Letter Agreement



 









EXHIBIT 10.1




October 4, 2004




Mr. Neil R. Austrian

Office Depot, Inc.

2200 Old Germantown Road

Delray Beach, FL 33445



Dear Neil:



This letter, when signed by each of us shall constitute the agreement
(“Agreement”) between Office Depot, Inc. (“Company”) and yourself (“Executive”)
with regard to your serving as the Chairman and Chief Executive Officer of the
Company during the period from today’s date through the arrival of a new,
permanent Chief Executive Officer for the Company. This period is referred to
herein as the “Engagement.”



Engagement: Executive has agreed to serve, at the unanimous request of the
non-management Directors of the Board of Directors (the “Board”), as Chairman
and Chief Executive Officer (“CEO”) of the Company during the Engagement.
During the Engagement, Executive shall devote substantially his full working
time, and his best efforts to performing the duties of CEO of the Company.



During the Engagement, Executive shall have the normal duties, responsibilities
and authority attendant to the position of CEO of the Company, subject to the
power of the Board to expand or limit such duties, responsibilities and
authority from time to time.



Executive shall be allowed to serve as a director of any company or entity of
which he is currently a director, including any non-profit organization
(including trade, civic, educational or charitable organizations). With the
prior written approval of the Board, Executive also shall be allowed to serve
as (i) a director or officer of, or (ii) a director of any corporation which is
not competing with the Company or any of its Subsidiaries in the office product
and office supply industry, so long as such duties do not materially interfere
with the performance of Executive’s duties or responsibilities hereunder.



Executive shall perform Executive’s duties and responsibilities under this
Agreement to the best of Executive’s abilities in a diligent, trustworthy,
businesslike and efficient manner.



Either party may terminate the Engagement at any time upon not less than sixty
(60) days’ notice to the other, subject to, in the case of a termination by the
Company,




2200 Old Germantown Road

Delray Beach, FL 33445

Phone (561) 438-4800



 









 





payment to Executive of the Minimum Compensation referred to in the next
section of this Agreement and to the vesting of the Restricted Stock award
referred to below. In the event Executive provides such notice of termination
prior to the completion of six months of service under the Engagement (other
than in connection with the assumption of such position by a new CEO, selected
by the Board, in which event he shall receive the Minimum Compensation), the
Company shall be obligated to pay Executive only at the monthly rate of
compensation referred to below for the number of months during Executive
actually renders services to the Company pursuant to this Agreement.



Cash Compensation: The Company shall pay to Executive for performing his
duties hereunder, cash compensation of $170,000 per month. Regardless of the
duration of the Engagement (other than Executive’s resignation as set forth in
the preceding section of this Agreement), the total such compensation payable
to Executive shall not be less than six months’ compensation, or $1,020,000
(the “Minimum Compensation”). Executive’s cash compensation shall be payable
in regular installments in accordance with the Company’s general payroll
practices and shall be subject to customary withholding for income taxes, FICA
and similar items.



Incentive Compensation, Equity Award: As further compensation to Executive for
accepting the position of CEO during the Engagement, and upon the terms of this
Agreement, the Company shall award to Executive, effective on October 5, 2004,
as of the market close, an award of “Restricted Stock” under the Company’s
Long-Term Equity Incentive Plan, calculated as follows: The Restricted Stock
award (the “Award”) shall consist of that number of shares of the Company’s
stock which results from dividing the sum of $1 million by the closing price of
the Company’s stock on October 5, 2004. The restrictions on such Restricted
Stock shall lapse and cease, and the Award shall become 100% vested, (i) upon
the third anniversary (the “Vesting Date”) of the Award, provided that
Executive either (a) remains CEO of the Company as of the Vesting Date, or (b)
remains a member of the Board of Directors of the Company as of the Vesting
Date, or (ii) upon the occurrence of any of the following events (a) Executive
has not been re-elected to the Board prior to the Vesting Date, despite having
offered himself as a candidate for re-election to the Board or (b) Executive
has been removed from his position as CEO, other than for “good cause” (defined
below), or (c) a change in control of the Company occurs. As used herein, the
term “change in control” shall have the meaning set forth on Attachment A to
this Agreement, which is incorporated by this reference herein and made a part
hereof.



If Executive resigns from his position as CEO (other than in connection with
the assumption of such position by a new CEO, selected by the Board) or from
the Board, or is removed for good cause from either his position as CEO or from
the Board prior to the Vesting Date, then the award of Restricted Stock shall
lapse and be null and void from the date of such resignation or removal for
good cause. Good cause shall be established only if a vote of 75% or more of
the Directors of the Company (other than Executive) shall specify the nature of
such “good cause” and shall direct that Executive shall be terminated for good
cause. As used herein, the term “good cause” shall mean: conviction of a
felony or willful malfeasance or gross negligence in discharging Executive’s
duties under this Agreement, resulting in material harm to the Company.



Other Benefits: In addition to the cash compensation, the Company shall
furnish the Executive with the following items (collectively “Benefits”) during
the term of the Engagement:




	a)	 	A car allowance of $1,500 per month, for use by Executive in
obtaining a suitable vehicle for his use during the Engagement, and for
upkeep, insurance, fuel and similar expenses.
	 
	b)	 	A suitable furnished apartment, condominium or residence, subject
to reasonable approval by Executive, for the use of Executive and his
spouse during the Engagement.
	 
	c)	 	Use of corporate jet for business travel, and during the
Engagement, for commuting between Executive’s Florida residence and his
other residences. When Executive determines in the reasonable
exercise of his judgment that his spouse should accompany him
(including without limitation when commuting between residences), then
this use shall be permitted.



 









 








The Benefits shall be provided to Executive on a tax “grossed-up” basis. This
shall be accomplished by either (at the Company’s option), (a) the Company’s
providing to Executive a Form W-2 which reflects the Company’s payment of the
applicable income tax withholdings on the value of the Benefits, or (b) by the
Company’s providing to Executive an additional payment (a “Gross-Up Payment”)
in an amount such that after payment by Executive of all taxes (including any
interest or penalties imposed with respect to such taxes), including, without
limitation, any income taxes (and any interest and penalties imposed with
respect thereto), including any taxes imposed upon the Gross-Up Payment,
Executive shall have received the value of such Benefits, undiminished by the
requirement that he pay any tax on such Benefits.



Benefits; Health & Welfare Plans: Other than the Benefits referred to in the
preceding section of this Agreement, Executive shall not participate in any
other benefit plans of the Company. Provided, however, that Executive shall
continue to participate in the Company’s stock option plan in his capacity as a
member of the Board of Directors of the Company, to the same extent as he has
been participating, and to the same extent as other members of the Board may
participate from time to time.



Business Expenses: The Company shall reimburse Executive for all reasonable
expenses incurred by Executive in the course of performing Executive’s duties
under this Agreement that are consistent with the Company’s policies in effect
from time to time with respect to travel, entertainment and other business
expenses. Reimbursement shall be subject to the Company’s customary
requirements imposed upon executive level employees, with respect to reporting
and documentation of such expenses.



Confidential Information: Executive acknowledges that the information,
observations and data obtained by Executive while employed by the Company
concerning the business or affairs of the Company or any subsidiary or
affiliate of the Company (“Confidential Information”) is the property of the
Company. Therefore, Executive agrees that Executive shall not disclose to any
unauthorized person or use for Executive’s own purposes any Confidential
Information without the prior written consent of the Board of Directors, unless
and to the extent that the aforementioned matters become generally known to and
available for use by the public other than as a result of Executive’s acts or
omissions. Executive shall deliver to the Company at the termination of the
Employment Term, or at any other time the Company may request, all memoranda,
notes, plans, records, reports, computer tapes, printouts and software and
other documents and data (and copies thereof) in any form or medium relating to
the Confidential Information, or the business of the Company or any subsidiary
or affiliate of the Company that Executive may then possess or have under
Executive’s control.



Suspension of Committee Memberships: During the Engagement, Executive shall
continue to serve as a member of the Board of Directors of the Company, subject
to the requirement that he stand for re-election at each Annual Meeting of
Shareholders of the Company. During the Engagement, Executive’s membership on
all Board committees on which he currently serves shall be suspended. However,
in his capacity as CEO, he shall be allowed to attend any and all meetings of
Board committees ex officio.



Miscellaneous Provisions:





	a)	 	Severability. Whenever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be
invalid, illegal or unenforceable in any respect under any applicable
law or rule in any jurisdiction, such invalidity, illegality or
unenforceability shall not affect any other provision or any other
jurisdiction, but this Agreement shall be reformed, construed and
enforced in such jurisdiction as if such invalid, illegal or
unenforceable provision had never been contained herein.
	 
	b)	 	Complete Agreement. This Agreement constitutes the complete
agreement and understanding among the parties and supersedes and
preempts any prior understandings, agreements or representations by or
among the parties, written or oral, which may have related to the
subject matter hereof in any way.
	 
	c)	 	Construction. The language used in this Agreement shall be deemed
to be the language chosen by the parties hereto to express their mutual
intent, and no rule of strict construction shall be applied against any
party.



 









 





	d)	 	Successors and Assigns. This Agreement is intended to bind and
inure to the benefit of and be enforceable by Executive, the Company
and their respective heirs, successors and permitted assigns, except
that Executive may not assign Executive’s rights or delegate
Executive’s obligations hereunder without the prior written consent of
the Company.
	 
	e)	 	Assignment by the Company. This Agreement shall not be assignable
by the Company except to a successor of the Company (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company, which
successor shall be required to perform this Agreement in the same
manner and to the same extent that the Company would be required to
perform it if no such succession had taken place.
	 
	f)	 	Choice of Law. All issues and questions concerning the
construction, validity, enforcement and interpretation of this
Agreement hereto shall be governed by, and construed in accordance
with, the laws of the State of Florida, without giving effect to any
choice of law or conflict of law rules or provisions (whether of the
State of Florida or any other jurisdiction) that would cause the
application of the laws of any jurisdiction other than the State of
Florida.
	 
	g)	 	Amendment and Waiver. The provisions of this Agreement may be
amended or waived only with the prior written consent of the Company
and Executive, and no course of conduct or failure or delay in
enforcing the provisions of this Agreement shall affect the validity,
binding effect or enforceability of this Agreement.




Neil, if you will please countersign a copy of this Letter Agreement, it will
constitute the terms of the Engagement of you as interim Chairman and CEO of
the Company upon the terms herein.



Sincerely,




/s/ Lee A. Ault III






Lee A. Ault III



Chairman, Compensation Committee

Office Depot, Inc.



This Letter Agreement is agreed to:



/s/ Neil R. Austrian






Neil R. Austrian



Date: October 4, 2004




 









 







Attachment A




Definition of Change in Control



(a) The acquisition by any individual, entity or group (within the meaning of
Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended
(the “Exchange Act”)) (a “Person”) of beneficial ownership of 20% or more of
either (i) the then-outstanding shares of common stock of the Company (the
“Outstanding Company Common Stock”) or (ii) the combined voting power of the
then-outstanding voting securities of the Company entitled to vote generally in
the election of directors (the “Outstanding Company Voting Securities”).



(b) Individuals who, as of the date hereof, constitute the Board (the
“Incumbent Board”) cease for any reason to constitute at least a majority of
the Board; provided, however, that any individual becoming a director
subsequent to the date hereof whose election, or nomination for election by the
Company’s shareholders, was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board shall be considered as though
such individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office occurs as a
result of an actual or threatened election contest with respect to the election
or removal of directors or other actual or threatened solicitation of proxies
or consents by or on behalf of a Person other than the Board; or



(c) Consummation of a reorganization, merger or consolidation or sale or other
disposition of all or substantially all of the assets of the Company (a
“Business Combination”), in each case, unless, following such Business
Combination, (i) all or substantially all of the individuals and entities who
were the beneficial owners, respectively, of the Outstanding Company Common
Stock and Outstanding Company Voting Securities immediately prior to such
Business Combination beneficially own, directly or indirectly, more than 60%
of, respectively, the then-outstanding shares of common stock and the combined
voting power of the then outstanding voting securities entitled to vote
generally in the election of directors, as the case may be, of the corporation
resulting from such Business Combination (including, without limitation, a
corporation which as a result of such transaction owns the Company or all or
substantially all of the Company’s assets either directly or through one or
more subsidiaries) in substantially the same proportions as their ownership,
immediately prior to such Business Combination of the Outstanding Company
Common Stock and Outstanding Company Voting Securities, as the case may be,
(ii) no Person (excluding any corporation resulting from such Business
Combination or any employee benefit plan (or related trust) of the Company or
such corporation resulting from such Business Combination) beneficially owns,
directly or indirectly, 20% or more of, respectively, the then-outstanding
shares of common stock of the corporation resulting from such Business
Combination, or the combined voting power of the then-outstanding voting
securities of such corporation except to the extent that such ownership existed
prior to the Business Combination and (iii) at least a majority of the members
of the board of directors of the corporation resulting from such Business
Combination were members of the Incumbent Board at the time of the execution of
the initial agreement, or of the action of the Board, providing for such
Business Combination; or



(d) Approval by the shareholders of the Company of a complete liquidation or
dissolution of the Company.