other corporation, other than (A) a merger or consolidation
which would result in the voting securities of Staples outstanding immediately
prior thereto continuing to represent (either by remaining outstanding or by
being converted into voting securities of the surviving entity) more than 75% of
the combined voting power of the voting securities of Staples or such surviving
entity outstanding immediately after such merger or consolidation or (B) a
merger or consolidation effected to implement a recapitalization of Staples (or
similar transaction) in which no "person" (as hereinabove defined) acquires more
than 50% of the combined voting power of Staples's then outstanding securities;
or (iv) the stockholders of Staples approve a plan of complete liquidation of
Staples or an agreement for the sale or disposition by Staples of all or
substantially all of Staples's assets.
(b) Disability. If, as a result of incapacity due to physical or mental
illness, you shall have been absent from the full-time performance of your
duties with Staples for six (6) consecutive months and, within thirty (30) days
after written Notice of Termination is given to you, you shall not have returned
to the full-time performance of your duties, your employment may be terminated
for "Disability."
(c) Cause. Termination by Staples of your employment for "Cause" shall
mean termination
<PAGE> 4
(i) upon your willful and continued failure to substantially perform
your duties with Staples (other than any such failure resulting from your
incapacity due to physical or mental illness or any such actual or anticipated
failure after the issuance of a Notice of Termination by you for Good Reason as
defined below), provided that a written demand for substantial performance has
been delivered to you by Staples specifically identifying the manner in which
Staples believes that you have not substantially performed your duties and you
have not cured such failure within 30 days after such demand, or
(ii) any breach by you of any of the terms of the Proprietary and
Confidential Information Agreement or Non-Competition Agreement (or other
similar agreement) between you and Staples, or
(iii) a violation by you of the Staples Business Conduct & Ethics
Policy or any attempt by you to secure any improper personal profit in
connection with the business of Staples, or
(iv) failure by you to devote your full working time to the affairs of
Staples (other than in connection with outside director positions existing as of
this date or as authorized by the CEO and COO of Staples), or
(v) the engaging by you in business other than the business of Staples
(other than in connection with outside director positions existing as of this
date or as authorized by the CEO and COO of Staples), or
(vi) by reason of your willful engaging in misconduct which is
demonstrably and materially injurious to Staples;
provided that in each case you shall have been given written notice by the CEO
and COO of Staples of Staples' intent to terminate your employment under this
Section 5(c) and an opportunity to present to the CEO and COO of Staples, in
person, any objections you may have to such termination. For purposes of this
section 5(c), no act or failure to act on your part shall be deemed "willful"
unless done or omitted to be done by you not in good faith and without
reasonable belief that your action or omission was in the best interest of
Staples;
The provisions of clauses (iv) and (v) above shall not be construed to
prevent you from investing or trading in non-conflicting investments for your
own account, including real estate, stocks, bonds, securities or other forms of
investment, other than more than 1% of securities issued by entities in
competition with Staples.
(d) Good Reason. For purposes of this Agreement, "Good Reason" shall
mean, without your written consent, the occurrence of any of the following
circumstances within the 90 days immediately prior to your giving Staples a
Notice of Termination:
<PAGE> 5
(i) any significant diminution in your position, duties,
responsibilities, power, title or office;
(ii) any reduction in your annual base salary from time to time;
(iii) any failure by Staples to allow your participation in a cash
bonus program in a manner substantially consistent with past practice in light
of Staples' financial performance and attainment of your specified goals, or the
substantial reduction of your participation in any other material compensation
plan (other than any stock option or stock award program which programs are
within the full discretion of the Compensation Committee) on a significantly
less favorable basis, both in terms of the amount of benefits provided and the
level of your participation relative to other participants; unless such
circumstances are fully corrected prior to the Date of Termination specified in
the Notice of Termination given in respect thereof;
(iv) the failure by Staples to continue to provide you with benefits
substantially similar to those enjoyed by you under any of Staples's life
insurance, medical, health and accident, or disability plans in which you were
participating, the taking of any action by Staples which would directly or
indirectly materially reduce any of such benefits, or the reduction in the
number of paid vacation days to which you are entitled; unless such
circumstances are fully corrected prior to the Date of Termination specified in
the Notice of Termination given in respect thereof;
(v) in the event of a Change in Control, any requirement by Staples or
of any person in control of Staples that the location at which you perform your
principal duties for Staples be changed to a new location outside a radius of 50
miles from your business location at the time of the Change in Control; or
(vi) the failure of Staples to obtain a satisfactory agreement from any
successor to assume and agree to perform the Agreement, as contemplated in
Section 6(a).
Notwithstanding the foregoing, any general reduction of salary or reduction (or
elimination) of other compensation, bonus and/or benefits for its executive
officers which are substantially comparable for all such officers (but not
occurring within 24 months after a Change of Control) shall not be considered
"Good Reason."
6. Successors; Binding Agreement.
(a) Staples will require any successor (whether direct or indirect,
by purchase, merger, consolidation or otherwise) to all or substantially all of
the business or assets of Staples expressly to assume and agree to perform this
Agreement to the same extent that Staples would be required to perform it if no
such succession had taken place. Failure of Staples to obtain an assumption of
this Agreement prior to the effectiveness of any succession shall be a breach of
this Agreement and shall entitle you to compensation from Staples in the same
amount and on the same terms as you would
<PAGE> 6
be entitled hereunder. As used in this Agreement, "Staples" shall mean Staples
as defined above and any successor to its business or assets as aforesaid which
assumes and agrees to perform this Agreement by operation of law, or otherwise.
(b) This Agreement shall inure to the benefit of and be enforceable
by your personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If you should die while
any amount would still be payable to you hereunder if you had continued to live,
all such amounts, unless otherwise provided herein, shall be paid in accordance
with the terms of this Agreement to your devisee, legatee or other designee or
if there is no such designee, to your estate.
7. Notice. For the purposes of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and shall be
duly given when delivered or when mailed by United States registered or
certified mail, return receipt requested, postage prepaid, addressed to the
Chairman of Staples, at 100 Pennsylvania Avenue, P.O. Box 9328, Framingham,
Massachusetts 01701-9328, and to you at the address shown above or to such other
address as either Staples or you may have furnished to the other in writing in
accordance herewith, except that notice of change of address shall be effective
only upon receipt.
8. Miscellaneous.
(a) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement, which shall remain in full force and effect.
(b) The validity, interpretation, construction and performance of
this Agreement shall be governed by the laws of the Commonwealth of
Massachusetts.
(c) No waiver by you at any time of any breach of, or compliance
with, any provision of this Agreement to be performed by Staples shall be deemed
a waiver of that or any other provision at any subsequent time.
(d) This Agreement may be executed in several counterparts, each of
which shall be deemed to be an original but all of which together will
constitute one and the same instrument.
(e) Any payments provided for hereunder shall be paid net of any
applicable withholding required under federal, state or local law.
(f) Staples shall pay to you all legal fees and expenses incurred by
you in seeking to obtain or enforce any right or benefit provided by this
Agreement.
(g) This Agreement is the exclusive agreement with respect to the
severance benefits payable to you in the event of a termination of your
employment, and
<PAGE> 7
this Agreement specifically replaces the letter agreement dated August 26, 1994
and the Employee Retention Agreement dated August 26, 1994, between Staples and
you, which agreements are hereby expressly terminated effective as of the date
hereof. All prior negotiations are merged into this agreement.
If this letter sets forth our agreement on the subject matter hereof,
kindly sign and return to Staples the enclosed copy of this letter, which will
then constitute our agreement on this subject.
Sincerely,
STAPLES, INC.
By: /S/ Thomas G. Stemberg
Chairman and CEO
Agreed to this 17TH day of May, 1995
/s/ Jack C. Bingleman
<PAGE> 1
STAPLES, INC.
Severance Benefits Agreement
Mr. James E. Flavin
84 Radcliffe Road
Belmont, MA 02178
Dear Mr. Flavin:
1. Officer Relationship. You are currently, or are about to become, an
officer of Staples, Inc. and/or one of its subsidiaries ("Staples"). In order to
induce you to remain or enter into its employ, Staples agrees that you shall
receive the severance benefits set forth in this letter agreement (the
"Agreement") in the event your employment with Staples is terminated under the
circumstances described below.
2. Term of the Agreement. The term of this Agreement (the "Term") shall
commence as of the date hereof and shall continue in effect until the later of
May 31, 2000 or 24 months after any Change of Control that may occur prior to
May 31, 2000. Notwithstanding the termination of your employment, any
obligations hereunder which by their terms continue (such as severance benefits)
shall survive such termination. This Agreement does not constitute a contract of
employment or impose on Staples any obligation to retain you as an employee, it
being acknowledged that your employment is "at will" and that both you and
Staples may terminate your employment at any time. Any termination of your
employment by Staples or by you during the Term shall be communicated by written
notice of termination ("Notice of Termination") to the other party hereto in
accordance with Section 7, which Notice of Termination shall specify the
provisions of this Agreement, if any, upon which such termination is based. The
"Date of Termination" shall mean the effective date of such termination as
specified in the Notice of Termination (provided that no such Notice of
Termination shall specify an effective date more than 180 days after the date of
such Notice of Termination).
3. Change in Employment Status. You shall be entitled to the benefits
provided in Section 4 if the following event (a "Qualified Termination") occurs:
your employment with Staples terminates for any reason, unless such termination
is (i) because of your death or Disability, (ii) by Staples for Cause, or (iii)
by you other than for Good Reason.
4. Compensation Upon Termination.
(a) In the event of a Qualified Termination, Staples will (i) pay to
you for a period of 6 months after the Date of Termination, in equal monthly
installments, severance payments at an annual rate equal to the sum of (i) your
annual base salary rate in effect immediately prior to the Qualified Termination
(or such higher rate as may have been in effect within the 90 days prior to the
Notice of Termination) plus (ii) an
<PAGE> 2
annualized amount equal to the average annual bonus paid to (or accrued for) you
by Staples during the three full fiscal years preceding such Qualified
Termination.
(b) In the event of a Qualified Termination, for a 6-month period
after the Date of Termination, Staples shall provide you with life, disability,
dental, accident and group health insurance benefits substantially similar to
those available to similarly situated officers. Notwithstanding the foregoing,
Staples shall not provide any such benefit if an equivalent benefit is actually
received by you during such period following your termination from another
party.
(c) Notwithstanding a Qualified Termination, the vesting schedule of
your then outstanding options to purchase Common Stock of Staples shall be
accelerated only to the extent specifically provided in the respective option
agreements.
(d) If such Qualified Termination is within two years after a Change
in Control, you shall be entitled to the benefits provided in paragraphs (a) and
(b) above for an additional 6 months beyond the time period specified in such
paragraphs.
(e) The amount of any monthly payments to be made to you under
Section 4(a) shall be reduced by 50% of any cash compensation earned by or
accrued for you as a result of services rendered by you for a third party during
the month immediately preceding the date of such payment; provided, however,
that (i) this paragraph (e) shall not apply in the event of a Qualified
Termination occurring within 24 months after a Change of Control, and (ii)
nothing in this Agreement shall obligate you to seek to mitigate the amount of
any payments provided for in this Agreement by seeking alternative employment or
otherwise.
(f) The benefits payable under this Section 4 shall be conditioned
on none of the following events occurring: (i) a determination by the CEO and
COO of Staples within 60 days after your termination that your conduct prior to
your termination would have warranted a discharge for "Cause" as specified in
Section 5(c), or (ii) the CEO and COO of Staples determines that your conduct
after termination of employment fails to comply with the terms of any
non-competition or confidentiality provision contained in any employment,
consulting, advisory, non-disclosure, non-competition or other similar agreement
between you and Staples.
5. Certain Definitions.
As used herein, the following terms shall have the following respective
meanings:
(a) Change in Control. A "Change in Control" shall occur or be deemed
to have occurred only if any of the following events occur:
(i) any "person," as such term is used in Sections 13(d) and 14(d) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), (other
than
<PAGE> 3
Staples, any trustee or other fiduciary holding securities under an employee
benefit plan of Staples, or any corporation owned directly or indirectly by the
stockholders of Staples in substantially the same proportion as their ownership
of stock of Staples) is or becomes the "beneficial owner" (as defined in Rule
13d-3 under the Exchange Act), directly or indirectly, of securities of Staples
representing 30% or more of the combined voting power of Staples's then
outstanding securities;
(ii) individuals who, as of the date hereof, constitute the Board (as
of the date hereof, the "Incumbent Board") cease for any reason to constitute at
least a majority of the Board, provided that any person becoming a director
subsequent to the date hereof whose election, or nomination for election by
Staples's stockholders, was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board (other than an election or
nomination of an individual whose initial assumption of office is in connection
with an actual or threatened election contest relating to the election of the
directors of Staples, as such terms are used in Rule 14a-11 of Regulation 14A
under the Exchange Act) shall be, for purposes of this Agreement, considered as
though such person were a member of the Incumbent Board; or
(iii) the stockholders of Staples approve a merger or consolidation of
Staples with any other corporation, other than (A) a merger or consolidation
which would result in the voting securities of Staples outstanding immediately
prior thereto continuing to represent (either by remaining outstanding or by
being converted into voting securities of the surviving entity) more than 75% of
the combined voting power of the voting securities of Staples or such surviving
entity outstanding immediately after such merger or consolidation or (B) a
merger or consolidation effected to implement a recapitalization of Staples (or
similar transaction) in which no "person" (as hereinabove defined) acquires more
than 50% of the combined voting power of Staples's then outstanding securities;
or (iv) the stockholders of Staples approve a plan of complete liquidation of
Staples or an agreement for the sale or disposition by Staples of all or
substantially all of Staples's assets.
(b) Disability. If, as a result of incapacity due to physical or mental
illness, you shall have been absent from the full-time performance of your
duties with Staples for six (6) consecutive months and, within thirty (30) days
after written Notice of Termination is given to you, you shall not have returned
to the full-time performance of your duties, your employment may be terminated
for "Disability."
(c) Cause. Termination by Staples of your employment for "Cause" shall
mean termination
(i) upon your willful and continued failure to substantially perform
your duties with Staples (other than any such failure resulting from your
incapacity due to physical or mental illness or any such actual or anticipated
failure after the issuance of a Notice of Termination by you for Good Reason as
defined below), provided that a written demand for substantial performance has
been delivered to you by Staples specifically identifying
<PAGE> 4
the manner in which Staples believes that you have not substantially performed
your duties and you have not cured such failure within 30 days after such
demand, or
(ii) any breach by you of any of the terms of the Proprietary and
Confidential Information Agreement or Non-Competition Agreement (or other
similar agreement) between you and Staples, or
(iii) a violation by you of the Staples Business Conduct & Ethics
Policy or any attempt by you to secure any improper personal profit in
connection with the business of Staples, or
(iv) failure by you to devote your full working time to the affairs of
Staples (other than in connection with outside director positions existing as of
this date or as authorized by the CEO and COO of Staples), or
(v) the engaging by you in business other than the business of Staples
(other than in connection with outside director positions existing as of this
date or as authorized by the CEO and COO of Staples), or
(vi) by reason of your willful engaging in misconduct which is
demonstrably and materially injurious to Staples;
provided that in each case you shall have been given written notice by the CEO
and COO of Staples of Staples' intent to terminate your employment under this
Section 5(c) and an opportunity to present to the CEO and COO of Staples, in
person, any objections you may have to such termination. For purposes of this
section 5(c), no act or failure to act on your part shall be deemed "willful"
unless done or omitted to be done by you not in good faith and without
reasonable belief that your action or omission was in the best interest of
Staples;
The provisions of clauses (iv) and (v) above shall not be construed to
prevent you from investing or trading in non-conflicting investments for your
own account, including real estate, stocks, bonds, securities or other forms of
investment, other than more than 1% of securities issued by entities in
competition with Staples.
(d) Good Reason. For purposes of this Agreement, "Good Reason" shall
mean, without your written consent, the occurrence of any of the following
circumstances within the 90 days immediately prior to your giving Staples a
Notice of Termination:
(i) any significant diminution in your position, duties,
responsibilities, power, title or office;
(ii) any reduction in your annual base salary from time to time;
<PAGE> 5
(iii) any failure by Staples to allow your participation in a cash
bonus program in a manner substantially consistent with past practice in light
of Staples' financial performance and attainment of your specified goals, or the
substantial reduction of your participation in any other material compensation
plan (other than any stock option or stock award program which programs are
within the full discretion of the Compensation Committee) on a significantly
less favorable basis, both in terms of the amount of benefits provided and the
level of your participation relative to other participants; unless such
circumstances are fully corrected prior to the Date of Termination specified in
the Notice of Termination given in respect thereof;
(iv) the failure by Staples to continue to provide you with benefits
substantially similar to those enjoyed by you under any of Staples's life
insurance, medical, health and accident, or disability plans in which you were
participating, the taking of any action by Staples which would directly or
indirectly materially reduce any of such benefits, or the reduction in the
number of paid vacation days to which you are entitled; unless such
circumstances are fully corrected prior to the Date of Termination specified in
the Notice of Termination given in respect thereof;
(v) in the event of a Change in Control, any requirement by Staples or
of any person in control of Staples that the location at which you perform your
principal duties for Staples be changed to a new location outside a radius of 50
miles from your business location at the time of the Change in Control; or
(vi) the failure of Staples to obtain a satisfactory agreement from any
successor to assume and agree to perform the Agreement, as contemplated in
Section 6(a).
Notwithstanding the foregoing, any general reduction of salary or reduction (or
elimination) of other compensation, bonus and/or benefits for its executive
officers which are substantially comparable for all such officers (but not
occurring within 24 months after a Change of Control) shall not be considered
"Good Reason."
6. Successors; Binding Agreement.
(a) Staples will require any successor (whether direct or indirect,
by purchase, merger, consolidation or otherwise) to all or substantially all of
the business or assets of Staples expressly to assume and agree to perform this
Agreement to the same extent that Staples would be required to perform it if no
such succession had taken place. Failure of Staples to obtain an assumption of
this Agreement prior to the effectiveness of any succession shall be a breach of
this Agreement and shall entitle you to compensation from Staples in the same
amount and on the same terms as you would be entitled hereunder. As used in this
Agreement, "Staples" shall mean Staples as defined above and any successor to
its business or assets as aforesaid which assumes and agrees to perform this
Agreement by operation of law, or otherwise.
<PAGE> 6
(b) This Agreement shall inure to the benefit of and be enforceable
by your personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If you should die while
any amount would still be payable to you hereunder if you had continued to live,
all such amounts, unless otherwise provided herein, shall be paid in accordance
with the terms of this Agreement to your devisee, legatee or other designee or
if there is no such designee, to your estate.
7. Notice. For the purposes of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and shall be
duly given when delivered or when mailed by United States registered or
certified mail, return receipt requested, postage prepaid, addressed to the
Chairman of Staples, at 100 Pennsylvania Avenue, P.O. Box 9328, Framingham,
Massachusetts 01701-9328, and to you at the address shown above or to such other
address as either Staples or you may have furnished to the other in writing in
accordance herewith, except that notice of change of address shall be effective
only upon receipt.
8. Miscellaneous.
(a) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement, which shall remain in full force and effect.
(b) The validity, interpretation, construction and performance of
this Agreement shall be governed by the laws of the Commonwealth of
Massachusetts.
(c) No waiver by you at any time of any breach of, or compliance
with, any provision of this Agreement to be performed by Staples shall be deemed
a waiver of that or any other provision at any subsequent time.
(d) This Agreement may be executed in several counterparts, each of
which shall be deemed to be an original but all of which together will
constitute one and the same instrument.
(e) Any payments provided for hereunder shall be paid net of any
applicable withholding required under federal, state or local law.
(f) Staples shall pay to you all legal fees and expenses incurred by
you in seeking to obtain or enforce any right or benefit provided by this
Agreement.
(g) This Agreement is the exclusive agreement with respect to the
severance benefits payable to you in the event of a termination of your
employment. All prior negotiations are merged into this agreement.
<PAGE> 7
If this letter sets forth our agreement on the subject matter hereof,
kindly sign and return to Staples the enclosed copy of this letter, which will
then constitute our agreement on this subject.
Sincerely,
STAPLES, INC.
By: /s/ Thomas Stemberg
Chairman and CEO
Agreed to this 15th day of May, 1995
/s/ James E. Flavin
<PAGE> 1
STAPLES, INC.
Severance Benefits Agreement
Mr. Robert S. Fried
25 Ledge Hill Road
Southborough, MA 01772
Dear Mr. Fried:
1. Officer Relationship. You are currently, or are about to become, an
officer of Staples, Inc. and/or one of its subsidiaries ("Staples"). In order to
induce you to remain or enter into its employ, Staples agrees that you shall
receive the severance benefits set forth in this letter agreement (the
"Agreement") in the event your employment with Staples is terminated under the
circumstances described below.
2. Term of the Agreement. The term of this Agreement (the "Term") shall
commence as of the date hereof and shall continue in effect until the later of
May 31, 2000 or 24 months after any Change of Control that may occur prior to
May 31, 2000. Notwithstanding the termination of your employment, any
obligations hereunder which by their terms continue (such as severance benefits)
shall survive such termination. This Agreement does not constitute a contract of
employment or impose on Staples any obligation to retain you as an employee, it
being acknowledged that your employment is "at will" and that both you and
Staples may terminate your employment at any time. Any termination of your
employment by Staples or by you during the Term shall be communicated by written
notice of termination ("Notice of Termination") to the other party hereto in
accordance with Section 7, which Notice of Termination shall specify the
provisions of this Agreement, if any, upon which such termination is based. The
"Date of Termination" shall mean the effective date of such termination as
specified in the Notice of Termination (provided that no such Notice of
Termination shall specify an effective date more than 180 days after the date of
such Notice of Termination).
3. Change in Employment Status. You shall be entitled to the benefits
provided in Section 4 if the following event (a "Qualified Termination") occurs:
your employment with Staples terminates for any reason, unless such termination
is (i) because of your death or Disability, (ii) by Staples for Cause, or (iii)
by you other than for Good Reason.
4. Compensation Upon Termination.
(a) In the event of a Qualified Termination, Staples will (i) pay to
you for a period of 6 months after the Date of Termination, in equal monthly
installments, severance payments at an annual rate equal to the sum of (i) your
annual base salary rate in effect immediately prior to the Qualified Termination
(or such higher rate as may
<PAGE> 2
have been in effect within the 90 days prior to the Notice of Termination) plus
(ii) an annualized amount equal to the average annual bonus paid to (or accrued
for) you by Staples during the three full fiscal years preceding such Qualified
Termination.
(b) In the event of a Qualified Termination, for a 6-month period
after the Date of Termination, Staples shall provide you with life, disability,
dental, accident and group health insurance benefits substantially similar to
those available to similarly situated officers. Notwithstanding the foregoing,
Staples shall not provide any such benefit if an equivalent benefit is actually
received by you during such period following your termination from another
party.
(c) Notwithstanding a Qualified Termination, the vesting schedule of
your then outstanding options to purchase Common Stock of Staples shall be
accelerated only to the extent specifically provided in the respective option
agreements.
(d) If such Qualified Termination is within two years after a Change
in Control, you shall be entitled to the benefits provided in paragraphs (a) and
(b) above for an additional 6 months beyond the time period specified in such
paragraphs.
(e) The amount of any monthly payments to be made to you under
Section 4(a) shall be reduced by 50% of any cash compensation earned by or
accrued for you as a result of services rendered by you for a third party during
the month immediately preceding the date of such payment; provided, however,
that (i) this paragraph (e) shall not apply in the event of a Qualified
Termination occurring within 24 months after a Change of Control, and (ii)
nothing in this Agreement shall obligate you to seek to mitigate the amount of
any payments provided for in this Agreement by seeking alternative employment or
otherwise.
(f) The benefits payable under this Section 4 shall be conditioned
on none of the following events occurring: (i) a determination by the CEO and
COO of Staples within 60 days after your termination that your conduct prior to
your termination would have warranted a discharge for "Cause" as specified in
Section 5(c), or (ii) the CEO and COO of Staples determines that your conduct
after termination of employment fails to comply with the terms of any
non-competition or confidentiality provision contained in any employment,
consulting, advisory, non-disclosure, non-competition or other similar agreement
between you and Staples.
5. Certain Definitions.
As used herein, the following terms shall have the following respective
meanings:
(a) Change in Control. A "Change in Control" shall occur or be deemed
to have occurred only if any of the following events occur:
<PAGE> 3
(i) any "person," as such term is used in Sections 13(d) and 14(d) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), (other
than Staples, any trustee or other fiduciary holding securities under an
employee benefit plan of Staples, or any corporation owned directly or
indirectly by the stockholders of Staples in substantially the same proportion
as their ownership of stock of Staples) is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of Staples representing 30% or more of the combined voting power of
Staples's then outstanding securities;
(ii) individuals who, as of the date hereof, constitute the Board (as
of the date hereof, the "Incumbent Board") cease for any reason to constitute at
least a majority of the Board, provided that any person becoming a director
subsequent to the date hereof whose election, or nomination for election by
Staples's stockholders, was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board (other than an election or
nomination of an individual whose initial assumption of office is in connection
with an actual or threatened election contest relating to the election of the
directors of Staples, as such terms are used in Rule 14a-11 of Regulation 14A
under the Exchange Act) shall be, for purposes of this Agreement, considered as
though such person were a member of the Incumbent Board; or
(iii) the stockholders of Staples approve a merger or consolidation of
Staples with any other corporation, other than (A) a merger or consolidation
which would result in the voting securities of Staples outstanding immediately
prior thereto continuing to represent (either by remaining outstanding or by
being converted into voting securities of the surviving entity) more than 75% of
the combined voting power of the voting securities of Staples or such surviving
entity outstanding immediately after such merger or consolidation or (B) a
merger or consolidation effected to implement a recapitalization of Staples (or
similar transaction) in which no "person" (as hereinabove defined) acquires more
than 50% of the combined voting power of Staples's then outstanding securities;
or (iv) the stockholders of Staples approve a plan of complete liquidation of
Staples or an agreement for the sale or disposition by Staples of all or
substantially all of Staples's assets.
(b) Disability. If, as a result of incapacity due to physical or mental
illness, you shall have been absent from the full-time performance of your
duties with Staples for six (6) consecutive months and, within thirty (30) days
after written Notice of Termination is given to you, you shall not have returned
to the full-time performance of your duties, your employment may be terminated
for "Disability."
(c) Cause. Termination by Staples of your employment for "Cause" shall
mean termination
(i) upon your willful and continued failure to substantially perform
your duties with Staples (other than any such failure resulting from your
incapacity due to physical or mental illness or any such actual or anticipated
failure after the issuance of a Notice of
<PAGE> 4
Termination by you for Good Reason as defined below), provided that a written
demand for substantial performance has been delivered to you by Staples
specifically identifying the manner in which Staples believes that you have not
substantially performed your duties and you have not cured such failure within
30 days after such demand, or
(ii) any breach by you of any of the terms of the Proprietary and
Confidential Information Agreement or Non-Competition Agreement (or other
similar agreement) between you and Staples, or
(iii) a violation by you of the Staples Business Conduct & Ethics
Policy or any attempt by you to secure any improper personal profit in
connection with the business of Staples, or
(iv) failure by you to devote your full working time to the affairs of
Staples (other than in connection with outside director positions existing as of
this date or as authorized by the CEO and COO of Staples), or
(v) the engaging by you in business other than the business of Staples
(other than in connection with outside director positions existing as of this
date or as authorized by the CEO and COO of Staples), or
(vi) by reason of your willful engaging in misconduct which is
demonstrably and materially injurious to Staples;
provided that in each case you shall have been given written notice by the CEO
and COO of Staples of Staples' intent to terminate your employment under this
Section 5(c) and an opportunity to present to the CEO and COO of Staples, in
person, any objections you may have to such termination. For purposes of this
section 5(c), no act or failure to act on your part shall be deemed "willful"
unless done or omitted to be done by you not in good faith and without
reasonable belief that your action or omission was in the best interest of
Staples;
The provisions of clauses (iv) and (v) above shall not be construed to
prevent you from investing or trading in non-conflicting investments for your
own account, including real estate, stocks, bonds, securities or other forms of
investment, other than more than 1% of securities issued by entities in
competition with Staples.
(d) Good Reason. For purposes of this Agreement, "Good Reason" shall
mean, without your written consent, the occurrence of any of the following
circumstances within the 90 days immediately prior to your giving Staples a
Notice of Termination:
(i) any significant diminution in your position, duties,
responsibilities, power, title or office;
(ii) any reduction in your annual base salary from time to time;
<PAGE> 5
(iii) any failure by Staples to allow your participation in a cash
bonus program in a manner substantially consistent with past practice in light
of Staples' financial performance and attainment of your specified goals, or the
substantial reduction of your participation in any other material compensation
plan (other than any stock option or stock award program which programs are
within the full discretion of the Compensation Committee) on a significantly
less favorable basis, both in terms of the amount of benefits provided and the
level of your participation relative to other participants; unless such
circumstances are fully corrected prior to the Date of Termination specified in
the Notice of Termination given in respect thereof;
(iv) the failure by Staples to continue to provide you with benefits
substantially similar to those enjoyed by you under any of Staples's life
insurance, medical, health and accident, or disability plans in which you were
participating, the taking of any action by Staples which would directly or
indirectly materially reduce any of such benefits, or the reduction in the
number of paid vacation days to which you are entitled; unless such
circumstances are fully corrected prior to the Date of Termination specified in
the Notice of Termination given in respect thereof;
(v) in the event of a Change in Control, any requirement by Staples or
of any person in control of Staples that the location at which you perform your
principal duties for Staples be changed to a new location outside a radius of 50
miles from your business location at the time of the Change in Control; or
(vi) the failure of Staples to obtain a satisfactory agreement from any
successor to assume and agree to perform the Agreement, as contemplated in
Section 6(a).
Notwithstanding the foregoing, any general reduction of salary or reduction (or
elimination) of other compensation, bonus and/or benefits for its executive
officers which are substantially comparable for all such officers (but not
occurring within 24 months after a Change of Control) shall not be considered
"Good Reason."
6. Successors; Binding Agreement.
(a) Staples will require any successor (whether direct or indirect,
by purchase, merger, consolidation or otherwise) to all or substantially all of
the business or assets of Staples expressly to assume and agree to perform this
Agreement to the same extent that Staples would be required to perform it if no
such succession had taken place. Failure of Staples to obtain an assumption of
this Agreement prior to the effectiveness of any succession shall be a breach of
this Agreement and shall entitle you to compensation from Staples in the same
amount and on the same terms as you would be entitled hereunder. As used in this
Agreement, "Staples" shall mean Staples as defined above and any successor to
its business or assets as aforesaid which assumes and agrees to perform this
Agreement by operation of law, or otherwise.
<PAGE> 6
(b) This Agreement shall inure to the benefit of and be enforceable
by your personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If you should die while
any amount would still be payable to you hereunder if you had continued to live,
all such amounts, unless otherwise provided herein, shall be paid in accordance
with the terms of this Agreement to your devisee, legatee or other designee or
if there is no such designee, to your estate.
7. Notice. For the purposes of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and shall be
duly given when delivered or when mailed by United States registered or
certified mail, return receipt requested, postage prepaid, addressed to the
Chairman of Staples, at 100 Pennsylvania Avenue, P.O. Box 9328, Framingham,
Massachusetts 01701-9328, and to you at the address shown above or to such other
address as either Staples or you may have furnished to the other in writing in
accordance herewith, except that notice of change of address shall be effective
only upon receipt.
8. Miscellaneous.
(a) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement, which shall remain in full force and effect.
(b) The validity, interpretation, construction and performance of
this Agreement shall be governed by the laws of the Commonwealth of
Massachusetts.
(c) No waiver by you at any time of any breach of, or compliance
with, any provision of this Agreement to be performed by Staples shall be deemed
a waiver of that or any other provision at any subsequent time.
(d) This Agreement may be executed in several counterparts, each of
which shall be deemed to be an original but all of which together will
constitute one and the same instrument.
(e) Any payments provided for hereunder shall be paid net of any
applicable withholding required under federal, state or local law.
(f) Staples shall pay to you all legal fees and expenses incurred by
you in seeking to obtain or enforce any right or benefit provided by this
Agreement.
(g) This Agreement is the exclusive agreement with respect to the
severance benefits payable to you in the event of a termination of your
employment. All prior negotiations are merged into this agreement.
<PAGE> 7
If this letter sets forth our agreement on the subject matter hereof,
kindly sign and return to Staples the enclosed copy of this letter, which will
then constitute our agreement on this subject.
Sincerely,
STAPLES, INC.
By: /s/ Thomas G. Stemberg
Chairman and CEO
Agreed to this 4th day of June, 1995
/s/ Robert S. Fried
<PAGE> 1
STAPLES, INC.
Severance Benefits Agreement
Mr. Martin E. Hanaka
4 Woodcrest Road
Westborough, MA 01581
Dear Mr. Hanaka:
1. Officer Relationship. You are currently, or are about to become, an
officer of Staples, Inc. and/or one of its subsidiaries ("Staples"). In order to
induce you to remain or enter into its employ, Staples agrees that you shall
receive the severance benefits set forth in this letter agreement (the
"Agreement") in the event your employment with Staples is terminated under the
circumstances described below.
2. Term of the Agreement. The term of this Agreement (the "Term") shall
commence as of the date hereof and shall continue in effect until the later of
May 31, 2000 or 24 months after any Change of Control that may occur prior to
May 31, 2000. Notwithstanding the termination of your employment, any
obligations hereunder which by their terms continue (such as severance benefits)
shall survive such termination. This Agreement does not constitute a contract of
employment or impose on Staples any obligation to retain you as an employee, it
being acknowledged that your employment is "at will" and that both you and
Staples may terminate your employment at any time. Any termination of your
employment by Staples or by you during the Term shall be communicated by written
notice of termination ("Notice of Termination") to the other party hereto in
accordance with Section 7, which Notice of Termination shall specify the
provisions of this Agreement, if any, upon which such termination is based. The
"Date of Termination" shall mean the effective date of such termination as
specified in the Notice of Termination (provided that no such Notice of
Termination shall specify an effective date more than 180 days after the date of
such Notice of Termination).
3. Change in Employment Status. You shall be entitled to the benefits
provided in Section 4 if the following event (a "Qualified Termination") occurs:
your employment with Staples terminates for any reason, unless such termination
is (i) because of your death or Disability, (ii) by Staples for Cause, or (iii)
by you other than for Good Reason.
4. Compensation Upon Termination.
(a) In the event of a Qualified Termination, Staples will (i) pay to
you for a period of 18 months after the Date of Termination, in equal monthly
installments, severance payments at an annual rate equal to the sum of (i) your
annual base salary rate in effect immediately prior to the Qualified Termination
(or such higher rate as may
<PAGE> 2
have been in effect within the 90 days prior to the Notice of Termination) plus
(ii) an annualized amount equal to the average annual bonus paid to (or accrued
for) you by Staples during the three full fiscal years preceding such Qualified
Termination.
(b) In the event of a Qualified Termination, for an 18-month period
after the Date of Termination, Staples shall provide you with life, disability,
dental, accident and group health insurance benefits substantially similar to
those available to similarly situated officers. Notwithstanding the foregoing,
Staples shall not provide any such benefit if an equivalent benefit is actually
received by you during such period following your termination from another
party.
(c) Notwithstanding a Qualified Termination, the vesting schedule of
your then outstanding options to purchase Common Stock of Staples shall be
accelerated only to the extent specifically provided in the respective option
agreements; provided, however, that in the event of a termination of your
employment by Staples without Cause, the vesting of your initial stock options
granted on August 15, 1994 shall be accelerated such that such options shall be
immediately exercisable in full.
(d) If such Qualified Termination is within two years after a Change
in Control, you shall be entitled to the benefits provided in paragraphs (a) and
(b) above for an additional 6 months beyond the time period specified in such
paragraphs.
(e) The amount of any monthly payments to be made to you under
Section 4(a) shall be reduced by 50% of any cash compensation earned by or
accrued for you as a result of services rendered by you for a third party during
the month immediately preceding the date of such payment; provided, however,
that (i) this paragraph (e) shall not apply in the event of a Qualified
Termination occurring within 24 months after a Change of Control, and (ii)
nothing in this Agreement shall obligate you to seek to mitigate the amount of
any payments provided for in this Agreement by seeking alternative employment or
otherwise.
(f) The benefits payable under this Section 4 shall be conditioned
on none of the following events occurring: (i) a determination by the Board of
Directors of Staples within 60 days after your termination that your conduct
prior to your termination would have warranted a discharge for "Cause" as
specified in Section 5(c), or (ii) the Board of Directors of Staples determines
that your conduct after termination of employment fails to comply with the terms
of any non-competition or confidentiality provision contained in any employment,
consulting, advisory, non-disclosure, non-competition or other similar agreement
between you and Staples.
5. Certain Definitions.
As used herein, the following terms shall have the following respective
meanings:
<PAGE> 3
(a) Change in Control. A "Change in Control" shall occur or be deemed
to have occurred only if any of the following events occur:
(i) any "person," as such term is used in Sections 13(d) and 14(d) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), (other
than Staples, any trustee or other fiduciary holding securities under an
employee benefit plan of Staples, or any corporation owned directly or
indirectly by the stockholders of Staples in substantially the same proportion
as their ownership of stock of Staples) is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of Staples representing 30% or more of the combined voting power of
Staples's then outstanding securities;
(ii) individuals who, as of the date hereof, constitute the Board (as
of the date hereof, the "Incumbent Board") cease for any reason to constitute at
least a majority of the Board, provided that any person becoming a director
subsequent to the date hereof whose election, or nomination for election by
Staples's stockholders, was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board (other than an election or
nomination of an individual whose initial assumption of office is in connection
with an actual or threatened election contest relating to the election of the
directors of Staples, as such terms are used in Rule 14a-11 of Regulation 14A
under the Exchange Act) shall be, for purposes of this Agreement, considered as
though such person were a member of the Incumbent Board; or
(iii) the stockholders of Staples approve a merger or consolidation of
Staples with any other corporation, other than (A) a merger or consolidation
which would result in the voting securities of Staples outstanding immediately
prior thereto continuing to represent (either by remaining outstanding or by
being converted into voting securities of the surviving entity) more than 75% of
the combined voting power of the voting securities of Staples or such surviving
entity outstanding immediately after such merger or consolidation or (B) a
merger or consolidation effected to implement a recapitalization of Staples (or
similar transaction) in which no "person" (as hereinabove defined) acquires more
than 50% of the combined voting power of Staples's then outstanding securities;
or (iv) the stockholders of Staples approve a plan of complete liquidation of
Staples or an agreement for the sale or disposition by Staples of all or
substantially all of Staples's assets.
(b) Disability. If, as a result of incapacity due to physical or mental
illness, you shall have been absent from the full-time performance of your
duties with Staples for six (6) consecutive months and, within thirty (30) days
after written Notice of Termination is given to you, you shall not have returned
to the full-time performance of your duties, your employment may be terminated
for "Disability."
(c) Cause. Termination by Staples of your employment for "Cause" shall
mean termination
<PAGE> 4
(i) upon your willful and continued failure to substantially perform
your duties with Staples (other than any such failure resulting from your
incapacity due to physical or mental illness or any such actual or anticipated
failure after the issuance of a Notice of Termination by you for Good Reason as
defined below), provided that a written demand for substantial performance has
been delivered to you by Staples specifically identifying the manner in which
Staples believes that you have not substantially performed your duties and you
have not cured such failure within 30 days after such demand, or
(ii) any breach by you of any of the terms of the Proprietary and
Confidential Information Agreement or Non-Competition Agreement (or other
similar agreement) between you and Staples, or
(iii) a violation by you of the Staples Business Conduct & Ethics
Policy or any attempt by you to secure any improper personal profit in
connection with the business of Staples, or
(iv) failure by you to devote your full working time to the affairs of
Staples (other than in connection with outside director positions existing as of
this date or as authorized by the Board of Directors), or
(v) the engaging by you in business other than the business of Staples
(other than in connection with outside director positions existing as of this
date or as authorized by the Board of Directors), or
(vi) by reason of your willful engaging in misconduct which is
demonstrably and materially injurious to Staples;
provided that in each case you shall have been given written notice by the Board
of Directors of Staples of Staples' intent to terminate your employment under
this Section 5(c) and an opportunity to present to the Board of Directors, in
person, any objections you may have to such termination. For purposes of this
section 5(c), no act or failure to act on your part shall be deemed "willful"
unless done or omitted to be done by you not in good faith and without
reasonable belief that your action or omission was in the best interest of
Staples;
The provisions of clauses (iv) and (v) above shall not be construed to
prevent you from investing or trading in non-conflicting investments for your
own account, including real estate, stocks, bonds, securities or other forms of
investment, other than more than 1% of securities issued by entities in
competition with Staples.
(d) Good Reason. For purposes of this Agreement, "Good Reason" shall
mean, without your written consent, the occurrence of any of the following
circumstances within the 90 days immediately prior to your giving Staples a
Notice of Termination:
<PAGE> 5
(i) any significant diminution in your position, duties,
responsibilities, power, title or office;
(ii) any reduction in your annual base salary from time to time;
(iii) any failure by Staples to allow your participation in a cash
bonus program in a manner substantially consistent with past practice in light
of Staples' financial performance and attainment of your specified goals, or the
substantial reduction of your participation in any other material compensation
plan (other than any stock option or stock award program which programs are
within the full discretion of the Compensation Committee) on a significantly
less favorable basis, both in terms of the amount of benefits provided and the
level of your participation relative to other participants; unless such
circumstances are fully corrected prior to the Date of Termination specified in
the Notice of Termination given in respect thereof;
(iv) the failure by Staples to continue to provide you with benefits
substantially similar to those enjoyed by you under any of Staples's life
insurance, medical, health and accident, or disability plans in which you were
participating, the taking of any action by Staples which would directly or
indirectly materially reduce any of such benefits, or the reduction in the
number of paid vacation days to which you are entitled; unless such
circumstances are fully corrected prior to the Date of Termination specified in
the Notice of Termination given in respect thereof;
(v) in the event of a Change in Control, any requirement by Staples or
of any person in control of Staples that the location at which you perform your
principal duties for Staples be changed to a new location outside a radius of 50
miles from your business location at the time of the Change in Control; or
(vi) the failure of Staples to obtain a satisfactory agreement from any
successor to assume and agree to perform the Agreement, as contemplated in
Section 6(a).
Notwithstanding the foregoing, any general reduction of salary or reduction (or
elimination) of other compensation, bonus and/or benefits for its executive
officers which are substantially comparable for all such officers (but not
occurring within 24 months after a Change of Control) shall not be considered
"Good Reason."
6. Successors; Binding Agreement.
(a) Staples will require any successor (whether direct or indirect,
by purchase, merger, consolidation or otherwise) to all or substantially all of
the business or assets of Staples expressly to assume and agree to perform this
Agreement to the same extent that Staples would be required to perform it if no
such succession had taken place. Failure of Staples to obtain an assumption of
this Agreement prior to the effectiveness of any succession shall be a breach of
this Agreement and shall entitle you to compensation from Staples in the same
amount and on the same terms as you would
<PAGE> 6
be entitled hereunder. As used in this Agreement, "Staples" shall mean Staples
as defined above and any successor to its business or assets as aforesaid which
assumes and agrees to perform this Agreement by operation of law, or otherwise.
(b) This Agreement shall inure to the benefit of and be enforceable
by your personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If you should die while
any amount would still be payable to you hereunder if you had continued to live,
all such amounts, unless otherwise provided herein, shall be paid in accordance
with the terms of this Agreement to your devisee, legatee or other designee or
if there is no such designee, to your estate.
7. Notice. For the purposes of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and shall be
duly given when delivered or when mailed by United States registered or
certified mail, return receipt requested, postage prepaid, addressed to the
Chairman of the Compensation Committee of Staples, at 100 Pennsylvania Avenue,
P.O. Box 9328, Framingham, Massachusetts 01701-9328, and to you at the address
shown above or to such other address as either Staples or you may have furnished
to the other in writing in accordance herewith, except that notice of change of
address shall be effective only upon receipt.
8. Miscellaneous.
(a) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement, which shall remain in full force and effect.
(b) The validity, interpretation, construction and performance of
this Agreement shall be governed by the laws of the Commonwealth of
Massachusetts.
(c) No waiver by you at any time of any breach of, or compliance
with, any provision of this Agreement to be performed by Staples shall be deemed
a waiver of that or any other provision at any subsequent time.
(d) This Agreement may be executed in several counterparts, each of
which shall be deemed to be an original but all of which together will
constitute one and the same instrument.
(e) Any payments provided for hereunder shall be paid net of any
applicable withholding required under federal, state or local law.
(f) Staples shall pay to you all legal fees and expenses incurred by
you in seeking to obtain or enforce any right or benefit provided by this
Agreement.
<PAGE> 7
(g) This Agreement is the exclusive agreement with respect to the
severance benefits payable to you in the event of a termination of your
employment, and this Agreement specifically replaces the letter agreement dated
August 15, 1994 and the Employee Retention Agreement dated August 15, 1994,
between Staples and you, which agreements are hereby expressly terminated
effective as of the date hereof. All prior negotiations are merged into this
agreement.
If this letter sets forth our agreement on the subject matter hereof,
kindly sign and return to Staples the enclosed copy of this letter, which will
then constitute our agreement on this subject.
Sincerely,
STAPLES, INC.
By: /s/ Thomas G. Stemberg
Chairman and CEO
Agreed to this 15th day of May, 1995
/s/ Martin Hanaka
<PAGE> 1
STAPLES, INC.
Severance Benefits Agreement
Mr. Todd J. Krasnow
17 Hobart Road
Newton, MA 02159
Dear Mr. Krasnow:
1. Officer Relationship. You are currently, or are about to become, an
officer of Staples, Inc. and/or one of its subsidiaries ("Staples"). In order to
induce you to remain or enter into its employ, Staples agrees that you shall
receive the severance benefits set forth in this letter agreement (the
"Agreement") in the event your employment with Staples is terminated under the
circumstances described below.
2. Term of the Agreement. The term of this Agreement (the "Term") shall
commence as of the date hereof and shall continue in effect until the later of
May 31, 2000 or 24 months after any Change of Control that may occur prior to
May 31, 2000. Notwithstanding the termination of your employment, any
obligations hereunder which by their terms continue (such as severance benefits)
shall survive such termination. This Agreement does not constitute a contract of
employment or impose on Staples any obligation to retain you as an employee, it
being acknowledged that your employment is "at will" and that both you and
Staples may terminate your employment at any time. Any termination of your
employment by Staples or by you during the Term shall be communicated by written
notice of termination ("Notice of Termination") to the other party hereto in
accordance with Section 7, which Notice of Termination shall specify the
provisions of this Agreement, if any, upon which such . The "Date of
Termination" shall mean the effective date of such termination as specified in
the Notice of Termination (provided that no such Notice of Termination shall
specify an effective date more than 180 days after the date of such Notice of
Termination).
3. Change in Employment Status. You shall be entitled to the benefits
provided in Section 4 if the following event (a "Qualified Termination") occurs:
your employment with Staples terminates for any reason, unless such termination
is (i) because of your death or Disability, (ii) by Staples for Cause, or (iii)
by you other than for Good Reason.
4. Compensation Upon Termination.
(a) In the event of a Qualified Termination, Staples will (i) pay
to you for a period of 6 months after the Date of Termination, in equal monthly
installments, severance payments at an annual rate equal to the sum of (i) your
annual base salary rate in effect immediately prior to the Qualified Termination
(or such higher rate as may
<PAGE> 2
have been in effect within the 90 days prior to the Notice of Termination) plus
(ii) an annualized amount equal to the average annual bonus paid to (or accrued
for) you by Staples during the three full fiscal years preceding such Qualified
Termination.
(b) In the event of a Qualified Termination, for a 6-month period
after the Date of Termination, Staples shall provide you with life, disability,
dental, accident and group health insurance benefits substantially similar to
those available to similarly situated officers. Notwithstanding the foregoing,
Staples shall not provide any such benefit if an equivalent benefit is actually
received by you during such period following your termination from another
party.
(c) Notwithstanding a Qualified Termination, the vesting schedule
of your then outstanding options to purchase Common Stock of Staples shall be
accelerated only to the extent specifically provided in the respective option
agreements.
(d) If such Qualified Termination is within two years after a
Change in Control, you shall be entitled to the benefits provided in paragraphs
(a) and (b) above for an additional 6 months beyond the time period specified in
such paragraphs.
(e) The amount of any monthly payments to be made to you under
Section 4(a) shall be reduced by 50% of any cash compensation earned by or
accrued for you as a result of services rendered by you for a third party during
the month immediately preceding the date of such payment; provided, however,
that (i) this paragraph (e) shall not apply in the event of a Qualified
Termination occurring within 24 months after a Change of Control, and (ii)
nothing in this Agreement shall obligate you to seek to mitigate the amount of
any payments provided for in this Agreement by seeking alternative employment or
otherwise.
(f) The benefits payable under this Section 4 shall be conditioned
on none of the following events occurring: (i) a determination by the CEO and
COO of Staples within 60 days after your termination that your conduct prior to
your termination would have warranted a discharge for "Cause" as specified in
Section 5(c), or (ii) the CEO and COO of Staples determines that your conduct
after termination of employment fails to comply with the terms of any
non-competition or confidentiality provision contained in any employment,
consulting, advisory, non-disclosure, non-competition or other similar agreement
between you and Staples.
5. Certain Definitions.
As used herein, the following terms shall have the following respective
meanings:
(a) Change in Control. A "Change in Control" shall occur or be deemed
to have occurred only if any of the following events occur:
<PAGE> 3
(i) any "person," as such term is used in Sections 13(d) and 14(d) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), (other
than Staples, any trustee or other fiduciary holding securities under an
employee benefit plan of Staples, or any corporation owned directly or
indirectly by the stockholders of Staples in substantially the same proportion
as their ownership of stock of Staples) is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of Staples representing 30% or more of the combined voting power of
Staples's then outstanding securities;
(ii) individuals who, as of the date hereof, constitute the Board (as
of the date hereof, the "Incumbent Board") cease for any reason to constitute at
least a majority of the Board, provided that any person becoming a director
subsequent to the date hereof whose election, or nomination for election by
Staples's stockholders, was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board (other than an election or
nomination of an individual whose initial assumption of office is in connection
with an actual or threatened election contest relating to the election of the
directors of Staples, as such terms are used in Rule 14a-11 of Regulation 14A
under the Exchange Act) shall be, for purposes of this Agreement, considered as
though such person were a member of the Incumbent Board; or
(iii) the stockholders of Staples approve a merger or consolidation of
Staples with any other corporation, other than (A) a merger or consolidation
which would result in the voting securities of Staples outstanding immediately
prior thereto continuing to represent (either by remaining outstanding or by
being converted into voting securities of the surviving entity) more than 75% of
the combined voting power of the voting securities of Staples or such surviving
entity outstanding immediately after such merger or consolidation or (B) a
merger or consolidation effected to implement a recapitalization of Staples (or
similar transaction) in which no "person" (as hereinabove defined) acquires more
than 50% of the combined voting power of Staples's then outstanding securities;
or (iv) the stockholders of Staples approve a plan of complete liquidation of
Staples or an agreement for the sale or disposition by Staples of all or
substantially all of Staples's assets.
(b) Disability. If, as a result of incapacity due to physical or mental
illness, you shall have been absent from the full-time performance of your
duties with Staples for six (6) consecutive months and, within thirty (30) days
after written Notice of Termination is given to you, you shall not have returned
to the full-time performance of your duties, your employment may be terminated
for "Disability."
(c) Cause. Termination by Staples of your employment for "Cause" shall
mean termination
(i) upon your willful and continued failure to substantially perform
your duties with Staples (other than any such failure resulting from your
incapacity due to physical or mental illness or any such actual or anticipated
failure after the issuance of a Notice of
<PAGE> 4
Termination by you for Good Reason as defined below), provided that a written
demand for substantial performance has been delivered to you by Staples
specifically identifying the manner in which Staples believes that you have not
substantially performed your duties and you have not cured such failure within
30 days after such demand, or
(ii) any breach by you of any of the terms of the Proprietary and
Confidential Information Agreement or Non-Competition Agreement (or other
similar agreement) between you and Staples, or
(iii) a violation by you of the Staples Business Conduct & Ethics
Policy or any attempt by you to secure any improper personal profit in
connection with the business of Staples, or
(iv) failure by you to devote your full working time to the affairs of
Staples (other than in connection with outside director positions existing as of
this date or as authorized by the CEO and COO of Staples), or
(v) the engaging by you in business other than the business of Staples
(other than in connection with outside director positions existing as of this
date or as authorized by the CEO and COO of Staples), or
(vi) by reason of your willful engaging in misconduct which is
demonstrably and materially injurious to Staples;
provided that in each case you shall have been given written notice by
the CEO and COO of Staples of Staples' intent to terminate your employment
under this Section 5(c) and an opportunity to present to the CEO and COO of
Staples, in person, any objections you may have to such termination. For
purposes of this section 5(c), no act or failure to act on your part shall be
deemed "willful" unless done or omitted to be done by you not in good faith and
without reasonable belief that your action or omission was in the best interest
of Staples;
The provisions of clauses (iv) and (v) above shall not be construed to
prevent you from investing or trading in non-conflicting investments for your
own account, including real estate, stocks, bonds, securities or other forms of
investment, other than more than 1% of securities issued by entities in
competition with Staples.
(d) Good Reason. For purposes of this Agreement, "Good Reason" shall
mean, without your written consent, the occurrence of any of the following
circumstances within the 90 days immediately prior to your giving Staples a
Notice of Termination:
(i) any significant diminution in your position, duties,
responsibilities, power, title or office;
(ii) any reduction in your annual base salary from time to time;
<PAGE> 5
(iii) any failure by Staples to allow your participation in a cash
bonus program in a manner substantially consistent with past practice in light
of Staples' financial performance and attainment of your specified goals, or the
substantial reduction of your participation in any other material compensation
plan (other than any stock option or stock award program which programs are
within the full discretion of the Compensation Committee) on a significantly
less favorable basis, both in terms of the amount of benefits provided and the
level of your participation relative to other participants; unless such
circumstances are fully corrected prior to the Date of Termination specified in
the Notice of Termination given in respect thereof;
(iv) the failure by Staples to continue to provide you with benefits
substantially similar to those enjoyed by you under any of Staples's life
insurance, medical, health and accident, or disability plans in which you were
participating, the taking of any action by Staples which would directly or
indirectly materially reduce any of such benefits, or the reduction in the
number of paid vacation days to which you are entitled; unless such
circumstances are fully corrected prior to the Date of Termination specified in
the Notice of Termination given in respect thereof;
(v) in the event of a Change in Control, any requirement by Staples or
of any person in control of Staples that the location at which you perform your
principal duties for Staples be changed to a new location outside a radius of 50
miles from your business location at the time of the Change in Control; or
(vi) the failure of Staples to obtain a satisfactory agreement from any
successor to assume and agree to perform the Agreement, as contemplated in
Section 6(a).
Notwithstanding the foregoing, any general reduction of salary or reduction (or
elimination) of other compensation, bonus and/or benefits for its executive
officers which are substantially comparable for all such officers (but not
occurring within 24 months after a Change of Control) shall not be considered
"Good Reason."
6. Successors; Binding Agreement.
(a) Staples will require any successor (whether direct or indirect,
by purchase, merger, consolidation or otherwise) to all or substantially all of
the business or assets of Staples expressly to assume and agree to perform this
Agreement to the same extent that Staples would be required to perform it if no
such succession had taken place. Failure of Staples to obtain an assumption of
this Agreement prior to the effectiveness of any succession shall be a breach of
this Agreement and shall entitle you to compensation from Staples in the same
amount and on the same terms as you would be entitled hereunder. As used in this
Agreement, "Staples" shall mean Staples as defined above and any successor to
its business or assets as aforesaid which assumes and agrees to perform this
Agreement by operation of law, or otherwise.
<PAGE> 6
(b) This Agreement shall inure to the benefit of and be enforceable
by your personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If you should die while
any amount would still be payable to you hereunder if you had continued to live,
all such amounts, unless otherwise provided herein, shall be paid in accordance
with the terms of this Agreement to your devisee, legatee or other designee or
if there is no such designee, to your estate.
7. Notice. For the purposes of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and shall be
duly given when delivered or when mailed by United States registered or
certified mail, return receipt requested, postage prepaid, addressed to the
Chairman of Staples, at 100 Pennsylvania Avenue, P.O. Box 9328, Framingham,
Massachusetts 01701-9328, and to you at the address shown above or to such other
address as either Staples or you may have furnished to the other in writing in
accordance herewith, except that notice of change of address shall be effective
only upon receipt.
8. Miscellaneous.
(a) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement, which shall remain in full force and effect.
(b) The validity, interpretation, construction and performance of
this Agreement shall be governed by the laws of the Commonwealth of
Massachusetts.
(c) No waiver by you at any time of any breach of, or compliance
with, any provision of this Agreement to be performed by Staples shall be deemed
a waiver of that or any other provision at any subsequent time.
(d) This Agreement may be executed in several counterparts, each of
which shall be deemed to be an original but all of which together will
constitute one and the same instrument.
(e) Any payments provided for hereunder shall be paid net of any
applicable withholding required under federal, state or local law.
(f) Staples shall pay to you all legal fees and expenses incurred by
you in seeking to obtain or enforce any right or benefit provided by this
Agreement.
(g) This Agreement is the exclusive agreement with respect to the
severance benefits payable to you in the event of a termination of your
employment. All prior negotiations are merged into this agreement.
<PAGE> 7
If this letter sets forth our agreement on the subject matter
hereof, kindly sign and return to Staples the enclosed copy of this letter,
which will then constitute our agreement on this subject.
Sincerely,
STAPLES, INC.
By: /s/ Thomas G. Stemberg
Chairman and CEO
Agreed to this 2nd day of June, 1995
/s/ Todd J. Krasnow
<PAGE> 1
STAPLES, INC.
Severance Benefits Agreement
Mr. Louis R. Pepi
21 Backriver Way
Duxbury, MA 02332
Dear Mr. Pepi:
1. Officer Relationship. You are currently, or are about to become, an
officer of Staples, Inc. and/or one of its subsidiaries ("Staples"). In order to
induce you to remain or enter into its employ, Staples agrees that you shall
receive the severance benefits set forth in this letter agreement (the
"Agreement") in the event your employment with Staples is terminated under the
circumstances described below.
2. Term of the Agreement. The term of this Agreement (the "Term") shall
commence as of the date hereof and shall continue in effect until the later of
May 31, 2000 or 24 months after any Change of Control that may occur prior to
May 31, 2000. Notwithstanding the termination of your employment, any
obligations hereunder which by their terms continue (such as severance benefits)
shall survive such termination. This Agreement does not constitute a contract of
employment or impose on Staples any obligation to retain you as an employee, it
being acknowledged that your employment is "at will" and that both you and
Staples may terminate your employment at any time. Any termination of your
employment by Staples or by you during the Term shall be communicated by written
notice of termination ("Notice of Termination") to the other party hereto in
accordance with Section 7, which Notice of Termination shall specify the
provisions of this Agreement, if any, upon which such termination is based. The
"Date of Termination" shall mean the effective date of such termination as
specified in the Notice of Termination (provided that no such Notice of
Termination shall specify an effective date more than 180 days after the date of
such Notice of Termination).
3. Change in Employment Status. You shall be entitled to the benefits
provided in Section 4 if the following event (a "Qualified Termination") occurs:
your employment with Staples terminates for any reason, unless such termination
is (i) because of your death or Disability, (ii) by Staples for Cause, or (iii)
by you other than for Good Reason.
4. Compensation Upon Termination.
(a) In the event of a Qualified Termination, Staples will (i) pay to
you for a period of 6 months after the Date of Termination, in equal monthly
installments, severance payments at an annual rate equal to the sum of (i) your
annual base salary rate in effect immediately prior to the Qualified Termination
(or such higher rate as may
<PAGE> 2
have been in effect within the 90 days prior to the Notice of Termination) plus
(ii) an annualized amount equal to the average annual bonus paid to (or accrued
for) you by Staples during the three full fiscal years preceding such Qualified
Termination.
(b) In the event of a Qualified Termination, for a 6-month period
after the Date of Termination, Staples shall provide you with life, disability,
dental, accident and group health insurance benefits substantially similar to
those available to similarly situated officers. Notwithstanding the foregoing,
Staples shall not provide any such benefit if an equivalent benefit is actually
received by you during such period following your termination from another
party.
(c) Notwithstanding a Qualified Termination, the vesting schedule of
your then outstanding options to purchase Common Stock of Staples shall be
accelerated only to the extent specifically provided in the respective option
agreements.
(d) If such Qualified Termination is within two years after a Change
in Control, you shall be entitled to the benefits provided in paragraphs (a) and
(b) above for an additional 6 months beyond the time period specified in such
paragraphs.
(e) The amount of any monthly payments to be made to you under
Section 4(a) shall be reduced by 50% of any cash compensation earned by or
accrued for you as a result of services rendered by you for a third party during
the month immediately preceding the date of such payment; provided, however,
that (i) this paragraph (e) shall not apply in the event of a Qualified
Termination occurring within 24 months after a Change of Control, and (ii)
nothing in this Agreement shall obligate you to seek to mitigate the amount of
any payments provided for in this Agreement by seeking alternative employment or
otherwise.
(f) The benefits payable under this Section 4 shall be conditioned
on none of the following events occurring: (i) a determination by the CEO and
COO of Staples within 60 days after your termination that your conduct prior to
your termination would have warranted a discharge for "Cause" as specified in
Section 5(c), or (ii) the CEO and COO of Staples determines that your conduct
after termination of employment fails to comply with the terms of any
non-competition or confidentiality provision contained in any employment,
consulting, advisory, non-disclosure, non-competition or other similar agreement
between you and Staples.
5. Certain Definitions.
As used herein, the following terms shall have the following respective
meanings:
(a) Change in Control. A "Change in Control" shall occur or be deemed
to have occurred only if any of the following events occur:
<PAGE> 3
(i) any "person," as such term is used in Sections 13(d) and 14(d) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), (other
than Staples, any trustee or other fiduciary holding securities under an
employee benefit plan of Staples, or any corporation owned directly or
indirectly by the stockholders of Staples in substantially the same proportion
as their ownership of stock of Staples) is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of Staples representing 30% or more of the combined voting power of
Staples's then outstanding securities;
(ii) individuals who, as of the date hereof, constitute the Board (as
of the date hereof, the "Incumbent Board") cease for any reason to constitute at
least a majority of the Board, provided that any person becoming a director
subsequent to the date hereof whose election, or nomination for election by
Staples's stockholders, was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board (other than an election or
nomination of an individual whose initial assumption of office is in connection
with an actual or threatened election contest relating to the election of the
directors of Staples, as such terms are used in Rule 14a-11 of Regulation 14A
under the Exchange Act) shall be, for purposes of this Agreement, considered as
though such person were a member of the Incumbent Board; or
(iii) the stockholders of Staples approve a merger or consolidation of
Staples with any other corporation, other than (A) a merger or consolidation
which would result in the voting securities of Staples outstanding immediately
prior thereto continuing to represent (either by remaining outstanding or by
being converted into voting securities of the surviving entity) more than 75% of
the combined voting power of the voting securities of Staples or such surviving
entity outstanding immediately after such merger or consolidation or (B) a
merger or consolidation effected to implement a recapitalization of Staples (or
similar transaction) in which no "person" (as hereinabove defined) acquires more
than 50% of the combined voting power of Staples's then outstanding securities;
or (iv) the stockholders of Staples approve a plan of complete liquidation of
Staples or an agreement for the sale or disposition by Staples of all or
substantially all of Staples's assets.
(b) Disability. If, as a result of incapacity due to physical or mental
illness, you shall have been absent from the full-time performance of your
duties with Staples for six (6) consecutive months and, within thirty (30) days
after written Notice of Termination is given to you, you shall not have returned
to the full-time performance of your duties, your employment may be terminated
for "Disability."
(c) Cause. Termination by Staples of your employment for "Cause" shall
mean termination
(i) upon your willful and continued failure to substantially perform
your duties with Staples (other than any such failure resulting from your
incapacity due to physical or mental illness or any such actual or anticipated
failure after the issuance of a Notice of
<PAGE> 4
Termination by you for Good Reason as defined below), provided that a written
demand for substantial performance has been delivered to you by Staples
specifically identifying the manner in which Staples believes that you have not
substantially performed your duties and you have not cured such failure within
30 days after such demand, or
(ii) any breach by you of any of the terms of the Proprietary and
Confidential Information Agreement or Non-Competition Agreement (or other
similar agreement) between you and Staples, or
(iii) a violation by you of the Staples Business Conduct & Ethics
Policy or any attempt by you to secure any improper personal profit in
connection with the business of Staples, or
(iv) failure by you to devote your full working time to the affairs of
Staples (other than in connection with outside director positions existing as of
this date or as authorized by the CEO and COO of Staples), or
(v) the engaging by you in business other than the business of Staples
(other than in connection with outside director positions existing as of this
date or as authorized by the CEO and COO of Staples), or
(vi) by reason of your willful engaging in misconduct which is
demonstrably and materially injurious to Staples;
provided that in each case you shall have been given written notice by the CEO
and COO of Staples of Staples' intent to terminate your employment under this
Section 5(c) and an opportunity to present to the CEO and COO of Staples, in
person, any objections you may have to such termination. For purposes of this
section 5(c), no act or failure to act on your part shall be deemed "willful"
unless done or omitted to be done by you not in good faith and without
reasonable belief that your action or omission was in the best interest of
Staples;
The provisions of clauses (iv) and (v) above shall not be construed to
prevent you from investing or trading in non-conflicting investments for your
own account, including real estate, stocks, bonds, securities or other forms of
investment, other than more than 1% of securities issued by entities in
competition with Staples.
(d) Good Reason. For purposes of this Agreement, "Good Reason" shall
mean, without your written consent, the occurrence of any of the following
circumstances within the 90 days immediately prior to your giving Staples a
Notice of Termination:
(i) any significant diminution in your position, duties,
responsibilities, power, title or office;
(ii) any reduction in your annual base salary from time to time;
<PAGE> 5
(iii) any failure by Staples to allow your participation in a cash
bonus program in a manner substantially consistent with past practice in light
of Staples' financial performance and attainment of your specified goals, or the
substantial reduction of your participation in any other material compensation
plan (other than any stock option or stock award program which programs are
within the full discretion of the Compensation Committee) on a significantly
less favorable basis, both in terms of the amount of benefits provided and the
level of your participation relative to other participants; unless such
circumstances are fully corrected prior to the Date of Termination specified in
the Notice of Termination given in respect thereof;
(iv) the failure by Staples to continue to provide you with benefits
substantially similar to those enjoyed by you under any of Staples's life
insurance, medical, health and accident, or disability plans in which you were
participating, the taking of any action by Staples which would directly or
indirectly materially reduce any of such benefits, or the reduction in the
number of paid vacation days to which you are entitled; unless such
circumstances are fully corrected prior to the Date of Termination specified in
the Notice of Termination given in respect thereof;
(v) in the event of a Change in Control, any requirement by Staples or
of any person in control of Staples that the location at which you perform your
principal duties for Staples be changed to a new location outside a radius of 50
miles from your business location at the time of the Change in Control; or
(vi) the failure of Staples to obtain a satisfactory agreement from any
successor to assume and agree to perform the Agreement, as contemplated in
Section 6(a).
Notwithstanding the foregoing, any general reduction of salary or
reduction (or elimination) of other compensation, bonus and/or benefits for its
executive officers which are substantially comparable for all such officers (but
not occurring within 24 months after a Change of Control) shall not be
considered "Good Reason."
6. Successors; Binding Agreement.
(a) Staples will require any successor (whether direct or indirect,
by purchase, merger, consolidation or otherwise) to all or substantially all of
the business or assets of Staples expressly to assume and agree to perform this
Agreement to the same extent that Staples would be required to perform it if no
such succession had taken place. Failure of Staples to obtain an assumption of
this Agreement prior to the effectiveness of any succession shall be a breach of
this Agreement and shall entitle you to compensation from Staples in the same
amount and on the same terms as you would be entitled hereunder. As used in this
Agreement, "Staples" shall mean Staples as defined above and any successor to
its business or assets as aforesaid which assumes and agrees to perform this
Agreement by operation of law, or otherwise.
<PAGE> 6
(b) This Agreement shall inure to the benefit of and be enforceable
by your personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If you should die while
any amount would still be payable to you hereunder if you had continued to live,
all such amounts, unless otherwise provided herein, shall be paid in accordance
with the terms of this Agreement to your devisee, legatee or other designee or
if there is no such designee, to your estate.
7. Notice. For the purposes of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and shall be
duly given when delivered or when mailed by United States registered or
certified mail, return receipt requested, postage prepaid, addressed to the
Chairman of Staples, at 100 Pennsylvania Avenue, P.O. Box 9328, Framingham,
Massachusetts 01701-9328, and to you at the address shown above or to such other
address as either Staples or you may have furnished to the other in writing in
accordance herewith, except that notice of change of address shall be effective
only upon receipt.
8. Miscellaneous.
(a) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement, which shall remain in full force and effect.
(b) The validity, interpretation, construction and performance of
this Agreement shall be governed by the laws of the Commonwealth of
Massachusetts.
(c) No waiver by you at any time of any breach of, or compliance
with, any provision of this Agreement to be performed by Staples shall be deemed
a waiver of that or any other provision at any subsequent time.
(d) This Agreement may be executed in several counterparts, each of
which shall be deemed to be an original but all of which together will
constitute one and the same instrument.
(e) Any payments provided for hereunder shall be paid net of any
applicable withholding required under federal, state or local law.
(f) Staples shall pay to you all legal fees and expenses incurred by
you in seeking to obtain or enforce any right or benefit provided by this
Agreement.
(g) This Agreement is the exclusive agreement with respect to the
severance benefits payable to you in the event of a termination of your
employment, and this Agreement specifically replaces the letter agreement dated
September 6, 1990 and the Employee Retention Agreement dated June 26, 1991,
between Staples and you, which agreements are hereby expressly terminated
effective as of the date hereof. All prior negotiations are merged into this
agreement.
<PAGE> 7
If this letter sets forth our agreement on the subject matter hereof,
kindly sign and return to Staples the enclosed copy of this letter, which will
then constitute our agreement on this subject.
Sincerely,
STAPLES, INC.
By: /s/ Thomas G. Stemberg
Chairman and CEO
Agreed to this 17th day of May, 1995
/s/ Louis R. Pepi
<PAGE> 1
STAPLES, INC.
Severance Benefits Agreement
Mr. Ronald L. Sargent
75 North Mill Street
Hopkinton, MA 01748
Dear Mr. Sargent:
1. Officer Relationship. You are currently, or are about to become, an
officer of Staples, Inc. and/or one of its subsidiaries ("Staples"). In order to
induce you to remain or enter into its employ, Staples agrees that you shall
receive the severance benefits set forth in this letter agreement (the
"Agreement") in the event your employment with Staples is terminated under the
circumstances described below.
2. Term of the Agreement. The term of this Agreement (the "Term") shall
commence as of the date hereof and shall continue in effect until the later of
May 31, 2000 or 24 months after any Change of Control that may occur prior to
May 31, 2000. Notwithstanding the termination of your employment, any
obligations hereunder which by their terms continue (such as severance benefits)
shall survive such termination. This Agreement does not constitute a contract of
employment or impose on Staples any obligation to retain you as an employee, it
being acknowledged that your employment is "at will" and that both you and
Staples may terminate your employment at any time. Any termination of your
employment by Staples or by you during the Term shall be communicated by written
notice of termination ("Notice of Termination") to the other party hereto in
accordance with Section 7, which Notice of Termination shall specify the
provisions of this Agreement, if any, upon which such termination is based. The
"Date of Termination" shall mean the effective date of such termination as
specified in the Notice of Termination (provided that no such Notice of
Termination shall specify an effective date more than 180 days after the date of
such Notice of Termination).
3. Change in Employment Status. You shall be entitled to the benefits
provided in Section 4 if the following event (a "Qualified Termination") occurs:
your employment with Staples terminates for any reason, unless such termination
is (i) because of your death or Disability, (ii) by Staples for Cause, or (iii)
by you other than for Good Reason.
4. Compensation Upon Termination.
(a) In the event of a Qualified Termination, Staples will (i) pay to
you for a period of 12 months after the Date of Termination, in equal monthly
installments, severance payments at an annual rate equal to the sum of (i) your
annual base salary rate in effect immediately prior to the Qualified Termination
(or such higher rate as may
<PAGE> 2
have been in effect within the 90 days prior to the Notice of Termination) plus
(ii) an annualized amount equal to the average annual bonus paid to (or accrued
for) you by Staples during the three full fiscal years preceding such Qualified
Termination.
(b) In the event of a Qualified Termination, for a 12-month period
after the Date of Termination, Staples shall provide you with life, disability,
dental, accident and group health insurance benefits substantially similar to
those available to similarly situated officers. Notwithstanding the foregoing,
Staples shall not provide any such benefit if an equivalent benefit is actually
received by you during such period following your termination from another
party.
(c) Notwithstanding a Qualified Termination, the vesting schedule of
your then outstanding options to purchase Common Stock of Staples shall be
accelerated only to the extent specifically provided in the respective option
agreements.
(d) If such Qualified Termination is within two years after a Change
in Control, you shall be entitled to the benefits provided in paragraphs (a) and
(b) above for an additional 6 months beyond the time period specified in such
paragraphs.
(e) The amount of any monthly payments to be made to you under
Section 4(a) shall be reduced by 50% of any cash compensation earned by or
accrued for you as a result of services rendered by you for a third party during
the month immediately preceding the date of such payment; provided, however,
that (i) this paragraph (e) shall not apply in the event of a Qualified
Termination occurring within 24 months after a Change of Control, and (ii)
nothing in this Agreement shall obligate you to seek to mitigate the amount of
any payments provided for in this Agreement by seeking alternative employment or
otherwise.
(f) The benefits payable under this Section 4 shall be conditioned
on none of the following events occurring: (i) a determination by the CEO and
COO of Staples within 60 days after your termination that your conduct prior to
your termination would have warranted a discharge for "Cause" as specified in
Section 5(c), or (ii) the CEO and COO of Staples determines that your conduct
after termination of employment fails to comply with the terms of any
non-competition or confidentiality provision contained in any employment,
consulting, advisory, non-disclosure, non-competition or other similar agreement
between you and Staples.
5. Certain Definitions.
As used herein, the following terms shall have the following respective
meanings:
(a) Change in Control. A "Change in Control" shall occur or be deemed
to have occurred only if any of the following events occur:
<PAGE> 3
(i) any "person," as such term is used in Sections 13(d) and 14(d) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), (other
than Staples, any trustee or other fiduciary holding securities under an
employee benefit plan of Staples, or any corporation owned directly or
indirectly by the stockholders of Staples in substantially the same proportion
as their ownership of stock of Staples) is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of Staples representing 30% or more of the combined voting power of
Staples's then outstanding securities;
(ii) individuals who, as of the date hereof, constitute the Board (as
of the date hereof, the "Incumbent Board") cease for any reason to constitute at
least a majority of the Board, provided that any person becoming a director
subsequent to the date hereof whose election, or nomination for election by
Staples's stockholders, was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board (other than an election or
nomination of an individual whose initial assumption of office is in connection
with an actual or threatened election contest relating to the election of the
directors of Staples, as such terms are used in Rule 14a-11 of Regulation 14A
under the Exchange Act) shall be, for purposes of this Agreement, considered as
though such person were a member of the Incumbent Board; or
(iii) the stockholders of Staples approve a merger or consolidation of
Staples with any other corporation, other than (A) a merger or consolidation
which would result in the voting securities of Staples outstanding immediately
prior thereto continuing to represent (either by remaining outstanding or by
being converted into voting securities of the surviving entity) more than 75% of
the combined voting power of the voting securities of Staples or such surviving
entity outstanding immediately after such merger or consolidation or (B) a
merger or consolidation effected to implement a recapitalization of Staples (or
similar transaction) in which no "person" (as hereinabove defined) acquires more
than 50% of the combined voting power of Staples's then outstanding securities;
or (iv) the stockholders of Staples approve a plan of complete liquidation of
Staples or an agreement for the sale or disposition by Staples of all or
substantially all of Staples's assets.
(b) Disability. If, as a result of incapacity due to physical or mental
illness, you shall have been absent from the full-time performance of your
duties with Staples for six (6) consecutive months and, within thirty (30) days
after written Notice of Termination is given to you, you shall not have returned
to the full-time performance of your duties, your employment may be terminated
for "Disability."
(c) Cause. Termination by Staples of your employment for "Cause" shall
mean termination
(i) upon your willful and continued failure to substantially perform
your duties with Staples (other than any such failure resulting from your
incapacity due to physical or mental illness or any such actual or anticipated
failure after the issuance of a Notice of
<PAGE> 4
Termination by you for Good Reason as defined below), provided that a written
demand for substantial performance has been delivered to you by Staples
specifically identifying the manner in which Staples believes that you have not
substantially performed your duties and you have not cured such failure within
30 days after such demand, or
(ii) any breach by you of any of the terms of the Proprietary and
Confidential Information Agreement or Non-Competition Agreement (or other
similar agreement) between you and Staples, or
(iii) a violation by you of the Staples Business Conduct & Ethics
Policy or any attempt by you to secure any improper personal profit in
connection with the business of Staples, or
(iv) failure by you to devote your full working time to the affairs of
Staples (other than in connection with outside director positions existing as of
this date or as authorized by the CEO and COO of Staples), or
(v) the engaging by you in business other than the business of Staples
(other than in connection with outside director positions existing as of this
date or as authorized by the CEO and COO of Staples), or
(vi) by reason of your willful engaging in misconduct which is
demonstrably and materially injurious to Staples;
provided that in each case you shall have been given written notice by the CEO
and COO of Staples of Staples' intent to terminate your employment under this
Section 5(c) and an opportunity to present to the CEO and COO of Staples, in
person, any objections you may have to such termination. For purposes of this
section 5(c), no act or failure to act on your part shall be deemed "willful"
unless done or omitted to be done by you not in good faith and without
reasonable belief that your action or omission was in the best interest of
Staples;
The provisions of clauses (iv) and (v) above shall not be construed to
prevent you from investing or trading in non-conflicting investments for your
own account, including real estate, stocks, bonds, securities or other forms of
investment, other than more than 1% of securities issued by entities in
competition with Staples.
(d) Good Reason. For purposes of this Agreement, "Good Reason" shall
mean, without your written consent, the occurrence of any of the following
circumstances within the 90 days immediately prior to your giving Staples a
Notice of Termination:
(i) any significant diminution in your position, duties,
responsibilities, power, title or office;
(ii) any reduction in your annual base salary from time to time;
<PAGE> 5
(iii) any failure by Staples to allow your participation in a cash
bonus program in a manner substantially consistent with past practice in light
of Staples' financial performance and attainment of your specified goals, or the
substantial reduction of your participation in any other material compensation
plan (other than any stock option or stock award program which programs are
within the full discretion of the Compensation Committee) on a significantly
less favorable basis, both in terms of the amount of benefits provided and the
level of your participation relative to other participants; unless such
circumstances are fully corrected prior to the Date of Termination specified in
the Notice of Termination given in respect thereof;
(iv) the failure by Staples to continue to provide you with benefits
substantially similar to those enjoyed by you under any of Staples's life
insurance, medical, health and accident, or disability plans in which you were
participating, the taking of any action by Staples which would directly or
indirectly materially reduce any of such benefits, or the reduction in the
number of paid vacation days to which you are entitled; unless such
circumstances are fully corrected prior to the Date of Termination specified in
the Notice of Termination given in respect thereof;
(v) in the event of a Change in Control, any requirement by Staples or
of any person in control of Staples that the location at which you perform your
principal duties for Staples be changed to a new location outside a radius of 50
miles from your business location at the time of the Change in Control; or
(vi) the failure of Staples to obtain a satisfactory agreement from any
successor to assume and agree to perform the Agreement, as contemplated in
Section 6(a).
Notwithstanding the foregoing, any general reduction of salary or
reduction (or elimination) of other compensation, bonus and/or benefits for its
executive officers which are substantially comparable for all such officers (but
not occurring within 24 months after a Change of Control) shall not be
considered "Good Reason."
6. Successors; Binding Agreement.
(a) Staples will require any successor (whether direct or indirect,
by purchase, merger, consolidation or otherwise) to all or substantially all of
the business or assets of Staples expressly to assume and agree to perform this
Agreement to the same extent that Staples would be required to perform it if no
such succession had taken place. Failure of Staples to obtain an assumption of
this Agreement prior to the effectiveness of any succession shall be a breach of
this Agreement and shall entitle you to compensation from Staples in the same
amount and on the same terms as you would be entitled hereunder. As used in this
Agreement, "Staples" shall mean Staples as defined above and any successor to
its business or assets as aforesaid which assumes and agrees to perform this
Agreement by operation of law, or otherwise.
<PAGE> 6
(b) This Agreement shall inure to the benefit of and be enforceable
by your personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If you should die while
any amount would still be payable to you hereunder if you had continued to live,
all such amounts, unless otherwise provided herein, shall be paid in accordance
with the terms of this Agreement to your devisee, legatee or other designee or
if there is no such designee, to your estate.
7. Notice. For the purposes of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and shall be
duly given when delivered or when mailed by United States registered or
certified mail, return receipt requested, postage prepaid, addressed to the
Chairman of Staples, at 100 Pennsylvania Avenue, P.O. Box 9328, Framingham,
Massachusetts 01701-9328, and to you at the address shown above or to such other
address as either Staples or you may have furnished to the other in writing in
accordance herewith, except that notice of change of address shall be effective
only upon receipt.
8. Miscellaneous.
(a) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement, which shall remain in full force and effect.
(b) The validity, interpretation, construction and performance of
this Agreement shall be governed by the laws of the Commonwealth of
Massachusetts.
(c) No waiver by you at any time of any breach of, or compliance
with, any provision of this Agreement to be performed by Staples shall be deemed
a waiver of that or any other provision at any subsequent time.
(d) This Agreement may be executed in several counterparts, each of
which shall be deemed to be an original but all of which together will
constitute one and the same instrument.
(e) Any payments provided for hereunder shall be paid net of any
applicable withholding required under federal, state or local law.
(f) Staples shall pay to you all legal fees and expenses incurred by
you in seeking to obtain or enforce any right or benefit provided by this
Agreement.
(g) This Agreement is the exclusive agreement with respect to the
severance benefits payable to you in the event of a termination of your
employment, and this Agreement specifically replaces the letter agreement dated
April 20, 1994 and the Employee Retention Agreement dated April 27, 1994,
between Staples and you, which agreements are hereby expressly terminated
effective as of the date hereof. All prior negotiations are merged into this
agreement.
<PAGE> 7
If this letter sets forth our agreement on the subject matter hereof,
kindly sign and return to Staples the enclosed copy of this letter, which will
then constitute our agreement on this subject.
Sincerely,
STAPLES, INC.
By: /s/ Thomas G. Stemberg
Chairman and CEO
Agreed to this 18th day of May, 1995
/s/ Ronald L. Sargent
<PAGE> 1
STAPLES, INC.
Severance Benefits Agreement
Mr. Thomas G. Stemberg
70 Chestnut Street
Boston, MA 02108
Dear Mr. Stemberg:
1. Officer Relationship. You are currently, or are about to become, an
officer of Staples, Inc. and/or one of its subsidiaries ("Staples"). In order to
induce you to remain or enter into its employ, Staples agrees that you shall
receive the severance benefits set forth in this letter agreement (the
"Agreement") in the event your employment with Staples is terminated under the
circumstances described below.
2. Term of the Agreement. The term of this Agreement (the "Term") shall
commence as of the date hereof and shall continue in effect until the later of
May 31, 2000 or 24 months after any Change of Control that may occur prior to
May 31, 2000. Notwithstanding the termination of your employment, any
obligations hereunder which by their terms continue (such as severance benefits)
shall survive such termination. This Agreement does not constitute a contract of
employment or impose on Staples any obligation to retain you as an employee, it
being acknowledged that your employment is "at will" and that both you and
Staples may terminate your employment at any time. Any termination of your
employment by Staples or by you during the Term shall be communicated by written
notice of termination ("Notice of Termination") to the other party hereto in
accordance with Section 7, which Notice of Termination shall specify the
provisions of this Agreement, if any, upon which such termination is based. The
"Date of Termination" shall mean the effective date of such termination as
specified in the Notice of Termination (provided that no such Notice of
Termination shall specify an effective date more than 180 days after the date of
such Notice of Termination).
3. Change in Employment Status. You shall be entitled to the benefits
provided in Section 4 if the following event (a "Qualified Termination") occurs:
your employment with Staples terminates for any reason, unless such termination
is (i) because of your death or Disability, (ii) by Staples for Cause, or (iii)
by you other than for Good Reason.
4. Compensation Upon Termination.
(a) In the event of a Qualified Termination, Staples will (i) pay to
you for a period of 18 months after the Date of Termination, in equal monthly
installments, severance payments at an annual rate equal to the sum of (i) your
annual base salary rate in effect immediately prior to the Qualified Termination
(or such higher rate as may
<PAGE> 2
have been in effect within the 90 days prior to the Notice of Termination) plus
(ii) an annualized amount equal to the average annual bonus paid to (or accrued
for) you by Staples during the three full fiscal years preceding such Qualified
Termination.
(b) In the event of a Qualified Termination, for an 18-month period
after the Date of Termination, Staples shall provide you with life, disability,
dental, accident and group health insurance benefits substantially similar to
those available to similarly situated officers. Notwithstanding the foregoing,
Staples shall not provide any such benefit if an equivalent benefit is actually
received by you during such period following your termination from another
party.
(c) Notwithstanding a Qualified Termination, the vesting schedule of
your then outstanding options to purchase Common Stock of Staples shall be
accelerated only to the extent specifically provided in the respective option
agreements.
(d) If such Qualified Termination is within two years after a Change
in Control, you shall be entitled to the benefits provided in paragraphs (a) and
(b) above for an additional 6 months beyond the time period specified in such
paragraphs.
(e) The amount of any monthly payments to be made to you under
Section 4(a) shall be reduced by 50% of any cash compensation earned by or
accrued for you as a result of services rendered by you for a third party during
the month immediately preceding the date of such payment; provided, however,
that (i) this paragraph (e) shall not apply in the event of a Qualified
Termination occurring within 24 months after a Change of Control, and (ii)
nothing in this Agreement shall obligate you to seek to mitigate the amount of
any payments provided for in this Agreement by seeking alternative employment or
otherwise.
(f) The benefits payable under this Section 4 shall be conditioned
on none of the following events occurring: (i) a determination by the Board of
Directors of Staples within 60 days after your termination that your conduct
prior to your termination would have warranted a discharge for "Cause" as
specified in Section 5(c), or (ii) the Board of Directors of Staples determines
that your conduct after termination of employment fails to comply with the terms
of any non-competition or confidentiality provision contained in any employment,
consulting, advisory, non-disclosure, non-competition or other similar agreement
between you and Staples.
5. Certain Definitions.
As used herein, the following terms shall have the following respective
meanings:
(a) Change in Control. A "Change in Control" shall occur or be deemed
to have occurred only if any of the following events occur:
<PAGE> 3
(i) any "person," as such term is used in Sections 13(d) and 14(d) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), (other
than Staples, any trustee or other fiduciary holding securities under an
employee benefit plan of Staples, or any corporation owned directly or
indirectly by the stockholders of Staples in substantially the same proportion
as their ownership of stock of Staples) is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of Staples representing 30% or more of the combined voting power of
Staples's then outstanding securities;
(ii) individuals who, as of the date hereof, constitute the Board (as
of the date hereof, the "Incumbent Board") cease for any reason to constitute at
least a majority of the Board, provided that any person becoming a director
subsequent to the date hereof whose election, or nomination for election by
Staples's stockholders, was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board (other than an election or
nomination of an individual whose initial assumption of office is in connection
with an actual or threatened election contest relating to the election of the
directors of Staples, as such terms are used in Rule 14a-11 of Regulation 14A
under the Exchange Act) shall be, for purposes of this Agreement, considered as
though such person were a member of the Incumbent Board; or
(iii) the stockholders of Staples approve a merger or consolidation of
Staples with any other corporation, other than (A) a merger or consolidation
which would result in the voting securities of Staples outstanding immediately
prior thereto continuing to represent (either by remaining outstanding or by
being converted into voting securities of the surviving entity) more than 75% of
the combined voting power of the voting securities of Staples or such surviving
entity outstanding immediately after such merger or consolidation or (B) a
merger or consolidation effected to implement a recapitalization of Staples (or
similar transaction) in which no "person" (as hereinabove defined) acquires more
than 50% of the combined voting power of Staples's then outstanding securities;
or (iv) the stockholders of Staples approve a plan of complete liquidation of
Staples or an agreement for the sale or disposition by Staples of all or
substantially all of Staples's assets.
(b) Disability. If, as a result of incapacity due to physical or mental
illness, you shall have been absent from the full-time performance of your
duties with Staples for six (6) consecutive months and, within thirty (30) days
after written Notice of Termination is given to you, you shall not have returned
to the full-time performance of your duties, your employment may be terminated
for "Disability."
(c) Cause. Termination by Staples of your employment for "Cause" shall
mean termination
(i) upon your willful and continued failure to substantially perform
your duties with Staples (other than any such failure resulting from your
incapacity due to physical or mental illness or any such actual or anticipated
failure after the issuance of a Notice of
<PAGE> 4
Termination by you for Good Reason as defined below), provided that a written
demand for substantial performance has been delivered to you by Staples
specifically identifying the manner in which Staples believes that you have not
substantially performed your duties and you have not cured such failure within
30 days after such demand, or
(ii) any breach by you of any of the terms of the Proprietary and
Confidential Information Agreement or Non-Competition Agreement (or other
similar agreement) between you and Staples, or
(iii) a violation by you of the Staples Business Conduct & Ethics
Policy or any attempt by you to secure any improper personal profit in
connection with the business of Staples, or
(iv) failure by you to devote your full working time to the affairs of
Staples (other than in connection with outside director positions existing as of
this date or as authorized by the Board of Directors), or
(v) the engaging by you in business other than the business of Staples
(other than in connection with outside director positions existing as of this
date or as authorized by the Board of Directors), or
(vi) by reason of your willful engaging in misconduct which is
demonstrably and materially injurious to Staples;
provided that in each case you shall have been given written notice by the Board
of Directors of Staples of Staples' intent to terminate your employment under
this Section 5(c) and an opportunity to present to the Board of Directors, in
person, any objections you may have to such termination. For purposes of this
section 5(c), no act or failure to act on your part shall be deemed "willful"
unless done or omitted to be done by you not in good faith and without
reasonable belief that your action or omission was in the best interest of
Staples;
The provisions of clauses (iv) and (v) above shall not be construed to
prevent you from investing or trading in non-conflicting investments for your
own account, including real estate, stocks, bonds, securities or other forms of
investment, other than more than 1% of securities issued by entities in
competition with Staples.
(d) Good Reason. For purposes of this Agreement, "Good Reason" shall
mean, without your written consent, the occurrence of any of the following
circumstances within the 90 days immediately prior to your giving Staples a
Notice of Termination:
(i) any significant diminution in your position, duties,
responsibilities, power, title or office;
(ii) any reduction in your annual base salary from time to time;
<PAGE> 5
(iii) any failure by Staples to allow your participation in a cash
bonus program in a manner substantially consistent with past practice in light
of Staples' financial performance and attainment of your specified goals, or the
substantial reduction of your participation in any other material compensation
plan (other than any stock option or stock award program which programs are
within the full discretion of the Compensation Committee) on a significantly
less favorable basis, both in terms of the amount of benefits provided and the
level of your participation relative to other participants; unless such
circumstances are fully corrected prior to the Date of Termination specified in
the Notice of Termination given in respect thereof;
(iv) the failure by Staples to continue to provide you with benefits
substantially similar to those enjoyed by you under any of Staples's life
insurance, medical, health and accident, or disability plans in which you were
participating, the taking of any action by Staples which would directly or
indirectly materially reduce any of such benefits, or the reduction in the
number of paid vacation days to which you are entitled; unless such
circumstances are fully corrected prior to the Date of Termination specified in
the Notice of Termination given in respect thereof;
(v) in the event of a Change in Control, any requirement by Staples or
of any person in control of Staples that the location at which you perform your
principal duties for Staples be changed to a new location outside a radius of 50
miles from your business location at the time of the Change in Control; or
(vi) the failure of Staples to obtain a satisfactory agreement from any
successor to assume and agree to perform the Agreement, as contemplated in
Section 6(a).
Notwithstanding the foregoing, any general reduction of salary or reduction (or
elimination) of other compensation, bonus and/or benefits for its executive
officers which are substantially comparable for all such officers (but not
occurring within 24 months after a Change of Control) shall not be considered
"Good Reason."
6. Successors; Binding Agreement.
(a) Staples will require any successor (whether direct or indirect,
by purchase, merger, consolidation or otherwise) to all or substantially all of
the business or assets of Staples expressly to assume and agree to perform this
Agreement to the same extent that Staples would be required to perform it if no
such succession had taken place. Failure of Staples to obtain an assumption of
this Agreement prior to the effectiveness of any succession shall be a breach of
this Agreement and shall entitle you to compensation from Staples in the same
amount and on the same terms as you would be entitled hereunder. As used in this
Agreement, "Staples" shall mean Staples as defined above and any successor to
its business or assets as aforesaid which assumes and agrees to perform this
Agreement by operation of law, or otherwise.
<PAGE> 6
(b) This Agreement shall inure to the benefit of and be enforceable
by your personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If you should die while
any amount would still be payable to you hereunder if you had continued to live,
all such amounts, unless otherwise provided herein, shall be paid in accordance
with the terms of this Agreement to your devisee, legatee or other designee or
if there is no such designee, to your estate.
7. Notice. For the purposes of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and shall be
duly given when delivered or when mailed by United States registered or
certified mail, return receipt requested, postage prepaid, addressed to the
Chairman of the Compensation Committee of Staples, at 100 Pennsylvania Avenue,
P.O. Box 9328, Framingham, Massachusetts 01701-9328, and to you at the address
shown above or to such other address as either Staples or you may have furnished
to the other in writing in accordance herewith, except that notice of change of
address shall be effective only upon receipt.
8. Miscellaneous.
(a) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement, which shall remain in full force and effect.
(b) The validity, interpretation, construction and performance of
this Agreement shall be governed by the laws of the Commonwealth of
Massachusetts.
(c) No waiver by you at any time of any breach of, or compliance
with, any provision of this Agreement to be performed by Staples shall be deemed
a waiver of that or any other provision at any subsequent time.
(d) This Agreement may be executed in several counterparts, each of
which shall be deemed to be an original but all of which together will
constitute one and the same instrument.
(e) Any payments provided for hereunder shall be paid net of any
applicable withholding required under federal, state or local law.
(f) Staples shall pay to you all legal fees and expenses incurred by
you in seeking to obtain or enforce any right or benefit provided by this
Agreement.
(g) This Agreement is the exclusive agreement with respect to the
severance benefits payable to you in the event of a termination of your
employment, and this Agreement specifically replaces the letter agreement dated
May 9, 1988 and the Employee Retention Agreement dated June 30, 1991, between
Staples and you, which
<PAGE> 7
agreements are hereby expressly terminated effective as of the date hereof. All
prior negotiations are merged into this agreement.
If this letter sets forth our agreement on the subject matter hereof,
kindly sign and return to Staples the enclosed copy of this letter, which will
then constitute our agreement on this subject.
Sincerely,
STAPLES, INC.
By: /s/ Robert C. Nakasone
Chairman Compensation Committee
Agreed to this 7th day of June, 1995
/s/ Thomas G. Stemberg
<PAGE> 1
STAPLES, INC.
Severance Benefits Agreement
Mr. Evan Stern
280 Mountain Road
Englewood, NJ 07631
Dear Mr. Stern:
1. Officer Relationship. You are currently, or are about to become, an
officer of Staples, Inc. and/or one of its subsidiaries ("Staples"). In order to
induce you to remain or enter into its employ, Staples agrees that you shall
receive the severance benefits set forth in this letter agreement (the
"Agreement") in the event your employment with Staples is terminated under the
circumstances described below.
2. Term of the Agreement. The term of this Agreement (the "Term") shall
commence as of the date hereof and shall continue in effect until the later of
May 31, 2000 or 24 months after any Change of Control that may occur prior to
May 31, 2000. Notwithstanding the termination of your employment, any
obligations hereunder which by their terms continue (such as severance benefits)
shall survive such termination. This Agreement does not constitute a contract of
employment or impose on Staples any obligation to retain you as an employee, it
being acknowledged that your employment is "at will" and that both you and
Staples may terminate your employment at any time. Any termination of your
employment by Staples or by you during the Term shall be communicated by written
notice of termination ("Notice of Termination") to the other party hereto in
accordance with Section 7, which Notice of Termination shall specify the
provisions of this Agreement, if any, upon which such termination is based. The
"Date of Termination" shall mean the effective date of such termination as
specified in the Notice of Termination (provided that no such Notice of
Termination shall specify an effective date more than 180 days after the date of
such Notice of Termination).
3. Change in Employment Status. You shall be entitled to the benefits
provided in Section 4 if the following event (a "Qualified Termination") occurs:
your employment with Staples terminates for any reason, unless such termination
is (i) because of your death or Disability, (ii) by Staples for Cause, or (iii)
by you other than for Good Reason.
4. Compensation Upon Termination.
(a) In the event of a Qualified Termination, Staples will (i) pay to
you for a period of 12 months after the Date of Termination, in equal monthly
installments, severance payments at an annual rate equal to the sum of (i) your
annual base salary rate in effect immediately prior to the Qualified Termination
(or such higher rate as may
<PAGE> 2
have been in effect within the 90 days prior to the Notice of Termination) plus
(ii) an annualized amount equal to the average annual bonus paid to (or accrued
for) you by Staples during the three full fiscal years preceding such Qualified
Termination.
(b) In the event of a Qualified Termination, for a 12-month period
after the Date of Termination, Staples shall provide you with life, disability,
dental, accident and group health insurance benefits substantially similar to
those available to similarly situated officers. Notwithstanding the foregoing,
Staples shall not provide any such benefit if an equivalent benefit is actually
received by you during such period following your termination from another
party.
(c) Notwithstanding a Qualified Termination, the vesting schedule of
your then outstanding options to purchase Common Stock of Staples shall be
accelerated only to the extent specifically provided in the respective option
agreements; provided, however, that in the event of a termination of your
employment by Staples without Cause, the vesting of your initial stock options
granted on February 23, 1994 shall be accelerated such that such options shall
be immediately exercisable in full.
(d) If such Qualified Termination is within two years after a Change
in Control, you shall be entitled to the benefits provided in paragraphs (a) and
(b) above for an additional 6 months beyond the time period specified in such
paragraphs.
(e) [deleted]
(f) The benefits payable under this Section 4 shall be conditioned
on none of the following events occurring: (i) a determination by the CEO and
COO of Staples within 60 days after your termination that your conduct prior to
your termination would have warranted a discharge for "Cause" as specified in
Section 5(c), or (ii) the CEO and COO of Staples determines that your conduct
after termination of employment fails to comply with the terms of any
non-competition or confidentiality provision contained in any employment,
consulting, advisory, non-disclosure, non-competition or other similar agreement
between you and Staples.
5. Certain Definitions.
As used herein, the following terms shall have the following
respective meanings:
(a) Change in Control. A "Change in Control" shall occur or be deemed
to have occurred only if any of the following events occur:
(i) any "person," as such term is used in Sections 13(d) and 14(d) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), (other
than Staples, any trustee or other fiduciary holding securities under an
employee benefit plan of Staples, or any corporation owned directly or
indirectly by the stockholders of Staples in substantially the same proportion
as their ownership of stock of Staples) is or
<PAGE> 3
becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, of securities of Staples representing 30% or more
of the combined voting power of Staples's then outstanding securities;
(ii) individuals who, as of the date hereof, constitute the Board (as
of the date hereof, the "Incumbent Board") cease for any reason to constitute at
least a majority of the Board, provided that any person becoming a director
subsequent to the date hereof whose election, or nomination for election by
Staples's stockholders, was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board (other than an election or
nomination of an individual whose initial assumption of office is in connection
with an actual or threatened election contest relating to the election of the
directors of Staples, as such terms are used in Rule 14a-11 of Regulation 14A
under the Exchange Act) shall be, for purposes of this Agreement, considered as
though such person were a member of the Incumbent Board; or
(iii) the stockholders of Staples approve a merger or consolidation of
Staples with any other corporation, other than (A) a merger or consolidation
which would result in the voting securities of Staples outstanding immediately
prior thereto continuing to represent (either by remaining outstanding or by
being converted into voting securities of the surviving entity) more than 75% of
the combined voting power of the voting securities of Staples or such surviving
entity outstanding immediately after such merger or consolidation or (B) a
merger or consolidation effected to implement a recapitalization of Staples (or
similar transaction) in which no "person" (as hereinabove defined) acquires more
than 50% of the combined voting power of Staples's then outstanding securities;
or (iv) the stockholders of Staples approve a plan of complete liquidation of
Staples or an agreement for the sale or disposition by Staples of all or
substantially all of Staples's assets.
(b) Disability. If, as a result of incapacity due to physical or mental
illness, you shall have been absent from the full-time performance of your
duties with Staples for six (6) consecutive months and, within thirty (30) days
after written Notice of Termination is given to you, you shall not have returned
to the full-time performance of your duties, your employment may be terminated
for "Disability."
(c) Cause. Termination by Staples of your employment for "Cause" shall
mean termination
(i) upon your willful and continued failure to substantially perform
your duties with Staples (other than any such failure resulting from your
incapacity due to physical or mental illness or any such actual or anticipated
failure after the issuance of a Notice of Termination by you for Good Reason as
defined below), provided that a written demand for substantial performance has
been delivered to you by Staples specifically identifying the manner in which
Staples believes that you have not substantially performed your duties and you
have not cured such failure within 30 days after such demand, or
<PAGE> 4
(ii) any breach by you of any of the terms of the Proprietary and
Confidential Information Agreement or Non-Competition Agreement (or other
similar agreement) between you and Staples, or
(iii) a violation by you of the Staples Business Conduct & Ethics
Policy or any attempt by you to secure any improper personal profit in
connection with the business of Staples, or
(iv) failure by you to devote your full working time to the affairs of
Staples (other than in connection with outside director positions existing as of
this date or as authorized by the CEO and COO of Staples), or
(v) the engaging by you in business other than the business of Staples
(other than in connection with outside director positions existing as of this
date or as authorized by the CEO and COO of Staples), or
(vi) by reason of your willful engaging in misconduct which is
demonstrably and materially injurious to Staples;
provided that in each case you shall have been given written notice by the CEO
and COO of Staples of Staples' intent to terminate your employment under this
Section 5(c) and an opportunity to present to the CEO and COO of Staples, in
person, any objections you may have to such termination. For purposes of this
section 5(c), no act or failure to act on your part shall be deemed "willful"
unless done or omitted to be done by you not in good faith and without
reasonable belief that your action or omission was in the best interest of
Staples;
The provisions of clauses (iv) and (v) above shall not be construed to
prevent you from investing or trading in non-conflicting investments for your
own account, including real estate, stocks, bonds, securities or other forms of
investment, other than more than 1% of securities issued by entities in
competition with Staples.
(d) Good Reason. For purposes of this Agreement, "Good Reason" shall
mean, without your written consent, the occurrence of any of the following
circumstances within the 90 days immediately prior to your giving Staples a
Notice of Termination:
(i) any significant diminution in your position, duties,
responsibilities, power, title or office;
(ii) any reduction in your annual base salary from time to time;
(iii) any failure by Staples to allow your participation in a cash
bonus program in a manner substantially consistent with past practice in light
of Staples' financial performance and attainment of your specified goals, or the
substantial reduction of your participation in any other material compensation
plan (other than any stock option or
<PAGE> 5
stock award program which programs are within the full discretion of the
Compensation Committee) on a significantly less favorable basis, both in terms
of the amount of benefits provided and the level of your participation relative
to other participants; unless such circumstances are fully corrected prior to
the Date of Termination specified in the Notice of Termination given in respect
thereof;
(iv) the failure by Staples to continue to provide you with benefits
substantially similar to those enjoyed by you under any of Staples's life
insurance, medical, health and accident, or disability plans in which you were
participating, the taking of any action by Staples which would directly or
indirectly materially reduce any of such benefits, or the reduction in the
number of paid vacation days to which you are entitled; unless such
circumstances are fully corrected prior to the Date of Termination specified in
the Notice of Termination given in respect thereof;
(v) any requirement by Staples that the location at which you perform
your principal duties for Staples be changed to a new location outside of
Northern New Jersey or a new location that is further than approximately a
20-minute commute from Englewood, New Jersey; or
(vi) the failure of Staples to obtain a satisfactory agreement from any
successor to assume and agree to perform the Agreement, as contemplated in
Section 6(a).
Notwithstanding the foregoing, any general reduction of salary or reduction (or
elimination) of other compensation, bonus and/or benefits for its executive
officers which are substantially comparable for all such officers (but not
occurring within 24 months after a Change of Control) shall not be considered
"Good Reason."
6. Successors; Binding Agreement.
(a) Staples will require any successor (whether direct or indirect,
by purchase, merger, consolidation or otherwise) to all or substantially all of
the business or assets of Staples expressly to assume and agree to perform this
Agreement to the same extent that Staples would be required to perform it if no
such succession had taken place. Failure of Staples to obtain an assumption of
this Agreement prior to the effectiveness of any succession shall be a breach of
this Agreement and shall entitle you to compensation from Staples in the same
amount and on the same terms as you would be entitled hereunder. As used in this
Agreement, "Staples" shall mean Staples as defined above and any successor to
its business or assets as aforesaid which assumes and agrees to perform this
Agreement by operation of law, or otherwise.
(b) This Agreement shall inure to the benefit of and be enforceable
by your personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If you should die while
any amount would still be payable to you hereunder if you had continued to live,
all such amounts, unless
<PAGE> 6
otherwise provided herein, shall be paid in accordance with the terms of this
Agreement to your devisee, legatee or other designee or if there is no such
designee, to your estate.
7. Notice. For the purposes of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and shall be
duly given when delivered or when mailed by United States registered or
certified mail, return receipt requested, postage prepaid, addressed to the
Chairman of Staples, at 100 Pennsylvania Avenue, P.O. Box 9328, Framingham,
Massachusetts 01701-9328, and to you at the address shown above or to such other
address as either Staples or you may have furnished to the other in writing in
accordance herewith, except that notice of change of address shall be effective
only upon receipt.
8. Miscellaneous.
(a) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement, which shall remain in full force and effect.
(b) The validity, interpretation, construction and performance of
this Agreement shall be governed by the laws of the Commonwealth of
Massachusetts.
(c) No waiver by you at any time of any breach of, or compliance
with, any provision of this Agreement to be performed by Staples shall be deemed
a waiver of that or any other provision at any subsequent time.
(d) This Agreement may be executed in several counterparts, each of
which shall be deemed to be an original but all of which together will
constitute one and the same instrument.
(e) Any payments provided for hereunder shall be paid net of any
applicable withholding required under federal, state or local law.
(f) Staples shall pay to you all legal fees and expenses incurred by
you in seeking to obtain or enforce any right or benefit provided by this
Agreement.
(g) This Agreement is the exclusive agreement with respect to the
severance benefits payable to you in the event of a termination of your
employment, and this Agreement specifically replaces the letter agreement dated
February 23, 1994 and the Employee Retention Agreement dated February 23, 1994,
between Staples and you, which agreements are hereby expressly terminated
effective as of the date hereof. All prior negotiations are merged into this
agreement.
If this letter sets forth our agreement on the subject matter
hereof, kindly sign and return to Staples the enclosed copy of this letter,
which will then constitute our agreement on this subject.
<PAGE> 7
Sincerely,
STAPLES, INC.
By: /s/ Thomas G. Stemberg
Chairman and CEO
Agreed to this 31st day of May, 1995
/s/ Evan Stern
<PAGE> 1
STAPLES, INC.
Severance Benefits Agreement
Mr. Joseph S. Vassalluzzo
37 Constitution Drive
Southborough, MA 01772
Dear Mr. Vassalluzzo:
1. Officer Relationship. You are currently, or are about to become, an
officer of Staples, Inc. and/or one of its subsidiaries ("Staples"). In order to
induce you to remain or enter into its employ, Staples agrees that you shall
receive the severance benefits set forth in this letter agreement (the
"Agreement") in the event your employment with Staples is terminated under the
circumstances described below.
2. Term of the Agreement. The term of this Agreement (the "Term") shall
commence as of the date hereof and shall continue in effect until the later of
May 31, 2000 or 24 months after any Change of Control that may occur prior to
May 31, 2000. Notwithstanding the termination of your employment, any
obligations hereunder which by their terms continue (such as severance benefits)
shall survive such termination. This Agreement does not constitute a contract of
employment or impose on Staples any obligation to retain you as an employee, it
being acknowledged that your employment is "at will" and that both you and
Staples may terminate your employment at any time. Any termination of your
employment by Staples or by you during the Term shall be communicated by written
notice of termination ("Notice of Termination") to the other party hereto in
accordance with Section 7, which Notice of Termination shall specify the
provisions of this Agreement, if any, upon which such termination is based. The
"Date of Termination" shall mean the effective date of such termination as
specified in the Notice of Termination (provided that no such Notice of
Termination shall specify an effective date more than 180 days after the date of
such Notice of Termination).
3. Change in Employment Status. You shall be entitled to the benefits
provided in Section 4 if the following event (a "Qualified Termination") occurs:
your employment with Staples terminates for any reason, unless such termination
is (i) because of your death or Disability, (ii) by Staples for Cause, or (iii)
by you other than for Good Reason.
4. Compensation Upon Termination.
(a) In the event of a Qualified Termination, Staples will (i) pay to
you for a period of 12 months after the Date of Termination, in equal monthly
installments, severance payments at an annual rate equal to the sum of (i) your
annual base salary rate in effect immediately prior to the Qualified Termination
(or such higher rate as may
<PAGE> 2
have been in effect within the 90 days prior to the Notice of Termination) plus
(ii) an annualized amount equal to the average annual bonus paid to (or accrued
for) you by Staples during the three full fiscal years preceding such Qualified
Termination.
(b) In the event of a Qualified Termination, for a 12-month period
after the Date of Termination, Staples shall provide you with life, disability,
dental, accident and group health insurance benefits substantially similar to
those available to similarly situated officers. Notwithstanding the foregoing,
Staples shall not provide any such benefit if an equivalent benefit is actually
received by you during such period following your termination from another
party.
(c) Notwithstanding a Qualified Termination, the vesting schedule of
your then outstanding options to purchase Common Stock of Staples shall be
accelerated only to the extent specifically provided in the respective option
agreements.
(d) If such Qualified Termination is within two years after a Change
in Control, you shall be entitled to the benefits provided in paragraphs (a) and
(b) above for an additional 6 months beyond the time period specified in such
paragraphs.
(e) The amount of any monthly payments to be made to you under
Section 4(a) shall be reduced by 50% of any cash compensation earned by or
accrued for you as a result of services rendered by you for a third party during
the month immediately preceding the date of such payment; provided, however,
that (i) this paragraph (e) shall not apply in the event of a Qualified
Termination occurring within 24 months after a Change of Control, and (ii)
nothing in this Agreement shall obligate you to seek to mitigate the amount of
any payments provided for in this Agreement by seeking alternative employment or
otherwise.
(f) The benefits payable under this Section 4 shall be conditioned
on none of the following events occurring: (i) a determination by the CEO and
COO of Staples within 60 days after your termination that your conduct prior to
your termination would have warranted a discharge for "Cause" as specified in
Section 5(c), or (ii) the CEO and COO of Staples determines that your conduct
after termination of employment fails to comply with the terms of any
non-competition or confidentiality provision contained in any employment,
consulting, advisory, non-disclosure, non-competition or other similar agreement
between you and Staples.
5. Certain Definitions.
As used herein, the following terms shall have the following respective
meanings:
(a) Change in Control. A "Change in Control" shall occur or be deemed
to have occurred only if any of the following events occur:
<PAGE> 3
(i) any "person," as such term is used in Sections 13(d) and 14(d) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), (other
than Staples, any trustee or other fiduciary holding securities under an
employee benefit plan of Staples, or any corporation owned directly or
indirectly by the stockholders of Staples in substantially the same proportion
as their ownership of stock of Staples) is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of Staples representing 30% or more of the combined voting power of
Staples's then outstanding securities;
(ii) individuals who, as of the date hereof, constitute the Board (as
of the date hereof, the "Incumbent Board") cease for any reason to constitute at
least a majority of the Board, provided that any person becoming a director
subsequent to the date hereof whose election, or nomination for election by
Staples's stockholders, was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board (other than an election or
nomination of an individual whose initial assumption of office is in connection
with an actual or threatened election contest relating to the election of the
directors of Staples, as such terms are used in Rule 14a-11 of Regulation 14A
under the Exchange Act) shall be, for purposes of this Agreement, considered as
though such person were a member of the Incumbent Board; or
(iii) the stockholders of Staples approve a merger or consolidation of
Staples with any other corporation, other than (A) a merger or consolidation
which would result in the voting securities of Staples outstanding immediately
prior thereto continuing to represent (either by remaining outstanding or by
being converted into voting securities of the surviving entity) more than 75% of
the combined voting power of the voting securities of Staples or such surviving
entity outstanding immediately after such merger or consolidation or (B) a
merger or consolidation effected to implement a recapitalization of Staples (or
similar transaction) in which no "person" (as hereinabove defined) acquires more
than 50% of the combined voting power of Staples's then outstanding securities;
or (iv) the stockholders of Staples approve a plan of complete liquidation of
Staples or an agreement for the sale or disposition by Staples of all or
substantially all of Staples's assets.
(b) Disability. If, as a result of incapacity due to physical or mental
illness, you shall have been absent from the full-time performance of your
duties with Staples for six (6) consecutive months and, within thirty (30) days
after written Notice of Termination is given to you, you shall not have returned
to the full-time performance of your duties, your employment may be terminated
for "Disability."
(c) Cause. Termination by Staples of your employment for "Cause" shall
mean termination
(i) upon your willful and continued failure to substantially perform
your duties with Staples (other than any such failure resulting from your
incapacity due to physical or mental illness or any such actual or anticipated
failure after the issuance of a Notice of
<PAGE> 4
Termination by you for Good Reason as defined below), provided that a written
demand for substantial performance has been delivered to you by Staples
specifically identifying the manner in which Staples believes that you have not
substantially performed your duties and you have not cured such failure within
30 days after such demand, or
(ii) any breach by you of any of the terms of the Proprietary and
Confidential Information Agreement or Non-Competition Agreement (or other
similar agreement) between you and Staples, or
(iii) a violation by you of the Staples Business Conduct & Ethics
Policy or any attempt by you to secure any improper personal profit in
connection with the business of Staples, or
(iv) failure by you to devote your full working time to the affairs of
Staples (other than in connection with outside director positions existing as of
this date or as authorized by the CEO and COO of Staples), or
(v) the engaging by you in business other than the business of Staples
(other than in connection with outside director positions existing as of this
date or as authorized by the CEO and COO of Staples), or
(vi) by reason of your willful engaging in misconduct which is
demonstrably and materially injurious to Staples;
provided that in each case you shall have been given written notice by the CEO
and COO of Staples of Staples' intent to terminate your employment under this
Section 5(c) and an opportunity to present to the CEO and COO of Staples, in
person, any objections you may have to such termination. For purposes of this
section 5(c), no act or failure to act on your part shall be deemed "willful"
unless done or omitted to be done by you not in good faith and without
reasonable belief that your action or omission was in the best interest of
Staples;
The provisions of clauses (iv) and (v) above shall not be construed to
prevent you from investing or trading in non-conflicting investments for your
own account, including real estate, stocks, bonds, securities or other forms of
investment, other than more than 1% of securities issued by entities in
competition with Staples.
(d) Good Reason. For purposes of this Agreement, "Good Reason" shall
mean, without your written consent, the occurrence of any of the following
circumstances within the 90 days immediately prior to your giving Staples a
Notice of Termination:
(i) any significant diminution in your position, duties,
responsibilities, power, title or office;
(ii) any reduction in your annual base salary from time to time;
<PAGE> 5
(iii) any failure by Staples to allow your participation in a cash
bonus program in a manner substantially consistent with past practice in light
of Staples' financial performance and attainment of your specified goals, or the
substantial reduction of your participation in any other material compensation
plan (other than any stock option or stock award program which programs are
within the full discretion of the Compensation Committee) on a significantly
less favorable basis, both in terms of the amount of benefits provided and the
level of your participation relative to other participants; unless such
circumstances are fully corrected prior to the Date of Termination specified in
the Notice of Termination given in respect thereof;
(iv) the failure by Staples to continue to provide you with benefits
substantially similar to those enjoyed by you under any of Staples's life
insurance, medical, health and accident, or disability plans in which you were
participating, the taking of any action by Staples which would directly or
indirectly materially reduce any of such benefits, or the reduction in the
number of paid vacation days to which you are entitled; unless such
circumstances are fully corrected prior to the Date of Termination specified in
the Notice of Termination given in respect thereof;
(v) in the event of a Change in Control, any requirement by Staples or
of any person in control of Staples that the location at which you perform your
principal duties for Staples be changed to a new location outside a radius of 50
miles from your business location at the time of the Change in Control; or
(vi) the failure of Staples to obtain a satisfactory agreement from any
successor to assume and agree to perform the Agreement, as contemplated in
Section 6(a).
Notwithstanding the foregoing, any general reduction of salary or reduction (or
elimination) of other compensation, bonus and/or benefits for its executive
officers which are substantially comparable for all such officers (but not
occurring within 24 months after a Change of Control) shall not be considered
"Good Reason."
6. Successors; Binding Agreement.
(a) Staples will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business or assets of Staples expressly to assume and
agree to perform this Agreement to the same extent that Staples would be
required to perform it if no such succession had taken place. Failure of Staples
to obtain an assumption of this Agreement prior to the effectiveness of any
succession shall be a breach of this Agreement and shall entitle you to
compensation from Staples in the same amount and on the same terms as you would
be entitled hereunder. As used in this Agreement, "Staples" shall mean Staples
as defined above and any successor to its business or assets as aforesaid which
assumes and agrees to perform this Agreement by operation of law, or otherwise.
<PAGE> 6
(b) This Agreement shall inure to the benefit of and be enforceable
by your personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If you should die while
any amount would still be payable to you hereunder if you had continued to live,
all such amounts, unless otherwise provided herein, shall be paid in accordance
with the terms of this Agreement to your devisee, legatee or other designee or
if there is no such designee, to your estate.
7. Notice. For the purposes of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and shall be
duly given when delivered or when mailed by United States registered or
certified mail, return receipt requested, postage prepaid, addressed to the
Chairman of Staples, at 100 Pennsylvania Avenue, P.O. Box 9328, Framingham,
Massachusetts 01701-9328, and to you at the address shown above or to such other
address as either Staples or you may have furnished to the other in writing in
accordance herewith, except that notice of change of address shall be effective
only upon receipt.
8. Miscellaneous.
(a) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement, which shall remain in full force and effect.
(b) The validity, interpretation, construction and performance of
this Agreement shall be governed by the laws of the Commonwealth of
Massachusetts.
(c) No waiver by you at any time of any breach of, or compliance
with, any provision of this Agreement to be performed by Staples shall be deemed
a waiver of that or any other provision at any subsequent time.
(d) This Agreement may be executed in several counterparts, each of
which shall be deemed to be an original but all of which together will
constitute one and the same instrument.
(e) Any payments provided for hereunder shall be paid net of any
applicable withholding required under federal, state or local law.
(f) Staples shall pay to you all legal fees and expenses incurred by
you in seeking to obtain or enforce any right or benefit provided by this
Agreement.
(g) This Agreement is the exclusive agreement with respect to the
severance benefits payable to you in the event of a termination of your
employment, and this Agreement specifically replaces the letter agreement dated
August 14, 1989 and the Employee Retention Agreement dated June 30, 1991,
between Staples and you, which agreements are hereby expressly terminated
effective as of the date hereof. All prior negotiations are merged into this
agreement.
<PAGE> 7
If this letter sets forth our agreement on the subject matter hereof,
kindly sign and return to Staples the enclosed copy of this letter, which will
then constitute our agreement on this subject.
Sincerely,
STAPLES, INC.
By: /s/ Thomas G. Stemberg
Chairman and CEO
Agreed to this 31st day of May, 1995
/s/ Joseph S. Vassalluzzo
<PAGE> 1
STAPLES, INC.
Severance Benefits Agreement
Mr. John B. Wilson
135 Benvenue Street
Wellesely, MA 02181
Dear Mr. Wilson:
1. Officer Relationship. You are currently, or are about to become, an
officer of Staples, Inc. and/or one of its subsidiaries ("Staples"). In order to
induce you to remain or enter into its employ, Staples agrees that you shall
receive the severance benefits set forth in this letter agreement (the
"Agreement") in the event your employment with Staples is terminated under the
circumstances described below.
2. Term of the Agreement. The term of this Agreement (the "Term") shall
commence as of the date hereof and shall continue in effect until the later of
May 31, 2000 or 24 months after any Change of Control that may occur prior to
May 31, 2000. Notwithstanding the termination of your employment, any
obligations hereunder which by their terms continue (such as severance benefits)
shall survive such termination. This Agreement does not constitute a contract of
employment or impose on Staples any obligation to retain you as an employee, it
being acknowledged that your employment is "at will" and that both you and
Staples may terminate your employment at any time. Any termination of your
employment by Staples or by you during the Term shall be communicated by written
notice of termination ("Notice of Termination") to the other party hereto in
accordance with Section 7, which Notice of Termination shall specify the
provisions of this Agreement, if any, upon which such termination is based. The
"Date of Termination" shall mean the effective date of such termination as
specified in the Notice of Termination (provided that no such Notice of
Termination shall specify an effective date more than 180 days after the date of
such Notice of Termination).
3. Change in Employment Status. You shall be entitled to the benefits
provided in Section 4 if the following event (a "Qualified Termination") occurs:
your employment with Staples terminates for any reason, unless such termination
is (i) because of your death or Disability, (ii) by Staples for Cause, or (iii)
by you other than for Good Reason.
4. Compensation Upon Termination.
(a) In the event of a Qualified Termination, Staples will (i) pay to
you for a period of 12 months after the Date of Termination, in equal monthly
installments, severance payments at an annual rate equal to the sum of (i) your
annual base salary rate in effect immediately prior to the Qualified Termination
(or such higher rate as may
<PAGE> 2
have been in effect within the 90 days prior to the Notice of Termination) plus
(ii) an annualized amount equal to the average annual bonus paid to (or accrued
for) you by Staples during the three full fiscal years preceding such Qualified
Termination.
(b) In the event of a Qualified Termination, for a 12-month period
after the Date of Termination, Staples shall provide you with life, disability,
dental, accident and group health insurance benefits substantially similar to
those available to similarly situated officers. Notwithstanding the foregoing,
Staples shall not provide any such benefit if an equivalent benefit is actually
received by you during such period following your termination from another
party.
(c) Notwithstanding a Qualified Termination, the vesting schedule of
your then outstanding options to purchase Common Stock of Staples shall be
accelerated only to the extent specifically provided in the respective option
agreements.
(d) If such Qualified Termination is within two years after a Change
in Control, you shall be entitled to the benefits provided in paragraphs (a) and
(b) above for an additional 6 months beyond the time period specified in such
paragraphs.
(e) The amount of any monthly payments to be made to you under
Section 4(a) shall be reduced by 50% of any cash compensation earned by or
accrued for you as a result of services rendered by you for a third party during
the month immediately preceding the date of such payment; provided, however,
that (i) this paragraph (e) shall not apply in the event of a Qualified
Termination occurring within 24 months after a Change of Control, and (ii)
nothing in this Agreement shall obligate you to seek to mitigate the amount of
any payments provided for in this Agreement by seeking alternative employment or
otherwise.
(f) The benefits payable under this Section 4 shall be conditioned
on none of the following events occurring: (i) a determination by the CEO and
COO of Staples within 60 days after your termination that your conduct prior to
your termination would have warranted a discharge for "Cause" as specified in
Section 5(c), or (ii) the CEO and COO of Staples determines that your conduct
after termination of employment fails to comply with the terms of any
non-competition or confidentiality provision contained in any employment,
consulting, advisory, non-disclosure, non-competition or other similar agreement
between you and Staples.
5. Certain Definitions.
As used herein, the following terms shall have the following respective
meanings:
(a) Change in Control. A "Change in Control" shall occur or be deemed
to have occurred only if any of the following events occur:
<PAGE> 3
(i) any "person," as such term is used in Sections 13(d) and 14(d) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), (other
than Staples, any trustee or other fiduciary holding securities under an
employee benefit plan of Staples, or any corporation owned directly or
indirectly by the stockholders of Staples in substantially the same proportion
as their ownership of stock of Staples) is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of Staples representing 30% or more of the combined voting power of
Staples's then outstanding securities;
(ii) individuals who, as of the date hereof, constitute the Board (as
of the date hereof, the "Incumbent Board") cease for any reason to constitute at
least a majority of the Board, provided that any person becoming a director
subsequent to the date hereof whose election, or nomination for election by
Staples's stockholders, was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board (other than an election or
nomination of an individual whose initial assumption of office is in connection
with an actual or threatened election contest relating to the election of the
directors of Staples, as such terms are used in Rule 14a-11 of Regulation 14A
under the Exchange Act) shall be, for purposes of this Agreement, considered as
though such person were a member of the Incumbent Board; or
(iii) the stockholders of Staples approve a merger or consolidation of
Staples with any other corporation, other than (A) a merger or consolidation
which would result in the voting securities of Staples outstanding immediately
prior thereto continuing to represent (either by remaining outstanding or by
being converted into voting securities of the surviving entity) more than 75% of
the combined voting power of the voting securities of Staples or such surviving
entity outstanding immediately after such merger or consolidation or (B) a
merger or consolidation effected to implement a recapitalization of Staples (or
similar transaction) in which no "person" (as hereinabove defined) acquires more
than 50% of the combined voting power of Staples's then outstanding securities;
or (iv) the stockholders of Staples approve a plan of complete liquidation of
Staples or an agreement for the sale or disposition by Staples of all or
substantially all of Staples's assets.
(b) Disability. If, as a result of incapacity due to physical or mental
illness, you shall have been absent from the full-time performance of your
duties with Staples for six (6) consecutive months and, within thirty (30) days
after written Notice of Termination is given to you, you shall not have returned
to the full-time performance of your duties, your employment may be terminated
for "Disability."
(c) Cause. Termination by Staples of your employment for "Cause" shall
mean termination
(i) upon your willful and continued failure to substantially perform
your duties with Staples (other than any such failure resulting from your
incapacity due to physical or mental illness or any such actual or anticipated
failure after the issuance of a Notice of
<PAGE> 4
Termination by you for Good Reason as defined below), provided that a written
demand for substantial performance has been delivered to you by Staples
specifically identifying the manner in which Staples believes that you have not
substantially performed your duties and you have not cured such failure within
30 days after such demand, or
(ii) any breach by you of any of the terms of the Proprietary and
Confidential Information Agreement or Non-Competition Agreement (or other
similar agreement) between you and Staples, or
(iii) a violation by you of the Staples Business Conduct & Ethics
Policy or any attempt by you to secure any improper personal profit in
connection with the business of Staples, or
(iv) failure by you to devote your full working time to the affairs of
Staples (other than in connection with outside director positions existing as of
this date or as authorized by the CEO and COO of Staples), or
(v) the engaging by you in business other than the business of Staples
(other than in connection with outside director positions existing as of this
date or as authorized by the CEO and COO of Staples), or
(vi) by reason of your willful engaging in misconduct which is
demonstrably and materially injurious to Staples;
provided that in each case you shall have been given written notice by the CEO
and COO of Staples of Staples' intent to terminate your employment under this
Section 5(c) and an opportunity to present to the CEO and COO of Staples, in
person, any objections you may have to such termination. For purposes of this
section 5(c), no act or failure to act on your part shall be deemed "willful"
unless done or omitted to be done by you not in good faith and without
reasonable belief that your action or omission was in the best interest of
Staples;
The provisions of clauses (iv) and (v) above shall not be construed to
prevent you from investing or trading in non-conflicting investments for your
own account, including real estate, stocks, bonds, securities or other forms of
investment, other than more than 1% of securities issued by entities in
competition with Staples.
(d) Good Reason. For purposes of this Agreement, "Good Reason" shall
mean, without your written consent, the occurrence of any of the following
circumstances within the 90 days immediately prior to your giving Staples a
Notice of Termination:
(i) any significant diminution in your position, duties,
responsibilities, power, title or office;
(ii) any reduction in your annual base salary from time to time;
<PAGE> 5
(iii) any failure by Staples to allow your participation in a cash
bonus program in a manner substantially consistent with past practice in light
of Staples' financial performance and attainment of your specified goals, or the
substantial reduction of your participation in any other material compensation
plan (other than any stock option or stock award program which programs are
within the full discretion of the Compensation Committee) on a significantly
less favorable basis, both in terms of the amount of benefits provided and the
level of your participation relative to other participants; unless such
circumstances are fully corrected prior to the Date of Termination specified in
the Notice of Termination given in respect thereof;
(iv) the failure by Staples to continue to provide you with benefits
substantially similar to those enjoyed by you under any of Staples's life
insurance, medical, health and accident, or disability plans in which you were
participating, the taking of any action by Staples which would directly or
indirectly materially reduce any of such benefits, or the reduction in the
number of paid vacation days to which you are entitled; unless such
circumstances are fully corrected prior to the Date of Termination specified in
the Notice of Termination given in respect thereof;
(v) in the event of a Change in Control, any requirement by Staples or
of any person in control of Staples that the location at which you perform your
principal duties for Staples be changed to a new location outside a radius of 50
miles from your business location at the time of the Change in Control; or
(vi) the failure of Staples to obtain a satisfactory agreement from any
successor to assume and agree to perform the Agreement, as contemplated in
Section 6(a).
Notwithstanding the foregoing, any general reduction of salary or reduction (or
elimination) of other compensation, bonus and/or benefits for its executive
officers which are substantially comparable for all such officers (but not
occurring within 24 months after a Change of Control) shall not be considered
"Good Reason."
6. Successors; Binding Agreement.
(a) Staples will require any successor (whether direct or indirect,
by purchase, merger, consolidation or otherwise) to all or substantially all of
the business or assets of Staples expressly to assume and agree to perform this
Agreement to the same extent that Staples would be required to perform it if no
such succession had taken place. Failure of Staples to obtain an assumption of
this Agreement prior to the effectiveness of any succession shall be a breach of
this Agreement and shall entitle you to compensation from Staples in the same
amount and on the same terms as you would be entitled hereunder. As used in this
Agreement, "Staples" shall mean Staples as defined above and any successor to
its business or assets as aforesaid which assumes and agrees to perform this
Agreement by operation of law, or otherwise.
<PAGE> 6
(b) This Agreement shall inure to the benefit of and be enforceable
by your personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If you should die while
any amount would still be payable to you hereunder if you had continued to live,
all such amounts, unless otherwise provided herein, shall be paid in accordance
with the terms of this Agreement to your devisee, legatee or other designee or
if there is no such designee, to your estate.
7. Notice. For the purposes of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and shall be
duly given when delivered or when mailed by United States registered or
certified mail, return receipt requested, postage prepaid, addressed to the
Chairman of Staples, at 100 Pennsylvania Avenue, P.O. Box 9328, Framingham,
Massachusetts 01701-9328, and to you at the address shown above or to such other
address as either Staples or you may have furnished to the other in writing in
accordance herewith, except that notice of change of address shall be effective
only upon receipt.
8. Miscellaneous.
(a) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement, which shall remain in full force and effect.
(b) The validity, interpretation, construction and performance of
this Agreement shall be governed by the laws of the Commonwealth of
Massachusetts.
(c) No waiver by you at any time of any breach of, or compliance
with, any provision of this Agreement to be performed by Staples shall be deemed
a waiver of that or any other provision at any subsequent time.
(d) This Agreement may be executed in several counterparts, each of
which shall be deemed to be an original but all of which together will
constitute one and the same instrument.
(e) Any payments provided for hereunder shall be paid net of any
applicable withholding required under federal, state or local law.
(f) Staples shall pay to you all legal fees and expenses incurred by
you in seeking to obtain or enforce any right or benefit provided by this
Agreement.
(g) This Agreement is the exclusive agreement with respect to the
severance benefits payable to you in the event of a termination of your
employment, and this Agreement specifically replaces the letter agreement dated
October 7, 1992 and the Employee Retention Agreement dated December 1, 1992,
between Staples and you, which agreements are hereby expressly terminated
effective as of the date hereof. All prior negotiations are merged into this
agreement.
<PAGE> 7
If this letter sets forth our agreement on the subject matter hereof,
kindly sign and return to Staples the enclosed copy of this letter, which will
then constitute our agreement on this subject.
Sincerely,
STAPLES, INC.
By: /s/ Thomas G. Stemberg
Chairman and CEO
Agreed to this 22nd day of May, 1995
/s/ John B. Wilson
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
financial statements of Staples, Inc. for the three months ended April 29, 1995,
and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-28-1995
<PERIOD-END> APR-29-1995
<CASH> 41,897
<SECURITIES> 29,553
<RECEIVABLES> 89,098
<ALLOWANCES> 1,006
<INVENTORY> 511,388
<CURRENT-ASSETS> 709,398
<PP&E> 311,489
<DEPRECIATION> 90,141
<TOTAL-ASSETS> 1,089,505
<CURRENT-LIABILITIES> 362,635
<BONDS> 300,361
<COMMON> 37
0
0
<OTHER-SE> 401,676
<TOTAL-LIABILITY-AND-EQUITY> 1,089,505
<SALES> 668,795
<TOTAL-REVENUES> 668,795
<CGS> 518,413
<TOTAL-COSTS> 624,530
<OTHER-EXPENSES> 27,432
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,921
<INCOME-PRETAX> 12,912
<INCOME-TAX> 5,035
<INCOME-CONTINUING> 7,877
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,877
<EPS-PRIMARY> .12
<EPS-DILUTED> .12
</TABLE>
