Exhibit 10.1


 


COMMERCIAL
PAPER DEALER AGREEMENT

4(2) PROGRAM


 


between


 


STAPLES,
INC., as Issuer


 


and


 


LEHMAN
BROTHERS INC., as Dealer


 


Concerning Notes to be issued pursuant to an
Issuing and Paying Agency Agreement dated as of June 9, 2008 between the
Issuer and LaSalle Bank, as Issuing and Paying Agent


 


Dated as
of


June 9,
2008


 

















 


Commercial Paper Dealer
Agreement


4(2) Program


 


This agreement (as amended, supplemented or otherwise modified and in
effect from time to time, the “Agreement”) sets forth the understandings
between the Issuer and the Dealer, each named on the cover page hereof, in
connection with the issuance and sale by the Issuer of its short-term
promissory notes (the “Notes”) through the Dealer.


 


Certain terms used in this Agreement are defined in Section 6
hereof.


 


The Addendum to this Agreement, and any Annexes or Exhibits described
in this Agreement or such Addendum, are hereby incorporated into this Agreement
and made fully a part hereof.


 


1.     Offers, Sales and Resales of
Notes.


 


1.1       While (i) the Issuer has and shall
have no obligation to sell the Notes to the Dealer or to permit the Dealer to
arrange any sale of the Notes for the account of the Issuer, and (ii) the
Dealer has and shall have no obligation to purchase the Notes from the Issuer
or to arrange any sale of the Notes for the account of the Issuer, the parties
hereto agree that in any case where the Dealer purchases Notes from the Issuer,
or arranges for the sale of Notes by the Issuer, such Notes will be purchased
or sold by the Dealer in reliance on the representations, warranties, covenants
and agreements of the Issuer contained herein or made pursuant hereto and on
the terms and conditions and in the manner provided herein.


 


1.2       So long as this Agreement shall remain in effect, and
in addition to the limitations contained in Section 1.7 hereof, the Issuer
shall not, without the consent of the Dealer, offer, solicit or accept offers
to purchase, or sell, any Notes except (a) in transactions with one or
more dealers which may from time to time after the date hereof become dealers
with respect to the Notes by executing with the Issuer one or more agreements
which contain provisions substantially identical to those contained in Section 1
of this Agreement, of which the Issuer hereby undertakes to provide the Dealer
prompt notice or (b) in transactions with the other dealers listed on the
Addendum hereto, which are executing agreements with the Issuer which contain
provisions substantially identical to Section 1 of this Agreement contemporaneously
herewith.  In no event shall the Issuer
offer, solicit or accept offers to purchase, or sell, any Notes directly on its
own behalf in transactions with persons other than broker-dealers as
specifically permitted in this Section 1.2.


 


1.3       The Notes shall be in a minimum denomination of
$250,000 or integral multiples of $1,000 in excess thereof, will bear such
interest rates, if interest bearing, or will be sold at such discount from
their face amounts, as shall be agreed upon by the Dealer and the Issuer, shall
have a maturity not exceeding 397 days from the date of issuance and may have
such terms as are specified in Exhibit C hereto or the Private Placement
Memorandum.  The Notes shall not contain
any provision for extension, renewal or automatic “rollover.”


 


1.4       The authentication and issuance of, and payment for,
the Notes shall be effected in accordance with the Issuing and Paying Agency
Agreement, and the Notes shall be either individual physical certificates or
book-entry notes evidenced by one or more master notes (each, a “Master Note”)
registered in the name of The Depository Trust Company (“DTC”) or its nominee,
in the form or forms annexed to the Issuing and Paying Agency Agreement.


 


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1.5       If the Issuer and the Dealer shall agree on the terms
of the purchase of any Note by the Dealer or the sale of any Note arranged by
the Dealer (including, but not limited to, agreement with respect to the date
of issue, purchase price, principal amount, maturity and interest rate or
interest rate index and margin (in the case of interest-bearing Notes) or
discount thereof (in the case of Notes issued on a discount basis), and
appropriate compensation for the Dealer’s services hereunder) pursuant to this
Agreement, the Issuer shall cause such Note to be issued and delivered in
accordance with the terms of the Issuing and Paying Agency Agreement and
payment for such Note shall be made by the purchaser thereof, either directly
or through the Dealer, to the Issuing and Paying Agent, for the account of the
Issuer.  Except as otherwise agreed, in
the event that the Dealer is acting as an agent and a purchaser shall either
fail to accept delivery of or make payment for a Note on the date fixed for
settlement, the Dealer shall promptly notify the Issuer, and if the Dealer has
theretofore paid the Issuer for the Note, the Issuer will promptly return such
funds to the Dealer against its return of the Note to the Issuer, in the case
of a certificated Note, and upon notice of such failure in the case of a
book-entry Note.  If such failure
occurred for any reason other than default by the Dealer, the Issuer shall
reimburse the Dealer on an equitable basis for the Dealer’s loss of the use of
such funds for the period such funds were credited to the Issuer’s account.


 


1.6       All offers and sales of the Notes by the Issuer shall
be effected pursuant to the exemption from the registration requirements of the
Securities Act provided by Section 4(2) thereof, which exempts transactions
by an issuer not involving any public offering. 
The Dealer and the Issuer hereby establish and agree to observe the
following procedures in connection with offers, sales and subsequent resales or
other transfers of the Notes:


 


(a)   Offers and sales of the Notes by or
through the Dealer shall be made only to: (i) investors reasonably
believed by the Dealer to be Qualified Institutional Buyers, Institutional
Accredited Investors or Sophisticated Individual Accredited Investors and (ii) non-bank
fiduciaries or agents that will be purchasing Notes for one or more accounts,
each of which is reasonably believed by the Dealer to be an Institutional
Accredited Investor or Sophisticated Individual Accredited Investor.


 


(b)   Resales and other transfers of the Notes
by the holders thereof shall be made only in accordance with the restrictions
in the legend described in clause (e) below.


 


(c)   No general solicitation or general
advertising shall be used in connection with the offering of the Notes.  Without limiting the generality of the
foregoing, without the prior written approval of the Dealer, the Issuer shall
not issue any press release or place or publish any “tombstone” or other
advertisement relating to the Notes.


 


(d)   No sale of Notes to any one purchaser shall
be for less than $250,000 principal or face amount, and no Note shall be issued
in a smaller principal or face amount. 
If the purchaser is a non-bank fiduciary acting on behalf of others,
each person for whom such purchaser is acting must purchase at least $250,000
principal or face amount of Notes.


 


(e)   Offers and sales of the Notes by the
Issuer through the Dealer acting as agent for the Issuer shall be made in
accordance with Rule 506 under the Securities Act, and shall be subject to
the restrictions described in the legend appearing on Exhibit A
hereto.  A legend substantially to the
effect of such Exhibit A shall appear as part of the Private Placement 


 


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Memorandum used in connection with offers and sales of Notes hereunder,
as well as on each individual certificate representing a Note and each Master
Note representing book-entry Notes offered and sold pursuant to this Agreement.


 


(f)    The Dealer shall furnish or shall have
furnished to each purchaser of Notes for which it has acted as the Dealer a
copy of the then-current Private Placement Memorandum unless such purchaser has
previously received a copy of the Private Placement Memorandum as then in
effect.  The Private Placement Memorandum
shall expressly state that any person to whom Notes are offered shall have an
opportunity to ask questions of, and receive information from, the Issuer and
the Dealer and shall provide the names, addresses and telephone numbers of the
persons from whom information regarding the Issuer may be obtained.


 


(g)   The Issuer agrees, for the benefit of the
Dealer and each of the holders and prospective purchasers from time to time of
the Notes that, if at any time the Issuer shall not be subject to Section 13
or 15(d) of the Exchange Act, the Issuer will furnish, upon request and at
its expense, to the Dealer and to holders and prospective purchasers of Notes
information required by Rule 144A(d)(4)(i) in compliance with Rule 144A(d).


 


(h)   In the event that any Note offered or to
be offered by the Dealer would be ineligible for resale under Rule 144A,
the Issuer shall immediately notify the Dealer (by telephone, confirmed in
writing) of such fact and shall promptly prepare and deliver to the Dealer an
amendment or supplement to the Private Placement Memorandum describing the
Notes that are ineligible, the reason for such ineligibility and any other
relevant information relating thereto.


 


(i)    The Issuer represents that it is not
currently issuing commercial paper in the United States market in reliance upon
the exemption provided by Section 3(a)(3) of the Securities Act.  The Issuer agrees that, if it shall issue
commercial paper after the date hereof in reliance upon such exemption (a) the
proceeds from the sale of the Notes will be segregated from the proceeds of the
sale of any such commercial paper by being placed in a separate account; (b) the
Issuer will institute appropriate corporate procedures to ensure that the
offers and sales of notes issued by the Issuer pursuant to the Section 3(a)(3) exemption
are not integrated with offerings and sales of Notes hereunder; and (c) the
Issuer will comply with each of the requirements of Section 3(a)(3) of
the Securities Act in selling commercial paper or other short-term debt
securities other than the Notes in the United States.  The Dealer agrees with the Issuer not to
offer or sell any Notes in a manner that might call into question the
availability of the private offering exemption contained in Section 4(2) of
the Securities Act and Rule 144A thereunder, it being agreed that the
foregoing procedures do not call into question the availability of such
exemption.


 


1.7           The Issuer hereby represents and warrants
to the Dealer, in connection with offers, sales and resales of Notes, as follows:


 


(a)   The Issuer hereby confirms to the Dealer
that (except as permitted by Section 1.6(i)) within the preceding six
months neither the Issuer nor any person other than the Dealer or the other
dealers referred to in Section 1.2 hereof acting on behalf of the Issuer
has offered or sold any Notes, or any substantially similar security of the
Issuer (including, without limitation, medium-term notes issued by the Issuer),
to, or solicited offers to buy any such security from, 


 


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any person other than the Dealer or the other dealers referred to in Section 1.2
hereof.  The Issuer also agrees that
(except as permitted by Section 1.6(i)), as long as the Notes are being
offered for sale by the Dealer and the other dealers referred to in Section 1.2
hereof as contemplated hereby and until at least six months after the offer of
Notes hereunder has been terminated, neither the Issuer nor any person other
than the Dealer or the other dealers referred to in Section 1.2 hereof
(except as contemplated by Section 1.2 hereof) will offer the Notes or any
substantially similar security of the Issuer for sale to, or solicit offers to
buy any such security from, any person other than the Dealer or the other
dealers referred to in Section 1.2 hereof, it being understood that such
agreement is made with a view to bringing the offer and sale of the Notes
within the exemption provided by Section 4(2) of the Securities Act
and Rule 506 thereunder and shall survive any termination of this
Agreement.  The Issuer hereby represents
and warrants that it has not taken or omitted to take, and will not take or
omit to take, any action that would cause the offering and sale of Notes
hereunder to be integrated with any other offering of securities, whether such
offering is made by the Issuer or some other party or parties, under
circumstances that would cause the offering and sale of the Notes by the Issuer
to fail to be exempt under Section 4(2) of the Securities Act.


 


(b)   The Issuer represents and agrees that the
proceeds of the sale of the Notes are not currently contemplated to be used for
the purpose of buying, carrying or trading securities within the meaning of
Regulation T and the interpretations thereunder by the Board of Governors of
the Federal Reserve System.  In the event
that the Issuer determines to use proceeds from the sale of the Notes for the
purpose of buying, carrying or trading securities, whether in connection with
an acquisition of another company or otherwise, the Issuer shall give the
Dealer at least three business days’ prior written notice to that effect.  The Issuer shall also give the Dealer prompt
notice of the actual date that it commences to purchase securities with the
proceeds of the Notes.  Thereafter, in
the event that the Dealer purchases Notes as principal and does not resell such
Notes on the day of such purchase, to the extent necessary to comply with
Regulation T and the interpretations thereunder, the Dealer will sell such
Notes either (i) only to offerees it reasonably believes to be Qualified
Institutional Buyers or to Qualified Institutional Buyers it reasonably
believes are acting for other Qualified Institutional Buyers, in each case in
accordance with Rule 144A or (ii) in a manner which would not cause a
violation of Regulation T and the interpretations thereunder.


 


2.     Representations and
Warranties of Issuer.


 


The Issuer
represents and warrants that:


 


2.1       The Issuer is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has all the requisite power and authority
to execute, deliver and perform its obligations under the Notes, this Agreement
and the Issuing and Paying Agency Agreement.


 


2.2       This Agreement and the Issuing and Paying
Agency Agreement have been duly authorized, executed and delivered by the
Issuer and constitute legal, valid and binding obligations of the Issuer
enforceable against the Issuer in accordance with their terms, subject to
applicable bankruptcy, insolvency and similar laws affecting creditors’ rights
generally, and subject, as to enforceability, to general principles of equity
(regardless of whether enforcement is sought in a proceeding in equity or at
law).


 


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2.3       The Notes have been duly authorized, and
when issued as provided in the Issuing and Paying Agency Agreement, will be
duly and validly issued and will constitute legal, valid and binding
obligations of the Issuer enforceable against the Issuer in accordance with
their terms, subject to applicable bankruptcy, insolvency and similar laws
affecting creditors’ rights generally, and subject, as to enforceability, to
general principles of equity (regardless of whether enforcement is sought in a
proceeding in equity or at law).


 


2.4       Assuming compliance by the Dealer with
the procedures applicable to it set forth in Section 1 hereof, the offer
and sale of the Notes in the manner contemplated hereby do not require
registration of the Notes under the Securities Act, pursuant to the exemption
from registration contained in Section 4(2) thereof, and no indenture
in respect of the Notes is required to be qualified under the Trust Indenture
Act of 1939, as amended.


 


2.5       The Notes will rank at least pari passu
with all other unsecured and unsubordinated indebtedness of the Issuer.


 


2.6       2.4       Assuming
compliance by the Dealer with the procedures applicable to it set forth in Section 1
hereof, no consent or action of, or filing or registration with, any
governmental or public regulatory body or authority, including the SEC, is
required to authorize, or is otherwise required in connection with the
execution, delivery or performance of, this Agreement, the Notes or the Issuing
and Paying Agency Agreement, except as may be required by the securities or
Blue Sky laws of the various states in connection with the offer and sale of
the Notes.


 


2.7       Neither the execution and delivery of
this Agreement and the Issuing and Paying Agency Agreement, nor the issuance of
the Notes in accordance with the Issuing and Paying Agency Agreement, nor the
fulfillment of or compliance with the terms and provisions hereof or thereof by
the Issuer, will (i) result in the creation or imposition of any mortgage,
lien, charge or encumbrance of any nature whatsoever upon any of the properties
or assets of the Issuer, or (ii) violate or result in a breach or a
default under any of the terms of the Issuer’s charter documents or by-laws,
any contract or instrument to which the Issuer is a party or by which it or its
property is bound, or any law or regulation, or any order, writ, injunction or
decree of any court or government instrumentality, to which the Issuer is
subject or by which it or its property is bound, which breach or default might
have a material adverse effect on the financial condition or operations of the
Issuer and its subsidiaries taken as a whole or the ability of the Issuer to
perform its obligations under this Agreement, the Notes or the Issuing and
Paying Agency Agreement.


 


2.8       Except as disclosed in the Company
Information, there is no litigation or governmental proceeding pending, or to
the knowledge of the Issuer threatened, against or affecting the Issuer or any
of its subsidiaries which might reasonably be expected to result in a material
adverse change in the financial condition or operations of the Issuer and its
subsidiaries taken as a whole or the ability of the Issuer to perform its
obligations under this Agreement, the Notes or the Issuing and Paying Agency
Agreement.


 


2.9       The Issuer is not an “investment company”
within the meaning of the Investment Company Act of 1940, as amended


 


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2.10     Neither the Private Placement Memorandum
nor the Company Information contains any untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they
were made, not misleading.


 


2.11     Each (a) issuance of Notes by the
Issuer hereunder and (b) amendment or supplement of the Private Placement
Memorandum shall be deemed a representation and warranty by the Issuer to the
Dealer, as of the date thereof, that, both before and after giving effect to
such issuance and after giving effect to such amendment or supplement, (i) the
representations and warranties given by the Issuer set forth in this Section 2
remain true and correct in all material respects on and as of such date as if
made on and as of such date, (ii) in the case of an issuance of Notes, the
Notes being issued on such date have been duly and validly issued and
constitute legal, valid and binding obligations of the Issuer, enforceable
against the Issuer in accordance with their terms, subject to applicable
bankruptcy, insolvency and similar laws affecting creditors’ rights generally
and subject, as to enforceability, to general principles of equity (regardless
of whether enforcement is sought in a proceeding in equity or at law), (iii) in
the case of an issuance of Notes, since the date of the most recent Private
Placement Memorandum, there has been no material adverse change in the
financial condition or operations of the Issuer and its subsidiaries taken as a
whole which has not been disclosed to the Dealer in writing and (iv) the
Issuer is not in default of any of its obligations hereunder, under the Notes
or the Issuing and Paying Agency Agreement.


 


3.     Covenants and Agreements of
Issuer.


 


The Issuer covenants and agrees that:


 


3.1     The Issuer will give the Dealer prompt
notice (but in any event prior to any subsequent issuance of Notes hereunder)
of any amendment to, modification of or waiver with respect to, the Notes or
the Issuing and Paying Agency Agreement, including a complete copy of any such
amendment, modification or waiver.


 


3.2     The Issuer shall, whenever there shall
occur any change in the financial condition or operations of the Issuer and its
subsidiaries taken as a whole or any development or occurrence in relation to
the Issuer that would have a material adverse effect on holders of the Notes or
potential holders of the Notes (including any downgrading or receipt of any
notice of intended downgrading in the rating accorded any of the Issuer’s
securities by any nationally recognized statistical rating organization which
has published a rating of the Notes), promptly, and in any event prior to any
subsequent issuance of Notes hereunder, notify the Dealer (by telephone,
confirmed in writing) of such change, development or occurrence.


 


3.3     The Issuer shall from time to time
furnish to the Dealer such information as the Dealer may reasonably request,
including, without limitation, any press releases or material provided by the
Issuer to any national securities exchange or rating agency, regarding (i) the
Issuer’s operations and financial condition, (ii) the due authorization
and execution of the Notes and (iii) the Issuer’s ability to pay the Notes
as they mature.


 


3.4     The Issuer will take all such action as
the Dealer may reasonably request to ensure that each offer and each sale of
the Notes will comply with any applicable state Blue Sky laws; provided, 


 


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however, that the Issuer shall not be obligated to
file any general consent to service of process or to qualify as a foreign
corporation in any jurisdiction in which it is not so qualified or subject
itself to taxation in respect of doing business in any jurisdiction in which it
is not otherwise so subject.


 


3.5     The Issuer will not be in default of any
of its obligations hereunder, under the Notes or under the Issuing and Paying
Agency Agreement, at any time that any of the Notes are outstanding.


 


3.6     The Issuer shall not issue Notes
hereunder until the Dealer shall have received (a) an opinion of counsel
to the Issuer, addressed to the Dealer, satisfactory in form and substance to
the Dealer, (b) a copy of the executed Issuing and Paying Agency Agreement
as then in effect, (c) a copy of resolutions adopted by the Board of
Directors of the Issuer, satisfactory in form and substance to the Dealer and
certified by the Secretary or similar officer of the Issuer, authorizing
execution and delivery by the Issuer of this Agreement, the Issuing and Paying
Agency Agreement and the Notes and consummation by the Issuer of the transactions
contemplated hereby and thereby, (d) prior to the issuance of any
book-entry Notes represented by a master note registered in the name of DTC or
its nominee, a copy of the executed Letter of Representations among the Issuer,
the Issuing and Paying Agent and DTC and of the executed master note, (e) prior
to the issuance of any Notes in physical form, a copy of such form (unless
attached to this Agreement or the Issuing and Paying Agency Agreement), (f) confirmation
of the then current rating assigned to the Notes by each nationally recognized
statistical rating organization then rating the Notes, and (g) such other
certificates, opinions, letters and documents as the Dealer shall have
reasonably requested.


 


3.7     The Issuer shall reimburse the Dealer for
all of the Dealer’s reasonable and documented out-of-pocket expenses [related
to this Agreement, including expenses incurred in connection with its
preparation and negotiation, and the transactions contemplated hereby
(including, but not limited to, the printing and distribution of the Private
Placement Memorandum), and, if applicable, for the reasonable fees and
out-of-pocket expenses] of the Dealer’s counsel.


 


4.     Disclosure.


 


4.1     The Private Placement Memorandum and its contents
(other than the Dealer Information) shall be the sole responsibility of the
Issuer.  The Private Placement Memorandum
shall contain a statement expressly offering an opportunity for each
prospective purchaser to ask questions of, and receive answers from, the Issuer
concerning the offering of Notes and to obtain relevant additional information
which the Issuer possesses or can acquire without unreasonable effort or
expense.


 


4.2     The Issuer agrees to
promptly furnish the Dealer the Company Information as it becomes available.


 


4.3     (a)  The Issuer further agrees to notify the
Dealer promptly upon the occurrence of any event relating to or affecting the
Issuer that would cause the Company Information then in existence to include an
untrue statement of a material fact or to omit to state a material fact
necessary in order to make the statements contained therein, in light of the
circumstances under which they are made, not misleading.  Notwithstanding the foregoing, the Issuer
shall have no obligation to so notify the Dealer if (i) the Issuer has
temporarily suspended offers and sales of the Notes and 


 


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has given the Dealer written notice of such suspension, or (ii) there
are no Notes outstanding.  In the event
that the Issuer wishes to resume offers and sales of the Notes, it shall (i) give
the Dealer notice thereof, and (ii) either (x) confirm that the then
current Private Placement Memorandum and Company Information do not violate the
representation contained in Section 3.11 
of this Agreement, or (y) if the representation contained in Section 2.11
cannot be made, provide to the Dealer an updated Private Placement Memorandum
that will permit the representation to be made. 
The Dealer agrees that, upon such notification, all solicitations and sales
of Notes shall be suspended.


 


(b)   In the event that the Issuer
gives the Dealer notice pursuant to Section 4.3(a) and the Dealer
notifies the Issuer that it then has Notes it is holding in inventory, (i) the
Issuer agrees promptly to supplement or amend the Private Placement Memorandum
so that the Private Placement Memorandum, as amended or supplemented, shall not
contain an untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading, and the Issuer shall
make such supplement or amendment available to the Dealer or (ii) if the
Issuer chooses not to promptly amend or supplement the Private Placement
Memorandum, the Issuer shall, if required by the Dealer, purchase from the
Dealer any such Notes held in inventory at a price equal to the face amount
thereof discounted on a ratable basis based on the Issuer’s market rate
reflecting the remaining period until maturity in relation to the original
term, provided that no commissions or fees will be paid to such Dealer in
connection with any such repurchase pursuant to this Section 4.3(b)(ii).


 


(c)   In the event that (i) the
Issuer gives the Dealer notice pursuant to Section 4.3(a), (ii) the
Dealer does not notify the Issuer that it is then holding Notes in inventory
and (iii) the Issuer chooses not to promptly amend or supplement the
Private Placement Memorandum in the manner described in clause (b) above,
then all solicitations and sales of Notes shall be suspended until such time as
the Issuer has so amended or supplemented the Private Placement Memorandum, and
made such amendment or supplement available to the Dealer.


 


(d)   Without
limiting the generality of Section 4.3(a), the Issuer shall review, amend
and supplement the Private Placement Memorandum on a periodic basis, but no
less than at least once annually, to incorporate current financial information
of the Issuer to the extent necessary to ensure that the information provided in
the Private Placement Memorandum is accurate and complete.


 


5.     Indemnification and
Contribution.


 


5.1     The Issuer will indemnify and hold
harmless the Dealer, each individual, corporation, partnership, trust,
association or other entity controlling the Dealer, any affiliate of the Dealer
or any such controlling entity and their respective directors, officers,
employees, partners, incorporators, shareholders, servants, trustees and agents
(hereinafter the “Indemnitees”) against any and all liabilities, penalties,
suits, causes of action, losses, damages, claims, costs and expenses
(including, without limitation, fees and disbursements of counsel) or judgments
of whatever kind or nature (each a “Claim”), imposed upon, incurred by or
asserted against the Indemnitees arising out of or based upon (i) any
allegation that the Private Placement Memorandum, the Company Information or
any information provided by the Issuer to the Dealer included (as of any
relevant time) or includes an untrue statement of a material fact or omitted
(as of any relevant time) or omits to state any material fact necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading or (ii) arising out of or based upon the breach by
the Issuer of any agreement, covenant or representation made 


 


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in or pursuant to this Agreement. 
This indemnification shall not apply to the extent that the Claim arises
out of or is based upon Dealer Information or that the Claim is determined by a
court of competent jurisdiction to have resulted from an Indemnitee’s gross
negligence or willful misconduct.


 


5.2     Provisions relating to claims made for
indemnification under this Section 5 are set forth on Exhibit B to this
Agreement.


 


5.3     In order to provide for just and
equitable contribution in circumstances in which the indemnification provided
for in this Section 5 is held to be unavailable or insufficient to hold
harmless the Indemnitees, although applicable in accordance with the terms of
this Section 5, the Issuer shall contribute to the aggregate costs
incurred by the Dealer in connection with any Claim in the proportion of the
respective economic interests of the Issuer and the Dealer; provided, however,
that such contribution by the Issuer shall be in an amount such that the
aggregate costs incurred by the Dealer do not exceed the aggregate of the
commissions and fees earned by the Dealer hereunder with respect to the issue
or issues of Notes to which such Claim relates. 
The respective economic interests shall be calculated by reference to
the aggregate proceeds to the Issuer of the Notes issued hereunder and the
aggregate commissions and fees earned by the Dealer hereunder.


 


6.     Definitions.


 


6.1     “Claim” shall have the meaning set forth
in Section 5.1.


 


6.2     “Company Information” at any given time
shall mean the Private Placement Memorandum (other than the Dealer Information)
together with, to the extent applicable, (i) the Issuer’s most recent
report on Form 10-K filed with the SEC and each report on Form 10-Q
or 8-K filed by the Issuer with the SEC since the most recent Form 10-K, (ii) the
Issuer’s most recent annual audited financial statements and each interim
financial statement or report prepared subsequent thereto, if not included in
item (i) above, (iii) the Issuer’s other publicly available recent
reports, including, but not limited to, any publicly available filings or
reports provided to its shareholders, (iv) any other information or
disclosure prepared pursuant to Section 4.3 hereof and (v) any
information prepared or approved by the Issuer for dissemination to investors
or potential investors in the Notes.


 


6.3     “Dealer Information” shall mean material
concerning the Dealer provided by the Dealer in writing expressly for inclusion
in the Private Placement Memorandum.


 


6.4     “Exchange Act” shall mean the U.S.
Securities Exchange Act of 1934, as amended.


 


6.5     “Indemnitee” shall have the meaning set
forth in Section 5.1.


 


6.6     “Institutional Accredited Investor” shall
mean an institutional investor that is an accredited investor within the
meaning of Rule 501 under the Securities Act and that has such knowledge
and experience in financial and business matters that it is capable of
evaluating and bearing the economic risk of an investment in the Notes,
including, but not limited to, a bank, as defined in Section 3(a)(2) of
the Securities Act, or a savings and loan association or other institution, as


 


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defined in Section 3(a)(5)(A) of the
Securities Act, whether acting in its individual or fiduciary capacity.


 


6.7       “Issuing and Paying Agency Agreement”
shall mean the issuing and paying agency agreement described on the cover page of
this Agreement, as such agreement may be amended or supplemented from time to
time.


 


6.8       “Issuing and Paying Agent” shall mean the
party designated as such on the cover page of this Agreement, as issuing
and paying agent under the Issuing and Paying Agency Agreement, or any successor
thereto in accordance with the Issuing and Paying Agency Agreement.


 


6.9       “Non-bank fiduciary or agent” shall mean
a fiduciary or agent other than (a) a bank, as defined in Section 3(a)(2) of
the Securities Act, or (b) a savings and loan association, as defined in Section 3(a)(5)(A) of
the Securities Act.


 


6.10     “Private Placement Memorandum” shall mean
offering materials prepared in accordance with Section 4 (including
materials referred to therein or incorporated by reference therein, if any)
provided to purchasers and prospective purchasers of the Notes, and shall
include amendments and supplements thereto which may be prepared from time to
time in accordance with this Agreement (other than any amendment or supplement
that has been completely superseded by a later amendment or supplement).


 


6.11     “Qualified Institutional Buyer” shall
have the meaning assigned to that term in Rule 144A under the Securities
Act.


 


6.12     “Rule 144A” shall mean Rule 144A
under the Securities Act.


 


6.13     “SEC” shall mean the U.S. Securities and
Exchange Commission.


 


6.14     “Securities Act” shall mean the U.S.
Securities Act of 1933, as amended.


 


6.15     “Sophisticated Individual Accredited
Investor” shall mean an individual who (a) is an accredited investor
within the meaning of Regulation D under the Securities Act and (b) based
on his or her pre-existing relationship with the Dealer, is reasonably believed
by the Dealer to be a sophisticated investor (i) possessing such knowledge
and experience (or represented by a fiduciary or agent possessing such
knowledge and experience) in financial and business matters that he or she is
capable of evaluating and bearing the economic risk of an investment in the
Notes and (ii) having not less than $5 million in investments (as defined,
for purposes of this section, in Rule 2a51-1 under the Investment Company
Act of 1940, as amended).


 


7.     General


 


7.1     Unless otherwise expressly provided
herein, all notices under this Agreement to parties hereto shall be in writing
and shall be effective when received at the address of the respective party set
forth in the Addendum to this Agreement.


 


7.2     This Agreement shall be governed by and
construed in accordance with the laws of the State of New York, without regard
to its conflict of laws provisions.


 


11

















 


7.3     (a) The Issuer agrees that any suit,
action or proceeding brought by the Issuer against the Dealer in connection
with or arising out of this Agreement or the Notes or the offer and sale of the
Notes shall be brought solely in the United States federal courts located in
the Borough of Manhattan or the courts of the State of New York located in the
Borough of Manhattan.  EACH OF THE DEALER
AND THE ISSUER WAIVES ITS RIGHT TO TRIAL BY JURY IN ANY SUIT, ACTION OR
PROCEEDING WITH RESPECT TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY.


 


(b) The Issuer hereby irrevocably accepts and submits to the
non-exclusive jurisdiction of each of the aforesaid courts in personam,
generally and unconditionally, for itself and in respect of its properties,
assets and revenues, with respect to any suit, action or proceeding in
connection with or arising out of this Agreement or the Notes or the offer and
sale of the Notes.


 


7.4     This Agreement may be terminated, at any
time, by the Issuer, upon one business day’s prior notice to such effect to the
Dealer, or by the Dealer upon one business day’s prior notice to such effect to
the Issuer.  Any such termination,
however, shall not affect the obligations of the Issuer under Sections 3.7, 4.3(a) and
(b), 5 and 7.3 hereof or the respective representations, warranties,
agreements, covenants, rights or responsibilities of the parties made or
arising prior to the termination of this Agreement.


 


7.5     This Agreement is not assignable by
either party hereto without the written consent of the other party; provided,
however, that the Dealer may assign its rights and obligations under this
Agreement to any affiliate of the Dealer.


 


7.6     This Agreement may be signed in any
number of counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.


 


7.7     This Agreement is for the exclusive
benefit of the parties hereto, and their respective permitted successors and assigns
hereunder, and shall not be deemed to give any legal or equitable right, remedy
or claim to any other person whatsoever.


 


7.8     The Issuer acknowledges and
agrees that in connection with this purchase and sale of the Notes or any other
services the Dealer may be deemed to be providing hereunder, notwithstanding
any preexisting relationship, advisory or otherwise, between the parties or any
oral representations or assurances previously or subsequently made by the
Dealer: (i) no fiduciary or agency relationship between the Issuer and any
other person, on the one hand, and the Dealer, on the other, exists; (ii) the
Dealer is not acting as advisor, expert or otherwise, to the Issuer, including,
without limitation, with respect to the determination of the  offering price of the Notes, and such
relationship between the Issuer, on the one hand, and the Dealer, on the other,
is entirely and solely commercial, based on arms-length negotiations; (iii) any
duties and obligations that the Dealer may have to the Issuer shall be limited
to those duties and obligations specifically stated herein; and (iv) the
Dealer and their respective affiliates may have interests that differ from
those of the Issuer.  The Issuer hereby
waives any claims that the Issuer may have against the Dealer with respect to
any breach of fiduciary duty in connection with the purchase and sale of the
Notes.


 


12

















 


IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date and year first above written.


 


	
  Staples, Inc., as Issuer

  	
   

  	
  Lehman Brothers Inc.,  as Dealer

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Ronald L. Sargent

  	
   

  	
  By:

  	
  /s/ J .Petrossian

  
	
   

  	
   

  	
   

  
	
  Name: Ronald L. Sargent

  	
   

  	
  Name: J .Petrossian

  
	
   

  	
   

  	
   

  
	
  Title: Chairman and Chief
  Executive Officer

  	
   

  	
  Title: SVP

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ John J. Mahoney

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Name: John J. Mahoney

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Title: Vice Chairman and
  Chief Financial Officer

  	
   

  	
   

  



 


13

















 


Addendum(1)


 


The following additional clauses shall apply to the Agreement and be
deemed a part thereof.


 


1.     The addresses of the respective parties for purposes
of notices under Section 7.1 are as follows:


 


For the Issuer:


 


Address:  500 Staples Drive,
Framingham, MA 01702


 


Attention:


 


Telephone number:


 


Fax number:


 


For the Dealer:


 


Address: 745 Seventh Avenue, 4th floor, New York, New York 10019-6801


 


Attention: Product Management-Commercial Paper


 


Telephone number: 212-526-0731


 


Fax number: 646-758-4641


 






(1)   There may be added to this Addendum any changes or
additions to the model Agreement, as agreed between the parties.


 


14

















 


Exhibit A


 


Form of
Legend for Private Placement Memorandum and Notes


 


THE  NOTES  HAVE  NOT  BEEN  REGISTERED  UNDER  THE  SECURITIES  ACT  OF  1933,  AS  AMENDED  (THE  “ACT”),  OR  ANY  OTHER  APPLICABLE  SECURITIES  LAW,  AND  OFFERS  AND  SALES  THEREOF  MAY  BE  MADE  ONLY  IN  COMPLIANCE  WITH  AN  APPLICABLE  EXEMPTION  FROM  THE  REGISTRATION  REQUIREMENTS  OF  THE  ACT  AND  ANY  APPLICABLE  STATE  SECURITIES  LAWS.  BY  ITS  ACCEPTANCE  OF  A  NOTE,  THE  PURCHASER  WILL  BE  DEEMED  TO  REPRESENT  THAT  (I)  IT  HAS  BEEN  AFFORDED  AN  OPPORTUNITY  TO  INVESTIGATE  MATTERS  RELATING  TO  THE  ISSUER  AND  THE  NOTES,  (II)  IT  IS  NOT  ACQUIRING  SUCH  NOTE  WITH  A  VIEW  TO  ANY  DISTRIBUTION  THEREOF  AND  (III)  IT  IS  EITHER  (A)(1)  AN  INSTITUTIONAL  INVESTOR  OR  SOPHISTICATED  INDIVIDUAL  INVESTOR  THAT  IS  AN  ACCREDITED  INVESTOR  WITHIN  THE  MEANING  OF  RULE  501(a)  UNDER  THE  ACT  AND  WHICH,  IN  THE  CASE  OF  AN  INDIVIDUAL,  (i)  POSSESSES  SUCH  KNOWLEDGE  AND  EXPERIENCE  IN  FINANCIAL  AND  BUSINESS  MATTERS  THAT  HE  OR  SHE  IS  CAPABLE  OF  EVALUATING  AND  BEARING  THE  ECONOMIC  RISK  OF  AN  INVESTMENT  IN  THE  NOTES  AND  (ii)  HAS  NOT  LESS  THAN  $5  MILLION  IN  INVESTMENTS  (AN  “INSTITUTIONAL  ACCREDITED  INVESTOR”  OR  “SOPHISTICATED  INDIVIDUAL  ACCREDITED  INVESTOR”,  RESPECTIVELY)  AND  (2)(i)  PURCHASING  NOTES  FOR  ITS  OWN  ACCOUNT,  (ii)  A  BANK  (AS  DEFINED  IN  SECTION  3(a)(2)  OF  THE  ACT)  OR  A  SAVINGS  AND  LOAN  ASSOCIATION  OR  OTHER  INSTITUTION  (AS  DEFINED  IN  SECTION  3(a)(5)(A)  OF  THE  ACT)  ACTING  IN  ITS  INDIVIDUAL  OR  FIDUCIARY  CAPACITY  OR  (iii)  A  FIDUCIARY  OR  AGENT  (OTHER  THAN  A  U.S.  BANK  OR  SAVINGS  AND  LOAN  ASSOCIATION)  PURCHASING  NOTES  FOR  ONE  OR  MORE  ACCOUNTS  EACH  OF  WHICH  ACCOUNTS  IS  SUCH  AN  INSTITUTIONAL  ACCREDITED  INVESTOR  OR  SOPHISTICATED  INDIVIDUAL  ACCREDITED  INVESTOR;  OR  (B)  A  QUALIFIED  INSTITUTIONAL  BUYER  (“QIB”)  WITHIN  THE  MEANING  OF  RULE  144A  UNDER  THE  ACT  THAT  IS  ACQUIRING  NOTES  FOR  ITS  OWN  ACCOUNT  OR  FOR  ONE  OR  MORE  ACCOUNTS,  EACH  OF  WHICH  ACCOUNTS  IS  A  QIB;  AND  THE  PURCHASER  ACKNOWLEDGES  THAT  IT  IS  AWARE  THAT  THE  SELLER  MAY  RELY  UPON  THE  EXEMPTION  FROM  THE  REGISTRATION  PROVISIONS  OF  SECTION  5  OF  THE  ACT  PROVIDED  BY  RULE  144A.  BY  ITS  ACCEPTANCE  OF  A  NOTE,  THE  PURCHASER  THEREOF  SHALL  ALSO  BE  DEEMED  TO  AGREE  THAT  ANY  RESALE  OR  OTHER  TRANSFER  THEREOF  WILL  BE  MADE  ONLY  (A)  IN  A  TRANSACTION  EXEMPT  FROM  REGISTRATION  UNDER  THE  ACT,  EITHER  (1)  TO  THE  ISSUER  OR  TO  A  PLACEMENT  AGENT  DESIGNATED  BY  THE  ISSUER  AS  A  PLACEMENT  AGENT  FOR  THE  NOTES  (COLLECTIVELY,  THE  “PLACEMENT  AGENTS”),  NONE  OF  WHICH  SHALL  HAVE  ANY  OBLIGATION  TO  ACQUIRE  SUCH  NOTE,  (2)  THROUGH  A  PLACEMENT  AGENT  TO  AN  INSTITUTIONAL  ACCREDITED  INVESTOR,  SOPHISTICATED  INDIVIDUAL  ACCREDITED  INVESTOR  OR  A  QIB,  OR  (3)  TO  A  QIB  IN  A  TRANSACTION  THAT  MEETS  THE  REQUIREMENTS  OF  RULE  144A  AND  (B)  IN  MINIMUM  AMOUNTS  OF  $250,000.


 


15

















 


Exhibit B


 


Further
Provisions Relating to Indemnification


 


(a)   The Issuer agrees to reimburse each Indemnitee for all
expenses (including reasonable fees and disbursements of internal and external
counsel) as they are incurred by it in connection with investigating or
defending any loss, claim, damage, liability or action in respect of which
indemnification may be sought under Section 5 of the Agreement (whether or
not it is a party to any such proceedings).


 


(b)   Promptly after receipt by an Indemnitee of notice of
the existence of a Claim, such Indemnitee will, if a claim in respect thereof
is to be made against the Issuer, notify the Issuer in writing of the existence
thereof; provided that (i) the omission so to notify the Issuer will not
relieve the Issuer from any liability which it may have hereunder unless and
except to the extent it did not otherwise learn of such Claim and such failure
results in the forfeiture by the Issuer of substantial rights and defenses, and
(ii) the omission so to notify the Issuer will not relieve it from
liability which it may have to an Indemnitee otherwise than on account of this
indemnity agreement.  In case any such
Claim is made against any Indemnitee and it notifies the Issuer of the
existence thereof, the Issuer will be entitled to participate therein, and to
the extent that it may elect by written notice delivered to the Indemnitee, to
assume the defense thereof, with counsel reasonably satisfactory to such
Indemnitee; provided that if the defendants in any such Claim include both the
Indemnitee and the Issuer, and the Indemnitee shall have concluded that there
may be legal defenses available to it which are different from or additional to
those available to the Issuer, the Issuer shall not have the right to direct
the defense of such Claim on behalf of such Indemnitee, and the Indemnitee
shall have the right to select separate counsel to assert such legal defenses
on behalf of such Indemnitee.  Upon
receipt of notice from the Issuer to such Indemnitee of the Issuer’s election
so to assume the defense of such Claim and approval by the Indemnitee of
counsel, the Issuer will not be liable to such Indemnitee for expenses incurred
thereafter by the Indemnitee in connection with the defense thereof (other than
reasonable costs of investigation) unless (i) the Indemnitee shall have
employed separate counsel in connection with the assertion of legal defenses in
accordance with the proviso to the next preceding sentence (it being understood,
however, that the Issuer shall not be liable for the expenses of more than one
separate counsel (in addition to any local counsel in the jurisdiction in which
any Claim is brought), approved by the Dealer, representing the Indemnitee who
is party to such Claim), (ii) the Issuer shall not have employed counsel
reasonably satisfactory to the Indemnitee to represent the Indemnitee within a
reasonable time after notice of existence of the Claim or (iii) the Issuer
has authorized in writing the employment of counsel for the Indemnitee.  The indemnity, reimbursement and contribution
obligations of the Issuer hereunder shall be in addition to any other liability
the Issuer may otherwise have to an Indemnitee and shall be binding upon and
inure to the benefit of any successors, assigns, heirs and personal
representatives of the Issuer and any Indemnitee.  The Issuer agrees that without the Dealer’s
prior written consent, it will not settle, compromise or consent to the entry
of any judgment in any Claim in respect of which indemnification may be sought
under the indemnification provision of the Agreement (whether or not the Dealer
or any other Indemnitee is an actual or potential party to such Claim), unless
such settlement, compromise or consent (i) includes an unconditional
release of each Indemnitee from all liability arising out of such Claim and (ii) does
not include a statement as to or an admission of fault, culpability or failure
to act, by or on behalf of any Indemnitee.


 


16

















 


Exhibit C


 


Statement
of Terms for Interest – Bearing Commercial Paper Notes of Staples, Inc.


 


THE PROVISIONS SET FORTH BELOW ARE QUALIFIED TO
THE EXTENT APPLICABLE BY THE TRANSACTION SPECIFIC PRIVATE PLACEMENT MEMORANDUM
SUPPLEMENT (THE “SUPPLEMENT”) (IF ANY) SENT TO EACH PURCHASER AT THE TIME OF
THE TRANSACTION.


 


1.  General.  (a)  The obligations of the Issuer to
which these terms apply (each a “Note”) are represented by one or more Master
Notes (each, a “Master Note”) issued in the name of (or of a nominee for) The
Depository Trust Company (“DTC”), which Master Note includes the terms and
provisions for the Issuer’s Interest-Bearing Commercial Paper Notes that are
set forth in this Statement of Terms, since this Statement of Terms constitutes
an integral part of the Underlying Records as defined and referred to in the
Master Note.


 


(b)  “Business Day” means any day other than a Saturday or Sunday
that is neither a legal holiday nor a day on which banking institutions are
authorized or required by law, executive order or regulation to be closed in
New York City and, with respect to LIBOR Notes (as defined below) is also a
London Business Day.  “London Business
Day” means, a day, other than a Saturday or Sunday, on which dealings in
deposits in U.S. dollars are transacted in the London interbank market.


 


2.  Interest.  (a)  Each Note will bear interest at a
fixed rate (a “Fixed Rate Note”) or at a floating rate (a “Floating Rate Note”).


 


(b)  The
Supplement sent to each holder of such Note will describe the following terms: (i) whether
such Note is a Fixed Rate Note or a Floating Rate Note and whether such Note is
an Original Issue Discount Note (as defined below); (ii) the date on which
such Note will be issued (the “Issue Date”); (iii) the Stated Maturity
Date (as defined below); (iv) if such Note is a Fixed Rate Note, the rate
per annum at which such Note will bear interest, if any, and the Interest
Payment Dates; (v) if such Note is a Floating Rate Note, the Base Rate,
the Index Maturity, the Interest Reset Dates, the Interest Payment Dates and
the Spread and/or Spread Multiplier, if any (all as defined below), and any
other terms relating to the particular method of calculating the interest rate
for such Note; and (vi) any other terms applicable specifically to such
Note.  “Original Issue Discount Note”
means a Note which has a stated redemption price at the Stated Maturity Date
that exceeds its Issue Price by more than a specified de minimis amount and
which the Supplement indicates will be an “Original Issue Discount Note”.


 


(c)  Each
Fixed Rate Note will bear interest from its Issue Date at the rate per annum
specified in the Supplement until the principal amount thereof is paid or made
available for payment.  Interest on each
Fixed Rate Note will be payable on the dates specified in the Supplement (each
an “Interest Payment Date” for a Fixed Rate Note) and on the Maturity Date (as
defined below).  Interest on Fixed Rate
Notes will be computed on the basis of a 360-day year of twelve 30-day months.


 


If any Interest Payment Date or the Maturity Date of a Fixed Rate Note
falls on a day that is not a Business Day, the required payment of principal,
premium, if any, and/or interest will be payable on the 


 


17

















 


next succeeding Business Day, and no additional interest will accrue in
respect of the payment made on that next succeeding Business Day.


 


(d)  The interest rate on each Floating Rate Note for each
Interest Reset Period (as defined below) will be determined by reference to an
interest rate basis (a “Base Rate”) plus or minus a number of basis points (one
basis point equals one-hundredth of a percentage point) (the “Spread”), if any,
and/or multiplied by a certain percentage (the “Spread Multiplier”), if any,
until the principal thereof is paid or made available for payment.  The Supplement will designate which of the
following Base Rates is applicable to the related Floating Rate Note: (a) the
CD Rate (a “CD Rate Note”), (b) the Commercial Paper Rate (a “Commercial
Paper Rate Note”), (c) the Federal Funds Rate (a “Federal Funds Rate Note”),
(d) LIBOR (a “LIBOR Note”), (e) the Prime Rate (a “Prime Rate Note”),
(f) the Treasury Rate (a “Treasury Rate Note”) or (g) such other Base
Rate as may be specified in such Supplement.


 


The rate of interest on each Floating Rate Note will be reset daily,
weekly, monthly, quarterly or semi-annually (the “Interest Reset Period”).  The date or dates on which interest will be
reset (each an “Interest Reset Date”) will be, unless otherwise specified in
the Supplement, in the case of Floating Rate Notes which reset daily, each
Business Day, in the case of Floating Rate Notes (other than Treasury Rate
Notes) that reset weekly, the Wednesday of each week; in the case of Treasury
Rate Notes that reset weekly, the Tuesday of each week; in the case of Floating
Rate Notes that reset monthly, the third Wednesday of each month; in the case
of Floating Rate Notes that reset quarterly, the third Wednesday of March,
June, September and December; and in the case of Floating Rate Notes that
reset semiannually, the third Wednesday of the two months specified in the
Supplement.  If any Interest Reset Date
for any Floating Rate Note is not a Business Day, such Interest Reset Date will
be postponed to the next day that is a Business Day, except that in the case of
a LIBOR Note, if such Business Day is in the next succeeding calendar month,
such Interest Reset Date shall be the immediately preceding Business Day.
Interest on each Floating Rate Note will be payable monthly, quarterly or
semiannually (the “Interest Payment Period”) and on the Maturity Date.  Unless otherwise specified in the Supplement,
and except as provided below, the date or dates on which interest will be
payable (each an “Interest Payment Date” for a Floating Rate Note) will be, in
the case of Floating Rate Notes with a monthly Interest Payment Period, on the
third Wednesday of each month; in the case of Floating Rate Notes with a
quarterly Interest Payment Period, on the third Wednesday of March, June, September and
December; and in the case of Floating Rate Notes with a semiannual Interest
Payment Period, on the third Wednesday of the two months specified in the
Supplement.  In addition, the Maturity
Date will also be an Interest Payment Date.


 


If any Interest Payment Date for any Floating Rate Note (other than an
Interest Payment Date occurring on the Maturity Date) would otherwise be a day
that is not a Business Day, such Interest Payment Date shall be postponed to
the next day that is a Business Day, except that in the case of a LIBOR Note,
if such Business Day is in the next succeeding calendar month, such Interest
Payment Date shall be the immediately preceding Business Day.  If the Maturity Date of a Floating Rate Note
falls on a day that is not a Business Day, the payment of principal and
interest will be made on the next succeeding Business Day, and no interest on
such payment shall accrue for the period from and after such maturity.


 


Interest payments on each Interest Payment Date for Floating Rate Notes
will include accrued interest from and including the Issue Date or from and
including the last date in respect of which interest has been paid, as the case
may be, to, but excluding, such Interest Payment Date.  On the Maturity Date, the interest payable on
a Floating Rate Note will include interest accrued to, but excluding, the
Maturity Date.  Accrued interest will be
calculated by multiplying the principal amount of a Floating Rate Note by an
accrued interest factor.  This accrued
interest factor will be computed by adding the interest factors 


 


18

















 


calculated for each day in the period for which accrued interest is
being calculated.  The interest factor
(expressed as a decimal) for each such day will be computed by dividing the
interest rate applicable to such day by 360, in the cases where the Base Rate
is the CD Rate, Commercial Paper Rate, Federal Funds Rate, LIBOR or Prime Rate,
or by the actual number of days in the year, in the case where the Base Rate is
the Treasury Rate.  The interest rate in
effect on each day will be (i) if such day is an Interest Reset Date, the
interest rate with respect to the Interest Determination Date (as defined
below) pertaining to such Interest Reset Date, or (ii) if such day is not
an Interest Reset Date, the interest rate with respect to the Interest
Determination Date pertaining to the next preceding Interest Reset Date,
subject in either case to any adjustment by a Spread and/or a Spread
Multiplier.


 


The “Interest Determination Date” where the Base Rate is the CD Rate or
the Commercial Paper Rate will be the second Business Day next preceding an
Interest Reset Date.  The Interest
Determination Date where the Base Rate is the Federal Funds Rate or the Prime
Rate will be the Business Day next preceding an Interest Reset Date.  The Interest Determination Date where the
Base Rate is LIBOR will be the second London Business Day next preceding an Interest
Reset Date.  The Interest Determination
Date where the Base Rate is the Treasury Rate will be the day of the week in
which such Interest Reset Date falls when Treasury Bills are normally
auctioned.  Treasury Bills are normally
sold at auction on Monday of each week, unless that day is a legal holiday, in
which case the auction is held on the following Tuesday or the preceding
Friday.  If an auction is so held on the
preceding Friday, such Friday will be the Interest Determination Date
pertaining to the Interest Reset Date occurring in the next succeeding week.


 


The “Index Maturity” is the period to maturity of the instrument or
obligation from which the applicable Base Rate is calculated.


 


The “Calculation Date,” where applicable, shall be the earlier of (i) the
tenth calendar day following the applicable Interest Determination Date or (ii) the
Business Day preceding the applicable Interest Payment Date or Maturity Date.


 


All times referred to herein reflect New York City time, unless
otherwise specified.


 


The Issuer shall specify in writing to the Issuing and Paying Agent
which party will be the calculation agent (the “Calculation Agent”) with
respect to the Floating Rate Notes.  The
Calculation Agent will provide the interest rate then in effect and, if
determined, the interest rate which will become effective on the next Interest
Reset Date with respect to such Floating Rate Note to the Issuing and Paying
Agent as soon as the interest rate with respect to such Floating Rate Note has
been determined and as soon as practicable after any change in such interest
rate.


 


All percentages resulting from any calculation on Floating Rate Notes
will be rounded to the nearest one hundred-thousandth of a percentage point,
with five-one millionths of a percentage point rounded upwards.  For example, 9.876545% (or .09876545) would
be rounded to 9.87655% (or .0987655). 
All dollar amounts used in or resulting from any calculation on Floating
Rate Notes will be rounded, in the case of U.S. dollars, to the nearest cent
or, in the case of a foreign currency, to the nearest unit (with one-half cent
or unit being rounded upwards).


 


CD Rate Notes


 


“CD Rate” means
the rate on any Interest Determination Date for negotiable certificates of
deposit having the Index Maturity as published by the Board of Governors of the
Federal Reserve System 


 


19

















 


(the “FRB”) in “Statistical
Release H.15(519), Selected Interest Rates” or any successor publication of the
FRB (“H.15(519)”) under the heading “CDs (Secondary Market)”.


 


If the above rate
is not published in H.15(519) by 3:00 p.m. on the Calculation Date, the CD
Rate will be the rate on such Interest Determination Date set forth in the
daily update of H.15(519), available through the world wide website of the FRB
at http://www.federalreserve.gov/releases/h15/Update, or any successor site or
publication or other recognized electronic source used for the purpose of
displaying the applicable rate (“H.15 Daily Update”) under the caption “CDs
(Secondary Market)”.


 


If such rate is
not published in either H.15(519) or H.15 Daily Update by 3:00 p.m. on the
Calculation Date, the Calculation Agent will determine the CD Rate to be the
arithmetic mean of the secondary market offered rates as of 10:00 a.m. on
such Interest Determination Date of three leading nonbank dealers(2)  in
negotiable U.S. dollar certificates of deposit in New York City selected by the
Calculation Agent for negotiable U.S. dollar certificates of deposit of major
United States money center banks of the highest credit standing in the market
for negotiable certificates of deposit with a remaining maturity closest to the
Index Maturity in the denomination of $5,000,000.


 


If the dealers
selected by the Calculation Agent are not quoting as set forth above, the CD
Rate will remain the CD Rate then in effect on such Interest Determination
Date.


 


Commercial Paper Rate Notes


 


“Commercial Paper
Rate” means the Money Market Yield (calculated as described below) of the rate
on any Interest Determination Date for commercial paper having the Index
Maturity, as published in H.15(519) under the heading “Commercial
Paper-Nonfinancial”.


 


If the above rate
is not published in H.15(519) by 3:00 p.m. on the Calculation Date, then
the Commercial Paper Rate will be the Money Market Yield of the rate on such
Interest Determination Date for commercial paper of the Index Maturity as
published in H.15 Daily Update under the heading “Commercial Paper-Nonfinancial”.


 


If by 3:00 p.m.
on such Calculation Date such rate is not published in either H.15(519) or H.15
Daily Update, then the Calculation Agent will determine the Commercial Paper
Rate to be the Money Market Yield of the arithmetic mean of the offered rates
as of 11:00 a.m. on such Interest Determination Date of three leading
dealers of U.S. dollar commercial paper in New York City selected by the
Calculation Agent for commercial paper of the Index Maturity placed for an
industrial issuer whose bond rating is “AA,” or the equivalent, from a
nationally recognized statistical rating organization.


 


If the dealers
selected by the Calculation Agent are not quoting as mentioned above, the
Commercial Paper Rate with respect to such Interest Determination Date will
remain the Commercial Paper Rate then in effect on such Interest Determination
Date.


 


“Money Market
Yield” will be a yield calculated in accordance with the following formula:


 


	
  Money
  Market Yield =

  	
  D x 360

  	
  x
  100

  	
   

  
	
  360 - (D x M)

  	
   

  



 






(2)   Such nonbank dealers
referred to in this Statement of Terms may include affiliates of the Dealer.


 


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where “D” refers
to the applicable per annum rate for commercial paper quoted on a bank discount
basis and expressed as a decimal and “M” refers to the actual number of days in
the interest period for which interest is being calculated.


 


Federal Funds Rate Notes


 


“Federal
Funds Rate” means the rate on any Interest Determination Date for Federal Funds
as published in Reuters (or any successor service) on page FEDFUNDS1 under
the heading “EFFECT” (or any other page as may replace the specified page on
that service) (“Reuters Page FEDFUNDS1”).


 


If the above rate does not
appear on Reuters Page FEDFUNDS1 or is not so published by 3:00 p.m.
on the Calculation Date, the Federal Funds Rate will be the rate on such
Interest Determination Date as published in H.15 Daily Update under the heading
“Federal Funds/(Effective)”.


 


If such rate is
not published as described above by 3:00 p.m. on the Calculation Date, the
Calculation Agent will determine the Federal Funds Rate to be the arithmetic
mean of the rates for the last transaction in overnight U.S. dollar federal
funds arranged by each of three leading brokers of Federal Funds transactions
in New York City selected by the Calculation Agent prior to 9:00 a.m. on
such Interest Determination Date.


 


If the brokers
selected by the Calculation Agent are not quoting as mentioned above, the
Federal Funds Rate will remain the Federal Funds Rate then in effect on such
Interest Determination Date.


 


LIBOR Notes


 


The London
Interbank offered rate (“LIBOR”) means, with respect to any Interest
Determination Date, the rate for deposits in U.S. dollars having the Index
Maturity that appears on the Designated LIBOR Page as of 11:00 a.m.,
London time, on such Interest Determination Date.


 


If no rate
appears, LIBOR will be determined on the basis of the rates at approximately
11:00 a.m., London time, on such Interest Determination Date at which
deposits in U.S. dollars are offered to prime banks in the London interbank
market by four major banks in such market selected by the Calculation Agent for
a term equal to the Index Maturity and in principal amount equal to an amount
that in the Calculation Agent’s judgment is representative for a single
transaction in U.S. dollars in such market at such time (a “Representative
Amount”).  The Calculation Agent will
request the principal London office of each of such banks to provide a
quotation of its rate.  If at least two
such quotations are provided, LIBOR will be the arithmetic mean of such
quotations.  If fewer than two quotations
are provided, LIBOR for such interest period will be the arithmetic mean of the
rates quoted at approximately 11:00 a.m., in New York City, on such
Interest Determination Date by three major banks in New York City, selected by
the Calculation Agent, for loans in U.S. dollars to leading European banks, for
a term equal to the Index Maturity and in a Representative Amount; provided,
however, that if fewer than three banks so selected by the Calculation Agent
are providing such quotations, the then existing LIBOR rate will remain in
effect for such Interest Payment Period.


 


“Designated
LIBOR Page” means Reuters Screen LIBOR01 Page or any replacement page or
pages on which London interbank rates of major banks for the Index
Currency are displayed.


 


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Prime Rate Notes


 


“Prime Rate” means
the rate on any Interest Determination Date as published in H.15(519) under the
heading “Bank Prime Loan”.


 


If the above rate
is not published in H.15(519) prior to 3:00 p.m. on the Calculation Date,
then the Prime Rate will be the rate on such Interest Determination Date as
published in H.15 Daily Update opposite the caption “Bank Prime Loan”.


 


If the rate is not
published prior to 3:00 p.m. on the Calculation Date in either H.15(519)
or H.15 Daily Update, then the Calculation Agent will determine the Prime Rate
to be the arithmetic mean of the rates of interest publicly announced by each
bank that appears on the Reuters Screen US PRIME1 Page (as defined below)
as such bank’s prime rate or base lending rate as of 11:00 a.m., on that
Interest Determination Date.


 


If fewer than four
such rates referred to above are so published by 3:00 p.m. on the
Calculation Date, the Calculation Agent will determine the Prime Rate to be the
arithmetic mean of the prime rates or base lending rates quoted on the basis of
the actual number of days in the year divided by 360 as of the close of
business on such Interest Determination Date by three major banks in New York
City selected by the Calculation Agent.


 


If the banks
selected are not quoting as mentioned above, the Prime Rate will remain the
Prime Rate in effect on such Interest Determination Date.


 


“Reuters Screen US Prime1
Page” means the display designated as page “USPrime1” of the Reuters
Service, or any successor service, or any replacement page or pages on
that service, for the purpose of displaying prime rates or base lending rates
of major U.S. banks.


 


Treasury Rate Notes


 


“Treasury Rate” means:


 


(1) the
rate from the auction held on the Interest Determination Date (the “Auction”)
of direct obligations of the United States (“Treasury Bills”) having the Index
Maturity specified in the applicable pricing supplement above under the caption
“INVESTMENT RATE”, as that rate appears on Reuters Screen USAUCTION10 or
USAUCTION11 Page under the heading “Investment Rate” (or any other page as
may replace the specified page on that service or a successor service).


 


 (2) if the rate referred to in clause (1) is
not so published by 3:00 p.m. on the related Calculation Date, the Bond
Equivalent Yield (as defined below) of the rate for the applicable Treasury
Bills as published in H.15 Daily Update, under the caption “U.S. Government
Securities/Treasury Bills/Auction High”, or


 


(3) if the
rate referred to in clause (2) is not so published by 3:00 p.m. on
the related Calculation Date, the Bond Equivalent Yield of the auction rate of
the applicable Treasury Bills as announced by the United States Department of
the Treasury, or


 


(4) if the rate
referred to in clause (3) is not so announced by the United States
Department of the Treasury, or if the 
Auction is not held, the Bond Equivalent Yield of the rate on the
particular Interest 


 


22

















 


Determination Date
of the applicable Treasury Bills as published in H.15(519) under the caption “U.S.
Government Securities/Treasury Bills/Secondary Market”, or


 


(5) if the
rate referred to in clause (4) not so published by 3:00 p.m. on the
related Calculation Date, the rate on the particular Interest Determination
Date of the applicable Treasury Bills as published in H.15 Daily Update, under
the caption “U.S. Government Securities/Treasury Bills/Secondary Market”, or


 


(6) if the
rate referred to in clause (5) is not so published by 3:00 p.m. on
the related Calculation Date, the rate on the particular Interest Determination
Date calculated by the Calculation Agent as the Bond Equivalent Yield of the
arithmetic mean of the secondary market bid rates, as of approximately 3:30 p.m.
on that Interest Determination Date, of three primary United States government
securities dealers selected by the Calculation Agent, for the issue of Treasury
Bills with a remaining maturity closest to the Index Maturity specified in the
Supplement, or


 


(7) if the dealers so selected by the Calculation Agent are not
quoting as mentioned in clause (6), the Treasury Rate in effect on the
particular Interest Determination Date.


 


“Bond Equivalent Yield” means a yield
(expressed as a percentage) calculated in accordance with the following
formula:


 


	
  Bond
  Equivalent Yield  =

  	
  D x N

  	
  x
  100

  	
   

  
	
  360 - (D x M)

  	
   

  



 


where “D” refers
to the applicable per annum rate for Treasury Bills quoted on a bank discount
basis and expressed as a decimal, “N” refers to 365 or 366, as the case may be,
and “M” refers to the actual number of days in the applicable Interest Reset
Period.


 


3.     Final Maturity. 
The Stated Maturity Date for any Note will be the date so specified in
the Supplement, which shall be no later than 397 days from the date of
issuance.  On its Stated Maturity Date,
or any date prior to the Stated Maturity Date on which the particular Note
becomes due and payable by the declaration of acceleration, each such date being
referred to as a Maturity Date, the principal amount of each Note, together
with accrued and unpaid interest thereon, will be immediately due and payable.


 


4.     Events of Default. 
The occurrence of any of the following shall constitute an “Event of
Default” with respect to a Note:  (i) default
in any payment of principal of or interest on such Note (including on a
redemption thereof); (ii) the Issuer makes any compromise arrangement with
its creditors generally including the entering into any form of moratorium with
its creditors generally; (iii) a court having jurisdiction shall enter a
decree or order for relief in respect of the Issuer in an involuntary case
under any applicable bankruptcy, insolvency or other similar law now or
hereafter in effect, or there shall be appointed a receiver, administrator,
liquidator, custodian, trustee or sequestrator (or similar officer) with
respect to the whole or substantially the whole of the assets of the Issuer and
any such decree, order or appointment is not removed, discharged or withdrawn
within 60 days thereafter; or (iv) the Issuer shall commence a voluntary
case under any applicable bankruptcy, insolvency or other similar law now or
hereafter in effect, or consent to the entry of an order for relief in an
involuntary case under any such law, or consent to the appointment of or taking
possession by a receiver, 


 


23

















 


administrator,
liquidator, assignee, custodian, trustee or sequestrator (or similar official),
with respect to the whole or substantially the whole of the assets of the
Issuer or make any general assignment for the benefit of creditors.  Upon the occurrence of an Event of Default,
the principal of each obligation evidenced by such Note (together with interest
accrued and unpaid thereon) shall become, without any notice or demand,
immediately due and payable.


 


5.    Obligation Absolute.  No provision of the Issuing and Paying Agency
Agreement under which the Notes are issued shall alter or impair the obligation
of the Issuer, which is absolute and unconditional, to pay the principal of and
interest on each Note at the times, place and rate, and in the coin or
currency, herein prescribed.


 


6.    Supplement.  Any term contained in the Supplement shall
supercede any conflicting term contained herein.


 


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