Exhibit 10.1


 


STAPLES, INC.


 


2004 STOCK INCENTIVE PLAN


 


1.                                       Purpose


 


The purpose of this 2004 Stock Incentive Plan (the
“Plan”) of Staples, Inc., a Delaware corporation (the “Company”), is to advance
the interests of the Company’s stockholders by enhancing the Company’s ability
to attract, retain and motivate persons who make (or are expected to make)
important contributions to the Company by providing such persons with equity
ownership opportunities and performance-based incentives and thereby better
aligning the interests of such persons with those of the Company’s
stockholders.  Except where the context
otherwise requires, the term “Company” shall include any of the Company’s
present or future parent or subsidiary corporations as defined in
Sections 424(e) or (f) of the Internal Revenue Code of 1986, as amended,
and any regulations promulgated thereunder (the “Code”), and any other business
venture (including, without limitation, joint venture or limited liability
company) in which the Company has a controlling interest, as determined by the
Board of Directors of the Company (the “Board”).


 


The Plan is designed to replace the Company’s Amended
and Restated 1992 Equity Incentive Plan (the “1992 Plan”), the Company’s
Amended and Restated 1990 Director Stock Option Plan (the “1990 Plan”) and the
Company’s 1997 United Kingdom Company Share Option Plan (the “UK Plan”).  Upon the approval of the Plan by the
Company’s stockholders, no further awards may be made under the 1990 Plan, the
1992 Plan or the UK Plan.


 


2.                                       Eligibility


 


All of the Company’s employees, officers, directors,
consultants, advisors, and other service providers (including persons who have
entered into an agreement with the Company under which they will be employed by
the Company in the future) are eligible to be granted options, restricted
stock, restricted stock units, stock appreciation rights or other stock-based
awards (each, an “Award”) under the Plan. 
Each person who has been granted an Award under the Plan shall be deemed
a “Participant”.


 


3.                                       Administration
and Delegation


 


(a)                                  Administration
by Board of Directors.  The Plan
will be administered by the Board.  The
Board shall have authority to grant Awards and to adopt, amend and repeal such
administrative rules, guidelines and practices relating to the Plan as it shall
deem advisable.  The Board may correct
any defect, supply any omission or reconcile any inconsistency in the Plan or
any Award in the manner and to the extent it shall deem expedient to carry the
Plan into effect and it shall be the sole and final judge of such
expediency.  All decisions by the Board
shall be made in the Board’s sole discretion and shall be final and binding on
all persons having or claiming any interest in the Plan or in any Award.  No director or person acting pursuant to the


 

















 


authority delegated by the Board shall be liable for
any action or determination relating to or under the Plan made in good faith.


 


(b)                                 Appointment
of Committees.  To
the extent permitted by applicable law, the Board may delegate any or all of
its powers under the Plan to one or more committees or subcommittees of the
Board (a “Committee”).  All references
in the Plan to the “Board” shall mean the Board or a Committee of the Board or
the officers referred to in Section 3(c) to the extent that the Board’s powers
or authority under the Plan have been delegated to such Committee or officers.


 


(c)                                  Delegation
to Officers.  To the extent
permitted by applicable law, the Board may delegate to one or more officers of
the Company the power to grant Awards to employees or officers of the Company
or any of its present or future subsidiary corporations and to exercise such
other powers under the Plan as the Board may determine, provided that the Board
shall fix the terms of the Awards to be granted by such officers (including the
exercise price of such Awards, which may include a formula by which the
exercise price will be determined) and the maximum number of shares subject to
Awards that the officers may grant; provided further, however, that no officer
shall be authorized to grant Awards to himself or herself.


 


4.                                       Stock
Available for Awards


 


(a)                                  Number
of Shares.


 


(1)                                  Subject
to adjustment under Section 9, Awards may be made under the Plan for up to
23,000,000 shares of common stock, $.0006 par value per share, of the Company
(the “Common Stock”).  If any Award
expires, is terminated, surrendered or canceled without having been fully
exercised, is forfeited in whole or in part (including as the result of shares
of Common Stock subject to such Award being repurchased by the Company at the
original issuance price pursuant to a contractual repurchase right), or results
in any Common Stock not being issued (including without limitation, when an
Award is settled for cash), then in each such case the unused Common Stock
covered by such Award shall again be available for the grant of Awards under
the Plan.  Further, shares of Common
Stock tendered to the Company by a Participant to exercise an Award (either by
actual delivery or by attestation) shall be added to the number of shares of
Common Stock available for the grant of Awards under the Plan.  However, in the case of Incentive Stock
Options (as hereinafter defined), the foregoing provisions shall be subject to
any limitations under the Code.


 


(2)                                  In
addition, if any option or restricted stock award granted under the 1992 Plan
expires, is terminated, surrendered or canceled without having been fully
exercised, is forfeited in whole or in part (including as the result of shares
of Common Stock subject to such restricted stock award being repurchased by the
Company at the original issuance price pursuant to a contractual repurchase
right), or results in any Common Stock not being issued because (i) the option
or restricted stock award is settled for cash or (ii) shares are used to
satisfy the exercise price or a tax withholding obligation, then in each such
case the unused Common Stock covered by such option or restricted stock award
shall be available for the grant of Awards under the Plan, subject, however, in
the case of Incentive Stock Options, to any limitations under the Code and
further provided that the aggregate number of shares of Common Stock available
for


 


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grant of Awards pursuant to this sentence shall not
exceed 45,000,000.  Shares issued under
the Plan may consist in whole or in part of authorized but unissued shares or
treasury shares.


 


(b)                                 Sub-limits.  Subject to adjustment under Section 9,
the following sub-limits on the number of shares of Common Stock subject to
Awards shall apply:


 


(1)                                  Section
162(m) Per-Participant Limit.  The
maximum number of shares of Common Stock with respect to which Awards may be
granted to any Participant under the Plan in any calendar year shall be  2,300,000.  The per-Participant limit described in this
Section 4(b)(1) shall be construed and applied consistently with Section 162(m)
of the Code (“Section 162(m)”).


 


(2)                                  Limit
on Awards other than Options and SARs. 
The maximum number of shares with respect to which Awards other than
Options and SARs may be granted shall be one-half of the total number of shares
of Common Stock covered by the Plan (including any shares that may become
available under this Plan pursuant to Section 4(a)(2) hereof).


 


(3)                                  Limits
on Awards to Directors.  The maximum
number of shares with respect to which Awards may be granted during the term of
the Plan to directors who are not employees of the Company shall be 1,150,000
and the maximum number of shares of Common stock with respect to which Awards
may be granted in any calendar year to any director who is not an employee of
the Company shall be 100,000.


 


5.                                       Stock
Options


 


(a)                                  General.  The Board may grant options to purchase
Common Stock (each, an “Option”) and determine the number of shares of Common
Stock to be covered by each Option, the exercise price of each Option and the
conditions and limitations applicable to the exercise of each Option, including
conditions relating to applicable federal or state securities laws, as it
considers necessary or advisable.  An
Option which is not intended to be an Incentive Stock Option (as hereinafter
defined) shall be designated a “Nonstatutory Stock Option”.


 


(b)                                 Incentive
Stock Options.  An Option that the
Board intends to be an “incentive stock option” as defined in Section 422 of
the Code (an “Incentive Stock Option”) shall only be granted to employees of
Staples, Inc., any of Staples, Inc.’s present or future parent or subsidiary
corporations as defined in Sections 424(e) or (f) of the Code, and any other
entities the employees of which are eligible to receive Incentive Stock Options
under the Code, and shall be subject to and shall be construed consistently
with the requirements of Section 422 of the Code.  The Company shall have no liability to a Participant, or any
other party, if an Option (or any part thereof) that is intended to be an
Incentive Stock Option is not an Incentive Stock Option.


 


(c)                                  Exercise
Price.  The Board shall establish
the exercise price at the time each Option is granted and specify it in the
applicable option agreement; provided, however, that the exercise price shall
be not less than 100% of the fair market value (the “Fair Market Value”) of the
Common Stock, as determined by the Board, at the time the Option is granted.


 


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(d)                                 No
Reload Rights.  Options granted
under this Plan shall not contain any provision entitling the optionee to the
automatic grant of additional Options in connection with any exercise of the
original Option.


 


(e)                                  No
Repricing.  Unless such action is
approved by the Company’s stockholders: (i) no outstanding Option granted under
the Plan may be amended to provide an exercise price per share that is lower
than the then-current exercise price per share of such outstanding Option
(other than adjustments pursuant to Section 9), and (ii) the Board may not
cancel any outstanding Option and grant in substitution therefor new Options
under the Plan covering the same or a different number of shares of Common
Stock and having an exercise price per share lower than the then-current
exercise price per share of the cancelled Option.


 


(f)                                    Duration
of Options.  Each Option shall be
exercisable at such times and subject to such terms and conditions as the Board
may specify in the applicable option agreement provided, however, that no
Option will be granted for a term in excess of 10 years.


 


(g)                                 Exercise
of Option.  Options may be exercised
by delivery to the Company of a written notice of exercise signed by the proper
person or by any other form of notice (including electronic notice) approved by
the Company, together with payment in full as specified in Section 5(h) for the
number of shares for which the Option is exercised. Shares of Common Stock
subject to the Option will be delivered by the Company following exercise
either as soon as practicable or, to the extent permitted by the Company in its
sole discretion, on a deferred basis (with the Company’s obligation to be
evidenced by an instrument providing for future delivery of the deferred shares
at the time or times specified by the Board).


 


(h)                                 Payment
Upon Exercise.  Common Stock
purchased upon the exercise of an Option granted under the Plan shall be paid
for as follows:


 


(1)                                  in
cash or by check, payable to the order of the Company;


 


(2)                                  except
as the Board may, in its sole discretion, otherwise provide in an option
agreement, by (i) delivery of an irrevocable and unconditional undertaking by a
creditworthy broker to deliver promptly to the Company sufficient funds to pay
the exercise price and any required tax withholding or (ii) delivery by the
Participant to the Company of a copy of irrevocable and unconditional
instructions to a creditworthy broker to promptly pay to the Company the
exercise price and any required tax withholding;


 


(3)                                  if
provided for in the option agreement or approved by the Company, in its sole
discretion, by delivery (either by actual delivery or attestation) of shares of
Common Stock owned by the Participant valued at their Fair Market Value, provided
(i) such method of payment is then permitted under applicable law, (ii) such
Common Stock, if acquired directly from the Company was owned by the
Participant for such minimum period of time, if any, as may be established by
the Board in its discretion, and (iii) such Common Stock is not subject to any
repurchase, forfeiture, unfulfilled vesting or other similar requirements;


 


(4)                                  if
provided for in the option agreement or approved by the Company, in its sole
discretion, by (i) delivery of a promissory note of the Participant (other than
Participants who are directors or executive officers (or equivalent thereof))
to the Company on terms


 


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determined by the Board, or (ii) payment of such
other lawful consideration as the Board may determine; or


 


(5)                                  by
any combination of the above permitted forms of payment.


 


(i)                                     Substitute
Options.  In connection with a
merger or consolidation of an entity with the Company or the acquisition by the
Company of property or stock of an entity, the Board may grant Options in
substitution for any options or other stock or stock-based awards granted by
such entity or an affiliate thereof. 
Substitute Options may be granted pursuant to this Section 5(i) on such
terms as the Board deems appropriate in the circumstances, notwithstanding any
limitations on Options contained in the other sections of this Section 5
or in Section 2.


 


(j)                                     Amendment
of Options.  Subject to the
provisions of Section 10(f), the Board may amend an Option to convert it into a
Stock Appreciation Right.


 


6.                                       Stock
Appreciation Rights


 


(a)                                  Nature
of Stock Appreciation Rights. A Stock Appreciation Right, or SAR, is an
Award entitling the holder on exercise to receive an amount in cash or Common
Stock or a combination thereof (such form to be determined by the Board)
determined in whole or in part by reference to appreciation, from and after the
date of grant, in the fair market value of a share of Common Stock. SARs may be
based solely on appreciation in the fair market value of Common Stock or on a
comparison of such appreciation with some other measure of market growth such
as (but not limited to) appreciation in a recognized market index. The date as
of which such appreciation or other measure is determined shall be the exercise
date unless another date is specified by the Board.


 


(b)                                 Grant
of Stock Appreciation Rights. Stock Appreciation Rights may be granted
in tandem with, or independently of, Options granted under the Plan.


 


(1)                                  Rules
Applicable to Tandem Awards. When Stock Appreciation Rights are
granted in tandem with Options, (a) the Stock Appreciation Right will be
exercisable only at such time or times, and to the extent, that the related
Option is exercisable (except to the extent designated by the Board in
connection with an Acquisition Event or a Change in Control Event) and will be
exercisable in accordance with the procedure required for exercise of the
related Option; (b) the Stock Appreciation Right will terminate and no longer
be exercisable upon the termination or exercise of the related Option, except
to the extent designated by the Board in connection with an Acquisition Event
or a Change in Control Event and except that a Stock Appreciation Right granted
with respect to less than the full number of shares covered by an Option will
not be reduced until the number of shares as to which the related Option has
been exercised or has terminated exceeds the number of shares not covered by
the Stock Appreciation Right; (c) the Option will terminate and no longer be
exercisable upon the exercise of the related Stock Appreciation Right; and (d)
the Stock Appreciation Right will be transferable only with the related Option.


 


(2)                                  Exercise
of Independent Stock Appreciation Rights. A Stock Appreciation Right not granted
in tandem with an Option will become exercisable at such time or times, and


 


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on such conditions, as the Board may specify. The
Board may at any time accelerate the time at which all or any part of the Right
may be exercised.


 


(c)                                  Exercise
of Stock Appreciation Rights.  Stock
Appreciation Rights may be exercised by delivery to the Company of a written
notice of exercise signed by the proper person or by any other form of notice
(including electronic notice) approved by the Company.


 


7.                                       Restricted
Stock; Restricted Stock Units


 


(a)                                  Grants.  The Board may grant Awards entitling
recipients to acquire shares of Common Stock (“Restricted Stock”), subject to
the right of the Company to repurchase all or part of such shares at their
issue price or other stated or formula price (or to require forfeiture of such
shares if issued at no cost) from the recipient in the event that conditions
specified by the Board in the applicable Award are not satisfied prior to the
end of the applicable restriction period or periods established by the Board
for such Award.  Instead of granting
Awards for Restricted Stock, the Board may grant Awards entitling the recipient
to receive shares of Common Stock to be delivered in the future (“Restricted
Stock Units”) subject to such terms and conditions on the delivery of the
shares of Common Stock as the Board shall determine (each Award for Restricted
Stock or Restricted Stock Units, a “Restricted Stock Award”). The Board may
also permit an exchange of unvested shares of Common Stock that have already
been delivered to a Participant for an instrument evidencing the right to
future delivery of Common Stock at such time or times, and on such conditions,
as the Board shall specify.


 


(b)                                 Terms
and Conditions.  The Board shall
determine the terms and conditions of any such Restricted Stock Award,
including the conditions for repurchase (or forfeiture) and the issue price, if
any.


 


(c)                                  Limitations
on Vesting.


 


(1)                                  Restricted
Stock Awards that vest based on the passage of time alone shall be zero percent
vested prior to the first anniversary of the date of grant, no more than
33-1/3% vested after the said first anniversary of the date of grant and before
the second anniversary of the date of grant, and no more than 66-2/3% vested
after the second anniversary of the date of grant and before the third
anniversary of the date of grant. 
Restricted Stock Awards that vest based on performance alone shall not
vest earlier than the first anniversary of the date of grant.  Restricted Stock Awards that vest upon the
passage of time and provide for accelerated vesting based on performance shall
not vest earlier than the first anniversary of the date of grant.  Notwithstanding the preceding provisions of this
Section 7(c)(1), the Board may grant Restricted Stock Awards that are not
subject to any limitations on vesting with respect to up to 5% of the total
number of shares of Common Stock covered by the Plan (excluding any shares that
may become available under this Plan pursuant to Section 4(a)(2) hereof).


 


(2)                                  Notwithstanding
any other provision of this Plan, the Board may, in its discretion, either at
the time a Restricted Stock Award is made or at any time thereafter, waive its
right to repurchase shares of Common Stock (or waive the forfeiture thereof) or
remove or modify any part or all of the restrictions applicable to the
Restricted Stock Award, provided that the Board may only exercise such rights
in extraordinary circumstances which shall include,


 


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without limitation, death or disability of the
Participant; estate planning needs of the Participant; a merger, consolidation,
sale, reorganization, recapitalization, or change in control of the Company; or
any other nonrecurring significant event affecting the Company, a Participant
or the Plan.


 


8.                                       Other
Stock-Based Awards


 


Other Awards of shares of Common Stock and other
Awards that are valued in whole or in part by reference to, or are otherwise
based on, shares of Common Stock or other property, including without
limitation rights to purchase shares of Common Stock (“Other Stock Unit
Awards”), may be granted hereunder to Participants.  Such Other Stock Unit Awards shall also be available as a form of
payment in the settlement of other Awards granted under the Plan or as payment
in lieu of compensation to which a Participant is otherwise entitled.  Other Stock Unit Awards may be paid in
shares of Common Stock or cash, as the Board shall determine.  Subject to the provisions of the Plan, the
Board shall determine the conditions of each Other Stock Unit Awards, including
any purchase price applicable thereto.  


 


9.                                       Adjustments
for Changes in Common Stock and Certain Other Events


 


(a)                                  Changes
in Capitalization.  In the event of
any stock split, reverse stock split, stock dividend, recapitalization,
combination of shares, reclassification of shares, spin-off or other similar
change in capitalization or event, or any distribution to holders of Common
Stock other than an ordinary cash dividend, (i) the number and class of
securities available under this Plan, (ii) the sub-limits set forth in Section
4(b), (iii) the number and class of securities and exercise price per share
subject to each outstanding Option, (iv) the repurchase price per share subject
to each outstanding Restricted Stock Award and (v) the terms of each other
outstanding stock-based Award shall be appropriately adjusted by the Company
(or substituted Awards may be made, if applicable) to the extent the Board
shall determine, in good faith, that such an adjustment (or substitution) is
necessary and appropriate.  If this
Section 9(a) applies and Section 9(c) also applies to any event, Section 9(c)
shall be applicable to such event, and this Section 9(a) shall not be
applicable.


 


(b)                                 Liquidation
or Dissolution.  In the event of a
proposed liquidation or dissolution of the Company, the Board shall upon
written notice to the Participants provide that all then unexercised Options
will (i) become exercisable in full as of a specified time at least 10 business
days prior to the effective date of such liquidation or dissolution and (ii)
terminate effective upon such liquidation or dissolution, except to the extent
exercised before such effective date. 
The Board may specify the effect of a liquidation or dissolution on any
Restricted Stock Award granted under the Plan at the time of the grant.


 


(c)                                  Reorganization
Events.


 


(1)                                  Definition.  A “Reorganization Event” shall mean:  (a) any merger or consolidation of the
Company with or into another entity as a result of which all of the outstanding
shares of Common Stock are converted into or exchanged for the right to receive
cash, securities or other property or (b) any exchange of all of the Common
Stock for cash, securities or other property pursuant to a share exchange
transaction.


 


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(2)                                  Consequences
of a Reorganization Event on Awards. 
In connection with a Reorganization Event, the Board shall take any one
or more of the following actions as to all or any outstanding Awards on such
terms as the Board determines:  (i)
provide that Awards shall be assumed, or substantially equivalent Awards shall
be substituted, by the acquiring or succeeding corporation (or an affiliate
thereof), (ii) upon written notice to a Participant, provide that the
Participant’s unexercised Options or other unexercised Awards shall become
exercisable in full and will terminate immediately prior to the consummation of
such Reorganization Event unless exercised by the Participant within a
specified period following the date of such notice, (iii) in the event of a
Reorganization Event under the terms of which holders of Common Stock will
receive upon consummation thereof a cash payment for each share surrendered in
the Reorganization Event (the “Acquisition Price”), make or provide for a cash
payment to a Participant equal to (A) the Acquisition Price times the number of
shares of Common Stock subject to the Participant’s Options or other Awards (to
the extent the exercise price does not exceed the Acquisition Price) minus (B)
the aggregate exercise price of all such outstanding Options or other Awards,
in exchange for the termination of such Options or other Awards, (iv) provide
that outstanding Awards shall become exercisable or realizable, or restrictions
applicable to a Restricted Stock Award or other Award shall lapse, in whole or
in part, prior to or upon such Reorganization Event, (v) provide that, in
connection with a liquidation or dissolution of the Company, Awards shall
convert into the right to receive liquidation proceeds (if applicable, net of
the exercise price thereof) and (vi) any combination of the foregoing.  To the extent all or any portion of an Award
becomes exercisable solely as a result of clause (ii) above, the Board may
provide that upon exercise of such Award the Participant shall receive shares
subject to a right of repurchase by the Company or its successor at the Award
exercise price; such repurchase right (A) shall lapse at the same rate as the
Award would have become exercisable under its terms and (B) shall not apply to
any shares subject to the Award that were exercisable under its terms without
regard to clause (ii) above.


 


10.                                 General
Provisions Applicable to Awards


 


(a)                                  Transferability
of Awards.  Except as the Board may
otherwise determine or may provide in an Award, Awards shall not be sold,
assigned, transferred, pledged or otherwise encumbered by the person to whom
they are granted, either voluntarily or by operation of law, except by will or
the laws of descent and distribution, and, during the life of the Participant,
shall be exercisable only by the Participant. 
References to a Participant, to the extent relevant in the context,
shall include references to authorized transferees.


 


(b)                                 Documentation.  Each Award shall be evidenced in such form
(written, electronic or otherwise) as the Board shall determine.  Each Award may contain terms and conditions
in addition to those set forth in the Plan.


 


(c)                                  Board
Discretion.  Except as otherwise
provided by the Plan, each Award may be made alone or in addition or in
relation to any other Award.  The terms
of each Award need not be identical, and the Board need not treat Participants
uniformly.


 


(d)                                 Termination
of Status.  The Board shall
determine the effect on an Award of the disability, death, retirement,
authorized leave of absence or other change in the employment or other status
of a Participant and the extent to which, and the period during which, the
Participant,


 


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the Participant’s legal representative, conservator or
guardian may exercise rights under the Award.


 


(e)                                  Withholding.  The Company may require each Participant to
pay to the Company, or make provision satisfactory to the Company for payment
of, an amount sufficient to pay any taxes, social security contributions, or
other similar amounts required by law to be withheld in connection with an
Award to such Participant.  If provided
for in an Award or approved by the Company, in its sole discretion, a
Participant may satisfy such tax obligations in whole or in part by delivery of
shares of Common Stock, including shares retained from the Award creating the
tax obligation, valued at their Fair Market Value; provided, however, that
except as otherwise provided by the Board, the total tax withholding where
stock is being used to satisfy such tax obligations cannot exceed the Company’s
minimum statutory withholding obligations (based on minimum statutory withholding
rates for federal and state tax purposes, including payroll taxes, that are
applicable to such supplemental taxable income).  Shares surrendered to satisfy tax withholding requirements cannot
be subject to any repurchase, forfeiture, unfulfilled vesting or other similar
requirements.  The Company may, to the
extent permitted by law, deduct any such tax obligations from any payment of
any kind otherwise due to a Participant.


 


(f)                                    Amendment
of Award.  Except as prohibited by
Section 5(e), the Board may amend, modify or terminate any outstanding Award,
including but not limited to, substituting therefor another Award of the same
or a different type, changing the date of exercise or realization, converting
an Incentive Stock Option to a Nonstatutory Stock Option and converting an
Option into a SAR, provided that, in each such case, the Participant’s consent
to such action shall be required unless the Board determines that the action,
taking into account any related action, would not materially and adversely affect
the Participant.


 


(g)                                 Conditions
on Delivery of Stock.  The Company
will not be obligated to deliver any shares of Common Stock pursuant to the
Plan or to remove restrictions from shares previously delivered under the Plan
until (i) all conditions of the Award have been met or removed to the
satisfaction of the Company, (ii) in the opinion of the Company’s counsel,
all other legal matters in connection with the issuance and delivery of such
shares have been satisfied, including any applicable securities laws and any
applicable stock exchange or stock market rules and regulations, and (iii) the
Participant has executed and delivered to the Company such representations or
agreements as the Company may consider appropriate to satisfy the requirements
of any applicable laws, rules or regulations.


 


(h)                                 Acceleration.  The Board may at any time provide that any
Award shall become immediately exercisable in full or in part, free of some or
all restrictions or conditions, or otherwise realizable in full or in part, as
the case may be; provided, however, that this sentence shall apply to a
Restricted Stock Award only to the extent consistent with Sections 7(c)(2) and
10(j).


 


(i)                                     Deferral.  The Board may provide in an Award or in an
amendment to an Award that the Participant may elect to defer the delivery of
shares of Common Stock that would otherwise be delivered pursuant to such
Award.  The Board may establish such
conditions on the Participant’s election as it deems appropriate.


 


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(j)                                     Performance
Conditions.


 


(1)                                  Notwithstanding
any other provision of the Plan, if the Committee determines at the time a
Restricted Stock Award or an Other Stock-Based Award is granted to a
Participant who is then an officer, that such Participant is, or is likely to
be as of the end of the tax year in which the Company would claim a tax
deduction in connection with such Award, a Covered Employee (as defined in
Section 162(m) of the Code), then the Committee may provide that this Section
10(j) is applicable to such Award.


 


(2)                                  If
a Restricted Stock Award or an Other Stock-Based Award is subject to this
Section 10(j), then the lapsing of restrictions thereon and the distribution of
Shares pursuant thereto, as applicable, shall be subject to the achievement of
one or more objective performance goals established by the Committee, which
shall 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.  The Committee may determine that special,
one-time or extraordinary gains and/or losses or other special, one-time or
extraordinary events should or should not be included or considered in the
calculation of such measures.  In
addition, customer service target levels will be based on predetermined tests
of customer service levels such as scores on blind test (“mystery”) shopping,
customer comment card statistics, customer relations statistics (e.g., number
of customer complaints), and delivery response levels.  The Committee believes that disclosure of
further detail concerning the performance criteria may be confidential
commercial or business information, the disclosure of which would adversely
affect the Company.  Such performance
goals may vary by Participant and may be different for different Awards.  Such performance goals shall be set by the
Committee within the time period prescribed by, and shall otherwise comply with
the requirements of, Section 162(m) of the Code, or any successor provision
thereto, and the regulations thereunder.


 


(3)                                  The
Committee shall have the power to impose such other restrictions on Awards
subject to this Section 10(j) as it may deem necessary or appropriate to ensure
that such Awards satisfy all requirements for “performance-based compensation”
within the meaning of Section 162(m)(4)(C) of the Code, or any successor
provision thereto.


 


11.                                 Miscellaneous


 


(a)                                  No
Right To Employment or Other Status. 
No person shall have any claim or right to be granted an Award, and the
grant of an Award shall not be construed as giving a Participant the right to
continued employment or any other relationship with the Company.  The Company expressly reserves the right at
any time to dismiss or otherwise terminate its relationship with a Participant
free from any liability or claim under the Plan, except as expressly provided
in the applicable Award.


 


(b)                                 No
Rights As Stockholder.  Subject to
the provisions of the applicable Award, no Participant shall have any rights as
a stockholder with respect to any shares of Common Stock to be distributed with
respect to an Award until becoming the record holder of such shares.  Notwithstanding the foregoing, in the event
the Company effects a split of the Common Stock by means of a stock dividend
and the exercise price of and the number of shares subject to such Option are
adjusted as of the date of the distribution of the dividend (rather than as of
the record


 


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date for such dividend), then an optionee who
exercises an Option between the record date and the distribution date for such
stock dividend shall be entitled to receive, on the distribution date, the
stock dividend with respect to the shares of Common Stock acquired upon such
Option exercise, notwithstanding the fact that such shares were not outstanding
as of the close of business on the record date for such stock dividend.


 


(c)                                  Effective
Date and Term of Plan.  The Plan
shall become effective on the date on which it is approved by stockholders of
the Company and shall remain in full force and effect until terminated by the
Board.  No Awards shall be granted under
the Plan after the completion of ten years from the date on which the Plan is
adopted or was approved by the Company’s stockholders, whichever is earlier,
but Awards previously granted may extend beyond that date.


 


(d)                                 Amendment
of Plan.  The Board may amend,
suspend or terminate the Plan or any portion thereof at any time, provided that
no amendment requiring the approval of the Company’s stockholders under any
applicable tax requirement, including without limitation Sections 162(m) and
422 of the Code, shall become effective until such approval of the Company’s
stockholders is obtained and provided further that without approval of the Company’s
stockholders, no amendment may (i) increase the number of shares
authorized under the Plan (other than pursuant to Section 9),
(ii) materially increase the benefits provided under the Plan,
(iii) materially expand the class of participants eligible to participate
in the Plan, (iv) expand the types of Awards provided under the Plan or (v)
make any other changes which require stockholder approval under the rules of
the Nasdaq National Market, Inc.  No
Award shall be made that is conditioned on the approval of the Company’s
stockholders of any amendment to the Plan.


 


(e)                                  Provisions
for Foreign Participants.  The Board
may modify the terms and conditions of Awards granted to Participants who are
foreign nationals or employed outside the United States, establish subplans
under the Plan, or adopt such modifications or procedures as the Board may
determine to be necessary or advisable to recognize differences in laws, rules,
regulations or customs of such foreign jurisdictions with respect to tax,
securities, currency, employee benefit, accounting or other matters.


 


(f)                                    Governing
Law.  The provisions of the Plan and
all Awards made hereunder shall be governed by and interpreted in accordance
with the laws of the State of Delaware, without regard to any applicable
conflicts of law.


 


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