<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of Earliest Event Reported): September 4, 1996
-----------------
STAPLES, INC.
----------------------------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
Delaware
----------------------------------------------------------------------
(State or Other Jurisdiction of Incorporation)
0-17586 04-2896127
------------------------ ----------------------------------
(Commission File Number) (IRS Employer Identification No.)
One Research Drive, Westboro, Massachusetts 01581
----------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(508) 370-8500
----------------------------------------------------------------------
Registrant's Telephone Number, Including Area Code
Not Applicable
----------------------------------------------------------------------
(Former Name or Former Address, if Changed Since Last Report)
<PAGE> 2
ITEM 5. OTHER EVENTS.
------------
On September 4, 1996, Staples, Inc. ("Staples") announced that it
had entered into an Agreement and Plan of Merger (the "Merger
Agreement") with Marlin Acquisition Corp., a wholly-owned subsidiary of
Staples (the "Subsidiary"), and Office Depot, Inc. ("Office Depot").
Pursuant to the Merger Agreement, (i) the Subsidiary will be merged
with and into Office Depot and Office Depot will become a wholly-owned
subsidiary of Staples and (ii) all outstanding shares of common stock
of Office Depot will be converted into the right to receive 1.14 shares
of common stock of Staples. A copy of the Merger Agreement is attached
as an exhibit to this Current Report on Form 8-K.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
---------------------------------
(c) Exhibits.
--------
See Index to Exhibits attached hereto.
<PAGE> 3
SIGNATURES
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 hereunto duly authorized.
Date: September 4, 1996 STAPLES, INC.
(Registrant)
/s/ Peter M. Schwarzenbach
---------------------------------
By: Peter M. Schwarzenbach
Vice President, General
Counsel and Secretary
<PAGE> 4
INDEX TO EXHIBITS
Exhibit
Number
-------
1 Agreement and Plan of Merger, dated September 4, 1996
by and among Staples, Inc., Marlin Acquisition Corp.,
and Office Depot, Inc.
2 Stock Option Agreement, dated as of September 4, 1996,
between Staples, Inc. (as Grantee) and Office Depot,
Inc. (as Grantor)
3 Stock Option Agreement, dated as of September 4, 1996,
between Office Depot, Inc. (as Grantee) and Staples,
Inc. (as Grantor)
<PAGE> 1
Exhibit 1
AGREEMENT AND PLAN OF MERGER
dated as of September 4, 1996,
among
Staples, Inc.
Marlin Acquisition Corp.
and
Office Depot, Inc.
<PAGE> 2
TABLE OF CONTENTS
Page
ARTICLE I
THE MERGER ................................................................ 2
Section 1.01 Effective Time of the Merger ........................... 2
Section 1.02 Closing ................................................ 2
Section 1.03 Effects of the Merger .................................. 2
Section 1.04 Directors and Officers ................................. 2
ARTICLE II
CONVERSION OF SECURITIES .................................................. 3
Section 2.01 Conversion of Capital Stock ............................ 3
Section 2.02 Exchange of Certificates ............................... 4
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF OFFICE DEPOT ............................ 7
Section 3.01 Organization of Office Depot ........................... 7
Section 3.02 Office Depot Capital Structure ......................... 8
Section 3.03 Authority; No Conflict; Required Filings and Consents .. 9
Section 3.04 SEC Filings; Financial Statements ...................... 10
Section 3.05 No Undisclosed Liabilities ............................. 11
Section 3.06 Absence of Certain Changes or Events ................... 11
Section 3.07 Taxes .................................................. 11
Section 3.08 Properties ............................................. 12
Section 3.09 Intellectual Property .................................. 13
Section 3.10 Agreements, Contracts and Commitments .................. 13
Section 3.11 Litigation ............................................. 13
Section 3.12 Environmental Matters .................................. 13
Section 3.13 Employee Benefit Plans ................................. 14
Section 3.14 Compliance With Laws ................................... 15
Section 3.15 Accounting and Tax Matters ............................. 16
Section 3.16 Registration Statement; Proxy Statement/Prospectus ..... 16
Section 3.17 Labor Matters .......................................... 16
Section 3.18 Insurance .............................................. 17
Section 3.19 No Existing Discussions ................................ 17
Section 3.20 Opinion of Financial Advisor ........................... 17
Section 3.21 Section 203 of the DGCL Not Applicable ................. 17
Section 3.22 Rights Agreement ....................................... 17
-ii-
<PAGE> 3
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF STAPLES AND SUB ......................... 17
Section 4.01 Organization of Staples and Sub ........................ 18
Section 4.02 Staples Capital Structure .............................. 18
Section 4.03 Authority; No Conflict; Required Filings and Consents .. 19
Section 4.04 SEC Filings; Financial Statements ...................... 20
Section 4.05 No Undisclosed Liabilities ............................. 21
Section 4.06 Absence of Certain Changes or Events ................... 21
Section 4.07 Taxes .................................................. 22
Section 4.08 Properties ............................................. 22
Section 4.09 Intellectual Property .................................. 23
Section 4.10 Agreements, Contracts and Commitments .................. 23
Section 4.11 Litigation ............................................. 23
Section 4.12 Environmental Matters .................................. 23
Section 4.13 Employee Benefit Plans ................................. 24
Section 4.14 Compliance With Laws ................................... 25
Section 4.15 Accounting and Tax Matters ............................. 25
Section 4.16 Registration Statement; Proxy Statement/Prospectus ..... 25
Section 4.17 Labor Matters .......................................... 26
Section 4.18 Insurance .............................................. 26
Section 4.19 Opinion of Financial Advisor ........................... 26
Section 4.20 No Existing Discussions ................................ 26
Section 4.22 Interim Operations of Sub .............................. 27
ARTICLE V
CONDUCT OF BUSINESS ....................................................... 27
Section 5.01 Covenants of Office Depot and Staples .................. 27
Section 5.02 Cooperation ............................................ 29
ARTICLE VI
ADDITIONAL AGREEMENTS ..................................................... 29
Section 6.01 No Solicitation ........................................ 29
Section 6.02 Proxy Statement/Prospectus; Registration Statement ..... 30
Section 6.03 Nasdaq and NYSE Quotation .............................. 31
Section 6.04 Access to Information .................................. 31
Section 6.05 Stockholders Meetings .................................. 31
Section 6.06 Legal Conditions to Merger ............................. 32
Section 6.07 Public Disclosure ...................................... 33
Section 6.08 Tax-Free Reorganization ................................ 33
Section 6.09 Pooling Accounting ..................................... 33
-iii-
<PAGE> 4
Section 6.10 Affiliate Agreements ................................... 34
Section 6.11 Nasdaq Quotation ....................................... 34
Section 6.12 Stock Plans ............................................ 34
Section 6.13 Brokers or Finders ..................................... 36
Section 6.14 Indemnification ........................................ 36
Section 6.15 Letter of Staples' Accountants ......................... 37
Section 6.16 Letter of Office Depot's Accountants ................... 37
Section 6.17 Stock Option Agreements ................................ 37
Section 6.18 Benefit Plans .......................................... 37
ARTICLE VII
CONDITIONS TO MERGER ...................................................... 37
Section 7.01 Conditions to Each Party's Obligation To
Effect the Merger ...................................... 37
Section 7.02 Additional Conditions to Obligations of
Staples and Sub ........................................ 39
Section 7.03 Additional Conditions to Obligations of Office Depot ... 40
ARTICLE VIII
TERMINATION AND AMENDMENT ................................................. 40
Section 8.01 Termination ............................................ 40
Section 8.02 Effect of Termination .................................. 42
Section 8.03 Fees and Expenses ...................................... 42
Section 8.04 Amendment .............................................. 44
Section 8.05 Extension; Waiver ...................................... 45
ARTICLE IX
MISCELLANEOUS ............................................................. 45
Section 9.01 Nonsurvival of Representations, Warranties
and Agreements ......................................... 45
Section 9.02 Notices ................................................ 45
Section 9.03 Interpretation ......................................... 46
Section 9.04 Counterparts ........................................... 47
Section 9.05 Entire Agreement; No Third Party Beneficiaries ......... 47
Section 9.06 Governing Law .......................................... 47
Section 9.07 Assignment ............................................. 47
Exhibit A - Staples Stock Option Agreement
Exhibit B - Office Depot Option Agreement
Schedule 1 - List of Directors
-iv-
<PAGE> 5
TABLES OF DEFINED TERMS
Cross Reference
Terms in Agreement
- ----- ---------------
Acquisition Proposal ....................................... Section 6.01(a)
Affiliate .................................................. Section 6.10
Affiliate Agreement ........................................ Section 6.10
Agreement .................................................. Preamble
Alternative Transaction .................................... Section 8.03(g)
Bankruptcy and Equity Exception ............................ Section 3.03(a)
Blue Sky ................................................... Section 7.02(d)
Certificate of Merger ...................................... Section 1.01
Certificates ............................................... Section 2.02(b)
Closing .................................................... Section 1.02
Closing Date ............................................... Section 1.02
Code ....................................................... Preamble
Confidentiality Agreement .................................. Section 6.01(a)
Constituent Corporations ................................... Section 1.03
Costs ...................................................... Section 6.14(a)
Current Premium ............................................ Section 6.14(b)
DGCL ....................................................... Section 1.01
Exchange Ratio ............................................. Section 2.01(c)
Effective Time ............................................. Section 1.01
Environmental Law .......................................... Section 3.12(c)
ERISA ...................................................... Section 3.13(a)
ERISA Affiliate ............................................ Section 3.13(a)
Exchange Act ............................................... Section 3.03(c)
Exchange Agent ............................................. Section 2.02(a)
-v-
<PAGE> 6
Exchange Fund .............................................. Section 2.02(a)
Expiration Date ............................................ Section 8.01(b)
Governmental Entity ........................................ Section 3.03(c)
Hazardous Substance ........................................ Section 3.12(c)
HSR Act .................................................... Section 3.03(c)
Incentive Stock Options .................................... Section 6.12(a)
Indemnified Parties ........................................ Section 6.14(a)
IRS ........................................................ Section 3.07(b)
Joint Proxy Statement ...................................... Section 3.16
Material Adverse Change .................................... Section 3.06
Material Leases ............................................ Section 3.08
Merger ..................................................... Preamble
Office Depot Balance Sheet ................................. Section 3.04(b)
Office Depot Common Stock .................................. Section 2.01(b)
Office Depot Disclosure Schedule ........................... Article III
Office Depot Employee Plans ................................ Section 3.13(a)
Office Depot Material Adverse Effect ....................... Section 3.01
Office Depot Material Contracts ............................ Section 3.10
Office Depot Preferred Stock ............................... Section 3.02(a)
Office Depot SEC Reports ................................... Section 3.04(a)
Office Depot Stock Option .................................. Section 6.12(a)
Office Depot Stock Option Agreement ........................ Preamble
Office Depot Stock Plans ................................... Section 3.02(a)
Office Depot Stockholders' Meeting ......................... Section 3.16
Order ...................................................... Section 6.06(b)
Outside Date ............................................... Section 8.01(b)
Registration Statement ..................................... Section 3.16
-vi-
<PAGE> 7
Rule 145 ................................................... Section 6.10
SEC ........................................................ Section 3.04(a)
Securities Act ............................................. Section 3.03(c)
Staples Balance Sheet ...................................... Section 4.04(b)
Staples Common Stock ....................................... Section 2.01(b)
Staples Disclosure Schedule ................................ Article IV
Staples Employee Plans ..................................... Section 4.13(a)
Staples Material Adverse Effect ............................ Section 4.01
Staples Material Contracts ................................. Section 4.10
Staples Preferred Stock .................................... Section 4.02(a)
Staples Rights ............................................. Section 2.01(c)
Staples Rights Plan ........................................ Section 4.02(b)
Staples SEC Reports ........................................ Section 4.04(a)
Staples Stock Option Agreement ............................. Preamble
Staples Stock Plans ........................................ Section 4.02(a)
Staples Stockholders' Meeting .............................. Section 3.16
Staples Voting Proposal .................................... Section 6.05(a)
Stock Option Agreements .................................... Preamble
Subsidiary ................................................. Section 3.01
Superior Proposal .......................................... Section 6.01(a)
Surviving Corporation ...................................... Section 1.03(a)
Tax ........................................................ Section 3.07(a)
Taxes ...................................................... Section 3.07(a)
Third Party ................................................ Section 8.03(g)
-vii-
<PAGE> 8
AGREEMENT AND PLAN OF MERGER
----------------------------
AGREEMENT AND PLAN OF MERGER (the "Agreement"), dated as of September 4,
1996, by and among Staples, Inc., a Delaware corporation ("Staples"), Marlin
Acquisition Corp., a Delaware corporation and a direct, wholly-owned subsidiary
of Staples ("Sub"), and Office Depot, Inc., a Delaware corporation ("Office
Depot").
WHEREAS, the Boards of Directors of Staples and Office Depot deem it
advisable and in the best interests of each corporation and its respective
stockholders that Staples and Office Depot combine in order to advance the
long-term business interests of Staples and Office Depot;
WHEREAS, the combination of Staples and Office Depot shall be effected
by the terms of this Agreement through a merger in which the stockholders of
Office Depot will become stockholders of Staples (the "Merger");
WHEREAS, concurrently with the execution and delivery of this Agreement
and as a condition and inducement to each of Staples' and Office Depot's
willingness to enter into this Agreement, Staples and Office Depot have entered
into (i) a Stock Option Agreement dated as of the date of this Agreement and
attached hereto as EXHIBIT A (the "Staples Stock Option Agreement"), pursuant to
which Office Depot granted Staples an option to purchase shares of common stock
of Office Depot under certain circumstances, and (ii) a Stock Option Agreement
dated as of the date of this Agreement and attached hereto as EXHIBIT B, (the
"Office Depot Stock Option Agreement" and, together with the Staples Stock
Option Agreement, the "Stock Option Agreements"), pursuant to which Staples
granted Office Depot an option to purchase shares of common stock of Staples
under certain circumstances;
WHEREAS, for Federal income tax purposes, it is intended that the Merger
shall qualify as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code"); and
WHEREAS, for accounting purposes, it is intended that the Merger shall
be accounted for as a pooling of interests.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth below, the
parties agree as follows:
-1-
<PAGE> 9
ARTICLE I
THE MERGER
Section 1.01 EFFECTIVE TIME OF THE MERGER. Subject to the provisions of
this Agreement, a certificate of merger in such form as is required by the
relevant provisions of the Delaware General Corporation Law ("DGCL") (the
"Certificate of Merger") shall be duly prepared, executed and acknowledged by
the Surviving Corporation (as defined in Section 1.03) and thereafter delivered
to the Secretary of State of the State of Delaware for filing, as provided in
the DGCL, as early as practicable on the Closing Date (as defined in Section
1.02). The Merger shall become effective upon the filing of the Certificate of
Merger with the Secretary of State of the State of Delaware (the "Effective
Time").
Section 1.02 CLOSING. The closing of the Merger (the "Closing") will
take place at 10:00 a.m., E.S.T., on a date to be specified by Staples and
Office Depot, which shall be no later than the second business day after
satisfaction of the latest to occur of the conditions set forth in Sections
7.01, 7.02(b) (other than the delivery of the officers' certificate referred to
therein) and 7.03(b) (other than the delivery of the officers' certificate
referred to therein) (provided that the other closing conditions set forth in
Article VII have been met or waived as provided in Article VII at or prior to
the Closing) (the "Closing Date"), at the offices of Hale and Dorr, 60 State
Street, Boston, Massachusetts, unless another date, place or time is agreed to
in writing by Staples and Office Depot.
Section 1.03 EFFECTS OF THE MERGER. At the Effective Time (i) the
separate existence of Sub shall cease and Sub shall be merged with and into
Office Depot (Sub and Office Depot are sometimes referred to below as the
"Constituent Corporations" and Office Depot following the Merger is sometimes
referred to below as the "Surviving Corporation"), (ii) the Certificate of
Incorporation of Office Depot shall be amended so that Article FOURTH of such
Certificate of Incorporation reads in its entirety as follows: "The total number
of shares of all classes of stock which the Corporation shall have authority to
issue is 1,000, all of which shall consist of Common Stock, par value $.01 per
share," and, as so amended, such Certificate of Incorporation shall be the
Certificate of Incorporation of the Surviving Corporation, and (iii) the Bylaws
of Sub as in effect immediately prior to the Effective Time shall be the Bylaws
of the Surviving Corporation.
Section 1.04 DIRECTORS AND OFFICERS.
(a) The officers of Sub immediately prior to the Effective Time shall
be the initial officers of the Surviving Corporation, each to hold office in
accordance with the Certificate of Incorporation and Bylaws of the Surviving
Corporation.
-2-
<PAGE> 10
(b) Prior to the Effective Time, Staples shall (i) increase the number
of the members of the Board of Directors of Staples and the Surviving
Corporation to 15 and (ii) take such action as may be necessary such that the
Board of Directors of Staples and the Surviving Corporation, immediately
following the Effective Time is comprised of the persons listed on SCHEDULE 1
attached hereto.
(c) Staples shall take such action so that, upon the Effective Time,
the following persons, subject to availability, shall hold the following
positions with Staples: David I. Fuente - Executive Chairman; Thomas G. Stemberg
- - Chief Executive Officer; and Martin E. Haneka - Chief Operating Officer and
President. It is the current intention of the parties that: (i) David I. Fuente
will remain as Executive Chairman for up to three years and then become Chairman
of the Executive Committee, and (ii) Thomas G. Stemberg will remain as Chief
Executive Officer for up to three years and then become Chairman of the Board.
(d) Staples shall, promptly following the execution of this Agreement,
offer to enter into Employment Agreements, in the forms attached to the Staples
Disclosure Schedule (as defined in Article IV), with those Office Depot
employees listed in Section 1.04 of the Staples Disclosure Schedule.
ARTICLE II
CONVERSION OF SECURITIES
Section 2.01 CONVERSION OF CAPITAL STOCK. As of the Effective Time, by
virtue of the Merger and without any action on the part of the holder of any
shares of Office Depot Common Stock or capital stock of Sub:
(a) CAPITAL STOCK OF SUB. Each issued and outstanding share of the
capital stock of Sub shall be converted into and become one fully paid and
nonassessable share of Common Stock, par value $.01 per share, of the Surviving
Corporation.
(b) CANCELLATION OF TREASURY STOCK AND STAPLES-OWNED STOCK. All shares
of Common Stock, par value $.01 per share, of Office Depot ("Office Depot Common
Stock") that are owned by Office Depot as treasury stock and any shares of
Office Depot Common Stock owned by Staples, Sub or any other wholly-owned
Subsidiary (as defined in Section 3.01) of Staples shall be cancelled and
retired and shall cease to exist and no stock of Staples or other consideration
shall be delivered in exchange therefor. All shares of Common Stock, par value
$.0006 per share, of Staples ("Staples Common Stock") owned by Office Depot
shall be unaffected by the Merger.
-3-
<PAGE> 11
(c) EXCHANGE RATIO FOR OFFICE DEPOT COMMON STOCK. Subject to Section
2.02, each issued and outstanding share of Office Depot Common Stock (other than
shares to be cancelled in accordance with Section 2.01(b)) shall be converted
into the right to receive 1.14 shares (the "Exchange Ratio") of Staples Common
Stock. All such shares of Office Depot Common Stock, when so converted, shall no
longer be outstanding and shall automatically be cancelled and retired and shall
cease to exist, and each holder of a certificate representing any such shares
shall cease to have any rights with respect thereto, except the right to receive
the shares of Staples Common Stock and any cash in lieu of fractional shares of
Staples Common Stock to be issued or paid in consideration therefor upon the
surrender of such certificate in accordance with Section 2.02, without interest.
Section 2.02 EXCHANGE OF CERTIFICATES. The procedures for exchanging
outstanding shares of Office Depot Common Stock for Staples Common Stock
pursuant to the Merger are as follows:
(a) EXCHANGE AGENT. As of the Effective Time, Staples shall deposit
with a bank or trust company designated by Staples and Office Depot (the
"Exchange Agent"), for the benefit of the holders of shares of Office Depot
Common Stock, for exchange in accordance with this Section 2.02, through the
Exchange Agent, certificates representing the shares of Staples Common Stock
(such shares of Staples Common Stock, together with any dividends or
distributions with respect thereto, being hereinafter referred to as the
"Exchange Fund") issuable pursuant to Section 2.01 in exchange for outstanding
shares of Office Depot Common Stock.
(b) EXCHANGE PROCEDURES. As soon as reasonably practicable after the
Effective Time, the Exchange Agent shall mail to each holder of record of a
certificate or certificates which immediately prior to the Effective Time
represented outstanding shares of Office Depot Common Stock (the "Certificates")
whose shares were converted pursuant to Section 2.01 into the right to receive
shares of Staples Common Stock (i) a letter of transmittal (which shall specify
that delivery shall be effected, and risk of loss and title to the Certificates
shall pass, only upon delivery of the Certificates to the Exchange Agent and
shall be in such form and have such other provisions as Staples and Office Depot
may reasonably specify) and (ii) instructions for effecting the surrender of the
Certificates in exchange for certificates representing shares of Staples Common
Stock (plus cash in lieu of fractional shares, if any, of Staples Common Stock
as provided below). Upon surrender of a Certificate for cancellation to the
Exchange Agent or to such other agent or agents as may be appointed by Staples,
together with such letter of transmittal, duly executed, the holder of such
Certificate shall be entitled to receive in exchange therefor a certificate
representing that number of whole shares of Staples Common Stock which such
holder has the right to receive pursuant to the provisions of this Article II,
and the Certificate so surrendered shall immediately be cancelled. In the event
of a transfer of ownership of Office Depot Common Stock which is not registered
in the transfer
-4-
<PAGE> 12
records of Office Depot, a certificate representing the proper number of shares
of Staples Common Stock may be issued to a transferee if the Certificate
representing such Office Depot Common Stock is presented to the Exchange Agent,
accompanied by all documents required to evidence and effect such transfer and
by evidence that any applicable stock transfer taxes have been paid. Until
surrendered as contemplated by this Section 2.02, each Certificate shall be
deemed at any time after the Effective Time to represent only the right to
receive upon such surrender the certificate representing shares of Staples
Common Stock and cash in lieu of any fractional shares of Staples Common Stock
as contemplated by this Section 2.02.
(c) DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES. No dividends or
other distributions declared or made after the Effective Time with respect to
Staples Common Stock with a record date after the Effective Time shall be paid
to the holder of any unsurrendered Certificate with respect to the shares of
Staples Common Stock represented thereby and no cash payment in lieu of
fractional shares shall be paid to any such holder pursuant to subsection (e)
below until the holder of record of such Certificate shall surrender such
Certificate. Subject to the effect of applicable laws, following surrender of
any such Certificate, there shall be paid to the record holder of the
certificates representing whole shares of Staples Common Stock issued in
exchange therefor, without interest, (i) at the time of such surrender, the
amount of any cash payable in lieu of a fractional share of Staples Common Stock
to which such holder is entitled pursuant to subsection (e) below and the amount
of dividends or other distributions with a record date after the Effective Time
previously paid with respect to such whole shares of Staples Common Stock, and
(ii) at the appropriate payment date, the amount of dividends or other
distributions with a record date after the Effective Time but prior to surrender
and a payment date subsequent to surrender payable with respect to such whole
shares of Staples Common Stock.
(d) NO FURTHER OWNERSHIP RIGHTS IN OFFICE DEPOT COMMON STOCK. All
shares of Staples Common Stock issued upon the surrender for exchange of
Certificates in accordance with the terms hereof (including any cash paid
pursuant to subsection (c) or (e) of this Section 2.02) shall be deemed to have
been issued in full satisfaction of all rights pertaining to such shares of
Office Depot Common Stock, subject, however, to the Surviving Corporation's
obligation to pay any dividends or make any other distributions with a record
date prior to the Effective Time which may have been declared or made by Office
Depot on such shares of Office Depot Common Stock in accordance with the terms
of this Agreement (to the extent permitted under Section 5.01) prior to the date
hereof and which remain unpaid at the Effective Time, and from and after the
Effective Time there shall be no further registration of transfers on the stock
transfer books of the Surviving Corporation of the shares of Office Depot Common
Stock which were outstanding immediately prior to the Effective Time. If, after
the Effective Time, Certificates are presented to the Surviving Corporation for
any reason, they shall be cancelled and exchanged as provided in this Section
2.02.
-5-
<PAGE> 13
(e) NO FRACTIONAL SHARES. No certificate or scrip representing
fractional shares of Staples Common Stock shall be issued upon the surrender for
exchange of Certificates, and such fractional share interests will not entitle
the owner thereof to vote or to any other rights of a stockholder of Staples.
Notwithstanding any other provision of this Agreement, each holder of shares of
Office Depot Common Stock exchanged pursuant to the Merger who would otherwise
have been entitled to receive a fraction of a share of Staples Common Stock
(after taking into account all Certificates delivered by such holder) shall
receive, in lieu thereof, cash (without interest) in an amount equal to such
fractional part of a share of Staples Common Stock multiplied by the average of
the last reported sales prices of Staples Common Stock, as reported on the
Nasdaq National Market, on each of the ten trading days immediately preceding
the date of the Effective Time.
(f) TERMINATION OF EXCHANGE FUND. Any portion of the Exchange Fund
which remains undistributed to the stockholders of Office Depot for 180 days
after the Effective Time shall be delivered to Staples, upon demand, and any
stockholders of Office Depot who have not previously complied with this Section
2.02 shall thereafter look only to Staples for payment of their claim for
Staples Common Stock, any cash in lieu of fractional shares of Staples Common
Stock and any dividends or distributions with respect to Staples Common Stock.
(g) NO LIABILITY. Neither Staples nor Office Depot shall be liable to
any holder of shares of Office Depot Common Stock or Staples Common Stock, as
the case may be, for such shares (or dividends or distributions with respect
thereto) delivered to a public official pursuant to any applicable abandoned
property, escheat or similar law.
(h) WITHHOLDING RIGHTS. Each of Staples and the Surviving Corporation
shall be entitled to deduct and withhold from the consideration otherwise
payable pursuant to this Agreement to any holder of shares of Office Depot
Common Stock such amounts as it is required to deduct and withhold with respect
to the making of such payment under the Code, or any provision of state, local
or foreign tax law. To the extent that amounts are so withheld by Surviving
Corporation or Staples, as the case may be, such withheld amounts shall be
treated for all purposes of this Agreement as having been paid to the holder of
the shares of Office Depot Common Stock in respect of which such deduction and
withholding was made by Surviving Corporation or Staples, as the case may be.
(i) LOST CERTIFICATES. If any Certificate shall have been lost, stolen
or destroyed, upon the making of an affidavit of that fact by the person
claiming such Certificate to be lost, stolen or destroyed and, if required by
the Surviving Corporation, the posting by such person of a bond in such
reasonable amount as the Surviving Corporation may direct as indemnity against
any claim that may be made against it with respect to such Certificate, the
Exchange Agent will issue in exchange
-6-
<PAGE> 14
for such lost, stolen or destroyed Certificate the shares of Staples Common
Stock and any cash in lieu of fractional shares, and unpaid dividends and
distributions on shares of Staples Common Stock deliverable in respect thereof
pursuant to this Agreement.
(j) AFFILIATES. Notwithstanding anything herein to the contrary,
Certificates surrendered for exchange by any Affiliate (as defined in Section
6.10) of Office Depot shall not be exchanged until Staples has received an
Affiliate Agreement (as defined in Section 6.10) from such Affiliate.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF OFFICE DEPOT
Office Depot represents and warrants to Staples and Sub that the
statements contained in this Article III are true and correct except as set
forth herein and in the disclosure schedule delivered by Office Depot to Staples
on or before the date of this Agreement (the "Office Depot Disclosure
Schedule"). The Office Depot Disclosure Schedule shall be arranged in paragraphs
corresponding to the numbered and lettered paragraphs contained in this Article
III and the disclosure in any paragraph shall qualify other paragraphs in this
Article III only to the extent that it is reasonably apparent from a reading of
such disclosure that it also qualifies or applies to such other paragraphs.
Section 3.01 ORGANIZATION OF OFFICE DEPOT. Each of Office Depot and its
Subsidiaries (as defined below) is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation, has all requisite corporate power to own, lease and operate its
property and to carry on its business as now being conducted and as proposed to
be conducted, and is duly qualified to do business and is in good standing as a
foreign corporation in each jurisdiction in which the failure to be so qualified
would have a material adverse effect on the business, properties, financial
condition or results of operations of Office Depot and its Subsidiaries, taken
as a whole (a "Office Depot Material Adverse Effect"). Except as set forth in
the Office Depot SEC Reports (as defined in Section 3.04) filed prior to the
date hereof, neither Office Depot nor any of its Subsidiaries directly or
indirectly owns any equity or similar interest in, or any interest convertible
into or exchangeable or exercisable for, any corporation, partnership, joint
venture or other business association or entity, excluding securities in any
publicly traded company held for investment by Office Depot and comprising less
than five percent (5%) of the outstanding stock of such company. As used in this
Agreement, the word "Subsidiary" means, with respect to any party, any
corporation or other organization, whether incorporated or unincorporated, of
which (i) such party or any other Subsidiary of such party is a general partner
(excluding partnerships, the general partnership interests of which held by such
party or any Subsidiary of such
-7-
<PAGE> 15
party do not have a majority of the voting interest in such partnership) or (ii)
at least a majority of the securities or other interests having by their terms
ordinary voting power to elect a majority of the Board of Directors or others
performing similar functions with respect to such corporation or other
organization is directly or indirectly owned or controlled by such party or by
any one or more of its Subsidiaries, or by such party and one or more of its
Subsidiaries.
Section 3.02 OFFICE DEPOT CAPITAL STRUCTURE.
(a) The authorized capital stock of Office Depot consists of
400,000,000 shares of Common Stock, $.01 par value, and 1,000,000 shares of
Preferred Stock, $.01 par value ("Office Depot Preferred Stock"). As of August
30, 1996, (i) 156,882,058 shares of Office Depot Common Stock were issued and
outstanding, all of which are validly issued, fully paid and nonassessable and
(ii) no shares of Office Depot Common Stock were held in the treasury of Office
Depot or by Subsidiaries of Office Depot. The Office Depot Disclosure Schedule
shows the number of shares of Office Depot Common Stock reserved for future
issuance pursuant to stock options granted and outstanding as of August 27, 1996
and the plans under which such options were granted (collectively, the "Office
Depot Stock Plans"). No material change in such capitalization has occurred
between August 27, 1996 and the date of this Agreement. As of the date of this
Agreement, none of the shares of Office Depot Preferred Stock is issued and
outstanding. All shares of Office Depot Common Stock subject to issuance as
specified above are duly authorized and, upon issuance on the terms and
conditions specified in the instruments pursuant to which they are issuable,
shall be validly issued, fully paid and nonassessable. There are no obligations,
contingent or otherwise, of Office Depot or any of its Subsidiaries to
repurchase, redeem or otherwise acquire any shares of Office Depot Common Stock
or the capital stock of any Subsidiary or to provide funds to or make any
material investment (in the form of a loan, capital contribution or otherwise)
in any such Subsidiary or any other entity other than guarantees of bank
obligations of Subsidiaries entered into in the ordinary course of business. All
of the outstanding shares of capital stock of each of Office Depot's
Subsidiaries are duly authorized, validly issued, fully paid and nonassessable
and all such shares (other than directors' qualifying shares in the case of
foreign Subsidiaries) are owned by Office Depot or another Subsidiary free and
clear of all security interests, liens, claims, pledges, agreements, limitations
in Office Depot's voting rights, charges or other encumbrances of any nature.
(b) Except as set forth in this Section 3.02 or as reserved for future
grants of options under the Office Depot Stock Plans or the Staples Stock Option
Agreement, there are no equity securities of any class of Office Depot or any of
its Subsidiaries, or any security exchangeable into or exercisable for such
equity securities, issued, reserved for issuance or outstanding. There are no
options, warrants, equity securities, calls, rights, commitments or agreements
of any character to which Office
-8-
<PAGE> 16
Depot or any of its Subsidiaries is a party or by which it is bound obligating
Office Depot or any of its Subsidiaries to issue, deliver or sell, or cause to
be issued, delivered or sold, additional shares of capital stock of Office Depot
or any of its Subsidiaries or obligating Office Depot or any of its Subsidiaries
to grant, extend, accelerate the vesting of or enter into any such option,
warrant, equity security, call, right, commitment or agreement. To the best
knowledge of Office Depot, there are no voting trusts, proxies or other voting
agreements or understandings with respect to the shares of capital stock of
Office Depot.
Section 3.03 AUTHORITY; NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) Office Depot has all requisite corporate power and authority to
enter into this Agreement and the Staples Stock Option Agreement and to
consummate the transactions contemplated by this Agreement and the Staples Stock
Option Agreement. The execution and delivery of this Agreement and the Staples
Stock Option Agreement and the consummation of the transactions contemplated by
this Agreement and the Staples Stock Option Agreement by Office Depot have been
duly authorized by all necessary corporate action on the part of Office Depot,
subject only to the approval of the Merger by Office Depot's stockholders under
the DGCL. This Agreement and the Staples Stock Option Agreement have been duly
executed and delivered by Office Depot and constitute the valid and binding
obligations of Office Depot, enforceable in accordance with their terms, subject
to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general applicability relating to or affecting creditors' rights
and to general equity principles (the "Bankruptcy and Equity Exception").
(b) The execution and delivery of this Agreement and the Staples Stock
Option Agreement by Office Depot does not, and the consummation of the
transactions contemplated by this Agreement and the Staples Stock Option
Agreement will not, (i) conflict with, or result in any violation or breach of,
any provision of the Certificate of Incorporation or Bylaws of Office Depot,
(ii) result in any violation or breach of, or constitute (with or without notice
or lapse of time, or both) a default (or give rise to a right of termination,
cancellation or acceleration of any obligation or loss of any material benefit)
under, or require a consent or waiver under, any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, lease, contract or other
agreement, instrument or obligation to which Office Depot or any of its
Subsidiaries is a party or by which any of them or any of their properties or
assets may be bound, or (iii) conflict with or violate any permit, concession,
franchise, license, judgment, order, decree, statute, law, ordinance, rule or
regulation applicable to Office Depot or any of its Subsidiaries or any of its
or their properties or assets, except in the case of (ii) and (iii) for any such
conflicts, violations, defaults, terminations, cancellations or accelerations
which are not, individually or in the aggregate, reasonably likely to have a
Office Depot Material Adverse Effect.
-9-
<PAGE> 17
(c) No consent, approval, order or authorization of, or registration,
declaration or filing with, any court, administrative agency or commission or
other governmental authority or instrumentality ("Governmental Entity") is
required by or with respect to Office Depot or any of its Subsidiaries in
connection with the execution and delivery of this Agreement and the Staples
Stock Option Agreement or the consummation of the transactions contemplated
hereby or thereby, except for (i) the filing of the pre-merger notification
report under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, ("HSR Act"), (ii) the filing of the Certificate of Merger with the
Delaware Secretary of State, (iii) the filing of the Joint Proxy Statement (as
defined in Section 3.16 below) with the Securities and Exchange Commission (the
"SEC") in accordance with the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), (iv) such consents, approvals, orders, authorizations,
registrations, declarations and filings as may be required under applicable
state securities laws and the laws of any foreign country (including the
Canadian Competition Act and the Investment Canada Act) and (v) such other
consents, authorizations, filings, approvals and registrations which, if not
obtained or made, would not be reasonably likely to have a Office Depot Material
Adverse Effect.
Section 3.04 SEC FILINGS; FINANCIAL STATEMENTS.
(a) Office Depot has filed and made available to Staples all forms,
reports and documents required to be filed by Office Depot with the SEC since
July 1, 1994 other than registration statements on Form S-8 (collectively, the
"Office Depot SEC Reports"). The Office Depot SEC Reports (i) at the time filed,
complied in all material respects with the applicable requirements of the
Securities Act of 1933, as amended (the "Securities Act"), and the Exchange Act,
as the case may be, and (ii) did not at the time they were filed (or if amended
or superseded by a filing prior to the date of this Agreement, then on the date
of such filing) contain any untrue statement of a material fact or omit to state
a material fact required to be stated in such Office Depot SEC Reports or
necessary in order to make the statements in such Office Depot SEC Reports, in
the light of the circumstances under which they were made, not misleading. None
of Office Depot's Subsidiaries is required to file any forms, reports or other
documents with the SEC.
(b) Each of the consolidated financial statements (including, in each
case, any related notes) contained in the Office Depot SEC Reports complied as
to form in all material respects with the applicable published rules and
regulations of the SEC with respect thereto, was prepared in accordance with
generally accepted accounting principles applied on a consistent basis
throughout the periods involved (except as may be indicated in the notes to such
financial statements or, in the case of unaudited statements, as permitted by
Form 10-Q of the SEC) and fairly presented the consolidated financial position
of Office Depot and its Subsidiaries as of the dates and the consolidated
results of its operations and cash flows for the periods indicated, except that
the unaudited interim financial statements were or are subject
-10-
<PAGE> 18
to normal and recurring year-end adjustments which were not or are not expected
to be material in amount. The audited balance sheet of Office Depot as of
December 30, 1995 is referred to herein as the "Office Depot Balance Sheet."
Section 3.05 NO UNDISCLOSED LIABILITIES. Except as disclosed in the
Office Depot SEC Reports filed prior to the date hereof, and except for normal
or recurring liabilities incurred since June 29, 1996 in the ordinary course of
business consistent with past practices, Office Depot and its Subsidiaries do
not have any liabilities, either accrued, contingent or otherwise (whether or
not required to be reflected in financial statements in accordance with
generally accepted accounting principles), and whether due or to become due,
which individually or in the aggregate are reasonably likely to have a Office
Depot Material Adverse Effect.
Section 3.06 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed
in the Office Depot SEC Reports filed prior to the date hereof or disclosed in
writing by Office Depot to Staples on or prior to the date hereof, since the
date of the Office Depot Balance Sheet, Office Depot and its Subsidiaries have
conducted their businesses only in the ordinary course and in a manner
consistent with past practice and, since such date, there has not been (i) any
material adverse change in the financial condition, results of operations,
business or properties (a "Material Adverse Change"), of Office Depot and its
Subsidiaries, taken as a whole (other than changes that are the effect or result
of economic factors affecting the economy as a whole or the retail markets in
which Office Depot competes), or any development or combination of developments
of which the management of Office Depot is aware that, individually or in the
aggregate, has had, or is reasonably likely to have, a Office Depot Material
Adverse Effect (other than developments that are the effect or result of actions
to be taken by Staples or economic factors affecting the economy as a whole or
the retail markets in which Office Depot competes); (ii) any damage, destruction
or loss (whether or not covered by insurance) with respect to Office Depot or
any of its Subsidiaries having a Office Depot Material Adverse Effect; (iii) any
material change by Office Depot in its accounting methods, principles or
practices to which Staples has not previously consented in writing; (iv) any
revaluation by Office Depot of any of its assets having a Office Depot Material
Adverse Effect; or (v) any other action or event that would have required the
consent of Staples pursuant to Section 5.01 of this Agreement had such action or
event occurred after the date of this Agreement and that, individually or in the
aggregate, has had or is reasonably likely to have a Office Depot Material
Adverse Effect.
Section 3.07 TAXES.
(a) For the purposes of this Agreement, a "Tax" or, collectively,
"Taxes," means any and all material federal, state, local and foreign taxes,
assessments and other governmental charges, duties, impositions and liabilities,
including taxes based upon or measured by gross receipts, income, profits,
sales, use and occupation, and
-11-
<PAGE> 19
value added, ad valorem, transfer, gains, franchise, withholding, payroll,
recapture, employment, excise, unemployment insurance, social security, business
license, occupation, business organization, stamp, environmental and property
taxes, together with all interest, penalties and additions imposed with respect
to such amounts and any obligations under any agreements or arrangements with
any other person with respect to such amounts and including any liability for
taxes of a predecessor entity.
(b) Office Depot and each of its Subsidiaries have (i) filed all
federal, state, local and foreign tax returns and reports required to be filed
by them prior to the date of this Agreement (taking into account extensions),
(ii) paid or accrued all Taxes due and payable, and (iii) paid or accrued all
Taxes for which a notice of assessment or collection has been received (other
than amounts being contested in good faith by appropriate proceedings), except
in the case of clause (i), (ii) or (iii) for any such filings, payments or
accruals which are not reasonably likely, individually or in the aggregate, to
have a Office Depot Material Adverse Effect. Neither the Internal Revenue
Service (the "IRS") nor any other taxing authority has asserted any claim for
taxes, or to the actual knowledge of the executive officers of Office Depot, is
threatening to assert any claims for taxes, which claims, individually or in the
aggregate, are reasonably likely to have a Office Depot Material Adverse Effect.
Office Depot and each of its Subsidiaries have withheld or collected and paid
over to the appropriate governmental authorities (or are properly holding for
such payment) all taxes required by law to be withheld or collected, except for
amounts which are not reasonably likely, individually or in the aggregate, to
have a Office Depot Material Adverse Effect. Neither Office Depot nor any of its
Subsidiaries has made an election under Section 341(f) of the Code, except for
any such election which shall not have a Office Depot Material Adverse Effect.
There are no liens for taxes upon the assets of Office Depot or any of its
Subsidiaries (other than liens for taxes that are not yet due or that are being
contested in good faith by appropriate proceedings), except for liens which are
not reasonably likely, individually or in the aggregate, to have a Office Depot
Material Adverse Effect.
Section 3.08 PROPERTIES.
(a) Office Depot has provided to Staples a true and complete list of
all real property leased by Office Depot or its Subsidiaries pursuant to leases
providing for the occupancy, in each case, of (i) a retail store or (ii) other
facilities in excess of 20,000 square feet (collectively "Material Lease(s)")
and the location of the premises. Office Depot is not in default under any of
such leases, except where the existence of such defaults, individually or in the
aggregate, is not reasonably likely to have a Office Depot Material Adverse
Effect.
(b) Office Depot has provided to Staples a true and complete list of
all real property that Office Depot or any of its Subsidiaries owns. With
respect to each such item of real property, except for such matters that,
individually or in the aggregate,
-12-
<PAGE> 20
are not reasonably likely to have a Office Depot Material Adverse Effect: (a)
Office Depot or the identified Subsidiary has good and clear record and
marketable title to such property, insurable by a recognized national title
insurance company at standard rates, free and clear of any security interest,
easement, covenant or other restriction, except for recorded easements,
covenants and other restrictions which do not materially impair the current uses
or occupancy of such property; and (b) the improvements constructed on such
property are in good condition, and all mechanical and utility systems servicing
such improvements are in good condition, free in each case of material defects.
Section 3.09 INTELLECTUAL PROPERTY. Office Depot owns, or is licensed
or otherwise possesses legally enforceable rights to use, all trademarks, trade
names, service marks, copyrights, and any applications for such trademarks,
trade names, service marks and copyrights, know-how, computer software programs
or applications and tangible or intangible proprietary information or material
that are necessary to conduct the business of Office Depot as currently
conducted, subject to such exceptions that would not be reasonably likely to
have a Office Depot Material Adverse Effect.
Section 3.10 AGREEMENTS, CONTRACTS AND COMMITMENTS. Office Depot has
not breached, or received in writing any claim or notice that it has breached,
any of the terms or conditions of any material agreement, contract or commitment
filed as an exhibit to the Office Depot SEC Reports ("Office Depot Material
Contracts") in such a manner as, individually or in the aggregate, are
reasonably likely to have a Office Depot Material Adverse Effect. Each Office
Depot Material Contract that has not expired by its terms is in full force and
effect.
Section 3.11 LITIGATION. Except as described in the Office Depot SEC
Reports filed prior to the date hereof, there is no action, suit or proceeding,
claim, arbitration or investigation against Office Depot pending or as to which
Office Depot has received any written notice of assertion, which, individually
or in the aggregate, is reasonably likely to have a Office Depot Material
Adverse Effect or a material adverse effect on the ability of Office Depot to
consummate the transactions contemplated by this Agreement.
Section 3.12 ENVIRONMENTAL MATTERS.
(a) Except as disclosed in the Office Depot SEC Reports filed prior to
the date hereof and except for such matters that, individually or in the
aggregate, are not reasonably likely to have a Office Depot Material Adverse
Effect: (i) Office Depot and its Subsidiaries have complied with all applicable
Environmental Laws (as defined in Section 3.12(b)); (ii) the properties
currently owned or operated by Office Depot and its Subsidiaries (including
soils, groundwater, surface water, buildings or other structures) are not
contaminated with any Hazardous Substances (as defined in
-13-
<PAGE> 21
Section 3.12(c)); (iii) the properties formerly owned or operated by Office
Depot or any of its Subsidiaries were not contaminated with Hazardous Substances
during the period of ownership or operation by Office Depot or any of its
Subsidiaries; (iv) neither Office Depot nor its Subsidiaries are subject to
liability for any Hazardous Substance disposal or contamination on any third
party property; (v) neither Office Depot nor any of its Subsidiaries has been
associated with any release or threat of release of any Hazardous Substance;
(vi) neither Office Depot nor any of its Subsidiaries has received any notice,
demand, letter, claim or request for information alleging that Office Depot or
any of its Subsidiaries may be in violation of or liable under any Environmental
Law; (vii) neither Office Depot nor any of its Subsidiaries is subject to any
orders, decrees, injunctions or other arrangements with any Governmental Entity
or is subject to any indemnity or other agreement with any third party relating
to liability under any Environmental Law or relating to Hazardous Substances;
and (viii) there are no circumstances or conditions involving Office Depot or
any of its Subsidiaries that could reasonably be expected to result in any
claims, liability, investigations, costs or restrictions on the ownership, use
or transfer of any property of Office Depot pursuant to any Environmental Law.
(b) As used herein, the term "Environmental Law" means any federal,
state, local or foreign law, regulation, order, decree, permit, authorization,
opinion, common law or agency requirement relating to: (A) the protection,
investigation or restoration of the environment, health and safety, or natural
resources, (B) the handling, use, presence, disposal, release or threatened
release of any Hazardous Substance or (C) noise, odor, wetlands, pollution,
contamination or any injury or threat of injury to persons or property.
(c) As used herein, the term "Hazardous Substance" means any substance
that is: (A) listed, classified or regulated pursuant to any Environmental Law;
(B) any petroleum product or by-product, asbestos-containing material,
lead-containing paint or plumbing, polychlorinated biphenyls, radioactive
materials or radon; or (C) any other substance which is the subject of
regulatory action by any Governmental Entity pursuant to any Environmental Law.
Section 3.13 EMPLOYEE BENEFIT PLANS.
(a) Office Depot has listed in Section 3.13 of the Office Depot
Disclosure Schedule all employee benefit plans (as defined in Section 3(3) of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA")) and
all bonus, stock option, stock purchase, incentive, deferred compensation,
supplemental retirement, severance and other similar employee benefit plans, and
all unexpired severance agreements, written or otherwise, for the benefit of, or
relating to, any current or former employee of Office Depot or any trade or
business (whether or not incorporated) which is a member or which is under
common control with Office
-14-
<PAGE> 22
Depot (an "ERISA Affiliate") within the meaning of Section 414 of the Code, or
any Subsidiary of Office Depot (together, the "Office Depot Employee Plans").
(b) With respect to each Office Depot Employee Plan, Office Depot has
made available to Staples, a true and correct copy of (i) the most recent annual
report (Form 5500) filed with the IRS, (ii) such Office Depot Employee Plan,
(iii) each trust agreement and group annuity contract, if any, relating to such
Office Depot Employee Plan and (iv) the most recent actuarial report or
valuation relating to a Office Depot Employee Plan subject to Title IV of ERISA.
(c) With respect to the Office Depot Employee Plans, individually and
in the aggregate, no event has occurred, and to the knowledge of Office Depot,
there exists no condition or set of circumstances in connection with which
Office Depot could be subject to any liability that is reasonably likely to have
a Office Depot Material Adverse Effect under ERISA, the Code or any other
applicable law.
(d) With respect to the Office Depot Employee Plans, individually and
in the aggregate, there are no funded benefit obligations for which
contributions have not been made or properly accrued and there are no unfunded
benefit obligations which have not been accounted for by reserves, or otherwise
properly footnoted in accordance with generally accepted accounting principles,
on the financial statements of Office Depot, which obligations are reasonably
likely to have a Office Depot Material Adverse Effect.
(e) Except as disclosed in Office Depot SEC Reports filed prior to the
date of this Agreement, and except as provided for in this Agreement, neither
Office Depot nor any of its Subsidiaries is a party to any oral or written (i)
agreement with any officer or other key employee of Office Depot or any of its
Subsidiaries, the benefits of which are contingent, or the terms of which are
materially altered, upon the occurrence of a transaction involving Office Depot
of the nature contemplated by this Agreement, (ii) agreement with any officer of
Office Depot providing any term of employment or compensation guarantee
extending for a period longer than one year from the date hereof and for the
payment of compensation in excess of $100,000 per annum, or (iii) agreement or
plan, including any stock option plan, stock appreciation right plan, restricted
stock plan or stock purchase plan, any of the benefits of which will be
increased, or the vesting of the benefits of which will be accelerated, by the
occurrence of any of the transactions contemplated by this Agreement or the
value of any of the benefits of which will be calculated on the basis of any of
the transactions contemplated by this Agreement.
Section 3.14 COMPLIANCE WITH LAWS. Office Depot has complied with, is
not in violation of, and has not received any notices of violation with respect
to, any federal, state or local statute, law or regulation with respect to the
conduct of its business, or the ownership or operation of its business, except
for failures to comply
-15-
<PAGE> 23
or violations which, individually or in the aggregate, have not had and are not
reasonably likely to have a Office Depot Material Adverse Effect.
Section 3.15 ACCOUNTING AND TAX MATTERS. To its knowledge, after
consulting with its independent auditors, neither Office Depot nor any of its
Affiliates (as defined in Section 6.10) has taken or agreed to take any action
which would (i) prevent Staples from accounting for the business combination to
be effected by the Merger as a pooling of interests or (ii) prevent the Merger
from constituting a transaction qualifying as a reorganization under 368(a) of
the Code.
Section 3.16 REGISTRATION STATEMENT; PROXY STATEMENT/PROSPECTUS. The
information to be supplied by Office Depot for inclusion in the registration
statement on Form S-4 pursuant to which shares of Staples Common Stock issued in
the Merger will be registered under the Securities Act (the "Registration
Statement"), shall not at the time the Registration Statement is declared
effective by the SEC contain any untrue statement of a material fact or omit to
state any material fact required to be stated in the Registration Statement or
necessary in order to make the statements in the Registration Statement, in
light of the circumstances under which they were made, not misleading. The
information supplied by Office Depot for inclusion in the joint proxy
statement/prospectus to be sent to the stockholders of Staples and Office Depot
in connection with the meeting of Office Depot's stockholders to consider this
Agreement and the Merger (the "Office Depot Stockholders' Meeting") and in
connection with the meeting of Staples' stockholders (the "Staples Stockholders'
Meeting") to consider the issuance of shares of Staples Common Stock pursuant to
the Merger (the "Joint Proxy Statement") shall not, on the date the Joint Proxy
Statement is first mailed to stockholders of Office Depot or Staples, at the
time of the Office Depot Stockholders' Meeting and the Staples Stockholders'
Meeting and at the Effective Time, contain any statement which, at such time and
in light of the circumstances under which it shall be made, is false or
misleading with respect to any material fact, or omit to state any material fact
necessary in order to make the statements made in the Joint Proxy Statement not
false or misleading; or omit to state any material fact necessary to correct any
statement in any earlier communication with respect to the solicitation of
proxies for the Office Depot Stockholders' Meeting or the Staples Stockholders'
Meeting which has become false or misleading. If at any time prior to the
Effective Time any event relating to Office Depot or any of its Affiliates,
officers or directors should be discovered by Office Depot which should be set
forth in an amendment to the Registration Statement or a supplement to the Joint
Proxy Statement, Office Depot shall promptly inform Staples.
Section 3.17 LABOR MATTERS. Neither Office Depot nor any of its
Subsidiaries is a party to or otherwise bound by any collective bargaining
agreement, contract or other agreement or understanding with a labor union or
labor organization, nor, as of the date hereof, is Office Depot or any of its
Subsidiaries the subject of any material proceeding asserting that Office Depot
or any of its Subsidiaries has committed an unfair
-16-
<PAGE> 24
labor practice or is seeking to compel it to bargain with any labor union or
labor organization nor, as of the date of this Agreement, is there pending or,
to the knowledge of the executive officers of Office Depot, threatened, any
material labor strike, dispute, walkout, work stoppage, slow-down or lockout
involving Office Depot or any of its Subsidiaries.
Section 3.18 INSURANCE. All material fire and casualty, general
liability, business interruption, product liability, and sprinkler and water
damage insurance policies maintained by Office Depot or any of its Subsidiaries
are with reputable insurance carriers, provide full and adequate coverage for
all normal risks incident to the business of Office Depot and its Subsidiaries
and their respective properties and assets, and are in character and amount at
least equivalent to that carried by persons engaged in similar businesses and
subject to the same or similar perils or hazards, except for any such failures
to maintain insurance policies that, individually or in the aggregate, are not
reasonably likely to have a Office Depot Material Adverse Effect.
Section 3.19 NO EXISTING DISCUSSIONS. As of the date hereof, Office
Depot is not engaged, directly or indirectly, in any discussions or negotiations
with any other party with respect to an Acquisition Proposal (as defined in
Section 6.01).
Section 3.20 OPINION OF FINANCIAL ADVISOR. The financial advisor of
Office Depot, Merrill Lynch, Pierce, Fenner & Smith Incorporated, has delivered
to Office Depot an opinion dated the date of this Agreement to the effect that
the Exchange Ratio is fair to the holders of Office Depot Common Stock from a
financial point of view.
Section 3.21 SECTION 203 OF THE DGCL NOT APPLICABLE. Section 203 of the
DGCL is not applicable to Office Depot or (by reason of Office Depot's
participation therein) the Merger. No other "fair price," "moratorium," "control
share acquisition" or other similar anti-takeover statute or regulation is
applicable to Office Depot or (by reason of Office Depot's participation
therein) the Merger or the other transactions contemplated by this Agreement.
Section 3.22 RIGHTS AGREEMENT. Office Depot has entered into a Rights
Agreement, a true and correct copy of which has previously been provided to
Staples, under which Staples is defined as an "Exempt Person."
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF STAPLES AND SUB
Staples and Sub represent and warrant to Office Depot that the
statements contained in this Article IV are true and correct, except as set
forth in the disclosure schedule delivered by Staples to Office Depot on or
before the date of this Agreement
-17-
<PAGE> 25
(the "Staples Disclosure Schedule"). The Staples Disclosure Schedule shall be
arranged in paragraphs corresponding to the numbered and lettered paragraphs
contained in this Article IV and the disclosure in any paragraph shall qualify
other paragraphs in this Article IV only to the extent that it is reasonably
apparent from a reading of such document that it also qualifies or applies to
such other paragraphs.
Section 4.01 ORGANIZATION OF STAPLES AND SUB. Each of Staples and Sub
and Staples' other Subsidiaries is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation, has all requisite corporate power to own, lease and operate its
property and to carry on its business as now being conducted and as proposed to
be conducted, and is duly qualified to do business and is in good standing as a
foreign corporation in each jurisdiction in which the failure to be so qualified
would have a material adverse effect on the business, properties, financial
condition or results of operations of Staples and its Subsidiaries, taken as a
whole (a "Staples Material Adverse Effect"). Except as set forth in the Staples
SEC Reports (as defined in Section 4.04) filed prior to the date hereof, neither
Staples nor any of its Subsidiaries directly or indirectly owns any equity or
similar interest in, or any interest convertible into or exchangeable or
exercisable for, any corporation, partnership, joint venture or other business
association or entity, excluding securities in any publicly traded company held
for investment by Staples and comprising less than five percent (5%) of the
outstanding stock of such company.
Section 4.02 STAPLES CAPITAL STRUCTURE.
(a) The authorized capital stock of Staples consists of 500,000,000
shares of Common Stock, $.0006 par value, and 5,000,000 shares of Preferred
Stock, $.01 par value ("Staples Preferred Stock"). As of August 3, 1996, (i)
160,449,493 shares of Staples Common Stock were issued and outstanding, all of
which are validly issued, fully paid and nonassessable, and (ii) 37,390 shares
of Staples Common Stock were held in the treasury of Staples or by Subsidiaries
of Staples. The Staples Disclosure Schedule shows the number of shares of
Staples Common Stock reserved for future issuance pursuant to stock options
granted and outstanding as of August 3, 1996 and the plans under which such
options were granted (collectively, the "Staples Stock Plans"). No material
change in such capitalization has occurred between August 3, 1996 and the date
of this Agreement. As of the date of this Agreement, none of the shares of
Staples Preferred Stock is issued and outstanding. All shares of Staples Common
Stock subject to issuance as specified above are duly authorized and, upon
issuance on the terms and conditions specified in the instruments pursuant to
which they are issuable, shall be validly issued, fully paid and nonassessable.
There are no obligations, contingent or otherwise, of Staples or any of its
Subsidiaries to repurchase, redeem or otherwise acquire any shares of Staples
Common Stock or the capital stock of any Subsidiary or to provide funds to or
make any material investment (in the form of a loan, capital contribution or
otherwise) in any such
-18-
<PAGE> 26
Subsidiary or any other entity other than guarantees of bank obligations of
Subsidiaries entered into in the ordinary course of business. All of the
outstanding shares of capital stock of each of Staples' Subsidiaries are duly
authorized, validly issued, fully paid and nonassessable and all such shares
(other than directors' qualifying shares in the case of foreign Subsidiaries)
are owned by Staples or another Subsidiary free and clear of all security
interests, liens, claims, pledges, agreements, limitations in Staples' voting
rights, charges or other encumbrances of any nature.
(b) Except as set forth in this Section 3.02 or as reserved for future
grants of options under the Staples Stock Plans or the Office Depot Stock Option
Agreement, and except for the Staples Rights issued and issuable under the
Rights Agreement dated February 3, 1994 between Staples and The First National
Bank of Boston (the "Staples Rights Plan"), there are no equity securities of
any class of Staples or any of its Subsidiaries, or any security exchangeable
into or exercisable for such equity securities, issued, reserved for issuance or
outstanding. There are no options, warrants, equity securities, calls, rights,
commitments or agreements of any character to which Staples or any of its
Subsidiaries is a party or by which it is bound obligating Staples or any of its
Subsidiaries to issue, deliver or sell, or cause to be issued, delivered or
sold, additional shares of capital stock of Staples or any of its Subsidiaries
or obligating Staples or any of its Subsidiaries to grant, extend, accelerate
the vesting of or enter into any such option, warrant, equity security, call,
right, commitment or agreement. To the best knowledge of Staples, there are no
voting trusts, proxies or other voting agreements or understandings with respect
to the shares of capital stock of Staples.
Section 4.03 AUTHORITY; NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) Each of Staples and the Sub has all requisite corporate power and
authority to enter into this Agreement and (in the case of Staples) the Office
Depot Stock Option Agreement and to consummate the transactions contemplated by
this Agreement and (in the case of Staples) the Office Depot Stock Option
Agreement. The execution and delivery of this Agreement and (in the case of
Staples) the Office Depot Stock Option Agreement and the consummation of the
transactions contemplated by this Agreement and (in the case of Staples) the
Office Depot Stock Option Agreement by Staples and Sub have been duly authorized
by all necessary corporate action on the part of each of Staples and Sub
(including the approval of the Merger by Staples as the sole stockholder of
Sub), subject only to the approval of the Staples Voting Proposal (as defined in
Section 6.05) by Staples' stockholders. This Agreement and (in the case of
Staples) the Office Depot Stock Option Agreement have been duly executed and
delivered by each of Staples and Sub and constitute the valid and binding
obligations of each of Staples and Sub, enforceable in accordance with their
terms, subject to the Bankruptcy and Equity Exception.
-19-
<PAGE> 27
(b) The execution and delivery of this Agreement and (in the case of
Staples) the Office Depot Stock Option Agreement by each of Staples and Sub does
not, and the consummation of the transactions contemplated by this Agreement and
(in the case of Staples) the Office Depot Stock Option Agreement will not, (i)
conflict with, or result in any violation or breach of, any provision of the
Certificate of Incorporation or Bylaws of Staples or Sub, (ii) result in any
violation or breach of, or constitute (with or without notice or lapse of time,
or both) a default (or give rise to a right of termination, cancellation or
acceleration of any obligation or loss of any material benefit) under, or
require a consent or waiver under, any of the terms, conditions or provisions of
any note, bond, mortgage, indenture, lease, contract or other agreement,
instrument or obligation to which Staples or any of its Subsidiaries is a party
or by which any of them or any of their properties or assets may be bound, or
(iii) conflict with or violate any permit, concession, franchise, license,
judgment, order, decree, statute, law, ordinance, rule or regulation applicable
to Staples or any of its Subsidiaries or any of its or their properties or
assets, except in the case of (ii) and (iii) for any such conflicts, violations,
defaults, terminations, cancellations or accelerations which are not,
individually or in the aggregate, reasonably likely to have a Staples Material
Adverse Effect.
(c) No consent, approval, order or authorization of, or registration,
declaration or filing with, any Governmental Entity is required by or with
respect to Staples or any of its Subsidiaries in connection with the execution
and delivery of this Agreement and (in the case of Staples) the Office Depot
Stock Option Agreement or the consummation of the transactions contemplated
hereby or thereby, except for (i) the filing of the pre-merger notification
report under the HSR Act, (ii) the filing of the Registration Statement with the
SEC in accordance with the Securities Act, (iii) the filing of the Certificate
of Merger with the Delaware Secretary of State, (iv) the filing of the Joint
Proxy Statement with the SEC in accordance with the Exchange Act, (v) such
consents, approvals, orders, authorizations, registrations, declarations and
filings as may be required under applicable state securities laws and the laws
of any foreign country (including the Canadian Competition Act and the
Investment Canada Act) and (vi) such other consents, authorizations, filings,
approvals and registrations which, if not obtained or made, would not be
reasonably likely to have a Staples Material Adverse Effect.
Section 4.04 SEC FILINGS; FINANCIAL STATEMENTS.
(a) Staples has filed and made available to Office Depot all forms,
reports and documents required to be filed by Staples with the SEC since July 1,
1994 other than registration statements on Form S-8 (collectively, the "Staples
SEC Reports"). The Staples SEC Reports (i) at the time filed, complied in all
material respects with the applicable requirements of the Securities Act and the
Exchange Act, as the case may be, and (ii) did not at the time they were filed
(or if amended or superseded by a filing prior to the date of this Agreement,
then on the date of such filing) contain
-20-
<PAGE> 28
any untrue statement of a material fact or omit to state a material fact
required to be stated in such Staples SEC Reports or necessary in order to make
the statements in such Staples SEC Reports, in the light of the circumstances
under which they were make, not misleading. None of Staples' Subsidiaries is
required to file any forms, reports or other documents with the SEC.
(b) Each of the consolidated financial statements (including, in each
case, any related notes) contained in the Staples SEC Reports complied as to
form in all material respects with the applicable published rules and
regulations of the SEC with respect thereto, was prepared in accordance with
generally accepted accounting principles applied on a consistent basis
throughout the periods involved (except as may be indicated in the notes to such
financial statements or, in the case of unaudited statements, as permitted by
Form 10-Q of the SEC) and fairly presented the consolidated financial position
of Staples and its Subsidiaries as of the dates and the consolidated results of
its operations and cash flows for the periods indicated, except that the
unaudited interim financial statements were or are subject to normal and
recurring year-end adjustments which were not or are not expected to be material
in amount. The audited balance sheet of Staples as of February 3, 1996 is
referred to herein as the "Staples Balance Sheet."
Section 4.05 NO UNDISCLOSED LIABILITIES. Except as disclosed in the
Staples SEC Reports filed prior to the date hereof, and except for normal or
recurring liabilities incurred since July 27, 1996 in the ordinary course of
business consistent with past practices, Staples and its Subsidiaries do not
have any liabilities, either accrued, contingent or otherwise (whether or not
required to be reflected in financial statements in accordance with generally
accepted accounting principles), and whether due or to become due, which
individually or in the aggregate, are reasonably likely to have a Staples
Material Adverse Effect.
Section 4.06 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed
in the Staples SEC Reports filed prior to the date hereof, since the date of the
Staples Balance Sheet, Staples and its Subsidiaries have conducted their
businesses only in the ordinary course and in a manner consistent with past
practice and, since such date, there has not been (i) any Material Adverse
Change in Staples and its Subsidiaries, taken as a whole (other than changes
that are the effect or result of economic factors affecting the economy as a
whole or the retail markets in which Staples competes), or any development or
combination of developments of which the management of Staples is aware that,
individually or in the aggregate, has had, or is reasonably likely to have, a
Staples Material Adverse Effect (other than developments that are the effect or
result of actions to be taken by Office Depot or economic factors affecting the
economy as a whole or the retail markets in which Staples competes); (ii) any
damage, destruction or loss (whether or not covered by insurance) with respect
to Staples or any of its Subsidiaries having a Staples Material Adverse Effect;
(iii) any material change by Staples in its accounting methods, principles or
practices
-21-
<PAGE> 29
to which Office Depot has not previously consented in writing; (iv) any
revaluation by Staples of any of its assets having a Staples Material Adverse
Effect; or (v) any other action or event that would have required the consent of
Office Depot pursuant to Section 5.01 of this Agreement had such action or event
occurred after the date of this Agreement and that, individually or in the
aggregate, has had or is reasonably likely to have a Staples Material Adverse
Effect.
Section 4.07 TAXES. Staples and each of its Subsidiaries have (i) filed
all federal, state, local and foreign tax returns and reports required to be
filed by them prior to the date of this Agreement (taking into account
extensions), (ii) paid or accrued all Taxes due and payable, and (iii) paid or
accrued all Taxes for which a notice of assessment or collection has been
received (other than amounts being contested in good faith by appropriate
proceedings), except in the case of clause (i), (ii) or (iii) for any such
filings, payments or accruals which are not reasonably likely, individually or
in the aggregate, to have a Staples Material Adverse Effect. Neither the IRS nor
any other taxing authority has asserted any claim for taxes, or to the actual
knowledge of the executive officers of Staples, is threatening to assert any
claims for taxes, which claims, individually or in the aggregate, are reasonably
likely to have a Staples Material Adverse Effect. Staples and each of its
Subsidiaries have withheld or collected and paid over to the appropriate
governmental authorities (or are properly holding for such payment) all taxes
required by law to be withheld or collected, except for amounts which are not
reasonably likely, individually or in the aggregate, to have a Staples Material
Adverse Effect. Neither Staples nor any of its Subsidiaries has made an election
under Section 341(f) of the Code, except for any such election which shall not
have a Staples Material Adverse Effect. There are no liens for taxes upon the
assets of Staples or any of its Subsidiaries (other than liens for taxes that
are not yet due or that are being contested in good faith by appropriate
proceedings), except for liens which are not reasonably likely, individually or
in the aggregate, to have a Staples Material Adverse Effect.
Section 4.08 PROPERTIES.
(a) Staples has provided to Office Depot a true and complete list of
all real property leased by Staples or its Subsidiaries pursuant to Material
Leases and the location of the premises. Staples is not in default under any of
such Material Leases, except where the existence of such defaults, individually
or in the aggregate, is not reasonably likely to have a Staples Material
Adverse Effect.
(b) Staples has provided to Office Depot a true and complete list of all
real property that Staples or any of its Subsidiaries owns. With respect to each
such item of real property, except for such matters that, individually or in the
aggregate, are not reasonably likely to have a Staples Material Adverse Effect:
(a) Staples or the identified Subsidiary has good and clear record and
marketable title to such property, insurable by a recognized national title
insurance company at standard rates, free and
-22-
<PAGE> 30
clear of any security interest, easement, covenant or other restriction, except
for recorded easements, covenants and other restrictions which do not materially
impair the current uses or occupancy of such property; and (b) the improvements
constructed on such property are in good condition, and all mechanical and
utility systems servicing such improvements are in good condition, free in each
case of material defects.
Section 4.09 INTELLECTUAL PROPERTY. Staples owns, or is licensed or
otherwise possesses legally enforceable rights to use, all trademarks, trade
names, service marks, copyrights, and any applications for such trademarks,
trade names, service marks and copyrights, know-how, computer software programs
or applications, and tangible or intangible proprietary information or material
that are necessary to conduct the business of Staples as currently conducted,
subject to such exceptions that would not be reasonably likely to have a Staples
Material Adverse Effect.
Section 4.10 AGREEMENTS, CONTRACTS AND COMMITMENTS. Staples has not
breached, or received in writing any claim or notice that it has breached, any
of the terms or conditions of any material agreement, contract or commitment
filed as an exhibit to the Staples SEC Reports ("Staples Material Contracts") in
such a manner as, individually or in the aggregate, are reasonably likely to
have a Staples Material Adverse Effect. Each Staples Material Contract that has
not expired by its terms is in full force and effect.
Section 4.11 LITIGATION. Except as described in the Staples SEC
Reports filed prior to the date hereof, there is no action, suit or proceeding,
claim, arbitration or investigation against Staples pending or as to which
Staples has received any written notice of assertion, which, individually or in
the aggregate, is reasonably likely to have a Staples Material Adverse Effect or
a material adverse effect on the ability of Staples to consummate the
transactions contemplated by this Agreement.
Section 4.12 ENVIRONMENTAL MATTERS. Except as disclosed in the Staples
SEC Reports filed prior to the date hereof and except for such matters that,
individually or in the aggregate, are not reasonably likely to have a Staples
Material Adverse Effect: (i) Staples and its Subsidiaries have complied with all
applicable Environmental Laws; (ii) the properties currently owned or operated
by Staples and its Subsidiaries (including soils, groundwater, surface water,
buildings or other structures) are not contaminated with any Hazardous
Substances; (iii) the properties formerly owned or operated by Staples or any of
its Subsidiaries were not contaminated with Hazardous Substances during the
period of ownership or operation by Staples or any of its Subsidiaries; (iv)
neither Staples nor its Subsidiaries are subject to liability for any Hazardous
Substance disposal or contamination on any third party property; (v) neither
Staples nor any of its Subsidiaries has been associated with any release or
threat of release of any Hazardous Substance; (vi) neither Staples nor any of
its Subsidiaries has received any notice, demand, letter, claim or request for
information
-23-
<PAGE> 31
alleging that Staples or any of its Subsidiaries may be in violation of or
liable under any Environmental Law; (vii) neither Staples nor any of its
Subsidiaries is subject to any orders, decrees, injunctions or other
arrangements with any Governmental Entity or is subject to any indemnity or
other agreement with any third party relating to liability under any
Environmental Law or relating to Hazardous Substances; and (viii) there are no
circumstances or conditions involving Staples or any of its Subsidiaries that
could reasonably be expected to result in any claims, liability, investigations,
costs or restrictions on the ownership, use or transfer of any property of
Staples pursuant to any Environmental Law.
Section 4.13 EMPLOYEE BENEFIT PLANS.
(a) Staples has listed in Section 4.13 of the Staples Disclosure
Schedule all employee benefit plans (as defined in Section 3(3) of ERISA) and
all bonus, stock option, stock purchase, incentive, deferred compensation,
supplemental retirement, severance and other similar employee benefit plans, and
all unexpired severance agreements, written or otherwise, for the benefit of, or
relating to, any current or former employee of Staples or any ERISA Affiliate of
Staples, or any Subsidiary of Staples (together, the "Staples Employee Plans").
(b) With respect to each Staples Employee Plan, Staples has made
available to Office Depot, a true and correct copy of (i) the most recent annual
report (Form 5500) filed with the IRS, (ii) such Staples Employee Plan, (iii)
each trust agreement and group annuity contract, if any, relating to such
Staples Employee Plan and (iv) the most recent actuarial report or valuation
relating to a Staples Employee Plan subject to Title IV of ERISA.
(c) With respect to the Staples Employee Plans, individually and in the
aggregate, no event has occurred, and to the knowledge of Staples, there exists
no condition or set of circumstances in connection with which Staples could be
subject to any liability that is reasonably likely to have a Staples Material
Adverse Effect under ERISA, the Code or any other applicable law.
(d) With respect to the Staples Employee Plans, individually and in the
aggregate, there are no funded benefit obligations for which contributions have
not been made or properly accrued and there are no unfunded benefit obligations
which have not been accounted for by reserves, or otherwise properly footnoted
in accordance with generally accepted accounting principles, on the financial
statements of Staples, which obligations are reasonably likely to have a Staples
Material Adverse Effect.
(e) Except as disclosed in Staples SEC Reports filed prior to the date
of this Agreement, and except as provided for in this Agreement, neither Staples
nor any of its Subsidiaries is a party to any oral or written (i) agreement with
any officer or
-24-
<PAGE> 32
other key employee of Staples or any of its Subsidiaries, the benefits of which
are contingent, or the terms of which are materially altered, upon the
occurrence of a transaction involving Staples of the nature contemplated by this
Agreement, (ii) agreement with any officer of Staples providing any term of
employment or compensation guarantee extending for a period longer than one year
from the date hereof or for the payment of compensation in excess of $100,000
per annum, or (iii) agreement or plan, including any stock option plan, stock
appreciation right plan, restricted stock plan or stock purchase plan, any of
the benefits of which will be increased, or the vesting of the benefits of which
will be accelerated, by the occurrence of any of the transactions contemplated
by this Agreement or the value of any of the benefits of which will be
calculated on the basis of any of the transactions contemplated by this
Agreement.
Section 4.14 COMPLIANCE WITH LAWS. Staples has complied with, is not
in violation of, and has not received any notices of violation with respect to,
any federal, state or local statute, law or regulation with respect to the
conduct of its business, or the ownership or operation of its business, except
for failures to comply or violations which, individually or in the aggregate,
have not had and are not reasonably likely to have a Staples Material Adverse
Effect.
Section 4.15 ACCOUNTING AND TAX MATTERS. To its knowledge, after
consulting with its independent auditors, neither Staples nor any of its
Affiliates has taken or agreed to take any action which would (i) prevent
Staples from accounting for the business combination to be effected by the
Merger as a pooling of interests, or (ii) prevent the Merger from constituting a
transaction qualifying as a reorganization under Section 368(a) of the Code.
Section 4.16 REGISTRATION STATEMENT; PROXY STATEMENT/PROSPECTUS. The
information in the Registration Statement (except for information supplied by
Office Depot for inclusion in the Registration Statement, as to which Staples
makes no representation) shall not at the time the Registration Statement is
declared effective by the SEC contain any untrue statement of a material fact or
omit to state any material fact required to be stated in the Registration
Statement or necessary in order to make the statements in the Registration
Statement, in light of the circumstances under which they were made, not
misleading. The information (except for information supplied by Office Depot for
inclusion in the Joint Proxy Statement, as to which Staples makes no
representation) in the Joint Proxy Statement shall not, on the date the Joint
Proxy Statement is first mailed to stockholders of Staples or Office Depot, at
the time of the Staples Stockholders' Meeting and the Office Depot Stockholder's
Meeting and at the Effective Time, contain any statement which, at such time and
in light of the circumstances under which it shall be made, is false or
misleading with respect to any material fact, or omit to state any material fact
necessary in order to make the statements made in the Joint Proxy Statement not
false or misleading; or omit to state any material fact necessary to correct any
-25-
<PAGE> 33
statement in any earlier communication with respect to the solicitation of
proxies for the Staples Stockholders' Meeting or the Office Depot Stockholders'
Meetings which has become false or misleading. If at any time prior to the
Effective Time any event relating to Staples or any of its Affiliates, officers
or directors should be discovered by Staples which should be set forth in an
amendment to the Registration Statement or a supplement to the Joint Proxy
Statement, Staples shall promptly inform Office Depot.
Section 4.17 LABOR MATTERS. Neither Staples nor any of its Subsidiaries
is a party to or otherwise bound by any collective bargaining agreement,
contract or other agreement or understanding with a labor union or labor
organization, nor, as of the date hereof, is Staples or any of its Subsidiaries
the subject of any material proceeding asserting that Staples or any of its
Subsidiaries has committed an unfair labor practice or is seeking to compel it
to bargain with any labor union or labor organization nor, as of the date of
this Agreement, is there pending or, to the knowledge of the executive officers
of Staples, threatened, any material labor strike, dispute, walkout, work
stoppage, slow-down or lockout involving Staples or any of its Subsidiaries.
Section 4.18 INSURANCE. All material fire and casualty, general
liability, business interruption, product liability, and sprinkler and water
damage insurance policies maintained by Staples or any of its Subsidiaries are
with reputable insurance carriers, provide full and adequate coverage for all
normal risks incident to the business of Staples and its Subsidiaries and their
respective properties and assets, and are in character and amount at least
equivalent to that carried by persons engaged in similar businesses and subject
to the same or similar perils or hazards, except for any such failures to
maintain insurance policies that, individually or in the aggregate, are not
reasonably likely to have a Staples Material Adverse Effect.
Section 4.19 OPINION OF FINANCIAL ADVISOR. The financial advisor of
Staples, Goldman, Sachs & Co., has delivered to Staples an opinion dated the
date of this Agreement to the effect that the Exchange Ratio is fair to Staples
from a financial point of view.
Section 4.20 NO EXISTING DISCUSSIONS. As of the date hereof, Staples
is not engaged, directly or indirectly, in any discussions or negotiations with
any other party with respect to an Acquisition Proposal.
Section 4.21 SECTION 203 OF THE DGCL NOT APPLICABLE. The restrictions
contained in Section 203 of the DGCL applicable to a "business combination" (as
defined in Section 203) will not apply to the execution, delivery or performance
of this Agreement by Staples or the consummation by Staples of the Merger or the
other transactions contemplated by this Agreement. No other "fair price,"
"moratorium," "control share acquisition" or other similar anti-takeover statute
or regulation is
-26-
<PAGE> 34
applicable to Staples or (by reason of Staples' participation therein) the
Merger or the other transactions contemplated by this Agreement.
Section 4.22 INTERIM OPERATIONS OF SUB. Sub was formed solely for the
purpose of engaging in the transactions contemplated by this Agreement, has
engaged in no other business activities and has conducted its operations only as
contemplated by this Agreement.
ARTICLE V
CONDUCT OF BUSINESS
Section 5.01 COVENANTS OF OFFICE DEPOT AND STAPLES. During the period
from the date of this Agreement and continuing until the earlier of the
termination of this Agreement or the Effective Time, Office Depot and Staples
each agrees as to itself and its respective Subsidiaries (except to the extent
that the other party shall otherwise consent in writing), to carry on its
business in the usual, regular and ordinary course in substantially the same
manner as previously conducted, to pay its debts and taxes when due subject to
good faith disputes over such debts or taxes, to pay or perform its other
obligations when due, and, to the extent consistent with such business, use all
reasonable efforts consistent with past practices and policies to preserve
intact its present business organization, keep available the services of its
present officers and key employees and preserve its relationships with
customers, suppliers, distributors, and others having business dealings with it.
Office Depot and Staples shall each promptly notify the other party of any
material event or occurrence not in the ordinary course of business of Office
Depot or Staples, respectively. Except as expressly contemplated by this
Agreement or as set forth in Section 5.01 of the Office Depot Disclosure
Schedule, subject to Section 6.01, Office Depot and Staples each shall not (and
shall not permit any of its respective Subsidiaries to), without the written
consent of the other party:
(a) Accelerate, amend or change the period of exercisability of options
or restricted stock granted under any employee stock plan of such party or
authorize cash payments in exchange for any options granted under any of such
plans except as required by the terms of such plans or any related agreements in
effect as of the date of this Agreement;
(b) Declare or pay any dividends on or make any other distributions
(whether in cash, stock or property) in respect of any of its capital stock, or
split, combine or reclassify any of its capital stock or issue or authorize the
issuance of any other securities in respect of, in lieu of or in substitution
for shares of its capital stock, or purchase or otherwise acquire, directly or
indirectly, any shares of its capital stock except from former employees,
directors and consultants in accordance with
-27-
<PAGE> 35
agreements providing for the repurchase of shares in connection with any
termination of service to such party;
(c) Issue, deliver or sell, or authorize or propose the issuance,
delivery or sale of, any shares of its capital stock or securities convertible
into shares of its capital stock, or subscriptions, rights, warrants or options
to acquire, or other agreements or commitments of any character obligating it to
issue any such shares or other convertible securities, other than (i) the grant
of options consistent with past practices to employees, which options represent
in the aggregate the right to acquire no more than 500,000 shares (net of
cancellations) of Office Depot Common Stock or Staples Common Stock, as the case
may be, or (ii) the issuance of shares of Office Depot Common Stock or Staples
Common Stock, as the case may be, pursuant to the exercise of options
outstanding on the date of this Agreement;
(d) Acquire or agree to acquire by merging or consolidating with, or
by purchasing a substantial equity interest in or substantial portion of the
assets of, or by any other manner, any business or any corporation, partnership
or other business organization or division, or otherwise acquire or agree to
acquire any assets (other than inventory and other items in the ordinary course
of business), except for any such acquisitions involving aggregate consideration
of not more than $1,000,000;
(e) Sell, lease, license or otherwise dispose of any of its material
properties or assets, except for transactions in the ordinary course of
business; provided, however, that in no event shall either party enter into any
agreement, option or other arrangements (including without limitation any joint
venture) involving the licensing of such party's name or system in any foreign
country;
(f) (i) Increase or agree to increase the compensation payable or to
become payable to its officers or employees, except for increases in salary or
wages of employees (other than officers) in accordance with past practices, (ii)
grant any additional severance or termination pay to, or enter into any
employment or severance agreements with, any employees or officers, (iii) enter
into any collective bargaining agreement (other than as required by law or
extensions to existing agreements in the ordinary course of business), (iv)
establish, adopt, enter into or amend any bonus, profit sharing, thrift,
compensation, stock option, restricted stock, pension, retirement, deferred
compensation, employment, termination, severance or other plan, trust, fund,
policy or arrangement for the benefit of any directors, officers or employees;
(g) Amend or propose to amend its Certificate of Incorporation or
Bylaws, except as contemplated by this Agreement; or
(h) Incur any indebtedness for borrowed money other than in the
ordinary course of business; or
-28-
<PAGE> 36
(i) Take, or agree in writing or otherwise to take, any of the actions
described in Sections (a) through (h) above.
Section 5.02 COOPERATION. Subject to compliance with applicable law,
from the date hereof until the Effective Time, each of Staples and Office Depot
shall confer on a regular and frequent basis with one or more representatives of
the other party to report on the general status of ongoing operations and shall
promptly provide the other party or its counsel with copies of all filings made
by such party with any Governmental Entity in connection with this Agreement,
the Merger and the transactions contemplated hereby and thereby.
ARTICLE VI
ADDITIONAL AGREEMENTS
Section 6.01 NO SOLICITATION.
(a) Office Depot and Staples each shall not, directly or indirectly,
through any officer, director, employee, financial advisor, representative or
agent of such party (i) solicit, initiate, or encourage any inquiries or
proposals that constitute, or could reasonably be expected to lead to, a
proposal or offer for a merger, consolidation, business combination, sale of
substantial assets, sale of shares of capital stock (including without
limitation by way of a tender offer) or similar transaction involving such party
or any of its Subsidiaries, other than the transactions contemplated by this
Agreement (any of the foregoing inquiries or proposals being referred to in this
Agreement as an "Acquisition Proposal"), (ii) engage in negotiations or
discussions concerning, or provide any non-public information to any person or
entity relating to, any Acquisition Proposal, or (iii) agree to or recommend any
Acquisition Proposal; PROVIDED, HOWEVER, that nothing contained in this
Agreement shall prevent Office Depot or Staples, or their respective Board of
Directors, from (A) furnishing non-public information to, or entering into
discussions or negotiations with, any person or entity in connection with an
unsolicited bona fide written Acquisition Proposal by such person or entity or
recommending an unsolicited bona fide written Acquisition Proposal to the
stockholders of such party, if and only to the extent that (1) the Board of
Directors of such party believes in good faith (after consultation with its
financial advisor) that such Acquisition Proposal is reasonably capable of being
completed on the terms proposed and, after taking into account the strategic
benefits anticipated to be derived from the Merger and the long-term prospects
of Office Depot and Staples as a combined company, would, if consummated, result
in a transaction more favorable over the long term than the transaction
contemplated by this Agreement (any such more favorable Acquisition Proposal
being referred to in this Agreement as a "Superior Proposal") and the Board of
Directors of such party determines in good faith after consultation with outside
legal counsel that such action is necessary for such Board of Directors to
comply with
-29-
<PAGE> 37
its fiduciary duties to stockholders under applicable law and (2) prior to
furnishing such non-public information to, or entering into discussions or
negotiations with, such person or entity, such Board of Directors receives from
such person or entity an executed confidentiality agreement with terms no less
favorable to such party than those contained in the Non-Disclosure Agreement
dated May 16, 1996 between Staples and Office Depot (the "Confidentiality
Agreement"); or (B) complying with Rule 14e-2 promulgated under the Exchange Act
with regard to an Acquisition Proposal.
(b) Office Depot and Staples shall each notify the other party
immediately after receipt by Office Depot or Staples (or their advisors) of any
Acquisition Proposal or any request for nonpublic information in connection with
an Acquisition Proposal or for access to the properties, books or records of
such party by any person or entity that informs such party that it is
considering making, or has made, an Acquisition Proposal. Such notice shall be
made orally and in writing and shall indicate in reasonable detail the identity
of the offeror and the terms and conditions of such proposal, inquiry or
contact. Such party shall continue to keep the other party hereto informed, on a
current basis, of the status of any such discussions or negotiations and the
terms being discussed or negotiated.
Section 6.02 PROXY STATEMENT/PROSPECTUS; REGISTRATION STATEMENT.
(a) As promptly as practical after the execution of this Agreement,
Staples and Office Depot shall prepare and file with the SEC the Joint Proxy
Statement, and Staples shall prepare and file with the SEC the Registration
Statement, in which the Joint Proxy Statement will be included as a prospectus,
provided that Staples may delay the filing of the Registration Statement until
approval of the Joint Proxy Statement by the SEC. Staples and Office Depot shall
use all reasonable efforts to cause the Registration Statement to become
effective as soon after such filing as practical. The Joint Proxy Statement
shall include the recommendation of the Board of Directors of Office Depot in
favor of this Agreement and the Merger and the recommendation of the Board of
Directors of Staples in favor of the issuance of shares of Staples Common Stock
pursuant to the Merger; provided that the Board of Directors of either party may
withdraw such recommendation if such Board of Directors believes in good faith
after consultation with outside legal counsel that the withdrawal of such
recommendation is necessary for such Board of Directors to comply with its
fiduciary duties under applicable law.
(b) Staples and Office Depot shall make all necessary filings with
respect to the Merger under the Securities Act, the Exchange Act, applicable
state blue sky laws and the rules and regulations thereunder.
-30-
<PAGE> 38
Section 6.03 NASDAQ AND NYSE QUOTATION. Each of Staples and Office
Depot agrees to continue the quotation of Staples Common Stock and Office Depot
Common Stock, respectively, on the Nasdaq National Market and New York Stock
Exchange, respectively, during the term of this Agreement so that appraisal
rights will not be available to stockholders of Office Depot under Section 262
of the DGCL.
Section 6.04 ACCESS TO INFORMATION. Upon reasonable notice, Office
Depot and Staples shall each (and shall cause each of their respective
Subsidiaries to) afford to the officers, employees, accountants, counsel and
other representatives of the other, access, during normal business hours during
the period prior to the Effective Time, to all its properties, books, contracts,
commitments and records and, during such period, each of Office Depot and
Staples shall (and shall cause each of their respective Subsidiaries to) furnish
promptly to the other (a) a copy of each report, schedule, registration
statement and other document filed or received by it during such period pursuant
to the requirements of federal securities laws and (b) all other information
concerning its business, properties and personnel as such other party may
reasonably request. Unless otherwise required by law, the parties will hold any
such information which is nonpublic in confidence in accordance with the
Confidentiality Agreement. No information or knowledge obtained in any
investigation pursuant to this Section 6.04 shall affect or be deemed to modify
any representation or warranty contained in this Agreement or the conditions to
the obligations of the parties to consummate the Merger.
Section 6.05 STOCKHOLDERS MEETINGS.
(a) Office Depot and Staples each shall call a meeting of its
respective stockholders to be held as promptly as practicable for the purpose of
voting, in the case of Office Depot, upon this Agreement and the Merger and, in
the case of Staples, upon the issuance of shares of Staples Common Stock
pursuant to the Merger (the "Staples Voting Proposal"). Subject to Sections 6.01
and 6.02, Office Depot and Staples shall, through their respective Boards of
Directors, recommend to their respective stockholders approval of such matters
and shall coordinate and cooperate with respect to the timing of such meetings
and shall use their best efforts to hold such meetings on the same day and as
soon as practicable after the date hereof. Unless otherwise required to comply
with the applicable fiduciary duties of the respective directors of Office Depot
and Staples, as determined by such directors in good faith after consultation
with outside legal counsel, each party shall use all reasonable efforts to
solicit from stockholders of such party proxies in favor of such matters.
(b) Staples may also submit additional proposals to its stockholders at
the Staples Stockholders' Meeting (including without limitation a proposal to
amend its Certificate of Incorporation to increase the number of authorized
shares of Common Stock or amend its 1992 Equity Incentive Plan to increase the
number of shares of
-31-
<PAGE> 39
Common Stock issuable thereunder), separate from the proposal referred to in
Section 6.05(a). The approval by Staples' stockholders of such additional
proposals shall not be a condition to the closing of the Merger under this
Agreement.
Section 6.06 LEGAL CONDITIONS TO MERGER.
(a) Office Depot and Staples shall each use their best efforts to (i)
take, or cause to be taken, all appropriate action, and do, or cause to be done,
all things necessary and proper under applicable law to consummate and make
effective the transactions contemplated hereby as promptly as practicable, (ii)
obtain from any Governmental Entity or any other third party any consents,
licenses, permits, waivers, approvals, authorizations, or orders required to be
obtained or made by Office Depot or Staples or any of their Subsidiaries in
connection with the authorization, execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby including, without
limitation, the Merger, and (iii) as promptly as practicable, make all necessary
filings, and thereafter make any other required submissions, with respect to
this Agreement and the Merger required under (A) the Securities Act and the
Exchange Act, and any other applicable federal or state securities laws, (B) the
HSR Act and any related governmental request thereunder, (C) the Canadian
Competition Act and any related governmental request thereunder, (D) the
Investment Canada Act, and (E) any other applicable law. Office Depot and
Staples shall cooperate with each other in connection with the making of all
such filings, including providing copies of all such documents to the non-filing
party and its advisors prior to filing and, if requested, to accept all
reasonable additions, deletions or changes suggested in connection therewith.
Office Depot and Staples shall use their best efforts to furnish to each other
all information required for any application or other filing to be made pursuant
to the rules and regulations of any applicable law (including all information
required to be included in the Joint Proxy Statement and the Registration
Statement) in connection with the transactions contemplated by this Agreement.
(b) Staples and Office Depot agree, and shall cause each of their
respective Subsidiaries, to cooperate and to use their respective best efforts
to obtain any government clearances required for Closing (including through
compliance with the HSR Act and any applicable foreign government reporting
requirements), to respond to any government requests for information, and to
contest and resist any action, including any legislative, administrative or
judicial action, and to have vacated, lifted, reversed or overturned any decree,
judgment, injunction or other order (whether temporary, preliminary or
permanent) (an "Order") that restricts, prevents or prohibits the consummation
of the Merger or any other transactions contemplated by this Agreement,
including, without limitation, by vigorously pursuing all available avenues of
administrative and judicial appeal and all available legislative action. Staples
and Office Depot also agree to take any and all of the following actions to the
extent necessary to obtain the approval of any Governmental Entity with
jurisdiction
-32-
<PAGE> 40
over the enforcement of any applicable laws regarding the Merger: entering into
negotiations; providing information; substantially complying with any second
request for information pursuant to the HSR Act; making proposals; entering into
and performing agreements or submitting to judicial or administrative orders;
selling or otherwise disposing of, or holding separate (through the
establishment of a trust or otherwise) particular assets or categories of
assets, or businesses of Staples, Office Depot or any of their affiliates; and
withdrawing from doing business in a particular jurisdiction. The parties hereto
will consult and cooperate with one another, and consider in good faith the
views of one another, in connection with any analyses, appearances,
presentations, memoranda, briefs, arguments, opinions and proposals made or
submitted by or on behalf of any party hereto in connection with proceedings
under or relating to the HSR Act or any other federal, state or foreign
antitrust or fair trade law. Staples shall be entitled to direct any proceedings
or negotiations with any Governmental Entity relating to any of the foregoing,
provided that it shall afford Office Depot a reasonable opportunity to
participate therein. Notwithstanding anything to the contrary in this Section
6.06, neither Staples nor Office Depot nor any of their respective Subsidiaries
shall be required to take any action that would reasonably be expected to
substantially impair the overall benefits expected, as of the date hereof, to be
realized from the consummation of the Merger.
(c) Each of Office Depot and Staples shall give (or shall cause their
respective Subsidiaries to give) any notices to third parties, and use, and
cause their respective Subsidiaries to use, their best efforts to obtain any
third party consents related to or required in connection with the Merger that
are (A) necessary to consummate the transactions contemplated hereby, (B)
disclosed or required to be disclosed in the Office Depot Disclosure Schedule or
the Staples Disclosure Schedule, as the case may be, or (C) required to prevent
a Office Depot Material Adverse Effect or a Staples Material Adverse Effect from
occurring prior to or after the Effective Time.
Section 6.07 PUBLIC DISCLOSURE. Staples and Office Depot shall consult
with each other before issuing any press release or otherwise making any public
statement with respect to the Merger or this Agreement and shall not issue any
such press release or make any such public statement prior to such consultation,
except as may be required by law.
Section 6.08 TAX-FREE REORGANIZATION. Staples and Office Depot shall
each use its best efforts to cause the Merger to be treated as a reorganization
within the meaning of Section 368(a) of the Code.
Section 6.09 POOLING ACCOUNTING. From and after the date hereof and
until the Effective time, neither Office Depot nor Staples, nor any of their
respective Subsidiaries or other Affiliates shall knowingly take any action, or
knowingly fail to
-33-
<PAGE> 41
take any action, that is reasonably likely to jeopardize the treatment of the
Merger as a pooling of interests for accounting purposes.
Section 6.10 AFFILIATE AGREEMENTS. Upon the execution of this
Agreement, Staples and Office Depot will provide each other with a list of those
persons who are, in Staples' or Office Depot's respective reasonable judgment,
"affiliates" of Staples or Office Depot, respectively, within the meaning of
Rule 145 (each such person who is an "affiliate" of Staples or Office Depot
within the meaning of Rule 145 is referred to as an "Affiliate") promulgated
under the Securities Act ("Rule 145"). Staples and Office Depot shall provide
each other such information and documents as Office Depot or Staples shall
reasonably request for purposes of reviewing such list and shall notify the
other party in writing regarding any change in the identity of its Affiliates
prior to the Closing Date. Office Depot and Staples shall each use its best
efforts to deliver or cause to be delivered to each other by September 30, 1996
(and in any case prior to the Effective Time) from each of its Affiliates, an
executed Affiliate Agreement, in form and substance satisfactory to Staples and
Office Depot, by which each Affiliate of Office Depot agrees to comply with the
applicable requirements of Rule 145 and such requirements as may be necessary
for the Merger to be treated as a pooling of interests for accounting purposes
and each Affiliate of Staples agrees to comply with such requirements as may be
necessary for the Merger to be treated as a pooling of interests for accounting
purposes (an "Affiliate Agreement"). Staples shall be entitled to place
appropriate legends on the certificates evidencing any Staples Common Stock to
be received by such Affiliates of Office Depot pursuant to the terms of this
Agreement, and to issue appropriate stop transfer instructions to the transfer
agent for the Staples Common Stock, consistent with the terms of the Affiliate
Agreements (provided that such legends or stop transfer instructions shall be
removed, three years after the Effective Date, upon the request of any
stockholder that is not then an Affiliate of Staples).
Section 6.11 NASDAQ QUOTATION. Staples shall use its best efforts to
cause the shares of Staples Common Stock to be issued in the Merger to be
approved for quotation on the Nasdaq National Market, subject to official notice
of issuance, prior to the Closing Date.
Section 6.12 STOCK PLANS.
(a) At the Effective Time, each outstanding option to purchase shares
of Office Depot Common Stock (a "Office Depot Stock Option") under the Office
Depot Stock Plans, whether vested or unvested, shall be deemed to constitute an
option to acquire, on the same terms and conditions as were applicable under
such Office Depot Stock Option, the same number of shares of Staples Common
Stock as the holder of such Office Depot Stock Option would have been entitled
to receive pursuant to the Merger had such holder exercised such option in full
immediately
-34-
<PAGE> 42
prior to the Effective Time (rounded downward to the nearest whole number), at a
price per share (rounded upward to the nearest whole cent) equal to (y) the
aggregate exercise price for the shares of Office Depot Common Stock purchasable
pursuant to such Office Depot Stock Option immediately prior to the Effective
Time divided by (z) the number of full shares of Staples Common Stock deemed
purchasable pursuant to such Office Depot Stock Option in accordance with the
foregoing.
(b) As soon as practicable after the Effective Time, Staples shall
deliver to the participants in Office Depot Stock Plans appropriate notice
setting forth such participants' rights pursuant thereto and the grants pursuant
to Office Depot Stock Plans shall continue in effect on the same terms and
conditions (subject to the adjustments required by this Section 6.12 after
giving effect to the Merger).
(c) Staples shall take all corporate action necessary to reserve for
issuance a sufficient number of shares of Staples Common Stock for delivery
under Office Depot Stock Plans assumed in accordance with this Section 6.12. As
soon as practicable after the Effective Time, Staples shall file a registration
statement on Form S-8 (or any successor or other appropriate forms), or another
appropriate form with respect to the shares of Staples Common Stock subject to
such options and shall use its best efforts to maintain the effectiveness of
such registration statement or registration statements (and maintain the current
status of the prospectus or prospectuses contained therein) for so long as such
options remain outstanding.
(d) The Board of Directors of Office Depot shall, prior to or as of the
Effective Time, take all necessary actions, pursuant to and in accordance with
the terms of the Office Depot Stock Plans and the instruments evidencing the
Office Depot Stock Options, to provide for the conversion of the Office Depot
Stock Options into options to acquire Staples Common Stock in accordance with
this Section 6.12, and that no consent of the holders of the Office Depot Stock
Options is required in connection with such conversion.
(e) The Board of Directors of Office Depot shall, prior to or as of the
Effective Time, take appropriate action to approve the deemed cancellation of
the Office Depot Stock Options for purposes of Section 16(b) of the Exchange
Act. The Board of Directors of Staples shall, prior to or as of the Effective
Time, take appropriate action to approve the deemed grant of options to purchase
Staples Common Stock under the Office Depot Stock Options (as converted pursuant
to this Section 6.12) for purposes of Section 16(b) of the Exchange Act.
(f) Office Depot shall terminate its 1989 Employee Stock Purchase Plan
as of or prior to the Effective Time.
-35-
<PAGE> 43
Section 6.13 BROKERS OR FINDERS. Each of Staples and Office Depot
represents, as to itself, its Subsidiaries and its Affiliates, that no agent,
broker, investment banker, financial advisor or other firm or person is or will
be entitled to any broker's or finder's fee or any other commission or similar
fee in connection with any of the transactions contemplated by this Agreement
except Peter J. Solomon Company and Merrill Lynch & Company, Inc., whose fees
and expenses will be paid by Office Depot in accordance with Office Depot's
agreements with such firms (copies of which have been delivered by Office Depot
to Staples prior to the date of this Agreement), and Goldman, Sachs & Co., whose
fees and expenses will be paid by Staples in accordance with Staples' agreement
with such firm (a copy of which has been delivered by Staples prior to the date
of this Agreement). Each of Staples and Office Depot agrees to indemnify and
hold the other harmless from and against any and all claims, liabilities or
obligations with respect to any such fees, commissions or expenses asserted by
any person on the basis of any act or statement alleged to have been made by
such party or any of its Affiliates.
Section 6.14 INDEMNIFICATION.
(a) From and after the Effective Time, Staples agrees that it will,
and will cause the Surviving Corporation to, indemnify and hold harmless each
present and former director and officer of Office Depot (the "Indemnified
Parties"), against any costs or expenses (including attorneys' fees), judgments,
fines, losses, claims, damages, liabilities or amounts paid in settlement
(collectively, "Costs") incurred in connection with any claim, action, suit,
proceeding or investigation, whether civil, criminal, administrative or
investigative, arising out of or pertaining to matters existing or occurring at
or prior to the Effective Time, whether asserted or claimed prior to, at or
after the Effective Time, to the fullest extent that Office Depot would have
been permitted under Delaware law and its certificate of incorporation or bylaws
in effect on the date hereof to indemnify such Indemnified Party (and Staples
and the Surviving Corporation shall also advance expenses as incurred to the
fullest extent permitted under applicable law, provided the Indemnified Party to
whom expenses are advanced provides an undertaking to repay such advances if it
is ultimately determined that such Indemnified Party is not entitled to
indemnification).
(b) For a period of six years after the Effective Time, Staples shall
cause the Surviving Corporation to maintain (to the extent available in the
market) in effect a directors' and officers' liability insurance policy covering
those persons who are currently covered by Office Depot's directors' and
officers' liability insurance policy (a copy of which has been heretofore
delivered to Staples) with coverage in amount and scope at least as favorable as
Office Depot's existing coverage; PROVIDED, that in no event shall Staples or
the Surviving Corporation be required to expend in excess of 200% of the annual
premium currently paid by Office Depot for such coverage (currently
approximately $421,000) (the "Current Premium"); and if such premium would at
any time exceed 200% of the Current Premium, then the Surviving
-36-
<PAGE> 44
Corporation shall maintain insurance policies which provide the maximum and best
coverage available at an annual premium equal to 200% of the Current Premium.
(c) The provisions of this Section 6.14 are intended to be an addition
to the rights otherwise available to the current officers and directors of
Office Depot by law, charter, statute, bylaw or agreement, and shall operate for
the benefit of, and shall be enforceable by, each of the Indemnified Parties,
their heirs and their representatives.
Section 6.15 LETTER OF STAPLES' ACCOUNTANTS. Staples shall use
reasonable efforts to cause to be delivered to Office Depot and Staples a letter
of Ernst & Young, LLP, Staples' independent auditors, dated a date within two
business days before the date on which the Registration Statement shall become
effective and addressed to Office Depot, in form reasonably satisfactory to
Office Depot and customary in scope and substance for letters delivered by
independent public accountants in connection with registration statements
similar to the Registration Statement.
Section 6.16 LETTER OF OFFICE DEPOT'S ACCOUNTANTS. Office Depot shall
use reasonable efforts to cause to be delivered to Staples and Office Depot a
letter of Deloitte & Touche, LLP, Office Depot's independent auditors, dated a
date within two business days before the date on which the Registration
Statement shall become effective and addressed to Staples, in form reasonably
satisfactory to Staples and customary in scope and substance for letters
delivered by independent public accountants in connection with registration
statements similar to the Registration Statement.
Section 6.17 STOCK OPTION AGREEMENTS. Staples and Office Depot each
agree to fully perform their respective obligations under the Stock Option
Agreements.
Section 6.18 BENEFIT PLANS. Staples agrees that, during the period
commencing at the Effective Time and ending on the first anniversary thereof,
the employees of Office Depot and its Subsidiaries will continue to be provided
with benefits under employee benefit plans (other than stock option or other
plans involving the potential issuance of securities) which are no less
favorable in the aggregate than those currently provided by Office Depot and its
Subsidiaries to such employees. Staples and Depot shall agree upon an
appropriate severance policy for employees of Office Depot not covered by the
Employment Agreements referred to in Section 1.04(d).
ARTICLE VII
CONDITIONS TO MERGER
Section 7.01 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE
MERGER. The respective obligations of each party to this Agreement to effect the
Merger shall be subject to the satisfaction prior to the Closing Date of the
following conditions:
-37-
<PAGE> 45
(a) STOCKHOLDER APPROVAL. This Agreement and the Merger shall have been
approved and adopted by the affirmative vote of the holders of a majority of the
outstanding shares of Office Depot Common Stock and the Staples Voting Proposal
shall have been approved by the affirmative vote of the holders of a majority of
the shares of Staples Common Stock present or represented at the Staples
Stockholders' Meeting at which a quorum is present.
(b) HSR ACT. The waiting period applicable to the consummation of the
Merger under the HSR Act shall have expired or been terminated.
(c) CANADIAN COMPETITION ACT. (i) The Director of Investigation and
Research shall have issued an Advance Ruling Certificate under section 102 of
the Canadian Competition Act reasonably satisfactory to the parties with respect
to the Merger, or any applicable waiting period under section 123 of the
Canadian Competition Act shall have expired and neither the Director nor any of
his representatives shall have advised the parties that the Director intends to
make an application under section 92 in respect of the Merger, and (ii) the
Director shall not have subsequently withdrawn such Advance Ruling Certificate
or indicated that he has obtained information as a result of which he is no
longer satisfied that he would not have sufficient grounds on which to apply to
the Competition Tribunal under section 92 of the Canadian Competition Act with
respect to the Merger.
(d) ICA APPROVALS. Either (i) Staples shall have received from the
Minister responsible for administering the Investment Canada Act a notice
pursuant to subsection 21(1) of that Act stating that the Minister is satisfied
that the Merger is likely to be of net benefit to Canada, such notice to be on
terms and in form reasonably satisfactory to the parties; or (ii) such Minister
shall be deemed, pursuant to subsection 21(2) of the Investment Canada Act, to
be satisfied that the Merger is likely to be of net benefit to Canada and
Staples shall have received a notice from such Minister to that effect.
(e) APPROVALS. Other than the filing provided for by Section 1.02, all
authorizations, consents, orders or approvals of, or declarations or filings
with, or expirations of waiting periods imposed by, any Governmental Entity the
failure of which to file, obtain or occur is reasonably likely to have a Staples
Material Adverse Effect or Office Depot Material Adverse Effect shall have been
filed, been obtained or occurred.
(f) REGISTRATION STATEMENT. The Registration Statement shall have
become effective under the Securities Act and shall not be the subject of any
stop order or proceedings seeking a stop order.
-38-
<PAGE> 46
(g) NO INJUNCTIONS. No Governmental Entity or federal, state or foreign
court of competent jurisdiction shall have enacted, issued, promulgated,
enforced or entered any order, executive order, stay, decree, judgment or
injunction (each an "Order) or statute, rule, regulation which is in effect and
which has the effect of making the Merger illegal or otherwise prohibiting
consummation of the Merger.
(h) POOLING LETTERS. Staples and Office Depot shall have received a
letter from Ernst & Young LLP, addressed to Staples regarding its concurrence
with Staples' management conclusions, as to the appropriateness of the pooling
of interests accounting, under Accounting Principles Board Opinion No. 16 for
the merger, as contemplated to be effected as of the date of the letter, it
being agreed that Staples and Office Depot shall each provide reasonable
cooperation to Ernst & Young LLP to enable them to issue such a letter.
(i) NASDAQ. The shares of Staples Common Stock to be issued in the
Merger shall have been approved for quotation on the Nasdaq National Market or
listing on the New York Stock Exchange.
Section 7.02 ADDITIONAL CONDITIONS TO OBLIGATIONS OF STAPLES AND SUB.
The obligations of Staples and Sub to effect the Merger are subject to the
satisfaction of each of the following conditions, any of which may be waived in
writing exclusively by Staples and Sub:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties
of Office Depot set forth in this Agreement shall be true and correct as of the
date of this Agreement and (except to the extent such representations and
warranties speak as of an earlier date) as of the Closing Date as though made on
and as of the Closing Date, except for, (i) changes contemplated by this
Agreement and (ii) where the failures to be true and correct, individually or in
the aggregate, have not had and are not reasonably likely to have a Office Depot
Material Adverse Effect, or a material adverse effect upon the consummation of
the transactions contemplated hereby; and Staples shall have received a
certificate signed on behalf of Office Depot by the chief executive officer and
the chief financial officer of Office Depot to such effect.
(b) PERFORMANCE OF OBLIGATIONS OF OFFICE DEPOT. Office Depot shall have
performed in all material respects all obligations required to be performed by
it under this Agreement at or prior to the Closing Date; and Staples shall have
received a certificate signed on behalf of Office Depot by the chief executive
officer and the chief financial officer of Office Depot to such effect.
(c) TAX OPINION. Staples shall have received a written opinion from
Hale and Dorr, counsel to Staples, to the effect that the Merger will be
treated for Federal income tax purposes as a tax-free reorganization within the
meaning of Section 368(a) of the Code; provided that if Hale and Dorr does not
render such opinion, this
-39-
<PAGE> 47
condition shall nonetheless be deemed satisfied if Kirkland & Ellis renders such
opinion to Staples (it being agreed that Staples and Office Depot shall each
provide reasonable cooperation to Kirkland & Ellis or Hale and Dorr, as the case
may be, to enable them to render such opinion).
Section 7.03 ADDITIONAL CONDITIONS TO OBLIGATIONS OF OFFICE DEPOT. The
obligation of Office Depot to effect the Merger is subject to the satisfaction
of each of the following conditions, any of which may be waived, in writing,
exclusively by Office Depot:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties
of Staples and Sub set forth in this Agreement shall be true and correct as of
the date of this Agreement and (except to the extent such representations speak
as of an earlier date) as of the Closing Date as though made on and as of the
Closing Date, except for, (i) changes contemplated by this Agreement and (ii)
where the failures to be true and correct, individually or in the aggregate,
have not had and are not reasonably likely to have a Staples Material Adverse
Effect, or a material adverse effect upon the consummation of the transactions
contemplated hereby; and Office Depot shall have received a certificate signed
on behalf of Staples by the chief executive officer and the chief financial
officer of Staples to such effect.
(b) PERFORMANCE OF OBLIGATIONS OF STAPLES AND SUB. Staples and Sub
shall have performed in all material respects all obligations required to be
performed by them under this Agreement at or prior to the Closing Date, and
Office Depot shall have received a certificate signed on behalf of Staples by
the chief executive officer and the chief financial officer of Staples to such
effect.
(c) TAX OPINION. Office Depot shall have received the opinion of
Kirkland & Ellis, counsel to Office Depot, to the effect that the Merger will be
treated for Federal income tax purposes as a tax-free reorganization within the
meaning of Section 368(a) of the Code; provided that if Kirkland & Ellis does
not render such opinion, this condition shall nonetheless be deemed satisfied if
Hale and Dorr renders such opinion to Office Depot (it being agreed that Staples
and Office Depot shall each provide reasonable cooperation to Kirkland & Ellis
or Hale and Dorr, as the case may be, to enable them to render such opinion).
ARTICLE VIII
TERMINATION AND AMENDMENT
Section 8.01 TERMINATION. This Agreement may be terminated at any time
prior to the Effective Time (with respect to Sections 8.01(b) through 8.01(g),
by written notice by the terminating party to the other party), whether before
or after
-40-
<PAGE> 48
approval of the matters presented in connection with the Merger by the
stockholders of Office Depot or Staples:
(a) by mutual written consent of Staples and Office Depot; or
(b) by either Staples or Office Depot if the Merger shall not have been
consummated by February 28, 1997 (provided that (i) either Staples or Office
Depot may extend such date to May 31, 1997 by providing written notice thereof
to the other party on or prior to February 14, 1997 (February 28, 1997, as it
may be so extended, shall be referred to herein as the "Outside Date") and (ii)
the right to terminate this Agreement under this Section 8.01(b) shall not be
available to any party whose failure to fulfill any obligation under this
Agreement has been the cause of or resulted in the failure of the Merger to
occur on or before such date); or
(c) by either Staples or Office Depot if a court of competent
jurisdiction or other Governmental Entity shall have issued a nonappealable
final order, decree or ruling or taken any other nonappealable final action, in
each case having the effect of permanently restraining, enjoining or otherwise
prohibiting the Merger; or
(d) by Staples, if, at the Office Depot Stockholders' Meeting
(including any adjournment or postponement), the requisite vote of the
stockholders of Office Depot in favor of this Agreement and the Merger shall not
have been obtained; or by Office Depot if, at the Staples Stockholders' Meeting
(including any adjournment or postponement), the requisite vote of the
stockholders of Staples in favor of the Staples Voting Proposal shall not have
been obtained; or
(e) by Staples, if (i) the Board of Directors of Office Depot shall
have withdrawn or modified its recommendation of this Agreement or the Merger;
(ii) after the receipt by Office Depot of an Acquisition Proposal, Staples
requests in writing that the Board of Directors of Office Depot reconfirm its
recommendation of this Agreement or the Merger and the Board of Directors of
Office Depot fails to do so within 10 business days after its receipt of
Staples' request; (iii) the Board of Directors of Office Depot shall have
recommended to the stockholders of Office Depot an Alternative Transaction (as
defined in Section 8.03(g)); (iv) a tender offer or exchange offer for 20% or
more of the outstanding shares of Office Depot Common Stock is commenced (other
than by Staples or an Affiliate of Staples) and the Board of Directors of Office
Depot recommends that the stockholders of Office Depot tender their shares in
such tender or exchange offer; or (v) for any reason Office Depot fails to call
and hold the Office Depot Stockholders' Meeting by the Outside Date (provided
that Staples' right to terminate this Agreement under such clause (v) shall not
be available if at such time Office Depot would be entitled to terminate this
Agreement under Section 8.01(g)); or
-41-
<PAGE> 49
(f) by Office Depot, if (i) the Board of Directors of Staples shall
have withdrawn or modified its recommendation of the Staples Voting Proposal;
(ii) after the receipt by Staples of an Acquisition Proposal, Office Depot
requests in writing that the Board of Directors of Staples reconfirm its
recommendation of the Staples Voting Proposal and the Board of Directors of
Staples fails to do so within 10 business days after its receipt of Office
Depot's request; (iii) the Board of Directors of Staples shall have recommended
to the stockholders of Staples an Alternative Transaction (as defined in Section
8.03(g)); (iv) a tender offer or exchange offer for 20% or more of the
outstanding shares of Staples Common Stock is commenced (other than by Office
Depot or an Affiliate of Office Depot) and the Board of Directors of Staples
recommends that the stockholders of Staples tender their shares in such tender
or exchange offer; or (v) for any reason Staples fails to call and hold the
Staples Stockholders' Meeting by the Outside Date (provided that Office Depot's
right to terminate this Agreement under such clause (v) shall not be available
if at such time Staples would be entitled to terminate this Agreement under
Section 8.01(g)); or
(g) by Staples or Office Depot, if there has been a breach of any
representation, warranty, covenant or agreement on the part of the other party
set forth in this Agreement, which breach (i) causes the conditions set forth in
Section 7.02(a) or (b) (in the case of termination by Staples) or 7.03(a) or (b)
(in the case of termination by Office Depot) not to be satisfied, and (ii) shall
not have been cured within 20 business days following receipt by the breaching
party of written notice of such breach from the other party.
Section 8.02 EFFECT OF TERMINATION. In the event of termination of this
Agreement as provided in Section 8.01, this Agreement shall immediately become
void and there shall be no liability or obligation on the part of Staples,
Office Depot, Sub or their respective officers, directors, stockholders or
Affiliates, except as set forth in Sections 6.13 and 8.03; provided that, the
provisions of Sections 6.13 and 8.03 of this Agreement, the Stock Option
Agreements and the Confidentiality Agreement shall remain in full force and
effect and survive any termination of this Agreement.
Section 8.03 FEES AND EXPENSES.
(a) Except as set forth in this Section 8.03, all fees and expenses
incurred in connection with this Agreement and the transactions contemplated
hereby shall be paid by the party incurring such expenses, whether or not the
Merger is consummated.
(b) Office Depot shall pay Staples up to $5,000,000 as reimbursement
for expenses of Staples actually incurred relating to the transactions
contemplated by this Agreement prior to termination (including, but not limited
to, fees and expenses of Staples' counsel, accountants and financial advisors,
but excluding any discretionary
-42-
<PAGE> 50
fees paid to such financial advisors), upon the termination of this Agreement by
Staples pursuant to (i) Section 8.01(d) as a result of the failure to receive
the requisite vote for approval of this Agreement and the Merger by the
stockholders of Office Depot at the Office Depot Stockholders' Meeting (other
than in the circumstances set forth in Section 8.03(c)(i)) or (ii) Section
8.01(b) or Section 8.01(g) as a result of the failure to satisfy the condition
set forth in Section 7.02(a).
(c) Office Depot shall pay Staples a termination fee of $75,000,000
upon the earliest to occur of the following events:
(i) the termination of this Agreement by Staples pursuant to
Section 8.01(d), if a proposal for an Alternative Transaction (as defined below)
involving Office Depot shall have been made prior to the Office Depot
Stockholders' Meeting;
(ii) the termination of this Agreement by Staples pursuant to
Section 8.01(e); or
(iii) the termination of this Agreement by Staples pursuant to
Section 8.01(g) after a breach by Office Depot of a covenant or agreement in
this Agreement.
Office Depot's payment of a termination fee pursuant to this
subsection shall be the sole and exclusive remedy of Staples against Office
Depot and any of its Subsidiaries and their respective directors, officers,
employees, agents, advisors or other representatives with respect to the
occurrences giving rise to such payment; provided that this limitation shall not
apply in the event of a willful breach of this Agreement by Office Depot.
(d) Staples shall pay Office Depot up to $5,000,000 as reimbursement
for expenses of Office Depot actually incurred relating to the transactions
contemplated by this Agreement prior to termination (including, but not limited
to, fees and expenses of Office Depot's counsel, accountants and financial
advisors, but excluding any discretionary fees paid to such financial advisors),
upon the termination of this Agreement by Office Depot pursuant to (i) Section
8.01(d) as a result of the failure to receive the requisite vote for approval of
the Staples Voting Proposal by the stockholders of Staples at the Staples
Stockholders' Meeting (other than in the circumstances set forth in Section
8.03(e)(i)) or (ii) Section 8.01(b) or Section 8.01(g) as a result of the
failure to satisfy the condition set forth in Section 7.03(a).
(e) Staples shall pay Office Depot a termination fee of $75,000,000
upon the earliest to occur of the following events:
(i) the termination of this Agreement by Office Depot pursuant
to Section 8.01(d), if a proposal for an Alternative Transaction (as defined
below) involving Staples shall have been made prior to the Staples Stockholders'
Meeting;
-43-
<PAGE> 51
(ii) the termination of this Agreement by Office Depot
pursuant to Section 8.01(f); or
(iii) the termination of this Agreement by Office Depot pursuant
to Section 8.01(g) after a breach by Staples of a covenant or agreement in this
Agreement.
Staples' payment of a termination fee pursuant to this
subsection shall be the sole and exclusive remedy of Office Depot against
Staples and any of its Subsidiaries and their respective directors, officers,
employees, agents, advisors or other representatives with respect to the
occurrences giving rise to such payment; provided that this limitation shall not
apply in the event of a willful breach of this Agreement by Staples.
(f) The expenses and fees, if applicable, payable pursuant to Section
8.03(b), 8.03(c), 8.03(d) or 8.03(e) shall be paid within one business day after
the first to occur of the events described in Section 8.03(b), 8.03(c)(i), (ii)
or (iii), 8.03(d) or 8.03(e)(i), (ii) or (iii).
(g) As used in this Agreement, "Alternative Transaction" means either
(i) a transaction pursuant to which any person (or group of persons) other than
Staples or Office Depot or their respective affiliates (a "Third Party"),
acquires more than 20% of the outstanding shares of Office Depot Common Stock or
Staples Common Stock, as the case may be, pursuant to a tender offer or exchange
offer or otherwise, (ii) a merger or other business combination involving
Staples or Office Depot pursuant to which any Third Party acquires more than 20%
of the outstanding shares of Office Depot Common Stock or Staples Common Stock,
as the case may be, or the entity surviving such merger or business combination,
(iii) any other transaction pursuant to which any Third Party acquires control
of assets (including for this purpose the outstanding equity securities of
Subsidiaries of Staples or Office Depot, and the entity surviving any merger or
business combination including any of them) of Staples or Office Depot having a
fair market value (as determined by the Board of Directors of Staples or Office
Depot, as the case may be, in good faith) equal to more than 20% of the fair
market value of all the assets of Staples or Office Depot, as the case may be,
and their respective Subsidiaries, taken as a whole, immediately prior to such
transaction, or (iv) any public announcement of a proposal, plan or intention to
do any of the foregoing or any agreement to engage in any of the foregoing.
Section 8.04 AMENDMENT. This Agreement may be amended by the parties
hereto, by action taken or authorized by their respective Boards of Directors,
at any time before or after approval of the matters presented in connection with
the Merger by the stockholders of Office Depot or of Staples, but, after any
such approval, no
-44-
<PAGE> 52
amendment shall be made which by law requires further approval by such
stockholders without such further approval. This Agreement may not be amended
except by an instrument in writing signed on behalf of each of the parties
hereto.
Section 8.05 EXTENSION; WAIVER. At any time prior to the Effective
Time, the parties hereto, by action taken or authorized by their respective
Boards of Directors, may, to the extent legally allowed, (i) extend the time for
the performance of any of the obligations or other acts of the other parties
hereto, (ii) waive any inaccuracies in the representations and warranties
contained herein or in any document delivered pursuant hereto and (iii) waive
compliance with any of the agreements or conditions contained herein. Any
agreement on the part of a party hereto to any such extension or waiver shall be
valid only if set forth in a written instrument signed on behalf of such party.
ARTICLE IX
MISCELLANEOUS
Section 9.01 NONSURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS.
None of the representations, warranties and agreements in this Agreement or in
any instrument delivered pursuant to this Agreement shall survive the Effective
Time, except for the agreements contained in Sections 1.04, 2.01, 2.02, 6.14,
6.17 and Article IX, and the agreements of the Affiliates delivered pursuant to
Section 6.10. The Confidentiality Agreement shall survive the execution and
delivery of this Agreement.
Section 9.02 NOTICES. All notices and other communications hereunder
shall be in writing and shall be deemed given if delivered personally,
telecopied (which is confirmed) or mailed by registered or certified mail
(return receipt requested) to the parties at the following addresses (or at such
other address for a party as shall be specified by like notice):
(a) if to Staples or Sub, to
Staples, Inc.
One Research Drive
Westborough, MA 01581
Attn: Secretary
Telecopy: (508) 370-7805
-45-
<PAGE> 53
with a copy to:
Hale and Dorr
60 State Street
Boston, MA 02109
Attn: Mark G. Borden, Esq.
Telecopy: (617) 526-5000
and
Sullivan & Cromwell
125 Broad Street
New York, NY 10004
Attn: James C. Morphy, Esq.
Telecopy: (212) 558-3299
(b) if to Office Depot, to
Office Depot, Inc.
2200 Old Germantown Road
Delray Beach, FL 33445
Attn: Secretary
Telecopy: (561) 266-1850
with a copy to
Kirkland & Ellis
200 East Randolph Street
Chicago, IL 60601
Attn: Willard G. Fraumann, Esq.
Telecopy: (312) 861-2200
Section 9.03 INTERPRETATION. When a reference is made in this Agreement
to Sections, such reference shall be to a Section of this Agreement unless
otherwise indicated. The table of contents and headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. Whenever the words "include,"
"includes" or "including" are used in this Agreement they shall be deemed to be
followed by the words "without limitation." The phrase "made available" in this
Agreement shall mean that the information referred to has been made available if
requested by the party to whom such information is to be made available. The
phrases "the date of this Agreement", "the date hereof," and terms of similar
import, unless the context otherwise requires, shall be deemed to refer to
September 4, 1996.
-46-
<PAGE> 54
Section 9.04 COUNTERPARTS. This Agreement may be executed in two or
more counterparts, all of which shall be considered one and the same agreement
and shall become effective when two or more counterparts have been signed by
each of the parties and delivered to the other parties, it being understood that
all parties need not sign the same counterpart.
Section 9.05 ENTIRE AGREEMENT; NO THIRD PARTY BENEFICIARIES. This
Agreement (including the documents and the instruments referred to herein) (a)
constitute the entire agreement and supersedes all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof, and (b) except as provided in Section 6.14 are not
intended to confer upon any person other than the parties hereto any rights or
remedies hereunder; provided that the Confidentiality Agreement shall remain in
full force and effect until the Effective Time. Each party hereto agrees that,
except for the representations and warranties contained in this Agreement,
neither Office Depot nor Staples makes any other representations or warranties,
and each hereby disclaims any other representations and warranties made by
itself or any of its officers, directors, employees, agents, financial and legal
advisors or other representatives, with respect to the execution and delivery of
this Agreement or the transactions contemplated hereby, notwithstanding the
delivery or disclosure to the other or the other's representatives of any
documentation or other information with respect to any one or more of the
foregoing.
Section 9.06 GOVERNING LAW. This Agreement shall be governed and
construed in accordance with the laws of the State of Delaware without regard to
any applicable conflicts of law.
Section 9.07 ASSIGNMENT. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other parties. Subject to the preceding sentence, this Agreement
will be binding upon, inure to the benefit of and be enforceable by the parties
and their respective successors and assigns.
-47-
<PAGE> 55
IN WITNESS WHEREOF, Staples, Sub and Office Depot have caused this
Agreement to be signed by their respective officers thereunto duly authorized as
of the date first written above.
Staples, Inc. Marlin Acquisition Corp.
By: /s/ Thomas G. Stemberg By: /s/ Thomas G. Stemberg
--------------------------------- ----------------------------
Title: Chief Executive Officer Title: President
------------------------------- --------------------------
Office Depot, Inc.
By: /s/ David I. Fuente
----------------------------
Title: Chief Executive Officer
--------------------------
-48-
<PAGE> 1
Exhibit 2
STOCK OPTION AGREEMENT, dated as of September 4, 1996 (the
"Agreement"), between STAPLES, INC., a Delaware corporation (the "Grantee"), and
OFFICE DEPOT, INC., a Delaware corporation (the "Grantor").
WHEREAS, the Grantee, Marlin Acquisition Corp., a Delaware corporation
and a wholly owned subsidiary of the Grantee ("Newco"), and the Grantor are
entering into an Agreement and Plan of Merger, dated as of the date hereof (the
"Merger Agreement"), which provides, among other things, for the merger (the
"Merger") of Newco with and into the Grantor;
WHEREAS, as a condition to their willingness to enter into the Merger
Agreement, the Grantee and Newco have requested that the Grantor grant to the
Grantee an option to purchase 31,200,000 shares of Common Stock, par value $0.01
per share, of the Grantor (the "Common Stock"), upon the terms and subject to
the conditions hereof; and
WHEREAS, in order to induce the Grantee and Newco to enter into the
Merger Agreement, the Grantor is willing to grant the Grantee the requested
option.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements set forth herein, the parties hereto agree as follows:
1. THE OPTION; EXERCISE; ADJUSTMENTS; PAYMENT OF SPREAD. (a)
Contemporaneously herewith the Grantee, Newco and the Grantor are entering into
the Merger Agreement. Subject to the other terms and conditions set forth
herein, the Grantor hereby grants to the Grantee an irrevocable option (the
"Option") to purchase up to 31,200,000 shares of Common Stock (the "Shares") at
a cash purchase price equal to the lower of (i) $22.23 per Share or (ii) the
average closing price of Common Stock on the New York Stock Exchange Composite
Tape for the five consecutive trading days beginning on and including the day
that the Merger is publicly announced (the "Purchase Price"). The Option may be
exercised by the Grantee, in whole or in part, at any time, or from time to
time, following the occurrence of one of the events set forth in Section 2(c)
hereof and prior to the termination of the Option in accordance with the terms
of this Agreement.
(b) In the event the Grantee wishes to exercise the Option, the Grantee
shall send a written notice to the Grantor (the "Stock Exercise Notice")
specifying a date
<PAGE> 2
(subject to the HSR Act (as defined below)) not later than 10 business days and
not earlier than the next business day following the date such notice is given
for the closing of such purchase. In the event of any change in the number of
issued and outstanding shares of Common Stock by reason of any stock dividend,
stock split, split-up, recapitalization, merger or other change in the corporate
or capital structure of the Grantor, the number of Shares subject to this Option
and the purchase price per Share shall be appropriately adjusted to restore the
Grantee to its rights hereunder, including its right to purchase Shares
representing 19.9% of the capital stock of the Grantor entitled to vote
generally for the election of the directors of the Grantor which is issued and
outstanding immediately prior to the exercise of the Option at an aggregate
purchase price equal to the Purchase Price multiplied by 31,200,000.
(c) If at any time the Option is then exercisable pursuant to the
terms of Section 1(a) hereof, the Grantee may elect, in lieu of exercising the
Option to purchase Shares provided in Section 1(a) hereof, to send a written
notice to the Grantor (the "Cash Exercise Notice") specifying a date not later
than 20 business days and not earlier than 10 business days following the date
such notice is given on which date the Grantor shall pay to the Grantee an
amount in cash equal to the Spread (as hereinafter defined) multiplied by all or
such portion of the Shares subject to the Option as Grantee shall specify. As
used herein "Spread" shall mean the excess, if any, over the Purchase Price of
the higher of (x) if applicable, the highest price per share of Common Stock
(including any brokerage commissions, transfer taxes and soliciting dealers'
fees) paid by any person in an Alternative Transaction (as defined in the Merger
Agreement) (the "Alternative Purchase Price") or (y) the closing price of the
shares of Common Stock on the NYSE Composite Tape on the last trading day
immediately prior to the date of the Cash Exercise Notice (the "Closing Price").
If the Alternative Purchase Price includes any property other than cash, the
Alternative Purchase Price shall be the sum of (i) the fixed cash amount, if
any, included in the Alternative Purchase Price plus (ii) the fair market value
of such other property. If such other property consists of securities with an
existing public trading market, the average of the closing prices (or the
average of the closing bid and asked prices if closing prices are unavailable)
for such securities in their principal public trading market on the five trading
days ending five days prior to the date of the Cash Exercise Notice shall be
deemed to equal the fair market value of such property. If such other property
consists of something other than cash or securities with an existing public
-2-
<PAGE> 3
trading market and, as of the payment date for the Spread, agreement on the
value of such other property has not been reached, the Alternative Purchase
Price shall be deemed to equal the Closing Price. Upon exercise of its right to
receive cash pursuant to this Section 1(c), the obligations of the Grantor to
deliver Shares pursuant to Section 3 shall be terminated with respect to such
number of Shares for which the Grantee shall have elected to be paid the Spread.
2. CONDITIONS TO DELIVERY OF SHARES. The Grantor's obligation to
deliver Shares upon exercise of the Option is subject only to the conditions
that:
(a) No preliminary or permanent injunction or other order
issued by any federal or state court of competent jurisdiction in the
United States prohibiting the delivery of the Shares shall be in
effect; and
(b) Any applicable waiting periods under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976 (the "HSR Act") shall have expired
or been terminated; and
(c) a proposal for an Alternative Transaction (as defined in
the Merger Agreement) involving Grantor shall have been made prior to
the date the Merger Agreement is terminated pursuant to the terms
thereof (the "Merger Termination Date") and one or more of the
following events shall have occurred on or after the date of the making
of such proposal: (1) the requisite vote of the stockholders of Grantor
in favor of the Merger Agreement shall not have been obtained at the
Office Depot Stockholders' Meeting (as defined in the Merger Agreement)
or any adjournment or postponement thereof; (2) the Board of Directors
of Grantor shall have withdrawn or modified its recommendation of the
Merger Agreement or the Merger or failed to confirm its recommendation
of the Merger Agreement or the Merger within ten business days after a
written request by Grantee to do so; (3) the Board of Directors of
Grantor shall have recommended to the stockholders of Grantor an
Alternative Transaction (as defined in the Merger Agreement); (4) a
tender offer or exchange offer for 20% or more of the outstanding
shares of Grantor Common Stock shall have been commenced (other
-3-
<PAGE> 4
than by Grantee or an affiliate of Grantee) and the Board of Directors
of Grantor shall have recommended that the stockholders of Grantor
tender their shares in such tender or exchange offer; or (5) for any
reason Grantor shall have failed to call and hold the Office Depot
Stockholders' Meeting (as defined in the Merger Agreement) by the
Outside Date (as defined in the Merger Agreement) and Grantor is not at
such time otherwise entitled to terminate the Merger Agreement pursuant
to Section 8.01(g) thereof.
3. THE CLOSING. (a) Any closing hereunder shall take place on the date
specified by the Grantee in its Stock Exercise Notice or Cash Exercise Notice,
as the case may be, at 9:00 A.M., local time, at the offices of Sullivan &
Cromwell, 125 Broad Street, New York, New York, or, if the conditions set forth
in Section 2(a) or 2(b) have not then been satisfied, on the second business day
following the satisfaction of such conditions, or at such other time and place
as the parties hereto may agree (the "Closing Date"). On the Closing Date, (i)
in the event of a closing pursuant to Section 1(b) hereof, the Grantor will
deliver to the Grantee a certificate or certificates, duly endorsed (or
accompanied by duly executed stock powers), representing the Shares in the
denominations designated by the Grantee in its Stock Exercise Notice and the
Grantee will purchase such Shares from the Grantor at the price per Share equal
to the Purchase Price or (ii) in the event of a closing pursuant to Section 1(c)
hereof, the Grantor will deliver to the Grantee cash in an amount determined
pursuant to Section 1(c) hereof. Any payment made by the Grantee to the Grantor,
or by the Grantor to the Grantee, pursuant to this Agreement shall be made by
certified or official bank check or by wire transfer of federal funds to a bank
designated by the party receiving such funds.
(b) The certificates representing the Shares may bear an appropriate
legend relating to the fact that such Shares have not been registered under the
Securities Act of 1933, as amended (the "Securities Act").
4. REPRESENTATIONS AND WARRANTIES OF THE GRANTOR. The Grantor
represents and warrants to the Grantee that (a) the Grantor is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware and has the requisite corporate power and authority to enter
into and perform this Agreement; (b) the execution and delivery of this
Agreement by the Grantor and the consummation by it of the transactions
contemplated hereby have
-4-
<PAGE> 5
been duly authorized by the Board of Directors of the Grantor and this Agreement
has been duly executed and delivered by a duly authorized officer of the Grantor
and constitutes a valid and binding obligation of the Grantor, enforceable in
accordance with its terms, subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors' rights and to general equity principles; (c)
the Grantor has taken all necessary corporate action to authorize and reserve
the Shares issuable upon exercise of the Option and the Shares, when issued and
delivered by the Grantor upon exercise of the Option, will be duly authorized,
validly issued, fully paid and non-assessable and free of preemptive rights; (d)
except as otherwise required by the HSR Act, the execution and delivery of this
Agreement by the Grantor and the consummation by it of the transactions
contemplated hereby do not require the consent, waiver, approval or
authorization of or any filing with any person or public authority and will not
violate, result in a breach of or the acceleration of any obligation under, or
constitute a default under, any provision of any charter or by-law, indenture,
mortgage, lien, lease, agreement, contract, instrument, order, law, rule,
regulation, judgment, ordinance, or decree, or restriction by which the Grantor
or any of its subsidiaries or any of their respective properties or assets is
bound; (e) no "fair price", "moratorium", "control share acquisition" or other
form of antitakeover statute or regulation (including, without limitation,
Section 203 of the Delaware General Corporation Law) is or shall be applicable
to the acquisition of Shares pursuant to this Agreement; and (f) the Grantor has
taken all corporate action necessary so that the grant and any subsequent
exercise of the Option by the Grantee will not result in the separation or
exercisability of rights under the Rights Agreement, dated as of August 28,
1996, between the Grantor and ChaseMellon Shareholder Services, L.L.C., as
Rights Agent.
5. REPRESENTATIONS AND WARRANTIES OF THE GRANTEE. The Grantee
represents and warrants to the Grantor that (a) the execution and delivery of
this Agreement by the Grantee and the consummation by it of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
on the part of the Grantee and this Agreement has been duly executed and
delivered by a duly authorized officer of the Grantee and will constitute a
valid and binding obligation of Grantee; and (b) the Grantee is acquiring the
Option and, if and when it exercises the Option, will be acquiring the Shares
issuable upon the exercise thereof for its own account and not with a view to
-5-
<PAGE> 6
distribution or resale in any manner which would be in violation of the
Securities Act.
6. LISTING OF SHARES; HSR ACT FILINGS; GOVERNMENTAL CONSENTS;
DIRECTORSHIP. (a) Subject to applicable law and the rules and regulations of the
New York Stock Exchange, Inc. (the "NYSE"), the Grantor will promptly file an
application to list the Shares on the NYSE and will use its best efforts to
obtain approval of such listing and to effect all necessary filings by the
Grantor under the HSR Act; provided, however, that if the Grantor is unable to
effect such listing on the NYSE by the Closing Date, the Grantor will
nevertheless be obligated to deliver the Shares upon the Closing Date. Each of
the parties hereto will use its best efforts to obtain consents of all third
parties and governmental authorities, if any, necessary to the consummation of
the transactions contemplated.
(b) Upon exercise by the Grantee of the Option, in whole or in part,
for at least 15,700,000 Shares (such number representing approximately 10% of
the number of outstanding shares of Common Stock on the date hereof) the Grantee
shall be entitled to designate one person to be appointed to the Board of
Directors of the Grantor. Within five business days of the giving of notice by
the Grantee to the Grantor of the name of such designee, the Grantor, subject to
the fiduciary obligations of the Board of Directors of the Grantor, shall cause
such designee to be appointed to the Board of Directors of the Grantor.
Thereafter, subject to the further provisions hereof, the Grantor's nominating
committee (or any other committee exercising a similar function) shall recommend
to the Board of Directors of the Grantor that such person designated by the
Grantee be included in the slate of nominees recommended by the Board of
Directors to the shareholders for election as directors at each annual meeting
of shareholders of the Grantor. In the event that the designee of the Grantee
shall cease to serve as a director for any reason, the vacancy resulting thereby
shall be filled by the designee of the Grantee. The Grantee agrees that it will
not seek to elect any person to the Board of Directors of the Grantor not
recommended by the Board of Directors in accordance with the foregoing. If any
such person has been designated by the Grantee and not approved by the Board of
Directors, the Grantee shall be permitted to designate a substitute designee for
such person in accordance with this Section 6(b). Notwithstanding the foregoing,
the Grantor shall not be required to nominate the designee of the Grantee, and
shall be entitled to request and receive the resignation of any designee of the
Grantee then serving on the Board of Directors of the Grantor, at any time that
the Grantee then
-6-
<PAGE> 7
beneficially owns less than 15,700,000 shares of Common Stock. The Grantee and
the Grantor agree to take such steps as may be necessary to give effect to this
Section 6(b) in a manner consistent with applicable law.
7. COVENANTS OF THE GRANTEE. For so long as, and at any time that, a
designee of the Grantee is a member of the Board of Directors of the Grantor,
the Grantee covenants and agrees that the Grantee will not enter into any
agreement or understanding with any person with respect to the voting of any
shares of Common Stock it may beneficially own, and shall vote all such shares
beneficially owned by it (unless the aggregate of all such shares of Common
Stock beneficially owned by the Grantee and its affiliates exceeds 50% of the
outstanding shares of Common Stock) in favor of the Grantor's nominees for
election of directors.
8. RIGHT OF FIRST REFUSAL. If a Change in Control Event (as defined
herein) has not then already occurred, if the Grantee, at any time prior to the
first anniversary of the Merger Termination Date, seeks to sell all or any part
of the Shares (i) in a transaction registered under the Securities Act (other
than in a registered public offering in which the underwriters are instructed to
achieve a broad public distribution) or (ii) in a transaction not required to be
registered under the Securities Act (other than in a transfer by operation of
law upon consummation of a merger), it shall give the Grantor (or a designee of
the Grantor) the opportunity, in the following manner, to purchase such Shares:
(a) The Grantee shall give notice to the Grantor in writing of its
intent to sell Shares (a "Disposition Notice"), specifying the number of Shares
to be sold, the price and, if applicable, the material terms of any agreement
relating thereto. For purposes of this Section 8, if the Disposition Notice is
given with respect to the sale of the Shares pursuant to a tender or exchange
offer, it shall be assumed that all Shares tendered will be accepted for
payment. The Disposition Notice may be given at any time, including prior to the
giving of any Stock Exercise Notice.
(b) The Grantor or its designee shall have the right, exercisable by
written notice given to the Grantee within five business days after receipt of a
Disposition Notice (or, if applicable, in the case of a proposed sale pursuant
to a tender or exchange offer for shares of Common Stock, by written notice
given to the Grantee at least two business days prior to the then announced
expiration date of such tender or exchange offer (the "Expiration Date") if
-7-
<PAGE> 8
such Disposition Notice was given at least four business days prior to such
Expiration Date), to purchase all, but not less than all, of the Shares
specified in the Disposition Notice at the price set forth in the Disposition
Notice. If the purchase price specified in the Disposition Notice includes any
property other than cash, the purchase price to be paid by the Grantor shall be
an amount of cash equal to the sum of (i) the cash included in the purchase
price plus (ii) the fair market value of such other property at the date of the
Disposition Notice. If such other property consists of securities with an
existing public trading market, the average of the last sales prices for such
securities on the five trading days ending five days prior to the date of the
Disposition Notice shall be used as the fair market value of such property. If
such other property consists of something other than cash or securities with an
existing public trading market and at the time of the closing referred to in
paragraph (c) below, agreement on the value of such other property has not been
reached, the average of the closing prices for the Grantor's Common Stock on the
five trading days ending five days prior to the date of the Disposition Notice
shall be used as the per share purchase price; provided, however, that promptly
after the closing, the Grantee and the Grantor or its designee, as the case may
be, shall settle any additional amounts to be paid or returned as a result of
the determination of fair market value of such other property made by a
nationally recognized investment banking firm selected by the Grantor and
approved by the Grantee within thirty days of the closing. Such determination
shall be final and binding on all parties hereto. If, at the time of the
purchase of any Shares by the Grantor (or its designee) pursuant to this Section
8, a tender or exchange offer is outstanding, then the Grantor (or its designee)
shall agree at the time of such purchase to promptly pay to Grantee from time to
time such additional amounts, if any, so that the consideration received by
Grantee with respect to each Share shall be equal to the highest price paid for
a share of Common Stock pursuant to such tender or exchange, or pursuant to any
other tender or exchange offer outstanding at any time such tender or exchange
offer is outstanding.
(c) If the Grantor exercises its right of first refusal hereunder, the
closing of the purchase of the Shares with respect to which such right has been
exercised shall take place within five business days after the notice of such
exercise (or, if applicable, in the case of a tender or exchange offer, no later
than one business day prior to the expiration date of the offer if written
notice was given within the time set forth in the parenthetical in the first
sentence of paragraph (b) above); provided, however, that at
-8-
<PAGE> 9
any time prior to the closing of the purchase of Shares hereunder, the Grantee
may determine not to sell the Shares and revoke the Disposition Notice and, by
so doing, cancel the Grantor's right of first refusal with respect to the
disposition in question. The Grantor (or its designee) shall pay for the Shares
in immediately available funds.
(d) If the Grantor does not exercise its right of first refusal
hereunder within the time specified for such exercise, the Grantee shall be free
for 90 days following the expiration of such time for exercise to sell or enter
into an agreement to sell the Shares specified in the Disposition Notice, at the
price specified in the Disposition Notice or any price in excess thereof and
otherwise on substantially the same terms set forth in the Disposition Notice;
provided, that if such sale is not consummated within such 90-day period, then
the provisions of this Section 8 will again apply to the sale of such Shares.
(e) For purposes of the Agreement, a "Change in Control Event" shall be
deemed to have occurred if (i) any person has a acquired beneficial ownership of
more than fifty percent (excluding the Shares) of the outstanding shares of
Common Stock or (ii) the Grantor shall have entered into an agreement, including
without limitation an agreement in principle, providing for a merger or other
business combination involving the Grantor or the acquisition of 20% or more of
the assets of the Grantor and its subsidiaries, taken as a whole.
9. REPURCHASE OF SHARES; SALE OF SHARES. (a) If a Change in Control
Event has not occurred prior to the first anniversary date of the Merger
Termination Date, then beginning on such anniversary date, the Grantor shall
have the right to purchase (the "Repurchase Right") all, but not less than all,
of the Shares at the greater of (i) the Purchase Price, or (ii) the average of
the closing prices for shares of Common Stock on the five trading days ending
five days prior to the date the Grantor gives written notice of its intention to
exercise the Repurchase Right. If the Grantor does not exercise the Repurchase
Right within thirty days following the first anniversary of the Merger
Termination Date, the Repurchase Right terminates. In the event the Grantor
wishes to exercise the Repurchase Right, the Grantor shall send a written notice
to the Grantee specifying a date (not later than 10 business days and not
earlier than the next business day following the date such notice is given) for
the closing of such purchase.
(b) At any time prior to the first anniversary of the Merger
Termination Date, the Grantee shall have the
-9-
<PAGE> 10
right to sell (the "Sale Right") to the Grantor all, but not less than all, of
the Shares at the greater of (i) the Purchase Price, or (ii) the average of the
last sales prices for shares of Common Stock on the five trading days ending
five days prior to the date the Grantee gives written notice of its intention to
exercise the Sale Right. If the Grantee does not exercise the Sale Right prior
to the first anniversary of the Merger Termination Date, the Sale Right
terminates. In the event the Grantee wishes to exercise the Sale Right, the
Grantee shall send a written notice to the Grantor specifying a date closing not
later than 20 business days and not earlier than 10 business days following the
date such notice is given for the closing of such sale.
10. REGISTRATION RIGHTS. (a) In the event that the Grantee shall
desire to sell any of the Shares within three years after the purchase of such
Shares pursuant hereto, and such sale requires, in the opinion of counsel to the
Grantee, which opinion shall be reasonably satisfactory to the Grantor and its
counsel, registration of such Shares under the Securities Act, the Grantor will
cooperate with the Grantee and any underwriters in registering such Shares for
resale, including, without limitation, promptly filing a registration statement
which complies with the requirements of applicable federal and state securities
laws, entering into an underwriting agreement with such underwriters upon such
terms and conditions as are customarily contained in underwriting agreements
with respect to secondary distributions; provided that the Grantor shall not be
required to have declared effective more than two registration statements
hereunder and shall be entitled to delay the filing or effectiveness of any
registration statement for up to 120 days if the offering would, in the judgment
of the Board of Directors of the Grantor, require premature disclosure of any
material corporate development or otherwise interfere with or adversely affect
any pending or proposed offering of securities of the Grantor or any other
material transaction involving the Grantor.
(b) If the Common Stock is registered pursuant to the provisions of
this Section 10, the Grantor agrees (i) to furnish copies of the registration
statement and the prospectus relating to the Shares covered thereby in such
numbers as the Grantee may from time to time reasonably request and (ii) if any
event shall occur as a result of which it becomes necessary to amend or
supplement any registration statement or prospectus, to prepare and file under
the applicable securities laws such amendments and supplements as may be
necessary to keep available for at least 90 days a prospectus covering the
Common Stock meeting the requirements of such securities laws, and to furnish
the Grantee
-10-
<PAGE> 11
such numbers of copies of the registration statement and prospectus as amended
or supplemented as may reasonably be requested. The Grantor shall bear the cost
of the registration, including, but not limited to, all registration and filing
fees, printing expenses, and fees and disbursements of counsel and accountants
for the Grantor, except that the Grantee shall pay the fees and disbursements of
its counsel, the underwriting fees and selling commissions applicable to the
shares of Common Stock sold by the Grantee. The Grantor shall indemnify and hold
harmless Grantee, its affiliates and its officers and directors from and against
any and all losses, claims, damages, liabilities and expenses arising out of or
based upon any statements contained in, omissions or alleged omissions from,
each registration statement filed pursuant to this paragraph; PROVIDED, HOWEVER,
that this provision does not apply to any loss, liability, claim, damage or
expense to the extent it arises out of any untrue statement or omission made in
reliance upon and in conformity with written information furnished to the
Grantor by the Grantee, its affiliates and its officers expressly for use in any
registration statement (or any amendment thereto) or any preliminary prospectus
filed pursuant to this paragraph. The Grantor shall also indemnify and hold
harmless each underwriter and each person who controls any underwriter within
the meaning of either the Securities Act or the Securities Exchange Act of 1934
against any and all losses, claims, damages, liabilities and expenses arising
out of or based upon any statements contained in, omissions or alleged omissions
from, each registration statement filed pursuant to this paragraph; PROVIDED,
HOWEVER, that this provision does not apply to any loss, liability, claim,
damage or expense to the extent it arises out of any untrue statement or
omission made in reliance upon and in conformity with written information
furnished to the Grantor by the underwriters expressly for use in any
registration statement (or any amendment thereto) or any preliminary prospectus
filed pursuant to this paragraph.
11. PROFIT LIMITATION. (a) Notwithstanding any other provision of this
Agreement, in no event shall the Grantee's Total Profit (as hereinafter defined)
exceed $150 million and, if it otherwise would exceed such amount, the Grantee,
at its sole election, shall either (a) deliver to the Grantor for cancellation
Shares previously purchased by Grantee, (b) pay cash or other consideration to
the Grantor or (c) undertake any combination thereof, so that Grantee's Total
Profit shall not exceed $150 million after taking into account the foregoing
actions.
(b) Notwithstanding any other provision of this Agreement, this Option
may not be exercised for a number of
-11-
<PAGE> 12
Shares as would, as of the date of the Stock Exercise Notice, result in a
Notional Total Profit (as defined below) of more than $150 million and, if
exercise of the Option otherwise would exceed such amount, the Grantee, at its
discretion, may increase the Purchase Price for that number of Shares set forth
in the Stock Exercise Notice so that the Notional Total Profit shall not exceed
$150 million; PROVIDED, that nothing in this sentence shall restrict any
exercise of the Option permitted hereby on any subsequent date at the Purchase
Price set forth in Section 1(a) hereof.
(c) As used herein, the term "Total Profit" shall mean the aggregate
amount (before taxes) of the following: (i) the amount of cash received by
Grantee pursuant to Section 8.03(c) of the Merger Agreement and Section 1(c)
hereof, (ii) (x) the amount received by Grantee pursuant to the Grantor's
repurchase of Shares pursuant to Sections 8 or 9 hereof, less (y) the Grantee's
purchase price for such Shares, and (iii) (x) the net cash amounts received by
Grantee pursuant to the sale of Shares (or any other securities into which such
Shares are converted or exchanged) to any unaffiliated party, less (y) the
Grantee's purchase price for such Shares.
(d) As used herein, the term "Notional Total Profit" with respect to
any number of Shares as to which Grantee may propose to exercise this Option
shall be the Total Profit determined as of the date of the Stock Exercise Notice
assuming that this Option were exercised on such date for such number of Shares
and assuming that such Shares, together with all other Shares held by Grantee
and its affiliates as of such date, were sold for cash at the closing market
price for the Common Stock as of the close of business on the preceding trading
day (less customary brokerage commissions).
12. EXPENSES. Each party hereto shall pay its own expenses incurred in
connection with this Agreement, except as otherwise specifically provided
herein.
13. SPECIFIC PERFORMANCE. The Grantor acknowledges that if the Grantor
fails to perform any of its obligations under this Agreement immediate and
irreparable harm or injury would be caused to the Grantee for which money
damages would not be an adequate remedy. In such event, the Grantor agrees that
the Grantee shall have the right, in addition to any other rights it may have,
to specific performance of this Agreement. Accordingly, if the Grantee should
institute an action or proceeding seeking specific enforcement of the provisions
hereof, the Grantor hereby waives the claim or defense that the Grantee has an
-12-
<PAGE> 13
adequate remedy at law and hereby agrees not to assert in any such action or
proceeding the claim or defense that such a remedy at law exists. The Grantor
further agrees to waive any requirements for the securing or posting of any bond
in connection with obtaining any such equitable relief.
14. NOTICE. All notices, requests, demands and other communications
hereunder shall be deemed to have been duly given and made if in writing and if
served by personal delivery upon the party for whom it is intended or delivered
by registered or certified mail, return receipt requested, or if sent by
facsimile transmission, upon receipt of oral confirmation that such transmission
has been received, to the person at the address set forth below, or such other
address as may be designated in writing hereafter, in the same manner, by such
person:
If to the Grantee:
Staples, Inc.
One Research Drive
Westborough, MA 01581
Attn: Secretary
Telecopy: (508) 370-7805
With a copy to:
Hale and Dorr
60 State Street
Boston, MA 02109
Attn: Mark G. Borden, Esq.
Telecopy: (617) 526-5000
and
Sullivan & Cromwell
125 Broad Street
New York, NY 10004
Attn: James C. Morphy, Esq.
Telecopy: (212) 558-3299
If to the Grantor:
Office Depot, Inc.
2200 Old Germantown Road
Delray Beach, FL 33445
Attn: Secretary
Telecopy: (561) 266-1850
-13-
<PAGE> 14
With a copy to:
Kirkland & Ellis
200 East Randolph Street
Chicago, IL 60601
Attn: Willard G. Fraumann, Esq.
Telecopy: (312) 861-2200
15. PARTIES IN INTEREST. This Agreement shall inure to the benefit of
and be binding upon the parties named herein and their respective successors and
assigns; PROVIDED, HOWEVER, that such successor in interest or assigns shall
agree to be bound by the provisions of this Agreement. Nothing in this
Agreement, express or implied, is intended to confer upon any person other than
the Grantor or the Grantee, or their successors or assigns, any rights or
remedies under or by reason of this Agreement.
16. ENTIRE AGREEMENT; AMENDMENTS. This Agreement, together with the
Merger Agreement and the other documents referred to therein, contains the
entire agreement between the parties hereto with respect to the subject matter
hereof and supersedes all prior and contemporaneous agreements and
understandings, oral or written, with respect to such transactions. This
Agreement may not be changed, amended or modified orally, but may be changed
only by an agreement in writing signed by the party against whom any waiver,
change, amendment, modification or discharge may be sought.
17. ASSIGNMENT. No party to this Agreement may assign any of its
rights or obligations under this Agreement without the prior written consent of
the other party hereto, except that the Grantee may assign its rights and
obligations hereunder to any of its direct or indirect wholly owned subsidiaries
(including Newco), but no such transfer shall relieve the Grantee of its
obligations hereunder if such transferee does not perform such obligations.
18. HEADINGS. The section headings herein are for convenience only and
shall not affect the construction of this Agreement.
19. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which, when executed, shall be deemed to be an original
and all of which together shall constitute one and the same document.
-14-
<PAGE> 15
20. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware (regardless of the laws that
might otherwise govern under applicable Delaware principles of conflicts of
law).
21. TERMINATION. The right to exercise the Option granted pursuant to
this Agreement shall terminate at the earlier of (i) the Effective Time (as
defined in the Merger Agreement), (ii) the date on which Grantee realizes a
Total Profit of $150 million and (iii) 90 days after the Merger Termination Date
(the date referred to in clause (iii) being hereinafter referred to as the
"Option Termination Date"); PROVIDED THAT, if the Option cannot be exercised or
the Shares cannot be delivered to Grantee upon such exercise because the
conditions set forth in Section 2(a) or Section 2(b) hereof have not yet been
satisfied, the Option Termination Date shall be extended until thirty days after
such impediment to exercise has been removed; and PROVIDED, FURTHER, THAT, if at
any time the Grantee seeks to exercise the Option by delivery of a Stock
Exercise Notice but is unable to do so with respect to all of the Shares subject
to the Option at the Purchase Price because of the limitation on profit
contained in Section 11(b) hereof, the Option Termination Date shall be extended
for an additional 180 days from the date of such Stock Exercise Notice (but in
no event shall the Option Termination Date be more than 270 days after the
Merger Termination Date).
All representations and warranties contained in this Agreement shall
survive delivery of and payment for the Shares.
22. SEVERABILITY. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction to be invalid, void
or unenforce- able, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated.
23. PUBLIC ANNOUNCEMENT. The Grantee will consult with the Grantor and
the Grantor will consult with the Grantee before issuing any press release with
respect to the initial announcement of this Agreement, the Option or the
transactions contemplated hereby and neither party shall issue any such press
release prior to such consultation except as may be required by law.
-15-
<PAGE> 16
IN WITNESS WHEREOF, the Grantee and the Grantor have caused this
Agreement to be duly executed and delivered on the day and year first above
written.
OFFICE DEPOT, INC.
By: /s/ Barry J. Goldstein
---------------------------------
Title
STAPLES, INC.
By: /s/ Thomas G. Stemberg
---------------------------------
Title
-16-
<PAGE> 1
Exhibit 3
STOCK OPTION AGREEMENT, dated as of September 4, 1996 (the
"Agreement"), between OFFICE DEPOT, INC., a Delaware corporation (the
"Grantee"), and STAPLES, INC., a Delaware corporation (the "Grantor").
WHEREAS, the Grantee, the Grantor and Marlin Acquisition Corp., a
Delaware corporation and a wholly owned subsidiary of the Grantor ("Newco"), are
entering into an Agreement and Plan of Merger, dated as of the date hereof (the
"Merger Agreement"), which provides, among other things, for the merger (the
"Merger") of Newco with and into the Grantee;
WHEREAS, as a condition to its willingness to enter into the Merger
Agreement, the Grantee has requested that the Grantor grant to the Grantee an
option to purchase 31,900,000 shares of Common Stock, par value $0.006 per
share, of the Grantor (the "Common Stock"), upon the terms and subject to the
conditions hereof; and
WHEREAS, in order to induce the Grantee to enter into the Merger
Agreement, the Grantor is willing to grant the Grantee the requested option.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements set forth herein, the parties hereto agree as follows:
1. THE OPTION; EXERCISE; ADJUSTMENTS; PAYMENT OF SPREAD. (a)
Contemporaneously herewith the Grantee, Newco and the Grantor are entering into
the Merger Agreement. Subject to the other terms and conditions set forth
herein, the Grantor hereby grants to the Grantee an irrevocable option (the
"Option") to purchase up to 31,900,000 shares of Common Stock (the "Shares") at
a cash purchase price equal to the lower of (i) $19.50 per Share or (ii) the
average closing price of the Common Stock on the Nasdaq National Market for the
five consecutive trading days beginning on and including the day that the Merger
is publicly announced (the "Purchase Price"). The Option may be exercised by the
Grantee, in whole or in part, at any time, or from time to time, following the
occurrence of one of the events set forth in Section 2(c) hereof and prior to
the termination of the Option in accordance with the terms of this Agreement.
(b) In the event the Grantee wishes to exercise the Option, the Grantee
shall send a written notice to the Grantor (the "Stock Exercise Notice")
specifying a date (subject to the HSR Act (as defined below)) not later than
<PAGE> 2
10 business days and not earlier than the next business day following the date
such notice is given for the closing of such purchase. In the event of any
change in the number of issued and outstanding shares of Common Stock by reason
of any stock dividend, stock split, split-up, recapitalization, merger or other
change in the corporate or capital structure of the Grantor, the number of
Shares subject to this Option and the purchase price per Share shall be
appropriately adjusted to restore the Grantee to its rights hereunder, including
its right to purchase Shares representing 19.9% of the capital stock of the
Grantor entitled to vote generally for the election of the directors of the
Grantor which is issued and outstanding immediately prior to the exercise of the
Option at an aggregate purchase price equal to the Purchase Price multiplied by
31,900,000.
(c) If at any time the Option is then exercisable pursuant to the
terms of Section 1(a) hereof, the Grantee may elect, in lieu of exercising the
Option to purchase Shares provided in Section 1(a) hereof, to send a written
notice to the Grantor (the "Cash Exercise Notice") specifying a date not later
than 20 business days and not earlier than 10 business days following the date
such notice is given on which date the Grantor shall pay to the Grantee an
amount in cash equal to the Spread (as hereinafter defined) multiplied by all or
such portion of the Shares subject to the Option as Grantee shall specify. As
used herein "Spread" shall mean the excess, if any, over the Purchase Price of
the higher of (x) if applicable, the highest price per share of Common Stock
(including any brokerage commissions, transfer taxes and soliciting dealers'
fees) paid by any person in an Alternative Transaction (as defined in the Merger
Agreement) (the "Alternative Purchase Price") or (y) the closing price of the
shares of Common Stock on the Nasdaq National Market on the last trading day
immediately prior to the date of the Cash Exercise Notice (the "Closing Price").
If the Alternative Purchase Price includes any property other than cash, the
Alternative Purchase Price shall be the sum of (i) the fixed cash amount, if
any, included in the Alternative Purchase Price plus (ii) the fair market value
of such other property. If such other property consists of securities with an
existing public trading market, the average of the closing prices (or the
average of the closing bid and asked prices if closing prices are unavailable)
for such securities in their principal public trading market on the five trading
days ending five days prior to the date of the Cash Exercise Notice shall be
deemed to equal the fair market value of such property. If such other property
consists of something other than cash or securities with an existing public
trading market and, as of the payment date for the Spread,
-2-
<PAGE> 3
agreement on the value of such other property has not been reached, the
Alternative Purchase Price shall be deemed to equal the Closing Price. Upon
exercise of its right to receive cash pursuant to this Section 1(c), the
obligations of the Grantor to deliver Shares pursuant to Section 3 shall be
terminated with respect to such number of Shares for which the Grantee shall
have elected to be paid the Spread.
2. CONDITIONS TO DELIVERY OF SHARES. The Grantor's obligation to
deliver Shares upon exercise of the Option is subject only to the conditions
that:
(a) No preliminary or permanent injunction or other order
issued by any federal or state court of competent jurisdiction in the
United States prohibiting the delivery of the Shares shall be in
effect; and
(b) Any applicable waiting periods under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976 (the "HSR Act") shall have expired
or been terminated; and
(c) a proposal for an Alternative Transaction (as defined in
the Merger Agreement) involving Grantor shall have been made prior to
the date the Merger Agreement is terminated pursuant to the terms
thereof (the "Merger Termination Date") and one or more of the
following events shall have occurred on or after the date of the making
of such proposal: (1) the requisite vote of the stockholders of Grantor
in favor of the Merger Agreement shall not have been obtained at the
Staples Stockholders' Meeting (as defined in the Merger Agreement) or
any adjournment or postponement thereof; (2) the Board of Directors of
Grantor shall have withdrawn or modified its recommendation of the
Merger Agreement or the Merger or failed to confirm its recommendation
of the Merger Agreement or the Merger within ten business days after a
written request by Grantee to do so; (3) the Board of Directors of
Grantor shall have recommended to the stockholders of Grantor an
Alternative Transaction (as defined in the Merger Agreement); (4) a
tender offer or exchange offer for 20% or more of the outstanding
shares of Grantor Common Stock shall have been commenced (other than by
Grantee or an affiliate of Grantee)
-3-
<PAGE> 4
and the Board of Directors of Grantor shall have recommended that the
stockholders of Grantor tender their shares in such tender or exchange
offer; or (5) for any reason Grantor shall have failed to call and hold
the Staples Stockholders' Meeting (as defined in the Merger Agreement)
by the Outside Date (as defined in the Merger Agreement) and Grantor is
not at such time otherwise entitled to terminate the Merger Agreement
pursuant to Section 8.01(g) thereof.
3. THE CLOSING. (a) Any closing hereunder shall take place on the date
specified by the Grantee in its Stock Exercise Notice or Cash Exercise Notice,
as the case may be, at 9:00 A.M., local time, at the offices of Sullivan &
Cromwell, 125 Broad Street, New York, New York, or, if the conditions set forth
in Section 2(a) or 2(b) have not then been satisfied, on the second business day
following the satisfaction of such conditions, or at such other time and place
as the parties hereto may agree (the "Closing Date"). On the Closing Date, (i)
in the event of a closing pursuant to Section 1(b) hereof, the Grantor will
deliver to the Grantee a certificate or certificates, duly endorsed (or
accompanied by duly executed stock powers), representing the Shares in the
denominations designated by the Grantee in its Stock Exercise Notice and the
Grantee will purchase such Shares from the Grantor at the price per Share equal
to the Purchase Price or (ii) in the event of a closing pursuant to Section 1(c)
hereof, the Grantor will deliver to the Grantee cash in an amount determined
pursuant to Section 1(c) hereof. Any payment made by the Grantee to the Grantor,
or by the Grantor to the Grantee, pursuant to this Agreement shall be made by
certified or official bank check or by wire transfer of federal funds to a bank
designated by the party receiving such funds.
(b) The certificates representing the Shares may bear an appropriate
legend relating to the fact that such Shares have not been registered under the
Securities Act of 1933, as amended (the "Securities Act").
4. REPRESENTATIONS AND WARRANTIES OF THE GRANTOR. The Grantor
represents and warrants to the Grantee that (a) the Grantor is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware and has the requisite corporate power and authority to enter
into and perform this Agreement; (b) the execution and delivery of this
Agreement by the Grantor and the consummation by it of the transactions
contemplated hereby have been duly authorized by the Board of Directors of the
-4-
<PAGE> 5
Grantor and this Agreement has been duly executed and delivered by a duly
authorized officer of the Grantor and constitutes a valid and binding obligation
of the Grantor, enforceable in accordance with its terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar laws of
general applicability relating to or affecting creditors' rights and to general
equity principles; (c) the Grantor has taken all necessary corporate action to
authorize and reserve the Shares issuable upon exercise of the Option and the
Shares, when issued and delivered by the Grantor upon exercise of the Option,
will be duly authorized, validly issued, fully paid and non-assessable and free
of preemptive rights; (d) except as otherwise required by the HSR Act, the
execution and delivery of this Agreement by the Grantor and the consummation by
it of the transactions contemplated hereby do not require the consent, waiver,
approval or authorization of or any filing with any person or public authority
and will not violate, result in a breach of or the acceleration of any
obligation under, or constitute a default under, any provision of any charter or
by-law, indenture, mortgage, lien, lease, agreement, contract, instrument,
order, law, rule, regulation, judgment, ordinance, or decree, or restriction by
which the Grantor or any of its subsidiaries or any of their respective
properties or assets is bound; (e) no "fair price", "moratorium", "control share
acquisition" or other form of antitakeover statute or regulation (including,
without limitation, Section 203 of the Delaware General Corporation Law) is or
shall be applicable to the acquisition of Shares pursuant to this Agreement; and
(f) the Grantor has taken all corporate action necessary so that the grant and
any subsequent exercise of the Option by the Grantee will not result in the
separation or exercisability of rights under the Rights Agreement, dated as of
February 3, 1994, between the Grantor and the First National Bank of Boston, as
Rights Agent.
5. REPRESENTATIONS AND WARRANTIES OF THE GRANTEE. The Grantee
represents and warrants to the Grantor that (a) the execution and delivery of
this Agreement by the Grantee and the consummation by it of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
on the part of the Grantee and this Agreement has been duly executed and
delivered by a duly authorized officer of the Grantee and will constitute a
valid and binding obligation of Grantee; and (b) the Grantee is acquiring the
Option and, if and when it exercises the Option, will be acquiring the Shares
issuable upon the exercise thereof for its own account and not with a view to
distribution or resale in any manner which would be in violation of the
Securities Act.
-5-
<PAGE> 6
6. LISTING OF SHARES; HSR ACT FILINGS; GOVERNMENTAL CONSENTS;
DIRECTORSHIP. (a) Subject to applicable law and the rules and regulations of the
Nasdaq National Market, the Grantor will promptly file an application to list
the Shares on the Nasdaq National Market and will use its best efforts to obtain
approval of such listing and to effect all necessary filings by the Grantor
under the HSR Act; provided, however, that if the Grantor is unable to effect
such listing on the NYSE by the Closing Date, the Grantor will nevertheless be
obligated to deliver the Shares upon the Closing Date. Each of the parties
hereto will use its best efforts to obtain consents of all third parties and
governmental authorities, if any, necessary to the consummation of the
transactions contemplated.
(b) Upon exercise by the Grantee of the Option, in whole or in part,
for at least 16,100,000 Shares (such number representing approximately 10% of
the number of outstanding shares of Common Stock on the date hereof) the Grantee
shall be entitled to designate one person to be appointed to the Board of
Directors of the Grantor. Within five business days of the giving of notice by
the Grantee to the Grantor of the name of such designee, the Grantor, subject to
the fiduciary obligations of the Board of Directors of the Grantor, shall cause
such designee to be appointed to the Board of Directors of the Grantor.
Thereafter, subject to the further provisions hereof, the Grantor's nominating
committee (or any other committee exercising a similar function) shall recommend
to the Board of Directors of the Grantor that such person designated by the
Grantee be included in the slate of nominees recommended by the Board of
Directors to the shareholders for election as directors at each annual meeting
of shareholders of the Grantor. In the event that the designee of the Grantee
shall cease to serve as a director for any reason, the vacancy resulting thereby
shall be filled by the designee of the Grantee. The Grantee agrees that it will
not seek to elect any person to the Board of Directors of the Grantor not
recommended by the Board of Directors in accordance with the foregoing. If any
such person has been designated by the Grantee and not approved by the Board of
Directors, the Grantee shall be permitted to designate a substitute designee for
such person in accordance with this Section 6(b). Notwithstanding the foregoing,
the Grantor shall not be required to nominate the designee of the Grantee, and
shall be entitled to request and receive the resignation of any designee of the
Grantee then serving on the Board of Directors of the Grantor, at any time that
the Grantee then beneficially owns less than 16,100,000 shares of Common Stock.
The Grantee and the Grantor agree to take such steps
-6-
<PAGE> 7
as may be necessary to give effect to this Section 6(b) in a manner consistent
with applicable law.
7. COVENANTS OF THE GRANTEE. For so long as, and at any time that, a
designee of the Grantee is a member of the Board of Directors of the Grantor,
the Grantee covenants and agrees that the Grantee will not enter into any
agreement or understanding with any person with respect to the voting of any
shares of Common Stock it may beneficially own, and shall vote all such shares
beneficially owned by it (unless the aggregate of all such shares of Common
Stock beneficially owned by the Grantee and its affiliates exceeds 50% of the
outstanding shares of Common Stock) in favor of the Grantor's nominees for
election of directors.
8. RIGHT OF FIRST REFUSAL. If a Change in Control Event (as defined
herein) has not then already occurred, if the Grantee, at any time prior to the
first anniversary of the Merger Termination Date, seeks to sell all or any part
of the Shares (i) in a transaction registered under the Securities Act (other
than in a registered public offering in which the underwriters are instructed to
achieve a broad public distribution) or (ii) in a transaction not required to be
registered under the Securities Act (other than in a transfer by operation of
law upon consummation of a merger), it shall give the Grantor (or a designee of
the Grantor) the opportunity, in the following manner, to purchase such Shares:
(a) The Grantee shall give notice to the Grantor in writing of its
intent to sell Shares (a "Disposition Notice"), specifying the number of Shares
to be sold, the price and, if applicable, the material terms of any agreement
relating thereto. For purposes of this Section 8, if the Disposition Notice is
given with respect to the sale of the Shares pursuant to a tender or exchange
offer, it shall be assumed that all Shares tendered will be accepted for
payment. The Disposition Notice may be given at any time, including prior to the
giving of any Stock Exercise Notice.
(b) The Grantor or its designee shall have the right, exercisable by
written notice given to the Grantee within five business days after receipt of a
Disposition Notice (or, if applicable, in the case of a proposed sale pursuant
to a tender or exchange offer for shares of Common Stock, by written notice
given to the Grantee at least two business days prior to the then announced
expiration date of such tender or exchange offer (the "Expiration Date") if such
Disposition Notice was given at least four business days prior to such
Expiration Date), to purchase all, but
-7-
<PAGE> 8
not less than all, of the Shares specified in the Disposition Notice at the
price set forth in the Disposition Notice. If the purchase price specified in
the Disposition Notice includes any property other than cash, the purchase price
to be paid by the Grantor shall be an amount of cash equal to the sum of (i) the
cash included in the purchase price plus (ii) the fair market value of such
other property at the date of the Disposition Notice. If such other property
consists of securities with an existing public trading market, the average of
the last sales prices for such securities on the five trading days ending five
days prior to the date of the Disposition Notice shall be used as the fair
market value of such property. If such other property consists of something
other than cash or securities with an existing public trading market and at the
time of the closing referred to in paragraph (c) below, agreement on the value
of such other property has not been reached, the average of the closing prices
for the Grantor's Common Stock on the five trading days ending five days prior
to the date of the Disposition Notice shall be used as the per share purchase
price; provided, however, that promptly after the closing, the Grantee and the
Grantor or its designee, as the case may be, shall settle any additional amounts
to be paid or returned as a result of the determination of fair market value of
such other property made by a nationally recognized investment banking firm
selected by the Grantor and approved by the Grantee within thirty days of the
closing. Such determination shall be final and binding on all parties hereto.
If, at the time of the purchase of any Shares by the Grantor (or its designee)
pursuant to this Section 8, a tender or exchange offer is outstanding, then the
Grantor (or its designee) shall agree at the time of such purchase to promptly
pay to Grantee from time to time such additional amounts, if any, so that the
consideration received by Grantee with respect to each Share shall be equal to
the highest price paid for a share of Common Stock pursuant to such tender or
exchange, or pursuant to any other tender or exchange offer outstanding at any
time such tender or exchange offer is outstanding.
(c) If the Grantor exercises its right of first refusal hereunder, the
closing of the purchase of the Shares with respect to which such right has been
exercised shall take place within five business days after the notice of such
exercise (or, if applicable, in the case of a tender or exchange offer, no later
than one business day prior to the expiration date of the offer if written
notice was given within the time set forth in the parenthetical in the first
sentence of paragraph (b) above); provided, however, that at any time prior to
the closing of the purchase of Shares hereunder, the Grantee may determine not
to sell the Shares
-8-
<PAGE> 9
and revoke the Disposition Notice and, by so doing, cancel the Grantor's right
of first refusal with respect to the disposition in question. The Grantor (or
its designee) shall pay for the Shares in immediately available funds.
(d) If the Grantor does not exercise its right of first refusal
hereunder within the time specified for such exercise, the Grantee shall be free
for 90 days following the expiration of such time for exercise to sell or enter
into an agreement to sell the Shares specified in the Disposition Notice, at the
price specified in the Disposition Notice or any price in excess thereof and
otherwise on substantially the same terms set forth in the Disposition Notice;
provided, that if such sale is not consummated within such 90-day period, then
the provisions of this Section 8 will again apply to the sale of such Shares.
(e) For purposes of the Agreement, a "Change in Control Event" shall be
deemed to have occurred if (i) any person has a acquired beneficial ownership of
more than fifty percent (excluding the Shares) of the outstanding shares of
Common Stock or (ii) the Grantor shall have entered into an agreement, including
without limitation an agreement in principle, providing for a merger or other
business combination involving the Grantor or the acquisition of 20% or more of
the assets of the Grantor and its subsidiaries, taken as a whole.
9. REPURCHASE OF SHARES; SALE OF SHARES. (a) If a Change in Control
Event has not occurred prior to the first anniversary date of the Merger
Termination Date, then beginning on such anniversary date, the Grantor shall
have the right to purchase (the "Repurchase Right") all, but not less than all,
of the Shares at the greater of (i) the Purchase Price, or (ii) the average of
the closing prices for shares of Common Stock on the five trading days ending
five days prior to the date the Grantor gives written notice of its intention to
exercise the Repurchase Right. If the Grantor does not exercise the Repurchase
Right within thirty days following the first anniversary of the Merger
Termination Date, the Repurchase Right terminates. In the event the Grantor
wishes to exercise the Repurchase Right, the Grantor shall send a written notice
to the Grantee specifying a date (not later than 10 business days and not
earlier than the next business day following the date such notice is given) for
the closing of such purchase.
(b) At any time prior to the first anniversary of the Merger
Termination Date, the Grantee shall have the right to sell (the "Sale Right") to
the Grantor all, but not less than all, of the Shares at the greater of (i) the
-9-
<PAGE> 10
Purchase Price, or (ii) the average of the last sales prices for shares of
Common Stock on the five trading days ending five days prior to the date the
Grantee gives written notice of its intention to exercise the Sale Right. If the
Grantee does not exercise the Sale Right prior to the first anniversary of the
Merger Termination Date, the Sale Right terminates. In the event the Grantee
wishes to exercise the Sale Right, the Grantee shall send a written notice to
the Grantor specifying a date closing not later than 20 business days and not
earlier than 10 business days following the date such notice is given for the
closing of such sale.
10. REGISTRATION RIGHTS. (a) In the event that the Grantee shall
desire to sell any of the Shares within three years after the purchase of such
Shares pursuant hereto, and such sale requires, in the opinion of counsel to the
Grantee, which opinion shall be reasonably satisfactory to the Grantor and its
counsel, registration of such Shares under the Securities Act, the Grantor will
cooperate with the Grantee and any underwriters in registering such Shares for
resale, including, without limitation, promptly filing a registration statement
which complies with the requirements of applicable federal and state securities
laws, entering into an underwriting agreement with such underwriters upon such
terms and conditions as are customarily contained in underwriting agreements
with respect to secondary distributions; provided that the Grantor shall not be
required to have declared effective more than two registration statements
hereunder and shall be entitled to delay the filing or effectiveness of any
registration statement for up to 120 days if the offering would, in the judgment
of the Board of Directors of the Grantor, require premature disclosure of any
material corporate development or otherwise interfere with or adversely affect
any pending or proposed offering of securities of the Grantor or any other
material transaction involving the Grantor.
(b) If the Common Stock is registered pursuant to the provisions of
this Section 10, the Grantor agrees (i) to furnish copies of the registration
statement and the prospectus relating to the Shares covered thereby in such
numbers as the Grantee may from time to time reasonably request and (ii) if any
event shall occur as a result of which it becomes necessary to amend or
supplement any registration statement or prospectus, to prepare and file under
the applicable securities laws such amendments and supplements as may be
necessary to keep available for at least 90 days a prospectus covering the
Common Stock meeting the requirements of such securities laws, and to furnish
the Grantee such numbers of copies of the registration statement and prospectus
as amended or supplemented as may reasonably be
-10-
<PAGE> 11
requested. The Grantor shall bear the cost of the registration, including, but
not limited to, all registration and filing fees, printing expenses, and fees
and disbursements of counsel and accountants for the Grantor, except that the
Grantee shall pay the fees and disbursements of its counsel, the underwriting
fees and selling commissions applicable to the shares of Common Stock sold by
the Grantee. The Grantor shall indemnify and hold harmless Grantee, its
affiliates and its officers and directors from and against any and all losses,
claims, damages, liabilities and expenses arising out of or based upon any
statements contained in, omissions or alleged omissions from, each registration
statement filed pursuant to this paragraph; PROVIDED, HOWEVER, that this
provision does not apply to any loss, liability, claim, damage or expense to the
extent it arises out of any untrue statement or omission made in reliance upon
and in conformity with written information furnished to the Grantor by the
Grantee, its affiliates and its officers expressly for use in any registration
statement (or any amendment thereto) or any preliminary prospectus filed
pursuant to this paragraph. The Grantor shall also indemnify and hold harmless
each underwriter and each person who controls any underwriter within the meaning
of either the Securities Act or the Securities Exchange Act of 1934 against any
and all losses, claims, damages, liabilities and expenses arising out of or
based upon any statements contained in, omissions or alleged omissions from,
each registration statement filed pursuant to this paragraph; PROVIDED, HOWEVER,
that this provision does not apply to any loss, liability, claim, damage or
expense to the extent it arises out of any untrue statement or omission made in
reliance upon and in conformity with written information furnished to the
Grantor by the underwriters expressly for use in any registration statement (or
any amendment thereto) or any preliminary prospectus filed pursuant to this
paragraph.
11. PROFIT LIMITATION. (a) Notwithstanding any other provision of this
Agreement, in no event shall the Grantee's Total Profit (as hereinafter defined)
exceed $150 million and, if it otherwise would exceed such amount, the Grantee,
at its sole election, shall either (a) deliver to the Grantor for cancellation
Shares previously purchased by Grantee, (b) pay cash or other consideration to
the Grantor or (c) undertake any combination thereof, so that Grantee's Total
Profit shall not exceed $150 million after taking into account the foregoing
actions.
(b) Notwithstanding any other provision of this Agreement, this Option
may not be exercised for a number of Shares as would, as of the date of the
Stock Exercise Notice, result in a Notional Total Profit (as defined below)
-11-
<PAGE> 12
of more than $150 million and, if exercise of the Option otherwise would exceed
such amount, the Grantee, at its discretion, may increase the Purchase Price for
that number of Shares set forth in the Stock Exercise Notice so that the
Notional Total Profit shall not exceed $150 million; PROVIDED, that nothing in
this sentence shall restrict any exercise of the Option permitted hereby on any
subsequent date at the Purchase Price set forth in Section 1(a) hereof.
(c) As used herein, the term "Total Profit" shall mean the aggregate
amount (before taxes) of the following: (i) the amount of cash received by
Grantee pursuant to Section 8.03(e) of the Merger Agreement and Section 1(c)
hereof, (ii) (x) the amount received by Grantee pursuant to the Grantor's
repurchase of Shares pursuant to Sections 8 or 9 hereof, less (y) the Grantee's
purchase price for such Shares, and (iii) (x) the net cash amounts received by
Grantee pursuant to the sale of Shares (or any other securities into which such
Shares are converted or exchanged) to any unaffiliated party, less (y) the
Grantee's purchase price for such Shares.
(d) As used herein, the term "Notional Total Profit" with respect to
any number of Shares as to which Grantee may propose to exercise this Option
shall be the Total Profit determined as of the date of the Stock Exercise Notice
assuming that this Option were exercised on such date for such number of Shares
and assuming that such Shares, together with all other Shares held by Grantee
and its affiliates as of such date, were sold for cash at the closing market
price for the Common Stock as of the close of business on the preceding trading
day (less customary brokerage commissions).
12. EXPENSES. Each party hereto shall pay its own expenses incurred in
connection with this Agreement, except as otherwise specifically provided
herein.
13. SPECIFIC PERFORMANCE. The Grantor acknowledges that if the Grantor
fails to perform any of its obligations under this Agreement immediate and
irreparable harm or injury would be caused to the Grantee for which money
damages would not be an adequate remedy. In such event, the Grantor agrees that
the Grantee shall have the right, in addition to any other rights it may have,
to specific performance of this Agreement. Accordingly, if the Grantee should
institute an action or proceeding seeking specific enforcement of the provisions
hereof, the Grantor hereby waives the claim or defense that the Grantee has an
adequate remedy at law and hereby agrees not to assert in any such action or
proceeding the claim or defense that such
-12-
<PAGE> 13
a remedy at law exists. The Grantor further agrees to waive any requirements for
the securing or posting of any bond in connection with obtaining any such
equitable relief.
14. NOTICE. All notices, requests, demands and other communications
hereunder shall be deemed to have been duly given and made if in writing and if
served by personal delivery upon the party for whom it is intended or delivered
by registered or certified mail, return receipt requested, or if sent by
facsimile transmission, upon receipt of oral confirmation that such transmission
has been received, to the person at the address set forth below, or such other
address as may be designated in writing hereafter, in the same manner, by such
person:
If to the Grantor:
Staples, Inc.
One Research Drive
Westborough, MA 01581
Attn: Secretary
Telecopy: (508) 370-7805
With a copy to:
Hale and Dorr
60 State Street
Boston, MA 02109
Attn: Mark G. Borden, Esq.
Telecopy: (617) 526-5000
and
Sullivan & Cromwell
125 Broad Street
New York, NY 10004
Attn: James C. Morphy, Esq.
Telecopy: (212) 558-3299
If to the Grantee:
Office Depot, Inc.
2200 Old Germantown Road
Delray Beach, FL 33445
Attn: Secretary
Telecopy: (561) 266-1850
-13-
<PAGE> 14
With a copy to:
Kirkland & Ellis
200 East Randolph Street
Chicago, IL 60601
Attn: Willard G. Fraumann, Esq.
Telecopy: (312) 861-2200
15. PARTIES IN INTEREST. This Agreement shall inure to the benefit of
and be binding upon the parties named herein and their respective successors and
assigns; PROVIDED, HOWEVER, that such successor in interest or assigns shall
agree to be bound by the provisions of this Agreement. Nothing in this
Agreement, express or implied, is intended to confer upon any person other than
the Grantor or the Grantee, or their successors or assigns, any rights or
remedies under or by reason of this Agreement.
16. ENTIRE AGREEMENT; AMENDMENTS. This Agreement, together with the
Merger Agreement and the other documents referred to therein, contains the
entire agreement between the parties hereto with respect to the subject matter
hereof and supersedes all prior and contemporaneous agreements and
understandings, oral or written, with respect to such transactions. This
Agreement may not be changed, amended or modified orally, but may be changed
only by an agreement in writing signed by the party against whom any waiver,
change, amendment, modification or discharge may be sought.
17. ASSIGNMENT. No party to this Agreement may assign any of its
rights or obligations under this Agreement without the prior written consent of
the other party hereto, except that the Grantee may assign its rights and
obligations hereunder to any of its direct or indirect wholly owned
subsidiaries, but no such transfer shall relieve the Grantee of its obligations
hereunder if such transferee does not perform such obligations.
18. HEADINGS. The section headings herein are for convenience only and
shall not affect the construction of this Agreement.
19. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which, when executed, shall be deemed to be an original
and all of which together shall constitute one and the same document.
-14-
<PAGE> 15
20. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware (regardless of the laws that
might otherwise govern under applicable Delaware principles of conflicts of
law).
21. TERMINATION. The right to exercise the Option granted pursuant to
this Agreement shall terminate at the earlier of (i) the Effective Time (as
defined in the Merger Agreement), (ii) the date on which Grantee realizes a
Total Profit of $150 million and (iii) 90 days after the Merger Termination Date
(the date referred to in clause (iii) being hereinafter referred to as the
"Option Termination Date"); PROVIDED THAT, if the Option cannot be exercised or
the Shares cannot be delivered to Grantee upon such exercise because the
conditions set forth in Section 2(a) or Section 2(b) hereof have not yet been
satisfied, the Option Termination Date shall be extended until thirty days after
such impediment to exercise has been removed; and PROVIDED, FURTHER, THAT, if at
any time the Grantee seeks to exercise the Option by delivery of a Stock
Exercise Notice but is unable to do so with respect to all of the Shares subject
to the Option at the Purchase Price because of the limitation on profit
contained in Section 11(b) hereof, the Option Termination Date shall be extended
for an additional 180 days from the date of such Stock Exercise Notice (but in
no event shall the Option Termination Date be more than 270 days after the
Merger Termination Date).
All representations and warranties contained in this Agreement shall
survive delivery of and payment for the Shares.
22. SEVERABILITY. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction to be invalid, void
or unenforce- able, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated.
23. PUBLIC ANNOUNCEMENT. The Grantee will consult with the Grantor and
the Grantor will consult with the Grantee before issuing any press release with
respect to the initial announcement of this Agreement, the Option or the
transactions contemplated hereby and neither party shall issue any such press
release prior to such consultation except as may be required by law.
-15-
<PAGE> 16
IN WITNESS WHEREOF, the Grantee and the Grantor have caused this
Agreement to be duly executed and delivered on the day and year first above
written.
OFFICE DEPOT, INC.
By: /s/ Barry J. Goldstein
------------------------------
Title
STAPLES, INC.
By: /s/ Thomas G. Stemberg
------------------------------
Title
-16-
