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Transaction Financial Advisory Services Letter

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PETER J. SOLOMON COMPANY 330 Park Avenue
LIMITED New York, NY 10023
TEL 212-936-3300
FAX 212-935-0770


August 22, 1996


Office Depot, Inc. 2200 Old Germantown Road Delray Beach, FL 33445


Attention: Barry J. Goldstein, Executive Vice President, Chief Financial
Officer and Secretary


Ladies and Gentlemen:


The purpose of this letter is to confirm the engagement of Peter J. Solomon Company Limited ("PJSC") by Office Depot, Inc. (the "Company") to render financial advisory services to the Company in connection with a possible: (i) merger of the Company (or a subsidiary of the Company) with Staples, Inc. ("Staples") (or a subsidiary of Staples); (ii) merger of the Company (or a subsidiary of the Company) and Staples (or a subsidiary of Staples) with a new company ("Newco") formed for the purpose of effecting such merger; (iii) acquisition by the Company (or a subsidiary of the Company) of Staples or all or a significant portion of the assets of Staples; (iv) sale of the Company or a significant portion of the assets of the Company to Staples (or a subsidiary of Staples); or (v) any other form of transaction which accomplishes a similar business combination between the Company and Staples (collectively, a "Transaction").


SECTION 1. SERVICES TO BE RENDERED. PJSC will perform such of the following financial advisory services as the Company may reasonably request:


(a) PJSC will familiarize itself to the extent it deems appropriate and feasible with the business, operations, properties, financial condition and prospects of the Company and, to the extent relevant, Staples, it being understood that PJSC shall, in the course of such familiarization, rely entirely upon publicly available information and such other information as may be supplied by the Company or Staples, without independent investigation;


(b) PJSC will advise and assist the Company in the course of its negotiations of any Transaction with Staples;


(c) PJSC will advise and assist management of the Company in making presentations to the Company's Board of Directors regarding any proposed Transaction;


1 2
(d) PJSC will advise the Company in the execution of and closing of a Transaction under a definitive agreement; and


(e) PJSC will render such other financial advisory services as may time to time be agreed upon by PJSC and the Company.


SECTION 2. INFORMATION PROVIDED BY THE COMPANY.


(a) The Company shall make available (and shall request that Staples make available) to PJSC all information concerning the business, assets, liabilities, operations, prospects and financial or other condition of the Company or Staples which PJSC reasonably requests in connection with the rendering of services hereunder; and


(b) The Company recognizes and confirms that PJSC (i) will use and rely primarily on the information provided by the Company and on information available from generally recognized public sources in performing the services contemplated hereby without having assumed any responsibility for independently verifying the same; (ii) does not assume responsibility for the accuracy or completeness of any such information; and (iii) will not make an appraisal of any assets of the Company or Staples. The Company confirms that any such information to be furnished by the Company when delivered will be true and correct in all material respects and will not contain any material misstatement of fact or omit to state any fact necessary to make the statements contained therein not misleading. The Company will promptly notify PJSC if the Company learns of any material inaccuracy or misstatement in, or any material omission from, any such information furnished by the Company to PJSC.


SECTION 3. FEES.


(a) As compensation for the services rendered hereunder, the Company agrees to pay PJSC (via wire transfer) a cash fee (the "Transaction Fee") equal to 0.375% of the Aggregate Consideration paid or payable in connection with a Transaction. In the event that the Company receives a fairness opinion in connection with the Transaction from any financial advisor other than PJSC, PJSC shall reduce the Transaction Fee by the amount paid by the Company for such fairness opinion up to $2.0 million. In the event that the Company hires any financial advisor in addition to PJSC in connection with the Transaction, PJSC shall reduce the Transaction Fee by the amount paid by the Company to such other financial advisor up to an amount equal to 30% of the Transaction Fee (inclusive of the $2.0 million for any fairness opinion as stipulated in the previous sentence).


Such Transaction Fee shall be contingent upon the consummation of a Transaction and shall be payable at the closing thereof, provided that compensation attributable to that part of Aggregate Consideration which is contingent upon the realization of future financial performance (e.g. an earn-out or similar provision) shall be paid by the Company to PJSC promptly upon the receipt of such Aggregate


2 3 Consideration by the Company, its shareholders or other parties. Compensation attributable to that part of Aggregate Consideration which is deferred (including without limitation any Aggregate Consideration held in escrow) shall be valued at the total stated amount of such consideration, after applying an appropriate discount thereto, which discount shall be determined in good faith by PJSC and the Company, and shall be paid by the Company at the closing of a Transaction.


For purposes hereof, the term "Aggregate Consideration" shall mean the total amount of all cash, securities, contractual arrangements and other properties paid or payable, directly or indirectly in connection with a Transaction to holders of the Company's equity securities (including, without limitation, amounts paid to holders of any warrants, stock purchase
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