STAPLES INC, 424B4, 1999-07-16

STAPLES INC
424B4, 1999-07-16
MISCELLANEOUS SHOPPING GOODS STORES

Previous: STAPLES INC, 424B4, 1999-07-16

Next: MICROLOG CORP, 8-K, 1999-07-16

<PAGE>

Filed pursuant to Rule 424(b)(4)
Registration No. 333-81503

PROSPECTUS

11,107,473 Shares

STAPLES, INC.

COMMON STOCK

----------------

The selling stockholders identified in this prospectus are offering all of the
shares. We will not receive any proceeds from the sale of the shares.

Our common stock is traded on the Nasdaq National Market under the symbol
"SPLS." On July 15, 1999, the closing sale price of the common stock on Nasdaq
was $29 3/8 per share.

----------------

Investing in our common stock involves risks. See "Risk Factors" beginning on
page 4.

-----------------

PRICE $29 3/8 A SHARE

-----------------

<TABLE>
<CAPTION>
Underwriting Proceeds to
Price to Discounts and Selling
Public Commissions Stockholders
------------ ------------- ------------
<S> <C> <C> <C>
Per Share............................... $29.375 $.89 $28.485
Total................................... $326,282,019 $9,885,651 $316,396,368
</TABLE>

The Securities and Exchange Commission and state securities regulators have
not approved or disapproved these securities, or determined if this prospectus
is truthful or complete. Any representation to the contrary is a
criminal offense.

The selling stockholders identified in this prospectus have granted the
underwriters the right to purchase up to an additional 1,666,121 shares to
cover over-allotments. The underwriters expect to deliver the shares to
purchasers on July 21, 1999.

----------------

Joint Book-Running Managers

MORGAN STANLEY DEAN WITTER GOLDMAN, SACHS & CO.

July 15, 1999
<PAGE>

TABLE OF CONTENTS

<TABLE>
<S> <C>
Prospectus Summary........................................................ 1
Risk Factors.............................................................. 4
Special Note Regarding Forward-Looking Information........................ 6
Use of Proceeds........................................................... 7
Price Range of Common Stock and Dividend Policy........................... 7
Capitalization............................................................ 8
Selected Historical Consolidated Financial Data........................... 9
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 10
</TABLE>
<TABLE>
<S> <C>
Business................................................................... 17
Management................................................................. 21
Principal and Selling Stockholders......................................... 25
Description of Capital Stock............................................... 28
United States Federal Tax Considerations for Non-United States Holders..... 30
Underwriters............................................................... 34
Legal Matters.............................................................. 37
Experts.................................................................... 37
Where You Can Find More Information........................................ 37
Incorporation of Certain Documents by Reference............................ 38
</TABLE>

----------------

Staples, Inc. was incorporated in Delaware in November 1985. Our executive
offices are located at 500 Staples Drive, Framingham, Massachusetts 01702 and
our telephone number is (508) 253-5000. Our World Wide Web site address is
www.staples.com. The information in our website is not incorporated by
reference. Unless the context otherwise requires, references in this prospectus
to "Staples," "we," "us," and "our" refer to Staples, Inc. and its
subsidiaries.

We have registered the trademarks "Staples" and "Staples--The Office
Superstore" on the Principal Register of the United States Patent and Trademark
Office, the trademark "Staples" in Canada, the United Kingdom and Germany and
the trademark "Quill" in the United States, Canada, Israel, Japan, Mexico and
the United Kingdom.

You should rely only on the information contained in this prospectus. We
have not authorized anyone to provide you with information different from that
contained in this prospectus. The selling stockholders are offering to sell,
and seeking offers to buy, shares of common stock only in jurisdictions where
offers and sales are permitted. The information contained in this prospectus is
accurate only as of the date of this prospectus, regardless of the time of
delivery of this prospectus or of any sale of the common stock.

Except as otherwise indicated, all information in this prospectus assumes no
exercise of the underwriters' over-allotment option.

i
<PAGE>

PROSPECTUS SUMMARY

This summary highlights important features of this offering and the
information included or incorporated by reference in this prospectus. This
summary does not contain all of the information that you should consider before
investing in our common stock. You should read the entire prospectus carefully,
especially the risks of investing in our common stock discussed under "Risk
Factors."

STAPLES, INC.

Staples pioneered the office products superstore concept and is a leading
office products distributor with a total of 960 retail stores located in the
United States, Canada, the United Kingdom and Germany as of May 1, 1999, in
addition to a catalog business, electronic commerce and contract stationer
operations.

Business Strategy

We view the office products market as a large, diversified market for office
supplies and equipment, business machines and computers, and various business
services. Although there are no clear demarcations among segments, we target
four principal end-user groups:

. consumers and home offices;

. small businesses and organizations with fewer than 50 office workers;

. medium-size businesses and organizations with more than 50 office
workers; and

. large businesses with more than 1,000 office workers.

Our ability to address all four major end-user groups increases and
diversifies our available market opportunities, increases awareness of the
Staples name among customers in all four end-user groups, who often shop across
distribution channels, and allows us to enjoy a number of important economies
of scale. These include increased buying power, enhanced efficiencies in
distribution and advertising, and improved capacity to leverage certain general
and administrative functions.

We effectively reach different sectors of the office products market through
different channels of distribution designed to be convenient to each targeted
market sector. Our in-store operations seek to address the retail needs of
customers, while our delivery operations focus on customers who desire delivery
of their office products and other specialized services.

North American Superstores

Our North American retail operations, consisting of 884 stores as of May 1,
1999, are our core business, generating a substantial majority of our sales and
profits. Our retail operations focus on serving the needs of customers
primarily in the consumer, home office and small business segments of the
office products market.

Delivery Operations

Our delivery operations are comprised of three principal operations:

. Our catalog businesses, operating under the names "Staples Direct" and
"Quill Corporation";

. Our contract stationer businesses, operating under the names "Staples
National Advantage" and "Staples Business Advantage"; and

. Our Internet electronic commerce business, operating under the name
"Staples.com."

1
<PAGE>

International

We started doing business in Europe in 1992. As of May 1, 1999, Staples UK
operated 51 stores and Staples Germany operated 25 stores with delivery
operations in both countries. We also recently expanded Quill's operations into
Europe.

Strategic Initiatives

We focus on numerous strategic priorities, with the objective of enhancing
our position as a leading office products supplier:

Profitably Increase Retail Sales Per Store. We are devoting significant
resources and efforts to profitably increase our retail sales per store in both
North America and Europe. These initiatives cover a wide-range of store
operations, including product and service offerings, inventory planning,
staffing, customer satisfaction and improvements in store design.

Continue Rapid Growth in Staples Delivery Operations. We are implementing a
number of actions to profitably grow our delivery business. These actions
include broadening product offerings, offering specialized, focused marketing
initiatives and expanding distribution capacity. We also plan to focus on
developing an electronic commerce business through Staples.com and to grow that
business during fiscal 1999.

Continue Store Growth and Strengthen Infrastructure. We are continuing our
store growth program. In fiscal 1999, we intend to open approximately 150
stores in North America and 20 stores in Europe. Our store growth strategy
follows a three-pronged approach of continuing the growth of our store network
in existing markets, entering smaller markets within both existing and new
geographic areas, and entering major new markets. To support this commitment,
we are also taking steps to strengthen our infrastructure, including our
distribution capabilities.

Improve Productivity. We maintain our historical focus on being a low cost
operator and believe that we have significant opportunities to reduce costs as
a percentage of sales. We believe that our future expansion will enable us to
leverage certain fixed costs in store operations, marketing, distribution and
administration. We also seek to enhance productivity through improvements in
operating practices.

Improve Customer Service. We continue to increase staffing levels in stores
and delivery operations and to make other investments to provide better
customer service. In addition, we continue to drive a corporate-wide CARE
program designed to empower associates to exceed customer expectations for
service by providing "great service, every day, every way" and have implemented
programs that tie a portion of incentive compensation to achievement of
customer satisfaction goals.

THE OFFERING

<TABLE>
<C> <S>
Common stock offered................................ 11,107,473 shares

Common stock to be outstanding after this offering.. 463,817,418 shares

Use of proceeds..................................... Staples will not receive
any proceeds from the
sale of shares in this
offering.

Nasdaq National Market symbol....................... SPLS
</TABLE>

2
<PAGE>

SUMMARY HISTORICAL CONSOLIDATED FINANCIAL DATA

The following summary consolidated financial data include adjustments to
give effect to our acquisition of Quill on May 21, 1998. We accounted for the
acquisition under the pooling of interests method. Some previously reported
amounts have been reclassified to conform with the current period presentation.
Our fiscal year is the 52 or 53 weeks ending on the Saturday closest to January
31 of the following calendar year. Fiscal 1995 was a 53 week fiscal year.

<TABLE>
<CAPTION>
As of
---------------------
May 1, Jan. 30,
1999 1999
---------- ----------
(in thousands)
<S> <C> <C>
Balance Sheet Data:
Working capital.......................................... $ 652,602 $ 798,768
Total assets............................................. 3,248,247 3,179,266
Total long-term debt, less current portion............... 204,270 205,015
Stockholders' equity..................................... 1,704,577 1,656,886
</TABLE>
- --------
(1) Net income for the year ended January 30, 1999 includes a pre-tax charge of
$41,000 resulting from the costs incurred in connection with our
acquisition of Quill and a $49,706 charge relating to a store closure and
relocation plan.

(2) Net income for the year ended January 31, 1998 includes a pre-tax charge of
$29,665 resulting from the costs incurred in connection with the proposed
merger with Office Depot, Inc.

(3) Pro forma net income and pro forma earnings per share include a provision
for income taxes on the previously untaxed earnings of Quill, which had
been an S corporation prior to its acquisition by Staples.

(4) Earnings per common share have been restated to reflect 3-for-2 stock
splits effective January 1999, January 1998, March 1996, July 1995 and
October 1994.

3
<PAGE>

RISK FACTORS

You should consider carefully the risks described below before you decide to
buy our common stock. The risks and uncertainties described below are not the
only ones facing us. If any of the following risks actually occur, our
business, financial condition or results of operations would likely suffer. In
such case the trading price of our common stock could fall, and you may lose
all or part of the money you paid to buy our common stock.

Our market is highly competitive and we may not continue to compete
successfully.

We compete in a highly competitive marketplace with a variety of retailers,
dealers and distributors. In most of our geographic markets, we compete with
other high-volume office supply chains, such as Office Depot, OfficeMax and
Office World, that have store formats, pricing strategies and product
selections that are similar to ours. We also compete with mass merchants, such
as Wal-Mart, warehouse clubs, computer and electronic superstores, and other
discount retailers. In addition, our retail stores and delivery and contract
businesses compete with numerous mail order firms, contract stationer
businesses and direct manufacturers. Many of our competitors, including Office
Depot, OfficeMax and Wal-Mart, have in recent years significantly increased the
number of stores they operate within our markets. Some of our current and
potential competitors are larger than we are and have substantially greater
financial resources. It is possible that increased competition or improved
performance by our competitors may reduce our market share, may force us to
charge lower prices than we otherwise would, and may adversely affect our
business and financial performance in other ways.

We may be unable to continue to successfully open new stores.

An important part of our business plan is to aggressively increase the
number of our stores. We opened 174 stores in the United States, Canada and
Europe in fiscal 1998 and plan to open approximately 170 new stores in fiscal
1999. For our growth strategy to be successful, we must identify and lease
favorable store sites, hire and train employees and adapt our management and
operational systems to meet the needs of our expanded operations. These tasks
may be difficult to accomplish successfully. If we are unable to open new
stores as quickly as planned, our future sales and profits could be materially
adversely affected. Even if we succeed in opening new stores, these new stores
may not achieve the same sales or profit levels as our existing stores. Also,
our expansion strategy includes opening new stores in markets where we have a
presence so that we can take advantage of economies of scale in marketing,
distribution and supervision costs. However, these new stores may result in the
loss of sales in our existing stores in nearby areas.

Our quarterly operating results are subject to significant fluctuation.

Our operating results have fluctuated from quarter to quarter in the past,
and we expect that they will continue to do so in the future. Our earnings may
not continue to grow at rates similar to the growth rates achieved in recent
years and may fall short of either a prior fiscal period or investors'
expectations. Factors that could cause these quarterly fluctuations include:

. the number of new store openings, primarily because we expense pre-
opening expenses as they are incurred and newer stores are less
profitable than mature stores;

. the extent to which sales in new stores result in the loss of sales
in existing stores;

. the mix of products sold;

. pricing actions of competitors;

. the level of advertising and promotional expenses;

. seasonality, primarily because the sales and profitability of our
stores are typically slightly lower in the first and second quarter
of our fiscal year than in other quarters; and

. charges associated with acquisitions.

4
<PAGE>

Most of our operating expenses, such as rent expense, advertising expense
and employee salaries, do not vary directly with the amount of our sales and
are difficult to adjust in the short term. As a result, if sales in a
particular quarter are below expectations for that quarter, we could not
proportionately reduce operating expenses for that quarter, and therefore any
shortfall could have a disproportionate effect on our net income for the
quarter.

The market price of our common stock is based in large part on professional
securities analysts' expectations that our business will continue to grow and
that we will achieve certain levels of net income. If our financial performance
in a particular quarter does not meet the expectations of securities analysts,
this may adversely affect the views of those securities analysts concerning our
growth potential and future financial performance. If the securities analysts
who regularly follow our common stock lower their rating of our common stock or
lower their projections for our future growth and financial performance, the
market price of our common stock is likely to drop significantly. In addition,
in those circumstances the decrease in our common stock price would probably be
disproportionate to the shortfall in financial performance.

Our rapid growth may continue to strain our operations, which could adversely
affect our business and financial results.

Our business, including sales, number of stores and number of employees, has
grown dramatically over the past several years. In addition, we have acquired a
number of significant companies in the last few years and may make additional
acquisitions in the future. This growth has placed significant demands on our
management and operational systems. If we are not successful in upgrading our
operational and financial systems, expanding our management team and increasing
and effectively managing our employee base, this growth is likely to result in
operational inefficiencies and ineffective management of our business and
employees, which will in turn adversely affect our business and financial
performance.

Our international operations may not become profitable.

We currently operate in international markets through The Business Depot
Ltd. in Canada, Staples UK in the United Kingdom and Staples Germany in
Germany. Our European operations are currently unprofitable, and we cannot
guarantee that they will become profitable. We may seek to expand into other
international markets in the future. Our foreign operations encounter risks
similar to those faced by our U.S. stores, as well as risks inherent in foreign
operations, such as local customs and competitive conditions and foreign
currency fluctuations.

We may be unable to obtain adequate future financing.

It is possible that we will require additional sources of financing earlier
than we anticipate, as a result of unexpected cash needs or opportunities, an
expanded growth strategy or disappointing operating results. Additional funds
may not be available on satisfactory terms when needed, or at all, whether
within the next 12 to 18 months or thereafter.

Year 2000 problems may adversely affect our business.

Our business could be adversely affected by information technology issues
related to the Year 2000. We anticipate that we will complete testing of our
most critical information technology related systems and applications by the
end of the second quarter of 1999. We are also working with third parties,
primarily major vendors but also customers, to assess their Year 2000
compliance. Uncontrollable factors such as the compliance of the systems of
third parties and the availability of resources could materially increase the
cost or delay the estimated date of Year 2000 compliance. Not all of our
vendors have assured us that they will be compliant in time. There are
potential risks if we or our customers or vendors do not become, or are late in
becoming, Year 2000 compliant. Such risks include an impairment of our ability
to:

. process and deliver customer orders and payments;

. procure saleable merchandise; and

5
<PAGE>

. perform other critical business functions;

each of which could have a material impact on financial performance.

Further, there is the risk that claims may be made against us in the event
of our non-compliance or the non-compliance of the products and services that
we sell. The costs of defending and settling such claims could have a material
impact on our financial statements.

SPECIAL NOTE REGARDING FORWARD-LOOKING INFORMATION

This prospectus includes or incorporates forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. You can identify these forward-looking
statements by our use of the words "believes," "anticipates," "plans,"
"expects," "may," "will," "would," "intends," "estimates" and similar
expressions, whether in the negative or affirmative. We cannot guarantee that
we actually will achieve these plans, intentions or expectations. Actual
results or events could differ materially from the plans, intentions and
expectations disclosed in the forward-looking statements we make. We have
included important factors in the cautionary statements below, particularly
under the heading "Risk Factors," that we believe could cause our actual
results to differ materially from the forward-looking statements that we make.
The forward-looking statements do not reflect the potential impact of any
future acquisitions, mergers or dispositions. We do not assume any obligation
to update any forward-looking statement we make.

6
<PAGE>

USE OF PROCEEDS

We will not receive any proceeds from the sale of shares in this offering by
the selling stockholders.

PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY

Our common stock is quoted on the Nasdaq National Market under the symbol
"SPLS." The following table sets forth, for the periods indicated, the high and
low sale prices per share of our common stock as reported on the Nasdaq
National Market.

<TABLE>
<CAPTION>
High Low
----- -----
<S> <C> <C>
Fiscal Year Ended January 31, 1998
First Quarter....................................... $ 11 23/32 $ 7 53/64
Second Quarter...................................... 11 43/64 8 35/64
Third Quarter....................................... 13 10 7/32
Fourth Quarter...................................... 13 25/64 10 19/32
Fiscal Year Ended January 30, 1999
First Quarter....................................... 17 1/8 12 1/4
Second Quarter...................................... 22 53/64 15 43/64
Third Quarter....................................... 23 27/64 17
Fourth Quarter...................................... 32 1/2 21 1/8
Fiscal Year Ending January 29, 2000
First Quarter....................................... 35 15/16 26 1/2
Second Quarter (through July 15, 1999).............. 32 1/4 26
</TABLE>

On July 15, 1999, the last reported sale price of our common stock on the
Nasdaq National Market was $29 3/8 per share. As of June 15, 1999, Staples had
over 9,000 stockholders of record.

We have never paid cash dividends on our common stock. We presently intend
to retain earnings to use in the operation and expansion of our business and
therefore do not anticipate paying any cash dividends in the foreseeable
future. In addition, our revolving credit agreement restricts the payment of
cash dividends.

7
<PAGE>

CAPITALIZATION

The following table sets forth our capitalization as of May 1, 1999.

<TABLE>
<CAPTION>
As of
May 1, 1999
--------------
(in thousands)
<S> <C>
Long-term debt.................................................. $ 204,270
Other long-term obligations..................................... 53,913
Stockholders' equity:
Preferred stock, $.01 par value, 5,000,000 shares authorized;
none issued.................................................. --
Common stock, $.0006 par value, 1,000,000,000 shares
authorized; 464,019,644 issued at May 1, 1999 and 461,538,061
shares issued at January 30, 1999............................ 279
Additional paid-in capital.................................... 1,065,137
Cumulative foreign currency translation adjustments........... (8,513)
Unrealized gain on investments................................ 1
Retained earnings............................................. 683,635
Less: treasury stock, at cost, 1,344,768 shares at May 1, 1999
and 488,922 shares at
January 30, 1999............................................. (35,962)
----------
Total stockholders' equity.................................. 1,704,577
----------
Total capitalization....................................... $1,962,760
==========
</TABLE>

The table above excludes 39,152,355 shares of our common stock issuable upon
the exercise of stock options outstanding under our stock incentive plans.

On June 2, 1999, our stockholders approved an increase in the number of
authorized shares of our common stock from 1,000,000,000 to 1,500,000,000.

8
<PAGE>

SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA

You should read the selected consolidated financial and other operating data
below in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and our consolidated financial statements,
including the accompanying notes, which are incorporated by reference in this
prospectus. The selected consolidated financial data for the five years ended
January 30, 1999 are derived from our consolidated financial statements, which
have been audited by Ernst & Young LLP, independent auditors, except for
Quill's financial statements, which were audited by Kupferburg, Goldberg &
Neimark, LLC, independent auditors. The financial data for the 13 weeks ended
May 1, 1999 and May 2, 1998 are derived from unaudited consolidated financial
statements. The unaudited consolidated financial statements include all
adjustments, consisting of normal recurring accruals, which we consider
necessary for a fair presentation of the financial position and the results of
operations for these periods. Operating results for the 13 weeks ended May 1,
1999 are not necessarily indicative of the results that investors in our common
stock should expect for the entire fiscal year ending January 29, 2000. Some
previously reported amounts have been reclassified to conform with the current
period presentation.

<TABLE>
<CAPTION>
13 Weeks Ended Fiscal Year
--------------------- ------------------------------------------------------------
May 1, May 2,
1999 1998 1998 1997 1996 1995 1994
---------- ---------- ---------- ---------- ---------- ---------- ----------
(in thousands, except per share and selected operating data)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Income
Data:
Sales................... $2,072,066 $1,670,611 $7,123,189 $5,732,145 $4,493,589 $3,565,235 $2,418,793
Gross profit............ 494,753 380,778 1,726,266 1,354,455 1,060,245 809,451 554,534
Operating and selling
expenses............... 315,320 248,411 992,727 808,517 628,553 484,065 338,344
Pre-opening expenses.... 4,508 3,352 13,836 9,443 8,299 5,607 4,858
General and
administrative
expenses............... 88,740 67,486 301,627 225,587 175,704 135,420 103,766
Merger-related costs.... -- -- 41,000 29,665 -- -- 2,150
Store closure charge.... -- -- 49,706 -- -- -- --
Interest and other
expense, net........... 1,416 4,694 17,370 21,955 22,962 15,671 5,330
Equity in loss of
affiliates............. -- -- -- 5,953 11,073 12,153 11,168
Net income.............. 50,314 35,950 185,370(1) 167,914(2) 144,742 108,428 72,071
Pro forma net
income(3).............. 50,314 34,136 183,556 153,128 129,413 94,539 59,219
Historical basic
earnings per common
share(4)............... $0.11 $0.09 $0.43 $0.41 $0.36 $0.28 $0.21
Historical diluted
earnings per common
share(4)............... $0.11 $0.08 $0.41 $0.39 $0.35 $0.27 $0.20
Pro forma basic earnings
per common
share(3)(4)............ $0.11 $0.08 $0.43 $0.38 $0.32 $0.24 $0.17
Pro forma diluted
earnings per common
share(3)(4)............ $0.11 $0.08 $0.41 $0.36 $0.31 $0.23 $0.16
Selected Operating Data:
Stores open (at period
end)................... 960 782 913 742 557 443 350
</TABLE>

<TABLE>
<CAPTION>
As of
-----------------------------------------------------------------
May 1, Jan. 30, Jan. 31, Feb. 1, Feb. 3, Jan. 28,
1999 1999 1998 1997 1996 1995
---------- ---------- ---------- ---------- ---------- ----------
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Balance Sheet Data:
Working capital......... $ 652,602 $ 798,768 $ 803,660 $ 623,836 $ 580,244 $ 355,639
Total assets............ 3,248,247 3,179,266 2,638,862 1,955,636 1,552,199 1,141,496
Total long-term debt,
less current portion... 204,270 205,015 518,959 402,985 351,508 257,122
Stockholders' equity.... 1,704,577 1,656,886 1,094,485 875,823 712,141 472,215
</TABLE>
- -------
(1) Net income for the year ended January 30, 1999 includes a pre-tax charge of
$41,000 resulting from the costs incurred in connection with our
acquisition of Quill and a $49,706 charge relating to a store closure and
relocation plan.

(2) Net income for the year ended January 31, 1998 includes a pre-tax charge of
$29,665 resulting from the costs incurred in connection with the proposed
merger with Office Depot, Inc.

(4) Earnings per common share have been restated to reflect 3-for-2 stock
splits effective January 1999, January 1998, March 1996, July 1995 and
October 1994.

9
<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

General

During the fiscal year ended January 30, 1999, we acquired Quill Corporation
and some related entities, which we collectively refer to as "Quill," in a
pooling of interests transaction. In 1997, Quill had net sales of approximately
$551 million. The following financial information includes adjustments to give
effect to the acquisition of Quill for all periods presented. Prior to the
acquisition, Quill elected to be treated as an S Corporation under the Internal
Revenue Code, and accordingly, its earnings were not subject to taxation at the
corporate level. Pro forma adjustments have been made to reflect a provision
for income taxes on Quill's previously untaxed earnings for each period
presented at an assumed rate of 40%. The statements of income combine Staples'
historical operating results for the fiscal years ended January 31, 1998 and
February 1, 1997 with corresponding Quill operating results for the years ended
December 31, 1997 and 1996.

Results of Operations

Comparison of fiscal quarters ended May 1, 1999 and May 2, 1998

Sales. Our sales increased 24.0% to $2,072,066,000 in the quarter ended May
1, 1999 from $1,670,611,000 in the quarter ended May 2, 1998. This growth was
attributable to an increased number of open stores and increased sales in
existing stores and in the delivery and contract stationer segments. Comparable
store and delivery hub sales for the quarter ended May 1, 1999 increased 9%
over the quarter ended May 2, 1998. Comparable sales in the contract stationer
segment, including Quill, increased 11% for the quarter ended May 1, 1999
versus the quarter ended May 2, 1998. We had 960 stores open as of May 1, 1999
compared to 782 stores as of May 2, 1998 and 913 stores as of January 30, 1999.

Gross Profit. Our gross profit as a percentage of sales was 23.9% for the
three months ended May 1, 1999 as compared to 22.8% for the same period in the
prior year. The gross profit rate for the quarter ended May 1, 1999 compared to
the quarter ended May 2, 1998 was increased by continually improving margins in
the retail and delivery segments due to lower product costs from vendors and
improved buying as well as the leveraging of fixed distribution center and
delivery costs over a larger sales base. These increases were partially offset
by continued price reductions and decreased margins on computer hardware sales
such as CPUs and laptops.

Operating and Selling Expenses. Our operating and selling expenses, which
consist of payroll, advertising and other operating expenses, increased as a
percentage of sales in the three months ended May 1, 1999 to 15.2%, as compared
to 14.9% for the same period in the prior year. The increase was primarily due
to increased payroll costs incurred for Tech Centers and Expanded Copy Centers
in remodeled stores as well as the addition of Claricom Holdings, Inc., which
we acquired during the three months ended May 1, 1999. Claricom had higher
operating and selling expenses as a percentage of sales than Staples. These
increases were partially offset by the continued leveraging of fixed store
operating costs as store sales have increased.

Pre-Opening Expenses. Our pre-opening expenses relating to new store
openings, consisting primarily of salaries, supplies, marketing and occupancy
costs, are expensed as incurred and therefore fluctuate from period to period
depending on the timing and number of new store openings. Pre-opening expenses
averaged $96,000 per store for the three months ended May 1, 1999, as compared
to $82,000 per store for the same period in the prior year.

General and Administrative Expenses. Our general and administrative expenses
for the three months ended May 1, 1999 increased as a percentage of sales to
4.3% as compared to 4.0% for the same period in the prior year. This increase
as a percentage of sales was primarily due to costs incurred for Year 2000
compliance projects and the addition of Claricom which had higher general and
administrative expenses as a percentage of sales than Staples. In addition, we
made other investments in our information systems staffing and

10
<PAGE>

infrastructure, which we believe will reduce costs as a percentage of sales in
future years. The overall increase in general and administrative costs was
partially offset by our ability to increase sales without proportionately
increasing overhead expenses in our core retail and direct business.

Amortization of Goodwill. Amortization of goodwill for the three months
ended May 1, 1999 was $2,287,000 as compared to $924,000 for the same period in
the prior year. The increase in amortization was due to the goodwill from the
acquisitions of Ivan Allen Corporation on November 1, 1998 and Claricom on
February 26, 1999.

Interest and Other Expense, Net. Net interest and other expense for the
three months ended May 1, 1999 was $1,416,000 as compared to $4,694,000 for the
same period in the prior year. The interest expense related primarily to
existing borrowings. The decrease in net interest expense during the three
months ended May 1, 1999 was primarily due to the conversion of all
$300,000,000 of our 4 1/2% debentures due 2000 into common stock in December
1998.

Income Taxes. Our provision for income taxes as a percentage of pre-tax
income was 39.0% for the quarter ended May 1, 1999 and 35.8% for the quarter
ended May 2, 1998. On a pro forma basis, to reflect a provision for income
taxes on previously untaxed earnings of Quill, our effective tax rate would
have been 39.0% for the quarter ended May 2, 1998.

Comparison of fiscal years ended January 30, 1999, January 31, 1998 and
February 1, 1997

Sales. Our sales increased 24.3% to $7,123,189,000 in the fiscal year ended
January 30, 1999 from $5,732,145,000 in the fiscal year ended January 31, 1998.
Sales increased 27.6% in the fiscal year ended January 31, 1998 from
$4,493,589,000 in the fiscal year ended February 1, 1997. The growth in each
year was attributable to an increase in the number of open stores, increased
sales in existing stores and increased sales in delivery operations. In
addition, sales for the fiscal years ended January 30, 1999 and January 31,
1998 (beginning in May 1997) include the consolidation of Staples UK and
Staples (Deutschland) GmbH. We refer to Staples (Deutschland) GmbH, which was
formerly MAXI-Papier-Markt-GmbH, as "Staples Germany". Comparable store and
delivery sales for the fiscal year ended January 30, 1999 increased 11% over
the fiscal year ended January 31, 1998. Comparable store and delivery hub sales
for the year ended January 31, 1998 increased 10% over the year ended February
1, 1997. We had 913 stores open as of January 30, 1999, 742 stores open as of
January 31, 1998, and 557 stores open as of February 1, 1997. The January 30,
1999 total includes 174 stores opened and three stores closed during the twelve
months ended January 30, 1999.

Gross Profit. Our gross profit as a percentage of sales was 24.2% for the
fiscal year ended January 30, 1999, compared to 23.6% for each of the fiscal
years ended January 31, 1998 and February 1, 1997. The gross profit rate was
increased by continually improving margins in the retail and delivery business
segments due to lower product costs from vendors and increased buying as well
as the leveraging of fixed distribution center and delivery costs over a larger
sales base. This was offset by decreases in the margin rates due to price
reductions as well as an increase in the sales of computer hardware, which
generate a lower margin rate than other categories, to 7.6% of total sales for
the year ended January 30, 1999 from 7.4% in the year ended January 31, 1998
and 6.0% in the year ended February 1, 1997.

Operating and Selling Expenses. Our operating and selling expenses were
13.9% of sales for the fiscal year ended January 30, 1999, compared to 14.1%
for the fiscal year ended January 31, 1998, and 14.0% for the fiscal year ended
February 1, 1997. The decrease as a percentage of sales for the year ended
January 30, 1999 was primarily due to decreased advertising as a percentage of
sales and increased leveraging of fixed store payroll expenses and store
operating costs as store sales have increased. These factors were partially
offset by increases in store labor and costs incurred for our store remodel
program in which significant investments have been made in store layouts and
signing to improve shopability and enhance customer service. In addition,
operating and selling expenses for the year ended January 30, 1999 and the year
ended January 31, 1998 (beginning in May 1997) include the results of Staples
UK and Staples Germany, which have higher costs as a percentage of sales.

11
<PAGE>

Pre-Opening Expenses. Our pre-opening expenses averaged $80,000 per store
for the stores opened in the year ended January 30, 1999, compared to $73,000
for the year ended January 31, 1998, and $72,000 for the year ended February 1,
1997. The increase during the fiscal year ended January 30, 1999 was due
primarily to increased openings outside of the United States which generally
involve higher pre-opening expenses per store.

General and Administrative Expenses. Our general and administrative expenses
as a percentage of sales were 4.2% in the year ended January 30, 1999, compared
to 3.9% in each of the years ended January 31, 1998 and February 1, 1997. The
increase as a percentage of sales for the year ended January 30, 1999 was
primarily due to costs incurred for Year 2000 compliance projects. In addition,
we have made other investments in our information systems' staffing and
infrastructure, which we believe will reduce costs as a percentage of sales in
future years. General and administrative expenses for the years ended January
30, 1999 and January 31, 1998 also include the results of Staples UK and
Staples Germany, which have higher costs as a percentage of sales. The overall
increase in general and administrative costs was partially offset by our
ability to increase sales without proportionately increasing overhead expenses
in our core retail and direct business.

Merger-Related and Integration Costs. In connection with our acquisition of
Quill, we recorded a charge to operating expense of $41,000,000 during the year
ended January 30, 1999. These costs consist of direct merger-related and
integration costs from the transaction. The merger transaction costs of
approximately $10,500,000 consist primarily of fees for investment bankers,
attorneys, accountants and other related charges. The integration costs
primarily include employee costs of approximately $7,000,000, contract and
lease termination costs of approximately $14,100,000, the write-down of
leasehold improvements of approximately $3,500,000 and other merger-related
costs of approximately $5,900,000. We paid approximately $14,000,000 in fiscal
year 1998, which consists primarily of transaction and employee related costs.
During the year ended January 31, 1998, we charged to expense non-recurring
costs in connection with the termination of our proposed merger with Office
Depot, Inc. of $29,665,000.

Store Closure Charge. In December 1998, we committed to a plan to close and
relocate stores which cannot be expanded and upgraded to our "Concept 97"
model. In connection with this plan, we recorded a charge to operating expense
of $49,706,000. This charge includes $29,620,000 for future rental payments
under operating lease agreements that will be paid after the store is closed
and will not be subsidized by subtenant income, $4,966,000 in fees, settlement
costs and other expenses related to store closure and $15,120,000 in asset
impairment charges. We anticipate that lease agreements for the relocation
sites will be executed during fiscal year 1999 and that the stores will be
closed and relocated during fiscal years 1999 and 2000. We made no payments in
fiscal year 1998 related to the store closure charge.

Interest and Other Expense, Net. Net interest and other expense totaled
$17,370,000 in the fiscal year ended January 30, 1999, compared to $21,955,000
in the fiscal year ended January 31, 1998 and $22,962,000 in the fiscal year
ended February 1, 1997. The interest expense related primarily to existing
borrowings which were used to fund the increase in store inventories related to
new store openings and improvements in in-stock levels; the acquisition of
fixed assets for new stores opened and remodeled; continued investments in the
information systems and distribution center infrastructure; and additional
investments in Staples UK and Staples Germany as well as the purchase of them
during the fiscal year ended January 31, 1998. The decrease in interest expense
during the year ended January 30, 1999 was due primarily to the conversion of
our $300,000,000 of 4 1/2% debentures due 2000 into common stock in December
1998.

Equity in Loss of Affiliates. Our equity in loss of affiliates was
$5,953,000 in the year ended January 31, 1998 and $11,073,000 in the year ended
February 1, 1997. We did not record any equity in loss of affiliates for the
year ended January 30, 1999 due to the acquisition of Staples UK and Staples
Germany in May 1997. As a result of these acquisitions, our ownership interest
in Staples UK increased to 100% and our ownership of Staples Germany increased
to approximately 92%. Our ownership interest in Staples Germany increased to
100% in December 1998. These transactions were accounted for in accordance with
the purchase method of accounting and accordingly, the consolidated results of
these entities are reflected in our financial statements

12
<PAGE>

since the respective dates of acquisition. Prior to the acquisitions, Staples
UK and Staples Germany were accounted for under the equity method which
resulted in Staples' share of losses from operations being included in equity
in loss of affiliates. As of January 30, 1999, Staples UK and Staples Germany
operated 48 and 25 stores, respectively.

Income Taxes. Our provision for income taxes as a percentage of pre-tax
income was 39.5% for the year ended January 30, 1999, compared to 32.8% for the
year ended January 31, 1998 and 31.5% for the year ended February 1, 1997. On a
pro forma basis, to reflect a provision for income taxes on previously untaxed
earnings of Quill, our effective tax rate would have been 40.1%, 38.7% and
38.8% for the same periods. The increase in the pro forma tax rate in fiscal
year 1998 was primarily due to non-deductible merger-related costs.

Liquidity and Capital Resources

We have traditionally used a combination of cash generated from operations
and debt or equity offerings to fund our expansion and acquisition activities.
We have also utilized our revolving credit facility to support various growth
initiatives.

We opened 174 stores in the year ended January 30, 1999, 130 stores in the
year ended January 31, 1998 and 115 stores in the year ended February 1, 1997.
We closed three stores in the year ended January 30, 1999 and one store in each
of the years ended January 31, 1998 and February 1, 1997. In addition, in the
fiscal year ended January 31, 1998, 56 stores were added as a result of our
acquisition of Staples UK and Staples Germany. We opened 47 stores during the
three months ended May 1, 1999 and 41 stores during the three months ended May
2, 1998. During the three months ended May 2, 1998 one store was closed. To the
extent that our store base matures and becomes more profitable, cash generated
from store operations is expected to provide a greater portion of funds
required for new store inventories and other working capital requirements.
Sales generated by the contract stationer business segment are made under
regular credit terms, which requires that we carry our own receivables from
these sales. We also utilized capital equipment financings to fund current
working capital requirements. During the year ended January 30, 1999, we paid
in full mortgages of approximately $14 million on five distribution centers
acquired from Quill.

As of January 30, 1999, cash, cash equivalents, and short-term investments
totaled $375,421,000, a decrease of $11,569,000 from the January 31, 1998
balance of $386,990,000. The principal sources of funds were primarily cash
from operations, including an increase in accounts payable and accrued expenses
of $363,988,000, which financed the increase in merchandise inventory of
$211,052,000 related to new store openings, expanded product assortment and
improvements in in-stock levels. These sources were partially offset by the
acquisition of property and equipment of $322,308,000 and $48,102,000 of cash
used in the acquisition of Quill.

During the three months ended May 1, 1999, cash and cash equivalents
decreased by $206,323,000. This decrease was primarily attributable to cash
used in investing activities of $201,118,000, including $137,625,000 of cash
used in the February 1999 acquisition of Claricom and the acquisition of
property and equipment of $60,623,000, primarily for the 47 new stores opened.
The decrease in cash was partially offset by cash provided by operating
activities of $2,882,000, which included a decrease in merchandise inventories
of $47,238,000 offset by an increase in accounts receivable of $100,995,000 and
a decrease in accounts payable, accrued expenses and other current liabilities
of $41,760,000. The cash used in financing activities of $8,570,000 was due to
the purchase of treasury shares of $19,779,000 offset by the proceeds from
capital stock sales from the exercise of employee stock options of $9,973,000.

We expect to open approximately 120 stores during the last three quarters of
fiscal 1999. We estimate that our cash requirements, including pre-opening
expenses, leasehold improvements and fixtures, will be approximately $1,400,000
for each new store (excluding the cost of any acquisitions of lease rights).
Accordingly, we expect to use approximately $168,000,000 for store openings
during this period.

13
<PAGE>

We began a stock repurchase program during the quarter ended May 1, 1999
which is intended to provide shares for employee stock programs. We expect to
repurchase approximately 6,000,000 shares annually and have authorized up to
$200,000,000 to be used in fiscal 1999 for these repurchases. Through May 1,
1999, we repurchased 591,000 shares for approximately $19,800,000. In addition,
in July 1999, we entered into a forward stock purchase contract for the
repurchase of approximately 2.6 million shares of common stock at approximately
$30.26 per share. We may elect to settle the contract on a net share basis in
lieu of physical settlement. We also plan to continue to make investments in
information systems, distribution centers and store remodels to improve
operational efficiencies and customer service, and may expend additional funds
to acquire businesses or lease rights from tenants occupying retail space that
is suitable for a Staples store. We expect to meet these cash requirements
through a combination of available cash, operating cash flow and borrowings
from our existing revolving line of credit.

We issued $200,000,000 of senior notes due 2007 on August 12, 1997 with an
interest rate of 7.125% payable semi-annually on February 15 and August 15 of
each year commencing on February 15, 1998. Net proceeds of approximately
$198,000,000 from the sale of the senior notes were used for repayment of
indebtedness under our revolving credit agreement and for general working
capital purposes, including the financing of new store openings, distribution
facilities and corporate offices.

We also maintain a revolving credit facility, effective through November
2002, with a syndicate of banks which provides up to $350,000,000 of available
borrowings. Borrowings made pursuant to this facility will bear interest at
either the lead bank's prime rate, the federal funds rate plus 0.50%, the LIBOR
rate plus a percentage spread based upon certain defined ratios, a competitive
bid rate or a swing line loan rate. This agreement, among other conditions,
contains certain restrictive covenants including net worth maintenance, minimum
fixed charge interest coverage and limitations on indebtedness and sales of
assets. As of May 1, 1999, no borrowings were outstanding under the revolving
credit agreement. We also have available $35,000,000 in uncommitted, short-term
bank credit lines, of which no borrowings were outstanding as of May 1, 1999.
Staples UK has a $50,000,000 line of credit which had an outstanding balance of
$32,936,000 at May 1, 1999 and Business Depot has a $16,545,000 line of credit
with no outstanding balance at May 1, 1999. Total cash, short-term investments
and available revolving credit amounts totaled $594,395,000 as of May 1, 1999.

We expect that income from operations, together with our current cash and
cash equivalents and funds available under our revolving credit facility will
be sufficient to fund our planned store openings and other recurring operating
cash needs for at least the next twelve to eighteen months. We continually
evaluate financing possibilities, and we may seek to raise additional funds
through any one or a combination of public or private debt or equity-related
offerings, dependent upon market conditions, or through an additional
commercial bank debt arrangement.

Inflation and Seasonality

While inflation or deflation has not had, and we do not expect it to have, a
material impact upon our operating results, there can be no assurance that our
business will not be affected by inflation or deflation in the future. We
believe that our business is somewhat seasonal, with sales and profitability
slightly lower during the first and second quarters of our fiscal year.

Year 2000 Readiness Disclosure

We have completed a comprehensive assessment of our internal computer
systems and applications to identify those that might be affected by computer
programs using two digits rather than four to define the applicable year. We
refer to these potential problems as the Year 2000 issue. We used internal
personnel as well as external contractors and consultants to identify those
systems and applications which are affected by the Year 2000 issue. Those
systems and applications identified as needing remediation are expected to be
replaced or modified and tested for compliance. Remediation of the most
critical information technology related systems and applications was completed
on schedule, during the first quarter of 1999, and it is anticipated that
testing

14
<PAGE>

will be completed by the end of the second quarter of 1999. These systems
include merchandising/logistics, distribution, store point of sale, and
corporate finance. The remediation of the less critical systems remains on
schedule to be completed during the second quarter of 1999. These systems and
applications include marketing systems and non-mission critical desktop
applications. Testing of these less critical systems and applications is
expected to be finished during the third quarter of 1999.

We have also finished our assessment of non-information technology-related
systems and applications and are continuing to assess the status of third
parties with regard to Year 2000 compliance. The non-information technology-
related systems and applications include telephone systems, store security
systems, and electrical systems, among others. The remediation of these systems
was completed during the first quarter of 1999 with testing scheduled to be
finished by the end of the second quarter of 1999. We are also working with
third parties, primarily major vendors but also customers, to assess their Year
2000 compliance. We have received responses from the majority of vendors, but
not all vendors have assured us that they will be compliant in time. As a
contingency, alternative lists of third party vendors have been created in case
a critical third party does not achieve compliance. We have completed our
enterprise-wide inventory review and a comprehensive risk assessment relative
to vendor-provided products, devices and/or services. Due diligence and
monitoring with respect to vendors with the greatest impact on us is scheduled
to be performed on a continuous basis throughout 1999.

We estimate that the total cost of Year 2000 compliance will be between $25
and $30 million, $20 million of which had been spent as of May 1, 1999. Most of
the costs to be incurred are related to remediation and testing of software
using outside contracted services. The costs of compliance have been included
in our current 1999 information technology budgets. The inclusion of Year 2000
compliance costs has not caused any critical information technology projects to
be delayed or eliminated.

We are currently preparing a "what steps to follow" contingency plan in the
event that an area of our operations is impacted by the Year 2000 issue. A
formal plan will be adopted if it becomes more evident that there will be an
area of non-compliance in our systems or at a critical third party. We are
developing these procedures for all our sites, listing those to contact in the
event a "Year 2000 suspected" issue is encountered. Although we expect to
achieve Year 2000 compliance as scheduled, there are potential risks if we do
not become, or are late in becoming, Year 2000 compliant. Such risks include
impairing our ability to process and deliver customer orders and payments,
procure saleable merchandise, and perform other critical business functions
which could have a material impact on our financial performance. We have yet to
make an analysis of the effect that an instance of critical non-compliance by
Staples or a third party would have on revenues and expenses since a worst case
scenario has not been identified. Further, there is also the risk that claims
may be made against us in the event of our non-compliance or the non-compliance
of the products and services that we sell. The costs of defending and settling
such claims could have a material impact on our financial statements. Starting
in May 1999, each of our points of customer contact (stores, call centers and
customer service) had a "Year 2000 Preparedness Guide" for its customers so we
can be proactive in assisting customers with vendor contacts to answer their
Year 2000 questions.

The information presented above is based on management's estimates, which
were made using assumptions of future events. Uncontrollable factors such as
the compliance of the systems of third parties and the availability of
resources could materially increase the cost or delay the estimated date of
Year 2000 compliance. All Year 2000 statements contained in this prospectus are
designated as "Year 2000 Readiness Disclosures" pursuant to the Year 2000
Information and Readiness Disclosures Act (P.L. 105-271).

Euro Currency

On January 1, 1999, participating member countries of the European Union
established fixed conversion rates between their existing currencies and the
European Union's common currency. The former currencies of the participating
countries are scheduled to remain legal tender as denominations of the euro
until January 1, 2002, when the euro will be adopted as the sole legal
currency.

15
<PAGE>

We have evaluated the potential impact on our business, including the
ability of our information systems to handle euro-denominated transactions and
the impact on exchange costs and currency exchange rate risks. Based on the
results of this evaluation, we do not expect the conversion to the euro to have
a material impact on our operations or financial position.

Quantitative and Qualitative Disclosures about Market Risks

We are exposed to market risk from changes in interest rates and foreign
exchange rates. We do not use derivative instruments for trading purposes. We
initiated a risk management control process to monitor the foreign exchange and
interest rate risks. The risk management process uses analytical techniques
including market value, sensitivity analysis, and value at risk estimates. We
do not believe that the potential exposure is significant in light of the size
of our company and our business. In addition, the foreign exchange rate can
move in our favor. Recent experience has demonstrated that gains on some days
are offset by losses on other days. Therefore, we do not expect to incur
material losses.

On May 11, 1999, we entered into an interest rate swap for an aggregate
notional amount of $100,000,000 in order to minimize financing costs associated
with our $200,000,000 of 7.125% senior notes due August 15, 2007. The swap
agreements are scheduled to terminate on August 15, 2007. Under the interest
rate swap agreements, we are entitled to receive semi-annual interest payments
at a fixed rate of approximately 7.125% and are obligated to pay interest based
on 30-day US non-financial commercial paper rates. The interest rate swap is
being accounted for as a hedge and the differential to be paid or received on
the interest rate swap agreements is accrued and recognized as an adjustment to
interest rate expense over the life of the agreements. If Staples and the
counterparty to the agreements terminate the swaps prior to their original
maturity, any gain or loss upon termination will be amortized to interest
expense over the remaining original life of the agreements.

In July 1999, we entered into a forward stock purchase contract for the
repurchase of approximately 2.6 million shares of common stock at approximately
$30.26 per share. The transaction was timed to coincide with the granting of
annual options under our employee stock program and is intended to partially
hedge the equity exposure of our stock option program.

This risk management discussion, and the effects of changes in interest
rates and foreign exchange rates, are forward-looking statements. Actual
results in the future may differ materially from these projected results due to
developments in the global financial markets. The analytical methods used by us
to assess and mitigate risk discussed above should not be considered
projections of future events or losses.

16
<PAGE>

BUSINESS

Staples pioneered the office products superstore concept in 1985 and is a
leading office products distributor with a total of 960 retail stores located
in the United States, Canada, the United Kingdom and Germany as of May 1, 1999,
in addition to a catalog business, electronic commerce and contract stationer
operations.

Business Strategy

. consumers and home offices;

. small businesses and organizations with fewer than 50 office workers;

. medium-size businesses and organizations with more than 50 office
workers; and

. large businesses with more than 1,000 office workers.

North American Superstores

Staples' North American retail operations, consisting of 884 stores as of
May 1, 1999, are our core business, generating a substantial majority of our
sales and profits. Our retail operations focus on serving the needs of
customers primarily in the consumer, home office and small business segments of
the office products market.

Superstores. Our North American superstores are located in 39 states, the
District of Columbia and ten Canadian provinces in both major metropolitan
markets and smaller outlying markets. Our current superstore prototype is
approximately 24,000 square feet. Our strategy for our North American
superstores focuses on four key objectives:

. providing superior customer value through a combination of broad product
selection, everyday low prices, outstanding customer service and
convenient locations;

. increasing our presence in targeted markets by adding new superstores and
achieving economies of scale in most of the major markets where we
compete;

. reducing operating costs to the lowest level consistent with providing
quality merchandise and service; and

. offering a comfortable, easy-to-shop store environment with skilled sales
associates available to assist the customer.

Express Stores. In select urban markets, we operate a smaller store format,
"Staples Express," which offers a more focused assortment of products. These
smaller stores give us the opportunity to meet the office

17
<PAGE>

supply needs of customers in a store format that is efficient and economical in
an urban environment. Staples Express stores range from approximately 6,000 to
10,000 square feet.

Delivery Operations

Staples' delivery operations are comprised of three principal operations:

. Our catalog businesses, operating under the names "Staples Direct" and
"Quill Corporation";

. Our contract stationer businesses, operating under the names "Staples
National Advantage" and "Staples Business Advantage"; and

. Our Internet electronic commerce business, operating under the name
"Staples.com."

Staples Direct. Operating since 1990, Staples Direct, our direct mail
catalog business, reaches all targeted segments of the office products market
seeking the convenience of telephone ordering and free next day delivery for
orders over $50. Delivery orders are shipped from our delivery distribution
centers and are distributed through dedicated delivery hubs. In some markets,
we also deliver products directly from our retail stores. We market Staples
Direct through both direct mail catalogs and a sales force primarily focused on
generating new accounts. We also have Staples Direct catalog operations in
Canada, the United Kingdom and Germany.

Quill Corporation. Acquired in May 1998, Quill is a direct mail catalog
business with a targeted approach to servicing the business product needs of
more than 700,000 medium-sized businesses in the United States. Quill markets
primarily through the distribution of catalogs designed to meet the needs of
specific customer segments. The business offers outstanding customer service, a
superior private label product and special services to attract and retain
customers.

Staples National Advantage and Staples Business Advantage. Staples' contract
stationer operations focus primarily on serving the needs of medium- to large-
size businesses that sometimes may seek more services than are provided by a
traditional retail or mail order business, such as customized pricing, payment
terms, usage reporting and the stocking of certain proprietary items. Our
contract stationer business is divided into two segments. Staples National
Advantage is a nationwide contract stationer business focused on selling to
large multi-regional businesses. Staples Business Advantage focuses on selling
to medium- and large-size regional companies and has the flexibility to handle
smaller accounts. Staples initially established this business through
acquisitions of regional contract stationers, and more recently has entered
certain metropolitan markets through the expanded sales and distribution
capabilities of Staples Business Advantage.

Staples.com. Launched in November 1998, our Internet operation markets over
6,000 products through our web-based superstore and offers free delivery for
orders over $50. Staples leverages existing resources wherever possible such as
offline advertising, call centers, distribution centers and delivery hubs.
Online marketing for Staples.com is currently done primarily through major
relationships with leading Internet properties. Staples.com has many innovative
features and offers functionality which allows Staples to better serve existing
customers as well as attract a large number of new customers.

International

We believe that foreign markets will provide additional growth
opportunities. In 1991, we established our first international joint venture,
"Business Depot", in Canada. Business Depot became a wholly-owned subsidiary of
Staples in 1994 and operates 131 stores as part of Staples' North American
superstores and delivery operations. Staples was also a partner in two overseas
office products superstore joint ventures operating in the United Kingdom under
the name "Staples UK" and in Germany under the name "Staples Der Buro
Megamarkt," which we refer to in this prospectus as "Staples Germany." In May
1997, we increased our ownership interest in the Staples UK operations to 100%
and in Staples Germany to approximately 92%. In

18
<PAGE>

December 1998, we increased our ownership interest in Staples Germany to 100%.
As of May 1, 1999, Staples UK operated 51 stores and Staples Germany operated
25 stores with delivery operations in both countries. Staples expanded the
operations of Quill into Europe during the first quarter of 1999.

Strategic Initiatives

We focus on numerous strategic priorities, with the objective of enhancing
our position as a leading office products supplier:

. expanding product selection across all key product categories;

. enhancing business services;

. improving in-stock positions in Europe;

. improving customer service;

. increasing staffing levels and personnel training;

. expanding store size; and

. improving shopability and signage.

Another key element of this strategy is our ongoing store remodeling program
and new store opening programs. In addition, during 1998 we committed to a plan
to close and relocate stores which cannot be expanded and updated in order to
improve customers shopability and improve market share.

Continue Rapid Growth in Staples Delivery Operations. We are implementing a
number of actions to profitably grow our delivery business. These actions
include:

. broadening the product offerings available for delivery;

. offering specialized, more focused marketing;

. expanding the distribution areas of catalogs;

. providing open account invoicing to large accounts; and

. increasing our multi-channel distribution capacity.

We believe that our delivery operations are also benefiting from the
increased marketing and advertising undertaken in connection with our store
sales growth strategy.

We also plan to focus on developing an electronic commerce business through
Staples.com and to grow that business during fiscal 1999.

Continue Store Growth and Strengthen Infrastructure. We are continuing our
store growth program. In fiscal year 1998, Staples opened 158 new stores in
North America and 16 new stores in Europe. In fiscal 1999, Staples intends to
open approximately 150 stores in North America and 20 stores in Europe, of
which 65 in North America and four in Europe are already open. Our store growth
strategy follows a three-pronged approach of continuing the growth of our store
network in existing markets, entering smaller markets within both existing and
new geographic areas, and entering major new markets.

We believe that our centralized distribution strategy facilitates our
aggressive store growth by enabling us to operate smaller stores than would
otherwise be required, thus reducing the cost of both opening and operating new
stores, while providing the same or better product selection as a larger,
competitive store. To support this commitment, we are taking steps to
strengthen our infrastructure, including our distribution capabilities.

19
<PAGE>

Improve Customer Service. We continue to increase staffing levels in stores
and delivery operations and to make other investments to provide better
customer service. In addition, we continue to drive a corporate-wide CARE
program designed to empower associates to exceed customer expectations for
service by providing "great service, every day, every way." We also focus on
our "mystery shopper program" in which outside representatives evaluate
customer service multiple times per year and have tied a portion of incentive
compensation to achievement of customer satisfaction goals.

20
<PAGE>

MANAGEMENT

The following table lists our executive officers and directors as of June
15, 1999:

<TABLE>
<CAPTION>
Name Position
---- --------
<C> <S>
Thomas G. Stemberg............... Chairman of the Board of Directors and
Chief Executive Officer

Ronald L. Sargent................ President and Chief Operating Officer

John C. Bingleman................ President, Staples International

David B. Crosier................. Executive Vice President, Supply Chain
Management

Joseph G. Doody.................. President, Staples Contract & Commercial

Richard R. Gentry................ Executive Vice President, Merchandising

Edward C. Harsant................ President, The Business Depot

Susan S. Hoyt.................... Executive Vice President, Human Resources

Jeffrey L. Levitan............... Senior Vice President, Strategy, New
Business Development and Staples.com

Jeanne B. Lewis.................. Executive Vice President, Marketing

Brian T. Light................... Senior Vice President and Chief Information
Officer

John J. Mahoney.................. Executive Vice President, Chief Financial
Officer and Chief Administrative Officer

Robert K. Mayerson............... Senior Vice President, Corporate Controller
and Chief Accounting Officer

James C. Peters.................. President, U.S. Stores

Jack A. VanWoerkom............... Senior Vice President, General Counsel and
Secretary

Joseph S. Vassalluzzo............ President, Realty and Development

Basil L. Anderson................ Director

Mary Elizabeth Burton............ Director

W. Lawrence Heisey............... Director

George J. Mitchell............... Director

James L. Moody, Jr. ............. Director

Rowland T. Moriarty.............. Director

Robert C. Nakasone............... Director

W. Mitt Romney................... Director

Martin Trust..................... Director

Paul F. Walsh.................... Director

Margaret C. Whitman.............. Director
</TABLE>

Mr. Stemberg has served as Chairman of the Board of Directors and Chief
Executive Officer of Staples since February 1988. Mr. Stemberg is also a
Director of PETsMART, Inc.

Mr. Sargent has served as President and Chief Operating Officer since
November 1998. Prior to that he served in various capacities since joining
Staples in 1989, including President, North American Operations from October
1997 to November 1998, President, Staples Contract & Commercial from June 1994
to October 1997, and Vice President, Staples Direct and Executive Vice
President, Contract & Commercial from September 1991 until June 1994.

21
<PAGE>

Mr. Bingleman has served as President, Staples International since February
1997. Prior to that he was President, North American Superstores from August
1994 to February 1997. Mr. Bingleman was President of The Business Depot, Ltd.
from its founding in 1990 until its acquisition by Staples in August 1994.

Mr. Crosier has served as Executive Vice President, Supply Chain Management
since June 1998. Prior to that he was Vice President, Logistics for A.W.
Chesterton from April 1994 to May 1998. From December 1973 to March 1994, he
was with Digital Equipment Corporation where he served in a variety of roles,
most recently Group Business Manager.

Mr. Doody has served as President, Staples Contract & Commercial since
November 1998. Prior to joining Staples, Mr. Doody was Vice President of
Sutherland Group, a call center outsourcing company, from January 1998 to
November 1998. From January 1997 to September 1997, Mr. Doody served as
President, North American Office Imaging of Danka, P.L.C. From December 1992 to
December 1996, Mr. Doody was with Eastman Kodak Company, where he served as
General Manager and Vice President Office Imaging.

Mr. Gentry has served as Executive Vice President, Merchandising since
February 1996. Prior to joining Staples, Mr. Gentry was with Lechmere, Inc.
from 1987 to January 1996 where he served as Executive Vice President,
Merchandising from 1993 to January 1996.

Mr. Harsant has served as President, The Business Depot since January 1995.
Prior to joining Staples, Mr. Harsant was with K-Mart Corp. where he served as
Vice President, Merchandise from October 1991 to December 1994.

Ms. Hoyt has served as Executive Vice President, Human Resources since July
1996. Prior to joining Staples, Ms. Hoyt was with Dayton Hudson Department
Stores, a clothing retailer in Minneapolis, Minnesota, where she served as
Executive Vice President of Store Operations from 1993 to 1996.

Mr. Levitan has served as Senior Vice President, Strategy, New Business
Development and Staples.com since November 1998. Prior to that he served as
Senior Vice President, Strategic Planning and Business Development from August
1996 to November 1998. From 1988 to 1996, he was with The Boston Consulting
Group where he served as a strategic management consultant.

Ms. Lewis has served as Executive Vice President, Marketing since November
1998. Prior to that she served in various capacities since joining Staples in
April 1993, including Senior Vice President, Marketing from February 1998 to
November 1998, Senior Vice President, Marketing and Small Business from April
1997 to February 1998, Vice President/Divisional Merchandise Manager from 1996
to April 1997, Director of Operations and Director of Sales and Marketing from
1994 to 1996 and Marketing Manager from 1993 to 1994.

Mr. Light has served as Senior Vice President and Chief Information Officer
since February 1998. From 1986 to January 1998, he was an associate partner at
Andersen Consulting where he served as a business and technology consultant.

Mr. Mahoney has served as Executive Vice President, Chief Financial Officer
and Chief Administrative Officer since October 1997. Prior to that he was
Executive Vice President and Chief Financial Officer from September 1996 to
October 1997. From June 1996 to August 1996, Mr. Mahoney was Executive Vice
President and Chief Financial Officer at Hill, Holliday, Connors, Cosmopulos,
an advertising agency. Prior to joining Hill, Holliday, Mr. Mahoney was a
partner with Ernst & Young LLP, where he served in various capacities in its
accounting and auditing groups from 1975 to June 1996.

Mr. Mayerson has served as Senior Vice President and Corporate Controller
since September 1997. He joined Staples in August 1993 and from that time until
April 1995, he served as Vice President and Treasurer. Thereafter, from April
1995 to September 1997, he served as Senior Vice President and Treasurer.

Mr. Peters has served as President, U.S. Stores since March 1988. Previously
he served as Executive Vice President, U.S. Stores from September 1997 to March
1998. Prior to joining Staples, Mr. Peters was with Office Depot, Inc. where he
served as Senior Vice President, Western Division from 1993 to September 1997.

22
<PAGE>

Mr. VanWoerkom has served as Senior Vice President, General Counsel and
Secretary since March 1999. Prior to that he served as General Counsel of
Teradyne, Inc. from January 1998 to March 1999. From 1994 to June 1997, Mr.
VanWoerkom was Chief Legal Counsel, Vice President of Development and Managing
Director of Europe for A.W. Chesterton.

Mr. Vassalluzzo has served as President, Realty and Development since
October 1997. Prior to that he served in various capacities since joining
Staples in September 1989, including President, Staples Realty from September
1996 to October 1997, Executive Vice President, Growth and Development from
November 1993 to September 1996 and Executive Vice President, Growth and
Support Services from April 1993 until November 1993.

Mr. Anderson has served as Executive Vice President, Finance and Chief
Financial Officer of Campbell Soup Company, a food products manufacturer since
April 1996. Prior to joining Campbell Soup, Mr. Anderson was with Scott Paper
Company where he served in a variety of capacities beginning in 1975, including
Vice President and Chief Financial Officer from February 1993 to December 1995.

Ms. Burton has served as Chief Executive Officer of BB Capital, Inc., an
investment company, since July 1992. Ms. Burton was Chief Executive Officer of
the Cosmetic Center, a chain of 250 specialty retail stores, from June 1998 to
April 1999. Ms. Burton was Chairman and Chief Executive Officer of Supertans,
Inc., a chain of tanning salons. She is also a Director of Gantos, Inc.

Mr. Heisey has served as Chairman, Emeritus of Harlequin Enterprises, Ltd.
of Toronto, Canada, a publishing company, since July 1990. Mr. Heisey was a
Director of The Business Depot, Ltd. prior to its acquisition by Staples in
August 1994.

Mr. Mitchell has served as Special Counsel at Verner, Liipfert, Bernhard,
McPherson and Hand, Chartered since 1995. Appointed to the United States Senate
in 1980, Senator Mitchell served until he left the Senate in 1995 as Majority
Leader, a position he had held since January 1989. Senator Mitchell is also a
Director of The Walt Disney Company, Xerox Corporation, FDX Corporation, UNUM
Corporation, KTI, Inc., Starwood Hotels and Resorts and Unilever.

Mr. Moody served as Chairman of the Board of Hannaford Bros. Co., a food
retailer, from May 1984 until his retirement in May 1997. Mr. Moody is a
Director of UNUM Corporation, IDEXX Laboratories, Inc., Penobscot Shoe Co., and
Empire Company Limited, a publicly traded Canadian company. He is also a
Trustee of Colonial Group mutual funds.

Mr. Moriarty has served as Chairman and Chief Executive Officer of Cubex
Corporation, a consulting company, since 1981. Mr. Moriarty was a professor at
Harvard Business School from September 1982 to September 1992. He is also a
Director of Trammel Crow Company and Charles River Associates, Inc.

Mr. Nakasone has served as Chief Executive Officer of Toys "R" Us, Inc., a
retail store chain, since February 1998. Previously, Mr. Nakasone served in
other positions with that company including President and Chief Operating
Officer from January 1994 to February 1998 and Vice Chairman and President of
Worldwide Toy Stores from January 1989 to January 1994. Mr. Nakasone is also a
Director of Toys "R" Us.

Mr. Romney has served as President and Chief Executive Officer of the Salt
Lake Olympic Committee since February 1999. He has also been Chief Executive
Officer of Bain Capital, Inc., a firm that manages venture capital funds, since
May 1992. Mr. Romney has been a general partner and the managing partner of
each of Bain Capital Partners and Bain Venture Capital, both general partners
of venture capital limited partnerships, since September 1984 and October 1987,
respectively. He served as Chief Executive Officer of Bain & Company, Inc., a
management consulting firm, from 1991 to 1993 and now serves as a Director of
that firm. Mr. Romney is also a Director of Marriott International, Inc. and
The Sports Authority, Inc.

23
<PAGE>

Mr. Trust has served as President and Chief Executive Officer of Mast
Industries, Inc., a contract manufacturer, importer and wholesaler of women's
apparel and wholly-owned subsidiary of The Limited, Inc., since 1970. Mr. Trust
is also a Director of The Limited, Inc.

Mr. Walsh has served as Chairman and Chief Executive Officer of MaineStay
Holdings, a private equity investment firm, since September 1998. In January
1999, MaineStay Holdings formed a partnership with Berkshire Partners and
BancBoston Capital, two equity investment firms, resulting in the creation of
iDEAL Partners, of which Mr. Walsh serves as Chairman and Chief Executive
Officer. From February 1995 to September 1998, Mr. Walsh was President and
Chief Executive Officer of Wright Express Corporation, an information and
financial services company. From January 1990 to February 1995, Mr. Walsh was
Chairman of BancOne Investors Services Corporation, a financial services
company. He is also a Director of Intelligent Controls, Inc.

Ms. Whitman has served as President and Chief Executive Office of eBay,
Inc., an on-line auction company, since February 1998 and as a director since
March 1998. From January 1997 to February 1998, Ms. Whitman was General Manager
of the Preschool Division of Hasbro, Inc. From February 1995 to December 1996,
Ms. Whitman was employed by FTD, Inc., most recently as President, Chief
Executive Officer and a Director. From October 1992 to February 1995, Ms.
Whitman was employed by The Stride Rite Corporation, in various capacities,
including President, Stride Rite Children's Group and Executive Vice President,
Product Development, Marketing & Merchandising, Keds Division.

24
<PAGE>

PRINCIPAL AND SELLING STOCKHOLDERS

We issued the shares of common stock that this prospectus covers in a
private placement in connection with our acquisition of Quill Corporation in
May 1998 and agreed to register the shares. The following table sets forth
information regarding beneficial ownership of our common stock as of June 15,
1999 by:

. each person we know who beneficially owns more than 5% of the outstanding
shares of our common stock;

. each of our directors;

. each of our five most highly compensated executive officers in fiscal
1998;

. our directors and executive officers as of June 15, 1999 as a group; and

. each of the selling stockholders.

Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission, and includes voting or investment power
with respect to shares. Shares of common stock issuable under stock options
that are exercisable within 60 days after June 15, 1999 are deemed outstanding
for computing the percentage ownership of the person holding the options but
are not deemed outstanding for computing the percentage ownership of any other
person. Unless otherwise indicated below, to our knowledge, all persons named
in the table have sole voting and investment power with respect to their shares
of common stock, except to the extent authority is shared by spouses under
applicable law. The inclusion of any shares in this table does not constitute
an admission of beneficial ownership for the person named below.

<TABLE>
<CAPTION>
Shares of Common Shares of Common
Stock Beneficially Stock to be
Owned Prior Number of Beneficially Owned
to Offering(1)(2) Shares of After Offering(1)(2)
--------------------- Common Stock ---------------------
Name of Beneficial Owner Number Percentage Being Offered Number Percentage
- ------------------------ ---------- ---------- ------------- ---------- ----------
<S> <C> <C> <C> <C> <C>
5% Stockholders
FMR Corp.(3)............ 36,629,910 7.89% 0 36,629,910 7.89%
82 Devonshire Street
Boston, MA 02109
Directors and Executive
Officers
Thomas G. Stemberg(4)... 4,812,254 1.03% 0 4,812,254 1.03%
Martin Trust(5)......... 3,566,427 * 0 3,566,427 *
Robert C. Nakasone...... 490,086 * 0 490,086 *
Rowland T. Moriarty(6).. 380,882 * 0 380,882 *
Mary Elizabeth Burton... 183,062 * 0 183,062 *
Paul F. Walsh........... 106,235 * 0 106,235 *
James L. Moody, Jr...... 63,656 * 0 63,656 *
W. Lawrence Heisey...... 59,312 * 0 59,312 *
W. Mitt Romney.......... 53,782 * 0 53,782 *
Basil L. Anderson....... 22,450 * 0 22,450 *
Margaret C. Whitman..... 13,941 * 0 13,941 *
George J. Mitchell...... 400 * 0 400 *
John C. Bingleman....... 1,096,970 * 0 1,096,970 *
John J. Mahoney......... 181,554 * 0 181,554 *
Ronald L. Sargent....... 598,030 * 0 598,030 *
Joseph S. Vassalluzzo... 1,356,913 * 0 1,356,913 *
All directors and execu-
tive officers
as of June 15, 1999 as
a group
(27 persons)........... 13,918,493 2.96% 0 13,918,493 2.96%
</TABLE>

25
<PAGE>

(1) If the U.S. Underwriters' over-allotment option is exercised in full, the
following stockholders will sell the number of additional shares of common
stock indicated below and, after that sale, will beneficially own the
number of shares of common stock, that is set forth below:

<TABLE>
<CAPTION>
Shares of Common
Stock to be
Additional Beneficially Owned
Number of Shares After Offering
of Common Stock --------------------
Name Being Offered Number Percentage
---- ---------------- --------- ----------
<S> <C> <C> <C>
Jack Miller........................... 855,605 1,019,069 *
Harvey L. Miller...................... 810,516 794,023 *
</TABLE>
--------
*Less than 1%

(2) The number of shares indicated includes the following shares of common
stock issuable under stock options that are or may become exercisable
within 60 days after June 15, 1999: Mr. Stemberg, 2,080,544; Mr. Trust,
168,863; Mr. Nakasone, 83,908; Mr. Moriarty, 140,387; Ms. Burton, 181,062;
Mr. Walsh, 83,435; Mr. Moody, 34,501; Mr. Heisey, 46,323; Mr. Romney,
10,525; Mr. Anderson, 6,750; Mr. Bingleman, 810,842; Mr. Sargent, 460,313;
Mr. Vassalluzzo, 1,165,372; all directors and executive officers as of
June 15, 1999 as a group, 5,977,719; Mr. Jack Miller, 119,374.

(3) Based on a Schedule 13G filed with the Securities and Exchange Commission
as of January 7, 1999.

(4) Includes 5,692 shares owned by Mr. Stemberg's wife and includes 254,046
shares owned by Thomas G. Stemberg 1998 Trust.

(5) Includes 3,264,594 shares owned by Trust Investments, Inc., with which Mr.
Trust is affiliated. Mr. Trust has shared investment and voting control of
these shares. Also includes 17,083 shares held by Mr. Trust's wife.

(6) Includes 39,480 shares held by trusts for the benefit of Mr. Moriarty's
children. Mr. Moriarty is not a trustee of the trusts for the benefit of
his children.

(7) Includes shares of common stock held by trusts for the benefit of Mr. Jack
Miller. Mr. Miller serves as President and Chief Executive Officer of
Quill.

(8) Consists of shares of common stock held by trusts for the benefit of Mr.
Harvey L. Miller.

(9) Includes 2,029,203 shares of common stock held by trusts for the benefit
of Ms. Judith N. Bernstein.

(10) Includes 1,687,751 shares of common stock held by trusts for the benefit
of Ms. Lori S. Khanuk, as to which she and Harvey L. Miller's spouse share
investment and voting power.

(11) Includes 1,687,750 shares of common stock held by trusts for the benefit
of Mr. Steven N. Miller, as to which he and Harvey L. Miller's spouse
share investment and voting power.

26
<PAGE>

(12) Consists of shares of common stock held by trusts for the benefit of Mr.
Ronald J. Miller, as to which he and Harvey L. Miller's spouse share
investment and voting power. Excludes 100,000 shares of common stock held
by the New Visions Foundation, as to which Mr. Ronald J. Miller disclaims
beneficial ownership.

(13) Includes 709,628 shares of common stock held by trusts for the benefit of
Ms. Sharon A. Ring.

(14) New Visions Foundation is a non-profit corporation formed for charitable
purposes. Ronald J. Miller serves as a director and the President of the
Foundation; however, Mr. Miller disclaims beneficial ownership of all
shares of common stock held by the Foundation.

27
<PAGE>

DESCRIPTION OF CAPITAL STOCK

Our authorized capital stock consists of 1,500,000,000 shares of common
stock, $.0006 par value per share, and 5,000,000 shares of preferred stock,
$.01 par value per share, of which 1,000,000 shares have been designated Series
A junior participating preferred stock. As of June 15, 1999, there were
463,817,418 shares of common stock issued and outstanding and no shares of
preferred stock outstanding.

The following summary of certain provisions of our securities and various
provisions of our certificate of incorporation and our bylaws is not intended
to be complete and is qualified by reference to the provisions of applicable
law and to our certificate of incorporation and bylaws.

Common Stock

Holders of common stock are entitled to one vote for each share on all
matters submitted to a vote of stockholders and do not have cumulative voting
rights. Accordingly, holders of a majority of the outstanding shares of common
stock entitled to vote in any election of directors may elect all of the
directors standing for election. Holders of common stock are entitled to share
ratably in all assets of Staples which are legally available for distribution,
after payment of all debts and other liabilities and subject to the prior
rights of any holders of preferred stock then outstanding. Holders of common
stock have no preemptive, subscription, redemption or conversion rights. The
outstanding shares of common stock are fully paid and nonassessable. The
rights, preferences and privileges of holders of common stock are subject to
the rights of the holders of shares of any series of preferred stock which we
may issue in the future.

Preferred Stock

Preferred stock may be issued from time to time in one or more series and
the Staples board of directors, without further approval of the stockholders,
is authorized to fix the dividend rights and terms, conversion rights, voting
rights, redemption rights, liquidation preferences, sinking funds and any other
rights, preferences, privileges and restrictions applicable to each series of
preferred stock. The purpose of authorizing the Staples board to determine such
rights and preferences is to eliminate delays associated with a stockholder
vote on specific issuances. The issuance of preferred stock, while providing
flexibility in connection with possible acquisitions and other corporate
purposes, could, among other things, adversely affect the voting power of
holders of Staples common stock and make it more difficult for a third party to
gain control of Staples. There are no outstanding shares of preferred stock
and, other than the Series A junior participating preferred stock discussed
below, no designated series of preferred stock.

Rights Plan

In February 1994, Staples adopted the Staples Rights Plan. Under the Rights
Plan, preferred stock purchase rights were distributed as a dividend, adjusted
for subsequent stock splits, at the rate of 32/243rds of a right for each share
of Staples common stock outstanding. The rights will expire on February 15,
2004, unless the rights are redeemed or exchanged before that time. Each right
entitles the holder to purchase one one-hundredth of a share of Series A junior
participating preferred stock of Staples at an exercise price of $130 per
right, subject to adjustment.

The rights will be exercisable only if a person or group has acquired
beneficial ownership of 20% or more of the outstanding shares of Staples common
stock or announces a tender or exchange offer that would result in such person
or group owning 30% or more of the outstanding shares of Staples common stock.
Such percentages may, in the board's discretion, be lowered, although in no
event below 10%. If any person becomes the beneficial owner of 25% or more of
the shares of Staples common stock, except pursuant to a tender or exchange
offer for all shares at a fair price as determined by the outside members of
the Staples board, or if a 20% or more stockholder constitutes or merges into
or engages in certain self dealing transactions with Staples, or if there
occurs any reclassification, merger or other transaction or transactions which
increases by more than 1% the proportionate share of the outstanding Staples
common stock held by a 20% or more

28
<PAGE>

stockholder, each right not owned by a 20% or more stockholder will enable its
holder to purchase that number of shares of the Staples common stock which
equals the exercise price of the right dividend by one-half of the current
market price of the Staples common stock at the date of the occurrence of the
event. In addition, if Staples is involved in a merger or other business
combination transaction with another person or group in which it is not the
surviving corporation or in connection with which the Staples common stock is
changed or converted, or it sells or transfers 50% or more of its assets or
earning power to another person, each right that has not previously been
exercised will entitle its holder to purchase that number of shares of common
stock of such other person which equals the exercise price of the right divided
by one-half of the current market price of such common stock at the date of the
occurrence of the event. Staples will generally be entitled to redeem the
rights at $.02 per right at any time until the tenth day following public
announcement that a 20% stock position has been acquired and in certain other
circumstances.

Because of the nature of the dividend, liquidation and voting rights of the
Series A junior participating preferred stock, the value of the fraction of a
share of Series A junior participating preferred stock purchasable upon
exercise of the 32/243rds of a right associated with each share of common stock
should approximate the value of one share of common stock.

The rights have certain anti-takeover effects. The rights may cause
substantial dilution to a person or group that attempts to acquire Staples on
terms not approved by the board of directors of Staples, except under the terms
of an offer conditioned on a substantial number of rights being acquired. The
rights should not interfere with any merger or other business combination
approved by the Staples board since the rights may be redeemed by Staples at
$.02 per right prior to the tenth day after the public announcement by a person
or group of the acquisition of 20% or more of the outstanding shares of common
stock.

Delaware Law and Certain Charter Provisions

Staples is subject to the provisions of Section 203 of the General
Corporation Law of Delaware, an anti-takeover law. In general, Section 203
prevents an "interested stockholder" of a corporation from engaging in any
"business combination" with the corporation for a period of three years
following the date on which such interested stockholder became an interested
stockholder, unless:

. before the person became an interested stockholder, the board of
directors of the corporation approved either the business combination in
question or the transaction which resulted in the interested stockholder
becoming an interested stockholder;

. upon consummation of the transaction which resulted in the interested
stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced, excluding, for
purposes of determining the number of shares outstanding, shares held by
directors who are also officers and employee stock plans in which
employee participants do not have the right to determine confidentially
whether shares held subject to the plan will be tendered in a tender or
exchange offer; or

. following the transaction which resulted in the interested stockholder
becoming an interested stockholder, the business combination is approved
by the board of directors of the corporation and authorized at a meeting
of stockholders by the affirmative vote of the holders of at least 66
2/3% of the outstanding voting stock of the corporation not owned by the
interested stockholder.

A "business combination" includes, mergers, asset sales and other
transactions resulting in a financial benefit to the interested stockholder.
Subject to certain exceptions, "interested stockholder" is a person who,
together with affiliates and associates, owns, or within three years did own,
15% or more of the corporation's voting stock.

Staples' certificate of incorporation requires that holders of two-thirds of
Staples' issued and outstanding stock entitled to vote approve any merger,
consolidation, dissolution or sale of all or substantially all of the assets of
Staples.

29
<PAGE>

The Staples board of directors is divided into three classes of
approximately equal size, one of which class is elected each year. Staples'
certificate of incorporation also requires all stockholder action to occur at a
meeting and prohibits stockholder action by written consent. Staples' bylaws
provide that special meetings of stockholders may be called only by the
Chairman of Staples' board of directors or the President of Staples.

Limitation of Liability and Indemnification

Our certificate of incorporation and bylaws include provisions to

. eliminate the personal liability of its directors for monetary damages
resulting from breaches of their fiduciary duty as directors to the
fullest extent permitted by the General Corporation Law of Delaware, and

. indemnify its directors and officers to the fullest extent permitted by
the General Corporation Law of Delaware, including under circumstances in
which indemnification is otherwise discretionary.

We believe that these provisions are necessary to attract and retain
qualified persons as directors and officers.

Transfer Agent

The transfer agent for our common stock is BankBoston, N.A.

UNITED STATES FEDERAL TAX
CONSIDERATIONS FOR NON-UNITED STATES HOLDERS

The following is a general discussion of material U.S. federal income and
estate tax consequences of the ownership and disposition of our common stock
applicable to Non-U.S. Holders. A "Non-U.S. Holder" is a person other than:

. an individual who is a citizen or resident of the United States,

. a corporation or partnership created or organized in the United States or
under the laws of the United States or of any state, or any other entity
treated as a U.S. corporation or partnership for U.S. federal income tax
purposes,

. an estate whose income is includible in gross income for U.S. federal
income tax purposes regardless of source, and

. a trust subject to the primary supervision of a court within the United
States and the control of one or more U.S. persons.

Generally, an individual may be deemed to be a resident alien, instead of a
non-resident alien in any calendar year, by being present in the United States
for at least 31 days in the calendar year and for a total of at least 183 days
during a three-year period ending in the current calendar year--counting for
these purposes all of the days present in the current year, one-third of the
days present in the immediately preceding year, and one-sixth of the days
present in the second preceding year. Resident aliens are subject to U.S.
income tax as if they were U.S. citizens.

This discussion does not consider:

. U.S. state and local or non-U.S. tax consequences,

. the tax consequences to Non-U.S. Holders who do not hold our comon stock
as a capital asset,

. facts and circumstances that may be relevant to a particular Non-U.S.
Holder, including, if it is a partnership, the consequences of some
determinations being made at the partner level,

30
<PAGE>

. the tax consequences to a Non-U.S. Holder's shareholders, partners or
beneficiaries,

. special tax rules that may apply to a Non-U.S. Holder that is, for
example, a bank, an insurance company, a dealer in securities, a trader
in securities that elects mark-to-market accounting treatment, a
financial institution or a tax-exempt entity, or

. special tax rules that may apply when our common stock is held as part of
a "straddle," "hedge," "conversion transaction" or other integrated
transaction.

The following discussion is based on provisions of the U.S. Internal Revenue
Code of 1986, as amended, existing and proposed Treasury regulations, and
administrative and judicial interpretations as of the date of this prospectus,
all of which may change retroactively or prospectively. The following summary
is for general information and does not contain all of the information that may
be important to you. If you are a Non-U.S. Holder, you should consult a tax
advisor on the U.S. federal tax consequences of holding and disposing of our
common stock, as well as any tax consequences under the laws of any U.S. state
or local or non-U.S. taxing jurisdiction.

Dividends

Dividends paid to a Non-U.S. Holder of common stock generally will be
subject to withholding of U.S. federal income tax at a rate of 30% or at a
lower rate under an applicable income tax treaty. Non-U.S. Holders should
consult their tax advisors on their eligibility for benefits under a relevant
income tax treaty.

Dividends that are effectively connected with a Non-U.S. Holder's conduct of
a trade or business in the U.S. generally are subject to U.S. federal income
tax on a net income basis at regular graduated rates, but generally are not
subject to the 30% withholding tax if the Non-U.S. Holder files the appropriate
IRS form with the payer. A Non-U.S. Holder that is a corporation may, under
specific circumstances, be subject to an additional "branch profits tax" on
U.S. trade or business income at a rate of 30% or at a lower rate under an
applicable income tax treaty.

Dividends paid on or before December 31, 2000 to an address in a foreign
country are presumed, absent actual knowledge to the contrary, to be paid to a
resident of that country for purposes of the withholding discussed above and
for purposes of determining the applicability of an income tax treaty rate. For
dividends paid on or after January 1, 2001:

. a Non-U.S. Holder of common stock that claims the benefit of an income
tax treaty rate generally will be required to satisfy applicable
certification and other requirements,

. in the case of common stock held by a foreign partnership, the
certification requirement generally will be applied to the partners of
the partnership, and the partnership may be required to provide a U.S.
taxpayer identification number and other information, and

. look-through rules will apply to tiered partnerships.

A Non-U.S. Holder of common stock that is eligible for a reduced rate of
U.S. withholding tax under an income tax treaty may obtain a refund or credit
of any excess amounts withheld by filing an appropriate claim for a refund with
the IRS.

Disposition of Common Stock

A Non-U.S. Holder generally will not be subject to U.S. federal income tax
on gain recognized on a sale or other disposition of our common stock unless:

. the gain is U.S. trade or business income, in which case the holder will
be taxed on the net gain derived from the sale at applicable U.S. tax
rates and the branch profits tax may also apply to a corporate Non-U.S.
Holder,

31
<PAGE>

. the Non-U.S. Holder is an individual who holds the common stock as a
capital asset within the meaning of Section 1221 of the Internal Revenue
Code, is present in the United States for 183 or more days in the taxable
year of the disposition and meets other requirements, in which case, the
holder generally will be subject to a flat 30% tax on the net gain from
the sale, which gain may be offset by U.S. capital losses recognized in
the same year,

. the Non-U.S. Holder is subject to tax under provisions of U.S. tax law
applicable to specific U.S. expatriates, or

. Staples is or has been a "U.S. real property holding corporation" for
U.S. federal income tax purposes at any time during the shorter of the
five-year period ending on the date of disposition and the Non-U.S.
Holder's holding period for our common stock.

The tax relating to stock in a "U.S. real property holding corporation" does
not apply to a Non-U.S. Holder whose holdings, actual and constructive, at all
times during the applicable period, amount to 5% or less of the common stock,
provided that the common stock is regularly traded on an established securities
market. Generally, a corporation is a "U.S. real property holding corporation"
if the fair market value of its "U.S. real property interests" equals or
exceeds 50% of the sum of the fair market value of its worldwide real property
interests and its other assets used or held for use in a trade or business.
Staples believes that it is not, and is not likely to become, a "U.S. real
property holding corporation" for U.S. federal income tax purposes.

Federal Estate Taxes

Common stock owned or treated as owned by an individual who is a Non-U.S.
Holder at the time of death, or common stock of which the Non-U.S. Holder made
certain lifetime transfers, will be included in the individual's gross estate
for U.S. federal estate tax purposes and may be subject to U.S. federal estate
tax, unless an applicable estate tax treaty provides otherwise.

Information Reporting Requirements and Backup Withholding Tax

Staples must report annually to the IRS and to each Non-U.S. Holder the
amount of the dividends paid to that holder and any tax withheld with respect
to those dividends, as well as the name and address of the holder. The
information reporting requirements apply regardless of whether withholding is
required. Copies of the information returns reporting those dividends and
withholding may also be made available, under an applicable income tax treaty
or agreement, to the tax authorities in the Non-U.S. Holder's country of
residence.

Under specific circumstances, the IRS requires additional information
reporting and backup withholding at a rate of 31% on specific payments with
respect to common stock. Under currently applicable law, Non-U.S. Holders of
common stock generally will be exempt from such additional information
reporting and backup withholding on dividends paid on or before December 31,
2000 to an address outside the U.S. For dividends paid on or after January 1,
2001, however, a Non-U.S. Holder of common stock that fails to certify its Non-
U.S. Holder status under applicable Treasury regulations may be subject to
backup withholding at a rate of 31% on payments of dividends.

The payment of the proceeds of the disposition of common stock by or through
the U.S. office of a broker generally will be subject to information reporting
and backup withholding at a rate of 31% unless the holder certifies its status
as a Non-U.S. Holder under penalties of perjury or otherwise establishes an
exemption. The payment of the proceeds of the disposition by a Non-U.S. Holder
of common stock by or through a non-U.S. office of a non-U.S. broker will not
be subject to backup withholding or information reporting unless the non-U.S.
broker has particular U.S. relationships that make it a "U.S. related person."
In the case of the payment of proceeds from disposition of common stock by or
through a non-U.S. office of a broker that is a U.S. person or a "U.S. related
person," information reporting, but not backup withholding, on the payment
applies unless the broker has documentary evidence in its files that the holder
is a Non-U.S. Holder and that specific conditions are met or that the holder
otherwise is entitled to an exemption. For this purpose, a "U.S. related
person" is:

. a "controlled foreign corporation" for U.S. federal income tax purposes,

32
<PAGE>

. a foreign person 50% or more of whose gross income from all sources for
the three-year period ending with the close of its taxable year preceding
the payment, or for that part of the period that the broker has been in
existence, is derived from activities that are effectively connected with
the conduct of a U.S. trade or business, or

. effective on or after January 1, 2001, a foreign partnership (A) at least
50% of the capital or profits interest in which is owned by U.S. persons,
or (B) that is engaged in a U.S. trade or business.

Effective on or after January 1, 2001, backup withholding will apply to a
payment of disposition proceeds if the broker has actual knowledge that the
holder is a U.S. person. Non-U.S. Holders should consult their own tax advisors
on the application of information withholding and backup withholding to them.

Any amounts withheld under the backup withholding rules from a payment to a
Non-U.S. Holder may be refunded or credited against the holder's U.S. federal
income tax liability, if any, if the holder provides the required information
to the IRS.

33
<PAGE>

UNDERWRITERS

We intend to offer our common stock in the United States through a number of
U.S. underwriters as well as elsewhere through international managers. Under
the terms and subject to the conditions of the underwriting agreement dated the
date of this prospectus, the U.S. underwriters named below, for whom Morgan
Stanley & Co. Incorporated and Goldman, Sachs & Co. are acting as U.S.
representatives, and the international underwriters named below, for whom
Morgan Stanley & Co. International Limited and Goldman Sachs International are
acting as international representatives, have severally agreed to purchase, and
the selling stockholders have severally agreed to sell to them, the respective
number of shares of our common stock set forth opposite the names of the
underwriters below:

<TABLE>
<CAPTION>
Number of
Name Shares
---- ----------
<S> <C>
U.S. underwriters:
Morgan Stanley & Co. Incorporated............................... 4,442,989
Goldman, Sachs & Co. ........................................... 4,442,989
----------
Subtotal...................................................... 8,885,978
----------
International underwriters:
Morgan Stanley & Co. International Limited...................... 1,110,748
Goldman Sachs International..................................... 1,110,747
----------
Subtotal...................................................... 2,221,495
----------
Total......................................................... 11,107,473
==========
</TABLE>

The U.S. underwriters and the international underwriters, and the U.S.
representatives and the international representatives, are collectively
referred to as the underwriters and the representatives, respectively. The
underwriting agreement provides that the obligations of the several
underwriters to pay for and accept delivery of the shares of our common stock
offered hereby are subject to the approval of specific legal matters by their
counsel and to other conditions. The underwriters are obligated to purchase all
of the offered shares of our common stock except those covered by the U.S.
underwriters' over-allotment option described below if any are purchased.

In the agreement between U.S. and international underwriters, each U.S.
underwriter has represented and agreed that, with specific exceptions:

. it is not purchasing any shares for the account of anyone other than a
U.S. or Canadian person, and

. it has not offered or sold, and will not offer or sell, directly or
indirectly, any shares or distribute any prospectus relating to the
shares outside the United States or Canada or to anyone other than a U.S.
or Canadian person.

In the agreement between U.S. and international underwriters, each
international underwriter has represented and agreed that, with specific
exceptions:

. it is not purchasing any shares for the account of any U.S. or Canadian
person, and

. it has not offered or sold, and will not offer or sell, directly or
indirectly, any shares or distribute any prospectus relating to the
shares in the United States or Canada or to any U.S. or Canadian person.

For any underwriter that is both a U.S. underwriter and an international
underwriter, these representations and agreements made by it in its capacity as
a U.S. underwriter apply only to it in its capacity as a U.S. underwriter and
those made by it in its capacity as an international underwriter apply only to
it in its capacity as an international underwriter. The limitations described
above do not apply to stabilization transactions or to other transactions
specified in the agreement between U.S. and international underwriters. As used
in this

34
<PAGE>

prospectus, U.S. or Canadian person means any national or resident of the
United States or Canada, or any corporation, pension, profit-sharing or other
trust or other entity organized under the laws of the United States or Canada
or of any of their political subdivisions, other than a branch located outside
the United States and Canada of any U.S. or Canadian person. U.S. or Canadian
person includes any U.S. or Canadian branch of a person who is otherwise not a
U.S. or Canadian person. All shares of common stock to be purchased by the
underwriters under the underwriting agreement are referred to as shares.

In the agreement between U.S. and international underwriters, sales of
shares may be made between the U.S. underwriters and international
underwriters. The price of any shares so sold will be the public offering price
set forth on the cover page of this prospectus, in U.S. dollars, less an amount
not greater than the per share amount of the concession to dealers set forth
below.

In the agreement between U.S. and international underwriters, each U.S.
underwriter has represented that it has not offered or sold, and has agreed not
to offer or sell, any shares in any province or territory of Canada or to, or
for the benefit of, any resident of any province or territory of Canada in
contravention of the securities laws of Canada. Each U.S. underwriter has
represented that any offer or sale of shares in Canada will be made only
pursuant to an exemption from the requirement to file a prospectus in the
province or territory of Canada in which the offer or sale is made. Each U.S.
underwriter has further agreed to send to any dealer who purchases from it any
of the shares a notice stating in substance that, by purchasing the shares, the
dealer agrees that any offer or sale of shares in Canada will be made only
pursuant to an exemption from the requirement to file a prospectus in the
province or territory of Canada in which the offer or sale is made. Each dealer
will deliver to any other dealer to whom it sells any of the shares a notice
containing substantially the same Canadian selling restrictions.

In the agreement between U.S. and international underwriters, each
international underwriter has represented and agreed that:

. it has not offered or sold and, prior to the date six months after the
closing date for the sale of the shares to the international
underwriters, will not offer or sell, any shares to persons in the United
Kingdom except to persons whose ordinary activities involve them in
acquiring, holding, managing or disposing of investments for the purposes
of their businesses or otherwise in circumstances which have not resulted
and will not result in an offer to the public in the United Kingdom
within the meaning of the public offers of Securities Regulations 1995,

. it has complied and will comply with all applicable provisions of the
Financial Services Act 1986, and

. it has and will distribute any document relating to the shares in the
United Kingdom only to a person who is of a kind described in Article
11(3) of the Financial Services Act 1986 (Investment Advertisements)
(Exemptions) Order 1996 (as amended) or is a person to whom the document
may otherwise lawfully be distributed.

In the agreement between U.S. and international underwriters, each
international underwriter has further represented that it has not offered or
sold, and has agreed not to offer or sell in Japan or to or for the account of
any resident of Japan, any of the shares. This limitation does not apply to
Japanese international underwriters or dealers and offers or sales pursuant to
any exemption from the registration requirements of the Securities and Exchange
Law and otherwise in compliance with applicable provisions of Japanese law.
Each international underwriter has further agreed to send to any dealer who
purchases from it any of the shares a notice stating that, by purchasing the
shares, the dealer agrees that any offer or sale of the shares in Japan will be
made only to Japanese international underwriters or dealers or under an
exemption from the registration requirements of the Securities and Exchange Law
and otherwise in compliance with applicable provisions of Japanese law. Each
dealer will send to any other dealer to whom it sells any of the shares a
notice containing substantially the same Japanese selling restrictions.

The underwriters initially propose to offer part of the shares directly to
the public at the public offering price set forth on the cover page of this
prospectus. The underwriters may also offer the shares to securities

35
<PAGE>

dealers at a price that represents a concession not in excess of $.53 per share
under the public offering price. Any underwriter may allow and dealers may
reallow, a concession not in excess of $.10 per share to other underwriters or
to securities dealers. After the initial offering of the shares, the offering
price and other selling terms may from time to time be changed by the
representatives.

Some of the selling stockholders have granted to the U.S. underwriters an
option, exercisable for 30 days from the date of this prospectus to purchase up
to an aggregate of 1,666,121 additional shares at the public offering price set
forth on the cover page of this prospectus, less underwriting discounts and
commissions. The U.S. underwriters may exercise this option solely for the
purpose of covering over-allotments, if any, made in connection with the
offering of the shares offered pursuant to this prospectus. To the extent this
option is exercised, each U.S. underwriter will become obligated, subject to
specified conditions, to purchase about the same percentage of additional
shares as the number set forth next to the U.S. underwriter's name in the
preceding table bears to the total number of shares set forth next to the names
of all U.S. underwriters in the preceding table. If the U.S. underwriters'
option is exercised in full, the total price to the public for this offering
would be $375,224,324, the total underwriters' discounts and commissions would
be $11,368,499 and total proceeds to the selling stockholders would be
$363,855,825.

The underwriters have agreed to reimburse Staples for certain expenses
payable by it in connection with the offering.

Each of Staples, the selling stockholders and our directors and executive
officers, has agreed that, without the prior written consent of Morgan Stanley
& Co. Incorporated and Goldman, Sachs & Co. on behalf of the underwriters, it
will not, during the period ending 90 days after the date of this prospectus:

. offer, pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option,
right or warrant to purchase, lend, or otherwise transfer or dispose of,
directly or indirectly, any shares of common stock or any securities
convertible into or exercisable or exchangeable for common stock, or

. enter into any swap or other arrangement that transfers to another, in
whole or in part, any of the economic consequences of ownership of the
common stock, whether any transaction described above is to be settled by
delivery of shares of common stock or other securities, in cash or
otherwise.

The restrictions described in the previous paragraph do not apply to:

. the sale of the shares to the underwriters,

. the issuance by us of shares of common stock upon the exercise of an
option or warrant or the conversion of a security outstanding on the date
of this prospectus of which the underwriters have been advised in
writing,

. issuances pursuant to our employee stock purchase plan or the issuance by
us of options or warrants to our employees or directors pursuant to our
stock-based incentive compensation plans existing on the date of this
prospectus which are not exercisable within the 90 day period,

. transactions by any person other than us relating to shares of common
stock or other securities acquired in open market transactions after the
completion of the offering,

. the issuance by us of shares of common stock under our 401(k) plan and
deferred compensation plan, and

. sales, after August 19, 1999, by certain of our officers of up to 500,000
shares of common stock in the aggregate under Rule 144.

The common stock is quoted on the Nasdaq National Market under the symbol
"SPLS."

In order to facilitate the offering, the underwriters may engage in
transactions that stabilize, maintain or otherwise affect the price of the
shares of common stock. Specifically, the underwriters may agree to sell or

36
<PAGE>

allot more shares than the 11,107,473 shares of our common stock which the
selling stockholders have agreed to sell to them. This over-allotment would
create a short position in our common stock for the underwriters' account. To
cover any over-allotments or to stabilize the price of the common stock, the
underwriters may bid for, and purchase, shares of common stock in the open
market. Finally, the underwriting syndicate may reclaim selling concessions
allowed to an underwriter or a dealer for distributing the common stock in the
offering, if the syndicate repurchases previously distributed common stock in
transactions to cover syndicate short positions, in stabilization transactions
or otherwise. The underwriters have reserved the right to reclaim selling
concessions in order to encourage underwriters and dealers to distribute the
common stock for investment, rather than for short-term profit taking.
Increasing the proportion of the offering held for investment may reduce the
supply of common stock available for short-term trading. Any of these
activities may stabilize or maintain the market price of the common stock above
independent market levels. The underwriters are not required to engage in these
activities and may end any of these activities at any time.

We, the selling stockholders and the underwriters have agreed to indemnify
each other against a variety of liabilities, including liabilities under the
Securities Act.

From time to time, some of the underwriters and their affiliates have
provided, and continue to provide, investment banking services to us.

LEGAL MATTERS

The validity of the shares of common stock we are offering will be passed
upon for us by Hale and Dorr LLP, Boston, Massachusetts. Certain legal matters
in connection with this offering will be passed upon for the selling
stockholders by Neal, Gerber & Eisenberg, Chicago, Illinois. Certain legal
matters in connection with this offering will be passed upon for the
underwriters by Davis Polk & Wardwell, New York, New York.

EXPERTS

Ernst & Young LLP, independent auditors, have audited our consolidated
financial statements included in our Annual Report on Form 10-K for the fiscal
year ended January 30, 1999, as set forth in their report, which is
incorporated by reference in this prospectus and registration statement. As to
the years 1997 and 1996, Ernst & Young LLP's report is based in part on the
reports of Kupferberg, Goldberg & Neimark, LLC, independent auditors. These
financial statements are incorporated by reference in reliance upon the reports
of Ernst & Young LLP and Kupferberg, Goldberg & Neimark, LLC, given on their
authority as experts in accounting and auditing.

WHERE YOU CAN FIND MORE INFORMATION

We file reports, proxy statements, and other documents with the Securities
and Exchange Commission. You may read and copy any document we file at the
SEC's public reference room at Judiciary Plaza Building, 450 Fifth Street,
N.W., Room 1024, Washington, D.C. 20549. You should call 1-800-SEC-0330 for
more information on the public reference room. Our SEC filings are also
available to you on the SEC's Internet site at http://www.sec.gov. In addition,
these materials may be read at the offices of The Nasdaq Stock Market, Inc.,
1735 K Street, N.W., Washington, D.C. 20006.

This prospectus is part of a registration statement that we filed with the
SEC. The registration statement contains more information than this prospectus
regarding Staples and our common stock, including certain exhibits and
schedules. You can obtain a copy of the registration statement from the SEC at
the address listed above or from its Internet site.

37
<PAGE>

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

The SEC allows us to "incorporate" into this prospectus information that we
file with the SEC in other documents. This means that we can disclose important
information to you by referring to other documents that contain that
information. The information incorporated by reference is considered to be part
of this prospectus. Information contained in this prospectus and information
that we file with the SEC in the future and incorporate by reference in this
prospectus automatically updates and supersedes previously filed information.
We incorporate by reference the documents listed below and any future filings
we make with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the Securities
Exchange Act of 1934, as amended, prior to the sale of all the shares covered
by this prospectus.

(1) Our Annual Report on Form 10-K for the fiscal year ended January 30,
1999;

(2) Our Quarterly Report on Form 10-Q for the fiscal quarter ended May
1, 1999;

(3) Our Current Report on Form 8-K filed on February 9, 1999; and

(4) The description of our common stock contained in our Registration
Statement on Form 8-A dated April 7, 1989.

You may request a copy of these documents, which will be provided at no cost,
by contacting: Staples, Inc., 500 Staples Drive, Framingham, Massachusetts
01702, Attention: Investor Relations; Telephone (508) 253-5000.

38
<PAGE>

[Staples Logo Appears Here]