<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
OFFICE DEPOT, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
OFFICE DEPOT, INC.
2200 OLD GERMANTOWN ROAD
DELRAY BEACH, FLORIDA 33445
NOTICE OF ANNUAL MEETING OF
STOCKHOLDERS
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DATE......................................... Friday April 28, 2000
TIME......................................... 10:00 a.m. E.S.T.
LOCATION..................................... The Boca Raton Marriott Hotel
5150 Town Center Circle Boca Raton, Florida 33486
ITEMS OF BUSINESS............................ 1. To elect eleven members of the Board of Directors
for the term described in this proxy statement;
2. To consider an amendment to our Long-Term Equity
Incentive Plan to increase the number of shares of
Company Common Stock authorized for issuance under
the Plan by 16,000,000 shares.
3. To consider an amendment to our Employee Stock
Purchase Plan to provide for an increase of
2,000,000 in the number of shares of Company
Common Stock authorized to be sold pursuant to the
Plan.
4. To ratify our Board's appointment of Deloitte &
Touche LLP as independent public accountants for the
term described in this proxy statement ; and
5. To transact any other business that may properly
come before the meeting.
RECORD DATE.................................. Holders of record of Office Depot common stock as of
the close of business on March 8, 2000 are entitled to
notice of and to vote at our Annual Meeting and any
adjournment thereof.
ANNUAL REPORT................................ Our 1999 Annual Report is enclosed with these Proxy
Materials.
</TABLE>
By order of the Board of Directors,
/s/ David C. Fannin
David C. Fannin
Senior Vice President, General Counsel &
Corporate Secretary
March 31, 2000
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THIS MEETING REGARDLESS OF
THE NUMBER YOU OWN. EVEN IF YOU PLAN TO ATTEND THE MEETING IN PERSON, PLEASE
PROMPTLY SIGN AND RETURN YOUR PROXY CARD IN THE ENCLOSED ENVELOPE OR VOTE YOUR
SHARES ELECTRONICALLY USING A TOUCH-TONE TELEPHONE OR THE INTERNET AS EXPLAINED
ON THE PROXY CARD.
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
NUMBER
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<S> <C>
PROXY STATEMENT & VOTING.................................... 1
Purpose of the Meeting and Recommendations of our
Board.................................................. 1
Voting Your Share....................................... 1
Changing or Revoking Your Proxy......................... 2
Solicitation of Proxies................................. 2
Stockholders Eligible to Vote at Our Annual Meeting;
List of Stockholders Available......................... 2
Establishing a Quorum................................... 2
ELECTION OF DIRECTORS -- ITEM 1............................. 4
Nominees for Directors of Office Depot.................. 4
Terms to be Served...................................... 4
Replacement Nominees.................................... 4
AMENDMENT OF LONG-TERM EQUITY INCENTIVE PLAN -- ITEM 2...... 5
Purpose of the Plan..................................... 5
Reasons for Proposed Amendment.......................... 5
Description of the Plan................................. 6
Certain United States Federal Income Tax Consequences of
the Plan............................................... 8
Vote Required for Plan Amendment........................ 10
Text of Proposed Plan Amendment......................... 10
AMENDMENT OF EMPLOYEE STOCK PURCHASE PLAN -- ITEM 3......... 11
Reasons for the Proposed Amendment...................... 11
General Description of the Plan......................... 11
Certain United States Federal Income Tax Consequences of
the Plan............................................... 12
Approval Required....................................... 13
Text of Proposed Plan Amendment......................... 13
RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC
ACCOUNTANTS -- ITEM 4..................................... 14
STOCK OWNERSHIP INFORMATION................................. 15
MANAGEMENT OF THE COMPANY................................... 18
Directors and Executive Officers........................ 18
Executive Officers Who Are Not Directors................ 20
Committees of our Board................................. 22
Audit Committee......................................... 22
Compensation Committee.................................. 22
Governance & Nominating Committee....................... 22
Director Compensation................................... 23
SECTION 16 BENEFICIAL OWNERSHIP REPORTING COMPLIANCE........ 23
EXECUTIVE COMPENSATION...................................... 24
Summary Compensation Table.............................. 24
Option/SAR Grants in Last Fiscal Year................... 26
Aggregated Option/SAR Exercise in the Last Fiscal Year
And Fiscal Year-End Option/SAR Values.................. 27
CEO Compensation........................................ 28
Contractual Arrangement with our Vice-Chairman, Irwin
Helford................................................. 30
Employment Agreements With Other Named Executive
Officers................................................ 30
Change in Control Agreements............................ 31
Change in Control Agreement with Mr. Nelson............. 32
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER
PARTICIPATION............................................. 32
COMPENSATION COMMITTEE REPORT ON 1999 EXECUTIVE
COMPENSATION.............................................. 33
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.............. 36
COPIES OF FORM 10-K AVAILABLE............................... 37
YEAR 2001 STOCKHOLDER PROPOSALS............................. 37
COMMON STOCK PERFORMANCE.................................... 38
</TABLE>
i
<PAGE> 4
PROXY STATEMENT
FOR THE
2000 ANNUAL MEETING OF STOCKHOLDERS OF
OFFICE DEPOT, INC.
2200 OLD GERMANTOWN ROAD
DELRAY BEACH, FLORIDA 33445
TELEPHONE (561) 438-4800
This Proxy Statement contains important information about our 2000 Annual
Meeting of Stockholders, to be held on April 28, 2000, beginning at 10:00 a.m.
E.S.T. at The Boca Raton Marriott Hotel, 5150 Town Center Circle, Boca Raton,
Florida 33486. If our Annual Meeting is rescheduled, postponed or adjourned,
this Proxy Statement will also apply to the rescheduled meeting.
We are mailing this Proxy Statement and accompanying proxy card to our
stockholders on or about March 31, 2000 .
PURPOSE OF THE MEETING AND RECOMMENDATIONS OF OUR BOARD
Our Annual Meeting will provide you with an opportunity to vote your shares
in connection with several important matters outlined in the Notice of this
Meeting on the cover page of this Proxy Statement. We have mailed you these
proxy materials in connection with the solicitation of proxies by our Board of
Directors (our "Board"). Our Board asks that you authorize your proxy to vote as
they recommend. OUR BOARD RECOMMENDS THAT YOU VOTE IN FAVOR OF ITS NOMINEES AS
DIRECTORS OF THE COMPANY AND THAT YOU VOTE IN FAVOR OF EACH OF THE OTHER MATTERS
REFERRED TO ABOVE.
VOTING YOUR SHARES
Your vote is extremely important. If you cannot attend the Meeting in
person, you may vote your shares by proxy. This can be done in three ways:
- by completing, signing and returning your proxy card to us in the
enclosed postage-paid envelope.
- by voting electronically using a touch-tone telephone or
- Using the Internet to vote your shares.
Information about alternative electronic voting methods is provided on your
enclosed proxy card. If your shares are held in "street name" with a broker or
similar party, you will need to contact your broker to determine whether you
will be able to vote using one of these alternative methods. If you vote over
the Internet, you may incur costs such as telephone and Internet access charges
for which you will be responsible. If you choose to use the Internet or
telephone to vote, you must do so by 5:00 p.m. E.S.T. on April 27, 2000.
Our Board has appointed certain persons ("proxies") to vote proxy shares in
accordance with the instructions of our stockholders. If you authorize the
proxies to vote your shares, but do NOT specify
<PAGE> 5
how your shares should be voted, they will vote your shares as our Board
recommends. We do not expect that any other matters will be presented for
consideration at our Annual Meeting; but if they are, your shares will be voted
as our Board recommends unless you withhold authority for proxies to vote on
such matters.
CHANGING OR REVOKING YOUR PROXY
You can change or revoke your proxy at any time before it is exercised,
regardless of the voting method you used, by mailing your request to our
Corporate Secretary so that it is received prior to our Annual Meeting or by
voting your ballot in person at the Annual Meeting. If you choose to do the
latter, you will need to inform the Secretary or his designee of your plans
prior to the actual vote.
SOLICITATION OF PROXIES
We are soliciting proxies by mail. However, with the help of our officers
and employees, we may also solicit proxies in person, by telephone or over the
Internet. Our employees do not receive additional compensation for their
solicitation services. In addition, certain banking institutions, brokerage
firms, custodians, trustees, nominees and fiduciaries who hold shares for the
benefit of another party (the "beneficial owner") may solicit proxies for us. If
so, they will mail proxy information to, or otherwise communicate with, the
beneficial owners of shares of our common stock held by them. We have also hired
Corporate Investor Communications, Inc. ("CIC") to assist us in communicating
with these institutions and forwarding solicitation materials to them, and have
agreed to pay CIC a fee of $6,000 plus reimbursement of their reasonable
out-of-pocket expenses in connection with this service. We will also reimburse
brokerage firms and other custodians, nominees and fiduciaries for their
expenses incurred in sending proxies and proxy materials to beneficial owners of
our common stock.
STOCKHOLDERS ELIGIBLE TO VOTE AT OUR ANNUAL MEETING; LIST OF STOCKHOLDERS
AVAILABLE
Anyone who owns shares of our common stock as of the close of business on
March 8, 2000 (the "Record Date") will be entitled to vote at our Annual
Meeting. Our official stock ownership records will conclusively determine
whether you are a "holder of record" as of the Record Date. In accordance with
Delaware law, a list of stockholders entitled to vote at the meeting will be
available at the location of our Annual Meeting on April 28, 2000 and for ten
days prior to the meeting between the hours of 9 a.m. and 4 p.m. E.S.T. at our
corporate headquarters in Delray Beach, Florida. As of March 8, 2000, there were
321,737,153 shares of common stock issued by Office Depot and owned by
stockholders. Each share of common stock is entitled to one vote on each matter
considered at our Annual Meeting.
ESTABLISHING A QUORUM
In order for us to transact business at our Annual Meeting, a "quorum" of
our stockholders must be present, i.e., more than 50% of our outstanding common
stock must be present, in person or by proxy. Stockholders will be counted as
"present" at the meeting: (1) if they attend in person, (2) if they have
properly voted by means of the Internet or by telephone, as described on the
proxy card, or (3) if they
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<PAGE> 6
have sent to the Company a properly signed proxy card. Stockholders choosing to
abstain from voting and broker "non-votes" should be treated as present and
entitled to vote for purposes of determining whether a quorum is present.
An abstention occurs when a stockholder chooses not to cast a vote on a
particular matter. A broker "non-vote" occurs when a nominee holding shares for
a beneficial owner does not vote on a particular proposal because the nominee
does not have discretionary voting power with respect to that item and has not
received instructions from the beneficial owner. If you complete your proxy card
but abstain from voting on a particular matter, you will be considered present
for purposes of determining whether a quorum has been established, even though
you don't vote on one or more matters.
Abstentions and broker "non-votes" will not be counted as a vote "for" or
"against" any matter. However, abstentions will have the same effect as voting
"no" or against a matter voted on at our Meeting which requires the affirmative
vote of a majority of the shares present and voting. Broker non-votes will not
be counted as shares entitled to vote and, accordingly will not affect the
outcome with respect to any matter to be voted on at the meeting.
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<PAGE> 7
MATTERS TO BE CONSIDERED BY OUR STOCKHOLDERS
ELECTION OF DIRECTORS -- ITEM 1
NOMINEES FOR DIRECTORS OF OFFICE DEPOT
The Governance & Nominating Committee of our Board has recommended, and our
Board has nominated, the following eleven individuals for election as directors
at our Annual Meeting. Our directors are elected by a plurality of the votes
cast at the meeting, either in person or by proxy. The eleven nominees for
directors who receive the highest number of votes cast at our Meeting will be
elected to the Board. Information about these individuals, their business
experience and other relevant information may be found under the heading
Management of Our Company: Directors and Executive Officers at pages 18 through
20 of this Proxy Statement:
<TABLE>
<S> <C> <C>
David I. Fuente Irwin Helford Lee A. Ault III
Neil R. Austrian Cynthia R. Cohen W. Scott Hedrick
James L. Heskett Michael J. Myers M. Bruce Nelson
Frank P. Scruggs, Jr. Peter J. Solomon
</TABLE>
TERMS TO BE SERVED
Directors who are elected at our Annual Meeting will serve for a term of
office that continues from the date and time of their election until our next
Annual Meeting of Stockholders, or until their successors are elected and
qualified. Generally, that term will be twelve months. All of our directors form
a single class of directors.
REPLACEMENT NOMINEES
The nominees listed above told us that they are willing to be elected and
to serve as directors on our Board. However, if any of these nominees should
become unable to serve, or otherwise become unavailable for election (for
example, if any of them should become ill or incapacitated or should die), the
current members of our Board of Directors (by majority vote) may name another
person as a substitute nominee. If a substitute nominee is named by our Board,
all proxies will be voted for the person so named (unless you specify on your
proxy card to withhold voting for such person). Our Board is not required to
name a substitute nominee. If a substitute nominee is not named, all proxies
will be voted for the election of the remaining nominees (or as directed on your
proxy card). In no event will more than eleven directors be elected at our
Annual Meeting.
YOUR BOARD OF DIRECTORS RECOMMENDS
A VOTE FOR ELECTION OF ALL NOMINEES LISTED ABOVE AS DIRECTORS
4
<PAGE> 8
AMENDMENT OF OUR LONG-TERM EQUITY INCENTIVE PLAN TO
INCREASE THE NUMBER OF SHARES
AUTHORIZED FOR ISSUANCE UNDER THE PLAN BY
16,000,000 SHARES -- ITEM 2
PURPOSE OF THE PLAN
Our Long-Term Equity Incentive Plan (the "Plan") exists to provide one
important component of compensation for our officers, directors and certain key
employees. The Plan has been adopted and previously approved by our stockholders
for the purpose of attracting, retaining and rewarding the best available
persons for positions of substantial responsibility in our Company. In addition,
the Plan serves to align the interests of our officers, directors and key
employees with the interests of our stockholders, since the benefits of the Plan
are realized generally only if the price of our stock increases in the
marketplace. The Plan permits issuance of stock options (both Incentive Stock
Options and non-qualified stock options), Stock Appreciation Rights ("SARs") and
Restricted Shares of our stock. Grants are made in the discretion of the
Compensation Committee of our Board of Directors.
REASONS FOR PROPOSED AMENDMENT TO INCREASE THE NUMBER OF SHARES OF STOCK
AUTHORIZED FOR ISSUANCE UNDER THE PLAN
For several reasons, the Compensation Committee has recommended to our
Board, and our Board now recommends to our stockholders, that the number of
shares authorized and available for issuance under the Plan be increased by
16,000,000 shares of stock, from 31,068,750 shares to 47,068,750 shares of our
stock. Of this total number (i.e. 47,068,750 total authorized shares), we
currently have issued and outstanding options for approximately 23,000,000 of
such shares (or approximately 49% of the total authorized if this Plan amendment
is approved). In October 1998, our stockholders approved an amendment to the
Plan to increase the number of shares with respect to which awards may be
granted under the Plan to 20,712,500. Pursuant to the terms of the Plan, this
number automatically increased to 31,068,750 as a result of the three-for-two
stock split which became effective April 1, 1999.
Our Company has enjoyed considerable growth in the past 17 months following
the Viking merger. We have added key personnel as our Internet and business to
business ("B2B") electronic commerce initiatives have grown by triple digits. In
addition, we have expanded our operations in Europe and in Japan, acquiring the
remaining interests in France and Japan of our joint venture partners in those
countries. With this expansion of our business, we have added a number of key
personnel, and we anticipate continuing to add personnel, particularly in
technical areas, such as electronic commerce. In addition, our contract business
continues to grow, and we expect to continue to add key managers in this area.
This dramatic increase in our overall business size, coupled with our
ambitious plans for the future growth of our Company, especially in the
Internet, electronic commerce, and B2B segments require that we have sufficient
shares authorized for issuance to new key managers and other employees. If we do
not add sufficient capacity to the Plan, we may be unable to attract the right
caliber of personnel to our
5
<PAGE> 9
Company or to retain the services of key managers currently with our Company,
which could jeopardize the future growth prospects of our Company.
In addition, we have incentivized several key senior executives at levels
appropriate to their responsibilities in order to ensure that we retain them.
Further, our philosophy of compensation takes stock option grants deeper into
our organizations than may be the case in some other companies. We believe it is
important to align the interests of as many employees with the interests of the
stockholders as is reasonable in order to ensure that our associates always take
the best interests of the stockholders into account as they make decisions
relative to our business.
As a result of these factors, we have determined that we do not currently
have available a sufficient number of shares authorized under the Plan to cover
normally anticipated needs. We believe at this time that an increase of
16,000,000 shares, from 31,068,750 to 47,068,750 shares authorized shares under
the Plan should be sufficient to cover our anticipated needs under the Plan for
approximately the next three (3) years.
DESCRIPTION OF THE PLAN
General. The Plan, which our stockholders approved effective October 1,
1997, allows us to grant stock options, stock appreciation rights ("SARs") in
tandem with options, restricted stock, performance awards and any combination of
the foregoing to directors, officers, key employees, and certain other key
individuals who perform services for our Company. The purpose of adopting the
Plan was to incentivize eligible individuals to maximize stockholder value and
otherwise contribute to the success of our Company. The Plan also enables us to
attract, retain and reward the best available persons for positions of
substantial responsibility.
The Plan is administered by our Compensation Committee. As grants to be
awarded under the Plan are made entirely at the discretion of this Committee,
the recipients, amounts and values of future benefits to be received pursuant to
the Plan are not determinable. The shares of our Common stock reserved for
issuance pursuant to the Plan are subject to adjustment in the event of a
reorganization, recapitalization, stock split, stock dividend or similar change
in our corporate structure or the outstanding shares of our common stock. Such
shares may be authorized and unissued or reacquired and held as treasury shares.
Eligibility. Our directors (whether or not employees), officers and key
employees, including those of our subsidiaries, who are selected by our
Compensation Committee are eligible to receive grants pursuant to the Plan.
However only our domestic employees may receive grants of incentive stock
options. As of the Record Date of March 8, 2000, approximately 3,350 employees
participated in the Plan.
Stock Options. Pursuant to the Plan, our Compensation Committee may award
grants of incentive stock options ("incentive options") conforming to the
provisions of Section 422 of the Internal Revenue Code (the "Code", and other
stock options ("non-qualified options"). However, the number of shares of our
common stock underlying grants of options and/or SARs made to any participant in
any one year shall not exceed 1,000,000 shares. The exercise price of any option
is determined by our Compensation
6
<PAGE> 10
Committee in its discretion at the time of the grant, but may not be less than
100% of the fair market value of a share of our stock on the grant date. The
exercise price of an incentive option awarded to a person who owns stock
constituting more than 10% of the voting power of our Company may not be less
than 110% of such fair market value on such date. The Plan also provides that no
option or SAR may be granted in substitution for a previously granted option or
SAR if the new award would have a lower option exercise price or SAR
appreciation base than the award it replaces.
The term of each option is established by our Compensation Committee,
subject to a maximum term of ten years from the date of grant (or five years
from the grant date in the case of an incentive option granted to a person who
owns stock constituting more than 10% of the voting power of Office Depot). In
addition, the Plan provides generally that all options cease vesting on, and
terminate 90 days after, the date on which a grantee ceases to be a director,
officer or employee of, or to otherwise perform services for, Office Depot or
its subsidiaries. The Plan does provide for certain exceptions.
Unless our Compensation Committee decides otherwise:
(a) Upon a Plan grantee's death while still an employee of our Company, all
of the grantee's options become fully vested and exercisable and remain
so for 18 months after the date of death, provided that all incentive
options must be exercised within twelve months of the grantee's death
or they will be treated as non-qualified stock options under the plan;
(b) Upon the retirement of a grantee, only the options vested as of the
date of retirement will remain exercisable for a period of 18 months
after retirement or they will be treated as non-qualified stock
options;
(c) Upon a grantee's termination for cause, all options terminate
immediately; and
(d) Upon a change in control of Office Depot, all options become fully
vested and exercisable.
Upon exercise of an SAR, the grantee will receive an amount in cash and/or
shares of our common stock equal to the difference between the fair market value
of a share of our common stock on the date of exercise and the exercise price of
the option to which it relates, multiplied by the number of shares as to which
the SAR is exercised.
Restricted Stock. Under the Plan, our Compensation Committee also may
award restricted stock subject to conditions and restrictions, and for such
duration (which shall be at least twelve months except as other described
below), as determined by the Committee in its discretion. Except as otherwise
provided by our Compensation Committee, all restrictions on a grantee's
restricted stock will lapse immediately prior to a change in control of our
Company or at such time as the grantee ceases to be a director, officer or
employee of, or otherwise perform services for us or one of our subsidiaries due
to death or retirement. Unless our Compensation Committee decides otherwise, if
a grantee ceases to serve as a director, officer or employee of, or otherwise
perform services for, our Company, all of his or her restricted stock as to
which the applicable restrictions have not lapsed will be forfeited immediately.
Performance Awards. Our Compensation Committee may grant performance
awards contingent upon achievement of set goals and objectives with respect to
specified performance criteria, such as
7
<PAGE> 11
return on equity, over a specified performance cycle, as designated by the
Committee. Performance awards may include specific dollar-value target awards,
performance units, (the value of which is established by our Compensation
Committee at the time of grant) and/or performance shares, the value of which is
equal to the fair market value of a share of our common stock on the date of
grant. The value of a performance award may be fixed or may fluctuate on the
basis of specified performance criteria. The number of shares of our common
stock or the amount of cash that can be granted to a participant to satisfy a
performance award in any one year cannot exceed 100,000 shares or $2.0 million,
respectively.
Except as otherwise provided by our Compensation Committee, in the event of
a change in control of our company, or if a grantee ceases to be a director,
officer or employee of, or otherwise perform services for, Office Depot or its
subsidiaries due to death or retirement prior to completion of a performance
cycle, the grantee will receive the portion of the performance award payable to
him or her based upon the achievement of the applicable performance criteria
over the elapsed portion of the performance cycle. If a grantee ceases to be a
director, officer or employee of, or otherwise perform services for us or one of
our subsidiaries for any other reason prior to completion of a performance
cycle, the grantee will become ineligible to receive any portion of a
performance award.
Vesting. The terms and conditions of each award made under the Plan,
including vesting requirements, will be set forth, consistent with the Plan, in
a written document provided to each grantee. Unless our Compensation Committee
determines otherwise, no award under the Plan may vest and become exercisable
within twelve months of the date of grant; other than immediately prior to a
change in control of our Company and in certain other circumstances upon a
participant's termination of employment or performance of services as described
above.
Transferability. Unless our Compensation Committee determines otherwise,
no award made pursuant to the Plan will be transferable otherwise than by will
or the laws of descent and distribution, and each award may be exercised only by
the grantee or his or her guardian or legal representative.
Amendment and Termination of the Plan. No options may be granted under the
Plan after the close of business on September 30, 2007 and the Plan may be
terminated by our Board at any time. Our Compensation Committee, with
concurrence of the Board, may amend the Plan in its discretion, except that no
amendment will become effective without the approval of our stockholders if such
approval is necessary for continued compliance with the performance-based
compensation exception of Section 162(m) of the Code or any stock exchange
listing requirements.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE PLAN
The following discussion is intended only as a brief summary of the federal
income tax rules relevant to options or shares issued under the Plan, as based
upon the Code as currently in effect. These rules are highly technical and
subject to change in the future. Because federal income tax consequences will
vary as a result of individual circumstances, grantees should consult their
personal tax advisors with respect to the tax consequences associated with stock
options. Moreover, the following summary relates only to grantees' United States
federal income tax treatment, and the state, local and foreign tax consequences
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<PAGE> 12
may be substantially different. Certain Plan participants are residents of
foreign countries. These grantees are provided country-specific tax summary
information at the time they receive grants under the Plan.
Non-Qualified Options. A grantee does not recognize any taxable income,
and we are not entitled to a tax deduction, upon the grant of a non-qualified
option. Upon the exercise of a non-qualified option, the grantee recognizes
ordinary income (subject to wage and employment tax withholding) equal to the
excess of the fair market value of our common stock acquired over the option
exercise price. A grantee's basis in the stock received is equal to such stock's
fair market value on the date of exercise. We are entitled to a tax deduction
equal to the compensation taxable to the grantee.
If a grantee sells our common stock acquired pursuant to the exercise of a
non-qualified option, the grantee will recognize capital gain or loss equal to
the difference between the selling price of the stock and the grantee's basis in
the stock. Capital gains are currently taxed at a maximum rate of 20% in the
case of stock held for more than 12 months, and 39.6% in the case of stock held
for not more than 12 months. The capital gain holding period will begin on the
exercise date. We are not entitled to any tax deduction with respect to any
capital gain recognized by the grantee.
Capital losses on the sale of stock may be used to offset capital gains. If
capital losses exceed capital gains, then up to $3,000 of the excess losses may
be deducted from ordinary income. Remaining capital losses may be carried
forward to future tax years.
Incentive Options. An optionee does not recognize taxable income on the
grant or exercise of an incentive option. However, the excess of the stock's
fair market value on the exercise date over the option exercise price will be
included in the grantee's alternative minimum taxable income and thereby may
subject the grantee to an alternative minimum tax. Such alternative minimum tax
may be payable even though the grantee receives no cash upon the exercise of his
or her incentive option with which to pay such tax. Upon the disposition of
shares of our common stock acquired pursuant to the exercise of an incentive
option (i) more than one year after the date of exercise, and (ii) more than two
years after the grant date (the "Required Holding Periods"), the grantee
recognizes capital gain or loss, as the case may be, measured by the difference
between the stock's selling price and the exercise price. We are not entitled to
any tax deduction by reason of the grant or exercise of an incentive option, or
a disposition of stock received upon the exercise of an incentive option after
the Required Holding Periods have been satisfied.
If a grantee disposes of shares of our common stock acquired pursuant to
the exercise of an incentive option before the expiration of the Required
Holding Periods (a "Disqualifying Disposition"), the difference between the
exercise price of such shares and the lesser of (i) the fair market value of
such shares upon the date of exercise or (ii) the selling price, will constitute
compensation taxable to the grantee as ordinary income. We would be allowed a
corresponding tax deduction equal to the amount of compensation taxable to the
grantee. If the selling price of the stock exceeds the fair market value on the
exercise date, the excess will be taxable to the grantee as capital gain. We are
not allowed a tax deduction with respect to any such capital gain recognized by
the grantee.
One Million Dollar Compensation Limit. If a covered employee's total
compensation from our Company (including compensation related to options)
exceeds $1 million in any given year, such
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<PAGE> 13
compensation in excess of $1 million may not be tax deductible by us under
Section 162(m) of the Code. The "covered employees" for any given taxable year
of Office Depot are our Chief Executive Officer and the four other most highly
compensated executive officers at the end of the taxable year. Excluded from the
calculation of total compensation for this purpose is compensation that is
"performance-based" within the meaning of Section 162(m) of the Code. We intend
that compensation realized upon the exercise of an option, SAR or a performance
award granted under the Plan be regarded as "performance-based" under Section
162(m) of the Code and that such compensation be deductible without regard to
the limits of Section 162(m) of the Code.
VOTE REQUIRED FOR THE PLAN AMENDMENT
The affirmative vote of a majority of the votes cast by the holders of
shares of Office Depot Common stock represented in person or by proxy at our
Annual Meeting is required for approval of the Plan Amendment.
TEXT OF PROPOSED PLAN AMENDMENT
The Amendment to the Plan submitted for your approval is as follows: The
first sentence of Section 4 of the Long-Term Equity Incentive Plan is hereby
amended as follows:
Subject to adjustments as provided in Section 15, as of any date the total
number of shares of Common stock with respect to which awards may be
granted under the Plan (the "Shares") shall equal the excess (if any) of
47,068,750 over (i) the number of shares of Common stock subject to
outstanding awards under the Plan or the Prior Plans, (ii) the number of
shares of Common stock in respect of which options and stock appreciate
rights have been exercised under the Plan or the Prior Plans, and (iii) the
number of shares of Common stock issued pursuant to performance awards or
issued subject to forfeiture restrictions which have lapsed under the Plan
or the Prior Plans.
YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR
OF PROPOSAL NUMBER TWO, AMENDING OUR
LONG-TERM EQUITY INCENTIVE PLAN.
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<PAGE> 14
ADOPTION OF AMENDMENTS TO THE EMPLOYEE STOCK PURCHASE PLAN
OF THE COMPANY TO ADD 2,000,000 SHARES TO THE TOTAL NUMBER OF SHARES AVAILABLE
FOR PURCHASE UNDER THE PLAN -- ITEM 3
REASONS FOR THE AMENDMENT
In April 1999, our stockholders approved the adoption of the 1999 Employee
Stock Purchase Plan for the Company (the "Plan"). The Plan is described in
detail below. For a variety of reasons, the levels of participation in the Plan
have exceeded our original expectations. The 1,125,000 shares of our common
stock of the Company authorized to be sold under the Plan have been attractive
to our employees under the terms of the Plan, which permit payroll deductions of
up to $400 per week per employee. Our average number of employee participants in
the Plan since its inception last year has been 6,795.
Our estimates of the number of shares required to meet the needs of this
Plan for the next two to three years necessitate that we authorize an additional
2,000,000 shares of our stock for sale under the Plan. We believe this Plan,
which requires our employees to contribute their own money to purchase stock in
our Company, is a powerful vehicle to align the interests of our employees with
our stockholders. Under the terms of the Plan, stock is purchased at the maximum
15% discount permitted under Section 423 of the Code. In addition, our officers
are able to participate in the Plan, and a number of them are acquiring shares
of our stock under this Plan, which we believe is positive for our Company and
our stockholders.
GENERAL DESCRIPTION OF THE PLAN
The Plan provides for the purchase through payroll deductions of our common
stock by employees of the Company who elect to participate. The Plan replaces
earlier plans of Office Depot and of Viking (the "Former Plans"). No further
shares will be purchased under the Former Plans. The purpose of the Plan is to
benefit our Company and its employees by increasing employee ownership of our
common stock through a plan that affords a discounted purchase price and an
opportunity to obtain capital gains tax treatment when the stock is sold at the
end of the mandatory two-year holding period under the Plan. The Plan aligns the
interests of participants with the interests of our stockholders. The Plan is
administered by our Compensation Committee. The amounts and values of future
benefits are subject to the individual elections of employees and are therefore
not determinable at this time.
The shares of common stock reserved for issuance pursuant to the Plan are
subject to adjustment in the event of a reorganization, stock split, stock
dividend or similar change in the corporate structure of the Company or the
outstanding shares of common stock. Such shares may be, in whole or in part,
authorized and unissued or reacquired and held as treasury shares.
Eligibility. Our employees who have been employed for at least ninety (90)
days, except for any person who is a 5% owner of the Company, are eligible to
participate in the Plan.
Election to Participate and Payroll Deductions. Participants can elect to
deduct, on an after tax basis, a minimum of $3.00 per week and a maximum of
$400.00 per week from their paychecks for the
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<PAGE> 15
purpose of purchasing shares under the Plan. Elections are accomplished through
written election forms which become effective for the next and all succeeding
payroll periods until changed or revoked by the participant.
Purchase of Common Stock. On the last Friday of each two-week period,
participants are deemed to receive and to exercise an option to purchase shares
of our common stock, and the appropriate number of shares are allocated to the
account of each participating employee. The number of shares allocated to each
participant is the number of full and fractional shares that can be purchased
with the payroll deductions elected by each participant for that payroll period.
The purchase price for the shares purchased under the Plan is 85% of the fair
market value of our stock on the date of purchase.
Transferability. The right to purchase shares under the Plan may not be
transferred to or exercised by any person other than the participant. Once
shares have been purchased and certificates issued to the participating
employee, they may be transferred in the same manner as other shares of common
stock held by the employee.
Amendment and Termination of the Plan. The Plan may be amended or
terminated by the Board at any time, but no amendment will be made that will
increase the persons authorized to participate in the Plan or increase the
aggregate number of shares available for purchase under the Plan without
approval of our stockholders.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE PLAN
The following discussion is intended only as a general summary of certain
of the federal income tax consequences arising from the purchase of common stock
pursuant to the Plan and the subsequent disposition of such stock. Federal
income tax consequences will vary as a result of individual circumstances.
Moreover, the following summary relates only to U.S. federal income tax
treatment. State, local and foreign tax consequences may be substantially
different than the federal income tax consequences described herein.
Grant and Purchase. Under applicable provisions of the Code, participants
are taxed on all compensation, including the amount of payroll deductions used
to purchase shares. However, participants will recognize no compensation income
upon being granted a right to purchase shares. Assuming that the Plan qualifies
under Code Section 423, participants will not recognize taxable income upon
purchase of shares, even though they will pay less than fair market value for
their shares. The Internal Revenue Service takes the position that there is
social security tax withholding due on the value of the 15% discount. We will
not be entitled to a tax deduction as a result of granting rights to purchase
plan shares or as a result of participants purchasing shares.
Sale of Common Stock. If a participant sells shares in a qualifying
disposition (a sale two years or more after the purchase date), the gain will be
taxed as ordinary income up to the amount of the bargain element (the 15%
discount), and any additional gain will be taxed as capital gain. Our Company
will not be entitled to a tax deduction as the result of a qualifying sale.
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<PAGE> 16
If a participant sells his or her shares in less than two years after
purchase of the shares, it is deemed to be a disqualifying disposition . In such
a case, a participant will be taxed on the full value of the 15% discount at
ordinary income tax rates, even if the shares are actually sold for less than
the fair market value on the purchase date. If the shares are sold for less than
fair market value on the purchase date, the participant can claim a capital loss
for the decline in value. In the case of a disqualifying disposition, we will be
entitled to a tax deduction equal to the amount the employee reports as ordinary
income. In some cases, however, we may not be able to ascertain whether
participants have made disqualifying dispositions of shares.
APPROVAL REQUIRED
The affirmative vote of a majority of the votes cast by the holders of
shares of our common stock represented in person or by proxy at the meeting is
required for approval of the proposed amendment of the Plan. Approval of the
Plan amendment by the stockholders is required in order for the plan to remain
qualified under Section 423 of the Code.
TEXT OF PROPOSED PLAN AMENDMENT
The Amendment to the Plan submitted for your approval is as follows:
The first clause of the first sentence of Section 2 of the Plan is hereby
amended as follows:
There shall be reserved for issuance and purchase by employees of the
Company under this Plan an aggregate of 3,125,000 [increased from
1,125,000] shares ("Shares") of the Company's Common Stock, par value $0.01
per share ("Common Stock"), subject to adjustment as provided in Section 13
hereof; provided....
YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF PROPOSAL NUMBER 3
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<PAGE> 17
RATIFICATION OF OUR APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS -- ITEM 4
INFORMATION ABOUT THE AUDITORS
Our Board has appointed the certified public accounting firm of Deloitte &
Touche LLP as independent accountants to audit our consolidated financial
statements for the fiscal year ending December 30, 2000. Deloitte & Touche LLP
has audited our consolidated financial statements each year since 1990.
Representatives of Deloitte & Touche LLP will be present at our Annual Meeting
with the opportunity to make a statement if they desire to do so, and they will
be available to respond to appropriate questions from stockholders. Although our
Board already has designated Deloitte & Touche LLP as our auditors, we request
the stockholders to confirm this appointment by our Board. Regardless of the
vote of the stockholders, our Board's decision to appoint Deloitte & Touche LLP
as our auditors for this year (2000) will not be changed, but our Board will
consider the vote of our stockholders in selecting independent accountants to
serve as our outside auditors in future years.
YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION
OF THE APPOINTMENT OF DELOITTE & TOUCHE LLP AS OUR
INDEPENDENT PUBLIC ACCOUNTANTS
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<PAGE> 18
STOCK OWNERSHIP
OUR LARGEST STOCKHOLDERS; OWNERSHIP BY OUR DIRECTORS AND EXECUTIVE OFFICERS
We have provided a stock ownership table below that contains certain
information about our large stockholders as well as information regarding stock
ownership by our directors and executive officers as of March 8, 2000.
Stockholders whom we believe are the "beneficial" owners of more than five
percent (5%) of our outstanding common stock have been included in the table
below. A beneficial owner is the person or entity who has voting and/or
investment power with respect to the stock, whether or not that person actually
holds legal title. For example, a person who holds shares in "street name" with
a broker is the beneficial owner, even though the broker may hold actual legal
title. Our information is based solely on the filing of Forms 13D and 13G with
the Securities and Exchange Commission. The table below also includes
information on the stock ownership of each of our directors, our "Named
Executive Officers" and all of our executive officers and directors as a group.
If a person or entity listed in the table below is the beneficial owner of
less than one percent of our outstanding COMMON STOCK, we have indicated this
fact with an asterisk. Except as otherwise noted below, each person or entity
named in the following table has the sole voting and investment power with
respect to all shares of our COMMON STOCK that he, she or it beneficially owns.
Each beneficial owner was asked to furnish their business address to us, and
that is the address that has been included in this table. Shares reserved for
issuance under outstanding stock options have been disregarded in the
determination of who would be listed in this table except where otherwise
indicated.
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<PAGE> 19
<TABLE>
<CAPTION>
NUMBER OF SHARES ALL SHARE COMMON STOCK PERCENT OF CLASS
NAME OF INDIVIDUAL OR GROUP BENEFICIALLY OWNED(1) UNLESS OTHERWISE INDICATED) OUTSTANDING(2)
- --------------------------- --------------------- --------------------------- ----------------
<S> <C> <C> <C>
(5% OR GREATER HOLDERS)
Massachusetts Financial Services
Company(3)
500 Boylston Street
Boston, Massachusetts 02116.... 28,088,811 8.5%
FMR Corp.(4)
82 Devonshire Street
Boston, Massachusetts 02109.... 25,876,738 7.857%
(DIRECTORS & EXECUTIVE
OFFICERS)(5)
Lee A. Ault III.................. 125,700 *
Neil R. Austrian................. 240,772 *
Cynthia R. Cohen................. 48,762 *
David I. Fuente(6)............... 2,644,156 *
Barry J. Goldstein(7)............ 908,801 *
Irwin Helford.................... 3,290,486 1.0%
Shawn McGhee..................... 148,875 *
M. Bruce Nelson.................. 669,480 *
Scott Hedrick(8)................. 136,942 *
James L. Heskett................. 26,500 *
Michael J. Myers................. 94,681 *
William Seltzer.................. 735,738 *
Frank P. Scruggs, Jr............. 16,000 *
Peter J. Solomon................. 194,971 *
All Executive Officers and
Directors as a Group
(Seventeen Persons)(9)...... 9,407,237 2.92%
</TABLE>
- ---------------
(1) Includes shares of common stock subject to options which are exercisable
within 60 days of March 8, 2000. All share numbers are adjusted for the
three-for-two stock split, effective April 1, 1999 to stockholders of record
on March 11, 1999.
(2) Based on 321,737,153 shares of common stock outstanding as of March 8, 2000.
Shares subject to options exercisable within 60 days of March 8, 2000 are
considered for the purpose of determining the option holder's percentage,
but not for the purpose of computing the percentage held by others.
(3) Based solely upon a Schedule 13G/A dated February 11, 2000. Of the
28,088,811 shares shown as beneficially owned by Massachusetts Financial
Services Company ("MFS"), MFS has sole voting power and sole dispositive
power with respect to 27,757,261 of such shares.
(4) Based solely upon a Schedule 13G/A dated February 14, 2000. Of the shares
shown as beneficially owned by FMR Corp. ("FMR"), FMR and Edward C. Johnson
3rd have sole voting power with respect to 314,684 of such shares, and the
balance of voting power is vested in various Fidelity funds. All shares held
by FMR are held by its wholly-owned subsidiary, Fidelity Management &
Research Company ("Fidelity"). The number of shares owned includes 127,404
shares of common stock
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<PAGE> 20
resulting from the assumed conversion of $4 million principal of Office
Depot LYON(R) 11/01/08 (31.851 shares of common stock for each $1,000
principal amount of debenture). Collectively, FMR, Fidelity, Mr. Johnson and
Ms. Johnson have sole dispositive power with respect to all of the shares
reflected in the share ownership table. Members of the Edward C. Johnson III
family and trusts for their benefit are the predominant owners of Class B
shares of common stock of FMR, representing approximately 49% of the voting
power of FMR. Mr. Johnson owns 12.0% and Abigail Johnson owns 24.5% of the
aggregate outstanding voting stock of FMR. Mr. Johnson is Chairman of FMR,
and Abigail P. Johnson is a Director of FMR. The Johnson family group and
all other Class B stockholders have entered into a stockholders' voting
agreement under which all Class B shares will be voted in accordance with
the majority vote of Class B shares. Accordingly, through their ownership of
voting common stock and the execution of the stockholders' voting agreement,
members of the Johnson family may be deemed, under the Investment Company
Act of 1940, to form a controlling group with respect to FMR. Share
ownership amounts and percentages for Mr. Johnson and Ms. Johnson are
included within the amounts and percentages for FMR.
(5) Includes shares which may be acquired under options exercisable within 60
days after March 8, 2000, issued to our directors and executive officers
pursuant to one or more option plans of our Company, as follows:
Mr. Ault -- 92,500; Mr. Austrian -- 92,500; Ms. Cohen -- 46,081; Mr.
Fuente -- 1,972,735; Mr. Goldstein -- 707,554; Mr. Helford -- 252,040; Mr.
McGhee -- 75,000; Mr. Nelson -- 564,000; Mr. Hedrick -- 67,592; Mr.
Heskett -- 25,000; Mr. Myers -- 86,181; Mr. Seltzer -- 643,751; Mr.
Scruggs -- 13,750; Mr. Solomon -- 53,125.
(6) Includes 2,835 shares held of record by his spouse, 5,985 held of record by
his stepdaughter, Rebecca Mishkin, and 5,625 shares held of record by an
irrevocable trust for the benefit of his stepdaughter. Mr. Goldstein is the
trustee of such trust. Mr. Fuente disclaims beneficial ownership of the
shares held by his spouse, his stepdaughter and Mr. Goldstein, as trustee.
(7) Includes 5,625 shares held of record by an irrevocable trust for the benefit
of Mr. Fuente's stepdaughter, of which Mr. Goldstein is the trustee. As the
trustee, Mr. Goldstein has investment and voting power with respect to the
shares held by the trust. Mr. Goldstein disclaims beneficial ownership of
the shares held by the trust.
(8) Includes shares which may be acquired under options to purchase 200 shares
of our stock purchased by Mr. Hedrick in the open market.
(9) Includes options to purchase 4,780,233 shares granted to our directors and
executive officers as a group pursuant to one or more option plans of our
Company.
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<PAGE> 21
MANAGEMENT OF OUR COMPANY
DIRECTORS AND EXECUTIVE OFFICERS
Our directors are elected at our Annual Meeting to serve for a period of
twelve months or until our next Annual Meeting and the election and
qualification of a successor director. Our executive officers are elected
annually by our Board and serve at the discretion of our Board. You can find
certain biographical information about each of our directors and certain
executive officers below:
DIRECTORS
DAVID I. FUENTE AGE: 54
Mr. Fuente has been Chairman of our Board and Chief Executive Officer since
he joined Office Depot in December 1987. Mr. Fuente is also a director of Vista
Eye Care, Inc., (formerly known as National Vision Associates, Inc.), Ryder
System, Inc., and PurchasePro.com, Inc., all publicly traded companies, as well
as Certive Corporation a privately held corporation. In 1999, our Company made
investments in PurchasePro.com, Inc. and Certive Corporation. Mr. Fuente is a
member of our Governance & Nominating Committee.
IRWIN HELFORD AGE: 65
Mr. Helford has been Vice Chairman of our Board since August 1998. From
September 1988 until August 1998, when Viking Office Products, Inc. ("Viking")
merged with Office Depot, he served as Chairman of their Board and Chief
Executive Officer of Viking. In September 1999, Mr. Helford retired from
full-time employment with our Company. At that time, we entered into a part-time
employment arrangement with him, which is described below. Since that date, Mr.
Helford has served as Chairman Emeritus of our Viking subsidiary as well as an
advisor to our businesses. Mr. Helford is also a director of Brady Corp., a
publicly traded company and a director of Svoboda Collins, LLC, a privately held
investment banking firm.
LEE A. AULT III AGE: 63
Mr. Ault has served as a one of our directors since August 1998. He is
currently Chairman of the Board of In-Q-Tel, Inc., an information technology
company. Mr. Ault served as Chief Executive Officer of Telecredit, Inc., a
payment services company, from November 1968 until January 1992. He also was
President of Telecredit, Inc. from 1968 until 1983 and Chairman of the Board
from 1983 until January 1992. Telecredit, Inc. was merged into Equifax, Inc. in
December 1990. Since 1990, Mr. Ault has served as a director of Equifax, Inc. He
served as a director of Viking from 1992 until August 1998 when we merged with
Viking. He also is a director of Sunrise Medical, Inc., a publicly traded
company and American Variable Insurance Series, a private investment management
company. Mr. Ault is a member of our Audit Committee.
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<PAGE> 22
NEIL R. AUSTRIAN AGE: 60
Mr. Austrian has served as one of our directors since August 1998. He is
currently Chairman of the Board of iWon.com, an Internet portal company. Mr.
Austrian served as President and Chief Operating Officer of the National
Football League from April 1991 until mid-1999. He was a Managing Director of
Dillon, Read & Co. Inc. from October 1987 until March 1991. Mr. Austrian served
as a director of Viking from January 1988 until August 1998 when we merged with
Viking. He also serves as a director of REFAC Technology Development
Corporation, a publicly traded company. Mr. Austrian is a member of our
Compensation Committee.
CYNTHIA R. COHEN AGE: 47
Ms. Cohen has served as one of our directors since July 1994. She is the
President of Strategic Mindshare, a marketing and strategy consulting firm.
Prior to founding this firm in 1990, she was a Partner with Deloitte & Touche
LLP. Ms. Cohen is a director of The Sports Authority, Inc. and Loehmann's, Inc.,
both publicly traded companies. Ms. Cohen is a member of our Governance and
Nominating Committee and our Compensation Committee.
W. SCOTT HEDRICK AGE: 54
Mr. Hedrick has served as one of our directors since April 1991. From
November 1986 until April 1991, he was a director of The Office Club, Inc.,
which has been our subsidiary since April 1991, when it was merged into Office
Depot. He was a founder and has been a general partner of InterWest Partners, a
venture capital fund, since 1979. Mr. Hedrick is also a director of Golden State
Vintners, Inc. and Il Fornaio America Corp., both publicly traded companies. Mr.
Hedrick is Chairman of our Compensation Committee.
JAMES L. HESKETT AGE: 66
Mr. Heskett has served as one of our directors since May 1996. Mr. Heskett
has served on the faculty of the Harvard University Graduate School of Business
Administration since 1965. He has taught courses in marketing, business
logistics, the management of service operations, business policy and service
management. He is also a director of First Security Services, Inc., and of
Planetfeedback.com, Inc., both privately held companies. Mr. Heskett is Chairman
of our Governance and Nominating Committee and a member of our Audit Committee.
MICHAEL J. MYERS AGE: 59
Mr. Myers has served as one of our directors since July 1987. He is the
President and a director of First Century Partners Management Company, an
advisor to private venture capital equity funds. He is also a director of
Salomon Smith Barney Venture Corp., a wholly-owned subsidiary of Smith Barney
Holdings, Inc., which acts as the managing general partner of two private
venture capital equity funds. Until January 1992, he was a Senior Vice President
and Managing Director of Smith Barney, Harris
19
<PAGE> 23
Upham & Co., Inc.. Mr. Myers is a director of Encore Paper Company, Inc., Floral
Plant Growers, L.L.C., HASCO Holdings Corp., RomaCorp, Inc. and Wisconsin
Porcelain Company, Inc., all privately held companies. Mr. Myers is Chairman of
our Audit Committee.
M. BRUCE NELSON AGE: 55
Mr. Nelson has been President of Office Depot International, President of
our Viking subsidiary and one of our directors since he joined us in August
1998. From January 1996 until August 1998, he served as President and as a
director of Viking. From July 1995 until January 1996, Mr. Nelson was Chief
Operating Officer of Viking, and from January 1995 until July 1995, he was
Executive Vice President of Viking. From 1990 until July 1994, Mr. Nelson was
President and Chief Executive Officer of BT Office Products USA. He had
previously worked for over 22 years at Boise Cascade Office Products in a number
of executive positions.
FRANK P. SCRUGGS, JR. AGE: 48
Mr. Scruggs has served as one of our directors since October 1996. Since
May 1995, Mr. Scruggs has been an attorney and shareholder in the law firm of
Greenberg Traurig, Attorneys at Law, Fort Lauderdale, Florida. Greenberg Traurig
provided us with certain legal services during 1999. Mr. Scruggs specializes in
the representation of management in employment and governmental law matters.
From January 1984 until April 1995, Mr. Scruggs was a partner in the law firm of
Steel, Hector & Davis, Miami, Florida, other than during the period from January
1991 to July 1992, when he served as Secretary of Labor for the State of
Florida. Mr. Scruggs is a director of Blue Cross and Blue Shield of Florida, a
mutual insurance company. He is a member of our Audit Committee.
PETER J. SOLOMON AGE: 61
Mr. Solomon has served as one of our directors since April 1990. He is
Chairman and Chief Executive Officer of Peter J. Solomon Company Limited
("PJSC"), an investment banking firm, which provided us with their services in
1998. From 1985 to 1989, Mr. Solomon was a Vice Chairman and a member of the
board of directors of Shearson Lehman Hutton, Inc. Mr. Solomon is a director of
Monroe Muffler/Brake, Inc., General Cigar Holdings, Inc., and Phillips-VanHeusen
Corporation, all publicly traded companies. Mr. Solomon is a member of our
Governance and Nominating Committee.
EXECUTIVE OFFICERS OF THE COMPANY WHO ARE NOT DIRECTORS
NAMED EXECUTIVE OFFICERS
SHAWN P. MCGHEE AGE: 37
Mr. McGhee has been President, North America, since January 2000. Prior to
assuming that position, he was President, Merchandising Group for our Company
since August 1999. He joined Office Depot in March 1998 as Executive Vice
President, Merchandising and Marketing. Prior to joining us, Mr. McGhee spent
ten years at Autozone, Inc., an auto parts retailer with over 2,600 stores and
$2.7
20
<PAGE> 24
billion in sales. Mr. McGhee served in a number of capacities at Autozone,
eventually rising to the position of Executive Vice President of Merchandising
in 1996.
BARRY J. GOLDSTEIN AGE: 57
Mr. Goldstein has been our Chief Financial Officer since he joined our
Company in May 1987. He has served as Executive Vice President, Finance since
July 1991. He served as Secretary from January 1988 to January 1999. From May
1987 until June 1991, he served as Vice President, Finance. Prior to joining
Office Depot, Mr. Goldstein spent 22 years in public accounting, the most recent
18 of which were with Grant Thornton, a national accounting firm. He became a
partner of Grant Thornton in 1976.
WILLIAM P. SELTZER AGE: 61
Mr. Seltzer has been our Executive Vice President, Information Systems
since August 1992. He was Senior Vice President -- Distribution and Systems of
Revco Drug Stores, Inc. from November 1987 to July 1992. Mr. Seltzer was Vice
President of Systems for the H.E. Butt Grocery Company from 1977 to 1987, and
was Corporate Manager of Information Processing from 1972 to 1977 with SCM
Corporation.
OTHER EXECUTIVE OFFICERS
THOMAS KROEGER AGE: 51
Mr. Kroeger has been Executive Vice President, Human Resources since he
joined us in July 1997. Before joining Office Depot, he was employed by The
Sherwin-Williams Company where he served as Corporate Vice President of Human
Resources from October 1987 to July 1997.
CHARLES E. BROWN AGE: 47
Mr. Brown has been our Senior Vice President, Finance and Corporate
Controller since he joined our Company in May 1998. He was Senior Vice President
and Chief Financial Officer of Denny's, Inc., a division of Advantica Restaurant
Group, Inc., a NASDAQ listed company, from January 1996 until May 1998; from
August 1994 until December 1995, he was Vice President and Chief Financial
Officer of ARAMARK International; and from September 1989 until July 1994, he
was Vice President and Controller of Pizza Hut International, a Division of
PepsiCo, Inc.
DAVID C. FANNIN AGE: 54
Mr. Fannin has been our Senior Vice President and General Counsel since he
joined our Company in November 1998, and he has been our Corporate Secretary
since January 1999. Mr. Fannin was Executive Vice President, General Counsel and
Corporate Secretary of Sunbeam Corporation, a manufacturer and wholesaler of
durable household and outdoor consumer products, from January 1994 until August
1998. From October 1979 until December 1993, Mr. Fannin was a partner in the law
firm Wyatt, Tarrant & Combs, Louisville, Kentucky.
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<PAGE> 25
COMMITTEES OF OUR BOARD
Our Board has established three standing committees -- an Audit Committee;
a Compensation Committee and a Governance and Nominating Committee. Our Board
met seven times during fiscal 1999. All of our directors attended more than 75%
of the total number of Board meetings and meetings of the committees on which
they serve.
AUDIT COMMITTEE -- Our Audit Committee makes recommendations to our Board
regarding the selection, retention and termination of our independent external
auditors (our "external auditors"). The committee meets with our external
auditors to discuss the quarterly reviews and annual audit of our financial
statements. The committee also confers with the our external auditors regarding
any non-audit related assignments, fees, independence of the external auditors,
results of the audit and effectiveness of our internal controls. Our external
auditors and our internal auditors have unrestricted access to meet with the
committee to discuss audit or other accounting matters, and they are not
required to notify management when doing so. Our Audit Committee is composed
entirely of independent directors and complies with applicable independence
rules of the New York Stock Exchange. Mr. Myers is Chairman, and other members
of the committee are Mr. Ault, Mr. Heskett and Mr. Scruggs. The Committee met
eight times during fiscal 1999. With respect to Mr. Scruggs' membership on this
Committee, our Board has carefully considered the fact that we employ the
services of Mr. Scruggs' law firm, Greenberg Traurig from time to time and has
made the determination required by Rule 303 of the New York Stock Exchange that
the relationship with Mr. Scruggs' law firm does not interfere with his exercise
of independent judgment as a member of this Committee.
COMPENSATION COMMITTEE -- Our Compensation Committee makes recommendations
to our Board regarding the salaries and incentive compensation of our elected
officers, as well as the compensation of our Board members. The committee also
reviews the compensation of certain other principal management employees and
administers our employee benefit plans, including our Long Term Equity Incentive
Plan. The Compensation Committee is composed of Mr. Hedrick, who is Chairman,
Mr. Austrian and Ms. Cohen. The Committee met three times during fiscal 1999 and
acted one time by unanimous consent.
GOVERNANCE & NOMINATING COMMITTEE -- Our Governance & Nominating Committee
reviews and makes recommendations to our Board concerning the size and
composition of our Board and its committees and the recruitment and selection of
directors. The committee also reviews and makes recommendations to our Board
concerning corporate governance policies and practices and approves certain
financial undertakings, including investments of our Company, between meetings
of our full Board. Mr. Heskett is the Chairman of this committee. Ms. Cohen and
Messrs. Fuente and Solomon also serve on the committee. The Governance Committee
held two meetings in fiscal 1999 and acted one time by unanimous consent. While
the Committee will consider recommendations from our stockholders as to nominees
for our Board, the Committee generally intends to utilize its own resources in
making nominations.
22
<PAGE> 26
DIRECTOR COMPENSATION
For 1999, our Directors were paid an annual stipend of $21,000 and received
a fee of $2,000 for each Board meeting attended by them. They did not receive
any compensation for attending meetings of Board committees in 1999 but were
reimbursed for expenses incurred in such attendance. Effective after February
17, 2000, the date our Board took action on this matter, our Directors who are
not employees receive $25,000 per year, $2,500 for each Board meeting they
attend, and $1,000 for each committee meeting ($1,500 for the committee chair)
attended by members of the committee. Our directors are reimbursed for their
out-of-pocket expenses in attending all meetings. Under our Long Term Equity
Incentive Plan, the amount of options granted to our directors and the terms and
provisions of options granted to our directors are at the discretion of the
Compensation Committee. Directors were awarded options to purchase 7,500 shares
of our common stock in 1999. It is anticipated that directors who are not
employees will receive options to purchase 11,250 shares of Office Depot common
stock in 2000, to reflect the three for two stock split which became effective
April 1, 1999. Directors who are not employees are permitted to defer 100% of
their compensation under the Officer Deferred Compensation Plan.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires our directors
and executive officers to file reports of their holdings and transactions of
Office Depot common stock with the Securities and Exchange Commission and the
New York Stock Exchange. Based on our records and other information, we believe
that each of our officers and directors complied with all Section 16(a) filing
requirements applicable to them during fiscal 1999, except as follows:
<TABLE>
<S> <C>
Irwin Helford Form 4, for gift of stock, filed late
M. Bruce Nelson Form 4, for sale of stock following
exercise of options, filed late
Kevin Phillips, EVP, Stores Form 4, for market purchase of
Company stock, filed late
Robert Keller, EVP, Business Services Form 4, for market purchase of
Group Company stock, filed late
</TABLE>
23
<PAGE> 27
EXECUTIVE COMPENSATION
The following table shows you the aggregate cash compensation paid to: (i)
our Chief Executive Officer and (ii) the four other most highly compensated
executive officers who were serving as executive officers of our Company at the
end of fiscal 1999 (collectively referred to as the "Named Executive Officers")
for services rendered during the 1997, 1998, and 1999 fiscal years.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
------------------------------------ ----------------------------------
AWARDS PAYOUTS
------------------------ -------
OTHER RESTRICTED
ANNUAL STOCK SECURITIES LTIP ALL OTHER
SALARY BONUS COMPENSATION AWARDS UNDERLYING PAYOUTS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($)(1) ($)(2) ($) OPTIONS(3) ($) ($)(4)
- --------------------------- ---- --------- --------- ------------ ---------- ---------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
David I. Fuente 1999 1,000,000 -0- 148,282 -0- 1,500,000 -0- 160,868
Chairman & 1998 1,000,000 2,033,846 54,695 -0- 1,500,000 -0- 160,485
Chief Executive Officer 1997 880,000 1,760,000 53,600 -0- 697,501 -0- 163,691
M. Bruce Nelson 1999 630,032 150,000 28,290 840,625(5) 240,000 -0- 105,128
President, VOP & 1998 600,028 1,554,000 -0- -0- 202,500 -0- 11,969
President, International 1997 550,014 372,000 -0- -0- 202,500 -0- 12,584
Shawn P. McGhee 1999 515,481 150,000 41,640 840,625(5) 425,000 -0- 12,070
President, N. America(6) 1998 318,750 765,000 27,465 -0- 337,500.. -0- 1,775
1997 -0- -0- -0- -0- -0- -0-
Barry J. Goldstein 1999 500,000 75,000 59,854 -0- 75,000 -0- 82,878
Executive Vice 1998 465,000 852,231 -0- -0- 75,000 -0- 55,442
President 1997 440,000 792,000 -0- -0- 210,000 -0- 52,708
Chief Financial Officer
William P. Seltzer 1999 440,000 100,000 50,514 -0- 52,500 -0- 104,005
EVP, Information 1998 400,000 732,116 37,020 -0- 52,500 -0- 85,997
Technology 1997 350,000 630,000 34,550 -0- 202,500 -0- 64,614
</TABLE>
- ---------------
1. Of the amounts shown for Messrs. Fuente, Goldstein and Seltzer for 1997 and
for such persons and Mr. McGhee for 1998, half is subject to vesting on
December 31, 2000, if the executive has been continuously employed as of such
date. Of the 1998 amounts shown for Mr. Nelson, $777,000 is subject to
vesting on December 31, 2001.
2. Except as otherwise noted, Other Annual Compensation was not reportable.
Amounts for Named Executives in various categories of Other Annual
Compensation for 1999 are as follows:
<TABLE>
<CAPTION>
EXECUTIVE
CAR TAX PREP. PERSONAL USE MEDICAL
EXECUTIVE ALLOWANCE & PLAN OF PLANE PLAN ALL OTHER
--------- --------- --------- ------------ --------- ---------
<S> <C> <C> <C> <C> <C>
Fuente................................................. 15,900 30,483 59,315 25,740 16,844
Nelson................................................. 24,000 -0- -0- 4,290 -0-
McGhee................................................. 15,900 -0- -0- 25,740 -0-
Goldstein.............................................. 15,900 -0- 1,369 25,740 16,844
Seltzer................................................ 15,900 -0- -0- 25,740 8,874
</TABLE>
Mr. Nelson's auto allowance is pursuant to the Viking Office Products plan.
His medical plan was under the Viking medical plan until November 26, 1999, at
which time Mr. Nelson became covered
24
<PAGE> 28
by the Office Depot executive medical plan. Mr. Nelson is President and CEO of
Viking Office Products, Inc., the Company's wholly-owned subsidiary. Taxable
value of personal use of corporate airplane was calculated pursuant to IRS
guidelines. "All other" compensation category is for expenses of executives'
spouses in attending corporate event for winners of company incentive awards
program.
3. All share amounts shown have been adjusted to reflect the three for two stock
split, effective April 1, 1999.
4. All Other Compensation amounts for 1999 were calculated as follows:
<TABLE>
<CAPTION>
MATCHING DISCRETIONARY DCPLAN DCPLAN PROFIT SPLIT
EXECUTIVE 401(k) 401(k) MATCH DISCRETIONARY SHARE DOLLAR
--------- -------- ------------- ------ ------------- ------ -------
MATCH LIFE
------------- -------
<S> <C> <C> <C> <C> <C> <C>
Fuente........................................... 520 480 12,455 2,373 -0- 145,040
Nelson........................................... -0- -0- -0- -0- 5,663 99,465
McGhee........................................... 2,494 404 -0- -0- -0- 9,172
Goldstein........................................ 520 480 12,455 2,373 -0- 67,050
Seltzer.......................................... 520 480 8,372 1,103 -0- 93,530
</TABLE>
Mr. Nelson was under the Viking profit-sharing plan for 1999, and did not
participate in other Office Depot executive plans. DC Plan is the Senior
Management Deferred Compensation Plan which shadows the Company's 401(k)
plan. Split dollar life insurance represents premiums we paid under a
split-dollar plan of life insurance for the benefit of our executives. For
1998, the amount shown for Mr. Fuente includes $21,420 for medical insurance,
$17,675 for tax planning and preparation and $15,600 for an automobile
allowance. For 1997, the amount shown for Mr. Fuente includes $21,600 paid
for medical insurance, $15,400 for tax planning and preparation, $15,600 for
an automobile allowance and $1,000 for his annual medical examination.
5. In accordance with SEC Rules, valued at closing price of stock on date of
grant = $16.8125 x 50,000 shares of restricted stock granted on August 4,
1999.
6. Mr. McGhee joined our Company May 28, 1998.
25
<PAGE> 29
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
The following table sets forth information with respect to all options
granted in fiscal 1999 to the Named Executive Officers.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
- --------------------------------------------------------------------------------------------------------------------
NUMBER OF PERCENT OF
SECURITIES TOTAL
UNDERLYING OPTIONS/SARs
OPTIONS/ GRANTED TO EXERCISE OR GRANT DATE
SARs EMPLOYEES IN BASE PRICE GRANT EXPIRATION PRESENT VALUE(2)
NAME GRANTED(1) FISCAL YEAR ($/SH) DATE DATE ($)
---- ---------- ------------ ----------- -------- ---------- ----------------
<S> <C> <C> <C> <C> <C> <C>
David I. Fuente................. 1,500,0000 11.83 24.8959 1/4/1999 1/4/2009 16,483,350
M. Bruce Nelson................. 240,000 2.84 16.3750 8/4/1999 8/4/2009 1,788,624
Shawn McGhee.................... 225,000 16.3750 8/4/1999 8/4/2009 1,676,835
200,000 9.3125 10/14/1999 10/14/2009 870,860
--------- ----------
425,000 5.03 2,547,695
Barry J. Goldstein.............. 75,000 0.89 16.3750 8/4/1999 8/4/2009 558,945
William Seltzer................. 52,500 0.62 16.3750 8/4/1999 8/4/2009 391,262
</TABLE>
- ---------------
(1) All numbers reflect the 3 for 2 stock split effective April 1, 1999, to
holders of record on March 11, 1999. Pursuant to the Company's Long Term
Equity Incentive Plan, stock options are automatically adjusted to reflect
stock splits. None of the options were awarded with tandem stock
appreciation rights ("SARs"). In order to prevent dilution or enlargement of
rights under the options, in the event of a merger or any other
reorganization, recapitalization, stock split, stock dividend, combinations
of shares, merger, consolidation or other change in the Common stock the
number of shares available upon exercise and the exercise price will be
adjusted accordingly. The Compensation Committee may, subject to specified
limitations advance (i) the date on which an option shall become exercisable
by the grantee and (ii) the grantee's right to designate an Appreciation
Date for any SAR. Number of options shown reflects the 3 for 2 stock split
approved by the Board of Directors on February 24, 1999, effective April 1,
1999 to holders of record on March 11, 1999.
(2) The Black-Scholes option-pricing model was used to determine the grant date
present value of the stock options granted in 1999 by the Company to the
Named Executive officers listed above. Details on such calculations are
available from the Company upon request.
26
<PAGE> 30
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION/SAR VALUES
The following table shows you information about all options exercised in
fiscal 1999 and the year-end value of unexercised options held by our Named
Executive Officers.
<TABLE>
<CAPTION>
NUMBER OF VALUE OF
SECURITIES UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARs AT OPTIONS/SAR's AT
FISCAL YEAR-END(1)(2) FISCAL YEAR-END(3)
SHARES ACQUIRED VALUE --------------------- ----------------------
ON EXERCISE REALIZED (#)EXERCISABLE/ ($)EXERCISABLE/
NAME (#) ($) UNEXERCISABLE UNEXERCISABLE
---- --------------- --------- --------------------- ----------------------
<S> <C> <C> <C> <C> <C> <C>
David I. Fuente................ 100,000 610,000 1,890,234 3,782,503 9,470,073 18,950,340
45,003 322,221
50,000 269,000
------- ---------
Totals......................... 195,003 1,201,221
M. Bruce Nelson................ 18,000 254,340 564,001 582,001 2,825,645 2,915,825
24,000 528,000
30,000 690,000
15,000 196,950
30,000 408,900
------- ---------
Totals......................... 117,000 2,078,190
Shawn McGhee................... -0- -0- 50,000 862,500 250,500 4,321,125
Barry J. Goldstein............. -0- -0- 687,552 370,003 3,444,636 1,853,715
William Seltzer................ -0- -0- 626,250 307,502 3,137,513 1,540,585
</TABLE>
- ---------------
(1) The first number shown for each officer represents exercisable options, and
the second number represents unexercisable options.
(2) Numbers reflect the 3-for-2 stock split approved by our Board on February
24, 1999, effective April 1, 1999 for holders of record on March 11, 1999.
Under our stock option plans, the number of shares subject to options is
automatically adjusted to reflect stock splits as they become effective.
(3) Value of unexercised in-the-money options/SARs at fiscal year end determined
using the Black Scholes method of calculation. Details of this calculation
are available from the Company on request.
(4) Value realized was determined by multiplying the shares exercised by the
difference between the sales price (if sold) or the fair market value (if
held) and the exercise price of each option exercised. All shares realized
upon exercise by Mr. Fuente have been held by him except for shares used to
discharge his withholding taxes obligations pursuant to cashless exercise
provisions of the Long Term Equity Incentive Plan. All shares realized upon
exercises by Mr. Nelson were sold in same-day sales.
27
<PAGE> 31
CEO COMPENSATION
Effective January 1, 1998, we entered into an Employment Agreement with our
CEO, David I. Fuente (the "Employment Agreement"). We agreed to continue to
employ Mr. Fuente as the Chairman of our Board of Directors for a five-year
period that ends on January 3, 2003, and the Employment Agreement may be
extended for additional one-year terms. We have also entered into an agreement
with Mr. Fuente that governs his employment in the event we have a "Change in
Control" as defined in that agreement.
SALARY AND BONUS
We currently pay Mr. Fuente a base salary of $1,000,000 per year. Mr.
Fuente's base salary is reviewed annually by the Compensation Committee of our
Board and may be increased, but not decreased. Mr. Fuente participates in our
Designated Executive Incentive Plan ("Bonus Plan"). Under this Bonus Plan,
annual performance targets are established for Mr. Fuente by our Compensation
Committee. We intend these performance targets to qualify as incentive
compensation under Section 162(m) of the Internal Revenue Code. The primary
factors in determining Mr. Fuente's bonus amount are the achievement of earnings
per share and return on net assets targets for our Company.
For 1999, Mr. Fuente did not receive any bonus because he did not meet the
performance targets established for him by the Committee. Under the Bonus Plan,
he could have received 55% of his base salary for achieving the "minimum" level
of performance, 78.5% of his base salary for achieving the "target" level of
performance and 110% of his base salary for achieving the "maximum" level of
performance. Mr. Fuente is also entitled to a deferred matching bonus grant
equal to the bonus he earns each year under the Bonus Plan, if he receives a
bonus for any particular year. The bonus targets for each remaining year during
the initial term of the Mr. Fuente's Employment Agreement are as follows:
<TABLE>
<CAPTION>
YEAR MINIMUM % TARGET % MAXIMUM %
- ---- --------- -------- ---------
<S> <C> <C> <C>
2000................. 60% 87.0% 120%
2001................. 65% 95.5% 130%
2002................. 70% 104.0% 140%
</TABLE>
STOCK OPTIONS.
Under the Employment Agreement, our Compensation Committee provided Mr.
Fuente in 1998 an option to acquire 1,500,000 shares of our common stock(1 )at
an exercise price of $19.73 on the date of grant, which was May 28, 1998 (the
"First Grant"). Pursuant to the Employment Agreement, he also was granted on
January 4, 1999, an additional option to acquire 1,500,000 shares of our common
stock at an exercise price of $24.89 (the "Second Grant"). In addition to the
First Grant and the Second Grant, Mr. Fuente is also eligible to receive annual
grants of stock options at the discretion of the Compensation Committee of our
Board. He is automatically entitled to receive additional grants of options each
year (beginning in the Year 2000) to acquire at least 247,500 shares, and the
Compensation Committee may
- ---------------
1 All stock numbers and prices are adjusted for the 3 for 2 stock split,
effective April 1, 1999 to holders of record on March 11, 1999.
28
<PAGE> 32
grant additional stock options to him. On January 6, 2000, Mr. Fuente was
awarded 250,000 additional stock options.
OTHER BENEFITS
Mr. Fuente receives certain additional benefits, including paid vacations
in accordance with our general policies for our senior officers, reimbursement
of business expenses and all other benefits, including insurance coverage,
generally provided to our senior officers. Under the Fuente Agreement, health
insurance benefits for Mr. Fuente and his family extend beyond the expiration of
his Employment Agreement until Mr. Fuente's death.
CIRCUMSTANCES UNDER WHICH MR. FUENTE'S EMPLOYMENT MAY BE TERMINATED
Mr. Fuente's Employment Agreement will be terminated earlier than its
normal expiration if he dies or becomes permanently disabled or incapacitated;
if we mutually agree to terminate; or if one of us decides unilaterally to
terminate the Employment Agreement. The reason for the termination would
determine the effect of the termination on Mr. Fuente or his estate. Mr. Fuente
may decide to terminate the Employment Agreement for good reason. A good reason,
according to his Employment Agreement, would include:
- if we assign tasks to Mr. Fuente that are inconsistent with his position,
authority, duties or responsibilities;
- if we do not compensate him in accordance with his Employment Agreement;
- if we require Mr. Fuente to relocate his offices to somewhere other than
our Delray Beach headquarters; or
- if we try to terminate Mr. Fuente when we don't have cause to do so.
We may decide to terminate the Employment Agreement if we have cause, such
as if (i) Mr. Fuente intentionally fails or refuses to perform his duties, or
(ii) he willfully engages in illegal conduct or gross misconduct that materially
and demonstrably injures us.
EFFECT OF TERMINATION
If Mr. Fuente dies or becomes permanently disabled or incapacitated, he or
his family would be entitled to receive Mr. Fuente's base salary through the
date he is no longer able to fulfill his duties, a pro rata portion of his
bonus, and the vested and earned amounts under his incentive plans, health and
welfare plans, deferred compensation plans and other benefit plans. While he is
still alive, Mr. Fuente would also receive health insurance benefits.
If we have cause to terminate Mr. Fuente's employment or he quits without a
good reason, as defined above, he is only entitled to receive his base salary
through the date of his termination and the vested and accrued amounts under his
incentive plans, health and welfare plans, deferred compensation plans and other
benefit plans. He would not receive a pro rata bonus.
29
<PAGE> 33
If we terminate Mr. Fuente's employment without cause or Mr. Fuente quits
for good reason, as defined above, then he is entitled to receive his base
salary through the second anniversary of his termination date; a pro rata
portion of his bonus; the vested and accrued amounts under his incentive plans,
health and welfare plans, deferred compensation plans and other benefit plans.
CONTRACTUAL ARRANGEMENT WITH OUR VICE-CHAIRMAN, IRWIN HELFORD
Effective September 30, 1999, we entered into an Executive Part-Time
Employment Agreement with the non-executive Vice Chairman of our Board, Irwin
Helford, in connection with his retirement from his former duties as Chairman
and Chief Executive Officer of our Viking Office Products subsidiary. This
Agreement runs through September 30, 2002. Mr. Helford serves as a Senior
Adviser to Office Depot and has agreed to devote reasonable efforts and
attention to our business, in consideration of an annual payment of $50,000.
From the effective date of the Agreement, Mr. Helford is no longer an officer of
our Company, but he continues as the non-executive Vice Chairman of our Board.
In addition to the annual compensation paid to him, we also provide Mr. Helford
with reimbursement of reasonable and necessary business expenses, health and
life insurance coverages and continued participation in vesting under our Stock
Option and Restricted Stock Plans. The Agreement also contains certain non-
compete and non-solicitation of employee provisions.
EMPLOYMENT AGREEMENTS WITH OTHER NAMED EXECUTIVE OFFICERS
We have Employment Agreements with each of our other Named Executive
Officers. Except as noted below, each of these "Executive Employment Agreements"
is substantially similar to the others. Each provides that the executive will
devote his full business time and attention to our Company's business and
affairs.
Salary. Each Agreement provides for a base salary which may be increased,
but not reduced, and further provides that the executive will be entitled to
participate in our bonus plan and other benefit plans. The 1999 base salaries
(as of December 31, 1999) of these executives were:
<TABLE>
<S> <C>
Mr. McGhee.................................................. $630,000
Mr. Nelson.................................................. $630,000
Mr. Goldstein............................................... $500,000
Mr. Seltzer................................................. $440,000
</TABLE>
Term. Unless extended, Mr. McGhee's Agreement would expire by its terms on
March 30, 2001; Mr. Nelson's Agreement would expire by its terms on August 26,
2000; Mr. Goldstein's Agreement would expire by its terms on October 21, 2001
and Mr. Seltzer's Agreement would expire by its terms on October 21, 2001.
However, pursuant to action taken by our Compensation Committee and ratified by
our Board of Directors on February 17, 2000, all of these executive agreements
were converted to one-year "evergreen" agreements, which automatically renew
each year unless either party notifies the other at least six (6) months in
advance of the expiration date that it does not wish the agreement to be
extended for an additional year.
30
<PAGE> 34
Termination. If we terminate an Executive Employment Agreement prior to
the end of the contract "without Cause" or the executive terminates with "Good
Reason," the executive is entitled to receive the following:
(a) his base salary and insurance benefits through the second
anniversary of termination (18 months in the case of Mr. Seltzer),
(b) his pro rata bonus for the year in which the termination occurs,
and
(c) vested and accrued but unpaid amounts under his other incentive
plans, deferred compensation plans and other benefit plans.
If we terminate an Executive Employment Agreement WITH Cause or if an
executive resigns WITHOUT Good Reason, he is entitled only to his base salary
through the date of such termination. He also will receive the vested and
accrued but unpaid amounts under his incentive plans, deferred compensation
plans and any other compensation programs in which he is a participant. He will
not, however, be entitled to any bonus payment for the year in which such
termination occurs.
If an Executive Employment Agreement is terminated upon an executive's
death, permanent disability or incapacity, the executive (or his estate) is
entitled to receive the following:
(a) his base salary through the date of such termination,
(b) his pro rata bonus for the year in which the disability or death
occurs, and
(c) vested and accrued but unpaid amounts under his other incentive
plans, deferred compensation plans and other benefit plans.
Non-Competition and Confidentiality Agreements. The Executive Employment
Agreements also contain confidentiality, non-compete and non-solicitation
provisions.
CHANGE IN CONTROL AGREEMENTS. Our CEO and our other Named Executive
Officers also are parties to Change in Control Employment Agreements ("CIC
Agreements" ). The purpose of the CIC Agreements is to assure the continued
dedication of these executives, notwithstanding the possibility,
31
<PAGE> 35
threat or occurrence of a change in control ("CIC"). We have CIC Agreements with
the following Named Executive Officers:
<TABLE>
<CAPTION>
NAME TITLE DATE OF CIC AGREEMENT
- ---- ----- ---------------------
<S> <C> <C>
David I Fuente......................... Chairman & CEO September 1996
Barry J. Goldstein..................... EVP & Chief Financial September 1996
Officer
Shawn McGhee........................... President, North America May 1998
M. Bruce Nelson*....................... President, Viking Direct and May 1997
President, International
William Seltzer........................ Executive Vice President, September 1996
Information Systems
</TABLE>
--------------------
* See Further Discussion Below Regarding Mr. Nelson
In the event of a CIC, each of these executives will be entitled to certain
employment rights, including:
(i) a minimum annual base salary and bonus;
(ii) participation rights in our incentive, savings, retirement and
welfare benefit plans; and
(iii) certain payments and other benefits upon termination of
employment.
MR. NELSON'S CHANGE IN CONTROL AGREEMENT. Mr. Nelson's CIC Agreement was
entered into between Mr. Nelson and Viking in May 1997, and we have succeeded to
the obligations and rights of Viking under this CIC Agreement. In addition to
the terms of the original CIC Agreement, Mr. Nelson has separately agreed that
he will not resign by reason of the change in his duties and responsibilities
following the merger of Viking into Office Depot for a period of two years
following the effective date of the merger (August 26, 1998). Further, we have
agreed that Mr. Nelson shall have the right for a 30-day period beginning on the
second anniversary of the merger to resign for any reason, and upon such
resignation to receive the benefits which he would have received if he had
resigned for Good Reason immediately prior to such second anniversary of the
Merger.
EMPLOYMENT AGREEMENTS WITH OTHER EXECUTIVE OFFICERS
Certain of our other executive officers are parties to standard form
Employment Agreements, which contain provisions similar to those contained in
the Executive Employment Agreements and provide for various terms of employment.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of our Board is comprised of three directors,
currently Mr. Hedrick, Chairman; Mr. Austrian and Ms. Cohen. None of these
directors has ever been an officer of our
32
<PAGE> 36
Company or any of our subsidiaries. No executive officer of our Company serves
or has served on the compensation committee of another corporation or entity (i)
one of whose executive officers served on the Compensation Committee of our
Company or (ii) one of whose executive officers served as a director of our
Company. None of our executive officers has ever served as a director of another
corporation or entity who has or had an executive officer serving on the
Compensation Committee of our Company.
COMPENSATION COMMITTEE REPORT ON 1999 EXECUTIVE COMPENSATION
The following report of the Compensation Committee and the Performance
Graph shall not be deemed to be incorporated by reference by any general
statement incorporating this Proxy Statement into any filing under the
Securities Act of 1933 or under the Securities Exchange Act of 1934, except to
the extent we specifically incorporate this information by reference.
WHAT IS OUR PHILOSOPHY OF EXECUTIVE COMPENSATION?
Our compensation philosophy is to design and implement compensation
practices that motivate employees to enhance stockholder value. Our compensation
practices are designed to attract, motivate and retain key personnel by
recognizing individual contributions as well as the achievement of specific
pre-determined goals and objectives, primarily through the use of "at risk"
compensation strategies. Our compensation program for executive officers
consists of three main components:
(i) competitive base salaries,
(ii) annual cash incentives based on our overall Company performance
under our bonus plans and
(iii) stock option awards intended to encourage the achievement of
superior results over time and to align executive officer and stockholder
interests.
The second and third components constitute the "at risk" or
"performance-based" elements of each executive's total compensation.
Base Salary. Our Compensation Committee determines base salaries for
executive officers utilizing market survey data which focuses on other high
performance and specialty retail companies. The market survey data focuses on
companies with annual revenues over six billion dollars. A number of the
companies included in the comparison base are included in the S&P Retail Stores
Composite and in the S&P 500. The Committee considers the median level of the
executive market for comparably sized companies within these surveys in
determining executive base pay levels.
Salary Adjustments in 1999. The 1999 base salary for Mr. Fuente, our CEO,
did not increase over his 1998 base salary. Salaries for the four other Named
Executive Officers as a group rose in the aggregate by $211,004 or 10.61% over
their 1998 base salaries. These increases in salaries for the four other Named
Executive Officers position these executives competitively with their respective
peer groups and reflect the increase in responsibilities consistent with our
growth.
33
<PAGE> 37
Annual Bonus. The bonus compensation of our executive officers is
determined pursuant to our bonus plans, which provide for cash awards to
eligible participants, based upon objectives determined each year. Executive
officers are eligible to participate in either our Management Incentive Plan
(our "Management Plan") or our Designated Executive Incentive Plan (our "
Executive Plan" and, together with the Management Plan, our "Bonus Plans").
Eligible participants under our Management Plan have generally been salaried
employees, including executive officers, who have been in our employ through the
end of the related fiscal year. Under the Executive Plan, eligible participants
are defined to include those key employees who have been identified by our
Board. Executive Officers who participate in the Executive Plan cannot
participate in the Management Plan. The objective of both plans is to enhance
stockholder value by rewarding employees for the attainment of financial
objectives and, in the case of the Management Plan, for the attainment of
specific individual goals linked to specified strategic elements of the
business. By extending annual bonuses deep into the organization, we seek to
motivate all managerial employees to help achieve our profit objectives and
other key strategic initiatives.
Awards under our Bonus Plans are expressed as a percentage of base salary
earnings. These awards to executive officers are a function of the participant's
level of responsibility and our financial performance for the year. Awards to
other management employees under our Management Plan are also based on
achievement of individual performance objectives. We have reserved the
discretionary power under our Bonus Plans to defer payment to prevent a
participant's includible compensation from exceeding the $1 million limit under
Section 162(m) of the Code for any given year. Under our Management Plan,
performance is measured in connection with attainment of specific financial
objectives (including earnings per share) and may also be based on individual
goals, where appropriate, that are established by the participant and his or her
immediate supervisor. Under the Executive Plan, performance is measured only in
connection with attainment of specific objectives based on one or more of the
following five measurements of our performance: pre-tax earnings, net earnings,
earnings per share, return on net assets and return on equity. The Bonus Plan
allows our Compensation Committee to adjust these measurements for merger costs
as presented in our audited financial statements. Our Compensation Committee
approves the goals of and Bonus awards to our Chief Executive Officer, our
Presidents, and our executive officers under our Bonus Plans. This emphasis on
"at risk" compensation is consistent with our compensation philosophy and
supports continued creation of stockholder value.
Incentive Awards in 1999. For 1999, potential incentive awards to our
executive officers were based on earnings per share and return on net assets
objectives as approved by the Compensation Committee. The incentive
opportunities for our executive officers pursuant to our Bonus Plans were
calculated as a percentage of base salary earnings, with a minimum award if our
diluted earnings per share for 1999 equaled $0.97 exclusive of merger costs and
a maximum award payable if our diluted earnings per share for 1999 equaled or
exceeded $1.07 (exclusive of merger costs). Incentive opportunities for certain
eligible participants approved by the Compensation Committee are equal to twice
the maximum award if our earnings per share meet the goals established by the
Compensation Committee. Actual 1999 diluted earnings per share decreased 17% to
$0.68 exclusive of merger costs ($0.69 inclusive of merger costs) compared to
actual 1998 earnings per share of $0.82 exclusive of merger costs ($0.61
inclusive of merger costs). In measuring the 1999 achievement of goals and
whether they qualify for bonus incentive awards, the Committee and our Board
took into consideration the effects
34
<PAGE> 38
of other non-recurring charges and credits (i.e., extended warranty sales,
provision for slow-moving and obsolete inventories, and store closure costs).
Excluding merger costs and these other non-recurring charges and credits,
diluted earnings per share for 1999 increased 5% to $0.86 per share compared to
$0.82 per share in 1998. While our Company did not achieve the level of earnings
per share performance called for by our Compensation Committee in setting goals
for 1999, our Committee did review the individual performances of our senior
officers other than Mr. Fuente and determined to exercise its discretion in
granting performance bonuses which reflect the individual accomplishments of
these officers but which are substantially smaller than would have been realized
if the Company had met all of its objectives.
Stock Based Incentive Program -- Stock Options. The objective of stock
option awards is to motivate grantees to maximize our long-term growth and
profitability. Grantees can recognize value from options granted only if our
stock price increases after the date on which such options are granted, since
the exercise price of options granted must at least equal the fair market value
of our stock on the date of grant. The award of options thus aligns the
long-range interests of the grantees with those of our stockholders.
Grants of options are generally made annually. The Compensation Committee
determined the grant levels for grants to our Chief Executive Officer and our
other executive officers after taking into consideration prior year's grants,
the organizational impact of the participant and the level of emphasis we placed
on participant retention. Stock option awards below the executive officer level
are a function of position within the organization.
Based on the Black-Scholes option-pricing model, the present value at date
of grant of Mr. Fuente's 1999 stock options represented 92.65% of his total 1999
compensation. Since Mr. Fuente did not receive any bonus for 1999, the total "at
risk" portion, stock options plus the portion of annual bonus requiring vesting,
also represented 92.65% of his total 1999 compensation.
Stock option awards granted to our other Named Executive Officers for 1999
represented 55.42% of their total 1999 compensation. The total "at risk"
portion, annual bonus, stock options, plus portion of annual bonus requiring
vesting, for our other Named Executive Officers represented 74.34% of their
total 1999 compensation.
Deferred Compensation Plan. Our executive officers and other key employees
are permitted to defer up to 25% of their base salaries and up to 100% of their
bonuses under the Office Depot, Inc. Officer Deferred Compensation Plan.
Deferrals may generally be made for any period of time selected by the
executive, but we have the right to further defer payouts under the plan in
order to avoid exceeding the $1 million limit on executive compensation under
Section 162(m) of the Code. Although the plan allows us to make additional
matching deferrals and incentive contributions at our discretion, no such
contributions were made under the plan for 1999 and no such contributions are
contemplated for 2000.
Split Dollar Life Insurance. Effective April 1995, we gave our executive
officers the opportunity to purchase whole life insurance policies, with the
premiums paid by us. If our assumptions regarding mortality, dividends and other
factors are realized, we will recover all of our payments for premiums either
from death benefits or from the executive, if the policy is transferred to the
executive.
35
<PAGE> 39
Senior Management Deferred Compensation Plan. We have implemented the
Senior Management Deferred Compensation Plan (a non qualified retirement savings
plan) to provide our executive officers and other management and sales
executives the opportunity to defer retirement savings in addition to those
amounts which may be deferred under the Office Depot Retirement Savings Plan
(401(k)). The Senior Management Deferred Compensation Plan allows us to
supplement our matching contributions, which are limited under the Office Depot
Retirement Savings Plan (401(k)) pursuant to provisions of the Internal Revenue
Code.
PHILOSOPHY OF COMPENSATION OF THE CHIEF EXECUTIVE OFFICER. In 1998 we
entered into an Employment Agreement with Mr. Fuente. Among other matters, this
Agreement is indicative of Mr. Fuente's willingness to remain as Chairman of our
Company for the five year period beginning January 1, 1998. The Agreement raised
Mr. Fuente's base salary to the maximum deductible amount under Section 162(m)
of the Internal Revenue Code. Salary survey work performed for us by a reputable
outside consultant indicated that Mr. Fuente's base salary is competitive with
the salaries paid to similarly situated executives at other similarly sized
companies and is not excessive. In lieu of a larger, and non-deductible, base
salary payment to Mr. Fuente, the Compensation Committee and Board of Directors
elected to award Mr. Fuente a large grant of stock options, thereby closely
aligning his interests with those of our stockholders. The Committee feels that
Mr. Fuente's compensation, including base salary, bonus payments and large stock
option grants, is properly oriented towards risk-based, incentive compensation
and that the combination of base salary and incentive compensation is
competitive with similarly situated chief executives.
SECTION 162(m) AND DEDUCTIBILITY LIMITS UNDER THE INTERNAL REVENUE
CODE. Section 162(m) of the Internal Revenue Code generally disallows a tax
deduction to public companies for compensation exceeding $1 million paid to our
Named Executive Officers. We have structured portions of our executive officers'
compensation (those portions currently being stock option grants and annual
bonus) in a manner intended to comply with Section 162(m). The Compensation
Committee intends to continue to take actions, including seeking stockholder
approval, to ensure that our executive compensation programs meet such
requirements, except in those cases where the Compensation Committee believes
our stockholder interests are best served by retaining flexibility of approach.
Report of Compensation Committee
W. Scott Hedrick, Chairman
Cynthia R. Cohen, Member
Neil R. Austrian, Member
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During 1999, we employed the law firm of Greenberg Traurig, of which
Director Frank Scruggs is a shareholder. The fees we paid to Greenberg Traurig
during 1999 did not exceed 5% of the gross revenues of that law firm for its
last fiscal year.
36
<PAGE> 40
COPIES OF FORM 10-K
WE WILL PROVIDE A COPY OF OUR ANNUAL REPORT ON FORM 10-K, WHICH INCLUDE OUR
CONSOLIDATED FINANCIAL STATEMENTS AND NOTES TO OUR FINANCIAL STATEMENTS TO ANY
STOCKHOLDER UPON WRITTEN REQUEST. REQUESTS SHOULD BE SENT TO THE VICE PRESIDENT,
INVESTOR RELATIONS AT OUR CORPORATE OFFICES, 2200 OLD GERMANTOWN ROAD, DELRAY
BEACH, FL 33445.
2001 STOCKHOLDER PROPOSALS
Any stockholder proposal intended to be presented for consideration at the
2001 Annual Meeting of Stockholders and to be included in our Proxy Statement
for that meeting must be received by the Secretary at our corporate offices,
2200 Old Germantown Road, Delray Beach, FL 33445, on or before December 1, 2000.
Stockholder proposals to be brought before the 2001 Annual Meeting but not
included in the Proxy Statement will be considered untimely if received after
December 29, 2000, and the proxies we solicit for next year's Annual Meeting may
confer discretionary authority to vote on any such matters without a description
of them in the Proxy Statement for that meeting. Notice of any stockholder
proposal must include various matters, including a clear and concise description
of the proposed business.
37
<PAGE> 41
COMMON STOCK PERFORMANCE
The graph shown below compares the cumulative total stockholder return on
our common stock since December 31, 1992 with the S&P 500 Index and the S&P
Retail Stores Composite Index.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
AMONG OFFICE DEPOT, INC., THE S&P 500 INDEX
AND THE S&P RETAIL STORES COMPOSITE INDEX
<TABLE>
<CAPTION>
S&P RETAIL STORES
OFFICE DEPOT, INC. S&P 500 COMPOSITE
------------------ ------- -----------------
<S> <C> <C> <C>
1994 100.00 100.00 100.00
1995 83.00 138.00 112.00
1996 76.00 169.00 132.00
1997 102.00 226.00 191.00
1998 158.00 290.00 308.00
1999 70.00 351.00 373.00
</TABLE>
OTHER MATTERS
It is not presently expected that any matters other than those discussed
herein will be brought before our Annual Meeting. If, however, other matters do
come before the Meeting, it is the intention of the persons named as
representatives in the accompanying proxy to vote in accordance with the
recommendation of our Board of Directors.
38
<PAGE> 42
APPENDIX A
PROXY
OFFICE DEPOT, INC.
2200 OLD GERMANTOWN ROAD
DELRAY BEACH, FL 33445
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints David I. Fuente, Barry J. Goldstein and
David C. Fannin as Proxies, each with the power to appoint his substitute, and
hereby authorizes them to represent and to vote as designated below all the
shares of common stock of Office Depot, Inc. held of record by the undersigned
on March 8, 2000, at the Annual Meeting of stockholders to be held on April 28,
2000 or any adjournment thereof.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED "FOR" PROPOSALS 1, 2, 3 AND 4.
YOUR VOTE IS IMPORTANT!
YOU CAN VOTE IN ONE OF THREE WAYS:
1. Call toll-free 1-800-480-1208 on a Touch-Tone telephone and follow the
instructions on the reverse side. There is NO CHARGE to you for this call.
OR
2. Vote by Internet at our Internet Address: htpp://www.eproxy.com/odp/
OR
3. Mark, sign and date your proxy card and return it promptly in the enclosed
envelope. IMPORTANT! IF YOU VOTE BY TELEPHONE OR THE INTERNET, DO NOT RETURN
YOUR PROXY CARD BY MAIL!
If you wish to access future Annual Reports and Proxy Statements electronically
via the Internet and no longer receive the printed materials please provide
your consent with your proxy vote.
PLEASE VOTE
Please mark [X]
your vote as
indicated in
the example
1. Election of Directors - Item 1
<TABLE>
<CAPTION>
<S> <C>
( ) FOR all of the nominees listed below ( ) WITHHOLD AUTHORITY
(except as marked in the space provided below) to vote for all of the nominees listed below
</TABLE>
Lee A. Ault III, Neil R. Austrian, Cynthia R. Cohen, David I. Fuente,
W. Scott Hedrick, Irwin Helford, James L. Heskett, Michael J. Myers, M. Bruce
Nelson, Frank P. Scruggs, Jr. and Peter J. Solomon
(INSTRUCTION: To withhold authority to vote for any individual
nominee(s) strike a line through that nominee's name in the list above.)
2. PROPOSAL TO AMEND OUR LONG-TERM EQUITY INCENTIVE PLAN TO INCREASE THE NUMBER
OF SHARES OF COMPANY STOCK AUTHORIZED FOR ISSUANCE UNDER THE PLAN BY 16,000,000
SHARES TO A TOTAL AUTHORIZATION OF 47,068,750 SHARES.
( ) FOR ( ) AGAINST ( ) ABSTAIN
3. PROPOSAL TO AMEND OUR EMPLOYEE STOCK PURCHASE PLAN TO PROVIDE FOR AN INCREASE
OF TWO MILLION IN THE NUMBER OF SHARES AUTHORIZED TO BE SOLD PURSUANT TO SUCH
PLAN.
( ) FOR ( ) AGAINST ( ) ABSTAIN
4. PROPOSAL TO RATIFY APPOINTMENT OF DELOITTE & TOUCHE LLP AS OUR INDEPENDENT
PUBLIC ACCOUNTANTS.
( ) FOR ( ) AGAINST ( ) ABSTAIN
5. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER
BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING UNLESS YOU INDICATE THAT YOU
WITHHOLD SUCH AUTHORITY BY SO INDICATING BELOW.
By checking the box to the right, I consent to future access of the Annual
Report, Proxy Statements, prospectuses and other communications electronically
via the Internet. I understand that the Company may no longer distribute
printed materials to me for any future stockholder meeting until such consent
is revoked. I understand that I may revoke any consent at any time by
contacting the Company's transfer agent, ChaseMellon Shareholder Services,
Ridgefield Park, New Jersey and that costs normally associated with electronic
assess, such as usage and telephone charges, will be my responsibility. [ ]
My e-mail address is:_____________________________________.
Please sign exactly as name appears below. When
shares are held by joint tenants, both should
sign. When signing as attorney, executor,
administrator, trustee or guardian, please give
full title as such. If a corporation, please
sign in full corporate name by President or
other authorized officer. If a partnership,
please sign in partnership name by authorized
person.
-----------------------------------------------
Signature
-----------------------------------------------
Signature if held jointly
DATED: , 2000
-----------------------------------
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE.
VOTE BY TELEPHONE OR INTERNET
QUICK *** EASY *** IMMEDIATE
Your telephone or Internet vote authorizes the named proxies to vote your shares
in the same manner as if you marked, signed and returned your proxy card.
VOTE BY PHONE: CALL TOLL-FREE ON A TOUCH-TONE TELEPHONE 1-800-840-1208 ANYTIME.
THERE IS NO CHARGE TO YOU FOR THIS CALL
You will be asked to enter a CONTROL NUMBER located in the lower
right of this form.
OPTION A: To vote as the Board of Directors recommends on ALL items, press
1.
OPTION B: If you choose to vote on each time separately, press 0. You will
hear these instructions:
ITEM 1: To vote FOR ALL nominees, press 1; to WITHHOLD FOR ALL
nominees, press 9.
To WITHHOLD FOR AN INDIVIDUAL nominee, press 0 and listen to the
instructions.
ITEM 2: To vote FOR, press 1; AGAINST, press 9; ABSTAIN, press 0.
ITEM 3: To vote FOR, press 1; AGAINST, press 9; ABSTAIN, press 0.
ITEM 4: To vote FOR, press 1; AGAINST, press 9; ABSTAIN, press 0.
WHEN ASKED, YOU MUST CONFIRM YOUR VOTE BY PRESSING 1.
VOTE BY INTERNET: THE WEB ADDRESS IN htpp://www.eproxy.com/odp/
THANK YOU FOR VOTING.
CALL * * TOLL-FREE * * ON A TOUCH-TONE TELEPHONE
1-800-840-1208 - ANYTIME
There is NO CHARGE to you for this call.
<PAGE> 43
Appendix B
OFFICE DEPOT, INC.
AMENDED LONG-TERM EQUITY INCENTIVE PLAN
(As Proposed to be Amended at Annual Meeting - 2000)
1. PURPOSE.
This plan shall be known as the Office Depot, Inc. Long-Term Equity
Incentive Plan (the "Plan"). The purpose of the Plan shall be to promote the
long-term growth and profitability of Office Depot, Inc. (the "Company") and its
Subsidiaries by (i) providing certain directors, officers and key employees of,
and certain other key individuals who perform services for, the Company and its
Subsidiaries with incentives to maximize stockholder value and otherwise
contribute to the success of the Company and (ii) enabling the Company to
attract, retain and reward the best available persons for positions of
substantial responsibility. Grants of incentive or nonqualified stock options,
stock appreciation rights ("SARs"), either alone or in tandem with options,
restricted stock, performance awards, or any combination of the foregoing may be
made under the Plan.
2. DEFINITIONS.
(a) "BOARD OF DIRECTORS" and "BOARD" mean the board of directors of Office
Depot.
(b) "CAUSE" means the occurrence of one of the following events:
(i) Conviction of a felony or any crime or offense lesser than a
felony involving the property of the Company or a Subsidiary; or
(ii) Conduct that has caused demonstrable and serious injury to the
Company or a Subsidiary, monetary or otherwise; or
(iii) Willful refusal to perform or substantial disregard of duties
properly assigned, as determined by the Company; or
(iv) Breach of duty of loyalty to the Company or a Subsidiary or other
act of fraud or dishonesty with respect to the Company or a Subsidiary.
(c) "CHANGE IN CONTROL" means, except as may otherwise be provided by
the Committee, the occurrence of one of the following events:
(i) if any "person" or "group" as those terms are used in Sections
13(d) and 14(d) of the Exchange Act, other than an Exempt Person, is or
becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, of securities of the Company representing 50%
or more of the combined voting power of the Company's then outstanding
securities; or
(ii) during any period of two consecutive years, individuals who at
the beginning of such period constitute the Board and any new directors
whose election by the Board or nomination for election by the Company's
stockholders was approved by at least two-thirds of the directors then
still in office who either were directors at the beginning of the period or
whose election was previously so approved, cease for any reason to
constitute a majority thereof; or
<PAGE> 44
(iii) the stockholders of the Company approve a merger or
consolidation of the Company with any other corporation; provided, however,
a Change of Control shall not be deemed to have occurred (A) if such merger
or consolidation would result in all or a portion of the voting securities
of the Company outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted into
voting securities of the surviving entity) either directly or indirectly
more than 50% of the combined voting power of the voting securities of the
Company or such surviving entity outstanding immediately after such merger
or consolidation, or (B) if the corporate existence of the Company is not
affected and following the merger or consolidation the Company's chief
executive officers retain their positions with the Company and the
directors of the Company prior to such merger or consolidation constitute
at least a majority of the board of the Company or the entity that directly
or indirectly controls the Company after such merger or consolidation; or
(iv) the stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition by
the Company of all or substantially all the Company's assets, other than a
sale to an Exempt Person.
(d) "CODE" means the Internal Revenue Code of 1986, as amended.
(e) "COMMITTEE" means the Compensation Committee of the Board. The
membership of the Committee shall be constituted so as to comply at all times
with the applicable requirements of Rule 16b-3 under the Exchange Act and
Section 162(m) of the Code.
(f) "COMMON STOCK" means the Common Stock, par value $.01 per share, of the
Company, and any other shares into which such stock may be changed by reason of
a recapitalization, reorganization, merger, consolidation or any other change in
the corporate structure or capital stock of the Company.
(g) "EMPLOYEE" means any person who is a regular employee of the Company
(including officers and directors who are also employees) of the Company, either
within or outside the United States, who is selected by the Committee to
participate in the Plan.
(h) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
(i) "EXEMPT PERSON" means any employee benefit plan of the Company or a
trustee or other administrator or fiduciary holding securities under an employee
benefit plan of the Company.
(j) "FAIR MARKET VALUE" of a share of Common Stock of the Company means, as
of the date in question,
(1) if the Common Stock is listed for trading on the New York
Stock Exchange, the mean of the highest and lowest sale
prices of the Common Stock on such date, as reported on the
New York Stock Exchange Composite Tape, or if no such
reported sale of the Common Stock shall have occurred on such
date, on the last day prior to such date on which there was
such a reported sale; or
(2) if the Common Stock is not so listed, but is listed on
another national securities exchange or authorized for
quotation on the National Association of Securities Dealers
Inc. NASDAQ National Market System ("NASDAQ/NMS"), the mean
2
<PAGE> 45
of the highest and lowest sale price of the Common Stock on
such date as reported on such exchange or NASDAQ/NMS, or if
no such reported sale of the Common Stock shall have occurred
on such date, on the last day prior to such date on which
there was such a reported sale;
(3) if the Common Stock is not listed for trading on a national
securities exchange or authorized for quotation on
NASDAQ/NMS, the mean of the highest and lowest sale prices of
the Common Stock on such date as reported by the National
Association of Securities Dealers Automated Quotation System
("NASDAQ") or, if no such prices shall have been so reported
for such date, on the last day prior to such date on which
there was such a reported sale.
(k) "INCENTIVE STOCK OPTION" means an option conforming to the requirements
of Section 422 of the Code and any successor thereto.
(l) "INTERNATIONAL PARTICIPANT" means a participant in the Plan who resides
or works outside of the United States.
(m) "NON-EMPLOYEE" means any person, not an Employee of the Company, as
defined herein, who serves as a director, consultant or adviser to the Company.
(n) "NON-EMPLOYEE DIRECTOR" has the meaning given to such term in Rule
16b-3 under the Exchange Act.
(o) "NONQUALIFIED STOCK OPTION" means any stock option other than an
Incentive Stock Option.
(p) "OFFICER" means an Employee or a Non-Employee of the Company whose
position in the Company or in any affiliate or subsidiary entity of the Company
is that of a corporate officer, as determined by the Board of Directors.
(q) "OTHER COMPANY SECURITIES" mean securities of the Company other than
Common Stock, which may include, without limitation, unbundled stock units or
components thereof, debentures, preferred stock, warrants and securities
convertible into or exchangeable for Common Stock or other property.
(r) "PRIOR PLAN(S)" means the Office Depot, Inc. Omnibus Equity Plan, the
Office Depot, Inc. Directors Stock Option Plan or any other plan which these
plans subsumed or replaced.
(s) "RETIREMENT" means retirement as defined under any Company pension plan
or retirement program or termination of one's employment on retirement with the
approval of the Committee.
(t) "SUBSIDIARY" means a corporation or other entity of which outstanding
shares or ownership interests representing 50% or more of the combined voting
power of such corporation or other entity entitled to elect the management
thereof, or such lesser percentage as may be approved by the Committee, are
owned directly or indirectly by the Company.
3. ADMINISTRATION.
The Plan shall be administered by the Committee; provided that the Board
may, in its discretion, at any time and from time to time, resolve to administer
the Plan, in which case the term "Committee" shall be deemed to mean the Board
for all purposes herein. The Committee shall consist of at least two directors.
Subject to the provisions of the Plan, the Committee shall be authorized to (i)
select persons to participate in the Plan, (ii) determine the form and substance
of grants made under the Plan to each participant, and the conditions and
restrictions, if any, subject to which such grants will be made, (iii) modify
the terms of grants
3
<PAGE> 46
made under the Plan in the event of a change in control, or death, disability,
retirement of the participant, or other situation which the Committee deems as a
special circumstance, (iv) interpret the Plan and grants made thereunder, (v)
make any adjustments necessary or desirable in connection with grants made under
the Plan to eligible participants located outside the United States and (vi)
adopt, amend, or rescind such rules and regulations, and make such other
determinations, for carrying out the Plan as it may deem appropriate. Decisions
of the Committee on all matters relating to the Plan shall be in the Committee's
sole discretion and shall be conclusive and binding on all parties. The
validity, construction, and effect of the Plan and any rules and regulations
relating to the Plan shall be determined in accordance with applicable federal
and state laws and rules and regulations promulgated pursuant thereto. No member
of the Committee and no officer of the Company shall be liable for any action
taken or omitted to be taken by such member, by any other member of the
Committee or by any officer of the Company in connection with the performance of
duties under the Plan, except for such person's own willful misconduct or as
expressly provided by statute.
The expenses of the Plan shall be borne by the Company. The Plan shall not
be required to establish any special or separate fund or make any other
segregation of assets to assume the payment of any award under the Plan, and
rights to the payment of such awards shall be no greater than the rights of the
Company's general creditors.
4. SHARES AVAILABLE FOR THE PLAN.
Subject to adjustments as provided in Section 15, as of any date the
total number of shares of Common Stock with respect to which awards may be
granted under the Plan (the "Shares") shall equal the excess (if any) of
47,068,750 over (i) the number of shares of Common Stock subject to outstanding
awards under the Plan or the Prior Plans, (ii) the number of shares of Common
Stock in respect of which options and stock appreciation rights have been
exercised under the Plan or the Prior Plans, and (iii) the number of shares of
Common Stock issued pursuant to performance awards or issued subject to
forfeiture restrictions which have lapsed under the Plan or the Prior Plans.
Such Shares may be in whole or in part authorized and unissued, or shares which
are held by the Company as treasury shares. If any grant under the Plan or any
Prior Plan expires or terminates unexercised, becomes unexercisable or is
forfeited as to any Shares, such unpurchased or forfeited Shares shall
thereafter be available for further grants under the Plan unless, in the case of
options granted under the Plan or any Prior Plan, related SARs are exercised.
Without limiting the generality of the foregoing provisions of this Section
4 or the generality of the provisions of Sections 3, 6 or 17 or any other
section of this Plan, the Committee may, at any time or from time to time, and
on such terms and conditions (that are consistent with and not in contravention
of the other provisions of this Plan) as the Committee may, in its sole
discretion, determine, enter into agreements (or take other actions with respect
to the options) for new options containing terms (including exercise prices)
more (or less) favorable than the outstanding options.
5. PARTICIPATION.
Participation in the Plan shall be limited to those directors (including
Non-Employee Directors), officers (including non-employee officers) and key
employees of, and other key individuals performing services for, the Company and
its Subsidiaries selected by the Committee (including participants located
outside the United States). Nothing in the Plan or in any grant thereunder shall
confer any right on a participant to continue in the employ of or the
performance of services for the Company or shall interfere in any way with the
right of the Company to terminate the employment or performance of services of a
participant at any time. By accepting any award under the Plan, each participant
and each person claiming under or through him or her shall be conclusively
deemed to have indicated his or her acceptance and ratification of, and consent
to, any action taken under the Plan by the Company, the Board or the Committee.
4
<PAGE> 47
Incentive Stock Options or Nonqualified Stock Options, SARs, alone or in
tandem with options, restricted stock awards, performance awards, or any
combination thereof, may be granted to such persons and for such number of
Shares as the Committee shall determine (such individuals to whom grants are
made being sometimes herein called "optionees" or "grantees," as the case may
be). Determinations made by the Committee under the Plan need not be uniform and
may be made selectively among eligible individuals under the Plan, whether or
not such individuals are similarly situated. A grant of any type made hereunder
in any one year to an eligible participant shall neither guarantee nor preclude
a further grant of that or any other type to such participant in that year or
subsequent years.
6. INCENTIVE AND NONQUALIFIED OPTIONS.
The Committee may from time to time grant to eligible participants
Incentive Stock Options, Nonqualified Stock Options, or any combination thereof;
provided that the Committee may grant Incentive Stock Options only to eligible
employees of the Company or its subsidiaries (as defined for this purpose in
Section 424(f) of the Code). In any one calendar year, the Committee shall not
grant to any one participant, options or SARs to purchase a number of shares of
Common Stock in excess of 1,000,000 shares. The options granted shall take such
form as the Committee shall determine, subject to the following terms and
conditions.
It is the Company's intent that Nonqualified Stock Options granted under
the Plan not be classified as Incentive Stock Options, that Incentive Stock
Options be consistent with and contain or be deemed to contain all provisions
required under Section 422 of the Code and any successor thereto, and that any
ambiguities in construction be interpreted in order to effectuate such intent.
If an Incentive Stock Option granted under the Plan does not qualify as such for
any reason, then to the extent of such nonqualification, the stock option
represented thereby shall be regarded as a Nonqualified Stock Option duly
granted under the Plan, provided that such stock option otherwise meets the
Plan's requirements for Nonqualified Stock Options.
(a) Price. The price per Share deliverable upon the exercise of each option
("exercise price") shall be established by the Committee, except that the
exercise price may not be less than 100% of the Fair Market Value of a share of
Common Stock as of the date of grant of the option, and in the case of the grant
of any Incentive Stock Option to an employee who, at the time of the grant, owns
more than 10% of the total combined voting power of all classes of stock of the
Company or any of its Subsidiaries, the exercise price may not be less than 110%
of the Fair Market Value of a share of Common Stock as of the date of grant of
the option, in each case unless otherwise permitted by Section 422 of the Code.
(b) Payment. Options may be exercised, in whole or in part, upon payment of
the exercise price of the Shares to be acquired ; provided, however, that no
participant shall be eligible to exercise any Stock Option (i) if the
participant, at the time of the purported exercise, is not in compliance with
any provision of the Plan or (ii) with respect to which the participant has not
signed and returned to the Company a letter in the form prescribed by the
Company, acknowledging receipt of such Stock Option, agreeing to abide by the
provisions of the Plan and otherwise containing such provisions as the Company
shall prescribe. Unless otherwise determined by the Committee, payment shall be
made (i) in cash (including check, bank draft or money order), (ii) by delivery
of outstanding shares of Common Stock with a Fair Market Value on the date of
exercise equal to the aggregate exercise price payable with respect to the
options' exercise, (iii) by simultaneous sale through a broker reasonably
acceptable to the Committee of Shares acquired on exercise, as permitted under
Regulation T of the Federal Reserve Board, (iv) by authorizing the Company to
withhold from issuance a number of Shares issuable upon exercise of the options
which, when multiplied by the Fair Market Value of a share of Common Stock on
the date of exercise is equal to the aggregate exercise price payable with
respect to the options so exercised or (v) by any combination of the foregoing.
Options may also be exercised upon payment of the exercise price of the Shares
to be acquired by delivery of the optionee's promissory note, but only to the
extent specifically approved by and in accordance with the policies of the
Committee.
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<PAGE> 48
In the event a grantee elects to pay the exercise price payable with
respect to an option pursuant to clause (ii) above, (A) only a whole number of
share(s) of Common Stock (and not fractional shares of Common Stock) may be
tendered in payment, (B) such grantee must present evidence acceptable to the
Company that he or she has owned any such shares of Common Stock tendered in
payment of the exercise price (and that such tendered shares of Common Stock
have not been subject to any substantial risk of forfeiture) for at least six
months prior to the date of exercise, and (C) Common Stock must be delivered to
the Company. Delivery for this purpose may, at the election of the grantee, be
made either by (A) physical delivery of the certificate(s) for all such shares
of Common Stock tendered in payment of the price, accompanied by duly executed
instruments of transfer in a form acceptable to the Company, or (B) direction to
the grantee's broker to transfer, by book entry, such shares of Common Stock
from a brokerage account of the grantee to a brokerage account specified by the
Company. When payment of the exercise price is made by delivery of Common Stock,
the difference, if any, between the aggregate exercise price payable with
respect to the option being exercised and the Fair Market Value of the share(s)
of Common Stock tendered in payment (plus any applicable taxes) shall be paid in
cash. No grantee may tender shares of Common Stock having a Fair Market Value
exceeding the aggregate exercise price payable with respect to the option being
exercised (plus any applicable taxes).
In the event a grantee elects to pay the exercise price payable with
respect to an option pursuant to clause (iv) above, (A) only a whole number of
Share(s) (and not fractional Shares) may be withheld in payment and (B) such
grantee must present evidence acceptable to the Company that he or she has owned
a number of shares of Common Stock at least equal to the number of Shares to be
withheld in payment of the exercise price (and that such owned shares of Common
Stock have not been subject to any substantial risk of forfeiture) for at least
six months prior to the date of exercise. When payment of the exercise price is
made by withholding of Shares, the difference, if any, between the aggregate
exercise price payable with respect to the option being exercised and the Fair
Market Value of the Share(s) withheld in payment (plus any applicable taxes)
shall be paid in cash. No grantee may authorize the withholding of Shares having
a Fair Market Value exceeding the aggregate exercise price payable with respect
to the option being exercised (plus any applicable taxes). Any withheld Shares
shall no longer be issuable under such option.
(c) Terms of Options. The term during which each option may be exercised
shall be determined by the Committee, but, except as otherwise provided herein,
in no event shall an option be exercisable in whole or in part, in the case of a
Nonqualified Stock Option or an Incentive Stock Option (other than as described
below), more than ten years from the date it is granted or, in the case of an
Incentive Stock Option granted to an employee who at the time of the grant owns
more than 10% of the total combined voting power of all classes of stock of the
Company or any of its Subsidiaries, if required by the Code, more than five
years from the date it is granted. All rights to purchase Shares pursuant to an
option shall, unless sooner terminated, expire at the date designated by the
Committee. The Committee shall determine the date on which each option shall
become exercisable and may provide that an option shall become exercisable in
installments. The Shares constituting each installment may be purchased in whole
or in part at any time after such installment becomes exercisable, subject to
such minimum exercise requirements as may be designated by the Committee. Unless
otherwise provided herein or in the terms of the related grant, an optionee may
exercise an option only if he or she is, and has continuously since the date the
option was granted, been a director, officer or employee of or performed other
services for the Company or a Subsidiary. Prior to the exercise of an option and
delivery of the Shares represented thereby, the optionee shall have no rights as
a stockholder with respect to any Shares covered by such outstanding option
(including any dividend or voting rights).
(d) Limitations on Grants. If required by the Code, the aggregate Fair
Market Value (determined as of the grant date) of Shares for which an Incentive
Stock Option is exercisable for the first time during any calendar year under
all equity incentive plans of the Company and its Subsidiary Corporations (as
defined in Section 424 of the Code) may not exceed $100,000.
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<PAGE> 49
(e) Termination; Change in Control. Except as may otherwise be provided by
the Committee:
(i) If a participant ceases to be a director, officer or employee
of, or to perform other services for, the Company and any
Subsidiary due to the death of the participant, all of the
participant's options and SARs shall become fully vested and
exercisable and shall remain so for a period of 24 months from
the date of such death but in no event after the expiration
date of the options or SARs.
(ii) If a participant ceases to be a director, officer or employee
of, or to perform other services for, the Company and any
Subsidiary upon the occurrence of his or her Retirement, (A)
all of the participant's options and SARs that were
exercisable on the date of Retirement shall remain exercisable
for, and shall otherwise terminate at the end of, a period of
up to 90 days after the date of Retirement, but in no event
after the expiration date of the options or SARs and (B) all
of the participant's options and SARs that were not
exercisable on the date of Retirement shall be forfeited
immediately upon such Retirement.
(iii) If a participant ceases to be a director, officer or employee
of, or to perform other services for, the Company or a
Subsidiary due to Cause, all of the participant's options and
SARs shall be forfeited immediately upon such cessation,
whether or not then exercisable.
(iv) If a participant ceases to be a director, officer or employee
of, or to otherwise perform services for, the Company or a
Subsidiary for any reason other than death, Retirement or
Cause, (A) all of the participant's options and SARs that were
exercisable on the date of such cessation shall remain
exercisable for, and shall otherwise terminate at the end of,
a period of 90 days after the date of such cessation, but in
no event after the expiration date of the options or SARs and
(B) all of the participant's options and SARs that were not
exercisable on the date of such cessation shall be forfeited
immediately upon such cessation. The Committee may, at its
sole discretion, determine (i) whether any leave of absence
(including short-term or long-term disability or medical
leave) shall constitute a termination of employment for
purposes of this Plan and (ii) the impact, if any, of any such
leave on outstanding awards under the Plan.
(v) If there is a Change in Control, all of the participant's
options and SARs shall become fully vested and exercisable
immediately prior to such Change in Control and shall remain
so until the expiration date of the options and SARs.
(f) Grant of Reload Options. The Committee may provide (either at the time
of grant or exercise of an option), in its discretion, for the grant to a
grantee who exercises all or any portion of an option ("Exercised Options") and
who pays all or part of such exercise price with shares of Common Stock, of an
additional option (a "Reload Option") for a number of shares of Common Stock
equal to the sum (the "Reload Number") of the number of shares of Common Stock
tendered or withheld in payment of such exercise price for the Exercised Options
plus, if so provided by the Committee, the number of shares of Common Stock, if
any, tendered or withheld by the grantee or withheld by the Company in
connection with the exercise
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<PAGE> 50
of the Exercised Options to satisfy any federal, state or local tax withholding
requirements. The terms of each Reload Option, including the date of its
expiration and the terms and conditions of its exercisability and
transferability, shall be the same as the terms of the Exercised Option to which
it relates, except that (i) the grant date for each Reload Option shall be the
date of exercise of the Exercised Option to which it relates and (ii) the
exercise price for each Reload Option shall be the Fair Market Value of the
Common Stock on the grant date of the Reload Option.
7. STOCK APPRECIATION RIGHTS.
The Committee shall have the authority to grant SARs under this Plan,
either alone or to any optionee in tandem with options (either at the time of
grant of the related option or thereafter by amendment to an outstanding
option). SARs shall be subject to such terms and conditions as the Committee may
specify.
No SAR may be exercised unless the Fair Market Value of a share of Common
Stock of the Company on the date of exercise exceeds the exercise price of the
SAR or, in the case of SARs granted in tandem with options, any options to which
the SARs correspond. Prior to the exercise of the SAR and delivery of the cash
and/or Shares represented thereby, the participant shall have no rights as a
stockholder with respect to Shares covered by such outstanding SAR (including
any dividend or voting rights).
SARs granted in tandem with options shall be exercisable only when, to the
extent and on the conditions that any related option is exercisable. The
exercise of an option shall result in an immediate forfeiture of any related SAR
to the extent the option is exercised, and the exercise of an SAR shall cause an
immediate forfeiture of any related option to the extent the SAR is exercised.
Upon the exercise of an SAR, the participant shall be entitled to a
distribution in an amount equal to the difference between the Fair Market Value
of a share of Common Stock on the date of exercise and the exercise price of the
SAR or, in the case of SARs granted in tandem with options, any option to which
the SAR is related, multiplied by the number of Shares as to which the SAR is
exercised (less any applicable taxes). The Committee shall decide whether such
distribution shall be in cash, in Shares having a Fair Market Value equal to
such amount, in Other Company Securities having a Fair Market Value equal to
such amount or in a combination thereof.
All SARs will be exercised automatically on the last day prior to the
expiration date of the SAR or, in the case of SARs granted in tandem with
options, any related option, so long as the Fair Market Value of a share of
Common Stock on that date exceeds the exercise price of the SAR or any related
option, as applicable. An SAR granted in tandem with options shall expire at the
same time as any related option expires and shall be transferable only when, and
under the same conditions as, any related option is transferable.
8. RESTRICTED STOCK.
The Committee may at any time and from time to time grant Shares of
restricted stock under the Plan to such participants and in such amounts as it
determines. Each grant of restricted stock shall specify the applicable
restrictions on such Shares, the duration of such restrictions (which shall be
at least 3 years , subject to partial vesting at the end of year 1 and any time
thereafter, and except as otherwise provided in the third paragraph of this
Section 8), and the time or times at which such restrictions shall lapse with
respect to all or a specified number of Shares that are part of the grant.
The participant will be required to pay the Company the aggregate par value
of any Shares of restricted stock (or such larger amount as the Board may
determine to constitute capital under Section 154 of the Delaware General
Corporation Law, as amended) within ten days of the date of grant, unless such
Shares of restricted stock are treasury shares. Unless otherwise determined by
the Committee, certificates
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<PAGE> 51
representing Shares of restricted stock granted under the Plan will be held in
escrow by the Company on the participant's behalf during any period of
restriction thereon and will bear an appropriate legend specifying the
applicable restrictions thereon, and the participant will be required to execute
a blank stock power therefor. Except as otherwise provided by the Committee,
during such period of restriction the participant shall have all of the rights
of a holder of Common Stock, including but not limited to the rights to receive
dividends and to vote, and any stock or other securities received as a
distribution with respect to such participant's restricted stock shall be
subject to the same restrictions as then in effect for the restricted stock.
Except as may otherwise be provided by the Committee, (a) immediately prior
to a Change in Control or at such time as a participant ceases to be a director,
officer or employee of, or to otherwise perform services for, the Company and
its Subsidiaries due to death or Retirement during any period of restriction,
all restrictions on Shares granted to such participant shall lapse, and (b) at
such time as a participant ceases to be a director, officer or employee of, or
to otherwise perform services for, the Company or its Subsidiaries for any other
reason, all Shares of restricted stock granted to such participant on which the
restrictions have not lapsed shall be immediately forfeited to the Company.
9. PERFORMANCE AWARDS.
Performance awards may be granted to participants at any time and from time
to time as determined by the Committee. The Committee shall have complete
discretion in determining the size and composition of performance awards so
granted to a participant and the appropriate period over which performance is to
be measured (a "performance cycle"), except that no performance cycle shall be
less than 12 months in duration. Performance awards may include (i) specific
dollar-value target awards (ii) performance units, the value of each such unit
being determined by the Committee at the time of issuance, and/or (iii)
performance Shares, the value of each such Share being equal to the Fair Market
Value of a share of Common Stock. The value of each performance award may be
fixed or it may be permitted to fluctuate based on a performance factor (e.g.,
return on equity) selected by the Committee. In any one calendar year, the
Committee shall not grant to any one participant more than 100,000 performance
Shares.
The Committee shall establish performance goals and objectives for each
performance cycle on the basis of one or more of the following five measurements
of the Company's performance for the relevant period, as such measurements may
be adjusted for merger costs as presented on the Company's audited financial
statements: pre-tax earnings, net earnings, earnings per share, return on assets
and return on equity. During any performance cycle, the Committee shall have the
authority to adjust the performance goals and objectives for such cycle for such
reasons as it deems equitable to the extent permitted under Section 162(m) of
the Code.
The Committee shall determine the portion of each performance award that is
earned by a participant on the basis of the Company's performance over the
performance cycle in relation to the performance goals for such cycle. The
earned portion of a performance award may be paid out in Shares, cash, Other
Company Securities, or any combination thereof, as the Committee may determine.
A participant must be a director, officer or employee of, or otherwise
perform services for, the Company or its Subsidiaries at the end of the
performance cycle in order to be entitled to payment of a performance award
issued in respect of such cycle; provided, however, that, except as otherwise
provided by the Committee, (a) if a participant ceases to be a director, officer
or employee of, or to otherwise perform services for, the Company and its
Subsidiaries upon his or her death or Retirement prior to the end of the
performance cycle, the participant shall earn a proportionate portion of the
performance award based upon the elapsed portion of the performance cycle and
the Company's performance over that portion of such cycle and (b) in the event
of a Change in Control, a participant shall earn no less than the portion of the
performance award that the participant would have earned if the performance
cycle(s) had terminated as of the date of the Change in Control.
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10. WITHHOLDING TAXES.
(a) Participant Election. The Committee may provide that a participant may
be permitted to elect to deliver shares of Common Stock (or have the Company
withhold shares acquired upon exercise of an option or SAR or deliverable upon
grant or vesting of restricted stock, as the case may be) to satisfy, in whole
or in part, the amount the Company is required to withhold for taxes in
connection with the exercise of an option or SAR or the delivery of restricted
stock upon grant or vesting, as the case may be. Such election must be made on
or before the date the amount of tax to be withheld is determined. Once made,
the election shall be irrevocable. The fair market value of the shares to be
withheld or delivered will be the Fair Market Value as of the date the amount of
tax to be withheld is determined. In the event a participant elects to deliver
shares of Common Stock pursuant to this Section 10(a), such delivery must be
made subject to the conditions and pursuant to the procedures set forth in
Section 6(b) with respect to the delivery of Common Stock in payment of the
exercise price of options.
(b) Company Requirement. The Company may require, as a condition to any
grant or exercise under the Plan, to the payment of any SAR or to the delivery
of certificates for Shares issued hereunder, that the grantee make provision for
the payment to the Company, either pursuant to Section 10(a) or this Section
10(b), of any federal, state or local taxes of any kind required by law to be
withheld with respect to any grant or payment or any delivery of Shares. The
Company, to the extent permitted or required by law, shall have the right to
deduct from any payment of any kind (including salary or bonus) otherwise due to
a grantee, an amount equal to any federal, state or local taxes of any kind
required by law to be withheld with respect to any grant or payment or to the
delivery of Shares under the Plan, or to retain or sell without notice a
sufficient number of the Shares to be issued to such grantee to cover any such
taxes, the payment of which has not otherwise been provided for in accordance
with the terms of the Plan, provided that the Company shall not sell any such
Shares if such sale would be considered a sale by such grantee for purposes of
Section 16 of the Exchange Act that is not exempt from matching thereunder.
11. WRITTEN AGREEMENT; VESTING.
Each employee to whom a grant is made under the Plan shall enter into a
written agreement with the Company that shall contain such provisions, including
without limitation vesting requirements, consistent with the provisions of the
Plan, as may be approved by the Committee. Unless the Committee may otherwise
provide and except as otherwise provided in Sections 6, 7, 8 and 9 in connection
with a Change of Control or certain occurrences of termination, no grant under
this Plan may be exercised, and no restrictions relating thereto may lapse,
within six months of the date such grant is made.
12. TRANSFERABILITY.
Unless the Committee determines otherwise, no option, SAR, performance
award, or restricted stock granted under the Plan shall be transferable by a
participant otherwise than by will or the laws of descent and distribution.
Unless the Committee determines otherwise, an option, SAR, or performance award
may be exercised only by the optionee or grantee thereof or his guardian or
legal representative; provided that Incentive Stock Options may be exercised by
such guardian or legal representative only if permitted by the Code and any
regulations promulgated thereunder.
13. LISTING, REGISTRATION AND QUALIFICATION.
If the Committee determines that the listing, registration or qualification
upon any securities exchange or under any law of Shares subject to any option,
SAR, performance award or restricted stock grant is necessary or desirable as a
condition of, or in connection with, the granting of same or the issue or
purchase of Shares thereunder, no such option or SAR may be exercised in whole
or in part, no such performance
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<PAGE> 53
award may be paid out and no Shares may be issued unless such listing,
registration or qualification is effected free of any conditions not acceptable
to the Committee.
It is the intent of the Company that the Plan comply in all respects with
Section 162(m) of the Code, that awards made hereunder comply in all respects
with Rule 16b-3 under the Exchange Act, that any ambiguities or inconsistencies
in construction of the Plan be interpreted to give effect to such intention and
that if any provision of the Plan is found not to be in compliance with Section
162(m), such provision shall be deemed null and void to the extent required to
permit the Plan to comply with Section 162(m), as the case may be.
14. TRANSFER OF EMPLOYEE.
The transfer of an employee from the Company to a Subsidiary, from a
Subsidiary to the Company, or from one Subsidiary to another shall not be
considered a termination of employment; nor shall it be considered a termination
of employment if an employee is placed on military, disability or sick leave or
such other leave of absence which is considered by the Committee as continuing
intact the employment relationship.
15. ADJUSTMENTS.
In the event of a reorganization, recapitalization, stock split, stock
dividend, combination of shares, merger, consolidation, distribution of assets,
or any other change in the corporate structure or shares of the Company, the
Committee shall make such adjustment as it deems appropriate in the number and
kind of Shares or other property reserved for issuance under the Plan, in the
number and kind of Shares or other property covered by grants previously made
under the Plan, and in the exercise price of outstanding options and SARs. Any
such adjustment shall be final, conclusive and binding for all purposes of the
Plan. In the event of any merger, consolidation or other reorganization in which
the Company is not the surviving or continuing corporation or in which a Change
in Control is to occur, all of the Company's obligations regarding options, SARs
performance awards, and restricted stock that were granted hereunder and that
are outstanding on the date of such event shall, on such terms as may be
approved by the Committee prior to such event, be assumed by the surviving or
continuing corporation or canceled in exchange for property (including cash).
Without limitation of the foregoing, in connection with any transaction of
the type specified by clause (iii) of the definition of a Change in Control in
Section 2(c), the Committee may, in its discretion, (i) cancel any or all
outstanding options under the Plan in consideration for payment to the holders
thereof of an amount equal to the portion of the consideration that would have
been payable to such holders pursuant to such transaction if their options had
been fully exercised immediately prior to such transaction, less the aggregate
exercise price that would have been payable therefor, or (ii) if the amount that
would have been payable to the option holders pursuant to such transaction if
their options had been fully exercised immediately prior thereto would be less
than the aggregate exercise price that would have been payable therefor, cancel
any or all such options for no consideration or payment of any kind. Payment of
any amount payable pursuant to the preceding sentence may be made in cash or, in
the event that the consideration to be received in such transaction includes
securities or other property, in cash and/or securities or other property in the
Committee's discretion.
16. TERMINATION AND MODIFICATION OF THE PLAN.
The Board of Directors or the Committee, without approval of the
stockholders, may modify or terminate the Plan, except that no modification
shall become effective without prior approval of the stockholders of the Company
if stockholder approval would be required for continued compliance with the
performance-based compensation exception of Section 162(m) of the Code or any
listing requirement of the principal stock
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<PAGE> 54
exchange on which the Common Stock is then listed. With respect to International
Participants, the Committee may, in its sole discretion, amend the terms of the
Plan or any Awards under the Plan with respect to such International
Participants in order to conform such terms to the requirements of local laws in
the country in which the International Participant resides or works.
17. AMENDMENT OR SUBSTITUTION OF AWARDS UNDER THE PLAN.
The terms of any outstanding award under the Plan may be amended from time
to time by the Committee in its discretion in any manner that it deems
appropriate (including, but not limited to, acceleration of the date of exercise
of any award and/or payments thereunder or of the date of lapse of restrictions
on Shares) in the event of a change in control or death, disability, retirement
of the participant, or other situation which the Committee deems as a special
circumstance; provided that, except as otherwise provided in Section 15, no such
amendment shall adversely affect in a material manner any right of a participant
under the award without his or her written consent. The Committee may, with the
grantee's consent, cancel any award under the Plan and issue a new award in
substitution therefor upon such terms as the Committee may in its sole
discretion determine, provided that the substituted award shall satisfy all
applicable Plan requirements as of the date such new award is made; and further
provided, notwithstanding the foregoing or any other provision of this Plan,
that in no event shall an option or stock appreciation right be granted in
substitution for a previously granted option or stock appreciation right, with
the old award being canceled or surrendered as a condition of receiving the new
award, if the new award would have a lower option exercise price or stock
appreciation right appreciation base than the award it replaces. The foregoing
is not intended to prevent equitable adjustment of awards upon the occurrence of
certain events as herein provided, for example, without limitation, adjustments
pursuant to Section 15.
18. COMMENCEMENT DATE; TERMINATION DATE.
The date of commencement of the Plan shall be October 1, 1997, subject to
approval by the stockholders of the Company. Unless previously terminated upon
the adoption of a resolution of the Board terminating the Plan, no Incentive
Stock Options shall be issued under this plan after the close of business on
September 30, 2007. No termination of the Plan shall materially and adversely
affect any of the rights or obligations of any person, without his consent,
under any grant of options or other incentives theretofore granted under the
Plan.
19. GOVERNING LAW.
The Plan shall be governed by the corporate laws of the State of Delaware,
without giving effect to any choice of law provisions.
* * *
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APPENDIX C
OFFICE DEPOT, INC.
1999 EMPLOYEE STOCK PURCHASE PLAN
(as Proposed to be Amended at Annual Meeting - 2000)
1. PURPOSE OF PLAN. The purpose of the Office Depot, Inc. 1999 Employee Stock
Purchase Plan (this "Plan") is to benefit Office Depot, Inc., a Delaware
corporation (the "Company"), and its eligible employees by increasing employee
ownership of the capital stock of the Company. This Plan is intended to comply
with the provisions of Section 423 of the Internal Revenue Code of 1986, as
amended (the "Code"), and this Plan shall be administered, interpreted and
construed in accordance with such provisions.
2. SHARES RESERVED FOR THE PLAN. There shall be reserved for issuance and
purchase by employees of the Company under this Plan an aggregate of [3,125,000
- - INCREASED FROM 1,125,000 ] shares ("Shares") of the Company's Common Stock,
par value $0.01 per share ("Common Stock"), subject to adjustment as provided in
Section 13 hereof; provided, that the number of Shares authorized for issuance
under this Plan shall be reduced by the number of shares of Common Stock issued
prior to the effective date of this Plan under the Office Depot, Inc. 1989
Employee Stock Purchase Plan (the "1989 Plan") in excess of the number of shares
of Common Stock previously authorized for issuance under the 1989 Plan. Shares
subject to this Plan may be shares now or hereafter authorized and unissued or
shares already authorized, issued and owned by the Company. The right to
purchase Shares pursuant to this Plan shall be made available by a series of
bi-weekly offerings (the "Offerings") to employees eligible to participate in
this Plan pursuant to Section 4 hereof. If and to the extent that any right to
purchase reserved Shares shall not be exercised by any employee for any reason
or if such right to purchase shall terminate as provided herein, Shares that
have not been so purchased under this Plan shall again become available for the
purposes of this Plan unless this Plan shall have terminated.
3. ADMINISTRATION. This Plan shall be administered by the Compensation Committee
of the Board of Directors (the "Committee"). The Committee shall consist of
three or more directors designated by the Board of Directors. The Committee
shall have full power to:
(a) prescribe, amend and rescind rule and procedures governing
the administration of the Plan;
(b) to interpret the provisions of the Plan and to establish
and interpret rules and procedures with respect to the Plan;
(c) to determine the requirements imposed by or rights of any
person under the Plan and the rules and procedures established by the
Committee relating to such rights;
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(d) to determine the eligibility of employees to participate
in the Plan in accordance with the standards set forth in Section 4
hereof; and
(e) to delegate certain of the duties of the Committee to
officers or other committees of the Company or to one or more outside
agents to facilitate the purchase and transfer of Shares and to
otherwise assist in the administration of the Plan.
Each action of the Committee which is within the scope of the authority
delegated to the Committee by the Plan or by the Board shall be binding on all
persons.
4. ELIGIBLE EMPLOYEES. All present and future regular full-time and part-time
employees of the Company and subsidiaries of the Company that are permitted by
the Company to participate in the Plan shall be eligible to participate in the
Plan, provided that each of such employees (a) has been employed by the Company
or a participating subsidiary for at least ninety (90) days, (b) has attained
the age of majority in the Participant's state of residence, and (c) does not
own, immediately after the right is granted, stock possessing five percent (5%)
or more of the total combined voting power or value of all classes of capital
stock of the Company. In determining stock ownership under this Section 4, the
rules of Section 424(d) of the Code shall apply and stock that an employee may
purchase under outstanding rights shall be treated as stock owned by the
employee. The Committee shall determine which employees are eligible to
participate in the Plan in accordance with the standards set forth in this
Section 4. Employees eligible to participate in this Plan pursuant to this
Section 4 are hereinafter referred to as "Eligible Employees."
5. ELECTION TO PARTICIPATE AND PAYROLL DEDUCTIONS. An Eligible Employee may
elect to participate in the Plan at any time by correctly completing and
returning to the Company an enrollment form authorizing a specified payroll
deduction to be made from each subsequent paycheck for the purchase of Common
Stock under this Plan (the "Payroll Deduction"). The minimum allowable Payroll
Deduction is $3.00 per week and the maximum allowable Payroll Deduction is
$400.00 per week. All Payroll Deductions shall be made regularly and in equal
amounts and shall be credited on the records of the Company in the name of the
Eligible Employee. Such credit shall constitute only a convenient bookkeeping
entry by the Company and no interest will be paid or due on any money paid into
this Plan or credited to such Eligible Employee. Employees who elect to
participate in the Plan are referred to herein as "Participating Employees."
A Participating Employee will be deemed to have elected to participate
and to have authorized the same Payroll Deduction for each subsequent Offering
provided that he or she is eligible to participate during each such subsequent
Offering. A Participating Employee may at any time increase or decrease his or
her Payroll Deduction by filing the required form with the Company, which
increase or decrease shall become effective as soon as practicable. A
Participating Employee may at any time terminate his or her Payroll Deduction
and thereby cease to be a Participating Employee by notifying the Benefits
Services Department of the Company in writing
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subject to such notice and timing requirements as may be reasonably required to
effect such termination. "Investment Date" shall mean the second and fourth
Friday of each month, or, if such Friday is a legal holiday, the next preceding
day that is not a legal holiday. Any employee who has terminated his or her
Payroll Deduction and thereby ceased to be a Participating Employee may, if then
eligible, elect to participate in a subsequent offering. Employees on leave of
absence who are eligible to participate in this Plan pursuant to Section 4
hereof shall be permitted to enroll and participate in this Plan in accordance
with this Section 5 and payroll deductions with respect to such employees shall
commence as of the first pay period that commences coincident with or after the
recommencement of employment.
6. LIMITATION OF NUMBER OF SHARES THAT AN EMPLOYEE MAY PURCHASE. No right to
purchase Shares under this Plan shall permit an employee to purchase stock under
all employee stock purchase plans (as defined in Section 423 of the Code) of the
Company at a rate which in aggregate exceeds $25,000 of fair market value of
such stock (determined at the time the right is granted) for each calendar year
in which the right is outstanding at any time.
7. PURCHASE PRICE. The purchase price for each Share for each Investment Date
shall be eighty-five percent (85%) of the fair market value of such share on the
Investment Date. "Fair market value" for each share of Common Stock shall be (a)
the closing sale price reported on any domestic stock exchange on which the
Common Stock is listed on the determining date, or if the Common Stock is not
traded on such an exchange on such date, (b) the closing sale price as quoted on
the National Association of Securities Dealers Automated Quotation System on the
determining date, or if the Common Stock is not traded on such system on such
date, (c) such other amount as may be determined by the Committee by any fair
and reasonable means.
8. METHOD OF PURCHASE AND INVESTMENT ACCOUNTS. Each Participating Employee shall
be granted the right to purchase on each Investment Date the number of whole and
fractional shares of Common Stock determined by dividing the amount of his or
her aggregate Payroll Deductions not theretofore invested by the purchase price
determined in accordance with Section 7 hereof. Each Participating Employee
having aggregate Payroll Deductions not theretofore invested on an Investment
Date shall be deemed, without any further action, to have elected to purchase
with such Payroll Deductions the number of whole and fractional Shares that he
or she has the right to purchase at the purchase price on that Investment Date.
A Participating Employee who has purchased the maximum number of Shares to which
he or she is entitled pursuant to Section 4, Section 6 or Section 17 hereof
shall be refunded any excess amount. All whole and fractional Shares purchased
shall be allocated to separate investment accounts ("Investment Accounts")
maintained by such brokerage house, investment banking firm, commercial bank or
other such similar institution as may be selected by the Board of Directors for
the Participating Employees. All dividends paid with respect to the whole and
fractional Shares in a Participating Employee's Investment Account shall be
credited to his or her Investment Account.
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9. ISSUANCE OF SHARE CERTIFICATES. Stock certificates for any of the whole
Shares in a Participant's Investment Account will be issued to such Participant
only upon receipt by the Committee (or its agent) of such Participant's written
request, which request shall indicate the number of Shares (up to a maximum of
the number of full Shares in such Participant's Investment Account) for which
the Participant wishes to receive stock certificates. Such request shall be made
on a form at the time prescribed by the Committee (or its agent) and shall be
accompanied by payment of any fee that may be charged by the Committee's agent
for such issuance. The appropriate Share certificates shall be issued to such
Participant as soon as practicable.
10. VOTING RIGHTS. Holders of Shares under the Plan shall have the same rights
to vote on matters affecting the Company as do other shareholders of the
Company. If any such matter is submitted to the shareholders for a vote, then
following the record date for any shareholder meeting at which such vote is to
occur the Committee (or its agent) shall advise the Company's transfer agent of
the number of Participants for whom Shares are held in Investment Accounts on
such record date, and the Company's transfer agent shall furnish the Committee
(or its agent) with sufficient sets of proxy soliciting materials for one set to
be delivered to each such Participant. The Committee (or its agent) shall
forward one such set to each Participant for whom allocated Shares are being
held, and shall request voting instructions from each such Participant. Upon
receipt of such voting instructions, the Committee (or its agent) shall vote
each Participant's Shares as instructed. If no voting instructions are received
from a Participant, the Committee or the Officers of the Company shall have the
authority to vote any Share allocated to such Participant's Investment Account
as they see fit in their discretion.
11. RIGHTS NOT TRANSFERABLE. Rights granted under the Plan may not be
transferred by a Participating Employee other than by will or the laws of
descent and distribution and may be exercised during the lifetime of the person
to whom they are granted only by such person. Until certificates for Shares are
issued, no person shall have any right to sell, assign, mortgage, pledge,
hypothecate or otherwise encumber any of such Shares.
12. EXPENSES. The Company or the Covered Entity, as applicable, shall bear all
costs associated with the administration of the Plan and the purchase of Shares.
No expenses attributable to a Participant's sale of Shares, however, shall be
borne by the Company or the Covered Entity.
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<PAGE> 59
13. ADJUSTMENT FOR CHANGES IN COMMON STOCK. In order to prevent the dilution or
enlargement of rights granted under this Plan, in the event of a reorganization,
recapitalization, stock split, stock dividend, combination of shares, merger,
consolidation or other change in the Common Stock, the Committee shall make
appropriate changes in the number and type of Shares authorized by this Plan,
the number and type of Shares covered by, or with respect to which payments are
measured under, outstanding rights and the prices specified therein, subject to
the limitations of Section 424 of the Code.
14. DEATH, RETIREMENT, AND TERMINATION. In the event of a Participating
Employee's death, retirement or termination of employment, participation in the
Plan shall cease and the amount of his or her aggregate Payroll Deductions not
theretofore invested shall be invested on the next subsequent Investment Date.
15. RECORDS AND REPORTS TO PARTICIPANTS.
(a) The Committee shall cause to be maintained true and
accurate books of account and records of all transactions under the
Plan. On or before July 31 of each year, the Committee shall file with
the Treasurer of the Company a written report setting forth all
receipts, disbursements and other transactions effected on behalf of
the Plan during the preceding Plan year, including a description of all
Shares purchased and the cost of all such Shares.
(b) An annual report shall be provided to each Participant
within 90 days after the close of each Plan Year, showing for the Plan
Year just ended:
(i) the aggregate amount of Payroll Deductions for
such Participant;
(ii) the aggregate amount of cash dividends credited
to the Cash Account of such Participant;
(iii) the number of Shares acquired for the
Investment Account of such Participant (including the amounts
of Share distributions or Share splits so allocated or
credited);
(iv) the average cost per Share of Shares purchased
for such Participant;
(v) the number of Shares, if any, for which
certificates were delivered to such Participant; and
(vi) the beginning and ending balances in the
Investment Account of such Participant.
16. AMENDMENT OF THE PLAN. The Committee may at any time or from time to time
amend this Plan in any respect, provided, that this Plan may not be amended in
any
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way that will cause rights issued under it to fail to meet the requirements for
employee stock purchase plans as defined in Section 423 of the Code.
17. TERMINATION OF THE PLAN. This Plan and all rights of employees hereunder may
be suspended or terminated at any time at the discretion of the Board of
Directors and shall terminate on the Investment Date that Participating
Employees become entitled to purchase a number of Shares greater than the number
of reserved Shares available for purchase pursuant to Section 2 hereof. In the
event that the Plan terminates because there are an insufficient number of
Shares available for purchase, reserved Shares remaining as of the termination
date shall be issued to Participating Employees on a pro rata basis.
18. EFFECTIVE DATE, PLAN YEAR AND APPROVAL OF STOCKHOLDERS. This Plan shall be
effective as of July 1, 1999. The Plan Year shall be the calendar year; provided
that the first Plan Year shall begin July 1, 1999 and end on December 31, 1999.
This Plan is subject to the approval of the Company's stockholders at the next
annual meeting of stockholders or at any special meeting of stockholders for
which one of the purposes shall be to act upon this Plan.
19. INDEMNIFICATION. No member of the Committee is liable, in the absence of bad
faith, for any act or omission with respect to his or her service on the
Committee under the Plan. Service on the Committee constitutes service as a
director of the Company and members of the Committee are entitled to
indemnification and reimbursement as directors of the Company for any action or
any failure to act in connection with service on the Committee to the fullest
extent provided for at any time in the Company's Certificate of Incorporation
and By-Laws, or in any insurance policy or other agreement intended for the
benefit of the Company's directors.
20. COMPLIANCE WITH LAWS AND OTHER REGULATIONS. Each right under this Plan shall
be subject to the requirement that if at any time the Committee determines that
the listing, registration or qualification of the shares of Common Stock subject
to this Plan upon any securities exchange or under any federal or state
securities or other law or regulation, or that the consent or approval of any
governmental regulatory body, is necessary or desirable as a condition to, or in
connection with, the granting of such right or the issuance or purchase of
shares thereunder, no such right may be exercised in whole or in part unless
such listing, registration, qualification, consent or approval shall have been
effected or obtained free of any conditions not acceptable to the Committee and,
the holder of the right will supply the Company with such certificates,
representations and information as the Company shall request and shall otherwise
cooperate with the Company in obtaining such listing, registration,
qualification, consent or approval.
* * * * * *
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