Office Depot 2003 Annual Report Download - page 82

Office Depot 2003 / Proxy Statement 80
Holding Periods”), the grantee recognizes capital gain or loss,
as the case may be, measured by the difference between the
stock’s selling price and the exercise price. We are not entitled
to any tax deduction by reason of the grant or exercise of an
incentive option, or a disposition of stock received upon the
exercise of an incentive option after the Required Holding
Periods have been satisfied.
If a grantee disposes of shares of our common stock acquired
pursuant to the exercise of an incentive option before the expi-
ration of the Required Holding Periods (a “ Disqualifying
Disposition”), the difference between the exercise price of
such shares and the lesser of (i) the fair market value of such
shares upon the date of exercise or (ii) the selling price, will
constitute compensation taxable to the grantee as ordinary
income. We would be allowed a corresponding tax deduction
equal to the amount of compensation taxable to the grantee. If
the selling price of the stock exceeds the fair market value on
the exercise date, the excess will be taxable to the grantee as
capital gain. We are not allowed a tax deduction with respect
to any such capital gain recognized by the grantee.
At the present time, it is the intention of our Compensation
Committee not to award any further incentive stock options
after February 19, 2004 and instead to award only non-quali-
fied stock options.
One Million Dollar Compensation Limit. If a covered
employee’s total compensation from our Company (including
compensation related to options) exceeds $1 million in any
given year, such compensation in excess of $1 million may
not be tax deductible by us under Section 162(m) of the Code.
The “ covered employees”for any given taxable year of Office
Depot are our Chief Executive Officer and the four other most
highly compensated executive officers at the end of the tax-
able year. Excluded from the calculation of total compensation
for this purpose is compensation that is “ performance-based”
within the meaning of Section 162(m) of the Code. We intend
that compensation realized upon the exercise of an option, SAR
or a performance award granted under the Plan be regarded as
“ performance-based” under Section 162(m) of the Code and
that such compensation be deductible without regard to the
limits of Section 162(m) of the Code.
Vote Required for the Plan Amendment
The affirmative vote of a majority of the votes cast by the
holders of shares of Office Depot Common stock represented
in person or by proxy at our Annual Meeting is required for
approval of the Plan Amendment.
Text of Proposed Plan Amendment
The Amendment to the Plan submitted for your approval is as
follows: The first sentence of Section 4 of the Long-Term
Equity Incentive Plan is hereby amended as follows:
Subject to adjustments as provided in Section 15, as of any date
the total number of shares of Common stock with respect to
which awards may be granted under the Plan (the “ Shares”)
shall equal the excess (if any) of 62,068,750 over (i) the number
of shares of Common stock subject to outstanding awards under
the Plan or the Prior Plans, (ii) the number of shares of
Common stock in respect of which options and stock appreciate
rights have been exercised under the Plan or the Prior Plans,
and (iii) the number of shares of Common stock issued pur-
suant to performance awards or issued subject to forfeiture
restrictions which have lapsed under the Plan or the Prior Plans.
Your Board of Directors Recommends a Vote FOR Item
Number 2 on your Proxy Card, Amending Our Long-
Term Equity Incentive Plan.
Item 3: Ratifying Our Audit Committee’s Appointment
of Deloitte & Touche LLP as Our Independent
Accounting Firm
Information About Our Independent Accountants
In accordance with the provisions of the Sarbanes-Oxley Act
of 2002 (“ SOA”), the Audit Committee of our Board has
appointed the certified public accounting firm of Deloitte &
Touche LLP (“ Deloitte”) as independent accountants to audit
our consolidated financial statements for the fiscal year end-
ing December 25, 2004. Deloitte has audited our consolidated
financial statements each year since 1990. Representatives of
Deloitte will be present at our Annual Meeting with the
opportunity to make a statement if they desire to do so, and
they will be available to respond to appropriate questions
from shareholders. Although our Audit Committee already
has appointed Deloitte as our independent accountants for
2004 and the vote of our shareholders is not required, we
request that the shareholders nevertheless ratify this appoint-
ment. Regardless of the vote of the shareholders, our Audit
Committee’s decision to appoint Deloitte as our independent
accountants for 2004 will not be changed, but our Audit
Committee may take into consideration the vote of our share-
holders on this matter in selecting independent accountants to
serve as our outside auditors in future years.