Office Depot 2010 Annual Report Download - page 56

allegations, he agreed to an SEC order requiring future compliance with Regulation FD and agreed to pay a civil
penalty. The settlement concludes for the company and its former Chief Executive Officer all matters arising
from the SEC investigation.
On December 13, 2010, the United States Court of Appeals for the Eleventh Circuit affirmed the dismissal with
prejudice of the Consolidated Lawsuit (defined below). As background, in early November 2007, two putative
class action lawsuits were filed against the Company and certain of its executive officers alleging violations of
the Securities Exchange Act of 1934. The allegations made in these lawsuits primarily related to the accounting
for vendor program funds. Each of the foregoing lawsuits was filed in the United States District Court for the
Southern District of Florida and captioned as follows: (1) Nichols v. Office Depot, Inc., Steve Odland and
Patricia McKay filed on November 6, 2007 and (2) Sheet Metal Worker Local 28 Pension Fund v. Office Depot,
Inc., Steve Odland and Patricia McKay filed on November 5, 2007. On March 21, 2008, the district court entered
an Order consolidating the class action lawsuits (the “Consolidated Lawsuit”). Lead plaintiff in the Consolidated
Lawsuit, the New Mexico Educational Retirement Board, filed its Consolidated Amended Complaint on July 2,
2008, and its Second Consolidated Amended Complaint on April 20, 2009. On January 14, 2010, the district
court dismissed the Second Consolidated Amended Complaint with prejudice, which led to the aforementioned
appeal.
In addition, in the ordinary course of business, our sales to and transactions with government customers may be
subject to investigations, audits and review by governmental authorities and regulatory agencies, with which we
cooperate. Many of these investigations, audits and reviews are resolved without incident. While claims in these
matters may at times assert large demands, we do not believe that contingent liabilities related to these matters,
either individually or in the aggregate, will materially affect our financial position, results of our operations or
cash flows. Among such matters, during the first quarter of 2011, we were notified that the United States
Department of Justice has commenced an investigation into certain pricing practices related to an expired
agreement that was in place between January 2, 2006 and January 1, 2011, pursuant to which state, local and
non-profit agencies could purchase office supplies.
NOTE J — EMPLOYEE BENEFIT PLANS
Long-Term Incentive Plan
During 2007, the company’s board of directors adopted, and the shareholders approved, the Office Depot, Inc.
2007 Long-Term Incentive Plan (the “Plan”). The Plan permits the issuance of stock options, stock appreciation
rights, restricted stock, restricted stock units, performance-based, and other equity-based incentive awards. The
option exercise price for each grant of a stock option shall not be less than 100% of the fair market value of a
share of common stock on the date the option is granted. Options granted under the Plan become exercisable
from one to five years after the date of grant, provided that the individual is continuously employed with the
company. All options granted expire no more than ten years following the date of grant. Our employee share-
based awards are generally issued in the first quarter of the year.
Long-Term Incentive Stock Plan
During 2010, the company implemented a one-time voluntary stock option exchange program that had been
approved by the board of directors and the company’s shareholders. The fair value exchange program resulted in
the tender of 3.8 million shares of eligible options in exchange for approximately 1.4 million of newly-issued
options. No additional compensation expense resulted from this value-for-value exchange. The new options have
an exercise price of $5.13, which was the closing price of Office Depot, Inc. common stock on the date of the
exchange, and the majority of the options will vest over three years. The fair value of the exchanged shares was
$2.97 per share. The new options are listed separately in the tables below.
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