Staples 2004 Annual Report Download - page 25

of 1986, as amended (the ‘‘Code’’) and other stock-based awards. No more than 50% of the total number of shares of
Staples common stock covered by the Plan may be issued pursuant to awards that are not options or stock
appreciation rights. No more than 2,000,000 shares in the aggregate of Staples common stock available under the
Restated Plan may be subject to awards made to Directors of Staples who are not also associates of Staples.
Incentive Stock Options and Non-statutory Stock Options. Optionees receive the right to purchase a specified
number of shares of Staples common stock at a specified option price and subject to such other terms and conditions
as are specified in connection with the option grant. Options may not be granted at an exercise price less than the fair
market value of the Staples common stock on the date of grant. Options may not be granted for a term in excess of ten
years. Outstanding options may not be amended to provide an exercise price per share which is lower than the then
current exercise price per share of such outstanding options. The Board of Directors may not cancel any outstanding
options and grant in substitution for such options new options under the Restated Plan covering the same or a
different number of shares of Staples common stock and having an exercise price per share lower than the then
current exercise price per share of the cancelled options. The Board of Directors, however, has the power to amend
stock options to convert them into stock appreciation rights and make other amendments to options, provided that the
optionee must consent to such action unless the Board of Directors determines that the action would not materially
and adversely affect the optionee.
Restricted Stock and Restricted Stock Unit Awards. Restricted stock awards entitle recipients to acquire shares of
Staples common stock, subject to the right of Staples to repurchase all or part of such shares from the recipient in the
event that the conditions specified in the applicable award are not satisfied prior to the end of the applicable
restriction period established for such award. Restricted stock unit awards entitle the recipient to receive shares of
Staples common stock to be delivered in the future subject to such terms and conditions on the delivery of the shares
as the Board of Directors may determine.
Restricted stock and restricted stock unit awards granted under the Restated Plan may vest (1) solely on the basis
of passage of time, (2) solely based on achievement of specified performance criteria or (3) upon the passage of time,
subject to accelerated vesting if specified performance criteria are met. We also refer to restricted stock awards
described in clause (3) above as performance accelerated restricted stock awards, or PARS. The Compensation
Committee may determine, at the time of grant, that a restricted stock or restricted stock unit award being made to an
officer of Staples to vest solely upon achievement of specified performance criteria be designed to qualify for
deduction under Section 162(m) of the Code. The performance criteria for each restricted stock or restricted stock
unit award intended to so qualify for purposes of Section 162(m) of the Code will be based on one or more of the
following measures: sales, earnings per share, return on net assets, return on equity, and customer service levels. The
Compensation Committee may also determine that special one-time or extraordinary gains and/or losses and/or other
one-time or extraordinary events should or should not be included or considered in the calculation of such measures.
In addition, customer service target levels will be based on predetermined tests of customer service levels such as
scores on blind test (‘‘mystery’’) shopping, customer comment card statistics, customer relations statistics (e.g.,
number of customer complaints), and delivery response levels. The Compensation Committee believes that disclosure
of further detail concerning the performance criteria for each plan year may be confidential commercial or business
information, the disclosure of which would adversely affect the Company.
Except as noted below, (a) restricted stock and restricted stock units that vest solely on the basis of passage of
time may vest no faster than ratably over three years and (b) restricted stock and restricted stock units that vest based
on achievement of specified performance criteria or provide for accelerated vesting based upon achievement of
specified performance criteria may not vest earlier than the first anniversary of the date of grant. These vesting
restrictions do not apply to restricted stock and restricted stock unit awards collectively with respect to up to 5% of the
total number of shares of Staples common stock covered by the Restated Plan (excluding any shares that become
available in connection with awards made under the 1992 Plan). In addition, the Board of Directors may make
exceptions to the vesting limitations described above in the event of the recipient’s death, a change in control of
Staples or other extraordinary circumstances specified in the Restated Plan.
Stock Appreciation Rights. A stock appreciation right, or SAR, is an award entitling the holder on exercise to
receive an amount in cash or Staples common stock or a combination thereof determined in whole or in part by
reference to appreciation, from and after the date of grant, in the fair market value of a share of Staples common
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