EXHIBIT
4.1
EXECUTION
COPY
INVESTOR RIGHTS AGREEMENT
Investor Rights
Agreement, dated as of June 23, 2009, by and among Office Depot,
Inc., a Delaware corporation (the “ Company ”),
BC Partners, Inc., as the Investor Representative, and the several
investors listed on Schedule 1 (collectively, the “
Investors ”).
WHEREAS, on the
date of this Agreement, the Company and the Investors entered into
a Securities Purchase Agreement (the “ Purchase
Agreement ”) pursuant to which the Company agreed to sell
to the Investors, and the Investors agreed to purchase from the
Company, the Preferred Shares on the terms and subject to the
conditions set forth in the Purchase Agreement; and
WHEREAS, it is a
condition to the closing of the transactions contemplated by the
Purchase Agreement that the Company and the Investors enter into
this Agreement.
NOW,
THEREFORE, in consideration of the foregoing and the agreements
contained in this Agreement, and intending to be legally bound by
this Agreement, the Company and the Investors agree as
follows:
1.
Definitions . Capitalized terms used and not otherwise
defined in this Agreement that are defined in the Purchase
Agreement shall have the meanings given such terms in the Purchase
Agreement. As used in this Agreement, the following terms shall
have the respective meanings set forth in this Section
1:
“
Adjusted EBITDA ” means, for any period, Consolidated
Net Income for such period, plus , to the extent reflected
as a charge in the statement of such Consolidated Net Income for
such period, the sum of, without duplication, (i) taxes, (ii)
interest, (iii) amortization or write-off of debt discount and debt
issuance costs and commissions, discounts and other fees and
charges associated with Indebtedness, (iv) depreciation and
amortization, (v) amortization or impairment of intangibles
(including but not limited to goodwill) and organization costs,
(vi) any extraordinary expenses or losses, (vii) any unusual or
non-recurring charges, expenses or losses approved by the finance
committee of the Board to the extent (x) consistent with past
practices of the Company and (y) disclosed by the Company in its
public filings with the SEC and (viii) any other non-cash charges
(excluding any non-cash charge that will result in a cash
expenditure in a future period), and minus , to the extent
reflected as a credit in determining Consolidated Net Income for
such period, (A) any extraordinary, unusual or non-recurring
credits, income or gains (including, whether or not otherwise
includable as a separate item in the statement of Consolidated Net
Income for such period, gains on dispositions outside of the
ordinary course of business) and (B) any other non-cash items of
income for such period (excluding any non-cash items of income in
respect of which cash will be received in a future
period).
“
Consolidated Debt ” means at any point in time, the
indebtedness of the Company and its Subsidiaries for such reporting
period, presented on a consolidated basis in accordance with
Generally Accepted Accounting Principles.
“
Consolidated Net Income ” means for any period, the
net income of the Company and its Subsidiaries for such period,
determined on a consolidated basis in accordance with Generally
Accepted Accounting Principles.
“ Credit
Facilities ” means (i) the Credit Agreement and (ii) each
of the Company’s foreign credit facilities in place as of the
date of this Agreement, in each case as amended, supplemented,
restated, renewed, replaced, refinanced or otherwise modified from
time to time as permitted by the terms of Sections 2.5(a)(i) and
2.5(b).
“
Indebtedness ” means (i) indebtedness for borrowed
money whether or not evidenced by bonds, notes, debentures or other
similar instruments, including purchase money obligations or other
obligations relating to the deferred purchase price of property,
(ii) obligations as lessee under leases which have been recorded as
capital leases and (iii) obligations under guaranties in respect of
indebtedness or obligations of others of the kind referred to in
clauses (i) through (ii) above, as reported in accordance with
Generally Accepted Accounting Principles, provided that
Indebtedness shall not include (A) trade payables and accrued
expenses arising in the ordinary course of business and (B)
indebtedness, obligations under guaranties and other liabilities
owed by the Company to its Subsidiaries or among the
Company’s Subsidiaries.
“ Mexico JV ” means Office Depot de Mexico, S.A.
de C.V.
“ New
Securities ” means any shares of capital stock of the
Company, including Common Stock and Preferred Stock, whether
authorized or not by the Board or any committee of the Board, and
rights, options, or warrants to purchase said shares of capital
stock, and securities of any type whatsoever that are, or may
become, convertible into capital stock; provided ,
however , that the term “New Securities” shall
not include: (i) securities issued to employees, consultants,
officers and directors of the Company, pursuant to any arrangement
approved by the Board or the Board’s Compensation Committee;
(ii) securities issued pursuant to the acquisition of another
business entity by the Company by merger, purchase of substantially
all of the assets or shares, or other reorganization whereby the
Company will own equity securities of the surviving or successor
corporation; (iii) securities issued in a registered public
offering underwritten, provided that the Company shall have
complied with Section 5 with respect to the initial sale or grant
by the Company of such securities; (iv) securities issued pursuant
to any rights or agreements, including, without limitation,
convertible securities, options and warrants, provided that
either (x) the Company shall have complied with Section 5 with
respect to the initial sale or grant by the Company of such rights
or agreements or (y) such rights or agreements existed prior to the
Closing Date (it being understood that any modification or
amendment to any such pre-existing right or agreement subsequent to
the Closing Date with the effect of increasing the percentage of
the Company’s fully-diluted securities underlying such rights
agreement shall not be included in this clause (iv)); (v)
securities issued in connection with any stock split, stock
dividend or recapitalization by the Company; (vi) Preferred Shares
issued pursuant to the Purchase Agreement and Common Stock issued
upon conversion of such Preferred Shares; and (vii) any right,
option, or warrant to acquire any security convertible into the
securities excluded from the definition of New Securities pursuant
to clauses (i) through (vi) above.
“
Ownership Percentage ” means, as of any date, the
percentage equal to (i) the difference of (x) the aggregate number
of shares of Common Stock issued to the Investors pursuant to the
Purchase Agreement (calculated assuming (A) the Shareholder
Approvals have been obtained and (B) full exercise and conversion
of the Preferred Shares issued to each of the Investors pursuant to
the Purchase Agreement), minus (y) the aggregate number of
any shares of Common Stock and any Preferred Shares (calculated for
such purposes as Common Stock, assuming (A) the Shareholder
Approvals have been obtained and (B) the full exercise and
conversion of such Preferred Shares) transferred by any Investor to
any Person (including to the Company in connection with a
redemption by the Company pursuant to the terms of the applicable
Certificate of Designations or pursuant to a merger or
consolidation recommended by the Board in which the Company will
not be the surviving entity, but excluding any transfers to such
Investor’s Affiliates (including commonly controlled or
managed investment funds) who, if required by Section 4.1, execute
a written joinder agreement in a form approved by the Company
pursuant to Section 4.1) or with respect to which any Investor has
entered into any swap or any other agreement, transaction or series
of transactions that hedges or transfers, in whole or in part,
directly or indirectly, the economic consequence of ownership of
such Common Stock or Preferred Shares, whether any such
transaction, swap or series of transactions is to be settled by
delivery of securities, in cash or otherwise (irrespective of
whether such transfer or swap or other agreement is in compliance
with the restrictions set forth in this Agreement or the
Certificates of Designations) divided by (ii) the total
number of shares of Common Stock then outstanding (calculated
assuming (A) the Shareholder
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Approvals have
been obtained and (B) full exercise and conversion of the Preferred
Shares issued to each of the Investors pursuant to the Purchase
Agreement).
2. Governance Matters
.
2.1 Board Composition
.
(a)
Effective as of the Closing, the Company shall increase the size of
the Board by three directors and cause Raymond Svider, James Rubin
and Justin Bateman to be appointed to the Board. For so long as the
Investors’ Ownership Percentage is equal to or greater than
the percentage indicated in the left hand column of the table
below, the Investor Representative on behalf of the Investors shall
have the right to nominate for election to the Board that number of
directors indicated in the right hand column of the table below
(each an “ Investor Designee ”), and the Company
shall, at any annual or special meeting of shareholders of the
Company at which directors are to be elected, subject to the
fulfillment of the requirements set forth in Section 2.1(b),
nominate the Investor Designees for election to the Board and use
all reasonable efforts to cause the Investor Designees to be
elected as directors of the Board.
|
Ownership
Percentage
|
Investor
Designees
|
|
15%
|
3
|
|
10%
|
2
|
|
5%
|
1
|
(b)
Any Investor Designee shall (i) be an employee of BC Partners
Limited, BC Partners Holdings Limited, BC Partners Inc., BC
Partners s.à r.l., BC Partners Gmbh, BC Partners s.à
r.l., BC Partners Suisse s.r.l. or CIE Management II Limited, (ii)
shall be reasonably acceptable to the Board’s Corporate
Governance and Nominating Committee (the “ Governance
Committee ”) and (iii) shall comply in all respects with
the Company’s corporate governance guidelines as in effect
from time to time. The Investor Representative shall notify the
Company of any proposed Investor Designee in writing no later than
the latest date on which shareholders of the Company may make
nominations to the Board in accordance with the Bylaws, together
with all information concerning such nominee required to be
delivered to the Company by the Bylaws and such other information
reasonably requested by the Company; provided that in each
such case, all such information is generally required to be
delivered to the Company by the other outside directors of the
Company (the “ Nominee Disclosure Information
”); provided , further that in the event the
Investor Representative fails to provide any such notice, the
Investor Designees shall be the person then serving as the Investor
Designee as long as the Investor Representative provides the
Nominee Disclosure Information to the Company promptly upon request
by the Company.
(c)
In the event of the death, disability, resignation or removal
of an Investor Designee, the Board will promptly elect to the Board
a replacement director designated by the Investor Representative,
subject to the fulfillment of the requirements set forth in Section
2.1(b), to fill the resulting vacancy, and such individual shall
then be deemed an Investor Designee for all purposes under this
Agreement.
2.2
Committee Membership . For so long as the Investors’
Ownership Percentage is equal to or greater than 10%, (i) one
Investor Designee will be appointed by the Board to sit on each
regular committee of the Board (other than the Board’s Audit
Committee (the “ Audit Committee ”)), subject to
such Investor Designee satisfying applicable qualifications under
applicable law, regulation or stock exchange rules and regulations,
(ii) one Investor Designee will be permitted to attend meetings of
the Audit Committee as an observer and (iii) the Board’s
Finance Committee (the “ Finance Committee ”)
will be comprised of five directors, two of whom will be Investor
Designees, and the Finance Committee’s charter will specify
that the
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Finance
Committee’s responsibilities include the review of the
Company’s annual business plan and operating budget. In the
event that the holders of Series A Preferred are entitled to
appoint more than one director, the Investor will have the right to
designate which director serves on which committee or committees
(subject to chosen director satisfying applicable qualifications
under law or stock exchange rule), provided that such
selection is reasonably acceptable to the Governance Committee. If
an Investor Designee fails to satisfy the applicable qualifications
under law or stock exchange rule to sit on any committee of the
Board, then the Board shall permit such Investor Designee to attend
(but not vote) at the meetings of such committee as an
observer.
2.3
Compensation and Benefits . Each of the Investor Designees
will be entitled to receive similar compensation, benefits,
reimbursement, indemnification and insurance coverage for their
service as directors as the other outside directors of the Company.
For so long as the Company maintains directors and officers
liability insurance, the Company shall include each Investor
Designee as an “insured” for all purposes under such
insurance policy for so long as such Investor Designee is a
director of the Company and for the same period as for other former
directors of the Company when such Investor Designee ceases to be a
director of the Company.
2.4
Budget Review . For so long as the Investors’
Ownership Percentage is equal to or greater than 10%, the Investor
Designees plus the chief executive officer and the chief financial
officer of the Company shall meet once annually and review the
annual business plan and operating budget produced prior to its
submission to the Board.
2.5 Special Approval
Matters .
(a)
For so long as the Investors’ Ownership Percentage is equal
to or greater than 10%, the following matters will require the
approval of at least 66-2/3% of the directors on the Board to
authorize the Company to proceed with such a transaction (excluding
any such transaction between the Company and its wholly owned
Subsidiaries or among the Company’s wholly owned
Subsidiaries):
(i)
the incurrence of any Indebtedness in excess of $200 million
in the aggregate during any fiscal year (excluding any (A)
refinancings and replacements of Indebtedness outstanding as of the
date of this Agreement and (B) borrowings under the Credit
Facilities);
(ii)
the sale, transfer or other disposition of assets or businesses of
the Company or its Subsidiaries (other than the Mexico JV) with a
value in excess of $50 million in the aggregate during any fiscal
year (other than sales of inventory or supplies in the ordinary
course of business, sales of obsolete assets (excluding real
estate), sale-leaseback transactions and accounts receivable
factoring transactions);
(iii)
the acquisition of any assets or properties (in one or more
related transactions) for cash or otherwise for an amount in excess
of $50 million in the aggregate during any fiscal year (other than
acquisitions of inventory and equipment in the ordinary course of
business);
(iv)
capital expenditures in excess of $30 million individually
(or in the aggregate if related to an integrated program of
activities) or in excess of $275 million in the aggregate during
any fiscal year; and
(v)
making, or permitting any Subsidiary (other than the Mexico JV) to
make, loans to, investments in, or purchasing, or permitting any
Subsidiary (other than the
4
Mexico JV) to
purchase, any stock or other securities in another corporation,
joint venture, partnership or other entity (including the Mexico
JV) in excess of $50 million in the aggregate during any fiscal
year.
(b)
For so long as the Investors’ Ownership Percentage is
equal to or greater than 10%, the following will require the
approval of at least one of the Investor Designees: (i) increasing
the size of the Board beyond 14 directors and (ii) the incurrence
of any Indebtedness for borrowed money in excess of $200 million in
the aggregate during any fiscal year (excluding (A) any borrowings
under the Credit Facilities and (B) after June 23, 2011, any
refinancings and replacements of Indebtedness outstanding as of the
date of this Agreement that do not increase the aggregate principal
amount of, or the amount that may be borrowed by the Company or its
Subsidiaries under, as applicable, such Indebtedness as in effect
on the date of this Agreement) if the ratio of Consolidated Net
Debt to the trailing four quarter Adjusted EBITDA of the Company
and its Subsidiaries, on a consolidated basis, is more than
4x.
(c)
For so long as the Investors or their respective Affiliates
(including commonly controlled or managed investment funds) or any
direct or indirect owner of the foregoing own any shares of Series
A Preferred or Series B Preferred issued to the Investors on the
Closing Date (each such owner of such a share, an “
Investor Group Member ”), issuing (i) convertible debt
that is by its terms convertible into capital stock of the Company,
(ii) preferred stock or (iii) options or warrants to acquire
preferred stock, will require the approval of the Investor
Representative; provided , however , that the
approval set forth in this Section 2.5(c) will not be required if
(A) the Company establishes (or has previously established) a
Withholding Tax Escrow (as defined in Annex A) or (B) if the
Company reasonably expects that the Company will not collect
Withholding Tax (as defined in Annex A) from any Investor Group
Member as a result of the issuance of such stock or securities or
the payment or accrual of interest or dividends on such stock or
securities ( provided in the case of this clause (B) that if
the Company subsequently determines to collect Withholding Tax as a
result of the issuance of such stock or securities or the payment
or accrual of interest or dividends on such stock or securities,
then, unless the Company has previously established a Withholding
Tax Escrow, the Company will, at the time it so determines to begin
collecting Withholding Tax, establish a Withholding Tax Escrow).
The Company shall establish a Withholding Tax Escrow only if it
reasonably expects that such issuance of stock or securities will
result in the Company having an obligation to collect Withholding
Tax.
3.
Voting Agreement .
3.1
Voting Agreement as to Certain Matters . In connection with
any proposal submitted for Company shareholder approval (at any
annual or special meeting called, or in connection with any other
action (including the execution of written consents)) related to
the election or removal of directors of the Board or any business
or proposal involving the Company, each of the Investors will (a)
cause all of their respective shares of Company capital stock that
are entitled to vote, whether now owned or hereafter acquired
(collectively, the “ Voting Securities ”), to be
present in person or represented by proxy at all meetings of
shareholders of the Company, so that all such shares shall be
counted as present for determining the presence of a quorum at such
meetings and (b) vote all of their Voting Securities : (i)
in favor of any nominee or director nominated by the Governance
Committee ( provided that the Governance Committee is
consistent with the terms of Section 2.1), (ii) against the removal
of any director nominated by the Governance Committee, (iii) with
respect to any other business or proposal, in accordance with the
recommendation of the Board, other than with respect to the
approval of any proposed business combination (including, without
limitation, any reorganization, merger, tender offer,
consolidation, sale of assets or otherwise) agreement between the
Company and any other Person and (iv) in favor of the Shareholder
Approvals. Notwithstanding anything to the contrary, there shall be
no restriction on the ability
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of any Investor
(or any successor in interest to any of the Voting Securities) to
exercise its voting rights pursuant to Section 9(b) and 9(c) of
each of the Certificates of Designations.
3.2
No Successors in Interest . The provisions of this Section 3
shall not be binding upon the successors in interest to any of the
Voting Securities other than Affiliates of the Investors (including
commonly controlled or managed investment funds).
3.3
Termination of Voting Agreement . The
provisions of this Section 3 shall terminate upon the earliest to
occur of any one of the following events: (i) as to any Investor,
the date on which such Investor ceases to own any Preferred Shares
and any shares of Common Stock issued upon conversion of the
Preferred Shares (for the avoidance of doubt, whether by reason of
redemption, transfer or conversion), (ii) the liquidation,
dissolution or indefinite cessation of the business operations of
the Company, (iii) the execution by the Company of a general
assignment for the benefit of creditors or the appointment of a
receiver or trustee to take possession of the property and assets
of the Company or (iv) the acquisition of the Company by any other
Person by means of any transaction or series of related
transactions (including, without limitation, any reorganization,
merger, consolidation, sale of assets or otherwise).
4. Restrictions on
Transfer .
4.1
No Transfer of Shares Prior to Second Anniversary .
Prior to June 23, 2011, each of the Investors agree that they will
not directly or indirectly sell, transfer, pledge, encumber, assign
or otherwise dispose of any portion of any Preferred Shares or
shares of Common Stock issued upon a conversion of the Preferred
Shares to any Person without the prior written consent of the
Company (which consent may be given or withheld, or made subject to
such conditions as are determined by the Company, in its sole
discretion) other than (i) to its Affiliates (including commonly
controlled or managed investment funds) who execute a written
joinder agreement in a form approved by the Company pursuant to
which such Affiliate agrees to be bound by the terms of Sections 3,
4 and 6, (ii) pursuant to a tender or exchange offer recommended by
the Board, (iii) pursuant to a merger or consolidation recommended
by the Board in which the Company will not be the surviving entity
or (iv) in connection with a redemption by the Company pursuant to
the terms of the applicable Certificate of Designations. Any
purported Transfer which is not in accordance with the terms and
conditions of this Section 4.1 shall be, to the fullest extent
permitted by law, null and void ab initio and, in addition
to other rights and remedies at law and in equity, the Company
shall be entitled to injunctive relief enjoining the prohibited
action.
4.2
No Transfer to Competitors . Each Investor agrees that they
will not at any time directly or knowingly indirectly (without any
duty of investigation) transfer any Preferred Shares or any shares
of Common Stock issuable upon conversion of the Preferred Shares to
any Competitor of the Company without the prior written consent of
the Company (which consent may be given or withheld, or made
subject to such conditions as are determined by the Company, in its
sole discretion). For purposes of this Section 4.2, “
Competitor ” shall mean (i) any Person that (x) sells
office products or services, whether in retail stores or via direct
sales, catalogs or the internet and (y) such sales represent
greater than 15% of the total annual sales, for the most recent
completed fiscal year, of such Person and its direct and indirect
subsidiaries taken as a whole and (ii) any Person that has direct
or indirect majority voting control of any Person identified in the
preceding clause (i).
4.3
No Block Transfers to Individual Persons . Each Investor
agrees that it will not, individually or acting together with any
other Investor, at any time knowingly (after reasonable inquiry),
directly or indirectly, transfer any Preferred Shares or any shares
of Common Stock issuable upon conversion of the Preferred Shares
(a) to any individual Person or “group” (within the
meaning of Section 13(d)(3) of the Exchange Act) in an amount
constituting 7.0% or more of the voting capital stock of the
Company then outstanding or (b) to any individual Person or
“group” (within the meaning of Section 13(d)(3) of the
Exchange Act) that, immediately followi
