Office Depot 2012 Annual Report Download - page 17

B
C Partners’
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ignificant ownership interest dilutes the interests of our common shareholders, may discourage, delay or prevent a
change in control of our Company and grants important rights to BC Partners, Inc.
The Series A and Series B Preferred Stock that we sold in June 2009 to funds advised by BC Partners, Inc. (the “Investors”) were
immediately convertible into shares of our common stock at an initial conversion price of $5.00 per share (subject to a conversion
cap). The investment equates to a potential current ownership interest of approximately 22%, assuming the full conversion of each
series of preferred stock into the Company’s common stock. Any sales in the public market of the shares of common stock issuable
upon such conversion could adversely affect prevailing market prices of our common stock.
The initial dividend rate remains 10% on both the Series A and Series B Preferred Stock, and dividends are paid quarterly in cash o
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are added to the liquidation preference at our option and are subject to certain restrictions. To the extent that dividends are added to
the liquidation preference, this further increases the ownership interest of the Investors and dilutes the interests of the common
shareholders.
The holders of the Series A and Series B Preferred Stock are entitled to vote with the holders of our common stock on an as-converted
basis, subject to limitations imposed by New York Stock Exchange (“NYSE”) shareholder approval requirements. The Investors have
agreed to cause all of their common stock and preferred stock entitled to vote at any meeting of our shareholders to be present at such
meeting and to vote all such shares in favor of any nominee or director nominated by the Company’s Corporate Governance and
Nominating Committee, against the removal of any director nominated by such Committee and, with respect to any other business o
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proposal, in accordance with the recommendation of the Board of Directors (other than with respect to the approval of any proposed
business combination agreement between the Company and another entity). This may discourage, delay or prevent a change in control
of our Company, which could deprive our shareholders of an opportunity to receive a premium for their common stock as part of
a
sale of our Company.
We also entered into a related Investor Rights Agreement pursuant to which we granted certain rights to the Investors that may
restrain our ability to take certain actions in the future. Subject to certain exceptions, for so long as the Investors’ ownership
percentage is equal to or greater than 10%, the approval of at least one of the directors designated to our Board of Directors by the
Investors is required for the Company to incur any indebtedness for borrowed money in excess of $200 million in the aggregate
during any fiscal year if the ratio of the consolidated debt of the Company to the trailing four quarter adjusted EBITDA of the
Company, on a consolidated basis, is more than 4x. In addition, for so long as the Investors’ ownership percentage is (i) equal to o
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greater than 15%, the Investors are entitled to nominate three directors, (ii) less than 15% but more than 10%, two directors and
(iii) less than 10% but more than 5%, one director. There can be no assurance that the interests of the Investors are aligned with those
of our other shareholders. Investor interests can differ from each other and from other corporate interests and it is possible that the
Investors may have interests that differ from management and those of other shareholders. If the Investors were to sell, or otherwise
transfer, all or a large percentage of their holdings, our stock price could decline and we could find it difficult to raise capital, i
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needed, through the sale of additional equity securities.
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