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Additional Materials
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Soliciting
Material Pursuant to §240.14a-12
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OFFICE
DEPOT, INC.
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(Name
of Registrant as Specified in its Charter)
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Levitt
Corporation
Woodbridge
Equity Fund LLLP
Mark
Begelman
Martin
E. Hanaka
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(Name
of Person(s) Filing Proxy Statement, if other than the
Registrant)
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Ø
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“The
decline in the company’s stock price is substantially greater than that
witnessed by its peers. The rapid deterioration in the
company’s stock price has adversely impacted Total Shareholder Return
(“TSR”) despite approx. $2 billion in share repurchases from FY2005 to
FY2007. We note that ODP underperformed all its peers in terms
of 1-year, 3-year and 5-year total shareholder returns (TSR) for the
period ending March 31, 2008.…”
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Ø
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“While
it is difficult to ascertain the exact impact of the Florida and
California markets on the financials, we note that 24.8% of ODP and 19.0%
of SPLS U.S. based stores are in California and
Florida. Though both ODP and SPLS have relatively
significant exposure to the two states, SPLS’ SSS2 and margins were
not as significantly affected by the regional dynamics as ODP
was.”
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Ø
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“We
note that ODP’s current strategic initiatives, announced in response to
the deterioration in 2HFY2007 performance, seem to address similar issues
that have affected the company since 2005. This, we believe,
lends credibility to the dissidents’ concern that some of the underlying
issues facing the company have yet to be fully
resolved.”
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Ø
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“Hence,
a comparison of the issues facing the company in 2005 with those that it
aims to resolve now indicates that the company has been affected by
similar issues for a considerable
time.”
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Ø
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“…we
believe the dissidents have met the burden of proof that change is
warranted at the company, and Mr. Begelman and Mr. Hanaka have relevant
industry experience… we believe that the dissidents have made a valid case
for greater management oversight.…”
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Ø
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“According
to PROXY Governance's performance analysis, the company has underperformed
peers over the past five years; the company ranks at the 40th percentile
relative to the S&P 1500 compared to peers at the 46th percentile, and
is declining relative to peers at a rate of 3 percentile points per
year.”
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Ø
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“The
average three-year compensation paid to the CEO is 243% above the median
paid to CEOs at peer companies and the average three-year compensation
paid to the other named executives is 3% below the median paid to
executives at peer companies.”
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Ø
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“We
have concerns regarding the company's CEO compensation, which is high
compared to peers and given the company's financial performance relative
to peers.”
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Ø
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“While
we recognize that part of the award is directly related to strong 2006
performance and the remainder is structured as a retention package with a
strong performance basis, we would not expect to see these levels of
compensation going forward, particularly without correspondingly strong
shareholder returns.”
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Ø
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“A
67% loss in share value over just nine months is undeniably striking. If
Odland’s execution on his retailing initiatives cannot claw back a
meaningful portion of those losses, the board may well be required – as we
believe both the board and the CEO are keenly aware – to take other
actions or face a more substantial challenge at the next annual
meeting.”
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Ø
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“We
note that, since mid-2007, the Company’s market value has declined by
approximately 64.4%. Though the broader industry has been
impacted by the same macro conditions effecting Office Depot, we note that
its shares underperformed the S&P 500 Special Retail Index by more
than 50.0% during the same period. For the period between July
2007 and April 2008, the S&P 500 Specialty Retail Index declined
approximately 25.0% while the Company’s shares fell approximately
60.0%”
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Ø
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“In
light of the Company’s performance troubles in the second half of 2007, we
are concerned that the Company paid bonuses to Mr. Odland of $10.0 million
in addition to $7.0 million in long term equity grants in
2007. Further, we are hard pressed to understand the
compensation committee’s rationale for its $5.0 million long term equity
grant to Mr. Odland in 2008. We note that Office Depot received
an F grade in the Glass Lewis’ Pay-for-Performance model for
2007.”
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Ø
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“It
is clear that Office Depot is struggling and, in our opinion, the
Dissident has raised a number of valid
concerns.”
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Ø
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"…the
directors of Office Depot should consider themselves to have been put on
notice. In the absence of the Woodbridge’s contest, given the
above mentioned audit and compensation committee issues with Office Depot,
Glass Lewis would recommend that shareholders withhold support from a
majority of the directors on the current board.… Though the board may get
an unearned passed here, time will tell whether its directors proactively
address the Company’s issues and effect positive change for
shareholders. If that does not occur, investors should not be
surprised to see further shareholder activism at the
Company.”
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1
Permission to excerpt was neither sought nor
obtained.
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