Staples 2005 Annual Report Download - page 45

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29
executive officer, and modest payments made to certain executive officers for reimbursement of tax/financial planning
services.
Retirement Benefits
In 2005, the Committee amended all of the Company’s non-qualified award based benefit plans to provide that
the prior service of any board member who subsequently becomes a Company associate will be counted as Company
service for all benefit plan calculations and determinations. As a result of this policy change, in connection with
Mr. Anderson’s retirement in March 2006, Mr. Anderson met the Company’s retirement definition under our
Supplemental Executive Retirement Plan and certain awards under our Amended and Restated 2004 Stock Incentive
Plan.
Revised Severance Agreements
Based on its review of the severance arrangements and change in control provisions applicable to chief executive
officers at Fortune 200 companies and a number of other retail companies, including a group of peer companies, and
after consulting with its independent expert, the Committee approved the following changes to the severance benefit
agreement with Mr. Sargent, the Company’s Chairman and Chief Executive Officer:
•The period during which Mr. Sargent will be entitled to continuation of his base salary, bonus and other
benefits in the event of a qualified termination (as defined in the severance agreement) was extended from 18
months to 24 months, and the additional period during which Mr. Sargent will be entitled to continuation of his
base salary, bonus and other benefits in the event such qualified termination occurs within two years of a
change in control (as defined in the severance agreement) was extended from 6 additional months to 12
additional months.
•If the severance payments payable by the Company to Mr. Sargent become subject to the excise tax on “excess
parachute payments” imposed by Section 4999 of the Internal Revenue Code or additional tax under
Section 409A of the Internal Revenue Code, the Company will reimburse Mr. Sargent for the amount of such
excise tax (and the income and excise taxes on such reimbursement).
•If Mr. Sargent’s employment is terminated by the Company without cause (as defined in the severance
agreement), all options to purchase Company common stock held by Mr. Sargent will become exercisable in
full and any restrictions on the vesting of shares subject to restricted stock awards held by him will lapse.
•The elimination of the provision whereby severance pay could be reduced by 50% of any cash compensation
earned by or accrued for Mr. Sargent as a result of services rendered by him for a third party.
Based on a similar review of severance arrangements and change in control provisions applicable to executives
comparable to Messrs. Mahoney and Miles, the Company’s Vice Chairman/Chief Financial Officer and
President/Chief Operating Officer, respectively, the Committee approved the following changes to the severance
benefits agreements with Messrs. Mahoney and Miles:
•The period during which they will each be entitled to continuation of their base salary, bonus and other
benefits in the event of a qualified termination (as defined in the severance agreement) was extended from 12
months to 18 months.
•The elimination of the provision whereby severance pay could be reduced by 50% of any cash compensation
earned by or accrued for the executive as a result of services rendered by the executive for a third party.
Compensation of the Chief Executive Officer
Mr. Sargent, Staples’ Chairman and Chief Executive Officer, is eligible to participate in the same executive
compensation program available to other Staples executives, and his Total Direct Compensation was set by the
Committee in accordance with the same criteria. Mr. Sargent’s annual salary increased in 2005 from $1,000,000 to
$1,036,000, in line with the median base salaries of chief executive officers in our retail peer group. Mr. Sargent’s
target bonus was increased in 2005 from 100% of salary to 125% of salary. As a result of the Company exceeding the