Office Depot 2003 Annual Report Download - page 91

89 Office Depot 2003 / Proxy Statement
Stock Options. In connection with entering into the new
Employment Agreement as of December 29, 2001, our
Compensation Committee provided Mr. Nelson with a total
grant of one million stock options. 750,000 of these stock
options have a grant date of December 20, 2001 and the
remaining 250,000 have a grant date of January 2, 2002. All
of these stock options vest in full on December 31, 2004, pro-
vided Mr. Nelson remains with our Company through such
date, and are subject to earlier vesting in the event of a change
in control of our Company, his death or disability, his termina-
tion without Cause or his resignation for “ good reason”—all
as such terms are defined in the Agreement. This one million-
share grant has the feature of premium pricing. The exercise
price for these stock options is 125% of the market price on
the date of grant, which means that these options will not have
realizable value to Mr. Nelson until the stock price increases
substantially above the 2002 year-end closing price. These
premium-priced stock options have an extended exercise
period of three (3) years, regardless of whether Mr. Nelson
remains employed by our Company during that period of
time. Mr. Nelson received 575,000 stock option grants during
2003, in the regular course of stock option grants made to our
executives by our Compensation Committee.
Change in Control Agreement.Mr. Nelson and our Company
also are parties to a Change in Control Agreement, under the
terms of which Mr. Nelson is entitled, upon a Change in
Control of our Company, coupled with certain other events
specified in the agreement, to a sum equal to three times the
sum of his annual base salary at the time of the change in con-
trol plus his highest annual bonus during the period preceding
the change in control. Mr. Nelson would also be entitled to the
continuation of his benefits for a period of three years and cer-
tain other benefits.
Other Benefits. Mr. Nelson receives certain additional bene-
fits under the terms of his Employment Agreement, which are
generally comparable to our benefits for all executive man-
agement employees. Mr. Nelson and his spouse are entitled to
health insurance coverage for their lifetimes.
Termination. If we terminate Mr. Nelson’s employment
“ withoutcause” or Mr. Nelson quits for “ good reason,” as
defined in the Employment Agreement, then he is entitled to
receive his base salary through the second anniversary of his
termination date; a pro rata portion of his bonus; the vested
and accrued amounts under his incentive plans, health and
welfare plans, deferred compensation plans and other benefit
plans; and insurance benefits for him and his family through
the second anniversary of his termination date (to the extent he
and his family participated in these benefits prior to the termi-
nation) and vesting of the deferral account and stock options
referred to above.
Employment Agreements with
Other Named Executive Officers
We have Employment Agreements with each of our other
Named Executive Officers. Each of these “ Executive Employ-
ment Agreements” is substantially similar to the others. Each
provides for a base salary which may be increased, but not
reduced, and further provides that the executive will be enti-
tled to participate in our bonus plan and other benefit plans.
All of these Executive Employment Agreements are one-year
“ evergreen”agreements, which automatically renew each year
unless either party notifies the other at least six (6) months in
advance of expiration that it does not wish the agreement to be
extended for an additional year. The Executive Employment
Agreements also contain confidentiality, non-compete and
non-solicitation provisions. All of our Named Executive
Officers also are parties to Change in Control Employment
Agreements (“ CIC Agreements”). The purpose of the CIC
Agreements is to assure the continued dedication of these
executives, notwithstanding the possibility, threat or occur-
rence of a change in control (“ CIC”). In the event of a CIC,
each of these executives will be entitled to certain employ-
ment rights, including: (i) a minimum annual base salary and
bonus; (ii) participation rights in our incentive, savings, retire-
ment and welfare benefit plans; and (iii) certain payments and
other benefits upon termination of employment.