As filed with the Securities and Exchange Commission on August 15, 2001
Registration No. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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OFFICE DEPOT, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 5940 59-2663954
(State or other jurisdiction (Primary Standard (I.R.S. Employer
of incorporation or Industrial Identification Number
organization) Classification Number)
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David C. Fannin
Executive Vice President
General Counsel and Secretary
Office Depot, Inc.
2200 Old Germantown Road
Delray Beach, Florida 33445
(561) 438-4800
(Address, including zip code, and telephone number,
including area code, of Registrant's principal executive offices)
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COPIES TO:
Scott N. Gierke, Esq.
McDermott, Will & Emery
227 West Monroe Street
Chicago, Illinois 60606-5096
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Approximate date of commencement of proposed sale to the public: As
soon as practicable after this Registration Statement becomes effective.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, check the following
box and list the Securities Act of 1933 registration statement number of the
earlier effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule
462(d) under the Securities Act of
1933, check the following box and list the Securities Act of 1933 registration
statement number of the earlier effective registration statement for the same
offering. [_]
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CALCULATION OF REGISTRATION FEE
=================================== ================ ====================== ========================= ===============
Amount Proposed Maximum Proposed Maximum Amount of
Title of Each Class of Securities to be Offering Price Aggregate Offering Registration
to be Registered Registered Per Unit Price(1) Fee(2)
- ----------------------------------- ---------------- ---------------------- ------------------------- ---------------
10% Senior Subordinated Notes due $250,000,000 100% $250,000,000 $62,500
2008...........................
=================================== ================ ====================== ========================= ===============
(1) Estimated solely for the purpose of calculating the registration fee under
Rule 457(f) of the Securities Act of 1933.
(2) Calculated pursuant to Rule 457(f)(2).
The Registrant hereby amends this Registration Statement on the date or dates
necessary to delay its effective date until the Registrant shall file a further
amendment that specifically states that this Registration Statement shall
thereafter become effective in accordance with Section 8(a) of the Securities
Act of 1933 or until the Registration Statement shall become effective on the
date determined by the Securities and Exchange Commission in accordance with
said Section 8(a).
PROSPECTUS
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The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission relating to these securities is effective.
This prospectus is not an offer to sell these securities and it is not an offer
to buy these securities in any state where the offer or sale is not permitted.
- --------------------------------------------------------------------------------
SUBJECT TO COMPLETION, DATED AUGUST 15, 2001
[OFFICE DEPOT LOGO]
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OFFICE DEPOT, INC.
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OFFER TO EXCHANGE
UP TO $250,000,000 PRINCIPAL AMOUNT
OF OUTSTANDING
10% SENIOR SUBORDINATED NOTES DUE 2008
FOR
A LIKE PRINCIPAL AMOUNT OF
REGISTERED 10% SENIOR SUBORDINATED NOTES DUE 2008
o We are offering to exchange $250,000,000 of our new 10% Senior Subordinated
Notes due 2008 (the "new notes") for $250,000,000 of our outstanding 10%
Senior Subordinated Notes due 2008 (the "old notes"). We are offering to
issue the new notes to satisfy our obligations contained in the
registration rights agreement entered into when the old notes were sold in
transactions permitted by Rule 144A and Regulation S under the Securities
Act of 1933.
o The terms of the new notes and the old notes are identical, except for
transfer restrictions, registration rights, and liquidated damages that
apply to the old notes.
o The exchange offer expires at 5:00 p.m., New York City time, on [Date],
2001 unless we extend it.
o The exchange of old notes for new notes will not be a taxable event for
United States federal income tax purposes. See "Certain United States
Federal Income Tax Considerations" on page 61 for more information.
o The new notes will not trade on any established exchange.
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PLEASE SEE "RISK FACTORS" BEGINNING ON PAGE 10 FOR A DISCUSSION OF
CERTAIN FACTORS YOU SHOULD CONSIDER IN CONNECTION WITH THE EXCHANGE OFFER.
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THE NEW NOTES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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The date of this prospectus is [Date], 2001.
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TABLE OF CONTENTS
Page Page
---- ----
Where You Can Find More Information.....iii Use of Proceeds.................14
Incorporation of Documents by Reference.iii Capitalization..................14
Forward-Looking Statements..............iii Selected Consolidated Financial
Data...................15
Prospectus Summary...................... 1 The Exchange Offer..............17
Summary of the Exchange Offer........... 3 Description of Notes............24
Summary Description of the New Notes.... 6 Certain United States Federal
Tax Considerations.....61
Summary Historical Financial Data....... 8 Plan of Distribution............63
Risk Factors............................ 10 Legal Matters...................63
Experts.........................64
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WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and
other information with the SEC. Our SEC filings are available to the public over
the Internet at the SEC's web site at http://www.sec.gov. You may also read and
copy, at prescribed rates, any document we file at the SEC's Public Reference
Room at 450 Fifth Street, N.W., Washington, D.C. 20549, as well as the regional
offices of the SEC located at 7 World Trade Center, New York, New York 10048 and
Citicorp Center, 500 West Madison Street, Chicago, Illinois 60661. Please call
the SEC at 1-800-SEC-0330 for further information on its Public Reference Room.
Our SEC filings are also available at the offices of the New York Stock Exchange
at 20 Broad Street, New York, NY 10005.
INCORPORATION OF DOCUMENTS BY REFERENCE
We "incorporate by reference" specified documents that we file with the
SEC which means:
o incorporated documents are considered part of this prospectus;
o we are disclosing important information to you by referring you to
these documents; and
o information that we file with the SEC will automatically update
and supersede information contained or incorporated by reference
in this prospectus.
We incorporate by reference the documents listed below to the extent
not superseded by the information contained in this prospectus and any documents
that we file with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act of 1934 after the date of this prospectus and before the
end of the exchange offer:
o Annual Report on Form 10-K for the fiscal year ended December 30,
2000 (the "2000 Form 10-K");
o Our Definitive Proxy Statement dated March 28, 2001;
o Quarterly Reports on Form 10-Q for the quarters ended March 31,
2001 and June 30, 2001; and
o Current Reports on Form 8-K dated May 1, 2001, May 30, 2001, June
18, 2001, June 21, 2001, July 10, 2001 and July 19, 2001.
You may request a copy of these filings at no cost, by writing or
telephoning us at:
Office Depot, Inc.
Attention: Vice President, Investor Relations & Public Relations
2200 Old Germantown Road
Delray Beach, Florida 33445
(561) 438-4800
If you request any incorporated documents from us, we will mail them to
you by first class mail, or by another equally prompt means. However, in order
to obtain timely delivery of these documents, you must make your request no
later than five business days before the expiration date of the exchange offer.
Unless the context requires otherwise, all references in this document to "this
prospectus" include all documents incorporated by reference into this
prospectus.
FORWARD-LOOKING STATEMENTS
This prospectus contains both historical information and other
information that you can use to infer future performance. We caution you that,
with the exception of information that is clearly historical, all the
information contained in this prospectus should be considered to be
"forward-looking statements" as referred to in the Securities Act of 1933.
Without limiting the generality of the preceding sentence, any time we use the
words "estimate," "project," "intend," "expect," "believe," "anticipate,"
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"continue," and similar expressions, we intend to express that the information
addresses possible future events and is forward-looking in nature.
We assume no obligation (and specifically disclaim any obligation) to
update any forward-looking statements contained in this prospectus to reflect
actual results, changes in assumptions or other factors affecting the
forward-looking statements.
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PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this
prospectus or incorporated by reference herein. It may not contain all the
information that is important to you. We encourage you to read this entire
prospectus and each of the incorporated documents carefully. In particular, you
should read the section entitled "Risk Factors" and the financial statements and
the notes relating to those statements incorporated by reference into this
prospectus.
We operate on a 52- or 53-week fiscal year ending on the last Saturday
in December. Our results for fiscal 2000 contained 53 weeks and all other years
contained 52 weeks. Accordingly, unless otherwise specified, all references to a
year, such as 2000, are to our fiscal year that ends during that year, and all
references to the second quarter of 2001 and the second quarter of 2000, refer
to the 13-week periods ended June 30, 2001 and June 24, 2000, respectively. The
terms "Office Depot," "we," "our" and "us" refer to Office Depot, Inc. and its
consolidated subsidiaries unless the context suggests otherwise. The term "you"
refers to holders of our outstanding, unregistered 10% Senior Subordinated Notes
Due 2008.
OUR BUSINESS
We are the largest supplier of office products and services in the
world, based on sales of $11.4 billion in the twelve months ending June 30,
2001. We sell to consumers and businesses of all sizes through our three
business segments: North American Retail Division, Business Services Group or
"BSG" and International Division. These segments include multiple sales channels
consisting of office supply stores, a dedicated contract sales force, Internet
sites, and catalog and delivery operations.
NORTH AMERICAN RETAIL DIVISION
Our North American Retail Division sells office products, copy and
print services and other business-related services under the Office Depot(R) and
the Office Place(R) brands through our chain of high-volume retail office supply
stores in the United States and Canada. We opened our first retail office supply
store in Florida in October 1986. From our inception, we have concentrated on
expanding our store base and increasing our sales in markets with high
concentrations of small and medium-sized businesses. As of the end of 2000, our
North American Retail Division operated 888 retail stores in 47 states, the
District of Columbia and Canada. During the first quarter of 2001, we closed 70
under-performing retail stores and opened six new stores in existing markets.
During the second quarter of 2001 we opened 5 new retail stores and we plan to
add approximately 34 new retail stores during the remainder of 2001. Most of
these stores will be located in areas we currently serve, with the balance in
under-served markets. Our North American Retail Division generated $6.2 billion
in sales in the twelve months ended June 30, 2001.
BUSINESS SERVICES GROUP
In 1993 and 1994, we entered the contract office supply business by
acquiring eight contract stationers with 18 domestic customer service centers
and a professional sales force. These acquisitions also allowed us to broaden
our catalog and retail delivery businesses. In August 1998, we expanded our
direct mail business through our merger with Viking Office Products, Inc. Today,
our Business Services Group sells office products and services to contract and
commercial customers through our Office Depot(R) and Viking Office Products(R)
direct mail catalogs and Internet sites, and by means of our dedicated contract
sales force. Our customer service centers or "CSCs" are warehouse and delivery
facilities, some of which also house sales offices, call centers and
administrative offices. Our CSCs also perform warehousing and delivery services
on behalf of all segments of our business. As of June 30, 2001, BSG operated 25
CSCs in the United States. BSG had $3.8 billion in sales in the twelve months
ended June 30, 2001.
Since January 1998, we have also offered our customers the convenience
of shopping on-line through our publicly-accessible Internet site. The addition
of this site has expanded our domestic electronic commerce or "E-commerce"
capabilities beyond our Viking public Internet site and our Office Depot
business-to-business contract Internet sites. We believe our E-commerce business
will provide significant future growth opportunities for our Business Services
Group segment and our business as a whole, based on the growth rates we have
experienced over the last three years.
INTERNATIONAL DIVISION
Our International Division sells office products and services to a wide
range of customers, from large corporations to individual consumers, in 16
countries outside the United States and Canada. We conduct our operations
through the following four channels: 132 retail stores in seven countries, 35 of
which are wholly-owned; Office Depot(R) brand and Viking Office Products(R)
brand direct mail catalogs in 14 countries; nine Internet sites in seven
countries; and a dedicated contract sales force primarily focussed on the United
Kingdom. We have expanded internationally through licensing and joint venture
agreements, acquisitions and greenfield development. In August 1998, we merged
with Viking Office Products, which had strong catalog businesses in key markets.
Currently, our International Division has operations either owned directly or
operated through joint ventures or licensing agreements, in Australia, Austria,
Belgium, France, Germany, Hungary, Ireland, Israel, Italy, Japan, Luxembourg,
Mexico, The Netherlands, Poland, Thailand, and the United Kingdom. Our
International Division had $1.5 billion in sales in the twelve months ended
June 30, 2001.
RECENT OPERATING IMPROVEMENTS AND IMPROVED COST POSITION RESULTING FROM OUR
2000 COMPREHENSIVE BUSINESS REVIEW
During the fourth quarter of 2000, we concluded a thorough review of
all aspects of our business (the "2000 Comprehensive Business Review"). This
review resulted in numerous initiatives designed to enhance our overall
profitability and drive organic growth in our stores by improving the overall
customer experience, including the following: closure of under-performing
stores, SKU reductions in stores and warehouses, increasing warehouse
efficiency, increasing contract business profitability and revaluation of
certain assets. Year to date, we have addressed all of the major issues and
completed all of the key initiatives that resulted from the review, and are
achieving improvements in our key operating metrics, including on-time delivery,
inventory efficiency and overall customer satisfaction. We expect these and
other metrics to show continuing improvement and to expand our overall margins.
OUR STRATEGY
We are committed to making Office Depot a more compelling place to shop
across every channel our customers choose when buying their office supplies and
services. To achieve our goal, our strategy is to continue building upon our
strengths across the retail, catalog, contract and Internet channels by:
o repositioning our North American Retail Division for rational
growth in a maturing environment, and using cash flows from our
retail operations to expand our Business Services Group and
International Division;
o developing a world-class warehouse and distribution network for
all of our businesses to improve service levels and lower our cost
position; and
o further leveraging our integrated sales channels to provide a
seamless and robust shopping experience
OUR EXECUTIVE OFFICES
Our executive offices are located at 2200 Old Germantown Road, Delray
Beach, Florida 33445, and our telephone number is (561) 438-4800.
RECENT DEVELOPMENTS
o On July 2, 2001, we closed the sale of the old notes in
transactions permitted by Rule 144A and Regulation S under the
Securities Act of 1933.
o On July 11, 2001, we closed on the acquisition by merger of
4Sure.com, Inc., a Delaware corporation headquartered in Trumbull,
CT.
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SUMMARY OF THE EXCHANGE OFFER
The Exchange Offer............................. We are offering to exchange our
new notes, which have been
registered under the Securities
Act of 1933, for a like
principal amount of our
outstanding, unregistered old
notes. Old notes may only be
tendered in integral multiples
of $1,000 principal amount at
maturity.
As of the date of this
prospectus, old notes
representing an aggregate
principal amount of $250,000,000
are outstanding. For procedures
for tendering, see "The Exchange
Offer."
Resale of New Notes.............................We believe you may offer for
resale, sell or otherwise
transfer any new notes that are
issued to you pursuant to the
exchange offer without
compliance with the registration
and prospectus delivery
provisions of the Securities Act
of 1933, provided that:
o you are acquiring the
new notes in the
ordinary course of your
business;
o you have not engaged
in, do not intend to
engage in, and have no
arrangement or
understanding with any
person to participate
in the distribution of
the new notes; and
o you are not our
affiliate as defined
under Rule 405 of the
Securities Act of 1933.
Each participating broker-dealer
that receives new notes for its
own account pursuant to the
exchange offer in exchange for
old notes that were acquired as
a result of market-making or
other trading activity must
acknowledge that it will deliver
a prospectus in connection with
any resale of new notes. See
"Plan of Distribution."
Any holder of old notes who:
o is our affiliate;
o does not acquire new
notes in the ordinary
course of its business;
o tenders in the exchange
offer with the
intention to
participate, or for the
purpose of
participating, in a
distribution of new
notes; or
o is a broker-dealer that
acquired the old notes
directly from us,
must comply with the
registration and prospectus
delivery requirements of the
Securities Act of 1933 in
connection with the resale of
new notes.
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Consequences If You Do Not Exchange Old notes that are not tendered
Your Old Notes..................................in the exchange offer or are not
accepted for exchange will
continue to bear legends
restricting their transfer. You
will not be able to offer or
sell the old notes unless:
o pursuant to an
exemption from the
requirements of the
Securities Act of 1933;
o the old notes are
registered under the
Securities Act of 1933;
or
o the transaction
requires neither an
exemption from nor
registration under the
Securities Act of 1933.
After the exchange offer is
closed, we will no longer have
an obligation to register the
old notes, except for some
limited exceptions. See "Risk
Factors--Failure to Exchange
Your Old Notes."
Expiration Date.................................5:00 p.m., New York City time,
on [Date], 2001, unless we
extend the exchange offer.
Certain Conditions to the Exchange The exchange offer is subject to
Offer...........................................certain customary conditions
that we may waive.
Procedures for Tendering Old Notes..............We issued the old notes in the
form of two global notes. The
global notes were deposited with
SunTrust Bank, as custodian for
Cede & Co., nominee of The
Depository Trust Company
("DTC"). Beneficial interests in
the notes are shown on records
that DTC maintains in book-entry
form.
To tender old notes in the
exchange offer, DTC must
transfer your outstanding notes
in accordance with DTC's
standard procedures for
transfer. In lieu of delivering
a letter of transmittal to the
exchange agent, a
computer-generated message, in
which the holder of the old
notes acknowledges and agrees to
be bound by the letter of
transmittal, must be transmitted
by DTC on behalf of a holder and
received by the exchange agent
before 5:00 p.m., New York City
time, on the expiration date of
the exchange offer.
Special Procedures for Beneficial If you beneficially own old
Holders.........................................notes that are registered in the
name of a broker, dealer,
commercial bank, trust company
or other nominee and you wish to
tender in the exchange offer,
you should contact the
registered holder promptly and
instruct that person to tender
on your behalf. If you wish to
tender in the exchange offer on
your own behalf, you must, prior
to completing and executing the
letter of transmittal and
delivering your old notes,
either arrange to have the old
notes registered in your name or
obtain a properly completed bond
power from the registered
holder. The transfer of
registered ownership may take
considerable time.
Withdrawal Rights..............................You may withdraw your tender of
old notes at any time before the
exchange offer expires.
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Accounting Treatment............................We will not recognize any gain
or loss for accounting purposes
upon the completion of the
exchange offer. The expenses of
the exchange offer that we pay
will increase our deferred
financing costs in accordance
with generally accepted
accounting principles. See "The
Exchange Offer--Accounting
Treatment."
Certain Tax Consequences........................The exchange pursuant to the
exchange offer generally will
not be a taxable event for U.S.
Federal income tax purposes.
Use of Proceeds.................................We will not receive any proceeds
from the exchange or the
issuance of new notes in
connection with the exchange
offer.
Exchange Agent..................................SunTrust Bank is serving as
exchange agent in connection
with the exchange offer.
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SUMMARY DESCRIPTION OF THE NEW NOTES
The new notes have the same financial terms and covenants as the old notes,
which are as follows:
Issuer..........................................Office Depot, Inc.
Total Amount of Notes Offered...................$250,000,000 aggregate principal
amount of new 10% Senior
Subordinated Notes due 2008.
Maturity........................................July 15, 2008.
Interest........................................January 15 and July 15,
commencing on January 15, 2002.
Ranking.........................................These notes are senior
subordinated debt. They rank
behind all of our current and
future senior indebtedness,
other than trade payables,
except indebtedness that
expressly provides that it is
not senior to these notes. The
notes will be effectively
subordinated to all debt of our
subsidiaries. After giving
effect to the sale of the old
notes, at June 30, 2001, we
would have had no senior debt
outstanding and our subsidiaries
would have had $58.7 million of
outstanding debt in addition to
other liabilities, including
trade payables.
Optional Redemption.............................We may redeem the notes at any
time at a redemption price equal
to the greater of:
o 100% of their principal
amount, or
o the sum of the present
values of the remaining
scheduled payments of
principal and interest,
discounted to maturity
on a semi-annual basis
(assuming a 360-day
year consisting of
twelve 30-day months)
at the Treasury Yield
plus 50 basis points,
plus, in each case, accrued and
unpaid interest.
Offer to Repurchase.............................If we sell assets under some
circumstances, or experience
specific kinds of changes of
control, we must offer to
repurchase the notes at the
prices listed under "Description
of Notes" under the heading
"Repurchase at the Option of
Holders."
Basic Covenants.................................Before the notes receive the
ratings described under
"Description of Notes" from both
Standard & Poor's Ratings Group
and Moody's Investor's Services
Inc. and certain other
conditions are satisfied which
we call a "Fall-Away Event,"
covenants contained in the
indenture under which the notes
will be issued will, among other
things, limit our ability and
that of our restricted
subsidiaries to:
o borrow money;
o pay dividends on,
redeem or repurchase
our capital stock;
o make investments;
o sell assets;
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o create restrictions on
the payment of
dividends or other
amounts to us from our
restricted
subsidiaries; and
o enter into transactions
with affiliates.
After the Fall-Away Event, the
above limitations will not
apply. So long as any notes are
outstanding, covenants contained
in the indenture will, among
other things, limit our ability
and the ability of our
restricted subsidiaries to:
o create liens; and
o consolidate, merge or
sell all or
substantially all of
our assets.
So long as any notes are
outstanding, the indenture will
require us to provide reports to
holders of notes. These
covenants are subject to a
number of important exceptions,
limitations and qualifications,
which are described under
"Description of Notes."
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SUMMARY HISTORICAL FINANCIAL DATA
The summary historical financial data as of and for each of the five
years 1996 through 2000 were derived from our audited consolidated financial
statements. The summary historical data as of and for the first half of 2000 and
2001 were derived from unaudited financial statements. The 1998, 1999 and 2000
audited financial statements and the unaudited second quarter 2000 and 2001
financial statements are included in documents incorporated by reference in this
prospectus. This summary historical and pro forma data is qualified in its
entirety by the more detailed information appearing in our consolidated
historical financial statements and related notes and other financial
information incorporated by reference in this prospectus. We have reclassified
certain amounts in our prior year statements to conform them to presentation
used in the current year.
FOR THE
TWELVE
. MONTHS
FISCAL YEAR(1) FIRST HALF ENDED
--------------------------------------------------------------- ------------------------ JUNE 30,
1996 1997 1998 1999 2000 2000 2001 2001(6)
-------- -------- -------- -------- -------- -------- -------- ---------
(DOLLARS IN THOUSANDS)
STATEMENT OF EARNINGS DATA:
Sales............................$7,259,206 $8,108,714 $9,007,051 $10,272,060 $11,569,696 $5,698,507 $5,571,417 $11,442,606
Cost of goods sold and occupancy
costs.......................... 5,395,223 5,963,521 6,484,464 7,450,310 8,479,698 4,109,348 4,025,848 8,396,198
--------- --------- --------- --------- --------- --------- --------- ---------
Gross profit.................. 1,863,983 2,145,193 2,522,587 2,821,750 3,089,998 1,589,159 1,545,569 3,046,408
Store and warehouse operating and
selling expenses............... 1,288,382 1,451,587 1,651,355 1,969,817 2,361,301 1,105,740 1,138,784 2,394,345
Pre-opening expenses............. 9,827 6,609 17,150 23,628 13,465 5,807 2,600 10,258
General and administrative
expenses 222,714 272,022 330,194 381,611 501,700 221,402 228,905 509,203
Merger and restructuring costs... - 16,094 119,129 (7,104) (6,732) 4,381 1,013 (10,100)
Facility closure and relocation
costs.......................... - - - 40,425 110,038 - (3,164) 106,874
--------- --------- --------- --------- --------- --------- ---------- ---------
Operating profit.............. 343,060 398,881 404,759 413,373 110,226 251,829 177,431 35,828
Interest income.................. 3,726 7,570 25,309 30,176 11,502 6,885 3,824 8,441
Interest expense................. (26,378) (21,680) (22,356) (26,148) (33,901) (14,266) (18,796) (38,431)
Miscellaneous income
(expense), net................. (8,325) (13,180) (18,985) (3,514) 4,632 20,589 (6,426) (22,383)
---------- ---------- ---------- ---------- --------- --------- ---------- ----------
Earnings before income taxes.. 312,083 371,591 388,727 413,887 92,459 265,037 156,033 (16,545)
Income taxes..................... 115,865 136,730 155,531 156,249 43,127 98,064 57,730 2,793
--------- --------- --------- --------- --------- --------- --------- ---------
Net earnings..................... $ 196,218 $ 234,861 $ 233,196 $ 257,638 $ 49,332 $ 166,973 $ 98,303 $ (19,338)
========= ========= ========= ========= ========= ========= ========= ==========
OTHER DATA:
Cash flows provided by (used in):
Operating activities.......... $ 181,645 $ 446,975 $ 678,615 $ 369,449 $ 316,482 $ 319,166 $ 423,192 $ 420,508
Investing activities:
Capital expenditures........ (234,489) (165,213) (233,089) (392,305) (267,728) (126,370) (71,546) (212,904)
Other investing activities.. (7,950) 24,157) (38,228) (55,536) 28,363 (2,652) (6,842) 24,173
Financing activities.......... 61,690 (131,920) 61,747 (405,849) (134,093) (187,926) (283,714) (229,881)
EBITDA(2)........................ 433,853 505,177 526,378 580,942 320,568 368,597 268,749 220,720
Total debt to EBITDA(3)....... 1.3x 0.9x 0.9x 1.0x 2.3x 1.0x 2.1x 2.1x
EBITDA to interest expenses(3)... 16.4x 23.3x 23.5x 22.2x 9.5x 21.9x 5.7x 5.7x
Adjusted EBITDA(4)............... $ 433,853 $ 521,271 $ 645,507 $ 686,124 $ 578,340 $ 372,978 $ 266,598 $ 471,960
Total debt to adjusted
EBITDA(3) 1.3x 0.9x 0.7x 0.8x 1.3x 0.9x 1.0x 1.0x
Adjusted EBITDA to interest
expense(3)..................... 16.4x 24.0x 28.9x 26.2x 17.1x 25.3x 12.3x 12.3x
BALANCE SHEET DATA
(AT PERIOD END):
Working capital.................. $ 860,280 $1,093,463 $1,293,370 $ 687,007 $ 790,752 $ 612,621 $ 729,758 $ 729,758
Net PP&E......................... 785,058 846,676 979,229 1,145,628 1,119,306 1,178,182 1,092,862 1,092,862
Short-term debt.................. 142,339 2,473 2,834 250,466 153,259 256,685 7,925 7,925
Long-term debt................... 416,757 447,020 470,711 321,099 598,499 341,628 459,741 459,741
Stockholders' equity............. 1,469,110 1,717,638 2,028,879 1,907,720 1,601,251 1,824,061 1,684,955 1,684,955
Percentage of total debt to
capitalization................. 27.6% 20.7% 18.9% 23.1% 31.9% 24.7% 21.7% 21.7%
PRO FORMA INFORMATION(5):
Cash ................................................................................................................... $ 334,007
Short-term debt......................................................................................................... 7,925
Long-term debt.......................................................................................................... 614,241
Percentage of total debt to capitalization.............................................................................. 27.0%
Total debt to adjusted EBITDA........................................................................................... 1.3x
Adjusted EBITDA to interest expense..................................................................................... 8.1x
- --------------------
-8-
(1) Our results for fiscal year 2000 contained 53 weeks; all other fiscal years
contained 52 weeks.
(2) EBITDA represents earnings before interest, taxes, depreciation and
amortization. EBITDA is presented because it is a widely accepted financial
indicator of a company's ability to incur and service debt. EBITDA does not
represent net income or cash flows from operations as those terms are
defined in generally accepted accounting principles or GAAP and does not
necessarily indicate whether cash flows will be sufficient to fund cash
needs.
(3) Ratios for interim periods are based on last twelve month operating data.
(4) Adjusted EBITDA represents EBITDA excluding the following charges and
credits:
FOR THE
TWELVE
MONTHS
FISCAL YEAR(1) FIRST HALF ENDED
--------------------------------------------------- ------------------- JUNE 30,
1996 1997 1998 1999 2000(a) 2000 2001 2001(a)(6)
-------- -------- -------- -------- --------- --------- -------- ---------
(DOLLARS IN THOUSANDS)
Merger and restructuring charges
(credits)...................... $ - $ 16,094 $ 119,129 $ (7,104) $ (6,732) $ 4,381 $ 1,013 $ (10,100)
Other one-time charges and
credits (b).................... - - - 112,286 264,504 - (3,164) 261,340
--------- -------- --------- -------- --------- -------- ---------- ---------
$ - $ 16,094 $ 119,129 $105,182 $ 257,772 $ 4,381 $ (2,151) $ 251,240
========= ======== ========= ======== ========= ======== ========== =========
(a) Excludes $2.9 million charge that was recorded in depreciation
expense; aggregate net charge in 2000 was $260.6 million
(b) For a discussion of these charges and credits see Management's
Discussion and Analysis of Financial Condition and Results of
Operations - Results of Operations - One-time Charges and Credits
included in the 2000 Form 10-K incorporated by reference in this
prospectus.
(5) The pro forma information gives effect to this offering and the application
of the net proceeds to repay $95,500 of borrowings outstanding as of June
30, 2001.
(6) Financial data for the twelve months ended June 30, 2001 are unaudited.
Amounts, other than ratios, Balance Sheet Data and Pro Forma Information,
were computed as Fiscal Year 2000 amounts less First Half 2000 amounts plus
First Half 2001 amounts.
-9-
RISK FACTORS
You should carefully consider the following risk factors and the other
information set forth in this prospectus before deciding to participate in the
exchange offer. You should also review the risk factors that are contained in
our cautionary statement in our 2000 Form 10-K which is incorporated herein by
reference.
RISKS RELATING TO THE EXCHANGE OFFER
THE LIQUIDITY OF UNEXCHANGED OLD NOTES WILL BE SUBSTANTIALLY LIMITED FOLLOWING
THE EXCHANGE OFFER.
Although we believe there is currently a limited trading market for the
old notes, no generally reliable public pricing information for the old notes is
available. The trading market for unexchanged old notes could become even more
limited or nonexistent due to the reduction in the amount of old notes
outstanding after the exchange offer, which might adversely affect the
liquidity, market price and price volatility of the old notes. If a market for
unexchanged old notes exists or develops, the old notes may trade at a discount
to the price at which the old notes would have traded if the amount of the old
notes outstanding had not been reduced following the exchange offer, depending
on prevailing interest rates, the market for similar securities, our operating
results, and other factors. There can be no assurance that an active market in
the unexchanged old notes exists, will continue to exist or will develop, and no
assurance can be given as to the prices at which the unexchanged old notes may
be traded.
THERE IS CURRENTLY NO MARKET FOR THE NEW NOTES--IF AN ACTIVE TRADING MARKET FOR
THE NEW NOTES DOES NOT DEVELOP, THE LIQUIDITY AND VALUE OF THE NEW NOTES COULD
BE HARMED.
The new notes are new issues of securities for which there is currently
no trading market. We do not intend to apply for listing of the new notes on any
securities exchange. Although the notes represented by the Global Notes are
expected to be eligible to trade in the PORTAL market and to trade in DTC's
Same-Day Funds Settlement System, there can be no assurance that an active
market will develop upon completion of the exchange offer or, if developed, that
the market will be sustained or that any market will be liquid.
THE NEW NOTES WILL BE JUNIOR TO OUR SENIOR DEBT.
The new notes will be subordinated in right of payment to all of our
future senior debt. Upon any distribution to our creditors in a liquidation or
dissolution, the holders of senior debt will be entitled to be paid in full
before any payment may be made with respect to the new notes. In addition, the
subordination provisions of the indenture will provide that payments with
respect to the new notes will be blocked in the event of a payment default on
senior debt and may be blocked for up to 179 days each year in the event of
certain non-payment defaults on senior debt. In the event of our bankruptcy,
liquidation or reorganization, holders of the new notes will participate ratably
in our remaining assets with all holders of subordinated indebtedness that is
deemed to be of the same class as the new notes and potentially with all other
general creditors, based upon the respective amounts owed to each holder or
creditor. In any of the foregoing events, there can be no assurance that there
would be sufficient assets to pay amounts due on the new notes. As a result,
holders of new notes may receive less, ratably, than the holders of senior debt.
In addition, under the subordination provisions of the indenture, payments that
would otherwise be made to holders of the new notes will instead be paid to
holders of senior debt under certain circumstances. As a result of these
provisions, other creditors (including trade creditors) that are not holders of
senior debt may recover more, ratably, than the holders of the new notes. In
addition, the new notes will be effectively subordinated to all outstanding
obligations of any of our subsidiaries.
As of June 30, 2001, after application of the net proceeds from the
sale of the old notes, we had no senior debt outstanding and our subsidiaries
would have had $58.7 million of outstanding debt in addition to other
liabilities, including trade payables. In addition, we would be able to incur a
significant amount of additional senior indebtedness under our existing credit
facilities. The indenture will permit us and our subsidiaries to incur a
substantial amount of additional indebtedness, including senior debt, in the
future.
-10-
A SIGNIFICANT PORTION OF OUR OPERATIONS EXIST AT OUR SUBSIDIARY LEVEL AND OUR
SUBSIDIARIES HAVE NO OBLIGATIONS UNDER THE NEW NOTES.
We derive much of our revenue from our subsidiaries. The indenture
governing the notes permits us and our subsidiaries to incur a substantial
amount of additional indebtedness, and does not require our subsidiaries to
guarantee the notes. In the event of a bankruptcy, liquidation or reorganization
of a subsidiary, holders of any of subsidiary's indebtedness will have a claim
to the assets of the subsidiary that is prior to our interest in those assets.
As of June 30, 2001, after giving effect to the sale of the old notes and the
application of the net proceeds therefrom, the aggregate amount of indebtedness
of our subsidiaries would have been approximately $58.7 million, in addition to
other liabilities, including trade payables. If any subsidiary indebtedness were
to be accelerated, there can be no assurance that the assets of that subsidiary
would be sufficient to repay the indebtedness or that our assets and the assets
of our other subsidiaries would be sufficient to repay in full our indebtedness,
including the new notes.
WE MAY NOT HAVE THE ABILITY TO RAISE THE FUNDS NECESSARY TO FINANCE ANY CHANGE
OF CONTROL OFFER REQUIRED BY THE INDENTURE.
Upon a change of control, we will be required to offer to repurchase
all outstanding new and old notes at 101% of the principal amount thereof plus
accrued and unpaid interest to the date of repurchase. However, there can be no
assurance that sufficient funds will be available at the time of any change of
control to make any required repurchases of new or old notes tendered or that
restrictions in our credit facilities will allow us to make the required
repurchases. Notwithstanding these provisions, we could enter into certain
transactions, including certain recapitalizations, that would not constitute a
change of control but would increase the amount of debt outstanding at that
time. See "Description of Notes -- Repurchase at the Option of Holders -- Change
of Control."
FEDERAL AND STATE LAWS PERMIT A COURT TO VOID THE NOTES UNDER CERTAIN
CIRCUMSTANCES.
Under applicable provisions of federal bankruptcy law or comparable
provisions of state fraudulent transfer law, if, among other things, we, at the
time we incurred the indebtedness evidenced by the new notes, (1) (a) were or
are insolvent or rendered insolvent by reason of incurring the indebtedness or
(b) were or are engaged in a business or transaction for which the assets
remaining with us constituted unreasonably small capital or (c) intended or
intend to incur, or believed or believe that we would incur, debts beyond our
ability to pay such debts as they mature, and (2) we received or receive less
than reasonably equivalent value or fair consideration for incurring the
indebtedness, then the new notes could be voided, or claims in respect of the
new notes could be subordinated to all of our other debts. In addition, the
payment of interest and principal by us pursuant to the new notes could be
voided and required to be returned to the person making payment, or to a fund
for the benefit of our creditors.
The measures of insolvency for purposes of the foregoing considerations
will vary depending upon the law applied in any proceeding with respect to the
foregoing. Generally, however, we would be considered insolvent if:
o the sum of our debts, including contingent liabilities, were
greater than the saleable value of all of our assets at a fair
valuation or if the present fair saleable value of our assets were
less than the amount that would be required to pay our probable
liability on our existing debts, including contingent liabilities,
as they become absolute and mature; or
o we could not pay our debts as they become due.
On the basis of historical financial information, recent operating
history and other factors, we believe that, after giving effect to the
indebtedness incurred in connection with the exchange offer, we will not be
insolvent, will not have unreasonably small capital for the business in which we
are engaged and will not incur debts beyond our ability to pay as the debts
mature. There can be no assurance, however, as to what standard a court would
apply in making a determination or that a court would agree with our conclusions
in this regard.
-11-
RISKS RELATING TO OUR BUSINESS
THE CURRENT ECONOMIC DOWNTURN IN THE U.S. ECONOMY HAS AND IS LIKELY TO CONTINUE
TO ADVERSELY IMPACT OUR BUSINESS AND OPERATING RESULTS.
In the past decade, the favorable United States economy has contributed
to the expansion and growth of retailers like us. Since the third quarter of
2000, the U.S. economy has shown signs of a downturn, particularly in the
technology sector. The retail industry, in particular, is displaying signs of a
slowdown, with several specialty retailers, both in and outside our industry
segment, reporting earnings warnings in the last few months. Technology
manufacturers, some of whom supply us with products, have issued earnings
warnings as a result of slow product sales. This general economic slowdown
negatively impacted our results during the second half of 2000 and the first
half of 2001 and is likely to continue to adversely impact our business and
operating results.
WE FACE INTENSE COMPETITION AND WILL FACE MORE COMPETITION IN THE FUTURE.
We compete with a variety of retailers, dealers and distributors in a
highly competitive marketplace that includes high-volume office supply chains,
warehouse clubs, computer stores, contract stationers, Internet-based
merchandisers and well-established mass merchant retailers. Significant
competitive factors include, among others, the following:
o Well-established mass merchant retailers that have the financial
and distribution ability to compete very effectively with us
should they choose to increase their presence in the office
superstore retail category, Internet office supply or contract
stationer business or should they substantially expand their
product offerings in their existing retail outlets.
o Many start-up operations that are heavily focused on Internet
sales may be able to compete with us in the areas of price and
selection. In addition, certain manufacturers of computer
hardware, software and peripherals, including certain of our
suppliers, have expanded their own direct marketing of products,
particularly over the Internet.
o Some of our competitors focus exclusively on the contract and/or
commercial businesses and therefore may gain a competitive
advantage in those areas.
In order to achieve and maintain expected profitability levels, we must
continue to grow our business while maintaining the service levels and
aggressive pricing necessary to retain existing customers in each of our
business segments. Our failure to adequately address these challenges could put
us at a competitive disadvantage relative to these competitors.
OUR QUARTERLY OPERATING RESULTS HAVE FLUCTUATED SIGNIFICANTLY IN THE PAST AND
MAY CONTINUE TO DO SO IN THE FUTURE.
Fluctuations in our quarterly operating results have occurred in the
past and may occur in the future. A variety of factors could contribute to this
quarter-to-quarter variability, including:
o new store openings that require an outlay of pre-opening expenses,
generate lower initial profit margins and cannibalize existing
stores;
o timing and effectiveness of warehouse integration;
o competitors' pricing;
o changes in our product mix;
o effects of seasonality; and
o competitive store openings or other events.
-12-
In addition, our operating results may fall below securities analysts'
expectations, which may cause the price of our securities to fall abruptly and
significantly. Our operating results should not be relied upon as an indication
of future performance.
THE LOSS OF KEY MEMBERS OF OUR SENIOR MANAGEMENT TEAM COULD ADVERSELY AFFECT OUR
BUSINESS.
Our success depends largely on the efforts and abilities of our current
senior management team. Their experience and industry contacts significantly
benefit us. Our management team has undergone changes in the last year with the
appointment of a new Chief Executive Officer and presidents to each of our three
operating business segments. We are currently searching for a Chief Financial
Officer. If we were to lose the benefit of their experience and contacts or if
the changes in management do not generate the benefits we seek, our business
could be adversely affected.
DOING BUSYNESS OUTSIDE THE UNITED STATES INVOLVES NUMEROUS RISKS THAT COULD
NEGATIVELY AFFECT OUR BUSINESS AND OPERATING RESULTS.
We operate in a number of international markets and intend to continue
to enter into additional international markets as attractive opportunities
arise. In addition to the risks described above, internationally we face risks
such as:
o foreign currency fluctuations;
o unstable political, economic, financial and market conditions;
o compromised operating control of some of our foreign operations
that are not wholly owned;
o system changes and harmonization of prices to accommodate the
adoption of the euro; and
o lack of adequate management resources.
All of these risks have in the past and could have in the future a
material adverse effect on our business and operating results.
VARIOUS GOVERNMENTAL REGULATIONS AND ENVIRONMENTAL RISKS APPLICABLE TO OUR
BUSINESS MAY REQUIRE US TO TAKE ACTIONS THAT WILL ADVERSELY AFFECT OUR RESULTS
OF OPERATIONS.
Our business is subject to numerous federal, state, provincial, local
and foreign laws and regulations, including regulations with respect to air
emissions, wastewater discharges and the generation, handling, storage,
transportation, treatment and disposal of waste materials. Although we believe
we are in substantial compliance with all applicable laws and regulations, legal
requirements are frequently changed and subject to interpretation, and we are
unable to predict the ultimate cost of compliance with these requirements or
their effect on our operations. We may be required to make significant
expenditures to comply with governmental laws and regulations. We cannot be
certain that existing laws or regulations, as currently interpreted or
reinterpreted in the future, or future laws or regulations, will not have a
material adverse effect on our results of operations and financial condition.
-13-
USE OF PROCEEDS
We will not receive any proceeds from the exchange offer.
CAPITALIZATION
The following table sets forth our consolidated capitalization as of
June 30, 2001, as adjusted to give effect to the sale of old notes and the
application of the estimated net proceeds therefrom. The information in this
table does not give effect to any other events subsequent to June 30, 2001.
As of June 30, 2001
-------------------
Actual As Adjusted
------ -----------
(unaudited)
(in thousands)
Current portion of long-term debt ................................................ $ 7,925 $ 7,925
Long-term debt, less current portion ............................................. 229,718 134,218
Zero coupon, convertible subordinated notes ...................................... 230,023 230,023
Issuance of old notes............................................................. _____ 250,000
Common stockholders' equity:
Common stock, $0.01 par value; 800,000,000 shares
authorized, 380,686,294 issued at June 30, 20012 .......................... 3,807 3,807
Additional paid-in capital .................................................. 953,459 953,459
Unamortized value of long-term incentive stock grant ........................ (2,770) (2,770)
Accumulated other comprehensive loss ........................................ (82,377) (82,377)
Retained earnings ........................................................... 1,614,994 1,614,994
Treasury stock, at cost; deferred compensation and other .................... (802,158) (802,158)
----------- -----------
Total common stockholders' equity ......................................... 1,684,955 1,684,955
----------- -----------
Total capitalization ................................................... $ 2,152,621 $ 2,307,121
=========== ===========
- --------
1 The actual amount repaid with the proceeds of the notes will depend upon the
amount outstanding under our domestic credit facilities when we repay them.
2 Does not include 55,005,061 shares of our common stock that are reserved for
issuance under our stock option plans, under which 21,408,503 options for shares
were exercisable at June 30, 2001.
-14-
SELECTED CONSOLIDATED FINANCIAL DATA
The following table sets forth certain of our selected consolidated
financial and operating data. The selected consolidated financial and operating
data as of and for the fiscal years ended December 28, 1996, December 27, 1997,
December 26, 1998, December 25, 1999, and December 30, 2000 have been derived
from our audited financial statements. The selected consolidated financial and
operating data as of and for the twenty-six weeks ended June 24, 2000 and June
30, 2001 have been derived from our unaudited consolidated financial statements.
Our operating results for the interim periods are not necessarily indicative of
the results that may be expected for 2001. This information should be read in
conjunction with the detailed information and consolidated financial statements
and accompanying notes incorporated by reference herein. See "Available
Information." On August 26, 1998, we merged with Viking Office Products in a
transaction accounted for as a pooling of interests. Accordingly, all periods
prior to the merger have been restated to include Viking. We have reclassified
certain amounts in our prior year statements to conform them to presentation
used in the current year.
FISCAL YEAR(1) FIRST HALF
------------------------------------------------------------ -----------------------
1996 1997 1998 1999 2000 2000 2001
---------- ---------- ---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
STATEMENT OF EARNINGS DATA:
Sales................... $7,259,206 $8,108,714 $9,007,051 $10,272,060 $11,569,696 $5,698,507 $5,571,417
Cost of goods sold and
occupancy costs....... 5,395,223 5,963,521 6,484,464 7,450,310 8,479,698 4,109,348 4,025,848
---------- ---------- ---------- ---------- ---------- ---------- ----------
Gross profit............ 1,863,983 2,145,193 2,522,587 2,821,750 3,089,998 1,589,159 1,545,569
Store and warehouse
operating and selling
expenses.............. 1,288,382 1,451,587 1,651,355 1,969,817 2,361,301 1,105,740 1,138,784
Pre-opening expenses.... 9,827 6,609 17,150 23,628 13,465 5,807 2,600
General and
administrative expenses 222,714 272,022 330,194 381,611 501,700 221,402 228,905
Merger and restructuring
costs................. - 16,094 119,129 (7,104) (6,732) 4,381 1,013
Facility closure and
relocation costs...... - - - 40,425 110,038 - (3,164)
---------- ---------- ---------- ---------- ---------- ---------- -----------
Operating profit........ 343,060 398,881 404,759 413,373 110,226 251,829 177,431
Interest income......... 3,726 7,570 25,309 30,176 11,502 6,885 3,824
Interest expense........ (26,378) (21,680) (22,356) (26,148) (33,901) (14,266) (18,796)
Miscellaneous income
(expense), net........ (8,325) (13,180) (18,985) (3,514) 4,632 20,589 (6,426)
----------- ----------- ----------- ----------- ---------- ---------- -----------
Earnings before income
taxes................. 312,083 371,591 388,727 413,887 92,459 265,037 156,033
Income taxes............ 115,865 136,730 155,531 156,249 43,127 98,064 57,730
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net earnings............ $ 196,218 $ 234,861 $ 233,196 $ 257,638 $ 49,332 $ 166,973 $ 98,303
========== ========== ========== ========== ========== ========== ==========
EARNINGS PER SHARE(2):
Basic................... $ 0.55 $ 0.65 $ 0.64 $ 0.71 $ 0.16 $ 0.52 $ 0.33
Diluted................. 0.53 0.62 0.61 0.69 0.16 0.50 0.33
-15-
FISCAL YEAR(1) FIRST HALF
------------------------------------------------------------ ---------------------
1996 1997 1998 1999 2000 2000 2001
---------- ---------- ---------- ---------- ---------- ---------- --------
(DOLLARS IN THOUSANDS)
STATISTICAL DATA:
Facilities open at end of
period:
United States and Canada:
Office supply stores.. 561 602 702 825 888 855 829
Customer service centers 32 33 30 30 25 30 25
Call centers.......... 6 8 8 7 7 7 8
International(3):
Office supply stores.. 21 39 87 118 132 123 132
Customer service centers 12 16 17 17 17 17 19
Call centers.......... 8 12 13 14 14 13 15
OTHER DATA:
Ratio of earnings to
fixed charges(4).... 4.4x 5.0x 4.6x 4.1x 1.6x 4.5x 2.9x
BALANCE SHEET DATA (AT PERIOD END):
Working capital......... $ 860,280 $1,093,463 $1,293,370 $ 687,007 $ 790,752 $ 612,621 $ 729,758
Total assets............ 3,186,630 3,498,891 4,025,283 4,276,183 4,196,334 4,025,665 3,729,046
Long-term debt, excluding
current maturities.... 416,757 447,020 470,711 321,099 598,499 341,628 459,741
Common stockholders'
equity................ 1,469,110 1,717,638 2,028,879 1,907,720 1,601,251 1,824,061 1,684,955
SEGMENT DATA(5):
North American Retail
Division
Sales................... NA $4,734,626 $5,150,854 $5,927,666 $6,517,022 $3,211,753 $2,895,466
Gross profit............ NA 1,017,092 1,229,434 1,392,044 1,462,265 739,735 646,240
Store and warehouse
operating profit...... NA 386,584 536,761 508,455 452,595 259,853 159,587
Business Services Group
Sales................... NA 2,489,984 2,807,573 3,057,187 3,632,068 1,754,642 1,894,758
Gross profit............ NA 766,886 859,406 964,777 1,101,308 558,480 587,505
Store and warehouse
operating profit...... NA 193,582 187,815 250,642 205,791 130,660 134,365
International Division
Sales................... NA 887,408 1,052,543 1,325,372 1,467,357 734,069 782,669
Gross profit............ NA 362,394 435,244 538,456 577,046 291,675 312,480
Store and warehouse
operating profit...... NA 113,840 147,071 164,881 184,168 92,989 112,911
- ------------------
NA = not available
(1) Our results for fiscal year 2000 contained 53 weeks; all other fiscal years
contained 52 weeks. (2) Earnings per share previously reported for 1996 through
1998 have been restated to reflect the three-for-two
stock split declared on February 24, 1999.
(3) Includes facilities in our International Division that we wholly own or
lease, as well as those that we operate through licensing and joint venture
agreements.
(4) The ratio of earnings to fixed charges is based on earnings before income
taxes, fixed charges and undistributed earnings of joint ventures. Fixed
charges include interest expense and an estimated interest portion of
rents.
(5) Certain one-time charges and credits were excluded from the segment results
for the fiscal years because the effects of these charges and credits are
not comparable on a year-over-year basis.
-16-
THE EXCHANGE OFFER
PURPOSE OF THE EXCHANGE OFFER
In connection with the sale of the old notes, we entered into a
registration rights agreement with the initial purchasers of the old notes,
under which we agreed to use our best efforts to file and have declared
effective an exchange offer registration statement under the Securities Act of
1933. As used in this section, the word "notes" when used without specific
reference to either new notes or old notes, refers to both old notes and new
notes.
We are making the exchange offer in reliance on the position of the SEC
as expressed in certain no-action letters, although we have not sought our own
no-action letter. Based upon the interpretations by the SEC, we believe that a
holder of new notes (except a holder who is our "affiliate" within the meaning
of Rule 405 of the Securities Act of 1933) who exchanges old notes for new notes
in the exchange offer, generally may offer the new notes for resale, sell the
new notes and otherwise transfer the new notes without further registration
under the Securities Act of 1933 and without delivery of a prospectus that
satisfies the requirements of Section 10 of the Securities Act of 1933. This
does not apply, however, to a holder who is our "affiliate" within the meaning
of Rule 405 of the Securities Act of 1933. We also believe that a holder may
offer, sell or transfer the new notes only if the holder acquires the new notes
in the ordinary course of its business and is not participating, does not intend
to participate and has no arrangement or understanding with any person to
participate in a distribution of the new notes.
Holders of the old notes using the exchange offer to participate in a
distribution of new notes may not rely on the no-action letters referenced
above. This includes broker-dealers that acquired old notes directly from us,
but not as a result of market-making activities or other trading activities.
Consequently, those holders must comply with the registration and prospectus
delivery requirements of the Securities Act of 1933 in the absence of an
exemption from those requirements.
Each broker-dealer that receives new notes for its own account in
exchange for old notes, as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of the new notes. This prospectus, as it may be amended or
supplemented from time to time, may be used by broker-dealers in connection with
the resale of new notes received in exchange for old notes where the old notes
were acquired by the broker-dealers as a result of market-making activities or
other trading activities. The letter of transmittal states that by acknowledging
and delivering a prospectus, a broker-dealer will not be considered to admit
that it is an "underwriter" within the meaning of the Securities Act of 1933. We
have agreed that for a period of 180 days after the expiration date, we will
make this prospectus available to broker-dealers for use in connection with any
resale. See the section entitled "Plan of Distribution."
Except as described above, this prospectus may not be used for an offer
to resell, resale or other transfer of new notes.
The exchange offer is not being made to, nor will we accept tenders for
exchange from, holders of old notes in any jurisdiction in which the exchange
offer or the acceptance of it would not be in compliance with the securities or
blue sky laws of that jurisdiction.
TERMS OF THE EXCHANGE
Upon the terms and subject to the conditions of the exchange offer, we
will accept any and all old notes validly tendered prior to 5:00 p.m., New York
City time, on the expiration date. The date of acceptance for exchange of the
old notes, and completion of the exchange offer, is the exchange date, which
will be the first business day following the expiration date (unless extended as
described in this prospectus). We will issue, on or promptly after the exchange
date, an aggregate principal amount of up to $250,000,000 new notes for a like
principal amount of outstanding old notes tendered and accepted in connection
with the exchange offer. The new notes issued in connection with the exchange
offer will be delivered on the earliest practicable date following the exchange
date. Holders may tender some or all of their old notes in connection with the
exchange offer, but only in $1,000 increments of principal amount at maturity.
The exchange offer is not conditioned upon holders tendering a minimum principal
amount of old notes.
-17-
The terms of the new notes are identical in all material respects to
the terms of the old notes, except that the new notes have been registered under
the Securities Act of 1933 and are issued free from any covenant regarding
registration, including the payment of additional interest upon a failure to
file or have declared effective an exchange offer registration statement or to
complete the exchange offer by certain dates. The new notes will evidence the
same debt as the old notes and will be issued pursuant to the same indenture. As
of the date of this prospectus, $250,000,000 in aggregate principal amount of
the old notes is outstanding.
In connection with the issuance of the old notes, we arranged for the
old notes originally purchased by qualified institutional buyers and those sold
in reliance on Regulation S under the Securities Act of 1933 to be issued and
transferable in book-entry form through the facilities of The Depository Trust
Company, acting as depositary. Except as described under "Description of
Notes--Book-Entry, Delivery and Form," the new notes will be issued in the form
of a global note registered in the name of DTC or its nominee and each
beneficial owner's interest in it will be transferable in book-entry form
through DTC. See "Description of Notes--Book-Entry, Delivery and Form."
Holders of old notes do not have any appraisal or dissenters' rights in
connection with the exchange offer. Old notes that are not tendered for exchange
or are tendered but not accepted in connection with the exchange offer will
remain outstanding and be entitled to the benefits of the indenture under which
they were issued, but will not be entitled to any registration rights under the
registration rights agreement.
We shall be considered to have accepted validly tendered old notes if
and when we have given oral or written notice to the exchange agent. The
exchange agent will act as agent for the tendering holders for the purposes of
receiving the new notes from us.
If any tendered old notes are not accepted for exchange because of an
invalid tender, the occurrence of certain other events described in this
prospectus or otherwise, we will return the old notes, without expense, to the
tendering holder as quickly as possible after the expiration date.
Holders who tender old notes will not be required to pay brokerage
commissions or fees or, subject to the instructions in the letter of
transmittal, transfer taxes on the exchange of old notes in connection with the
exchange offer. We will pay all charges and expenses, other than certain
applicable taxes described below, in connection with the exchange offer.
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The expiration date for the exchange offer is 5:00 p.m., New York City
time, on [Date], 2001, unless extended by us in our sole discretion (but in no
event to a date later than [Date], 2001), in which case the term "expiration
date" shall mean the latest date and time to which the exchange offer is
extended.
We reserve the right, in our sole discretion:
o to delay accepting any old notes;
o to extend or terminate the exchange offer if, in our reasonable
judgment, any of the conditions described below shall not have
been satisfied, by giving oral or written notice of the delay,
extension or termination to the exchange agent; and/or
o to amend or waive any term or condition of the exchange offer in
any manner.
If we amend the exchange offer in a manner that we consider material,
we will disclose the amendment by means of a prospectus supplement, and we will
extend the exchange offer for a period of five to ten business days. If we
determine to make a public announcement of any delay, extension, amendment or
termination of the exchange offer, we will do so by making a timely release
through an appropriate news agency.
INTEREST ON THE NEW NOTES
Interest on the new notes will accrue at the rate of 10% per annum from
the most recent date to which interest on the notes has been paid or, if no
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interest has been paid, from the date of the indenture governing the notes. We
will pay interest on the new notes semiannually in arrears on January 15 and
July 15, commencing on January 15, 2002.
CONDITIONS TO THE EXCHANGE OFFER
We will not be required to accept old notes for exchange and may
terminate the exchange offer as provided in this prospectus before the
acceptance of the old notes, if:
o any action or proceeding is instituted or threatened in any court
or by or before any governmental agency relating to the exchange
offer which, in our reasonable judgment, might materially impair
our ability to proceed with the exchange offer or materially
impair the contemplated benefits of the exchange offer to us, or
any material adverse development has occurred in any existing
action or proceeding relating to us or any of our subsidiaries;
o any change, or any development involving a prospective change, in
our business or financial affairs or those of any of our
subsidiaries has occurred which, in our reasonable judgment, might
materially impair our ability to proceed with the exchange offer
or materially impair the contemplated benefits of the exchange
offer to us;
o any law, statue, rule or regulation is proposed, adopted or
enacted, which in our reasonable judgment, might materially impair
our ability to proceed with the exchange offer or materially
impair the contemplated benefits of the exchange offer to us; or
o any governmental approval has not been obtained, which approval
we, in our reasonable discretion, consider necessary for the
completion of the exchange offer as contemplated by this
prospectus.
The conditions listed above are for our sole benefit and may be
asserted by us regardless of the circumstances giving rise to any of these
conditions. We may waive these conditions in our reasonable discretion in whole
or in part at any time and from time to time. The failure by us at any time to
exercise any of the above rights shall not be considered a waiver of the right,
and the right shall be considered an ongoing right that may be asserted at any
time and from time to time. If we determine in our reasonable discretion that
any of the conditions to the exchange offer are not satisfied, we may:
o refuse to accept any old notes and return all tendered old notes
to the tendering holders;
o extend the exchange offer and retain all old notes tendered before
the expiration of the exchange offer, subject, however, to the
rights of holders to withdraw their previously tendered old notes
(See "--Withdrawal of Tenders" below); or
o waive unsatisfied conditions relating to the exchange offer and
accept all properly tendered old notes that have not been
withdrawn.
PROCEDURES FOR TENDERING
Unless a tender is being made in book-entry form, to tender in the
exchange offer, a holder must:
o complete, sign and date the letter of transmittal,
o have the signatures guaranteed if required by the letter of
transmittal, and
o mail or otherwise deliver the letter of transmittal, the old notes
and any other required documents to the exchange agent prior to
5:00 p.m., New York City time, on the expiration date. Do not send
any letters of transmittal to us.
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Any financial institution that is a participant in DTC's Book-Entry
Transfer Facility system may make book-entry delivery of the old notes by
causing DTC to transfer the old notes into the exchange agent's account. In lieu
of delivering a letter of transmittal to the exchange agent, a computer-
generated message, in which the holder of old notes acknowledges and agrees to
be bound by the terms of the letter of transmittal, must be transmitted to DTC
on behalf of the holder and received by the exchange agent prior to 5:00 p.m.,
New York City time, on the expiration date. Delivery of documents to DTC in
accordance with its procedures does not constitute delivery to the exchange
agent.
The tender by a holder of old notes will constitute an agreement
between us and the holder in accordance with the terms and subject to the
conditions set forth in this prospectus and in the letter of transmittal.
The method of delivery of old notes and the letter of transmittal and
all other required documents to the exchange agent is at the election and risk
of the holders. Instead of delivery by mail, we recommend that holders use an
overnight or hand delivery service. In all cases, holders should allow
sufficient time to assure delivery to the exchange agent before the expiration
date. Holders may request their respective brokers, dealers, commercial banks,
trust companies or nominees to effect tenders on their behalf.
Any beneficial owner whose old notes are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender should contact the registered holder promptly and instruct the
registered holder to tender on behalf of the beneficial owner. If a beneficial
owner wishes to tender on that owner's own behalf, the owner must, prior to
completing and executing the letter of transmittal and delivering the owner's
old notes, either make appropriate arrangements to register ownership of the old
notes in the owner's name or obtain a properly completed bond power from the
registered holder. Please note that the transfer of registered ownership may
take considerable time.
Signature on a letter of transmittal or a notice of withdrawal must be
guaranteed by an eligible guarantor institution within the meaning of Rule
17Ad-15 under the Securities Exchange Act of 1934, unless the old notes tendered
pursuant thereto are tendered:
o by a registered holder who has not completed the box entitled
"Special Payment Instructions" or "Special Delivery Instructions"
on the letter of transmittal, or
o for the account of an eligible guarantor institution.
If the signatures on a letter of transmittal or a notice of withdrawal
are required to be guaranteed, the guarantee must be by:
o a member firm of a registered national securities exchange or of
the National Association of Securities Dealers, Inc.,
o a commercial bank or trust company having an office or
correspondent in the United States, or
o an "eligible guarantor institution."
If the letter of transmittal is signed by a person other than the
registered holder of any old notes, the old notes must be endorsed by the
registered holder or accompanied by a properly completed bond power, in each
case signed or endorsed in blank by the registered holder.
If the letter of transmittal or any old notes or bond powers are signed
or endorsed by trustees, executors, administrators, guardians, attorney-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, those persons should so indicate when signing and, unless waived by
us, submit evidence satisfactory to us of their authority to act in that
capacity with the letter of transmittal.
DETERMINATION OF VALIDITY
We will determine all questions as to the validity, form, eligibility
(including time of receipt), acceptance and withdrawal of tendered old notes in
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our sole discretion. We reserve the absolute right to reject any and all old
notes not properly tendered or any old notes whose acceptance by us would, in
the opinion of our U.S. counsel, be unlawful. We also reserve the right to waive
any defects, irregularities or conditions of tender as to any particular old
notes either before or after the expiration date. Our interpretation of the
terms and conditions of the exchange offer (including the instructions in the
letter of transmittal) will be final and binding on all parties. Unless waived,
any defects or irregularities in connection with tenders of old notes must be
cured within a time period we will determine. Although we intend to request the
exchange agent to notify holders of defects or irregularities relating to
tenders of old notes, neither we, the exchange agent nor any other person will
have any duty or incur any liability for failure to give such notification.
Tenders of old notes will not be considered to have been made until any defects
or irregularities have been cured or waived. Any old notes received by the
exchange agent that are not properly tendered and as to which the defects or
irregularities have not been cured or waived will be returned by the exchange
agent to the tendering holders, unless otherwise provided in the letter of
transmittal, as soon as practicable following the expiration date.
By tendering, each holder represents to us, among other things, that:
o the holder has full power and authority to tender, exchange, sell,
assign and transfer old notes;
o we will acquire good, marketable and unencumbered title to the
tendered old notes, free and clear of all liens, restrictions,
charges and other encumbrances;
o the old notes tendered for exchange are not subject to any adverse
claims or proxies;
o the new notes acquired in connection with the exchange offer are
being obtained in the ordinary course of business of the person
receiving the new notes, whether or not the person is the holder;
o neither the holder nor any other person has an arrangement or
understanding with any person to participate in the distribution
of the new notes; and
o neither the holder nor any such other person is our "affiliate"
(as defined in Rule 405 under the Securities Act of 1933).
Additionally, if the holder is a broker-dealer that will receive new
notes for its own account in exchange for old notes, the holder acknowledges
that it acquired old notes as the result of market-making or other trading
activities and covenants that the holder will deliver a prospectus in connection
with any resale of the new notes. See the section entitled "Plan of
Distribution."
GUARANTEED DELIVERY PROCEDURES
A holder who wishes to tender old notes and (1) whose old notes are not
immediately available, or (2) who cannot deliver the old notes, the letter of
transmittal or any other required documents to the exchange agent prior to the
expiration date; or (3) who cannot complete the procedures for book-entry
transfer before the expiration date, may effect a tender if the tender is made
through an eligible guarantor institution and that institution delivers to the
exchange agent, prior to the expiration date:
o a properly completed and duly executed notice of guaranteed
delivery by facsimile transmission, mail or hand delivery;
o the name and address of the holder;
o the certificate number(s) of the old notes and the principal
amount at maturity of old notes tendered, stating that the tender
is being made and guaranteeing that, within three New York Stock
Exchange trading days after the expiration date, the letter of
transmittal and the certificate(s) representing the old notes (or
a confirmation of book-entry transfer), and any other documents
required by the letter of transmittal will be deposited by the
eligible guarantor institution with the exchange agent;
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and thereafter the exchange agent receives, within three New York Stock Exchange
trading days after the expiration date, a properly completed and executed letter
of transmittal or facsimile, as well as the certificate(s) representing all
tendered old notes in proper form for transfer or a confirmation of book-entry
transfer, and all other documents required by the letter of transmittal.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of old notes may be
withdrawn at any time prior to 5:00 p.m., New York City time, on the expiration
date. To withdraw a tender of old notes in connection with the exchange offer, a
written facsimile transmission notice of withdrawal must be received by the
exchange agent at its address set forth herein prior to 5:00 p.m., New York City
time, on the expiration date. Any notice of withdrawal must:
o specify the name of the person who deposited the old notes to be
withdrawn;
o identify the old notes to be withdrawn (including the certificate
number or numbers and principal amount at maturity of the old
notes);
o be signed by the depositor in the same manner as the original
signature on the letter of transmittal by which the old notes were
tendered (including any required signature guarantees) or be
accompanied by documents or transfer sufficient to have the
trustee register the transfer of the old notes into the name of
the person withdrawing the tender; and
o specify the name in which any old notes are to be registered, if
different from that of the depositor.
We will determine all questions as to the validity, form and
eligibility (including time of receipt) of any withdrawal notices. Any old notes
withdrawn will be considered not to have been validly tendered for purposes of
the exchange offer, and no new notes will be issued unless the old notes
withdrawn are validly re-tendered prior to the expiration date. Any old notes
that have been tendered but which are not accepted for exchange or which are
withdrawn will be returned to the holder without cost as soon as practicable
after withdrawal, rejection of tender or termination of the exchange offer.
Properly withdrawn old notes may be re-tendered by following one of the
procedures described above under the caption "Procedures for Tendering" at any
time prior to the expiration date.
EXCHANGE AGENT
SunTrust Bank has been appointed as exchange agent in connection with
the exchange offer. Questions and requests for assistance, requests for
additional copies of this prospectus or of the letter of transmittal should be
directed to the exchange agent, at its offices at 777 Brickell Avenue, Miami,
Florida 33131. The exchange agent's telephone number is (305) 579-7009 and
facsimile number is (305) 579-7017.
FEES AND EXPENSES
We will not make any payment to brokers, dealers or others soliciting
acceptances of the exchange offer. We will pay certain other expenses to be
incurred in connection with the exchange offer, including the fees and expenses
of the exchange agent, accounting and certain legal fees. Holders who tender
their old notes for exchange will not be obligated to pay transfer taxes. If,
however:
o new notes are to be delivered to, or issued in the name of, any
person other than the registered holder of the old notes tendered,
or
o old notes are registered in the name of any person other than the
person signing the letter of transmittal, or
o a transfer tax is imposed for any reason other than the exchange
of old notes in connection with the exchange offer,
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then the amount of any transfer taxes (whether imposed on the registered holder
or any other persons) will be payable by the tendering holder. If satisfactory
evidence of payment of the taxes or exemption from them is not submitted with
the letter of transmittal, the amount of the transfer taxes will be billed
directly to the tendering holder.
ACCOUNTING TREATMENT
The new notes will be recorded at the same carrying value as the old
notes as reflected in our accounting records on the date of the exchange.
Accordingly, we will not recognize any gain or loss for accounting purposes upon
the completion of the exchange offer. The expenses of the exchange offer that we
pay will increase our deferred financing costs in accordance with generally
accepted accounting principles.
CONSEQUENCES OF FAILURE TO PROPERLY TENDER OLD NOTES IN THE EXCHANGE OFFER
We will issue new notes in exchange for the old notes pursuant to the
exchange offer only after timely receipt by the exchange agent of the old notes,
a properly completed and duly executed letter of transmittal and all other
required documents. Therefore, holders of the old notes desiring to tender their
old notes in exchange for new notes should allow sufficient time to ensure
timely delivery. We are under no duty to give notification of defects or
irregularities of tenders of old notes for exchange. Old notes that are not
tendered or that are tendered but not accepted by us will, following completion
of the exchange offer, continue to be subject to the existing restrictions upon
transfer thereof under the Securities Act of 1933, and, upon completion of the
exchange offer, certain registered rights under the registration rights
agreement will terminate.
If the exchange offer is completed, we will no longer be required to
register any old notes that remain outstanding. Remaining old notes will
continue to be subject to the following restrictions on transfer:
o the remaining old notes may be resold only if registered pursuant
to the Securities Act of 1933, if any exemption from registration
is available, or if neither registration nor exemption is required
by law, and
o the remaining old notes will bear a legend restricting transfer in
the absence of registration or an exemption.
We do not currently anticipate that we will register the remaining old
notes under the Securities Act of 1933. If a substantial number of old notes are
exchanged in connection with the exchange offer, any trading market for the
remaining old notes could be adversely affected.
In addition, although we have no present plan to acquire any old notes
that are not tendered in the exchange offer, we reserve the right in our sole
discretion to:
o purchase or make offers for any old notes that remain outstanding
subsequent to the expiration date; and
o to the extent permitted by applicable law, purchase old notes in
the open market, in privately negotiated transactions or
otherwise.
The terms of any such purchases or offers may differ from the terms of
the exchange offer.
DECISION TO PARTICIPATE IN THE EXCHANGE OFFER
Participation in the exchange offer is voluntary, and holders of old
notes should carefully consider whether or not to participate. We urge holders
of old notes to consult with their financial and tax advisors in making their
own decisions on which action to take.
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DESCRIPTION OF NOTES
You can find the definitions of certain terms used in this description
under the subheading "Certain Definitions" at the end of this section. In this
section, "Office Depot" refers only to Office Depot, Inc. and not to any of its
subsidiaries.
Office Depot will issue the new notes under the same indenture between
itself and SunTrust Bank, as trustee, that governs the old notes. See "Notice to
Investors." The terms of the new and old notes include those stated in the
indenture and those made part of the indenture by reference to the Trust
Indenture Act of 1939. As used in this section, the word "notes" when used
without specific reference to either new notes or old notes, refers to both old
notes and new notes.
The following description is a summary of the material provisions of
the indenture and the registration rights agreement. It does not restate those
agreements in their entirety. We urge you to read the indenture and the
registration rights agreement because they, and not this description, define
your rights as holders of the new and/or old notes. Copies of the indenture and
the registration rights agreement are available as set forth below under "--
Additional Information." Certain defined terms used in this description but not
defined below under "-- Certain Definitions" have the meanings assigned to them
in the indenture.
The registered Holder of a note will be treated as the owner of it for
all purposes. Only registered Holders will have rights under the indenture.
BRIEF DESCRIPTION OF THE NOTES
The notes:
o are general unsecured obligations of Office Depot;
o are subordinated in right of payment to all existing and future
Senior Debt of Office Depot; and
o are pari passu in right of payment with any future senior
subordinated Indebtedness of Office Depot.
Giving effect to application of the net proceeds from the sale of old
notes, as of June 30, 2001, Office Depot had no Senior Debt outstanding. As
indicated above and as discussed in detail below under the caption "--
Subordination," payments on the notes will be subordinated to the payment of
Senior Debt. The indenture permits us to incur additional Senior Debt without
limitation as to amount.
As of the date of the indenture, all of our subsidiaries were
"Restricted Subsidiaries." However, under the circumstances described below
under the subheading "-- Certain Covenants - Designation of Restricted and
Unrestricted Subsidiaries," we are permitted to designate certain of our
subsidiaries as "Unrestricted Subsidiaries." Our Unrestricted Subsidiaries are
not subject to many of the restrictive covenants in the indenture.
PRINCIPAL, MATURITY AND INTEREST
Office Depot will issue new notes having a maximum aggregate principal
amount of $250 million pursuant to the exchange offer. Office Depot may issue
additional notes from time to time after this exchange offer. Any offering of
additional notes is subject to the covenant described below under the caption
"-- Certain Covenants -- Undertaking of Indebtedness and Issuance of Preferred
Stock." New and old notes together with any additional notes subsequently issued
under the indenture will be treated as a single class for all purposes under the
indenture, including, without limitation, waivers, amendments, redemptions and
offers to purchase. Office Depot will issue new notes in denominations of $1,000
and integral multiples of $1,000. The notes will mature on July 15, 2008.
Interest on the notes will accrue at the rate of 10% per annum and will
be payable semi-annually in arrears on January 15 and July 15, commencing on
January 15, 2002. Office Depot will make each interest payment to the Holders of
record on the immediately preceding January 1 and July 1.
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Interest on the notes will accrue from the date of original issuance
or, if interest has already been paid, from the date it was most recently paid.
Interest will be computed on the basis of a 360-day year comprised of twelve
30-day months.
METHODS OF RECEIVING PAYMENTS ON THE NOTES
If a Holder has given wire transfer instructions to Office Depot,
Office Depot will pay all principal, interest and premium and Special Interest,
if any, on that Holder's notes in accordance with those instructions. All other
payments on notes will be made at the office or agency of the paying agent and
registrar within the City and State of New York unless Office Depot elects to
make interest payments by check mailed to the Holders at their address set forth
in the register of Holders.
PAYING AGENT AND REGISTRAR FOR THE NOTES
The trustee will initially act as paying agent and registrar. Office
Depot may change the paying agent or registrar without prior notice to the
Holders of the notes, and Office Depot or any of its Subsidiaries may act as
paying agent or registrar.
TRANSFER AND EXCHANGE
A Holder may transfer or exchange notes in accordance with the
indenture. The registrar and the trustee may require a Holder to furnish
appropriate endorsements and transfer documents in connection with a transfer of
notes. Holders will be required to pay all taxes due on transfer. Office Depot
is not required to transfer or exchange any note selected for redemption. Also,
Office Depot is not required to transfer or exchange any note for a period of 15
days before a selection of notes to be redeemed.
SUBORDINATION
The payment of principal, interest and premium and Special Interest, if
any, on the notes will be subordinated to the prior payment in full of all
Senior Debt of Office Depot, including Senior Debt incurred after the date of
the indenture.
The holders of Senior Debt will be entitled to receive payment in full
of all Obligations due in respect of Senior Debt (including interest after the
commencement of any bankruptcy proceeding at the rate specified in the
applicable Senior Debt) before the Holders of notes will be entitled to receive
any payment with respect to the notes (except that Holders of notes may receive
and retain Permitted Junior Securities and payments made from the trust
described under "-- Legal Defeasance and Covenant Defeasance"), in the event of
any distribution to creditors of Office Depot:
(1) in a liquidation or dissolution of Office Depot;
(2) in a bankruptcy, reorganization, insolvency, receivership or
similar proceeding relating to Office Depot or its property;
(3) in an assignment for the benefit of creditors; or
(4) in any marshaling of Office Depot's assets and liabilities.
Office Depot also may not make any payment in respect of the notes
(except in Permitted Junior Securities or from the trust described under "--
Legal Defeasance and Covenant Defeasance") if:
(1) a payment default on Designated Senior Debt occurs and is
continuing beyond any applicable grace period; or
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(2) any other default occurs and is continuing on any series of
Designated Senior Debt that permits holders of that series of
Designated Senior Debt to accelerate its maturity and the
trustee receives a notice of such default (a "Payment Blockage
Notice") from Office Depot or the holders of any Designated
Senior Debt.
Payments on the notes may and will be resumed:
(1) in the case of a payment default, upon the date on which the
default is cured or waived; and
(2) in the case of a nonpayment default, upon the earlier of the
date on which the nonpayment default is cured or waived or 179
days after the date on which the applicable Payment Blockage
Notice is received, unless the maturity of any Designated
Senior Debt has been accelerated.
No new Payment Blockage Notice may be delivered unless and until:
(1) 360 days have elapsed since the delivery of the immediately
prior Payment Blockage Notice; and
(2) all scheduled payments of principal, interest and premium and
Special Interest, if any, on the notes that have come due have
been paid in full in cash.
No nonpayment default that existed or was continuing on the date of
delivery of any Payment Blockage Notice to the trustee will be, or be made, the
basis for a subsequent Payment Blockage Notice.
If the trustee or any Holder of the notes receives a payment in respect
of the notes (except in Permitted Junior Securities or from the trust described
under "-- Legal Defeasance and Covenant Defeasance") when:
(1) the payment is prohibited by these subordination provisions;
and
(2) the trustee or the Holder has actual knowledge that the
payment is prohibited;
the trustee or the Holder, as the case may be, will hold the payment in trust
for the benefit of the holders of Senior Debt. Upon the proper written request
of the holders of Senior Debt, the trustee or the Holder, as the case may be,
will deliver the amounts in trust to the holders of Senior Debt or their proper
representative.
Office Depot must promptly notify holders of Senior Debt if payment of
the notes is accelerated because of an Event of Default.
As a result of the subordination provisions described above, in the
event of a bankruptcy, liquidation or reorganization of Office Depot, Holders of
notes may recover less ratably than creditors of Office Depot who are holders of
Senior Debt. See "Risk Factors - The new notes will be junior to our senior
debt."
OPTIONAL REDEMPTION
The notes will not be redeemable at the option of Office Depot except
as set forth in the following paragraph.
The notes may be redeemed, in whole or in part, at any time at the
option of Office Depot upon not less than 30 nor more than 60 days prior notice
mailed by first-class mail to each Holder's registered address, at a redemption
price equal to the greater of (i) 100% of the principal amount thereof or (ii)
as determined by an Independent Investment Banker, the sum of the present values
of the Remaining Scheduled Payments discounted to the redemption date on a
semiannual basis (assuming a 360-day year consisting of twelve 30-day months) at
the Adjusted Treasury Rate, plus, in each case, accrued and unpaid interest and
Special Interest, if any, to the date of redemption.
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Unless Office Depot defaults in payment of the redemption price, on and
after the redemption date, interest will cease to accrue on the notes or portion
thereof called for redemption.
MANDATORY REDEMPTION
Office Depot is not required to make mandatory redemption or sinking
fund payments with respect to the notes.
REPURCHASE AT THE OPTION OF HOLDERS
CHANGE OF CONTROL
If a Change of Control occurs, each Holder of notes will have the right
to require Office Depot to repurchase all or any part (equal to $1,000 or an
integral multiple of $1,000) of that Holder's notes pursuant to a Change of
Control Offer on the terms set forth in the indenture. In the Change of Control
Offer, Office Depot will offer a Change of Control Payment in cash equal to 101%
of the aggregate principal amount of notes repurchased plus accrued and unpaid
interest and Special Interest, if any, on the notes repurchased, to the date of
purchase. Within ninety days following any Change of Control, Office Depot will
mail a notice to each Holder describing the transaction or transactions that
constitute the Change of Control and offering to repurchase notes on the Change
of Control Payment Date specified in the notice, which date will be no earlier
than 30 days and no later than 60 days from the date such notice is mailed,
pursuant to the procedures required by the indenture and described in such
notice. Office Depot will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent those laws and regulations are applicable in connection with the
repurchase of the notes as a result of a Change of Control. To the extent that
the provisions of any securities laws or regulations conflict with the Change of
Control provisions of the indenture, Office Depot will comply with the
applicable securities laws and regulations and will not be deemed to have
breached its obligations under the Change of Control provisions of the indenture
by virtue of such conflict.
On the Change of Control Payment Date, Office Depot will, to the extent
lawful:
(1) accept for payment all notes or portions of notes properly
tendered pursuant to the Change of Control Offer;
(2) deposit with the paying agent an amount equal to the Change of
Control Payment in respect of all notes or portions of notes
properly tendered; and
(3) deliver or cause to be delivered to the trustee the notes
properly accepted together with an officers' certificate
stating the aggregate principal amount of notes or portions of
notes being purchased by Office Depot.
The paying agent will promptly mail to each Holder of notes properly
tendered the Change of Control Payment for the notes, and the trustee will
promptly authenticate and mail (or cause to be transferred by book entry) to
each Holder a new note equal in principal amount to any unpurchased portion of
the notes surrendered, if any; provided that each new note will be in a
principal amount of $1,000 or an integral multiple of $1,000.
Prior to complying with any of the provisions of this "Change of
Control" covenant, but in any event within 90 days following a Change of
Control, Office Depot will either repay all outstanding Senior Debt or obtain
the requisite consents, if any, under all agreements governing outstanding
Senior Debt to permit the repurchase of notes required by this covenant. Office
Depot will publicly announce the results of the Change of Control Offer on or as
soon as practicable after the Change of Control Payment Date.
The provisions described above that require Office Depot to make a
Change of Control Offer following a Change of Control will be applicable whether
or not any other provisions of the indenture are applicable. Except as described
above with respect to a Change of Control, the indenture does not contain
provisions that permit the Holders of the notes to require that Office Depot
repurchase or redeem the notes in the event of a takeover, recapitalization or
similar transaction.
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Office Depot will not be required to make a Change of Control Offer
upon a Change of Control if a third party makes the Change of Control Offer in
the manner, at the times and otherwise in compliance with the requirements set
forth in the indenture applicable to a Change of Control Offer made by Office
Depot and purchases all notes properly tendered and not withdrawn under the
Change of Control Offer.
The agreements governing Office Depot's Senior Debt currently prohibit
Office Depot from purchasing any notes, and also provide that certain change of
control or asset sale events with respect to Office Depot would constitute a
default under those agreements. Any future credit agreements or other agreements
relating to Senior Debt to which Office Depot becomes a party may contain
similar restrictions and provisions. In the event a Change of Control or Asset
Sale occurs at a time when Office Depot is prohibited from purchasing notes,
Office Depot could seek the consent of its senior lenders to the purchase of
notes or could attempt to refinance the borrowings that contain the prohibition.
If Office Depot does not obtain consent or repay the borrowings, Office Depot
will remain prohibited from purchasing notes. In that case, Office Depot's
failure to purchase tendered notes would constitute an Event of Default under
the indenture which could, in turn, constitute a default under the Senior Debt.
In those circumstances, the subordination provisions in the indenture would
likely restrict payments to the Holders of notes.
The definition of Change of Control includes a phrase relating to the
direct or indirect sale, lease, transfer, conveyance or other disposition of
"all or substantially all" of the properties or assets of Office Depot and its
Subsidiaries taken as a whole. Although there is a limited body of case law
interpreting the phrase "substantially all," there is no precise established
definition of the phrase under applicable law. Accordingly, the ability of a
Holder of notes to require Office Depot to repurchase the Holder's notes as a
result of a sale, lease, transfer, conveyance or other disposition of less than
all of the assets of Office Depot and its Subsidiaries taken as a whole to
another Person or group may be uncertain.
ASSET SALES
Office Depot will not, and will not permit any of its Restricted
Subsidiaries to, consummate an Asset Sale unless:
(1) Office Depot (or the Restricted Subsidiary, as the case may
be) receives consideration at the time of the Asset Sale at
least equal to the fair market value of the assets or Equity
Interests issued or sold or otherwise disposed of;
(2) the fair market value is determined by Office Depot's Board of
Directors and evidenced by a resolution of the Board of
Directors set forth in an officers' certificate delivered to
the trustee; and
(3) at least 75% of the consideration received in the Asset Sale
by Office Depot or the Restricted Subsidiary is in the form of
cash. For purposes of this provision, each of the following
will be deemed to be cash:
(a) any liabilities, as shown on Office Depot's or the
Restricted Subsidiary's most recent balance sheet, of
Office Depot or any Restricted Subsidiary (other than
contingent liabilities and liabilities that are by
their terms subordinated to the notes) that are
assumed by the transferee of any assets and the
transferee expressly releases Office Depot or the
Restricted Subsidiary from further liability;
(b) any securities, notes or other obligations received
by Office Depot or any Restricted Subsidiary from the
transferee that are delivered within 20 days of the
sale, subject to ordinary settlement periods,
converted by Office Depot or the Restricted
Subsidiary into cash, to the extent of the cash
received in that conversion; and
(c) any payment of Senior Debt secured by the assets sold
in the Asset Sale.
Within 360 days after the receipt of any Net Proceeds from an Asset
Sale, Office Depot may apply those Net Proceeds at its option:
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(1) to repay Senior Debt;
(2) to acquire all or substantially all of the assets of, or a
majority of the Voting Stock of, another Permitted Business;
(3) to make a capital expenditure; or
(4) to acquire other long-term assets that are used or useful in a
Permitted Business.
Pending the final application of any Net Proceeds, Office Depot may
temporarily reduce revolving credit borrowings or otherwise invest the Net
Proceeds in any manner that is not prohibited by the indenture.
Any Net Proceeds from Asset Sales that are not applied or invested as
provided in the preceding paragraph will constitute "Excess Proceeds." When the
aggregate amount of Excess Proceeds exceeds $25 million, Office Depot will make
an Asset Sale Offer to all Holders of notes and all holders of other
Indebtedness that is pari passu with the notes containing provisions similar to
those set forth in the indenture with respect to offers to purchase or redeem
with the proceeds of sales of assets to purchase the maximum principal amount of
notes and such other pari passu Indebtedness that may be purchased out of the
Excess Proceeds. The offer price in any Asset Sale Offer will be equal to 100%
of principal amount plus accrued and unpaid interest and Special Interest, if
any, to the date of purchase, and will be payable in cash. If any Excess
Proceeds remain after consummation of an Asset Sale Offer, Office Depot may use
those Excess Proceeds for any purpose not otherwise prohibited by the indenture.
If the aggregate principal amount of notes and other pari passu Indebtedness
tendered into the Asset Sale Offer exceeds the amount of Excess Proceeds, the
trustee will select the notes and other pari passu Indebtedness to be purchased
on a pro rata basis. Upon completion of each Asset Sale Offer, the amount of
Excess Proceeds will be reset at zero.
Office Depot will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent those laws and regulations are applicable in connection with each
repurchase of notes pursuant to an Asset Sale Offer. To the extent that the
provisions of any securities laws or regulations conflict with the Asset Sale
provisions of the indenture, Office Depot will comply with the applicable
securities laws and regulations and will not be deemed to have breached its
obligations under the Asset Sale provisions of the indenture by virtue of the
conflict.
SELECTION AND NOTICE
If less than all of the notes are to be redeemed at any time, the
trustee will select notes for redemption as follows:
(1) if the notes are listed on any national securities exchange,
in compliance with the requirements of the principal national
securities exchange on which the notes are listed; or
(2) if the notes are not listed on any national securities
exchange, on a pro rata basis, by lot or by any method the
trustee deems fair and appropriate.
No notes of $1,000 or less may be redeemed in part. Notices of
redemption will be mailed by first class mail at least 30 but not more than 60
days before the redemption date to each Holder of notes to be redeemed at its
registered address, except that redemption notices may be mailed more than 60
days prior to a redemption date if the notice is issued in connection with a
defeasance of the notes or a satisfaction and discharge of the indenture.
Notices of redemption may not be conditional.
If any note is to be redeemed in part only, the notice of redemption
that relates to that note will state the portion of the principal amount of the
note that is to be redeemed. A new note in principal amount equal to the
unredeemed portion of the original note will be issued in the name of the Holder
of notes upon cancellation of the original note. Notes called for redemption
become due on the date fixed for redemption. On and after the redemption date,
interest ceases to accrue on notes or portions of them called for redemption.
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CERTAIN COVENANTS
CHANGES IN COVENANTS WHEN NOTES RATED INVESTMENT GRADE
Following the first date upon which the notes are rated Baa3 or better
by Moody's Investors Service, Inc. ("Moody's") and BBB- or better by Standard &
Poor's Ratings Group ("S&P") (or, in either case, if such person ceases to rate
the notes for reasons outside of the control of Office Depot, the equivalent
investment grade credit rating from any other "nationally recognized statistical
rating organization" (within the meaning of Rule 15c3-1(c)(2)(vi)(F) under the
Exchange Act) selected by Office Depot as a replacement agency) and neither
Moody's nor S&P attaches any "negative outlook" or "negative credit watch" to
the rating of the notes (the "Rating Event Date") (and provided no Event of
Default or event that with notice or the passage of time would constitute an
Event of Default shall exist on the Rating Event Date), the covenants
specifically listed under "-- Repurchase at the Option of Holders -- Asset
Sales," "-- Repurchase at the Option of Holders -- Change of Control," "--
Restricted Payments," "-- Undertaking of Indebtedness and Issuance of Preferred
Stock," "-- Dividend and Other Payment Restrictions Affecting Subsidiaries," "--
Designation of Restricted and Unrestricted Subsidiaries," "-- Transactions with
Affiliates," and clause (4)(b) of the covenant listed under "-- Merger,
Consolidation or Sale of Assets" in this prospectus will no longer be applicable
to the notes.
There can be no assurance that a Rating Event Date will occur or, if
one occurs, that the notes will continue to maintain an investment grade rating
without a negative outlook.
The indenture contains, among others, the following covenants:
RESTRICTED PAYMENTS
Office Depot will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly:
(1) declare or pay any dividend or make any other payment or
distribution on account of Office Depot's or any of its
Restricted Subsidiaries' Equity Interests (including, without
limitation, any payment in connection with any merger or
consolidation involving Office Depot or any of its Restricted
Subsidiaries) or to the direct or indirect holders of Office
Depot's or any of its Restricted Subsidiaries' Equity
Interests in their capacity as such (other than dividends or
distributions payable in Equity Interests (other than
Disqualified Stock) of Office Depot or to Office Depot or a
Restricted Subsidiary of Office Depot);
(2) purchase, redeem or otherwise acquire or retire for value
(including, without limitation, in connection with any merger
or consolidation involving Office Depot) any Equity Interests
of Office Depot or any direct or indirect parent of Office
Depot;
(3) make any payment on or with respect to, or purchase, redeem,
defease or otherwise acquire or retire for value any
Indebtedness that is subordinated to the notes, except a
payment of interest or principal at the Stated Maturity
thereof; or
(4) make any Restricted Investment (all such payments and other
actions set forth in these clauses (1) through (4) above being
collectively referred to as "Restricted Payments"),
unless, at the time of and after giving effect to the Restricted Payment:
(1) no Default or Event of Default has occurred and is continuing
or would occur as a consequence of the Restricted Payment; and
(2) Office Depot would, at the time of the Restricted Payment and
after giving pro forma effect thereto as if the Restricted
Payment had been made at the beginning of the applicable
four-quarter period, have been permitted to incur at least
$1.00 of additional Indebtedness pursuant to the Fixed Charge
Coverage Ratio test set forth in the first paragraph of the
covenant described below under the caption "-- Undertaking of
Indebtedness and Issuance of Preferred Stock;" and
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(3) the Restricted Payment, together with the aggregate amount of
all other Restricted Payments made by Office Depot and its
Restricted Subsidiaries after the date of the indenture
(excluding Restricted Payments permitted by clauses (2), (3)
and (4) of the next succeeding paragraph), is less than the
sum, without duplication, of:
(a) 50% of the Consolidated Net Income of Office Depot
for the period (taken as one accounting period) from
the beginning of the first fiscal quarter commencing
after the date of the indenture to the end of Office
Depot's most recently ended fiscal quarter for which
internal financial statements are available at the
time of the Restricted Payment (or, if the
Consolidated Net Income for that period is a deficit,
less 100% of the deficit), plus
(b) 100% of the aggregate net cash proceeds received by
Office Depot since the date of the indenture as a
contribution to its common equity capital or from the
issue or sale of Equity Interests of Office Depot
(other than Disqualified Stock) or from the issue or
sale of convertible or exchangeable Disqualified
Stock or convertible or exchangeable debt securities
of Office Depot that have been converted into or
exchanged for such Equity Interests (other than
Equity Interests (or Disqualified Stock or debt
securities) sold to a Subsidiary of Office Depot),
plus
(c) to the extent any Restricted Investment that was made
after the date of the indenture is sold for cash or
otherwise liquidated or repaid for cash, the lesser
of (i) the cash return of capital with respect to the
Restricted Investment (less the cost of disposition,
if any) and (ii) the initial amount of the Restricted
Investment.
So long as no Default has occurred and is continuing or would be caused
thereby, the preceding provisions will not prohibit any of the following:
(1) the payment of any dividend within 60 days after the date of
declaration of the dividend, if at the date of declaration the
dividend payment would have complied with the provisions of
the indenture;
(2) the redemption, repurchase, retirement, defeasance or other
acquisition of any subordinated Indebtedness of Office Depot
or of any Equity Interests of Office Depot in exchange for, or
out of the net cash proceeds of the substantially concurrent
sale (other than to a Subsidiary of Office Depot) of, Equity
Interests of Office Depot (other than Disqualified Stock);
provided that the amount of any net cash proceeds that are
used for any such redemption, repurchase, retirement,
defeasance or other acquisition will be excluded from clause
(3)(b) of the preceding paragraph;
(3) the defeasance, redemption, repurchase or other acquisition of
subordinated Indebtedness of Office Depot with the net cash
proceeds from an undertaking of Permitted Refinancing
Indebtedness;
(4) the payment of any dividend by a Restricted Subsidiary of
Office Depot to the holders of its Equity Interests on a pro
rata basis;
(5) the repurchase, redemption or other acquisition or retirement
for value of any Equity Interests of Office Depot or any
Restricted Subsidiary of Office Depot held by any member of
Office Depot's (or any of its Restricted Subsidiaries')
management pursuant to any management equity subscription
agreement, stock option agreement or similar agreement;
provided that the aggregate price paid for all repurchased,
redeemed, acquired or retired Equity Interests may not exceed
$15.0 million in any twelve-month period;
(6) Repayment of LYONS; or
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(7) other Restricted Payments in an amount not to exceed $50.0
million.
The amount of all Restricted Payments (other than cash) will be the
fair market value on the date of the Restricted Payment of the assets) or
securities proposed to be transferred or issued by Office Depot or such
Restricted Subsidiary, as the case may be, pursuant to the Restricted Payment.
The fair market value of any assets or securities that are required to be valued
by this covenant will be determined by the Board of Directors whose resolution
with respect thereto will be delivered to the trustee. The Board of Directors'
determination must be based upon an opinion or appraisal issued by an
accounting, appraisal or investment banking firm of national standing if the
fair market value exceeds $25.0 million. Not later than the date of making any
Restricted Payment, Office Depot will deliver to the trustee an officers'
certificate stating that the Restricted Payment is permitted and setting forth
the basis upon which the calculations required by this "Restricted Payments"
covenant were computed, together with a copy of any fairness opinion or
appraisal required by the indenture.
UNDERTAKING OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK
Office Depot will not, and will not permit any of its Subsidiaries to,
directly or indirectly, create, incur, issue, assume, guarantee or otherwise
become directly or indirectly liable, contingently or otherwise, with respect to
(collectively, "incur") any Indebtedness (including Acquired Debt), and Office
Depot will not issue any Disqualified Stock and will not permit any of its
Subsidiaries to issue any shares of preferred stock; provided, however, that
Office Depot may incur Indebtedness (including Acquired Debt) or issue
Disqualified Stock, if the Fixed Charge Coverage Ratio for Office Depot's most
recently ended four full fiscal quarters for which internal financial statements
are available immediately preceding the date on which such additional
Indebtedness is incurred or such Disqualified Stock is issued would have been at
least 2.0 to 1, determined on a pro forma basis (including a pro forma
application of the net proceeds therefrom), as if the additional Indebtedness
had been incurred or the Disqualified Stock had been issued, as the case may be,
at the beginning of such four-quarter period.
The first paragraph of this covenant will not prohibit any of the
following items of Indebtedness (collectively, "Permitted Debt"):
(1) the undertaking by Office Depot of additional Indebtedness and
letters of credit under Credit Facilities in an aggregate
principal amount at any one time outstanding under this clause
(1) (with letters of credit being deemed to have a principal
amount equal to the maximum potential liability of Office
Depot and its Restricted Subsidiaries thereunder) not to
exceed $600.0 million;
(2) the undertaking by Office Depot and its Restricted
Subsidiaries of the Existing Indebtedness;
(3) the undertaking by Office Depot of Indebtedness represented by
the notes to be issued on the date of the indenture and the
new notes to be issued pursuant to the registration rights
agreement;
(4) the undertaking by Office Depot or any of its Restricted
Subsidiaries of Indebtedness represented by Capital Lease
Obligations, mortgage financings or purchase money
obligations, in each case, incurred for the purpose of
financing all or any part of the purchase price or cost of
construction or improvement of property, plant or equipment
used in the business of Office Depot or the Restricted
Subsidiary, in an aggregate principal amount, including all
Permitted Refinancing Indebtedness incurred to refund,
refinance or replace any Indebtedness incurred pursuant to
this clause (4), not to exceed $100.0 million at any time
outstanding;
(5) the undertaking by Office Depot or any of its Restricted
Subsidiaries of Permitted Refinancing Indebtedness in exchange
for, or the net proceeds of which are used to refund,
refinance or replace Indebtedness (other than intercompany
Indebtedness) that was permitted by the indenture to be
incurred under the first paragraph of this covenant or clauses
(2), (3), (4), (5), (9) or (12) of this paragraph;
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(6) the undertaking by Office Depot or any of its Restricted
Subsidiaries of intercompany Indebtedness between or among
Office Depot and any of its Restricted Subsidiaries; provided,
however, that:
(a) if Office Depot is the obligor on the Indebtedness,
the Indebtedness must be expressly subordinated to
the prior payment in full in cash of all Obligations
with respect to the notes and
(b) (i) any subsequent issuance or transfer of Equity
Interests that results in any Indebtedness being held
by a Person other than Office Depot or a Restricted
Subsidiary of Office Depot and (ii) any sale or other
transfer of any the Indebtedness to a Person that is
not either Office Depot or a Restricted Subsidiary of
Office Depot; will be deemed, in each case, to
constitute an undertaking of Indebtedness by Office
Depot or the Restricted Subsidiary, as the case may
be, that was not permitted by this clause (6);
(7) the undertaking by Office Depot or any of its Restricted
Subsidiaries of Hedging Obligations that are incurred for the
purpose of fixing or hedging interest rate risk with respect
to any floating rate Indebtedness that is permitted by the
terms of the indenture to be outstanding or Hedging
Obligations with respect to foreign currency translations;
(8) the undertaking by Office Depot's Unrestricted Subsidiaries of
Non-Recourse Debt; provided, however, that if any such
Indebtedness ceases to be Non-Recourse Debt of an Unrestricted
Subsidiary, the event will be deemed to constitute an
undertaking of Indebtedness by a Restricted Subsidiary of
Office Depot that was not permitted by this clause (8);
(9) the undertaking by Office Depot's Subsidiaries of Indebtedness
of up to 10.4 billion yen under the Yen Credit Facility and
the Guarantee of that Indebtedness by Office Depot;
(10) the guarantee by Office Depot of Indebtedness of a Restricted
Subsidiary of Office Depot that was permitted to be incurred
by another provision of this covenant;
(11) the undertaking by a Receivables Subsidiary of Indebtedness in
a Qualified Receivables Transaction that is without recourse
to Office Depot or to any other Subsidiary of Office Depot or
their assets (other than the Receivables Subsidiary and its
assets and, as to Office Depot or any Subsidiary of Office
Depot, other than pursuant to representations, warranties,
covenants and indemnities customary for such transactions) and
is not guaranteed by any Person; and
(12) the undertaking by Office Depot or any of its Restricted
Subsidiaries of additional Indebtedness in an aggregate
principal amount (or accreted value, as applicable) at any
time outstanding, including all Permitted Refinancing
Indebtedness incurred to refund, refinance or replace any
Indebtedness incurred pursuant to this clause (12), not to
exceed $175.0 million.
The accrual of interest, the accretion or amortization of original
issue discount, the payment of interest on any Indebtedness in the form of
additional Indebtedness with the same terms, and the payment of dividends on
Disqualified Stock in the form of additional shares of the same class of
Disqualified Stock will not be deemed to be an undertaking of Indebtedness or an
issuance of Disqualified Stock for purposes of this covenant; provided that, in
each case, the amount thereof is included in the Fixed Charges of Office Depot
as accrued.
For purposes of determining compliance with this "Undertaking of
Indebtedness and Issuance of Preferred Stock" covenant, if an item of proposed
Indebtedness meets the criteria of more than one of the categories of Permitted
Debt described in clauses (1) through (12) above, or is entitled to be incurred
pursuant to the first paragraph of this covenant, Office Depot will be permitted
to classify the item of Indebtedness on the date of its undertaking, or later
reclassify all or a portion of the item of Indebtedness, in any manner that
complies with this covenant. Indebtedness under Credit Facilities outstanding on
the date on which notes are first issued and authenticated under the indenture
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will be deemed to have been incurred on that date in reliance on the exception
provided by clause (1) of the definition of Permitted Debt.
ANTI-LAYERING
Office Depot will not incur, create, issue, assume, guarantee or
otherwise become liable for any Indebtedness that is subordinate or junior in
right of payment to any Senior Debt of Office Depot and senior in any respect in
right of payment to the notes.
LIENS
Office Depot will not, and will not permit any of its Subsidiaries to,
directly or indirectly, create, incur, assume or suffer to exist any Lien of any
kind securing Indebtedness or trade payables on any asset now owned or hereafter
acquired, except Permitted Liens.
DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES
Office Depot will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, create or permit to exist or become
effective any consensual encumbrance or restriction on the ability of any
Restricted Subsidiary to:
(1) pay dividends or make any other distributions on its Capital
Stock to Office Depot or any of its Restricted Subsidiaries,
or with respect to any other interest or participation in, or
measured by, its profits, or pay any indebtedness owed to
Office Depot or any of its Restricted Subsidiaries;
(2) make loans or advances to Office Depot or any of its
Restricted Subsidiaries; or
(3) transfer any of its properties or assets to Office Depot or
any of its Restricted Subsidiaries.
However, the preceding restrictions will not apply to encumbrances or
restrictions existing under or by reason of:
(1) agreements governing Existing Indebtedness and Credit
Facilities as in effect on the date of the indenture and any
amendments, modifications, restatements, renewals, increases,
supplements, refundings, replacements or refinancings of those
agreements, provided that the amendments, modifications,
restatements, renewals, increases, supplements, refundings,
replacement or refinancings are no more restrictive, taken as
a whole, with respect to the dividend and other payment
restrictions, than those contained in those agreements on the
date of the indenture;
(2) the indenture and the notes;
(3) applicable law;
(4) any instrument governing Indebtedness or Capital Stock of a
Person acquired by Office Depot or any of its Restricted
Subsidiaries as in effect at the time of the acquisition
(except to the extent the Indebtedness or Capital Stock was
incurred in connection with or in contemplation of the
acquisition), which encumbrance or restriction is not
applicable to any Person, or the properties or assets of any
Person, other than the Person, or the property or assets of
the Person, so acquired, provided that, in the case of
Indebtedness, the Indebtedness was permitted by the terms of
the indenture to be incurred;
(5) customary non-assignment provisions in leases entered into in
the ordinary course of business and consistent with past
practices;
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(6) purchase money obligations for property acquired in the
ordinary course of business that impose restrictions on that
property of the nature described in clause (3) of the
preceding paragraph;
(7) any agreement for the sale or other disposition of a
Restricted Subsidiary that restricts distributions by that
Restricted Subsidiary pending its sale or other disposition;
(8) Permitted Refinancing Indebtedness, provided that the
restrictions contained in the agreements governing the
Permitted Refinancing Indebtedness are no more restrictive,
taken as a whole, than those contained in the agreements
governing the Indebtedness being refinanced;
(9) Liens securing Indebtedness otherwise permitted to be incurred
under the provisions of the covenant described above under the
caption "-- Liens" that limit the right of the debtor to
dispose of the assets subject to Liens;
(10) provisions with respect to the disposition or distribution of
assets or property in joint venture agreements, assets sale
agreements, stock sale agreements and other similar agreements
entered into in the ordinary course of business;
(11) Indebtedness or other contractual requirements of a
Receivables Subsidiary in connection with a Qualified
Receivables Transaction, provided that the restrictions apply
only to the Receivables Subsidiary or the receivables which
are subject to the Qualified Receivables Transaction; and
(12) restrictions on cash or other deposits or net worth imposed by
customers under contracts entered into in the ordinary course
of business.
MERGER, CONSOLIDATION OR SALE OF ASSETS
Office Depot may not, directly or indirectly: (i) consolidate or merge
with or into another Person (whether or not Office Depot is the surviving
corporation); or (ii) sell, assign, transfer, convey or otherwise dispose of all
or substantially all of the properties or assets of Office Depot and its
Restricted Subsidiaries taken as a whole, in one or more related transactions,
to another Person, unless:
(1) either: (a) Office Depot is the surviving corporation; or (b)
the Person formed by or surviving any such consolidation or
merger (if other than Office Depot) or to which the sale,
assignment, transfer, conveyance or other disposition has been
made is a corporation organized or existing under the laws of
the United States, any state of the United States or the
District of Columbia;
(2) the Person formed by or surviving any such consolidation or
merger (if other than Office Depot) or the Person to which the
sale, assignment, transfer, conveyance or other disposition
has been made assumes all the obligations of Office Depot
under the notes, the indenture and the registration rights
agreement pursuant to agreements reasonably satisfactory to
the trustee;
(3) immediately after the transaction, no Default or Event of
Default exists; and
(4) Office Depot or the Person formed by or surviving any such
consolidation or merger (if other than Office Depot), or to
which the sale, assignment, transfer, conveyance or other
disposition has been made:
(a) will have Consolidated Net Worth immediately after
the transaction equal to or greater than the
Consolidated Net Worth of Office Depot immediately
preceding the transaction; and
(b) will, on the date of the transaction after giving pro
forma effect thereto and any related financing
transactions as if the same had occurred at the
beginning of the applicable four-quarter period, be
permitted to incur at least $1.00 of additional
Indebtedness pursuant to the Fixed Charge Coverage
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Ratio test set forth in the first paragraph of the
covenant described above under the caption "--
Undertaking of Indebtedness and Issuance of Preferred
Stock."
In addition, Office Depot may not, directly or indirectly, lease all or
substantially all of its properties or assets, in one or more related
transactions, to any other Person. This "Merger, Consolidation or Sale of
Assets" covenant will not apply to a sale, assignment, transfer, conveyance or
other disposition of assets between or among Office Depot and any of its
Restricted Subsidiaries.
DESIGNATION OF RESTRICTED AND UNRESTRICTED SUBSIDIARIES
The Board of Directors may designate any Restricted Subsidiary to be an
Unrestricted Subsidiary if that designation would not cause a Default. If a
Restricted Subsidiary is designated as an Unrestricted Subsidiary, the aggregate
fair market value of all outstanding Investments owned by Office Depot and its
Restricted Subsidiaries in the Subsidiary properly designated will be deemed to
be an Investment made as of the time of the designation and will reduce the
amount available for Restricted Payments under the first paragraph of the
covenant described above under the caption "-- Restricted Payments" or Permitted
Investments, as determined by Office Depot. That designation will only be
permitted if the Investment would be permitted at that time and if the
Restricted Subsidiary otherwise meets the definition of an Unrestricted
Subsidiary. The Board of Directors may redesignate any Unrestricted Subsidiary
to be a Restricted Subsidiary if the redesignation would not cause a Default.
TRANSACTIONS WITH AFFILIATES
Office Depot will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, enter into or permit to occur any
transaction or series of related transactions (including, without limitation,
the purchase, sale, lease or exchange of any property or the rendering of any
service) with, or for the benefit of, any of its Affiliates (an "Affiliate
Transaction"), other than Affiliate Transactions on terms that are not
materially less favorable than those that might reasonably have been obtained in
a comparable transaction at that time on an arm's-length basis from a Person
that is not an Affiliate of Office Depot or the Restricted Subsidiary; provided,
that for an Affiliate Transaction with an aggregate value of $25.0 million or
more, at Office Depot's option, either:
(1) a majority of the disinterested members of the Board of
Directors of Office Depot shall determine in good faith that
the Affiliate Transaction is on terms that are not materially
less favorable than those that might reasonably have been
obtained in a comparable transaction at that time on an
arm's-length basis from a Person that is not an Affiliate of
Office Depot; or
(2) the Board of Directors of Office Depot or any Restricted
Subsidiary to the Affiliate Transaction shall obtain an
opinion from a nationally recognized investment banking,
appraisal or accounting firm that the Affiliate Transaction is
on terms that are not materially less favorable than those
that might reasonably have been obtained in a comparable
transaction at that time on an arm's-length basis from a
Person that is not an Affiliate of Office Depot.
The following items will not be deemed to be Affiliate Transactions
and, therefore, will not be subject to the provisions of the prior paragraph:
(1) any employment agreement entered into by Office Depot or any
of its Restricted Subsidiaries in the ordinary course of
business and consistent with the past practice of Office Depot
or the Restricted Subsidiary;
(2) transactions between or among Office Depot and/or its
Restricted Subsidiaries;
(3) transactions with a Person that is an Affiliate of Office
Depot solely because Office Depot owns an Equity Interest in,
or controls, the Person;
(4) payment of reasonable directors fees to Persons who are not
otherwise Affiliates of Office Depot;
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(5) sales of Equity Interests (other than Disqualified Stock) to
Affiliates of Office Depot;
(6) transactions between or among Office Depot and/or its
Restricted Subsidiaries or transactions between a Receivables
Subsidiary and any Person in which the Receivables Subsidiary
has an Investment; or
(7) Restricted Payments that are permitted by the provisions of
the indenture described above under the caption "-- Restricted
Payments."
PAYMENTS FOR CONSENT
Office Depot will not, and will not permit any of its Subsidiaries to,
directly or indirectly, pay or cause to be paid any consideration to or for the
benefit of any Holder of notes for or as an inducement to any consent, waiver or
amendment of any of the terms or provisions of the indenture or the notes unless
the consideration is offered to be paid and is paid to all Holders of the notes
that consent, waive or agree to amend in the time frame set forth in the
solicitation documents relating to the consent, waiver or agreement.
REPORTS
Whether or not required by the SEC, so long as any notes are
outstanding, Office Depot will furnish to the Holders of notes, within the time
periods specified in the SEC's rules and regulations:
(1) all quarterly and annual financial information that would be
required to be contained in a filing with the SEC on Forms
10-Q and 10-K if Office Depot were required to file those
Forms, including a "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and, with
respect to the annual information only, a report on the annual
financial statements by Office Depot's certified independent
accountants; and
(2) all current reports that would be required to be filed with
the SEC on Form 8-K if Office Depot were required to file
those reports.
In addition, following the consummation of the exchange offer
contemplated by the registration rights agreement, whether or not required by
the SEC, Office Depot will file a copy of all of the information and reports
referred to in clauses (1) and (2) above with the SEC for public availability
within the time periods specified in the SEC's rules and regulations (unless the
SEC will not accept such a filing) and make the information available to
securities analysts and prospective investors upon request. In addition, Office
Depot has agreed that, for so long as any notes remain outstanding, it will
furnish to the Holders and to securities analysts and prospective investors,
upon their request, the information required to be delivered pursuant to Rule
144A(d)(4) under the Securities Act of 1933.
If Office Depot has designated any of its Subsidiaries as Unrestricted
Subsidiaries, then the quarterly and annual financial information required by
the preceding paragraph will include a reasonably detailed presentation, either
on the face of the financial statements or in the footnotes thereto, and in
Management's Discussion and Analysis of Financial Condition and Results of
Operations, of the financial condition and results of operations of Office Depot
and its Restricted Subsidiaries separate from the financial condition and
results of operations of the Unrestricted Subsidiaries of Office Depot.
EVENTS OF DEFAULT AND REMEDIES
Each of the following is an Event of Default:
(1) default for 30 days in the payment when due of interest on, or
Special Interest with respect to, the notes whether or not
prohibited by the subordination provisions of the indenture;
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(2) default in payment when due of the principal of, or premium,
if any, on the notes whether or not prohibited by the
subordination provisions of the indenture;
(3) failure by Office Depot or any of its Subsidiaries to comply
with the provisions described under the captions "--
Repurchase at the Option of Holders -- Change of Control," "--
Repurchase at the Option of Holders -- Asset Sales," "--
Certain Covenants -- Restricted Payments," "-- Certain
Covenants -- Undertaking of Indebtedness and Issuance of
Preferred Stock" or "-- Certain Covenants -- Merger,
Consolidation or Sale of Assets;"
(4) failure by Office Depot or any of its Subsidiaries for 60 days
after notice to comply with any of the other agreements in the
indenture;
(5) default under any mortgage, indenture or instrument under
which there may be issued or by which there may be secured or
evidenced any Indebtedness for money borrowed by Office Depot
or any of its Subsidiaries (or the payment of which is
guaranteed by Office Depot or any of its Subsidiaries) whether
the Indebtedness or guarantee now exists, or is created after
the date of the indenture, if that default:
(a) is caused by a failure to pay principal of, or
interest or premium, if any, on the Indebtedness
prior to the expiration of the grace period provided
in such Indebtedness on the date of the default (a
"Payment Default"); or
(b) results in the acceleration of the Indebtedness prior
to its express maturity,
and, in each case, the principal amount of any Indebtedness,
together with the principal amount of any other Indebtedness
under which there has been a Payment Default or the maturity
of which has been so accelerated, aggregates $35.0 million or
more;
(6) failure by Office Depot or any of its Subsidiaries to pay
final judgments aggregating in excess of $35.0 million, which
judgments are not paid, discharged or stayed pending appeal
(or otherwise stayed) for a period of 60 days; or
(7) certain events of bankruptcy or insolvency described in the
indenture with respect to Office Depot, any of its Significant
Subsidiaries, or any group of Subsidiaries that, taken
together, would constitute a Significant Subsidiary.
In the case of an Event of Default arising from certain events of
bankruptcy or insolvency, with respect to Office Depot, any Subsidiary that is a
Significant Subsidiary or any group of Subsidiaries that, taken together, would
constitute a Significant Subsidiary, all outstanding notes will become due and
payable immediately without further action or notice. If any other Event of
Default occurs and is continuing, the trustee or the Holders of at least 25% in
principal amount of the then outstanding notes may declare all the notes to be
due and payable immediately.
Holders of the notes may not enforce the indenture or the notes except
as provided in the indenture. Subject to certain limitations, Holders of a
majority in principal amount of the then outstanding notes may direct the
trustee in its exercise of any trust or power. The trustee may withhold from
Holders of the notes notice of any continuing Default or Event of Default if it
determines that withholding notes is in their interest, except a Default or
Event of Default relating to the payment of principal or interest or Special
Interest.
The Holders of a majority in aggregate principal amount of the notes
then outstanding by notice to the trustee may on behalf of the Holders of all of
the notes waive any existing Default or Event of Default and its consequences
under the indenture except a continuing Default or Event of Default in the
payment of interest or Special Interest on, or the principal of, the notes.
In the case of any Event of Default occurring by reason of any willful
action or inaction taken or not taken by or on behalf of Office Depot with the
intention of avoiding payment of the premium that Office Depot would have had to
pay if Office Depot then had elected to redeem the notes pursuant to the
optional redemption provisions of the indenture, an equivalent premium will also
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become and be immediately due and payable to the extent permitted by law upon
the acceleration of the notes.
Office Depot is required to deliver to the trustee annually a statement
regarding compliance with the indenture. Upon becoming aware of any Default or
Event of Default, Office Depot is required to deliver to the trustee a statement
specifying the Default or Event of Default.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS
No director, officer, employee, incorporator or stockholder of Office
Depot, as such, will have any liability for any obligations of Office Depot
under the notes or the indenture, or for any claim based on, in respect of, or
by reason of, the obligations or their creation. Each Holder of notes by
accepting a note waives and releases all such liability. The waiver and release
are part of the consideration for issuance of the notes. The waiver may not be
effective to waive liabilities under the federal securities laws.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
Office Depot may, at its option and at any time, elect to have all of
its obligations discharged with respect to the outstanding notes ("Legal
Defeasance") except for:
(1) the rights of Holders of outstanding notes to receive payments
in respect of the principal of, or interest or premium and
Special Interest, if any, on the notes when the payments are
due from the trust referred to below;
(2) Office Depot's obligations with respect to the notes
concerning issuing temporary notes, registration of notes,
mutilated, destroyed, lost or stolen notes and the maintenance
of an office or agency for payment and money for security
payments held in trust;
(3) the rights, powers, trusts, duties and immunities of the
trustee, and Office Depot's obligations in connection
therewith; and
(4) the Legal Defeasance provisions of the indenture.
In addition, Office Depot may, at its option and at any time, elect to
have the obligations of Office Depot released with respect to certain covenants
that are described in the indenture ("Covenant Defeasance") and thereafter any
omission to comply with those covenants will not constitute a Default or Event
of Default with respect to the notes. In the event Covenant Defeasance occurs,
certain events (not including non-payment, bankruptcy, receivership,
rehabilitation and insolvency events) described under "-- Events of Default and
Remedies" will no longer constitute an Event of Default with respect to the
notes.
In order to exercise either Legal Defeasance or Covenant Defeasance:
(1) Office Depot must irrevocably deposit with the trustee, in
trust, for the benefit of the Holders of the notes, cash in
U.S. dollars, non-callable Government Securities, or a
combination of cash in U.S. dollars and non-callable
Government Securities, in amounts as will be sufficient, in
the opinion of a nationally recognized firm of independent
public accountants, to pay the principal of, or interest and
premium, if any, on the outstanding notes on the stated
maturity or on the applicable redemption date, as the case may
be, and Office Depot must specify whether the notes are being
defeased to maturity or to a particular redemption date;
(2) in the case of Legal Defeasance, Office Depot has delivered to
the trustee an opinion of counsel reasonably acceptable to the
trustee confirming that (a) Office Depot has received from, or
there has been published by, the Internal Revenue Service a
ruling or (b) since the date of the indenture, there has been
a change in the applicable federal income tax law, in either
case to the effect that, and based thereon the opinion of
counsel will confirm that, the Holders of the outstanding
notes will not recognize income, gain or loss for federal
income tax purposes as a result of Legal Defeasance and will
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be subject to federal income tax on the same amounts, in the
same manner and at the same times as would have been the case
if the Legal Defeasance had not occurred;
(3) in the case of Covenant Defeasance, Office Depot has delivered
to the trustee an opinion of counsel reasonably acceptable to
the trustee confirming that the Holders of the outstanding
notes will not recognize income, gain or loss for federal
income tax purposes as a result of such Covenant Defeasance
and will be subject to federal income tax on the same amounts,
in the same manner and at the same times as would have been
the case if the Covenant Defeasance had not occurred;
(4) no Default or Event of Default has occurred and is continuing
on the date of the deposit (other than a Default or Event of
Default resulting from the borrowing of funds to be applied to
the deposit);
(5) the Legal Defeasance or Covenant Defeasance will not result in
a breach or violation of, or constitute a default under any
material agreement or instrument (other than the indenture) to
which Office Depot or any of its Subsidiaries is a party or by
which Office Depot or any of its Subsidiaries is bound;
(6) Office Depot must deliver to the trustee an officers'
certificate stating that the deposit was not made by Office
Depot with the intent of preferring the Holders of notes over
the other creditors of Office Depot with the intent of
defeating, hindering, delaying or defrauding creditors of
Office Depot or others; and
(7) Office Depot must deliver to the trustee an officers'
certificate and an opinion of counsel, each stating that all
conditions precedent relating to the Legal Defeasance or the
Covenant Defeasance have been complied with.
AMENDMENT, SUPPLEMENT AND WAIVER
Except as provided in the next two succeeding paragraphs, the indenture
or the notes may be amended or supplemented with the consent of the Holders of
at least a majority in principal amount of the notes then outstanding
(including, without limitation, consents obtained in connection with a purchase
of, or tender offer or exchange offer for, notes), and any existing default or
compliance with any provision of the indenture or the notes may be waived with
the consent of the Holders of a majority in principal amount of the then
outstanding notes (including, without limitation, consents obtained in
connection with a purchase of, or tender offer or exchange offer for, notes).
Without the consent of each Holder affected, an amendment or waiver may
not (with respect to any notes held by a non-consenting Holder):
(1) reduce the principal amount of notes whose Holders must
consent to an amendment, supplement or waiver;
(2) reduce the principal of or change the fixed maturity of any
note or alter the provisions with respect to the redemption of
the notes (other than provisions relating to the covenants
described above under the caption "-- Repurchase at the Option
of Holders");
(3) reduce the rate of or change the time for payment of interest
on any note;
(4) waive a Default or Event of Default in the payment of
principal of, or interest or premium, or Special Interest, if
any, on the notes (except a rescission of acceleration of the
notes by the Holders of at least a majority in aggregate
principal amount of the notes and a waiver of the payment
default that resulted from the acceleration);
(5) make any note payable in money other than that stated in the
notes;
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(6) make any change in the provisions of the indenture relating to
waivers of past Defaults or the rights of Holders of notes to
receive payments of principal of, or interest or premium or
Special Interest, if any, on the notes;
(7) waive a redemption payment with respect to any note (other
than a payment required by one of the covenants described
above under the caption "-- Repurchase at the Option of
Holders"); or
(8) make any change in the preceding amendment and waiver
provisions.
In addition, any amendment to, or waiver of, the provisions of the
indenture relating to subordination that adversely affects the rights of the
Holders of the notes will require the consent of the Holders of at least 75% in
aggregate principal amount of notes then outstanding.
Notwithstanding the preceding, without the consent of any Holder of
notes, Office Depot and the trustee may amend or supplement the indenture or the
notes:
(1) to cure any ambiguity, defect or inconsistency;
(2) to provide for uncertificated notes in addition to or in place
of certificated notes;
(3) to provide for the assumption of Office Depot's obligations to
Holders of notes in the case of a merger or consolidation or
sale of all or substantially all of Office Depot's assets;
(4) to make any change that would provide any additional rights or
benefits to the Holders of notes or that does not adversely
affect the legal rights under the indenture of any Holder; or
(5) to comply with requirements of the SEC in order to effect or
maintain the qualification of the indenture under the Trust
Indenture Act.
SATISFACTION AND DISCHARGE
The indenture will be discharged and will cease to be of further effect
as to all notes issued thereunder, when:
(1) either:
(a) all notes that have been authenticated, except lost,
stolen or destroyed notes that have been replaced or
paid and notes for whose payment money has been
deposited in trust and thereafter repaid to Office
Depot, have been delivered to the trustee for
cancellation; or
(b) all notes that have not been delivered to the trustee
for cancellation have become due and payable by
reason of the mailing of a notice of redemption or
otherwise or will become due and payable within one
year and Office Depot has irrevocably deposited or
caused to be deposited with the trustee as trust
funds in trust solely for the benefit of the Holders,
cash in U.S. dollars, non-callable Government
Securities, or a combination of cash in U.S. dollars
and non-callable Government Securities, in amounts as
will be sufficient without consideration of any
reinvestment of interest, to pay and discharge the
entire indebtedness on the notes not delivered to the
trustee for cancellation for principal, premium and
Special Interest, if any, and accrued interest to the
date of maturity or redemption;
(2) no Default or Event of Default has occurred and is continuing
on the date of the deposit or will occur as a result of the
deposit and the deposit will not result in a breach or
violation of, or constitute a default under, any other
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instrument to which Office Depot is a party or by which Office
Depot is bound;
(3) Office Depot has paid or caused to be paid all sums payable by
it under the indenture; and
(4) Office Depot has delivered irrevocable instructions to the
trustee under the indenture to apply the deposited money
toward the payment of the notes at maturity or the redemption
date, as the case may be.
In addition, Office Depot must deliver an officers' certificate and an opinion
of counsel to the trustee stating that all conditions precedent to satisfaction
and discharge have been satisfied.
CONCERNING THE TRUSTEE
If the trustee becomes a creditor of Office Depot, the indenture limits
its right to obtain payment of claims in certain cases, or to realize on certain
property received in respect of any claim as security or otherwise. The trustee
will be permitted to engage in other transactions; however, if it acquires any
conflicting interest it must eliminate the conflict within 90 days, apply to the
SEC for permission to continue or resign.
The Holders of a majority in principal amount of the then outstanding
notes will have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the trustee, subject to
certain exceptions. The indenture provides that in case an Event of Default
occurs and is continuing, the trustee will be required, in the exercise of its
power, to use the degree of care of a prudent man in the conduct of his own
affairs. Subject to those provisions, the trustee will be under no obligation to
exercise any of its rights or powers under the indenture at the request of any
Holder of notes, unless such Holder has offered to the trustee security and
indemnity satisfactory to it against any loss, liability or expense.
ADDITIONAL INFORMATION
Anyone who receives this prospectus may obtain a copy of the indenture
and registration rights agreement without charge by writing to Office Depot,
Inc., Attention: Vice President, Investor Relations and Public Relations.
BOOK-ENTRY, DELIVERY AND FORM
The new notes initially will be represented by one or more notes in
registered, global form without interest coupons (collectively, the "Global
Notes"). The Global Notes will be deposited upon issuance with the trustee as
custodian for The Depository Trust Company ("DTC"), in New York, New York, and
registered in the name of DTC or its nominee, in each case for credit to an
account of a direct or indirect participant in DTC as described below.
Except as set forth below, the Global Notes may be transferred, in
whole and not in part, only to another nominee of DTC or to a successor of DTC
or its nominee. Beneficial interests in the Global Notes may not be exchanged
for notes in certificated form except in the limited circumstances described
below. See "-- Exchange of Book-Entry Notes for Certificated Notes." Except in
the limited circumstances described below, owners of beneficial interests in the
Global Notes will not be entitled to receive physical delivery of notes in
certificated form.
Transfers of beneficial interests in the Global Notes will be subject
to the applicable rules and procedures of DTC and its Direct or Indirect
Participants, which may change from time to time.
DEPOSITORY PROCEDURES
The following description of the operations and procedures of DTC is
provided solely as a matter of convenience. These operations and procedures are
solely within the control of DTC and are subject to changes by DTC. Office Depot
takes no responsibility for these operations and procedures and urges investors
to contact DTC directly to discuss these matters.
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DTC has advised Office Depot that DTC is a limited-purpose trust
company created to hold securities for its participating organizations
(collectively, the "Participants") and to facilitate the clearance and
settlement of transactions in those securities between Participants through
electronic book-entry changes in accounts of its Participants. The Participants
include securities brokers and dealers (including the initial purchasers),
banks, trust companies, clearing corporations and certain other organizations.
Access to DTC's system is also available to other entities such as banks,
brokers, dealers and trust companies that clear through or maintain a custodial
relationship with a Participant, either directly or indirectly (collectively,
the "Indirect Participants"). Persons who are not Participants may beneficially
own securities held by or on behalf of DTC only through the Participants or the
Indirect Participants. The ownership interests in, and transfers of ownership
interests in, each security held by or on behalf of DTC are recorded on the
records of the Participants and Indirect Participants.
DTC has also advised Office Depot that, pursuant to procedures
established by it:
(1) upon deposit of the Global Notes, DTC will credit the accounts
of Participants designated by the initial purchasers with
portions of the principal amount of the Global Notes; and
(2) ownership of these interests in the Global Notes will be shown
on, and the transfer of ownership of these interests will be
effected only through, records maintained by DTC (with respect
to the Participants) or by the Participants and the Indirect
Participants (with respect to other owners of beneficial
interest in the Global Notes).
All interests in a Global Note may be subject to the procedures and
requirements of DTC. The laws of some states require that certain Persons take
physical delivery in definitive form of securities that they own. Consequently,
the ability to transfer beneficial interests in a Global Note to those Persons
will be limited to that extent. Because DTC can act only on behalf of
Participants, which in turn act on behalf of Indirect Participants, the ability
of a Person having beneficial interests in a Global Note to pledge those
interests to Persons that do not participate in the DTC system, or otherwise
take actions in respect of those interests, may be affected by the lack of a
physical certificate evidencing the interests.
EXCEPT AS DESCRIBED BELOW, OWNERS OF INTERESTS IN THE GLOBAL NOTES WILL
NOT HAVE NOTES REGISTERED IN THEIR NAMES, WILL NOT RECEIVE PHYSICAL DELIVERY OF
NOTES IN CERTIFICATED FORM AND WILL NOT BE CONSIDERED THE REGISTERED OWNERS OR
"HOLDERS" THEREOF UNDER THE INDENTURE FOR ANY PURPOSE.
Payments in respect of the principal of, and interest and premium and
Special Interest, if any, on a Global Note registered in the name of DTC or its
nominee will be payable to DTC in its capacity as the registered Holder under
the indenture. Under the terms of the indenture, Office Depot and the trustee
will treat the Persons in whose names the notes, including the Global Notes, are
registered as the owners of the notes for the purpose of receiving payments and
for all other purposes. Consequently, neither Office Depot, the trustee nor any
agent of Office Depot or the trustee has or will have any responsibility or
liability for:
(1) any aspect of DTC's records or any Participant's or Indirect
Participant's records relating to or payments made on account
of beneficial ownership interests in the Global Notes or for
maintaining, supervising or reviewing any of DTC's records or
any Participant's or Indirect Participant's records relating
to the beneficial ownership interests in the Global Notes; or
(2) any other matter relating to the actions and practices of DTC
or any of its Participants or Indirect Participants.
DTC has advised Office Depot that its current practice, upon receipt of
any payment in respect of securities such as the notes (including principal and
interest), is to credit the accounts of the relevant Participants with the
payment on the payment date unless DTC has reason to believe it will not receive
payment on such payment date. Each relevant Participant is credited with an
amount proportionate to its beneficial ownership of an interest in the principal
amount of the relevant security as shown on the records of DTC. Payments by the
Participants and the Indirect Participants to the beneficial owners of notes
will be governed by standing instructions and customary practices and will be
the responsibility of the Participants or the Indirect Participants and will not
be the responsibility of DTC, the trustee or Office Depot. Neither Office Depot
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nor the trustee will be liable for any delay by DTC or any of its Participants
in identifying the beneficial owners of the notes, and Office Depot and the
trustee may conclusively rely on and will be protected in relying on
instructions from DTC or its nominee for all purposes.
Subject to the transfer restrictions set forth under "Notice to
Investors," transfers between Participants in DTC will be effected in accordance
with DTC's procedures, and will be settled in same-day funds.
DTC has advised Office Depot that it will take any action permitted to
be taken by a Holder of notes only at the direction of one or more Participants
to whose account DTC has credited the interests in the Global Notes and only in
respect of such portion of the aggregate principal amount of the notes as to
which such Participant or Participants has or have given such direction.
However, if there is an Event of Default under the notes, DTC reserves the right
to exchange the Global Notes for legended notes in certificated form, and to
distribute such notes to its Participants.
DTC is under no obligation to perform or to continue to perform the
foregoing procedures to facilitate transfers of interests and may discontinue
the procedures at any time. Neither Office Depot nor the trustee nor any of
their respective agents will have any responsibility for the performance by DTC
or its participants or indirect participants of its obligations under the rules
and procedures governing DTC's operations.
EXCHANGE OF GLOBAL NOTES FOR CERTIFICATED NOTES
A Global Note is exchangeable for definitive notes in registered
certificated form ("Certificated Notes") if:
(1) DTC (a) notifies Office Depot that it is unwilling or unable
to continue as depositary for the Global Notes and Office
Depot fails to appoint a successor depositary or (b) has
ceased to be a clearing agency registered under the Exchange
Act;
(2) Office Depot, at its option, notifies the trustee in writing
that it elects to cause the issuance of the Certificated
Notes; or
(3) there has occurred and is continuing a Default or Event of
Default with respect to the notes.
In addition, beneficial interests in a Global Note may be exchanged for
Certificated Notes upon prior written notice given to the trustee by or on
behalf of DTC in accordance with the indenture. In all cases, Certificated Notes
delivered in exchange for any Global Note or beneficial interests in Global
Notes will be registered in the names, and issued in any approved denominations,
requested by or on behalf of the depositary (in accordance with its customary
procedures) and will bear the applicable restrictive legend referred to in
"Notice to Investors," unless that legend is not required by applicable law.
EXCHANGE OF CERTIFICATED NOTES FOR GLOBAL NOTES
Certificated Notes may not be exchanged for beneficial interests in any
Global Note unless the transferor first delivers to the trustee a written
certificate (in the form provided in the indenture) to the effect that such
transfer will comply with the appropriate transfer restrictions applicable to
such notes. See "Notice to Investors."
SAME DAY SETTLEMENT AND PAYMENT
Office Depot will make payments in respect of the notes represented by
the Global Notes (including principal, premium, if any, interest and Special
Interest, if any) by wire transfer of immediately available funds to the
accounts specified by the Global Note Holder. Office Depot will make all
payments of principal, interest and premium and Special Interest, if any, with
respect to Certificated Notes by wire transfer of immediately available funds to
the accounts specified by the Holders of the Certificated Notes or, if no
account is specified, by mailing a check to each such Holder's registered
address. The notes represented by the Global Notes are expected to be eligible
to trade in the PORTAL market and to trade in DTC's Same-Day Funds Settlement
System, and any permitted secondary market trading activity in the notes will,
therefore, be required by DTC to be settled in immediately available funds.
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Office Depot expects that secondary trading in any Certificated Notes will also
be settled in immediately available funds.
REGISTRATION RIGHTS; SPECIAL INTEREST
The following description is a summary of the material provisions of
the registration rights agreement. It does not restate that agreement in its
entirety. We urge you to read the registration rights agreement in its entirety
because it, and not this description, defines the registration rights of Holders
of old notes.
Office Depot and the initial purchasers of old notes entered into a
registration rights agreement upon the closing of the offering of the old notes.
Pursuant to the registration rights agreement, Office Depot agreed to file with
the SEC an Exchange Offer Registration Statement on the appropriate form under
the Securities Act of 1933 with respect to the new notes. Upon the effectiveness
of the Exchange Offer Registration Statement, Office Depot will offer to
exchange the old notes for new notes pursuant to the Exchange Offer provided the
Holders of old notes are able to make certain representations to us.
If:
(1) Office Depot is not:
(a) required to file the Exchange Offer Registration
Statement; or
(b) permitted to consummate the Exchange Offer because
the Exchange Offer is not permitted by applicable law
or SEC policy; or
(2) any Holder of Transfer Restricted Securities (as hereinafter
defined) notifies Office Depot prior to the 20th day following
consummation of the Exchange Offer that:
(a) it is prohibited by law or SEC policy from
participating in the Exchange Offer; or
(b) that it may not resell the new notes acquired by it
in the Exchange Offer to the public without
delivering a prospectus and the prospectus contained
in the Exchange Offer Registration Statement is not
appropriate or available for resales; or
(c) that it is a broker-dealer and owns notes acquired
directly from Office Depot or an affiliate of Office
Depot,
Office Depot will file with the SEC a Shelf Registration Statement to cover
resales of the notes by the Holders of the notes who satisfy certain conditions
relating to the provision of information in connection with the Shelf
Registration Statement.
Office Depot will use its best efforts to cause the applicable
registration statement to be declared effective as promptly as possible by the
SEC.
For purposes of the preceding, "Transfer Restricted Securities" means
each note until:
(1) the date on which the note has been exchanged by a Person
other than a broker-dealer for a new note in the Exchange
Offer;
(2) following the exchange by a broker-dealer in the Exchange
Offer of an old note for a new note, the date on which the new
note is sold to a purchaser who receives from the
broker-dealer on or prior to the date of sale a copy of the
prospectus contained in the Exchange Offer Registration
Statement;
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(3) the date on which the note has been effectively registered
under the Securities Act of 1933 and disposed of in accordance
with the Shelf Registration Statement; or
(4) the date on which the note is distributed to the public
pursuant to Rule 144 under the Securities Act of 1933.
The registration rights agreement provides that:
(1) Office Depot will file an Exchange Offer Registration
Statement with the SEC on or prior to 90 days after the
closing of the offering of old notes;
(2) Office Depot will use its best efforts to have the Exchange
Offer Registration Statement declared effective by the SEC on
or prior to 180 days after the closing of the offering of old
notes;
(3) unless the Exchange Offer would not be permitted by applicable
law or SEC policy, Office Depot will
(a) commence the Exchange Offer; and
(b) use best efforts to issue on or prior to 45 business
days, or longer, if required by the federal
securities laws, after the date on which the Exchange
Offer Registration Statement was declared effective
by the SEC, new notes in exchange for all old notes
tendered prior thereto in the Exchange Offer; and
(4) if obligated to file the Shelf Registration Statement, Office
Depot will use its best efforts to file the Shelf Registration
Statement with the SEC on or prior to 90 days after the filing
obligation arises and to cause the Shelf Registration to be
declared effective by the SEC on or prior to 180 days after
the obligation arises.
If:
(1) Office Depot fails to file any of the registration statements
required by the registration rights agreement on or before the
date specified for the filing; or
(2) any of the registration statements is not declared effective
by the SEC on or prior to the date specified for effectiveness
(the "Effectiveness Target Date"); or
(3) Office Depot fails to consummate the Exchange Offer within 45
business days of the Effectiveness Target Date with respect to
the Exchange Offer Registration Statement; or
(4) the Shelf Registration Statement or the Exchange Offer
Registration Statement is declared effective but thereafter
ceases to be effective or usable in connection with resales of
Transfer Restricted Securities during the periods specified in
the registration rights agreement (each event referred to in
clauses (1) through (4) above, a "Registration Default"),
then Office Depot will pay additional interest ("Special Interest") to each
Holder of notes, with respect to the first 90-day period immediately following
the occurrence of the first Registration Default in an amount equal to $.05 per
week per $1,000 principal amount of notes held by the Holder.
The amount of the Special Interest will increase by an additional $.05
per week per $1,000 principal amount of notes with respect to each subsequent
90-day period until all Registration Defaults have been cured, up to a maximum
amount of Special Interest for all Registration Defaults of $.50 per week per
$1,000 principal amount of notes.
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All accrued Special Interest will be paid by Office Depot on each
Damages Payment Date to the Global Note Holder by wire transfer of immediately
available funds or by federal funds check and to Holders of Certificated Notes
by wire transfer to the accounts specified by them or by mailing checks to their
registered addresses if no accounts have been specified.
Following the cure of all Registration Defaults, the accrual of Special
Interest will cease.
Holders of notes will be required to make certain representations to
Office Depot (as described in the registration rights agreement) in order to
participate in the Exchange Offer and will be required to deliver certain
information to be used in connection with the Shelf Registration Statement and
to provide comments on the Shelf Registration Statement within the time periods
set forth in the registration rights agreement in order to have their notes
included in the Shelf Registration Statement and benefit from the provisions
regarding Special Interest set forth above. By acquiring Transfer Restricted
Securities, a Holder will be deemed to have agreed to indemnify Office Depot
against certain losses arising out of information furnished by the Holder in
writing for inclusion in any Shelf Registration Statement. Holders of notes will
also be required to suspend their use of the prospectus included in the Shelf
Registration Statement under certain circumstances upon receipt of written
notice to that effect from Office Depot.
CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the indenture.
Reference is made to the indenture for a full disclosure of all the terms, as
well as any other capitalized terms used herein for which no definition is
provided.
"Acquired Debt" means, with respect to any specified Person:
(1) Indebtedness of any other Person existing at the time the
other Person is merged with or into or became a Subsidiary of
the specified Person, whether or not the Indebtedness is
incurred in connection with, or in contemplation of, the other
Person merging with or into, or becoming a Subsidiary of, the
specified Person; and
(2) Indebtedness secured by a Lien encumbering any asset acquired
by the specified Person.
"Adjusted Treasury Rate" means with respect to any redemption date, the
rate per annum equal to the semiannual equivalent yield to maturity of the
Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue
(expressed as a percentage of its principal amount) equal to the Comparable
Treasury Price for the redemption date, plus 50 basis points.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with the specified Person. For purposes of this definition, "control,"
as used with respect to any Person, means the possession, directly or
indirectly, of the power to direct or cause the direction of the management or
policies of the Person, whether through the ownership of voting securities, by
agreement or otherwise; provided that beneficial ownership of 10% or more of the
Voting Stock of a Person will be deemed to be control. For purposes of this
definition, the terms "controlling," "controlled by" and "under common control
with" have correlative meanings. No Person (other than Office Depot or any
Subsidiary of Office Depot) in whom a Receivables Subsidiary makes an Investment
in connection with a Qualified Receivables Transaction will be deemed to be an
Affiliate of Office Depot or any of its Subsidiaries solely by reason of the
Investment.
"Asset Sale" means:
(1) the sale, lease, conveyance or other disposition of any assets
or rights, other than sales of inventory in the ordinary
course of business; provided that the sale, conveyance or
other disposition of all or substantially all of the assets of
Office Depot and its Subsidiaries taken as a whole will be
governed by the provisions of the indenture described above
under the caption "--Repurchase at the Option of Holders--
Change of Control" and/or the provisions described above under
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the caption "--Certain Covenants-- Merger, Consolidation or
Sale of Assets" and not by the provisions of the Asset Sale
covenant; and
(2) the issuance of Equity Interests in any of Office Depot's
Restricted Subsidiaries or the sale of Equity Interests in any
of its Subsidiaries.
Notwithstanding the preceding, none of the following items will be
deemed to be Asset Sales:
(1) any single transaction or series of related transactions that
involves assets having a fair market value of less than $10.0
million;
(2) a transfer of assets between or among Office Depot and its
Subsidiaries;
(3) an issuance of Equity Interests by a Subsidiary to Office
Depot or to another Subsidiary;
(4) the sale or lease of equipment, inventory, accounts receivable
or other assets in the ordinary course of business;
(5) the sale or other disposition of cash or Cash Equivalents;
(6) sales of accounts receivable and related assets of the type
specified in the definition of "Qualified Receivables
Transaction" to a Receivables Subsidiary for the fair market
value thereof, including cash in an amount at least equal to
75% of the book value thereof as determined in accordance with
GAAP, it being understood that, for the purposes of this
clause (6), notes received in exchange for the transfer of
accounts receivable and related assets will be deemed cash if
the Receivables Subsidiary or other payor is required to repay
said notes as soon as practicable from available cash
collections less amounts required to be established as
reserves pursuant to contractual agreements with entities that
are not Affiliates of Office Depot entered into as part of a
Qualified Receivables Transaction;
(7) transfers of accounts receivable and related assets of the
type specified in the definition of "Qualified Receivables
Transaction" (or a fractional undivided interest therein) by a
Receivables Subsidiary in a Qualified Receivables Transaction;
(8) sale of assets deemed to occur in sale/lease back transactions
in an amount not to exceed $175 million; or
(9) a Restricted Payment or Permitted Investment that is permitted
by the covenant described above under the caption "-- Certain
Covenants -- Restricted Payments."
"Beneficial Owner" has the meaning assigned to that term in Rule 13d-3
and Rule 13d-5 under the Exchange Act, except that in calculating the beneficial
ownership of any particular "person" (as that term is used in Section 13(d)(3)
of the Exchange Act), the "person" will be deemed to have beneficial ownership
of all securities that the "person" has the right to acquire by conversion or
exercise of other securities, whether the right is currently exercisable or is
exercisable only upon the occurrence of a subsequent condition. The terms
"Beneficially Owns" and "Beneficially Owned" have a corresponding meaning.
"Board of Directors" means:
(1) with respect to a corporation, the board of directors of the
corporation;
(2) with respect to a partnership, the Board of Directors of the
general partner of the partnership; and
(3) with respect to any other Person, the board or committee of
the Person serving a similar function.
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"Capital Lease Obligation" means, at the time any determination is to
be made, the amount of the liability in respect of a capital lease that would at
that time be required to be capitalized on a balance sheet in accordance with
GAAP.
"Capital Stock" means:
(1) in the case of a corporation, corporate stock;
(2) in the case of an association or business entity, any and all
shares, interests, participations, rights or other equivalents
(however designated) of corporate stock;
(3) in the case of a partnership or limited liability company,
partnership or membership interests (whether general or
limited); and
(4) any other interest or participation that confers on a Person
the right to receive a share of the profits and losses of, or
distributions of assets of, the issuing Person.
"Cash Equivalents" means:
(1) United States dollars;
(2) securities issued or directly and fully guaranteed or insured
by the United States government or any agency or
instrumentality of the United States government (provided that
the full faith and credit of the United States is pledged in
support of those securities) having maturities of not more
than six months from the date of acquisition;
(3) certificates of deposit and eurodollar time deposits with
maturities of six months or less from the date of acquisition,
bankers' acceptances with maturities not exceeding six months
and overnight bank deposits, in each case, with any domestic
commercial bank having capital and surplus in excess of $500.0
million and a Thomson Bank Watch Rating of "B" or better;
(4) repurchase obligations with a term of not more than seven days
for underlying securities of the types described in clauses
(2) and (3) above entered into with any financial institution
meeting the qualifications specified in clause (3) above;
(5) commercial paper having the highest rating obtainable from
Moody's or S&P and in each case maturing within six months
after the date of acquisition; and
(6) money market funds at least 90% of the assets of which
constitute Cash Equivalents of the kinds described in clauses
(1) through (5) of this definition.
"Change of Control" means the occurrence of any of the following:
(1) the direct or indirect sale, transfer, conveyance or other
disposition (other than by way of merger or consolidation), in
one or a series of related transactions, of all or
substantially all of the properties or assets of Office Depot
and its Restricted Subsidiaries taken as a whole to any
"person" (as that term is used in Section 13(d)(3) of the
Exchange Act);
(2) the adoption of a plan relating to the liquidation or
dissolution of Office Depot;
(3) the consummation of any transaction (including, without
limitation, any merger or consolidation) the result of which
is that any "person" (as defined above), becomes the
Beneficial Owner, directly or indirectly, of more than 50% of
the Voting Stock of Office Depot, measured by voting power
rather than number of shares; or
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(4) the first day on which a majority of the members of the Board
of Directors of Office Depot are not Continuing Directors.
"Comparable Treasury Issue" means the United States Treasury Security
selected by an Independent Investment Banker as having a maturity comparable to
the remaining term of the notes that would be utilized, at the time of selection
and in accordance with customary financial practice, in pricing new issues of
corporate debt securities of comparable maturity to the remaining term of the
notes.
"Comparable Treasury Price" means, with respect to any redemption date,
(i) the average of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) on the third
Business Day preceding the redemption date, as set forth in the daily
statistical release (or any successor release) published by the Federal Reserve
Bank of New York and designated "Composite 3:30 p.m. Quotations for U.S.
Government Securities" or (ii) if the release (or any successor release) is not
published or does not contain the prices on such Business Day, (A) the Reference
Treasury Dealer Quotations for the redemption date, after excluding the highest
and lowest of the Reference Treasury Dealer Quotations, or (B) if the trustee
obtains fewer than three such Reference Treasury Dealer Quotations, the average
of all such Quotations.
"Consolidated Cash Flow" means, with respect to any specified Person
for any period, the Consolidated Net Income of the Person for that period plus:
(1) an amount equal to any extraordinary loss plus any net loss
realized by the Person or any of its Restricted Subsidiaries
in connection with an Asset Sale, to the extent the losses
were deducted in computing the Consolidated Net Income; plus
(2) provision for taxes based on income or profits of the Person
and its Restricted Subsidiaries for the period, to the extent
that the provision for taxes was deducted in computing such
Consolidated Net Income; plus
(3) consolidated interest expense of the Person and its Restricted
Subsidiaries for the period, whether paid or accrued and
whether or not capitalized (including, without limitation,
amortization of debt issuance costs and original issue
discount, non-cash interest payments, the interest component
of any deferred payment obligations, the interest component of
all payments associated with Capital Lease Obligations,
commissions, discounts and other fees and charges incurred in
respect of letter of credit or bankers' acceptance financings,
and net of the effect of all payments made or received
pursuant to Hedging Obligations), to the extent that any
expense was deducted in computing the Consolidated Net Income;
plus
(4) depreciation, amortization (including amortization of goodwill
and other intangibles but excluding amortization of prepaid
cash expenses that were paid in a prior period) and other
non-cash expenses (excluding any non-cash expense to the
extent that it represents an accrual of or reserve for cash
expenses in any future period or amortization of a prepaid
cash expense that was paid in a prior period) of the Person
and its Restricted Subsidiaries for the period to the extent
that the depreciation, amortization and other non-cash
expenses were deducted in computing the Consolidated Net
Income; minus
(5) non-cash items increasing the Consolidated Net Income for the
period, other than the accrual of revenue in the ordinary
course of business,
in each case, on a consolidated basis and determined in accordance with GAAP.
"Consolidated Net Income" means, with respect to any specified Person
for any period, the aggregate of the Net Income of the Person and its
Subsidiaries for the period, on a consolidated basis, determined in accordance
with GAAP; provided that:
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(1) the Net Income (but not loss) of any Person that is not a
Subsidiary or that is accounted for by the equity method of
accounting will be included only to the extent of the amount
of dividends or distributions paid in cash to the specified
Person or a Restricted Subsidiary of the Person;
(2) the Net Income of any Restricted Subsidiary will be excluded
to the extent that the declaration or payment of dividends or
similar distributions by that Restricted Subsidiary of that
Net Income is not at the date of determination permitted
without any prior governmental approval (that has not been
obtained) or, directly or indirectly, by operation of the
terms of its charter or any agreement, instrument, judgment,
decree, order, statute, rule or governmental regulation
applicable to that Restricted Subsidiary or its stockholders;
(3) the Net Income of any Person acquired in a pooling of
interests transaction for any period prior to the date of the
acquisition will be excluded;
(4) the cumulative effect of a change in accounting principles
will be excluded;
(5) charges taken by Office Depot in connection with the
restructuring of its operations in an amount not to exceed
$260.7 million will be excluded; and
(6) the Net Income (but not loss) of any Unrestricted Subsidiary
will be excluded (except to the extent distributed to Office
Depot or one of its Restricted Subsidiaries).
"Consolidated Net Worth" means, with respect to any specified Person as
of any date, the sum of:
(1) the consolidated equity of the common stockholders of the
Person and its consolidated Subsidiaries as of the date; plus
(2) the respective amounts reported on the Person's balance sheet
as of such date with respect to any series of preferred stock
(other than Disqualified Stock) that by its terms is not
entitled to the payment of dividends unless such dividends may
be declared and paid only out of net earnings in respect of
the year of such declaration and payment, but only to the
extent of any cash received by such Person upon issuance of
such preferred stock.
"Continuing Directors" means, as of any date of determination, any
member of the Board of Directors of Office Depot who:
(1) was a member of the Board of Directors on the date of the
indenture; or
(2) was nominated for election or elected to the Board of
Directors with the approval of a majority of the Continuing
Directors who were members of the Board at the time of the
nomination or election.
"Credit Facilities" means, one or more debt facilities or commercial
paper facilities, in each case with banks or other institutional lenders
providing for revolving credit loans, term loans, receivables financing
(including through the sale of receivables to such lenders or to special purpose
entities formed to borrow from the lenders against the receivables) or letters
of credit, in each case, as amended, restated, modified, renewed, refunded,
replaced or refinanced in whole or in part from time to time.
"Default" means any event that is, or with the passage of time or the
giving of notice or both would be, an Event of Default.
"Designated Senior Debt" means:
(1) any Indebtedness outstanding under the Existing Credit
Facilities; and
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(2) after payment in full of all Obligations under the Existing
Credit Facilities, any other Senior Debt permitted under the
indenture the principal amount of which is $25.0 million or
more and that has been designated by Office Depot as
"Designated Senior Debt."
"Disqualified Stock" means any Capital Stock that, by its terms (or by
the terms of any security into which it is convertible, or for which it is
exchangeable, in each case at the option of the holder of the Capital Stock), or
upon the happening of any event, matures or is mandatorily redeemable, pursuant
to a sinking fund obligation or otherwise, or redeemable at the option of the
holder of the Capital Stock, in whole or in part, on or prior to the date that
is 91 days after the date on which the notes mature. Notwithstanding the
preceding sentence, any Capital Stock that would constitute Disqualified Stock
solely because the holders of the Capital Stock have the right to require Office
Depot to repurchase the Capital Stock upon the occurrence of a change of control
or an asset sale will not constitute Disqualified Stock if the terms of the
Capital Stock provide that Office Depot may not repurchase or redeem any Capital
Stock pursuant to the provisions unless the repurchase or redemption complies
with the covenant described above under the caption "-- Certain Covenants --
Restricted Payments."
"Equity Interests" means Capital Stock and all warrants, options or
other rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock) and beneficial interests
and trusts created by a Receivables Subsidiary.
"Existing Credit Facilities" means (1) the $255 million, 364-Day
Revolving Credit Agreement dated May 10, 2001 among Office Depot, Inc., Bank
One, N.A., BNP Paribas, Citibank, N.A., First Union National Bank, Fleet
National Bank, The Royal Bank of Scotland, SunTrust Bank and Wells Fargo Bank,
N.A.; and (2) the $300 million, five-year, Revolving Credit and Line of Credit
Agreement dated February 20, 1998 among Office Depot, Inc., SunTrust Bank and
other lenders.
"Existing Indebtedness" means the aggregate principal amount of
Indebtedness of Office Depot and its Restricted Subsidiaries (other than
Indebtedness under Credit Facilities) in existence on the date of the indenture,
until the amounts are repaid.
"Fixed Charges" means, with respect to any specified Person for any
period, the sum, without duplication, of:
(1) the consolidated interest expense of such Person and its
Restricted Subsidiaries for the period, whether paid or
accrued, including, without limitation, amortization of debt
issuance costs and original issue discount, non-cash interest
payments, the interest component of any deferred payment
obligations, the interest component of all payments associated
with Capital Lease Obligations, commissions, discounts and
other fees and charges incurred in respect of letter of credit
or bankers' acceptance financings, and net of the effect of
all payments made or received pursuant to Hedging Obligations;
plus
(2) the consolidated interest of the Person and its Restricted
Subsidiaries that was capitalized during the period; plus
(3) any interest expense on Indebtedness of another Person that is
Guaranteed by the Person or one of its Restricted Subsidiaries
or secured by a Lien on assets of the Person or one of its
Restricted Subsidiaries, whether or not the Guarantee or Lien
is called upon; plus
(4) the product of (a) all dividends, whether paid or accrued and
whether or not in cash, on any series of preferred stock of
the Person or any of its Restricted Subsidiaries, other than
dividends on Equity Interests payable solely in Equity
Interests of Office Depot (other than Disqualified Stock) or
to Office Depot or a Restricted Subsidiary of Office Depot,
times (b) a fraction, the numerator of which is one and the
denominator of which is one minus the then current combined
federal, state and local statutory tax rate of such Person,
expressed as a decimal, in each case, on a consolidated basis
and in accordance with GAAP.
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"Fixed Charge Coverage Ratio" means with respect to any specified
Person and its Restricted Subsidiaries for any period, the ratio of the
Consolidated Cash Flow of the Person for that period to the Fixed Charges of the
Person for that period. In the event that the specified Person or any of its
Restricted Subsidiaries incurs, assumes, Guarantees, repays, repurchases or
redeems any Indebtedness (other than ordinary working capital borrowings) or
issues, repurchases or redeems preferred stock subsequent to the commencement of
the period for which the Fixed Charge Coverage Ratio is being calculated and on
or prior to the date on which the event for which the calculation of the Fixed
Charge Coverage Ratio is made (the "Calculation Date"), then the Fixed Charge
Coverage Ratio will be calculated giving pro forma effect to the undertaking,
assumption, Guarantee, repayment, repurchase or redemption of Indebtedness, or
such issuance, repurchase or redemption of preferred stock, and the use of the
proceeds therefrom as if the same had occurred at the beginning of the
applicable four-quarter reference period.
In addition, for purposes of calculating the Fixed Charge Coverage
Ratio:
(1) acquisitions that have been made by the specified Person or
any of its Restricted Subsidiaries, including through mergers
or consolidations and including any related financing
transactions, during the four-quarter reference period or
subsequent to the reference period and on or prior to the
Calculation Date will be given pro forma effect as if they had
occurred on the first day of the four-quarter reference period
and Consolidated Cash Flow for the reference period will be
calculated on a pro forma basis in accordance with Regulation
S-X under the Securities Act of 1933, but without giving
effect to clause (3) of the proviso set forth in the
definition of Consolidated Net Income;
(2) the Consolidated Cash Flow attributable to discontinued
operations, as determined in accordance with GAAP, and
operations or businesses disposed of prior to the Calculation
Date, will be excluded; and
(3) the Fixed Charges attributable to discontinued operations, as
determined in accordance with GAAP, and operations or
businesses disposed of prior to the Calculation Date, will be
excluded, but only to the extent that the obligations giving
rise to such Fixed Charges will not be obligations of the
specified Person or any of its Subsidiaries following the
Calculation Date.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in other statements by any other
entity that has been approved by a significant segment of the accounting
profession, which are in effect on the date of the indenture.
"Guarantee" means a guarantee other than by endorsement of negotiable
instruments for collection in the ordinary course of business, direct or
indirect, in any manner including, without limitation, by way of a pledge of
assets or through letters of credit or reimbursement agreements in respect
thereof, of all or any part of any Indebtedness.
"Hedging Obligations" means, with respect to any specified Person, the
obligations of the Person under:
(1) interest rate swap agreements, interest rate cap agreements
and interest rate collar agreements; and
(2) other agreements or arrangements designed to protect the
Person against fluctuations in interest rates, foreign
currency translation and commodity prices.
"Indebtedness" means, with respect to any specified Person, any
indebtedness of the Person, whether or not contingent:
(1) in respect of borrowed money;
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(2) evidenced by bonds, notes, debentures or similar instruments
or letters of credit (or reimbursement agreements in respect
thereof);
(3) in respect of banker's acceptances;
(4) representing Capital Lease Obligations;
(5) representing the balance deferred and unpaid of the purchase
price of any property, except any the balance that constitutes
an accrued expense or trade payable; or
(6) representing any Hedging Obligations,
if and to the extent any of the preceding items (other than letters of credit
and Hedging Obligations) would appear as a liability upon a balance sheet of the
specified Person prepared in accordance with GAAP. In addition, the term
"Indebtedness" includes all Indebtedness of others secured by a Lien on any
asset of the specified Person (whether or not the Indebtedness is assumed by the
specified Person) and, to the extent not otherwise included, the Guarantee by
the specified Person of any indebtedness of any other Person.
The amount of any Indebtedness outstanding as of any date will be:
(1) the accreted value of the Indebtedness, in the case of any
Indebtedness issued with original issue discount; and
(2) the principal amount of the Indebtedness, together with any
interest on the Indebtedness that is more than 30 days past
due, in the case of any other Indebtedness.
"Independent Investment Banker" means the Reference Treasury Dealers
appointed by the trustee after consultation with Office Depot.
"Investments" means, with respect to any Person, all direct or indirect
investments by the Person in other Persons (including Affiliates) in the forms
of loans (including Guarantees or other obligations), advances or capital
contributions (excluding commission, travel and similar advances to officers and
employees made in the ordinary course of business), purchases or other
acquisitions for consideration of Indebtedness, Equity Interests or other
securities, together with all items that are or would be classified as
investments on a balance sheet prepared in accordance with GAAP. If Office Depot
or any Subsidiary of Office Depot sells or otherwise disposes of any Equity
Interests of any direct or indirect Subsidiary of Office Depot such that, after
giving effect to any such sale or disposition, such Person is no longer a
Subsidiary of Office Depot, Office Depot will be deemed to have made an
Investment on the date of any such sale or disposition equal to the fair market
value of the Equity Interests of such Subsidiary not sold or disposed of in an
amount determined as provided in the final paragraph of the covenant described
above under the caption "-- Certain Covenants -- Restricted Payments." The
acquisition by Office Depot or any Subsidiary of Office Depot of a Person that
holds an Investment in a third Person will be deemed to be an Investment by
Office Depot or such Subsidiary in such third Person in an amount equal to the
fair market value of the Investment held by the acquired Person in such third
Person in an amount determined as provided in the final paragraph of the
covenant described above under the caption "-- Certain Covenants-Restricted
Payments."
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of the asset,
whether or not filed, recorded or otherwise perfected under applicable law,
including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in and, except in connection with any Qualified Receivables
Transaction, any filing of or agreement to give any financing statement under
the Uniform Commercial Code (or equivalent statutes) of any jurisdiction.
"LYON" means the Liquid Yield Option Notes due 2007 issued by Office
Depot in 1992.
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"Net Income" means, with respect to any specified Person, the net
income (loss) of the Person, determined in accordance with GAAP and before any
reduction in respect of preferred stock dividends, excluding, however:
(1) any gain (but not loss), together with any related provision
for taxes on such gain (but not loss), realized in connection
with: (a) any Asset Sale; or (b) the disposition of any
securities by the Person or any of its Restricted Subsidiaries
or the extinguishment of any Indebtedness of the Person or any
of its Restricted Subsidiaries; and
(2) any extraordinary gain (but not loss), together with any
related provision for taxes on such extraordinary gain (but
not loss).
"Net Proceeds" means the aggregate cash proceeds received by Office
Depot or any of its Restricted Subsidiaries in respect of any Asset Sale
(including, without limitation, any cash received upon the sale or other
disposition of any non-cash consideration received in any Asset Sale), net of
the direct costs relating to the Asset Sale, including, without limitation,
legal, accounting and investment banking fees, and sales commissions, and any
relocation expenses incurred as a result of the Asset Sale, taxes paid or
payable as a result of the Asset Sale, in each case, after taking into account
any available tax credits or deductions and any tax sharing arrangements, and
amounts required to be applied to the repayment of Indebtedness, other than
Indebtedness under a Credit Facility, secured by a Lien on the asset or assets
that were the subject of such Asset Sale and any reserve for adjustment in
respect of the sale price of such asset or assets established in accordance with
GAAP.
"Non-Recourse Debt" means Indebtedness:
(1) as to which neither Office Depot nor any of its Restricted
Subsidiaries (a) provides credit support of any kind
(including any undertaking, agreement or instrument that would
constitute Indebtedness), (b) is directly or indirectly liable
as a guarantor or otherwise, or (c) constitutes the lender;
(2) no default with respect to which (including any rights that
the holders of the Indebtedness may have to take enforcement
action against an Unrestricted Subsidiary) would permit upon
notice, lapse of time or both any holder of any other
Indebtedness of Office Depot or any of its Restricted
Subsidiaries to declare a default on such other Indebtedness
or cause the payment of the Indebtedness to be accelerated or
payable prior to its stated maturity; and
(3) as to which the lenders have been notified in writing that
they will not have any recourse to the stock or assets of
Office Depot or any of its Restricted Subsidiaries.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Permitted Business" means any business that derives a majority of its
revenues from the business engaged in by Office Depot and its Restricted
Subsidiaries on the date of original issuance of the notes and/or activities
that are reasonably similar, ancillary or related to, or a reasonable extension,
development or expansion of, the businesses in which Office Depot and its
Restricted Subsidiaries are engaged on the date of original issuance of the
notes.
"Permitted Investments" means:
(1) any Investment in Office Depot or in a Restricted Subsidiary
of Office Depot;
(2) any Investment in Cash Equivalents;
(3) any Investment by Office Depot or any Restricted Subsidiary of
Office Depot in a Person, if as a result of the Investment:
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(a) the Person becomes a Restricted Subsidiary of Office
Depot; or
(b) the Person is merged, consolidated or amalgamated
with or into, or transfers or conveys substantially
all of its assets to, or is liquidated into, Office
Depot or a Restricted Subsidiary of Office Depot;
(4) any Investment made as a result of the receipt of non-cash
consideration from an Asset Sale that was made pursuant to and
in compliance with the covenant described above under the
caption "-- Repurchase at the Option of Holders -- Asset
Sales;"
(5) any acquisition of assets to the extent in exchange for the
issuance of Equity Interests (other than Disqualified Stock)
of Office Depot;
(6) any Investments received in compromise of obligations of the
persons incurred in the ordinary course of trade creditors or
customers that were incurred in the ordinary course of
business, including pursuant to any plan of reorganization or
similar arrangement upon the bankruptcy or insolvency of any
trade creditor or customer;
(7) Hedging Obligations;
(8) the acquisition by a Receivables Subsidiary in connection with
a Qualified Receivables Transaction of Equity Interests of a
trust or other Person established by the Receivables
Subsidiary to effect the Qualified Receivables Transaction;
and any other Investment by Office Depot or a Subsidiary of
Office Depot in a Receivables Subsidiary or any Investment by
a Receivables Subsidiary in any other Person in connection
with a Qualified Receivables Transaction provided, that the
other Investment is in the form of a note or other instrument
that the Receivables Subsidiary or other Person is required to
repay as soon as practicable from available cash collections
less amounts required to be established as reserves pursuant
to contractual agreements with entities that are not
Affiliates of Office Depot entered into as part of a Qualified
Receivables Transaction; and
(9) other Investments in any Person having an aggregate fair
market value (measured on the date each such Investment was
made and without giving effect to subsequent changes in
value), when taken together with all other Investments made
pursuant to this clause (9) that are at the time outstanding
not to exceed $50.0 million.
"Permitted Junior Securities" means:
(1) Equity Interests in Office Depot; or
(2) debt securities that are subordinated to all Senior Debt and
any debt securities issued in exchange for Senior Debt to
substantially the same extent as, or to a greater extent than,
the notes are subordinated to Senior Debt under the indenture.
"Permitted Liens" means any of the following:
(1) Liens in favor of Office Depot;
(2) Liens on property of a Person existing at the time such Person
is merged with or into or consolidated with Office Depot or
any Restricted Subsidiary of Office Depot; provided that the
Liens were in existence prior to the contemplation of the
merger or consolidation and do not extend to any assets other
than those of the Person merged into or consolidated with
Office Depot or the Restricted Subsidiary;
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(3) Liens on property existing at the time of acquisition of the
property by Office Depot or any Restricted Subsidiary of
Office Depot, provided that such Liens were in existence prior
to the contemplation of such acquisition;
(4) Liens to secure the performance of statutory obligations,
surety or appeal bonds, performance bonds or other obligations
of a like nature incurred in the ordinary course of business;
(5) Liens to secure Indebtedness (including Capital Lease
Obligations) permitted by clause (4) of the second paragraph
of the covenant entitled "-- Certain Covenants-Undertaking of
Indebtedness and Issuance of Preferred Stock" covering only
the assets acquired with such Indebtedness;
(8) Liens existing on the date of the indenture;
(7) Liens on all Senior Debt;
(8) Liens for taxes, assessments or governmental charges or claims
that are not yet delinquent or that are being contested in
good faith by appropriate proceedings promptly instituted and
diligently concluded, provided that any reserve or other
appropriate provision as is required in conformity with GAAP
has been made therefor;
(9) Liens on assets of Office Depot or a Receivables Subsidiary
incurred in connection with a Qualified Receivables
Transaction;
(10) Liens on assets of Unrestricted Subsidiaries that secure
Non-Recourse Debt of Unrestricted Subsidiaries; and
(11) Liens incurred in the ordinary course of business of Office
Depot or any Restricted Subsidiary of Office Depot with
respect to obligations that do not exceed $25.0 million at any
one time outstanding.
"Permitted Refinancing Indebtedness" means any Indebtedness of Office
Depot or any of its Restricted Subsidiaries issued in exchange for, or the net
proceeds of which are used to extend, refinance, renew, replace, defease or
refund other Indebtedness of Office Depot or any of its Restricted Subsidiaries
(other than intercompany Indebtedness); provided that:
(1) the principal amount (or accreted value, if applicable) of the
Permitted Refinancing Indebtedness does not exceed the
principal amount (or accreted value, if applicable) of the
Indebtedness extended, refinanced, renewed, replaced, defeased
or refunded (plus all accrued interest on the Indebtedness and
the amount of all expenses and premiums incurred in connection
therewith) (the "Original Principal Amount"); provided,
however, if the Indebtedness exceeds the Original Principal
Amount, the Permitted Refinancing Indebtedness shall be
limited to the Original Principal Amount;
(2) the Permitted Refinancing Indebtedness has a final maturity
date later than the final maturity date of, and has a Weighted
Average Life to Maturity equal to or greater than the Weighted
Average Life to Maturity of, the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded;
(3) if the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded is subordinated in right of
payment to the notes, the Permitted Refinancing Indebtedness
has a final maturity date later than the final maturity date
of, and is subordinated in right of payment to, the notes on
terms at least as favorable to the Holders of notes as those
contained in the documentation governing the Indebtedness
being extended, refinanced, renewed, replaced, defeased or
refunded; and
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(4) such Indebtedness is incurred either by Office Depot or by the
Restricted Subsidiary who is the obligor on the Indebtedness
being extended, refinanced, renewed, replaced, defeased or
refunded.
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization, limited
liability company or government or other entity.
"Qualified Receivables Transaction" means any transaction or series of
transactions entered into by Office Depot or any of its Subsidiaries pursuant to
which Office Depot or any of its Subsidiaries sells, conveys or otherwise
transfers to (i) a Receivables Subsidiary (in the case of a transfer by Office
Depot or any of its Subsidiaries) and (ii) any other Person (in the case of a
transfer by a Receivables Subsidiary), or grants a security interest in, any
accounts receivable (whether now existing or arising in the future) of Office
Depot or any of its Subsidiaries, and any assets related thereto including,
without limitation, all collateral securing such accounts receivable, all
contracts and all guarantees or other obligations in respect of such accounts
receivable, proceeds of such accounts receivable and other assets which are
customarily transferred or in respect of which security interests are
customarily granted in connection with asset securitization transactions
involving accounts receivable.
"Receivables Subsidiary" means a Subsidiary of Office Depot which
engages in no activities other than in connection with the financing of accounts
receivable and which is designated by the Board of Directors of Office Depot (as
provided below) as a Receivables Subsidiary (a) no portion of the Indebtedness
or any other Obligations (contingent or otherwise) of which (i) is guaranteed by
Office Depot or any Subsidiary of Office Depot (excluding guarantees of
Obligations (other than the principal of, and interest on, Indebtedness)
pursuant to representations, warranties, covenants and indemnities entered into
in the ordinary course of business in connection with a Qualified Receivables
Transaction), (ii) is recourse to or obligates Office Depot or any Subsidiary of
Office Depot in any way other than pursuant to representations, warranties,
covenants and indemnities entered into in the ordinary course of business in
connection with a Qualified Receivables Transaction or (iii) subjects any
property or asset of Office Depot or any Subsidiary of Office Depot (other than
accounts receivable and related assets as provided in the definition of
"Qualified Receivables Transaction"), directly or indirectly, contingently or
otherwise, to the satisfaction thereof, other than pursuant to representations,
warranties, covenants and indemnities entered into in the ordinary course of
business in connection with a Qualified Receivables Transaction, (b) with which
neither Office Depot nor any Subsidiary of Office Depot has any material
contract, agreement, arrangement or understanding other than on terms customary
for securitization of receivables and (c) with which neither Office Depot nor
any Subsidiary of Office Depot has any obligation to maintain or preserve the
Subsidiary's financial condition or cause such Subsidiary to achieve certain
levels of operating results. Any designation by the Board of Directors of Office
Depot will be evidenced to the Trustee by filing with the Trustee a certified
copy of the resolution of the Board of Directors of Office Depot giving effect
to such designation and an Officers' Certificate certifying that such
designation complied with the foregoing conditions.
"Reference Treasury Dealer" means Goldman, Sachs & Co. and its
successors; provided, however, that if Goldman, Sachs & Co. shall cease to be a
primary U.S. Government securities dealer in New York city (a "Primary Treasury
Dealer"), Office Depot shall substitute therefor another Primary Treasury
Dealer.
"Reference Treasury Dealer Quotations" means, with respect to each
Reference Treasury Dealer and any redemption date, the average as determined by
the trustee, of the bid and asked prices of the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) quoted in
writing to the trustee by such Reference Treasury Dealer at 5:00 p.m. on the
third Business Day preceding such redemption date.
"Remaining Scheduled Payments" means, with respect to each note to be
redeemed, the remaining scheduled payments of the principal thereof and interest
thereon that would be due after the related redemption date but for the
redemption; provided, however, that, if the redemption date is not an interest
payment date with respect to the note, the amount of the next succeeding
scheduled interest payment thereon will be reduced by the amount of interest
accrued thereon to such redemption date.
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Subsidiary" of a Person means any Subsidiary of the
referent Person that is not an Unrestricted Subsidiary.
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"Senior Debt" means:
(1) all Indebtedness of Office Depot outstanding under Credit
Facilities and all Hedging Obligations with respect thereto;
(2) any other Indebtedness of Office Depot permitted to be
incurred under the terms of the indenture, unless the
instrument under which such Indebtedness is incurred expressly
provides that it is on a parity with or subordinated in right
of payment to the notes; and
(3) all Obligations with respect to the items listed in the
preceding clauses (1) and (2).
Notwithstanding anything to the contrary in the preceding, Senior Debt
will not include:
(1) any liability for federal, state, local or other taxes owed or
owing by Office Depot;
(2) any intercompany Indebtedness of Office Depot or any of its
Subsidiaries to Office Depot or any of its Affiliates;
(3) any trade payables; or
(4) the portion of any Indebtedness that is incurred in violation
of the indenture.
"Significant Subsidiary" means any Subsidiary that would be a
"significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X,
promulgated pursuant to the Securities Act of 1933, as that Regulation is in
effect on the date hereof.
"Stated Maturity" means, with respect to any installment of interest or
principal on any series of Indebtedness, the date on which the payment of
interest or principal was scheduled to be paid in the original documentation
governing the Indebtedness, and will not include any contingent obligations to
repay, redeem or repurchase any interest or principal prior to the date
originally scheduled for the payment thereof.
"Subsidiary" means, with respect to any specified Person:
(1) any corporation, association or other business entity of which
more than 50% of the total voting power of shares of Capital
Stock entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or
trustees of the corporation, association or other business
entity is at the time owned or controlled, directly or
indirectly, by that Person or one or more of the other
Subsidiaries of that Person (or a combination thereof); and
(2) any partnership (a) the sole general partner or the managing
general partner of which is the Person or a Subsidiary of the
Person or (b) the only general partners of which are that
Person or one or more Subsidiaries of that Person (or any
combination thereof).
"Unrestricted Subsidiary" means any Subsidiary of Office Depot that is
designated by the Board of Directors as an Unrestricted Subsidiary pursuant to a
Board Resolution, but only to the extent the Subsidiary:
(1) has no Indebtedness other than Non-Recourse Debt;
(2) is not party to any agreement, contract, arrangement or
understanding with Office Depot or any Restricted Subsidiary
of Office Depot unless the terms of any such agreement,
contract, arrangement or understanding are no less favorable
to Office Depot or such Restricted Subsidiary than those that
might be obtained at the time from Persons who are not
Affiliates of Office Depot;
(3) is a Person with respect to which neither Office Depot nor any
of its Restricted Subsidiaries has any direct or indirect
obligation (a) to subscribe for additional Equity Interests or
(b) to maintain or preserve the Person's financial condition
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or to cause the Person to achieve any specified levels of
operating results;
(4) is guaranteeing or otherwise providing credit support for any
Indebtedness of Office Depot or any of its Restricted
Subsidiaries; and
(5) has at least one director on its Board of Directors that is
not a director or executive officer of Office Depot or any of
its Restricted Subsidiaries and has at least one executive
officer that is not a director or executive officer of Office
Depot or any of its Restricted Subsidiaries.
Any designation of a Subsidiary of Office Depot as an Unrestricted
Subsidiary will be evidenced to the trustee by filing with the trustee a
certified copy of the Board Resolution giving effect to such designation and an
officers' certificate certifying that such designation complied with the
preceding conditions and was permitted by the covenant described above under the
caption "-- Certain Covenants -- Restricted Payments." If, at any time, any
Unrestricted Subsidiary would fail to meet the preceding requirements as an
Unrestricted Subsidiary, it will thereafter cease to be an Unrestricted
Subsidiary for purposes of the indenture and any Indebtedness of the Subsidiary
will be deemed to be incurred by a Restricted Subsidiary of Office Depot as of
the date and, if the Indebtedness is not permitted to be incurred as of the date
under the covenant described under the caption "-- Certain Covenants --
Undertaking of Indebtedness and Issuance of Preferred Stock," Office Depot will
be in default of the covenant. The Board of Directors of Office Depot may at any
time designate any Unrestricted Subsidiary to be a Restricted Subsidiary;
provided that the designation will be deemed to be an undertaking of
Indebtedness by a Restricted Subsidiary of Office Depot of any outstanding
Indebtedness of the Unrestricted Subsidiary and the designation will only be
permitted if (1) the Indebtedness is permitted under the covenant described
under the caption "-- Certain Covenants -- Undertaking of Indebtedness and
Issuance of Preferred Stock," calculated on a pro forma basis as if the
designation had occurred at the beginning of the four-quarter reference period
and (2) no Default or Event of Default would be in existence following the
designation.
"Voting Stock" of any Person as of any date means the Capital Stock of
the Person that is at the time entitled to vote in the election of the Board of
Directors of such Person.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing:
(1) the sum of the products obtained by multiplying (a) the amount
of each then remaining installment, sinking fund, serial
maturity or other required payments of principal, including
payment at final maturity, in respect of the Indebtedness, by
(b) the number of years (calculated to the nearest
one-twelfth) that will elapse between such date and the making
of such payment; by
(2) the then outstanding principal amount of such Indebtedness.
"Yen Credit Facility" means that certain credit facility dated July 1,
1994, by and among Office Depot Japan Ltd., Industrial Bank of Japan, Ltd, Union
Bank of California, N.A. Tokyo Branch and the Fuji Bank.
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CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following is a discussion of the material U.S. federal income tax
consequences relating to the ownership and disposition of the notes based on the
Internal Revenue Code of 1986, as amended to the date hereof (the "Code"),
administrative pronouncements, judicial decisions and final, temporary and
proposed Treasury regulations and interpretations of the foregoing, changes to
any of which subsequent to the date of this prospectus may affect the tax
consequences described herein, possibly with retroactive effect. This summary
discusses notes held as capital assets within the meaning of Section 1221 of the
Code. It does not discuss all of the tax consequences that may be relevant to a
holder in light of the holder's particular circumstances or to holders subject
to special rules, like certain financial institutions, tax-exempt entities,
holders whose "functional currency" is not the U.S. dollar, insurance companies,
dealers in securities or foreign currencies, foreign partnerships, persons
holding notes as part of a hedge, straddle or other integrated transaction,
foreign persons engaged in a trade or business in the United States or persons
who have ceased to be United States citizens or to be taxed as aliens. The U.S.
federal income tax consequences to an owner of a note that is a partnership may
depend on the status of its partners and activities of the partnership.
Prospective purchasers, including foreign partnerships and their partners,
should consult their own tax advisors with regard to the application of federal
income tax laws to their particular situation, as well as any tax consequences
arising under the laws of any state, local or foreign taxing jurisdiction.
As used herein, a "United States holder" of a note means a beneficial
owner of a note that is for United States federal income tax purposes:
o a citizen or resident of the United States;
o a corporation or partnership (including an entity treated as a
corporation or partnership for United States federal income tax
purposes) created or organized in or under the laws of the United
States, any state thereof or the District of Columbia (unless, in
the case of a partnership, Treasury regulations are adopted that
provide otherwise);
o an estate the income of which is subject to United States federal
income taxation regardless of its source; or
o a trust if a court within the United States is able to exercise
primary supervision over the administration of the trust and one
or more United States persons have the authority to control all
substantial decisions of the trust or the trust has a valid
election in effect under applicable Treasury regulations to be
treated as a United States person.
As used herein, the term "non-U.S. holder" means a beneficial owner of a note
that is not a United States holder.
TAX CONSEQUENCES OF THE EXCHANGE OFFER
The exchange of old notes for new notes pursuant to the exchange offer
will not be a taxable sale or exchange. Holders' basis in the old notes will
carry over to the new notes received and the holding period of the new notes
will include the holding period of the old notes surrendered. Accordingly, there
will be no U.S. Federal income tax consequences to holders who exchange their
old notes for new notes in connection with the exchange offer and any such
holder will have the same adjusted tax basis and holding period in the new notes
as it had in the old notes immediately before the exchange.
TAX CONSEQUENCES TO UNITED STATES HOLDERS
PAYMENTS OF INTEREST
Interest on a note, including additional interest payable upon a
Registration Default, if any, will generally be taxable to a United States
holder as ordinary interest income at the time it accrues or is received in
accordance with the United States holder's regular method of accounting for
federal income tax purposes.
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SALES, EXCHANGE OR RETIREMENT OF THE NOTES
Upon the sale, exchange or retirement of a note, a United States holder
will recognize gain or loss equal to the difference between the amount realized
on the sale, exchange, or retirement of the note and the holder's adjusted tax
basis in the note. A United States holder's adjusted tax basis in a note will
generally equal the cost of the note to the holder. The amount realized excludes
any amounts attributable to interest accrued between interest payment dates
which will be includible in income as interest in accordance with the United
States holder's method of accounting if not previously included in income. Any
gain or loss will be capital gain or loss and will be long-term capital gain or
loss if at the time of the sale, exchange, or retirement the note has been held
for more than one year. Under current law, the excess of net long-term capital
gains over net short-term capital losses is taxed at a lower rate than ordinary
income for certain non-corporate taxpayers. The distinction between capital gain
or loss and ordinary income or loss is also relevant for purposes of, among
other things, the limitations on the deductibility of capital losses.
TAX CONSEQUENCES TO NON-U.S. HOLDERS
PAYMENTS OF INTEREST
Subject to the discussion below concerning backup withholding, payments
of interest on the notes, including additional interest payable upon a
Registration Default, if any, by us or any paying agent to any non-U.S. holder
will not be subject to U.S. federal income tax or a 30% withholding tax provided
that (i) the interest is not effectively connected with the conduct by the
holder of a trade or business in the United States, (ii) the holder does not
own, actually or constructively, 10% or more of the combined voting power of all
classes of our stock entitled to vote, (iii) the holder is not a controlled
foreign corporation (within the meaning of the Code) that is related, directly
or indirectly, to us through stock ownership and (iv) the certification
requirements required to claim the portfolio interest exemption set forth in
Section 871(h) or Section 881(c) of the Code have been fulfilled with respect to
the beneficial owner. Generally, to satisfy the certification requirements set
forth in Section 871(h) or Section 881(c) of the Code, the beneficial owner of a
note must certify on IRS Form W-8BEN, under penalties of perjury, that the
holder is not a United States person. If notes are held by a foreign partnership
or a foreign intermediary, certain certification requirements apply to the
foreign partnership or the foreign intermediary, as the case may be, as well as
partners and beneficial owners, as the case may be.
SALE, EXCHANGE OR RETIREMENT OF THE NOTES
Subject to the discussion below concerning backup withholding, a
non-U.S. holder of a note will not be subject to U.S. federal income tax on any
gain realized on the sale, exchange or other disposition of a note unless (i)
the holder is an individual who is present in the United States for 183 days or
more during the taxable year of disposition and certain other conditions are met
or (ii) the gain is effectively connected with the conduct by the holder of a
trade or business in the United States.
EFFECTIVELY CONNECTED INCOME
If a non-U.S. holder is engaged in a trade or business in the United
States and its investment in a note is effectively connected with that trade or
business, the non-U.S. holder, although exempt from the 30% withholding tax
(provided a required certification, generally on IRS form W-8ECI, is met), will
generally be subject to regular U.S. federal income tax on any interest and gain
with respect to the notes in the same manner as if it were a United States
holder and may also be subject to branch profits tax at 30% (or a reduced rate
under an applicable treaty).
INFORMATION REPORTING AND BACKUP WITHHOLDING
Both a U.S. Holder and a Non-U.S. Holder of notes may be subject to
information reporting and backup withholding which is presently at a rate of up
to 31% on certain amounts paid to the holder unless such holder provides proof
of an applicable exemption (including a general exemption for Non-U.S. Holders
and for corporations) or correct taxpayer identification number, and otherwise
complies with applicable requirements of the information reporting and backup
withholding rules. Any amount withheld under the backup withholding rules may be
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allowed as a refund or a credit against the holder's United States federal
income tax liability, provided that the required information is furnished to the
Internal Revenue Service.
Under current United States federal income tax law, information
reporting requirements apply to certain payments of principal and interest made
to, and to the proceeds of sales before maturity by, noncorporate United States
holders. In addition, a backup withholding tax at a rate of up to 31% will apply
if the non-corporate United States holder (i) fails to furnish its Taxpayer
Identification Number ("TIN") which, for an individual, is his Social Security
Number, (ii) furnishes an incorrect TIN, (iii) is notified by the IRS that it
has failed to properly report payments of interest and dividends, or (iv) under
certain circumstances, fails to certify, under penalty of perjury, that it has
furnished a correct TIN and has not been notified by the IRS that it is subject
to backup withholding for failure to report interest and dividend payments.
Holders should consult their tax advisers regarding their qualification for
exemption from backup withholding and the procedure for obtaining such an
exemption if applicable.
Under current Treasury regulations, payments on the sale, exchange, or
other disposition of a note made to or through a foreign office of a broker
generally will not be subject to information reporting or backup withholding.
However, if the broker is (i) a United States person, (ii) a controlled foreign
corporation for United States federal income tax purposes, (iii) a foreign
person 50% or more of whose gross income is effectively connected with a United
States trade or business for a specified three-year period, or (iv) a foreign
partnership if, at any time during its tax year, one or more of its partners are
United States persons who in the aggregate hold more than 50% of the income or
capital interests in the partnership or if the partnership is engaged in a trade
or business in the United States, then information reporting will be required
unless the broker has in its records documentary evidence that the beneficial
owner is not a United States person and certain other conditions are met or the
beneficial owner otherwise establishes an exemption. Backup withholding may
apply to any payment that the broker is required to report if the broker has
actual knowledge that the payee is a United States person. Payments to or
through the United States office of a broker will be subject to backup
withholding and information reporting unless the beneficial owner certifies,
under penalties of perjury, that it is not a United States person or otherwise
establishes an exemption.
PLAN OF DISTRIBUTION
Each broker-dealer that receives new notes for its own account in
connection with the exchange offer must acknowledge that it will deliver a
prospectus in connection with any resale of new notes. This prospectus, as it
may be amended or supplemented from time to time, may be used by a broker-dealer
in connection with resales of new notes received in exchange for old notes where
the old notes were acquired as a result of market-making activities or other
trading activities. We have agreed that for a period of 180 days after the
expiration date, we will make available a prospectus, as amended or
supplemented, meeting the requirements of the Securities Act of 1933 to any
broker-dealer for use in connection with any such resale. In addition, until
[Date], 2001 (90 days after the date of this prospectus), all dealers effecting
transactions in the new notes may be required to deliver a prospectus.
We will not receive any proceeds from any sale of new notes by
broker-dealers. New notes received by broker-dealers for their own account
pursuant to the exchange offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions, through
the writing of options on the new notes or a combination of those methods of
resale, at market prices prevailing at the time of resale, at prices related to
the prevailing market prices or negotiated prices. Any resale may be made
directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any broker-dealer or
the purchasers of any new notes. Any broker-dealer that resells new notes that
were received by it for its own account pursuant to the exchange offer and any
broker or dealer that participates in a distribution of new notes may be deemed
to be an "underwriter" within the meaning of the Securities Act of 1933, and any
profit on any resale of new notes and any commissions or concessions received by
any such persons may be deemed to be underwriting compensation under the
Securities Act of 1933. The letter of transmittal states that by acknowledging
that it will deliver and by delivering a prospectus, a broker-dealer will not be
deemed to admit that it is an "underwriter" within the meaning of the Securities
Act of 1933.
LEGAL MATTERS
The validity of the new notes offered hereby will be passed on by
McDermott, Will & Emery, Chicago, Illinois.
-63-
EXPERTS
The financial statements and the related financial statement schedules
incorporated in this prospectus by reference from the Company's Annual Report on
Form 10-K for the year ended December 30, 2000 have been audited by Deloitte &
Touche LLP, independent auditors, as stated in their reports, which are
incorporated herein by reference, and have been so incorporated in reliance upon
the reports of such firm given upon their authority as experts in accounting and
auditing.
-64-
$250,000,000 10% Senior Subordinated Notes Due 2008
[OFFICE DEPOT LOGO]
OFFICE DEPOT, INC.
Offer to Exchange
all Outstanding 10% Senior Subordinated Notes Due 2008 for
10% Senior Subordinated Notes Due 2008 that have been Registered under
the Securities Act of 1933
------------
PROSPECTUS
[Date], 2001
------------
Until [Date], 2001, all dealers that effect transactions in these
securities, whether or not participating in this exchange offer, may be required
to deliver a prospectus. This is in addition to the dealers' obligation to
deliver a prospectus when acting as underwriters and with respect to their
unsold allotments or subscriptions.
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The General Corporation law of the State of Delaware (the "Delaware
Law") permits indemnification of directors, employees and agents of corporations
under certain conditions and subject to certain limitations. Pursuant to the
Delaware Law, the Company has included in its Restated Certificate of
Incorporation and bylaws a provision to eliminate the personal liability of its
directors for monetary damages for breach or alleged breach of their duty of
care to the fullest extent permitted by Delaware Law and to provide that the
Company shall indemnify its directors and officers to the fullest extent
permitted by the Delaware Law. The Company believes that its charter and bylaw
provisions are necessary to attract and retain qualified persons as directors
and officers.
The Company has obtained insurance policies under which the Company's
directors and officers are insured, within the limits and subject to the
limitations of the policies, against certain expenses in connection with the
defense of certain actions, suits or proceedings, and certain liabilities which
might be imposed as a result of certain actions, suits or proceedings, to which
they are parties by reason of being or having been such directors or officers.
ITEM 21. EXHIBITS.
Exhibit Number Description of Exhibit
- -------------- ----------------------
4(a)* Indenture, dated as of July 2, 2001, between the
Company and SunTrust Bank, N.A., relating to the 10%
Senior Subordinated Notes due 2008.
4(b)* Registration Rights Agreement dated July 2, 2001
between the Company and Goldman Sachs, as
representatives of the purchasers.
4(c)* Form of Indenture (including form of LYON(R)) between
the Company and The Bank of New York, as Trustee
(incorporated by reference to the respective exhibit to
the Company's Registration Statement No. 33-54574).
4(d) Form of Indenture (including form of LYON(R)) between
the Company and Bankers Trust Company, as Trustee
(incorporated by reference to the respective exhibit to
the Company's Registration Statement No. 33-70378).
5 Opinion of McDermott, Will & Emery as to the legality
of the securities being registered.
12 Computation of Ratios of Earnings to Fixed Charges.
23(a) Consent of McDermott, Will & Emery (included in its
opinion filed as Exhibit 5).
23(b) Consent of Deloitte & Touche LLP.
II-1
24 Power of Attorney (included with the signature page to
this registration statement).
25* Statement of Eligibility and Qualification under the
Trust Indenture Act of 1939 of SunTrust Bank, as
Trustee, on Form T-1, relating to the 10% Senior
Subordinated Notes due 2008.
99.1* Letter of Transmittal.
99.2* Notice of Guaranteed Delivery.
99.3* Letters to Brokers, Dealers, Commercial banks, Trust
Companies and Other Nominiees.
99.4* Letter to Clients.
99.5* Tax Guidelines.
- ---------------
*To be filed by amendment.
ITEM 22. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing
of the registrant's annual report pursuant to Section 13(a) or Section
15(d) of the Securities Exchange Act of 1934 (and, where applicable,
each filing of an employee benefit plan's annual report pursuant to
Section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in the registration statement shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at the time shall be
deemed to be the initial bona fide offering thereof.
(b) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or
otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against
public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the registrant of expenses incurred or paid
by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the opinion
of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act
and will be governed by the final adjudication of such issue.
(c) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus
pursuant to Items 4, 10(b), 11, or 13 of this Form, within one business
day of receipt of such request, and to send the incorporated documents
by first class mail or other equally prompt means. This includes
information contained in documents filed subsequent to the effective
date of the registration statement through the date of responding to
the request.
(d) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and
the company being acquired involved therein, that was not the subject
of and included in the registration statement when it became effective.
-2-
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Delray
Beach, Florida, on this 15th day of August, 2001.
Office Depot, Inc.
by: /s/ David C. Fannin
-------------------------
Name: David C. Fannin
Title: Executive Vice President, General Counsel
and Secretary
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints M. Bruce Nelson and David C. Fannin, and
each of them, his true and lawful attorneys-in-fact and agents, with full power
of substitution and resubstitution for him and in his name, place and stead, in
any and all capacities, to sign any and all amendments to this Registration
Statement or any registration statement for this offering that is to be
effective upon the filing pursuant to rule 462(b) under the Securities Act of
1933, and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents full power and authority to do and perform
each and every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that each of said attorney-in-fact
or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on this 15th day of August, 2001.
Signature Title
--------- -----
/s/ Bruce Nelson Chief Executive Officer and member of the Board of
- ------------------------- Directors (a Principal Executive Officer)
M. Bruce Nelson
/s/ Jerry Colley President, North American Retail Stores
- ------------------------- (a Principal Executive Officer)
Jerry Colley
/s/ Robert J. Keller President, Business Services Group
- ------------------------- (a Principal Executive Officer)
Robert J. Keller
/s/ Rolf Van Kaldekerken President, European Operations
- ------------------------- (a Principal Executive Officer)
Rolf Van Kaldekerken
/s/ Charles Brown Senior Vice President, Finance and Controller
- ------------------------- (Principal Financial Officer and Controller)
Charles Brown
-3-
/s/ David I. Fuente Chairman of the Board of Directors
- -------------------------
David I. Fuente
/s/ Irwin Helford Vice Chairman of the Board of Directors
- -------------------------
Irwin Helford
/s/ Lee A. Ault III Director
- -------------------------
Lee A. Ault III
/s/ Neil A. Austrian Director
- -------------------------
Neil A. Austrian
/s/ Cynthia R. Cohen Director
- -------------------------
Cynthia R. Cohen
/s/ W. Scott Hedrick Director
- -------------------------
W. Scott Hedrick
/s/ James L. Heskett Director
- -------------------------
James L. Heskett
/s/ Michael J. Myers Director
- -------------------------
Michael J. Myers
/s/ Frank P. Scruggs, Jr. Director
- -------------------------
Frank P. Scruggs, Jr.
/s/ Peter J. Solomon Director
- -------------------------
Peter J. Solomon
-4-
Exhibit 5
A Partnership Including Boston
Professional Corporations Chicago
227 West Monroe Street London
Chicago, IL 60606-5096 Los Angeles
312-372-2000 Miami
Facsimile 312- 984-7700 Moscow
http://www.mwe.com Orange County
New York
Silicon Valley
Vilnius
Washington, D.C.
MCDERMOTT, WILL & EMERY
August 15, 2001
Office Depot, Inc.
2200 Old Germantown Road
Delray Beach, Florida 33445
Re: Office Depot Registration Statement on Form S-4
-----------------------------------------------
Ladies and Gentlemen:
This opinion is furnished to you in connection with the registration
statement on Form S-4 (the "REGISTRATION STATEMENT") filed with the Securities
and Exchange Commission under the Securities Act of 1933, as amended (the
"ACT"), for the registration of $250,000,000 aggregate principal amount of 10%
Senior Subordinated Notes due 2008 (the "NEW Notes") of Office Depot, Inc., a
Delaware corporation (the "COMPANY"). The New Notes will be offered in exchange
(the "EXCHANGE") for the Company's outstanding 10% Senior Subordinated Notes due
2008 (the "OLD NOTES").
The New Notes will be issued in exchange for Old Notes pursuant to an
Indenture (the "INDENTURE") dated as of June 27, 2001 by and between the Company
and SunTrust Bank, national association, as Trustee (the "TRUSTEE"), and the
related Registration Rights Agreement dated as of June 27, 2001 among the
Company, Goldman, Sachs & Co., Banc One Capital Markets, Inc., BNP Paribas
Securities Corp., Fleet Securities, Inc. and SunTrust Equitable Securities
Corporation (the "REGISTRATION RIGHTS AGREEMENT").
We have examined the Registration Statement, the Indenture, the
Registration Rights Agreement, the form of the New Notes, and other documents we
have deemed necessary to enable us to express the opinion set forth below. In
addition, we have examined and relied, to the extent we deemed proper, on
certificates of officers of the Company as to factual matters, and on originals
or copies certified or otherwise identified to our satisfaction, of all
corporate records of the Company, instruments and certificates of public
officials and other persons that we deemed appropriate. In our examination, we
have assumed the authenticity of all documents submitted to us as originals, the
conformity to the original documents of all
August 15, 2001
Page 2
documents submitted to us as copies, the genuineness of all signatures on
documents reviewed by us and the legal capacity of natural persons. We have
further assumed that the New Notes will be duly executed and delivered in
accordance with the authorizing resolutions of the Board of Directors of the
Company.
We express no opinion as to the applicability of, compliance with or
effect of, the law of any jurisdiction other than the federal laws of the United
States and the General Corporation Law of the State of Delaware.
Based upon and subject to the foregoing, we are of the opinion that the
New Notes, when duly executed, authenticated and delivered in accordance with
the terms of the Indenture and as contemplated by the Registration Statement,
will be valid and legally binding obligations of the Company, except that the
enforceability thereof may be limited by or subject to bankruptcy,
reorganization, insolvency, fraudulent conveyance, moratorium or other similar
laws now or hereafter existing which affect the rights and remedies of creditors
generally and equitable principles of general applicability.
In rendering the opinion set forth above, we have assumed that the
execution and delivery by the Company of the Indenture and the New Notes do not
and will not violate, conflict with or constitute a default under any agreement
or instrument to which the Company or its properties is subject, except for
those agreements and instruments which have been identified to us by the Company
as being material to it and which were filed as exhibits to the Company's Annual
Report on Form 10-K for the year ended December 30, 2000.
We hereby consent to the reference to our firm under the caption "Legal
Matters" in the Registration Statement and to the use of this opinion as an
exhibit to the Registration Statement. In giving this consent, we do not hereby
admit that we come within the category of persons whose consent is required
under Section 7 of the Act or the rules and regulations of the Securities and
Exchange Commission thereunder.
Very truly yours,
/s/ McDermott, Will and Emery
EXHIBIT 12
Office Depot, Inc.
Computation of Ratios of Earnings to Fixed Charges
First Half
--------------------
1996 1997 1998 1999 2000 2000 2001
------------------------------------------------------ --------------------
(In thousands, except ratios)
Fixed charges:
Interest expense $26,378 $ 21,680 $22,356 $ 26,148 $33,901 $14,266 $18,796
Rental estimate 65,109 72,072 82,236 106,095 129,855 64,494 64,830
------------------------------------------------------ --------------------
Total fixed charges $91,487 $ 93,752 $ 104,592 $ 132,243 $163,756 $78,760 $83,626
====================================================== ====================
Earnings:
Earnings before income taxes $312,083 $371,591 $ 388,726 $ 413,887 $92,459 $265,037 $ 156,033
Undistributed Joint Venture earnings (15,254) 2,041 9,436 4,373 5,006
Fixed charges 91,487 93,752 104,592 132,243 163,756 78,760 83,626
------------------------------------------------------ --------------------
Total adjusted earnings $403,570 $465,343 $ 478,064 $ 548,171 $265,651 $348,170 $ 244,665
====================================================== ====================
Ratio of earnings to fixed charges 4.4 5.0 4.6 4.1 1.6 4.4 2.9
Exhibit 23(b) INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in this Registration Statement of Office Depot, Inc. on Form S-4 of our reports dated February 15, 2001, appearing in and incorporated by reference in the Annual Report on Form 10-K of Office Depot, Inc. and Subsidiaries for the year ended December 30, 2000, and to the reference to us under the heading "Experts" in such Prospectus, which is part of this Registration Statement. DELOITTE & TOUCHE LLP Miami, Florida August 15, 2001