Exhibit 10.3


 


Staples, Inc.


Executive Officer Incentive Plan


Fiscal Years 2008 - 2012


 


I.     Summary and Objectives


 


Staples, Inc.
(“Staples”) has developed this Executive Officer Incentive Plan (the “Incentive
Plan”) to provide opportunities for Plan Participants (as defined below) to
earn financial rewards for their role in ensuring that Staples meets its annual
performance targets. The Incentive Plan aims to align the interests of the Plan
Participants with those of our shareholders. Bonus awards are based on actual
results measured against pre-established company financial objectives. Bonus
awards are intended to provide a reward to Plan Participants and supplement the
base salary program.


 


II.    Term of Plan


 


The Incentive
Plan will cover five fiscal years, beginning with the 2008 fiscal year
(beginning February 3, 2008) and ending with the 2012 fiscal year (ending February 2,
2013). Each such fiscal year is referred to herein as a “Plan Year”.


 


III.  Eligibility


 


Provided that
the Compensation Committee of the Board of Directors (the “Committee”)
determines that Staples meets the applicable performance objectives for a
particular Plan Year, as set forth below, and all other eligibility
requirements are met, the following guidelines will be used to determine Plan
Participants’ bonus award eligibility. Except as set forth in Section III. D
with respect to a Plan Participant’s death, bonus awards are not guaranteed and
will not be paid unless Staples meets the required objectives set forth in the
Incentive Plan and the Committee authorizes the payment of bonus awards.


 


A.    General Eligibility
Requirements


 


Each executive
officer of Staples, within the meaning of the rules and regulations
promulgated by the Securities and Exchange Commission, will be eligible to participate
in the Incentive Plan, except that an executive officer whose employment
terminates prior to the end of a Plan Year, other than as a result of permanent
disability, death or retirement, will not be eligible to receive a bonus award
under the Incentive Plan for that Plan Year (each a “Plan Participant”).


 


B.    Changes in Position


 


A Plan
Participant who changes from one position to another will be eligible for a
prorated bonus award as follows:


 


1.     A Plan Participant who
transfers from an Incentive Plan eligible position into a position eligible for
another bonus plan is eligible for a prorated bonus award under the Incentive
Plan based on the number of days the associate was a Plan Participant during
the applicable Plan Year. The associate’s eligibility for a bonus for the new
position, if any, will be determined in accordance with any applicable bonus
plan for that position.


 


2.     A
Plan Participant who changes from one Incentive Plan eligible position to
another, through a promotion, transfer or demotion, is eligible for a prorated
bonus award for each position based on the number of days the associate held
such position during the applicable Plan Year.


 


C.    Leaves of Absence


 


A Plan
Participant who is on a company-approved leave of absence in excess of 90 days
during a Plan Year will not be eligible for a bonus award for the portion of
his or her leave over 90 days unless otherwise approved by the Committee.


 


1

















 


D.    Retirement, Disability or
Death


 


Retirement: 
If a Plan Participant terminates his or her employment after attaining
age 55 and if at the time of such termination of employment the sum of the
years of service (as determined by the Board of Directors of Staples) completed
by the associate plus the associate’s age is greater than or equal to 65, the
associate will be eligible for a prorated bonus award based on the number of
days the associate was employed by Staples during the applicable Plan Year.


 


Disability: 
If a Plan Participant’s employment is terminated due to permanent
disability before the end of the Plan Year, the associate will be eligible for
a prorated bonus award based on the number of days the associate was employed
by Staples during the applicable Plan Year.


 


In each case
described above, no prorated bonus will be paid unless all of the applicable
requirements set forth in the Incentive Plan are met, including without
limitation that the Committee determines that Staples meets the applicable
performance objectives for a particular Plan Year and authorizes the payment of
bonus awards.


 


Death: 
If a Plan Participant’s employment is terminated due to death before the
end of the Plan Year, 100% of the Plan Participant’s Target Award for such Plan
Year will be paid within 60 days of such termination; provided, that if
such termination occurs during the Plan Participant’s first Plan Year under the
Incentive Plan, the bonus award will be prorated based on the number of days
the associate was employed by Staples during the applicable Plan Year, calculated
as if the associate had been employed by Staples through the end of the Plan
Year.


 


E.     Employment and Compliance


 


As described
under “General Eligibility Requirements,” and except as set forth in Section III. D,
a Plan Participant must be employed as of the last day of the Plan Year in
order to be eligible for a bonus. If the employment of a Plan Participant
terminates during a Plan Year for any reason other than retirement (as defined
above), permanent disability or death, no bonus will be paid to the Plan
Participant for that Plan Year.


 


In addition, a
Plan Participant must comply with all applicable state and federal regulations
and Staples’ policies (the “Compliance Requirements”) in order to be eligible
to receive a bonus award under the Incentive Plan. A Plan Participant who is
terminated after the end of a Plan Year, but before bonus awards for such Plan
Year are distributed, for violating any of the Compliance Requirements will not
be eligible to receive a bonus award for such Plan Year.


 


IV.   The Plan


 


Within
90 days after the beginning of each Plan Year, the Committee will
establish specific performance objectives for the payment of bonus awards for
that Plan Year. The performance objectives for each Plan Year will be based on
one or more of the following measures: sales, earnings per share, return on net
assets, return on equity and customer service levels. These performance
objectives are intended to establish the benchmark of success for Staples. The
Committee may determine that special one-time or extraordinary gains or losses,
including without limitation as a result of certain acquisitions or
divestitures and changes in accounting principles, should or should not be
included in determining whether such performance objectives have been met. In
addition, customer service target levels will be based on pre-determined tests
of customer service levels, including without limitation scores on blind test (“mystery”)
shopping, customer comment card statistics, customer relations statistics
(e.g., number of customer complaints), delivery response levels or customer
satisfaction surveys conducted by a third party.


 


For each Plan
Year, a specified percentage (which may vary from Plan Year to Plan Year) of
each Target Award (as defined below) will be based upon each of the performance
objectives selected by the Committee for that Plan Year. For each of the
performance objectives, a specified percentage of the portion of the Target
Award that is based on that particular performance objective will be paid based
on the level of performance achieved. Each performance objective has a
threshold performance level that must be achieved for any of the bonus award to
be paid for such objective. Except as set forth in Section III. D
with respect to a Plan Participant’s death, no bonus will be paid under the
Incentive Plan for a Plan Year if the minimum earnings per share goal
established for such Plan Year is not achieved, regardless of whether any other
performance objective is achieved. The maximum bonus award payable to an
executive officer for any Plan Year is $4 million. In addition, the
Committee presently intends to limit bonus awards to 200% of a Plan Participant’s
Target Award.


 


2

















 


V.   Payment Calculations


 


Each Plan
Participant will have a target bonus award (a “Target Award”) for each Plan
Year. Target Awards will be expressed as a percentage of the actual base salary
paid to the Plan Participant during the Plan Year. The percentages will be
determined by the Committee based on the Plan Participant’s job level and
responsibilities and may vary for different officers or business units. At the
end of the Plan Year, the Committee shall determine the amount, if any, to be
paid to each Plan Participant based on the extent that the performance goals
established for the Plan Participant were achieved and shall authorize payment
by Staples to the Plan Participant; provided that the Committee may use
negative discretion to decrease, but not increase, the amount of any bonus
award otherwise payable to a Plan Participant.


 


Any bonus
checks will be distributed to Plan Participants within 21/2 months following the end of the
applicable Plan Year.


 


VI.  Plan Administration


 


A.    Administration


 


The Incentive
Plan will be administered by the Committee. The Committee will have broad
authority for: determining target bonuses and selecting performance objectives,
as described below; for adopting rules and regulations relating to the
Incentive Plan; and for making decisions and interpretations regarding the
provisions of the Incentive Plan, including determining to what extent, if any,
specific items are to be counted in the relevant financial measures for any
particular business, the satisfaction of performance objectives and the payment
of awards under the Incentive Plan.


 


B.    Employment at Will


 


The Incentive
Plan does not create an express or implied contract of employment between
Staples and a Plan Participant. Both Staples and the Plan Participants retain
the right to terminate the employment relationship at any time and for any
reason.


 


C.    Bonus Provisions (Amendments
and Termination)


 


Bonuses are
not earned or vested until actual payments are made. Staples reserves the right
at any time prior to actual payment of bonus awards to amend, terminate or
discontinue the Incentive Plan in whole or in part whenever it is considered
necessary.


 


The Incentive
Plan may be amended or terminated by either the Board of Directors or the
Committee, provided that (1) no amendment or termination of the Incentive
Plan after the end of a Plan Year may adversely affect the rights of Plan
Participants with respect to their bonus awards for that Plan Year, and (2) no
amendment which would require stockholder approval under Section 162(m) of
the Internal Revenue Code may be effected without such stockholder approval.


 


D.    Rights are Non-Assignable


 


Neither the
Plan Participant nor any beneficiary nor any other person shall have any right
to assign the right to receive payments hereunder, in whole or in part, which
payments are non-assignable and non-transferable, whether voluntarily or
involuntarily.


 


E.     Withholding


 


All required
deductions, including without limitation with respect to federal, state or
local taxes, will be withheld from the bonus awards prior to distribution.


 


3