EXECUTIVE AND DIRECTOR COMPENSATION

Compensation Discussion and Analysis

Overview of 2016 Named Executive Officers

This compensation discussion and analysis (the “CD&A”) describes our executive compensation programs and explains how the Compensation Committee made its compensation decisions for our named executive officers (also referred to in this CD&A as “NEOs”) for fiscal year 2016. The company has experienced several executive officer transitions during 2016 and early 2017 in connection with the implementation of the company’s three-year strategic plan following termination of the proposed merger with Staples, Inc., including the following:

The list of executives deemed to be serving as our NEOs for 2016 are:

Overview of 2016 Key Events and NEO Compensation

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The Compensation Committee approved an additional amendment on December 23, 2016 to the company’s long-term incentive programs for Messrs. Hare and Allison that provided a retention incentive for Messrs. Hare and Allison to remain employed with the company through March 31, 2018, allowing the new CEO substantial time to implement transition and succession planning of the Finance and Human Resources functions in the event that Messrs. Hare and Allison transition out of the company. The amendment modified the initial vesting provisions of Messrs. Hare’s and Allison’s equity awards granted in 2016, so they would continue to vest in (and not forfeit subject to the continuation of company performance requirements where applicable) the remainder of such awards following voluntary termination of employment if they remained employed with the company through March 31, 2018. The Compensation Committee also approved that similar vesting provisions would apply to any long-term incentive grants made to Messrs. Hare and Allison in 2017. Further information is provided in the “Outstanding Long-Term Incentive Programs” section of this CD&A.

2016 Financial Highlights

We continued to see positive results in 2016 from our November 2013 merger with OfficeMax, and our executives continued to achieve key business objectives that position the company for future success. Below is a summary of our significant achievements:

The 2016 annual cash bonus plan paid out at 103% of target based on 2016 metrics performance of adjusted operating income of $471 million and North America net sales of $11.001 billion. Further information is provided in the “2016 Annual Cash Bonus Plan” section of this CD&A.

The portion of the long-term incentive program implemented in 2016 and tied to performance is based on a three year performance period and two metrics: adjusted operating income over three one-year periods and total shareholder return over

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a multiple year period. The first third of the adjusted operating income metric was achieved at 114% based on the 2016 adjusted operating income performance of $471 million. The total shareholder return performance is not determinable until the end of 2018. Further information is provided in the “2016 Long-Term Incentive Program” section of this CD&A.

What were the results of our advisory vote to approve executive compensation?

At our July 2016 annual shareholder meeting, our shareholders were given the opportunity to cast an advisory vote “for” or “against” the compensation of our NEOs in fiscal 2015. On the advisory “say-on-pay” vote, our stockholders overwhelmingly approved the compensation of our NEOs with approximately 93.9% of the votes cast voted for the company’s executive compensation. The Compensation Committee considers this approval level as a strong validation of our compensation philosophy and program.

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What are the elements of our NEO compensation packages?

The various elements of compensation paid by the company are intended to reflect our compensation philosophy and: (i) provide an appropriate level of financial certainty through fixed compensation, (ii) ensure that at least 50% of equity compensation is performance-based, and (iii) create a balance of short-term and long-term incentives.

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How do the company’s pay practices compare to best practices?

Our 2016 executive compensation program was based on a compensation philosophy adopted by our Compensation Committee and reflected the advice of the Compensation Committee’s independent compensation consultant, Frederic W. Cook & Co., Inc. (“FW Cook”). The Compensation Committee considered the independence of FW Cook under applicable SEC and The NASDAQ Stock Market rules, and concluded there was no conflict of interest. The Compensation Committee is guided by the following key principles in determining the compensation structure for our executives:

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How does the company’s compensation program support pay-for-performance?

The Compensation Committee annually reviews the total mix of compensation for the company’s NEOs, which includes a significant portion of variable performance-based incentives that are linked to the attainment of critical performance targets and changes in stockholder value. The Compensation Committee believes that each of these elements provides a meaningful reward opportunity to the NEOs, focuses the company’s leadership team on the key drivers of success for the near- and long-term, and therefore supports the company’s short-term and long-term strategic objectives and links realized pay directly to performance.

With respect to our CEO’s compensation, 88% of Mr. Roland Smith’s target compensation was “at risk” in 2016 based on operating performance, relative total shareholder return, and/or changes in stock price while target compensation for our other NEOs in 2016 was 77% “at risk.”

Percentages are derived based upon compensation data as of December 31, 2016. Fifty percent of equity grant is performance-based and 50% is time-based. Percentages reflected above for equity components reflect slight differences resulting from accounting expense methodology used for total shareholder return component of performance-based restricted stock units.

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What was the total direct compensation for our NEOs during fiscal 2016?

Base Salaries

The Compensation Committee performed its annual review of executive compensation considering external market data, as well as scope of role, individual performance, and internal equity and then determined to make adjustments to the following NEOs’ base salaries during 2016:

Additionally, Mr. Rice received an increase in his base salary when he was promoted to Executive Vice President and Chief Operating Officer, North America effective August 21, 2016, from $500,000 to $650,000, to reflect the increased scope of his new role.

Neither Mr. Roland Smith nor Mr. Hare have received a salary increase since their date of hire. For the base salaries of all of the NEOs as of December 31, 2016, please refer to the Summary Compensation Table.

2016 Annual Cash Bonus Plan

The Compensation Committee reviewed our 2016 Annual Operating Plan approved by our Board and the key performance measures for our business and decided to modify the bonus metrics from 2015 when designing the company’s 2016 bonus plan. Our 2016 Annual Cash Bonus Plan included a threshold funding metric based on earnings before interest, taxes, depreciation and amortization (“EBITDA”) and performance metrics of adjusted operating income based on “line of sight” and North America net sales. The Compensation Committee believes that the metrics selected for 2016 were straight forward for the organization to understand, were key to the company’s continued stability and growth, and were elements that directly impact shareholder value. Additionally, the 2016 bonus performance metrics were designed to allow for payouts to be determined within the range of threshold and maximum so long as the minimum EBITDA threshold was achieved. The 2016 Annual Cash Bonus Plan payout was capped at 150% of target payout as the Compensation Committee believed this cap was market competitive for short-term incentives.    Actual payouts were to be based on the level of achievement of the performance metrics subject to the Compensation Committee’s ability to exercise “negative discretion” to decrease payouts if such bonuses were not in its opinion appropriately earned or should not be paid. Further details on each of these components of the 2016 Annual Cash Bonus Plan are described below.

The Compensation Committee approved a threshold EBITDA of $400 million for the 2016 fiscal year, with EBITDA calculated as follows:

Accordingly, if our 2016 EBITDA threshold was not met, no bonus would have been paid under the 2016 Annual Cash Bonus Plan regardless of how we performed on our performance metrics. The EBITDA threshold was also intended to encourage management to continue to focus on reducing expenses and capturing synergies from the Office Depot/OfficeMax merger.

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In selecting the performance metrics for fiscal 2016, the Compensation Committee took into consideration the company’s 2016 Annual Operating Plan, plus the estimated impact of the pending merger with Staples, and chose the maximum performance targets that reflected stretch goals and aligned with our 2016 Annual Operating Plan. The Compensation Committee retained adjusted operating income as the primary performance metric because it focused management on the key short-term drivers of sustainable value creation, including revenue generation, cost reduction, and synergy realization, each of which is critical in driving earnings improvement. The Compensation Committee believes that the adjusted operating income metric directly impacts stockholder value and is easy to communicate to the organization. The Compensation Committee focused on adjusted operating income results at both the total company and the North American level based on each NEO’s line of sight and scope of control within the organization.

Also, the FTC review and appeals process had already been ongoing for close to a year and there was a reasonable probability the merger with Staples would ultimately be blocked. Both of these factors combined with the company’s expectation of continued industry headwinds and competitive losses highlighted the importance of stabilizing revenues, so the Compensation Committee also added a new metric focusing on North America net sales. North America net sales was defined as the sum of the Sales figures reported in the Segment Information footnote of our 2016 10-K for the North American Retail and North American Business Solutions segments.

When designing the 2016 Annual Cash Bonus Plan and when considering whether the company has reached the target performance metric for a payout under the 2016 Annual Cash Bonus Plan, the Compensation Committee determined the categories of significant, unplanned and unusual items that would be excluded from adjusted operating income, whether the resulting impact was positive or negative, because they distort the company’s operating performance. This practice ensures that our executives will not be unduly influenced in their day-to-day decision-making because they would neither benefit, nor be penalized, as a result of certain unexpected and uncontrollable events or strategic initiatives that may positively or negatively affect the performance metric in the short-term. For 2016, the categories of excludable items included: merger-related expenses (OfficeMax and Staples); impacts of unplanned acquisitions and divestitures; international restructuring and country portfolio changes; impairment charges related to goodwill, other intangible assets, and long-lived assets (non-cash); and unplanned costs and benefits related to real estate strategy, including, but not limited to lease terminations or facility closure obligations; and other unplanned and unusual adjustments proposed by the Finance Committee and approved by the Compensation Committee.

The total company adjusted operating income target goal of $500 million set by the Compensation Committee early in the year while the Staples merger was still pending and prior to the company’s decision to sell the European business and the International Sale Group was approximately 109% of the 2015 performance of $460 million. (Note 2015 performance was restated to $438 million in late 2016 after incentive goals were set in order to reflect removal of the European business and the International Sale Group from the core operations’ financials.) The maximum total company adjusted operating income goal of $600 million was intended to be a stretch goal that was approximately 130% of 2015 performance and was intended to be very difficult to achieve if the merger with Staples was terminated. The North America adjusted operating income goals were set under a similar methodology with a target of $447 million and a maximum of $536 million. Finally, North America net sales goals were set at a target of $11.434 billion and a maximum of $12.006 billion, which were approximately 79% and 83%, respectively, of our 2015 performance of $14.485 billion (before restatement to reflect removal of the European business and the International Sale Group). The year-over-year reduction in the North America net sales goals were driven primarily by the expectation that sales would be heavily impacted by competitors taking advantage of opportunities to win business away from the company during the lengthy process to determine whether the company would continue as a stand-alone company or be permitted to merge with Staples.

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The following chart summarizes the thresholds, targets, and maximum parameters and actual 2016 performance for each of the applicable metrics selected under the 2016 Annual Cash Bonus Plan:

For purposes of determining the level of achievement for each of the bonus metrics under the 2016 Annual Cash Bonus Plan, the Compensation Committee reviewed the applicable financial metrics, as derived ultimately from our 2016 audited financial statements approved by the Audit Committee. For fiscal year 2016, the Compensation Committee certified achievement of the EBITDA funding metric based on EBITDA performance of $647 million and approved the adjusted operating income and net sales performance results as reflected in the charts above.

On February 13, 2017, the Compensation Committee authorized bonuses under the 2016 Annual Cash Bonus Plan to be paid at 103% of target for both the Total Company Metric and the North America Metric. Mr. Schmidt was not eligible for payment under the 2016 Annual Cash Bonus Plan because the terms of his employment agreement governed following his termination of employment.

The threshold, target and maximum payout for each NEO are disclosed in the “Estimated Future Payouts Under Non-Equity Incentive Plan Awards” column of the Grants of Plan-Based Awards table below. The actual dollar amounts earned by our NEOs in 2016, pursuant to the 2016 Annual Cash Bonus Plan, are disclosed in the “Non-Equity Incentive Plan Compensation” column of the Summary Compensation Table below.

2016 Long-Term Incentive Program

The company was prohibited by the terms of the merger agreement with Staples from granting any equity incentives to associates in 2016 while the FTC appeals process was ongoing. Following the termination of the merger agreement with Staples in May 2016, the Compensation Committee designed the company’s 2016 long-term incentive program using metrics that differed from those used in 2015. Our 2016 Long-Term Incentive Program (“2016 LTIP”) includes a threshold funding metric based on EBITDA for a portion of the grant and performance metrics through the end of 2018 based on total company adjusted operating income and total shareholder return relative to our executive compensation peer group. The Compensation Committee believes that the metrics selected for 2016 were key to the company’s long-term financial stability and growth because they hold management accountable for delivery of the annual operating plan over multiple years, including continued realization of synergies from the OfficeMax transaction in the remaining years of the integration, and for delivery of the plan to grow profitability and provide shareholder value focusing on: accelerating opportunities in the North American Contracts channel, optimizing and reinventing the North American Retail model, implementing multi-year cost reductions across the company, and returning capital to shareholders.

The purpose of the company’s long-term incentive program is to further align the long-term interests of management with those of our stockholders and help retain our key talent. These objectives must be balanced such that successful, high-achieving employees remain motivated and committed even in periods of temporary market downturns or volatility in company performance as well as the periods where we have strategic transactions that create uncertainty. In support of these objectives, the 2016 LTIP award includes both time and performance-based components to promote long-term retention and achievement of key operating objectives, as set forth below:

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AOI performance for each of the three fiscal years will be measured against the annual AOI target at the end of each year; and the applicable payout percentage, if any, will be calculated, but not paid or banked. At the end of 2018, the calculated payout percentages from each of the three years’ performance results will be averaged to determine the portion of the award earned.

The Compensation Committee also approved a threshold EBITDA of $250 million for the AOI Shares. Accordingly, if our EBITDA threshold was not met, the AOI Shares would not be paid regardless of how we perform on our AOI performance metric. A lower EBITDA threshold was set under the 2016 LTIP (as compared to the 2016 Annual Cash Bonus Plan) because the EBITDA performance period for the 2016 LTIP was shorter because the grant date was delayed until May. The shortened EBITDA period was necessary to comply with Internal Revenue Code (“Code”) Section 162(m) exemption for performance-based compensation and so the company could make meaningful grants under the 2016 LTIP within weeks of the termination of the merger agreement with Staples in order to address retention concerns and keep management and the organization focused on its 2016 Annual Operating Plan despite the distraction and additional uncertainty that was created by the failed merger. EBITDA is calculated as follows:

The 2016 long-term incentive performance metrics are designed to allow for payouts to be determined within the range of threshold and maximum and so long as the minimum EBITDA threshold was achieved where applicable. The 2016 LTIP payout is capped at 150% of target payout on the Total Shareholder Return metric and 200% of target payout on the AOI metric as the Compensation Committee believed these caps are market competitive for long-term incentives. Actual payout on the AOI metric is also subject to the Compensation Committee’s ability to exercise “negative discretion” to decrease such payout if such incentive is not, in the Compensation Committee’s opinion, appropriately earned or should not be paid.

When considering whether the company has reached the AOI performance metric for a payout under the 2016 LTIP, the Compensation Committee, when designing the 2016 LTIP, determined the categories of significant, unplanned and unusual items that would be excluded from adjusted operating income, whether the resulting impact was positive or negative, because they distort the company’s operating performance. This practice ensures that our executives will not be unduly influenced in their day-to-day decision-making because they would neither benefit, nor be penalized, as a result of certain unexpected and uncontrollable events or strategic initiatives that may positively or negatively affect the performance metric in the long-term. For 2016, the categories of excludable items included: merger related expenses (OfficeMax and Staples); impacts of unplanned acquisitions and divestitures; international restructuring and country portfolio changes; impairment charges related to goodwill, other intangible assets, and long-lived assets (non-cash); and unplanned costs and benefits related to real estate strategy, including, but not limited to lease terminations or facility closure obligations; and other unplanned and unusual adjustments proposed by the Finance Committee and approved by the Compensation Committee.

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The Compensation Committee set the following thresholds, targets, and maximum parameters for each of the applicable metrics selected under the 2016 LTIP:

For purposes of determining the level of achievement for the 2016 metrics under the 2016 LTIP, the Compensation Committee reviewed the applicable financial metrics, as derived ultimately from our 2016 audited financial statements approved by the Audit Committee. On February 13, 2017, the Compensation Committee approved the EBITDA for the 2016 LTIP at $474 million and certified that the required EBITDA threshold was satisfied for the AOI metric. The Compensation Committee also approved 2016 AOI at $471 million as shown in the chart above, which resulted in one-third of the 2016 LTIP award based on the AOI metric being calculated at 114%. The Compensation Committee set the 2017 AOI target at $485 million based on the pre-established goal of 3% above 2016 actual results. Total Shareholder Return performance is not determinable until the completion of the TSR Performance Period at the end of 2018.

Why does the company continue to use similar performance measures in both its Annual and Long-Term Incentives Programs?

The Compensation Committee modified the company’s 2016 incentive programs to include a sales metric in the short-term program and a total shareholder return metric in the long-term program which is equal in weight to the adjusted operating income metric in the long-term program. However, the Compensation Committee retained adjusted operating income in both programs because it continues to believe that adjusted operating income remains the key driver of stockholder value for our company. Adjusted operating income focuses on sustainable value creation, including revenue generation, cost reduction and synergy realization, each of which is critical in driving earnings improvement. In addition, the Compensation Committee believes that the management team continues to perform better when it is focused on a reinforced, well understood metric that balances revenue, cost and profit objectives. The use of adjusted operating income allows management to appropriately focus on driving down costs and achieving forecasted synergies, but also grow the top line. Furthermore, we have various controls in place to mitigate potential risk-taking with having adjusted operating income in both programs. These controls include a clawback policy, negative discretion used by the Compensation Committee to ensure that annual bonus and performance stock unit payouts are appropriate, robust executive stock ownership guidelines to ensure that NEOs are long-time stockholders of the company, and use of a three-year vesting schedule in the 2016 LTIP program.

2015 Long-Term Incentive Program

The Compensation Committee certified in 2016 that the 2015 Free Cash Flow threshold gate of negative $200 million for the 2015 Long-Term Incentive Program (“2015 LTIP”) was achieved based on 2015 Free Cash Flow performance of negative

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$37 million. The Compensation Committee also approved performance achievement of 130% of target for the performance shares granted under the 2015 LTIP award based on the company’s 2015 AOI performance of $460 million (before restatement to reflect removal of the European business and the International Sale Group). The eligible NEOs will be eligible to vest in their 2015 LTIP awards on March 4, 2018 if they are still employed with the company. Further information on the 2015 LTIP design is included in the company’s Proxy Statement filed on June 13, 2016.

2014 Long-Term Incentive Program

The Compensation Committee certified in 2017 that the cumulative three years Free Cash Flow threshold gate of negative $250 million for the 2014 Long-Term Incentive Program (“2014 LTIP”) was achieved based on cumulative Free Cash Flow for the 2014, 2015, and 2016 fiscal years of $384 million. The Compensation Committee also approved performance achievement of 150% of target for the performance shares granted under the 2014 LTIP award based on the company’s cumulative AOI performance for the 2014, 2015, and 2016 fiscal years of $1,219 million. The eligible NEOs will be eligible to vest in their 2014 LTIP awards as of the third anniversary of their applicable grant date if they are still employed with the company. Further information on the 2014 LTIP design is included in the company’s Proxy Statement filed on May 15, 2015.

Outstanding Long-Term Incentive Programs

On October 27, 2016, the Compensation Committee approved an amendment to certain outstanding awards made under the company’s long-term incentive programs to the NEOs, excluding the CEO and Mr. Schmidt, to address retention concerns with management as a result of the ongoing and lengthy CEO selection process. The changes applied to certain outstanding restricted stock unit (“RSU”) and performance share unit (“PSU”) awards previously awarded in fiscal years 2013 through 2016, as applicable (the “Awards”). Under the amendments, each of the eligible NEOs who is involuntarily terminated by the company without Cause (as that term is defined in the applicable award agreement) will continue to vest (to the extent they have not already vested) in the portion of his/her Awards that would otherwise have vested in 2017 if he/she had not been terminated prior to the 2017 vesting date. All applicable performance requirements under the Awards will continue to apply. All other outstanding equity previously granted to the eligible NEOs that would otherwise vest after 2017 will continue to be forfeited as of the applicable termination date.

On December 23, 2016, the Compensation Committee also approved an amendment to the 2016 LTIP awards made to Messrs. Hare and Allison. Under the amendment, Messrs. Hare and Allison will continue to vest (to the extent they have not already vested) in their outstanding 2016 LTIP awards, if any, following voluntary termination; provided that, they remain employed with the company through March 31, 2018. All applicable performance requirements under the 2016 LTIP will continue to apply. The Compensation Committee also approved that similar vesting provisions would apply to any long-term incentive grants made to Messrs. Hare and Allison in 2017.

Amendment to Mr. Roland Smith’s Employment Agreement

In connection with Mr. Roland Smith’s planned retirement, the company and Mr. Smith entered into an agreement, dated August 21, 2016, that amended and supplemented Mr. Smith’s employment agreement with the company, dated November 12, 2013 (together with a prior amendment effective February 7, 2014, the “Amended Employment Agreement”). The Amended Employment Agreement provided the terms and conditions for Mr. Smith’s continued employment with the company until his planned retirement following the Board’s appointment of a new chief executive officer, including:

For a detailed description of Mr. Roland Smith’s Amended Employment Agreement, please see the section entitled “Summary of Executive Agreements and Potential Payments upon Termination or Change in Control” beginning on page 34.

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Retention and Termination Payments to Mr. Schmidt

Mr. Schmidt received a retention bonus of $1 million on March 15, 2016 according to the terms of his retention award granted in 2015. In connection with Mr. Schmidt’s termination, he also received a severance payment of $2,786,196 on November 28, 2016, calculated according to the terms of his employment agreement. For a detailed description of Mr. Schmidt’s employment and retention agreements, please see the section entitled “Summary of Executive Agreements and Potential Payments upon Termination or Change in Control” beginning on page 34.

Payments Following Termination to Mr. Cosby

In connection with Mr. Cosby’s termination, he is eligible to receive a severance payment of $1,367,122 calculated according to the terms of his employment agreement. Payment of Mr. Cosby’s severance is required to be delayed until May 18, 2017 to comply with Code Section 409A. For a detailed description of Mr. Cosby’s employment agreement, please see the section entitled “Summary of Executive Agreements and Potential Payments upon Termination or Change in Control” beginning on page 34.

Mr. Cosby is also eligible to receive $807,163, which represents a pro-rata portion of his bonus earned under the 2016 Annual Cash Bonus Plan based on his service completed in the performance period through his termination date. Payment of Mr. Cosby’s earned bonus is also delayed until May 18, 2017 to comply with Code Section 409A.

Finally, Mr. Cosby will continue to vest in the portion of his long-term incentive awards granted to him in fiscal years 2014, 2015, and 2016 that would otherwise have vested in 2017 (according to the terms of the amendment approved by the Compensation Committee on October 27, 2016) because he was involuntarily terminated by the company without Cause (as defined in his applicable award agreements). All applicable performance requirements under these awards will continue to apply. All other outstanding equity previously granted to Mr. Cosby that would have otherwise vested after 2017 was forfeited as of his termination date.

Executive Compensation Process and Governance

What was the process used to determine executive compensation in 2016?

The Compensation Committee generally kept executive compensation in 2016 consistent with executive compensation in 2015 with a few adjustments described above. The Compensation Committee continued to engage FW Cook as its independent compensation consultant to assist the Compensation Committee with its annual review of executive compensation matters, including:

Members of management, including our former CEO, Mr. Roland Smith, provided input to the Compensation Committee regarding executive compensation for the NEOs (other than himself). Management provided input for the Compensation Committee’s consideration regarding the performance metrics for our 2016 Annual Cash Bonus Plan and 2016 LTIP.

How is peer group data used by the Compensation Committee?

The Compensation Committee believes benchmarking is a useful method to gauge both the compensation level and compensation mix for executives within competitive job markets that are relevant to our company. The Compensation

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Committee generally reviews data gathered from the proxy statements of our peer group (as defined below) as well as industry surveys for benchmarking purposes in its review and analysis of base salaries, bonuses, long-term incentives, and benefits/perquisites to establish our executive compensation program.

The peer group was developed based on the following criteria:

Companies selected for the peer group were required to have a significant number of the characteristics described above, but not necessarily all of them. Judgment was used to ensure that the median revenue of the group remained reasonable and to create a balanced mix of retailers, distributors, and service companies.

Peer group data is generally reviewed annually to determine if modifications to the peer group or the criteria used to determine the peer group are necessary. The Compensation Committee determined that no changes to the criteria were needed; and the companies listed below would be used to make up the company’s peer group in 2016, which was used by the Compensation Committee to make executive compensation decisions and as the comparison group for the Total Shareholder Return metric under the 2016 LTIP:

In addition to the benchmarking results, the Compensation Committee generally considers the following in making executive compensation decisions:

When making compensation decisions, the Compensation Committee considers each element of compensation individually (i.e. base salary, short-term incentives, and long-term incentives), but also considers the target total direct compensation and mix of compensation paid to the NEOs. The Compensation Committee also considers strategic business decisions when developing and approving the compensation program.

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Does the Compensation Committee take tax and accounting consequences into account when designing executive compensation ?

Code Section 162(m) generally does not allow a tax deduction to public companies for compensation in excess of $1 million paid to the CEO or certain other NEOs, excluding the CFO. Certain compensation is specifically exempt from the deduction limit to the extent that it does not exceed $1 million during any fiscal year or is “performance-based” as defined in Code Section 162(m). The Compensation Committee strives to structure NEO compensation to be exempt from the deductibility limits set in Code Section 162(m) whenever possible. The Compensation Committee also believes that tax deductibility is but one factor to consider in developing an appropriate compensation package for executives. As a result, the Compensation Committee reserves and will exercise its discretion in this area to design a compensation program that serves the long-term interests of the company, but which may not qualify for tax deductibility as a result of Code Section 162(m). In fiscal year 2016, a portion of the compensation paid to certain of our NEOs was not deductible for tax purposes pursuant to Code Section 162(m).

In addition to Code Section 162(m), the Compensation Committee considers other tax and accounting provisions in developing the pay programs for the NEOs, including:

While the Compensation Committee generally tries to compensate the NEOs in a manner that produces favorable tax and accounting treatment, the main objective is to develop fair and equitable compensation arrangements that appropriately incentivize, reward, and retain the NEOs and aligns the company’s performance goals with stockholder returns.

Share usage requirements and resulting potential stockholder dilution from equity compensation awards is also considered by the Compensation Committee in determining the size of long-term incentive grants.

Do we have change of control agreements with our NEOs ?

The Compensation Committee believes that change in control (“CIC”) agreements effectively motivate executives to remain engaged and strive to create stockholder value in the event the company becomes an acquisition target or is targeting another company for acquisition, despite the risk of job loss or the loss of equity vesting opportunity. In addition, these arrangements are necessary to attract and retain qualified executives who may have other job alternatives that may appear to them to be less risky absent these arrangements, and these arrangements are particularly important to the company given the high levels of competition for executive talent in the retail sector.

The company has a CIC Plan pursuant to which we will provide certain severance pay and other benefits to several key executives, including the NEOs (other than the CEO), who are viewed by us as critical to the continued leadership of the company in the event of a change in control. The use of a planned approach provides many benefits when compared to entering into individual change in control agreements with each NEO. In most instances, this method ensures consistent terms and provisions and allows us flexibility to amend or change our practices in response to market trends and best practices. The CIC Plan includes features considered to be best practices, including a double trigger for change in control benefits.

For a detailed description of the company’s change in control plan and agreements with our NEOs, please see the section entitled “Summary of Executive Agreements and Potential Payments upon Termination or Change in Control” beginning on page 34.

What types of perquisites are NEOs eligible to receive ?

The company provides the NEOs with a set of core benefits that are generally available to the company’s other full-time employees (e.g., coverage for medical, dental, vision care, prescription drugs, annual physical, and basic life insurance and long-term disability coverage), plus voluntary benefits that a NEO may select (e.g., supplemental life insurance).

In addition, the company has a matching contribution to the 401(k) plan for all participants, including the NEOs, which is equal to 50% of employee deferrals on the first 6% of eligible earnings (up to plan limits). The Compensation Committee believes it is important to offer a benefit of this nature to further motivate and retain employees.

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Consistent with the peer group and the current trend in executive compensation, the company limits the perquisites provided to its NEOs. Other than the car allowances and financial planning services provided to its NEOs, perquisites are reserved for the attraction and retention of executive talent and to allow NEOs to efficiently handle the responsibilities of their position. The company’s Aircraft Personal Use Policy states that the use of company-leased aircraft will be limited to the CEO (subject to an annual hours limit) and other executives as extenuating circumstance may require. The Compensation Committee reviews executive aircraft use quarterly and has established upper limits on personal usage. Please see the “Summary Compensation Table” and the footnotes to such table for further information concerning any such perquisites paid to NEOs.

Do the Compensation Committee and Audit Committee review incentive programs to ensure that they do not encourage excessive risk-taking ?

The Compensation Committee and Audit Committee jointly meet annually to review a report prepared by our Internal Audit Department upon such Department’s review of the design of each of the incentive programs for the company’s regions, certain classifications of employees and business lines, and other relevant programs. Such report assesses whether or not any inappropriate actions had been taken under such programs or whether such programs had any features to incentivize risk-taking. In addition, our independent compensation consultant also reviews and assesses the risk in our compensation programs. The Committees jointly reported to the Board that they do not believe that any aspects of the 2016 compensation program encouraged the NEOs to take unnecessary and excessive risks.

Additionally, the financial goals set forth in the corporate annual cash bonus plan and the long-term incentive program are based upon performance targets that the Compensation Committee believes are attainable without the need to take inappropriate risks or make material changes to the company’s business or strategy. Furthermore, the 2016 LTIP awards vest over a three-year period to encourage a longer-term perspective. Finally, the equity component of the company’s compensation program, including the addition of the Total Shareholder Return metric in the 2016 LTIP, coupled with our stock ownership guidelines, align executive and long-term stockholder interests because value is linked to changes in our stock price.

Does the Board have a clawback policy for bonuses and awards paid to NEOs in the event we restate our financial results ?

In February 2010, the Board adopted a policy for recoupment of incentive compensation (the “clawback policy”). The clawback policy provides that if we restate our reported financial results for any period beginning after January 1, 2010, the Board will review the bonus and other awards made to executive officers based on financial results during the period subject to the restatement. To the extent practicable and in the best interests of stockholders, the Board will seek to recover or cancel any such awards that were based on having met or exceeded performance targets that would not have been met under the restated financial results.

Are there any restrictions on the ability of our NEOs to engage in transactions involving our stock ?

In February 2011, the Board adopted an anti-hedging policy which prohibits hedging transactions with respect to company securities by our directors, executive officers and all other employees.

Furthermore, in October 2014, the Board adopted an anti-pledging policy which prohibits its directors and executive officers from using company stock as collateral for any borrowing.

Are the NEOs subject to any minimum requirements regarding ownership of our stock ?

The Compensation Committee believes that the NEOs should maintain a meaningful equity interest in the company through the ownership of stock. As such, the following stock ownership guidelines are in place for our NEOs still employed by the company:

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Our stock ownership guidelines are robust and continue to reflect current corporate governance trends. We require that all NEOs satisfy the ownership requirement by holding company stock equal to a multiple of base salary rather than as a fixed number of shares. This requires NEOs to hold more shares in the event that our stock price decreases. Our CEO and NEOs are only permitted to sell stock before meeting the ownership requirements if they retain 50% of the net shares (after shares are disposed of to pay for taxes and acquisition), which is in line with peer group practice. The type of equity considered for purposes of determining compliance with the stock ownership guidelines is equity that is earned or vested, which is defined as the following:

The current guidelines are considered competitive according to the market data provided by FW Cook. The Compensation Committee annually reviews each NEO’s progress toward meeting the ownership guidelines.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

During the 2016 fiscal year, the Compensation Committee was comprised of the following directors: Dr. David M. Szymanski (Chair), Ms. Cynthia T. Jamison, and Messrs. V. James Marino and Michael J. Massey. During the 2016 fiscal year, all members of the Compensation Committee were independent directors, and no member was an employee or former employee of the company. In addition, none of the company’s executive officers served on the board of directors or Compensation Committee (or other committee serving an equivalent function) of another entity whose executive officer served on the Compensation Committee.

COMPENSATION COMMITTEE REPORT

The information contained in this report shall not be deemed to be “soliciting material” or “filed” or incorporated by reference in future filings with the SEC, or subject to the liabilities of Section 18 of the Exchange Act, except to the extent that it is specifically incorporated by reference into a document filed under the Securities Act of 1933, as amended, or the Exchange Act.

The Compensation Committee has reviewed and discussed this Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with our management and, based on such review and discussion, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in this annual report on Form 10-K, as amended, for the fiscal year ended December 31, 2016.

The Compensation Committee:

David M. Szymanski (Chair)

Cynthia T. Jamison

V. James Marino

Michael J. Massey

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COMPENSATION PROGRAMS RISK ASSESSMENT

In 2017, the Compensation Committee, in a joint meeting with the Audit Committee, assessed the company’s 2016 compensation programs and practices and concluded that such programs and practices do not create risks that are reasonably likely to have a material adverse effect on the company. The Compensation Committee’s independent compensation consultant also reviews and assesses the risk in our compensation programs.

The company conducted a risk assessment that included a detailed qualitative and quantitative analysis of its compensation programs to which employees at all levels of the organization may participate, including the NEOs. The Compensation Committee also considers how the design of the company’s compensation programs compares to compensation programs maintained by the company’s peer companies. Based on the company’s risk assessment, and the reviews done by the independent compensation consultant and the Compensation and Audit Committees jointly, the Compensation Committee believes that the company’s 2016 compensation programs have been appropriately designed to attract and retain talent and properly incentivize employees to act in the best interests of the company.

The company has programs and features that are designed to ensure that its employees, including the NEOs, are not encouraged to take unnecessary risks in managing the company’s business, including:

The company periodically monitors its incentive programs throughout the year to ensure that such programs do not encourage undue risk taking and appropriately balance risk and reward consistent with the company’s enterprise risk management efforts.

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DIRECTOR COMPENSATION

Annual Retainer Fee

The Compensation Committee set the compensation for the non-management directors for the 2016-2017 service year at an annual targeted economic value (“annual retainer fee”) of $200,000. Of this amount, $75,000 is payable in cash in equal quarterly installments at the end of each quarter during which the director served. No deferrals of cash payments are permitted by the directors. The remaining $125,000 of the annual retainer fee is granted as stock unless the director elects to defer his/her stock in the form of RSUs to be distributed in shares following termination of Board service, with such election made by the end of the prior tax year for existing directors and prior to appointment to the Board for new directors. The equity portion is typically granted in a lump sum as soon as administratively practicable following the release of election results from the annual shareholder meeting, which is generally held in the second quarter of the year.

The independent compensation consultant reviews our non-management directors’ compensation program periodically to determine its competitiveness against the compensation of the boards of directors of our peer group (as defined in the CD&A). At its review in October, 2014, the amount of the non-management directors’ retainer fee was between the 25 ^th percentile and median relative to the peer group. However, the Compensation Committee did not recommend any changes to the dollar amount of the annual retainer fee payable to our non-management directors at that time. A market competitive assessment was not completed in October, 2015 because the Staples merger agreement was in effect at the time. No changes were recommended to the dollar amount of the annual retainer fee payable to our non-management directors for the 2016-2017 service period.

The Lead Director, if any, and Audit Committee Chair each receive additional compensation of $25,000 annually for serving in their roles, the Compensation Committee Chair and Finance Committee Chair each receive additional compensation of $20,000 annually for serving in their roles, and the Corporate Governance and Nominating Committee Chair receives an additional $15,000 annually. The additional compensation for services as the Lead Director, if any, or as a committee chair is payable in stock unless the director has elected to receive RSUs as explained above for the equity portion of his/her annual retainer fee.

The Board established a CEO Search Committee in 2016 in connection with Mr. Smith’s planned retirement. This special committee included: Messrs. Bryant (Chair) and Marino and Mses. Jamison and Luzuriaga. The Board approved a one-time cash payment of $25,000 for the Chair and $15,000 for each of the non-Chair members, which was paid on December 5, 2016 to each of the special committee members. The committee member fees were established after the Compensation Committee’s independent compensation consultant provided peer group benchmarking for special committees’ fees.

The Board appointed Mr. Joseph Vassalluzzo as the independent Chairman of the Board (in lieu of a Lead Director) effective February 27, 2017, following Mr. Roland Smith’s departure since Mr. Smith had previously been the Board Chairman. The independent Chairman of the Board receives additional compensation of $150,000 annually in cash for serving in this role.

Director Stock Ownership Guidelines

Non-management directors are required to own five times the directors’ annual cash retainer (equal to $375,000) in shares of the company’s common stock. Directors must also retain 100% of net shares awarded until termination of their service on the Board.

The Compensation Committee reviews the stock ownership guidelines for our non-management directors annually, with the assistance from its independent compensation consultant, to ensure that such guidelines align with best market practices, including the practices of a majority of the company’s peer group, and with management’s ownership guidelines. In addition, the Compensation Committee annually reviews each director’s progress toward meeting the ownership guidelines.

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SUMMARY OF EXECUTIVE AGREEMENTS AND POTENTIAL PAYMENTS UPON

TERMINATION OR CHANGE IN CONTROL

Overview

This section summarizes the key agreements governing the employment of the Named Executive Officers: Roland C. Smith, Stephen E. Hare, Troy Rice, Michael Allison, Mark Cosby, Steven Schmidt and Juliet Johansson. It also summarizes the potential payments that Messrs. R. Smith, Hare, Rice and Allison stand to receive upon termination or a change in control of the Company and the payments that Messrs. Cosby and Schmidt and Ms. Johansson received upon their terminations. Providing these considerations allows Office Depot to attract top talent in a competitive sector, allows executives to focus on their jobs without distraction, and ensures that critical executives will remain committed to Office Depot’s mission in the event of a change of control.

Key Definitions

Cause. Generally, “Cause” is defined in this section as any of the following:

For purposes of Mr. R. Smith’s employment agreement, Mr. Hare’s letter agreement and the award agreements evidencing the outstanding equity compensation awards granted in fiscal year 2014, “Cause” is defined as any of the following:

For purposes of the award agreements evidencing the outstanding equity compensation awards granted in fiscal year 2014, “Cause” also includes willful unauthorized disclosure of confidential information.

Change in Control. Generally, “Change in Control” is defined in this section as the following events:

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For purposes of the change in control agreement in effect for Mr. Schmidt prior to his separation in fiscal year 2016, the merger with OfficeMax in November 2013 constituted a Change in Control.

Disability. Generally, “Disability” is defined in this section as:

For purposes of the award agreements evidencing the outstanding equity compensation awards granted in fiscal year 2014, “Disability” is defined as eligibility to commence long-term disability benefits under the Company’s long-term disability plan.

Good Reason. Generally, “Good Reason” is defined in this section as the occurrence of any of the following during the executive’s employment:

As to the change in control agreement for Mr. Schmidt, “Good Reason” also includes:

Under the new “CIC Plan” and the award agreements evidencing outstanding equity compensation awards, “Good Reason” also includes:

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As to Mr. R. Smith, “Good Reason” also includes:

Executive Agreements

Restrictive Covenants

Each NEO is subject to confidentiality, non-competition, non-solicitation, and non-disparagement commitments entered into as a condition of employment or promotion with the Company. Mr. R. Smith’s commitments are included in his employment agreement described below; the other executives entered into separate agreements in this regard.

Agreements with Roland Smith, Former Chairman and CEO

Employment Agreement. The Company’s former Chairman and Chief Executive Officer, Mr. Roland Smith, was employed pursuant to the terms of an employment agreement effective November 12, 2013, and amended effective February 7, 2014, and August 21, 2016. Pursuant to the terms of the amended agreement, Mr. R. Smith was eligible to receive the following during his employment with the Company:

During fiscal year 2016, Mr. R. Smith’s salary was $1,400,000 and his bonus target payout was 150% of base salary.

Pursuant to his amended employment agreement, Mr. R. Smith was entitled to certain additional payments and benefits in the event of his employment termination under certain circumstances, including but not limited to his “Retirement.” For a description of these payments and benefits and the definition of “Retirement”, see “Benefits Upon Termination or Change in Control Under Executive Agreements” below.

Mr. R. Smith Retired from the Company effective February 27, 2017.

Equity Awards .

Mr. R. Smith also held equity awards granted under the 2007 Plan and 2015 Plan, the material terms of which are described in the Compensation Tables herein.

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Agreements with Stephen Hare, Executive Vice President and Chief Financial Officer

Letter Agreement. The Company’s Executive Vice President and Chief Financial Officer, Mr. Stephen Hare, is employed pursuant to the terms of a letter agreement, effective December 2, 2013, and amended effective February 7, 2014. Pursuant to the terms of the agreement, Mr. Hare is eligible to receive the following:

During fiscal year 2016, Mr. Hare’s salary was $750,000 and his bonus target payout was 85% of base salary.

Pursuant to his employment agreement, Mr. Hare is entitled to certain additional payments and benefits in the event his employment is terminated under certain circumstances. For a description of these payments and benefits, see “Benefits Upon Termination or Change in Control Under Executive Agreements” below.

Equity Awards .

Mr. Hare also holds equity awards granted under the 2007 Plan and 2015 Plan, the material terms of which are described in the Compensation Tables herein.

Change in Control Agreement . Mr. Hare and the Company are also parties to the Executive Change in Control Severance Plan (the “CIC Plan”), the terms of which are described below

Agreements with Troy Rice, Executive Vice President and Chief Operating Officer, North America

Letter Agreement. The Company’s Executive Vice President and Chief Operating Officer, North America, Mr. Troy Rice, is employed pursuant to the terms of a letter agreement, effective August 21, 2016. Pursuant to the terms of the agreement, Mr. Rice is eligible to receive the following:

During fiscal year 2016 and in connection with his promotion, Mr. Rice’s base salary was increased from $500,000 to $650,000 and his bonus target payout was increased from 65% to 75% of base salary, pro-rated for his partial year of employment, both effective August 21, 2016.

Pursuant to his letter agreement, Mr. Rice is entitled to certain additional payments and benefits in the event his employment is terminated under certain circumstances. For a description of these payments and benefits, see “Benefits Upon Termination or Change in Control Under Executive Agreements” below.    

Equity Awards .

Mr. Rice also holds equity awards granted under the 2003 Plan and 2015 Plan, the material terms of which are described in the Compensation Tables herein.

Change in Control Agreement . Mr. Rice and the Company are also parties to the CIC Plan, the terms of which are described below.

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Agreements with Michael Allison, Executive Vice President and Chief Administrative Officer (formerly Executive Vice President and Chief People Officer during 2016 and prior to March 12, 2017)

Letter Agreement. The Company’s Executive Vice President and Chief Administrative Officer, Mr. Michael Allison, is employed pursuant to the terms of a letter agreement, effective July 17, 2011. Pursuant to the terms of the agreement, Mr. Allison is eligible to receive the following:

During fiscal year 2016, Mr. Allison’s salary increased from $525,000 to $550,000 (effective October 30, 2016) and his bonus target payout was 75% of base salary.

Pursuant to his letter agreement, Mr. Allison is entitled to certain additional payments and benefits in the event his employment is terminated under certain circumstances. For a description of these payments and benefits, see “Benefits Upon Termination or Change in Control Under Executive Agreements” below.

Equity Awards .

Mr. Allison also holds equity awards granted under the 2007 Plan and 2015 Plan, the material terms of which are described in the Compensation Tables herein.

Change in Control Agreement . Mr. Allison and the Company are also parties to the CIC Plan, the terms of which are described below.

Agreements with Juliet Johansson, Former Executive Vice President and Chief Strategy and Innovation Officer

Letter Agreement. The Company’s former Executive Vice President and Chief Strategy and Innovation Officer, Ms. Juliet Johansson, was employed pursuant to the terms of a letter agreement, effective March 31, 2014. Pursuant to the terms of her letter agreement, Ms. Johansson was eligible to receive the following during her employment with the Company:

During fiscal year 2016, Ms. Johansson’s salary increased from $475,000 to $500,000 (effective October 30, 2016) and her bonus target payout was 75% of base salary.

Pursuant to her letter agreement, Ms. Johansson was entitled to certain additional payments and benefits in the event her employment is terminated under certain circumstances. For a description of these payments and benefits, see “Benefits Upon Termination or Change in Control Under Executive Agreements” below.    

Equity Awards .

Ms. Johansson also held equity awards granted under the 2003 Plan and 2015 Plan, the material terms of which are described in the Compensation Tables herein.

Change in Control Agreement . Ms. Johansson and the Company were also parties to the CIC Plan, the terms of which are described below.

Ms. Johansson left the Company as part of the Company’s restructuring tied to its three-year strategic plan, effective January 26, 2017.

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Agreements with Mark Cosby, Former President, North America

Letter Agreement. The Company’s former President, North America, Mark Cosby, was employed pursuant to the terms of a letter agreement dated July 21, 2014. Pursuant to the terms of the letter agreement, Mr. Cosby was eligible to receive the following during his employment with the Company:

During fiscal year 2016, Mr. Cosby’s salary was increased from $850,000 to $900,000 effective July 31, 2016 and his bonus target payout was 100% of base salary.

Pursuant to his letter agreement, Mr. Cosby was entitled to certain additional payments and benefits in the event his employment was terminated under certain circumstances. For a description of these payments and benefits, see “Benefits Upon Termination or Change in Control Under Executive Agreements” below.    

Separation Agreement. Mr. Cosby left the Company as part of the Company’s restructuring tied to its three-year strategic plan, effective November 18, 2016. In connection with Mr. Cosby’s termination, the Company and Mr. Cosby entered into a separation agreement, effective as of November 18, 2016. The Company paid Mr. Cosby $2,174,285 pursuant to the separation agreement, consisting of the sum of (i) 18 times Mr. Cosby’s monthly base salary in effect on November 18, 2016, (ii) 18 times the difference between Office Depot’s monthly COBRA premium for the type of Office Depot provided group health plan coverage in effect November 18, 2016, for Mr. Cosby and his active employee charge for such coverage, and (iii) a pro-rata bonus calculated based on actual performance under Office Depot’s annual bonus plan for the fiscal year 2016.

Under his separation agreement, Mr. Cosby released and discharged the Company and its affiliates and related parties from all claims resulting from anything that occurred prior to the date of such agreement. Mr. Cosby continues to be bound by the terms of his Associate Non-Competition, Confidentiality and Non-Solicitation Agreement signed on July 21, 2014.

Equity Awards .

Mr. Cosby also held equity awards granted under the 2003 Plan and 2015 Plan, the material terms of which are described in the Compensation Tables herein. In connection with Mr. Cosby’s termination and pursuant to an amendment approved by the Compensation Committee on October 27, 2016, Mr. Cosby will continue to vest in the portion of his restricted stock units granted in fiscal years 2014, 2015 and 2016 that would otherwise have vested in 2017 and in the portion of his performance share awards granted in fiscal year 2014 and tied to performance for the Company’s cumulative 2014-2016 fiscal year period. All applicable performance requirements under these awards will continue to apply.

Change in Control Agreement . During his employment with the Company Mr. Cosby and the Company were parties to the CIC Plan, the terms of which are described below.

Agreements with Steven Schmidt, Former Executive Vice President and President, International

Letter Agreement . The Company’s former Executive Vice President and President, International, Mr. Steven Schmidt, was employed pursuant to the terms of a letter agreement dated July 10, 2007, which was subsequently amended effective December 31, 2008. Pursuant to the terms of the letter agreement, Mr. Schmidt was eligible to receive the following during his employment with the Company:

During fiscal year 2016, Mr. Schmidt’s salary was $675,000 and his bonus target payout was 85% of base salary.

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Retention Agreement. The Company and Mr. Schmidt were parties to a retention agreement dated April 7, 2015, pursuant to which Mr. Schmidt was entitled to a retention payment of $1,000,000, payable in a single lump sum, upon the earlier to occur of the closing date of the Staples merger, the date of termination of the Staples merger, Mr. Schmidt’s termination by the Company without cause or March 15, 2016, provided that Mr. Schmidt remains actively employed by the Company. The retention bonus was paid on March 15, 2016.

Change in Control Agreement. At the time of the merger with OfficeMax, Mr. Schmidt was subject to a legacy change in control agreement dated July 21, 2011 and amended on February 21, 2013. This legacy change in control agreement provided for severance protections for two years from the date of a change of control; the Company’s merger with OfficeMax constituted a change in control under the agreement. Pursuant to this legacy change in control agreement, Mr. Schmidt was entitled to severance benefits in the event his employment was terminated by the Company without Cause or initiated by Mr. Schmidt for Good Reason on or before November 5, 2015. On April 7, 2015 the Company entered into an amendment to Mr. Schmidt’s change in control agreement that extended indefinitely the period during which Mr. Schmidt would become entitled to severance benefits in the event his employment was terminated by the Company terminated without Cause or initiated by Mr. Schmidt for Good Reason. For a description of these payments and benefits, see “Benefits Upon Termination or Change in Control Under Executive Agreements” below.

Separation Agreement. Mr. Schmidt separated from the Company for Good Reason effective May 27, 2016. In connection with Mr. Schmidt’s termination, the Company and Mr. Schmidt entered into a separation agreement. The Company paid Mr. Schmidt $2,786,196 pursuant to the separation agreement, consisting of the sum of (i) his 2016 annual bonus, calculated at target and pro-rated for the number of days worked in 2016, (ii) two times the sum of his annual base salary (including annual car allowance) in effect on his May 27, 2016 termination date and his 2016 target annual bonus, and (iii) eighteen (18) months of the Company’s monthly COBRA premium in effect on his termination date for the type of coverage in effect for Mr. Schmidt on the termination date. Also pursuant to the separation agreement, the Company made a $13,000 payment on Mr. Schmidt’s behalf for financial counseling services in lieu of the outplacement services to which Mr. Schmidt was entitled pursuant to his change in control agreement.

Under his separation agreement, Mr. Schmidt released and discharged the Company and its affiliates and related parties from all claims resulting from anything that occurred prior to the date of such agreement. Mr. Schmidt continues to be bound by the non-competition, non-solicitation, confidentiality, work product and cooperation provisions of his change in control agreement.

Equity Awards .

Mr. Schmidt held equity awards granted under the 2007 Plan during the term of his employment with the Company, the material terms of which are described in the Compensation Tables herein.

Benefits Upon Termination or Change in Control Under Executive Agreements

Roland Smith

Termination with Cause or without Good Reason. Mr. R. Smith’s employment was terminable at will by either Mr. R. Smith or the Company. Upon Mr. R. Smith’s employment termination in any circumstance, he would have been eligible to receive:

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Termination without Cause or with Good Reason. If Mr. R. Smith’s employment had been terminated without Cause or Mr. R. Smith had terminated his employment for Good Reason, then Mr. R. Smith would have been eligible to receive, subject to certain requirements and on the terms set forth in his agreement, the Accrued Items and: