10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark one)

x Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended:  May 1, 2010

o Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from                     to                    

Commission File Number:  0-17586

STAPLES, INC.

(Exact name of registrant as specified in its charter)

Delaware		04-2896127
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

Five Hundred Staples Drive, Framingham, MA 01702

(Address of principal executive office and zip code)

508-253-5000

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes x  No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes x  No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer x	Accelerated filer o
Non-accelerated filer o	Smaller reporting company o
(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)  Yes o  No x

The registrant had 729,918,637 shares of common stock outstanding as of May 18, 2010.

STAPLES, INC. AND SUBSIDIARIES

FORM  10-Q

May 1, 2010

TABLE OF CONTENTS

	Page
Part I — Financial Information:
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets (unaudited)	3
Condensed Consolidated Statements of Income (unaudited)	4
Condensed Consolidated Statements of Cash Flows (unaudited)	5
Notes to Condensed Consolidated Financial Statements	6-17
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	18-23
Item 3. Quantitative and Qualitative Disclosures about Market Risk	24
Item 4. Controls and Procedures	24
Part II — Other Information
Item 1A. Risk Factors	25-29
Item 6.  Exhibits	29
Signatures	30
Exhibit Index	31

2

PART I - - FINANCIAL INFORMATION

Item 1. Financial Statements

STAPLES, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(Dollar Amounts in Thousands, Except Share Data)

(Unaudited)

	May 1,			January 30,
	2010			2010
ASSETS
Current assets:
Cash and cash equivalents	$	1,533,390		$	1,415,819
Receivables, net	1,791,750			1,811,365
Merchandise inventories, net	2,292,504			2,261,149
Deferred income tax asset	313,391			353,329
Prepaid expenses and other current assets	305,835			333,105
Total current assets	6,236,870			6,174,767
Property and equipment:
Land and buildings	1,040,097			1,051,391
Leasehold improvements	1,276,246			1,268,848
Equipment	2,055,665			2,035,658
Furniture and fixtures	982,393			966,783
Total property and equipment	5,354,401			5,322,680
Less accumulated depreciation and amortization	3,260,421			3,158,147
Net property and equipment	2,093,980			2,164,533
Lease acquisition costs, net of accumulated amortization	24,121			25,083
Intangible assets, net of accumulated amortization	551,702			579,923
Goodwill	3,993,045			4,084,122
Other assets	646,735			688,906
Total assets	$	13,546,453		$	13,717,334
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	2,056,384		$	2,111,696
Accrued expenses and other current liabilities	1,433,618			1,603,354
Debt maturing within one year	567,283			67,269
Total current liabilities	4,057,285			3,782,319
Long-term debt	2,029,474			2,500,329
Other long-term obligations	591,753			579,746
Stockholders’ equity:
Preferred stock, $.01 par value, 5,000,000 shares authorized; no shares issued	—			—
Common stock, $.0006 par value, 2,100,000,000 shares authorized; issued 897,951,548 shares at May 1, 2010 and 896,655,170 shares at January 30, 2010	539			538
Additional paid-in capital	4,431,481			4,379,942
Accumulated other comprehensive loss	(250,352		)	(89,337		)
Retained earnings	5,992,670			5,869,138
Less: Treasury stock at cost - 168,120,477 shares at May 1, 2010 and 167,990,178 shares at January 30, 2010	(3,391,525		)	(3,388,395		)
Total Staples, Inc. stockholders’ equity	6,782,813			6,771,886
Noncontrolling interests	85,128			83,054
Total stockholders’ equity	6,867,941			6,854,940
Total liabilities and stockholders’ equity	$	13,546,453		$	13,717,334

See notes to condensed consolidated financial statements.

3

STAPLES, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Income

(Dollar Amounts in Thousands, Except Per Share Data)

(Unaudited)

	13 Weeks Ended
	May 1,			May 2,
	2010			2009
Sales	$	6,057,795		$	5,817,559
Cost of goods sold and occupancy costs	4,438,740			4,291,657
Gross profit	1,619,055			1,525,902
Operating and other expenses:
Selling, general and administrative	1,220,468			1,198,170
Integration and restructuring costs	20,882			18,997
Amortization of intangibles	15,399			21,871
Total operating expenses	1,256,749			1,239,038
Operating income	362,306			286,864
Other income (expense):
Interest income	1,771			1,672
Interest expense	(55,474		)	(60,498		)
Other expense	(631		)	(3,642		)
Consolidated income before income taxes	307,972			224,396
Income tax expense	115,490			77,417
Consolidated net income	192,482			146,979
Income attributed to the noncontrolling interests	3,712			4,015
Net income attributed to Staples, Inc.	$	188,770		$	142,964
Earnings Per Share:
Basic earnings per common share	$	0.26		$	0.20
Diluted earnings per common share	$	0.26		$	0.20
Dividends declared per common share	$	0.09		$	0.08

See notes to condensed consolidated financial statements.

4

STAPLES, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(Dollar Amounts in Thousands)

(Unaudited)

	13 Weeks Ended
	May 1,			May 2,
	2010			2009
Operating Activities:
Consolidated net income, including income from the noncontrolling interests	$	192,482		$	146,979
Adjustments to reconcile net income attributed to the controlling interests to net cash provided by operating activities:
Depreciation and amortization	125,411			134,362
Stock-based compensation	33,765			35,337
Deferred tax expense (benefit)	14,641			(11,385		)
Excess tax benefits from stock-based compensation arrangements	(1,185		)	—
Other	645			1,759
Changes in assets and liabilities:
Decrease in receivables	11,625			80,551
(Increase) decrease in merchandise inventories	(26,748		)	74,490
Decrease in prepaid expenses and other assets	22,150			64,578
Decrease in accounts payable	(50,833		)	(7,621		)
Decrease in accrued expenses and other current liabilities	(134,383		)	(33,807		)
Increase (decrease) in other long-term obligations	5,277			(47,009		)
Net cash provided by operating activities	192,847			438,234
Investing Activities:
Acquisition of property and equipment	(48,993		)	(53,717		)
Net cash used in investing activities	(48,993		)	(53,717		)
Financing Activities:
Proceeds from the exercise of stock options and the sale of stock under employee stock purchase plans	17,004			8,578
Repayments of commercial paper, net of proceeds from issuances	—			(529,634		)
Proceeds from borrowings	61,079			796,673
Payments on borrowings, including payment of deferred financing fees	(36,316		)	(504,342		)
Cash dividends paid	(65,238		)	(58,978		)
Excess tax benefits from stock-based compensation arrangements	1,185			—
Purchase of treasury stock, net	(3,130		)	(1,283		)
Net cash used in financing activities	(25,416		)	(288,986		)
Effect of exchange rate changes on cash and cash equivalents	(867		)	9,056
Net increase in cash and cash equivalents	117,571			104,587
Cash and cash equivalents at beginning of period	1,415,819			633,774
Cash and cash equivalents at end of period	$	1,533,390		$	738,361

See notes to condensed consolidated financial statements.

5

STAPLES, INC. AND SUBSIDIARES

Notes to Condensed Consolidated Financial Statements

Note A - Basis of Presentation

The accompanying interim unaudited condensed consolidated financial statements include the accounts of Staples, Inc. and its subsidiaries (“Staples” or “the Company”).  These financial statements are for the period covering the thirteen weeks ended May 1, 2010 (also referred to as the “first quarter of 2010”) and the period covering the thirteen weeks ended May 2, 2009 (also referred to as the “first quarter of 2009”).  All intercompany accounts and transactions are eliminated in consolidation.  Certain previously reported amounts have been reclassified to conform with the current period presentation.

These financial statements have been prepared based upon Securities and Exchange Commission (“SEC”) rules that permit reduced disclosure for interim periods.   For a more complete discussion of significant accounting policies and certain other information, these financial statements should be read in conjunction with the audited consolidated financial statements and footnotes included in the Company’s Annual Report on Form 10-K for the year ended January 30, 2010.  In the opinion of management, these financial statements reflect all normal recurring adjustments considered necessary to present fairly the financial position and the results of operations and cash flows for the interim periods presented.  The results of operations for the interim periods are not necessarily indicative of the results to be expected for the full fiscal year.

Note B — New Accounting Pronouncements

In June 2009, a pronouncement was issued relating to information a company needs to provide regarding the sales of securitized financial assets and similar transactions, particularly if the company has continuing exposure to the risks related to transferred financial assets (Financial Accounting Standards Board Accounting Standards Codification (“ASC”) Topic 860). This pronouncement eliminates the concept of a “qualifying special-purpose entity,” changes the requirements for derecognizing financial assets and requires additional disclosures. This pronouncement is effective for fiscal years beginning after November 15, 2009.  The Company adopted this pronouncement as of January 31, 2010.  This pronouncement did not have any impact on the Company’s consolidated financial condition, results of operations or cash flows.

In June 2009, a pronouncement was issued that clarified how a company determines whether an entity, that is insufficiently capitalized or not controlled through voting (or similar rights), should be capitalized (ASC Topic 810).  This determination of whether a company is required to consolidate an entity is based on, among other things, an entity’s purpose and design and a company’s ability to direct the activities of the entity that most significantly impact the entity’s economic performance. This pronouncement requires an ongoing reassessment of whether a company is the primary beneficiary of a variable interest entity. This pronouncement also requires additional disclosures about a company’s involvement in variable interest entities and any significant changes in risk exposure due to that involvement. This pronouncement is effective for fiscal years beginning after November 15, 2009.  The Company adopted this pronouncement as of January 31, 2010.   This pronouncement did not have any impact on the Company’s consolidated financial condition, results of operations or cash flows.

In October 2009, a pronouncement was issued that amended the rules on revenue recognition for multiple-deliverable revenue arrangements.  This amendment eliminated the residual method of allocation for multiple-deliverable revenue arrangements and requires that arrangement consideration be allocated at the inception of an arrangement to all deliverables using the relative selling price method (ASC Topic 605).   This pronouncement establishes a selling price hierarchy for determining the selling price of a deliverable, which includes: (1) vendor-specific objective evidence if available, (2) third-party evidence if vendor-specific objective evidence is not available, and (3) estimated selling price if neither vendor-specific nor third-party evidence is available.  In addition, this pronouncement expands the disclosure requirements related to a vendor’s multiple-deliverable revenue arrangements.  This pronouncement is effective for revenue arrangements entered into or materially modified in fiscal years beginning after June 15, 2010. The Company will adopt this pronouncement as of January 30, 2011.  The Company is currently evaluating the potential impact, if any, of the adoption on its consolidated financial condition, results of operations and cash flows.

Note C — Integration and Restructuring Costs and Acquisition Reserves

Integration and restructuring costs represent the costs associated with the integration of Corporate Express N.V. (“Corporate Express”) (which was acquired in July 2008) with the Company’s pre-existing business and the consolidation of certain operations of the combined Company.

6

STAPLES, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (continued)

Integration and restructuring costs are comprised of the following (in thousands):

	13 Weeks Ended
	May 1, 2010		May 2, 2009
Severance and retention	$	6,707	$	2,217
Consulting and other costs	8,908		5,080
Facility closure costs and other asset write-downs	5,267		11,700
Total	$	20,882	$	18,997

In connection with the Company’s acquisition of Corporate Express, acquisition reserves were established.  The activity related to the Company’s acquisition reserve (in thousands) for fiscal 2010 is as follows:

	Balance as ofJanuary 30, 2010		Utilization			Foreign Exchange Fluctuations			Balance as ofMay 1, 2010
Transaction costs	$	807	$	—		$	—		$	807
Severance	28,843		(5,632		)	(1,068		)	22,143
Facility closures	28,390		(4,638		)	(139		)	23,613
Other	10,759		—			(61		)	10,698
Total	$	68,799	$	(10,270	)	$	(1,268	)	$	57,261

The Company believes that the reserves above should be entirely utilized by the end of fiscal year 2010; however some payments related to facility closures may be made over the remaining lease terms.

Note D — Fair Value Measurements, Derivative Instruments and Hedging Activities

Fair Value Measurements:  ASC 820 establishes a fair value hierarchy that prioritizes the inputs used to measure fair value. The hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1 measurement), then priority to quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active and model-based valuation techniques for which all significant assumptions are observable in the market (Level 2 measurement), then the lowest priority to unobservable inputs (Level 3 measurement).

The following table shows the Company’s assets and liabilities as of May 1, 2010 that are measured at fair value on a recurring basis (in thousands):

	Quoted Prices inActive Markets forIdentical Assets orLiabilitiesLevel 1	SignificantOtherObservableInputsLevel 2(1)			UnobservableInputsLevel 3
Assets
Derivative assets	—	$	24,766		—
Liabilities
Derivative liabilities	—	$	(5,418	)	—

(1) Based on model-based valuation techniques.

The fair values of cash and cash equivalents, receivables, accounts payable, accrued expenses, other current liabilities and short-term debt with the exception of the $500 million, 7.75% notes due April 1, 2011 (the “April 2011 Notes”), approximate their carrying values because of their short-term nature.   The fair values of long-term debt, with the exception of the unhedged portion of the Company’s $1.5 billion, 9.75% notes due January 15, 2014 (the “January 2014 Notes”), approximate their carrying value because of the Company’s use of derivative instruments that qualify for hedge accounting. The fair values of the April 2011 Notes and unhedged portion of the January 2014 Notes at May 1, 2010 were $530.0 million and $913.4 million , respectively, based on quoted market prices.

7

STAPLES, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (continued)

Derivative Instruments and Hedging Activities: Staples uses interest rate swaps to turn certain fixed rate debt into variable rate debt and certain variable rate debt into fixed rate debt and currency swaps to hedge a portion of the value of Staples’ net investment in Canadian dollar denominated subsidiaries. These derivatives qualify for hedge accounting treatment as the derivatives have been highly effective in offsetting changes in fair value of the hedged items.

All derivatives are recorded at fair value and the changes in fair value are immediately included in earnings if the derivatives do not qualify as effective hedges. If a derivative is designated as a fair value hedge, then changes in the fair value of the derivative are offset against the changes in the fair value of the underlying hedged item in earnings.  If a derivative is designated as a cash flow hedge, then the effective portion of the changes in the fair value of the derivative is recognized as a component of accumulated other comprehensive income (loss) until the underlying hedged item is recognized in earnings or the forecasted transaction is no longer probable of occurring. If a derivative or a nonderivative financial instrument is designated as a hedge of the Company’s net investment in a foreign subsidiary, then changes in the fair value of the financial instrument are recognized as a component of accumulated other comprehensive income (loss) to offset a portion of the change in the translated value of the net investment being hedged, until the investment is sold or liquidated. The Company formally documents all hedging relationships for all derivative and nonderivative hedges and the underlying hedged items, as well as its risk management objectives and strategies for undertaking the hedge transactions.   There are no amounts excluded from the assessment of hedge effectiveness.

The Company classifies the fair value of all derivative contracts and the fair value of hedged firm commitments as either current or long-term assets or debt depending on whether the maturity date of the derivative contract is within or beyond one year from the balance sheet date. The cash flows from derivatives treated as hedges are classified in the Company’s condensed consolidated statement of cash flows in the same category as the item being hedged.

Interest Rate Swaps:   On January 8, 2003, Staples entered into an interest rate swap, for an aggregate notional amount of $325 million, designed to convert Staples’ $325 million, 7.375% notes due October 1, 2012 (the “October 2012 Notes”) into a variable rate obligation.  The swap agreement, scheduled to terminate on October 1, 2012, is designated as a fair value hedge of the October 2012 Notes.  Under the interest rate swap agreement, Staples is entitled to receive semi-annual interest payments at a fixed rate of 7.375% and is required to make semi-annual interest payments at a floating rate equal to the 6 month LIBOR plus 3.088%. The interest rate swap agreement is being accounted for as a fair value hedge and the differential to be paid or received on the interest rate swap agreement is accrued and recognized as an adjustment to interest expense over the life of the agreement and the October 2012 Notes.  At May 1, 2010, the interest rate swap agreement had a fair value gain of $21.8 million, which was included in other assets.  No amounts were included in the condensed consolidated statement of income for the first quarter of 2010 or 2009 related to ineffectiveness associated with this fair value hedge.

In connection with Staples’ acquisition of Corporate Express, the Company assumed interest rate swaps, for a notional amount of AUD $103 million, designed to convert Corporate Express’ variable rate credit facilities into fixed rate obligations.   AUD $30 million of these swaps matured in July 2009 and AUD $8 million of these swaps matured in January 2010, as scheduled.  The Company also entered into interest rate swap agreements in August 2009, for a notional amount of AUD $35 million, designed to convert local variable rate credit facilities into fixed rate obligations.  As of May 1, 2010, the total notional amount of all outstanding interest rate swap agreements is AUD $100 million (approximately $93.0 million, based on foreign exchange rates at May 1, 2010).  The remaining swap agreements are scheduled to terminate in four stages:  AUD $40 million in July 2010, AUD $25 million in July 2011, AUD $10 million in August 2011 and the remaining AUD $25 million in August 2012.    Under the terms of the agreements, the Company is required to make monthly interest payments at a weighted average interest rate of 6.34% and is entitled to receive monthly interest payments at a floating rate equal to the average bid rate for borrowings having a term closest to the relevant period displayed on the appropriate page of the Reuters screen (BBSY).  The interest rate swaps are being accounted for as a cash flow hedge and the differential to be paid or received on the interest rate swap agreements is accrued and recognized as an adjustment to interest expense over the life of the agreements.  At May 1, 2010, the interest rate swap agreements had a fair value loss of AUD $0.82 million (approximately $0.76 million, based on foreign exchange rates at May 1, 2010), which was included in stockholders’ equity as a component of accumulated other comprehensive loss.  No amounts were included in the condensed consolidated statement of income for the first quarter of 2010 or 2009 related to ineffectiveness associated with this cash flow hedge.   The amount of estimated cash flow hedges’ unrealized net gains or losses expected to be reclassified to earnings in the next twelve months is not significant.

8

STAPLES, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (continued)

On March 16, 2010, Staples entered into an interest rate swap, for an aggregate notional amount of $750 million, designed to convert half of the aggregate principal amount of the January 2014 Notes into a variable rate obligation.  The swap agreement, scheduled to terminate on January 14, 2014, is designated as a fair value hedge of half of the aggregate principal amount of the January 2014 Notes.  Under the interest rate swap agreement, Staples is entitled to receive semi-annual interest payments at a fixed rate of 9.75% and is required to make semi-annual interest payments at a floating rate equal to the 3 month LIBOR plus 7.262%. The interest rate swap agreement is being accounted for as a fair value hedge and the differential to be paid or received on the interest rate swap agreement is accrued and recognized as an adjustment to interest expense over the life of the agreement and the January 2014 Notes.  At May 1, 2010, the interest rate swap agreement had a fair value gain of $2.5 million, which was included in other assets.  No amounts were included in the condensed consolidated statement of income for the first quarter of 2010 related to ineffectiveness associated with this fair value hedge.

Foreign Currency Swaps:  On August 15, 2007, the Company entered into a $300 million foreign currency swap that has been designated as a foreign currency hedge on Staples’ net investment in Canadian dollar denominated subsidiaries.   Staples, upon maturity of the agreement in October 2012, will be entitled to receive $300 million and will be obligated to pay 316.2 million in Canadian dollars. Staples will also be entitled to receive quarterly interest payments on $300 million at a fixed rate of 5.28% and will be obligated to make quarterly interest payments on 316.2 million Canadian dollars at a fixed rate of 5.17%.  At May 1, 2010, the currency swap had an aggregate fair value loss of $4.7 million, which was included in other long term obligations. No amounts were included in the condensed consolidated statement of income for the first quarter of 2010 or 2009 related to ineffectiveness associated with this net investment hedge.

Foreign currency losses net of taxes, recorded in accumulated other comprehensive loss were $6.6 million for the first quarter of 2010 and foreign currency gains, net of taxes, recorded in accumulated other comprehensive loss were $7.0 million for the first quarter of 2009.

Note E — Equity Based Employee Benefit Plans

Staples offers its associates share ownership through certain equity based employee benefit plans, including the Amended and Restated 1998 Employee Stock Purchase Plan and the Amended and Restated International Employee Stock Purchase Plan (collectively the “Employee Stock Purchase Plans”), and the Amended and Restated 2004 Stock Incentive Plan.

Under the Employee Stock Purchase Plans, U.S. and International associates may purchase shares of Staples common stock at 85% of the lower of the market price of the common stock at the beginning or end of an offering period through payroll deductions in an amount not to exceed 10% of an employee’s annual base compensation.  Under the Amended and Restated 2004 Stock Incentive Plan, the Company grants restricted stock and restricted stock units (collectively, “Restricted Shares”) and nonqualified stock options to associates.  The Restricted Shares are restricted in that they are not transferable (i.e. they may not be exercised or sold) until they vest. The nonqualified stock options cannot be exercised until they vest.  Vesting of the Restricted Shares and nonqualified stock options occurs over different periods, depending on the terms of the individual award, but expenses relating to these awards are all recognized on a straight line basis over the applicable vesting period.

In connection with its equity based employee benefit plans, Staples included $33.8 million and $35.3 million in compensation expense for the first quarter of 2010 and the first quarter of 2009, respectively.

As of May 1, 2010, Staples had $208.9 million of nonqualified stock options and Restricted Shares to be expensed over the period through March 2014.  The Company had 42.7 million stock options outstanding, of which 29.4 million were exercisable at May 1, 2010.  The intrinsic value was $175.1 million for the outstanding nonqualified stock options and $154.0 million for the exercisable nonqualified stock options. The intrinsic value of the nonqualified stock options is the amount by which the market value of the underlying stock exceeds the exercise price of an option.

Note F — Pension Plans

In connection with the acquisition of Corporate Express, Staples assumed the obligations under the defined benefit pension plans Corporate Express sponsored.  The pension plans cover most employees in Europe and certain employees in the United States.   The benefits due to U.S. plan participants are frozen.  A number of the defined benefit plans outside the U.S. are funded with plan assets that have been segregated in trusts.  Contributions are made to these trusts, as necessary, to meet legal and other requirements.

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STAPLES, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (continued)

Net periodic pension cost recognized for the first quarter of 2010 and 2009 is based upon preliminary estimates pending the final actuarial determination of such costs for fiscal 2010 and 2009.   The following table presents a summary of the total net periodic cost recorded in the condensed consolidated statement of income for the first quarter of 2010 and 2009 related to the plans (in thousands):

	May 1, 2010									May 2, 2009
	U.S. Plans			International Plans			Total			U.S. Plans			International Plans			Total
Service cost	$	—		$	2,172		$	2,172		$	—		$	2,051		$	2,051
Interest cost	463			9,045			9,508			478			10,861			11,339
Expected return on plan assets	(435		)	(15,174		)	(15,609		)	(386		)	(13,155		)	(13,541		)
Amortization of unrecognized losses	—			967			967			—			2,133			2,133
Net periodic pension cost	$	28		$	(2,990	)	$	(2,962	)	$	92		$	1,890		$	1,982

Cash contributions of $0.3 million and $1.7 million were made to the U.S. Plans and International Plans, respectively, during the first quarter of 2010 and cash contributions of $0.2 million and $1.8 million were made to the U.S. Plans and International Plans, respectively, during the first quarter of 2009.

The Company expects to make additional cash contributions of $0.7 million and $8.4 million to the U.S. Plans and International Plans, respectively, during the remainder of fiscal 2010.

Note G — Stockholders’ Equity and Comprehensive Income

The following table reflects for the first quarter of 2010 and 2009 the changes in stockholders’ equity and comprehensive income attributable to Staples, Inc. and its noncontrolling interests (in thousands).  The noncontrolling interests reflect the 41.4% interest in Corporate Express Australia Limited that the Company does not currently own.

	Attributableto Staples,Inc.			Attributable toNoncontrollingInterests			Total
Stockholders’ equity at January 30, 2010	$	6,771,886		$	83,054		$	6,854,940
Comprehensive income:
Net income	188,770			3,712			192,482
Other comprehensive income:
Foreign currency translation adjustments, net	(152,359		)	(2,070		)	(154,429		)
Changes in fair value of derivatives, net (1)	(7,018		)	432			(6,586		)
Total other comprehensive income	(159,377		)	(1,638		)	(161,015		)
Comprehensive income	29,393			2,074			31,467
Issuance of common stock for stock options exercised	17,004			—			17,004
Tax benefit on exercise of options	1,185			—			1,185
Stock-based compensation	33,765			—			33,765
Common stock dividend	(65,238		)	—			(65,238		)
Purchase of treasury stock, net	(3,130		)	—			(3,130		)
Other	(2,052		)	—			(2,052		)
Stockholders’ equity at May 1, 2010	$	6,782,813		$	85,128		$	6,867,941

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STAPLES, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (continued)

	Attributableto Staples,Inc.			Attributable toNoncontrollingInterests			Total
Stockholders’ equity at January 31, 2009	$	5,564,207		$	58,224		$	5,622,431
Comprehensive income:
Net income	142,964			4,015			146,979
Other comprehensive income:
Foreign currency translation adjustments, net	64,060			(983		)	63,077
Changes in fair value of derivatives, net (1)	7,042			—			7,042
Total other comprehensive income (loss)	71,102			(983		)	70,119
Comprehensive income	214,066			3,032			217,098
Issuance of common stock options for stock options exercised	8,578			—			8,578
Stock-based compensation	35,337			—			35,337
Common stock dividend	(58,978		)	—			(58,978		)
Purchase of treasury stock, net	(1,283		)	—			(1,283		)
Other	(1,403		)	—			(1,403		)
Stockholders’ equity at May 2, 2009	$	5,760,524		$	61,256		$	5,821,780

(1) Changes in the fair value of derivatives are net of a tax benefit $4.9 million and tax expense of $5.2 million for the thirteen weeks ended May 1, 2010 and May 2, 2009, respectively.

The following table summarizes the components of accumulated other comprehensive income (loss) as of May 1, 2010 and January 30, 2010 (in thousands):

	May 1, 2010			January 30, 2010
Foreign currency translation adjustments	$	(117,604	)	$	36,825
Derivative instruments (net of taxes)	(750		)	5,836
Deferred pension costs (net of taxes)	(131,998		)	(131,998		)
Accumulated other comprehensive loss	$	(250,352)		$	(89,337	)

Note H - Computation of Earnings Per Common Share

The computation of basic and diluted earnings per share for the first quarter of 2010 and 2009 is as follows (in thousands, except per share data):

	13 Weeks Ended
	May 1, 2010		May 2, 2009
Net income attributed to Staples, Inc.	$	188,770	$	142,964
Denominator:
Weighted-average common shares outstanding	718,795		705,283
Effect of dilutive securities:
Employee stock options and restricted shares	13,354		12,655
Weighted-average common shares outstanding assuming dilution	732,149		717,938
Basic earnings per common share	$	0.26	$	0.20
Diluted earnings per common share	$	0.26	$	0.20

11

STAPLES, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (continued)

Options to purchase shares of common stock are excluded from the calculation of diluted earnings per share when their inclusion would have an anti-dilutive effect on the calculation.   Options to purchase 12.6 million and 32.3 million shares of Staples common stock were excluded from the calculation of diluted earnings per share at May 1, 2010 and May 2, 2009, respectively.

Note I - Segment Reporting

Staples has three reportable segments: North American Delivery, North American Retail and International Operations. Staples’ North American Delivery segment consists of the U.S. and Canadian business units that sell and deliver office products and services directly to customers, and includes Contract, Staples Business Delivery and Quill.  The North American Retail segment consists of the U.S. and Canadian business units that operate office products stores. The International Operations segment consists of business units that operate office products stores and that sell and deliver office products and services directly to customers and businesses in 23 countries in Europe, Asia, Australia, and South America.

Staples evaluates performance and allocates resources based on profit or loss from operations before integration and restructuring costs, stock-based compensation, interest and other expense, non-recurring items, and the impact of changes in accounting principles (“business unit income”).  Intersegment sales and transfers are recorded at Staples’ cost; therefore, there is no intercompany profit or loss recognized on these transactions.

Staples’ North American Delivery and North American Retail segments are managed separately because the way they market products is different, the classes of customers they service may be different, and the distribution methods used to deliver products to customers are different.  The International Operations are considered a separate reportable segment because of the significant differences in the operating environment from the North American operations.

The following is a summary of sales and business unit income by reportable segment for the first quarter of 2010 and 2009 and a reconciliation of segment income to consolidated income before income taxes (in thousands):

	13 Weeks Ended
	May 1, 2010		May 2, 2009
	Sales
North American Delivery	$	2,462,654	$	2,418,358
North American Retail	2,312,210		2,188,335
International Operations	1,282,931		1,210,866
Total reportable segments	$	6,057,795	$	5,817,559

	Business Unit Income
North American Delivery	$	203,516		$	160,629
North American Retail	176,549			160,451
International Operations	36,888			20,118
Business unit income	$	416,953		$	341,198
Stock-based compensation	(33,765		)	(35,337		)
Total segment income	383,188			305,861
Interest and other expense, net	(54,334		)	(62,468		)
Integration and restructuring costs	(20,882		)	(18,997		)
Consolidated income before income taxes	$	307,972		$	224,396

Note J - Guarantor Subsidiaries

Under the terms of the Company’s April 2011 Notes, the Amended and Restated Revolving Credit Agreement with Bank of America N.A. and other lending institutions named therein (the “Revolving Credit Facility”), the October 2012 Notes, the January 2014 Notes and the commercial paper program, the Guarantor Subsidiaries, as defined below, guarantee repayment of the

12

STAPLES, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (continued)

debt. The debt is fully and unconditionally guaranteed on an unsecured, joint and several basis by Staples, the Office Superstore, LLC, Staples the Office Superstore, East Inc., Staples Contract & Commercial, Inc. and Staples the Office Superstore Limited Partnership (collectively, the “Guarantor Subsidiaries”). The term of guarantees is equivalent to the term of the related debt.  The following condensed consolidating financial data is presented for the holders of the April 2011 Notes, the October 2012 Notes, and the January 2014 Notes and illustrates the composition of Staples, Inc. (the “Parent Company”), Guarantor Subsidiaries, and non-guarantor subsidiaries as of May 1, 2010 and January 30, 2010 and for the thirteen weeks ended May 1, 2010 and May 2, 2009.  The Guarantor Subsidiaries are wholly owned by Staples, Inc.  The non-guarantor subsidiaries represent more than an inconsequential portion of the consolidated assets and revenues of Staples.

Investments in subsidiaries are accounted for by the Parent Company on the equity method for purposes of the supplemental consolidating presentation. Earnings of subsidiaries are, therefore, reflected in the Parent Company’s investment accounts and earnings. The principal elimination entries eliminate the Parent Company’s investment in subsidiaries and intercompany balances and transactions.

Condensed Consolidating Balance Sheet

As of May 1,  2010

(in thousands)

	Staples, Inc. (Parent Co.)		Guarantor Subsidiaries		Non- Guarantor Subsidiaries		Eliminations			Consolidated
Cash and cash equivalents	$	618,067	$	51,064	$	864,259	$	—		$	1,533,390
Merchandise inventories, net	—		1,301,008		991,496		—			2,292,504
Other current assets	136,270		599,926		1,674,780		—			2,410,976
Total current assets	754,337		1,951,998		3,530,535		—			6,236,870
Net property, equipment and other assets	708,186		1,305,582		1,302,770		—			3,316,538
Goodwill	1,630,190		154,527		2,208,328		—			3,993,045
Investment in affiliates and intercompany, net	6,197,492		5,290,420		7,226,352		(18,714,264		)	—
Total assets	$	9,290,205	$	8,702,527	$	14,267,985	$	(18,714,264	)	$	13,546,453
Total current liabilities	$	747,143	$	1,626,865	$	1,683,277	$	—		$	4,057,285
Total long-term liabilities	1,675,121		583,157		362,949		—			2,621,227
Total stockholders’ equity	6,867,941		6,492,505		12,221,759		(18,714,264		)	6,867,941
Total liabilities and stockholders’ equity	$	9,290,205	$	8,702,527	$	14,267,985	$	(18,714,264	)	$	13,546,453

13

STAPLES, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (continued)

Condensed Consolidating Balance Sheet

As of January 30,  2010

(in thousands)

	Staples, Inc. (Parent Co.)		Guarantor Subsidiaries		Non- Guarantor Subsidiaries		Eliminations			Consolidated
Cash and cash equivalents	$	581,095	$	54,324	$	780,400	$	—		$	1,415,819
Merchandise inventories, net	—		1,312,523		948,626		—			2,261,149
Other current assets	171,292		640,587		1,685,920		—			2,497,799
Total current assets	752,387		2,007,434		3,414,946		—			6,174,767
Net property, equipment and other assets	751,876		1,351,770		1,354,799		—			3,458,445
Goodwill	1,648,686		154,527		2,280,909		—			4,084,122
Investment in affiliates and intercompany, net	6,243,472		5,026,554		3,495,550		(14,765,576		)	—
Total assets	$	9,396,421	$	8,540,285	$	10,546,204	$	(14,765,576	)	$	13,717,334
Total current liabilities	$	347,969	$	1,733,223	$	1,701,127	$	—		$	3,782,319
Total long-term liabilities	2,193,512		611,675		274,888		—			3,080,075
Total stockholders’ equity	6,854,940		6,195,387		8,570,189		(14,765,576		)	6,854,940
Total liabilities and stockholders’ equity	$	9,396,421	$	8,540,285	$	10,546,204	$	(14,765,576	)	$	13,717,334

14

STAPLES, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (continued)

Condensed Consolidating Statement of Income

For the thirteen weeks ended May 1, 2010

(in thousands)

	Staples, Inc. (Parent Co.)			Guarantor Subsidiaries		Non- Guarantor Subsidiaries		Eliminations			Consolidated
Sales	$	—		$	3,671,494	$	2,386,301	$	—		$	6,057,795
Cost of goods sold and occupancy costs	2,960			2,745,712		1,690,068		—			4,438,740
Gross profit	(2,960		)	925,782		696,233		—			1,619,055
Operating and other expenses	(191,730		)	737,925		570,986		193,902			1,311,083
Consolidated income before income taxes	188,770			187,857		125,247		(193,902		)	307,972
Income tax expense	—			77,717		37,773		—			115,490
Consolidated net income (loss)	188,770			110,140		87,474		(193,902		)	192,482
Income attributed to the noncontrolling interests	—			—		3,712		—			3,712
Net income attributed to Staples, Inc.	$	188,770		$	110,140	$	83,762	$	(193,902	)	$	188,770

Condensed Consolidating Statement of Income

For the thirteen weeks ended May 2, 2009

(in thousands)

	Staples, Inc. (Parent Co.)			Guarantor Subsidiaries		Non- Guarantor Subsidiaries		Eliminations			Consolidated
Sales	$	—		$	2,913,548	$	2,904,011	$	—		$	5,817,559
Cost of goods sold and occupancy costs	2,425			2,139,384		2,149,848		—			4,291,657
Gross profit	(2,425		)	774,164		754,163		—			1,525,902
Operating and other expenses	(145,389		)	638,696		602,609		205,590			1,301,506
Consolidated income before income taxes	142,964			135,468		151,554		(205,590		)	224,396
Income tax expense	—			31,489		45,928		—			77,417
Consolidated net income (loss)	142,964			103,979		105,626		(205,590		)	146,979
Income attributed to the noncontrolling interests	—			—		4,015		—			4,015
Net income attributed to Staples, Inc.	$	142,964		$	103,979	$	101,611	$	(205,590	)	$	142,964

15

STAPLES, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (continued)

Condensed Consolidating Statement of Cash Flows

For the thirteen weeks ended May 1, 2010

(in thousands)

	Staples, Inc. (Parent Co.)			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Consolidated
Net cash provided by operating activities	$	117,801		$	21,924		$	53,122		$	192,847
Investing activities:
Acquisition of property and equipment	(6,519		)	(26,037		)	(16,437		)	(48,993		)
Cash used in investing activities	(6,519		)	(26,037		)	(16,437		)	(48,993		)
Financing activities:
Proceeds from borrowings	13,072			—			48,007			61,079
Payments on borrowings, including payment of deferred financing fees	(36,316		)	—			—			(36,316		)
Purchase of treasury stock, net	(3,130		)	—			—			(3,130		)
Excess tax benefits from stock-based compensation arrangements	298			853			34			1,185
Cash dividends paid	(65,238		)	—			—			(65,238		)
Other	17,004			—			—			17,004
Cash (used in) provided by financing activities	(74,310		)	853			48,041			(25,416		)
Effect of exchange rate changes on cash	—			—			(867		)	(867		)
Net increase (decrease) in cash and cash equivalents	36,972			(3,260		)	83,859			117,571
Cash and cash equivalents at beginning of period	581,095			54,324			780,400			1,415,819
Cash and cash equivalents at end of period	$	618,067		$	51,064		$	864,259		$	1,533,390

Condensed Consolidating Statement of Cash Flows

For the thirteen weeks ended May 2, 2009

(in thousands)

	Staples, Inc. (Parent Co.)			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Consolidated
Net cash provided by operating activities	$	373,549		$	21,304		$	43,381		$	438,234
Investing activities:
Acquisition of property and equipment	(5,170		)	(28,714		)	(19,833		)	(53,717		)
Cash used in investing activities	(5,170		)	(28,714		)	(19,833		)	(53,717		)
Financing activities:
Repayments of commercial paper, net of proceeds from issuances	(529,634		)	—			—			(529,634		)
Proceeds from borrowings	796,673			—			—			796,673
Payments on borrowings, including payment of deferred financing fees	(504,342		)	—			—			(504,342		)
Purchase of treasury stock, net	(1,283		)	—			—			(1,283		)
Cash dividends paid	(58,978		)	—			—			(58,978		)
Other	8,578			—			—			8,578
Cash used in financing activities	(288,986		)	—			—			(288,986		)
Effect of exchange rate changes on cash	—			—			9,056			9,056
Net increase (decrease) in cash and cash equivalents	79,393			(7,410		)	32,604			104,587
Cash and cash equivalents at beginning of period	74,255			45,083			514,436			633,774
Cash and cash equivalents at end of period	$	153,648		$	37,673		$	547,040		$	738,361

16

STAPLES, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (continued)

Note K — Commitments and Contingencies

From time to time, the Company is involved in litigation arising from the operation of its business that is considered routine and incidental to its business. The Company does not expect the results of any of these actions to have a material adverse effect on its business, results of operations, or financial condition.

At the time the Corporate Express tender offer was fully settled on July 23, 2008, Staples had acquired more than 99% of the outstanding capital stock of Corporate Express.  Staples has worked diligently to acquire the remaining capital stock of Corporate Express by means of a compulsory judicial “squeeze out” procedure in accordance with the Dutch Civil Code.  Staples and the other parties to the “squeeze out” procedure have submitted their arguments to the Dutch court and are awaiting a decision.  While Staples does not know the exact date that the Dutch court will render a judgment, it anticipates that a judgment will be rendered prior to the end of fiscal 2010.  There is, however, no guarantee that the court will render a judgment before such time.  Any additional payments will be recorded in equity pursuant to ASC Topic 810.

With the acquisition of Corporate Express, the Company became the majority 58.6% shareholder of Corporate Express Australia Limited (“Corporate Express Australia”), a public company traded on the Australian Stock Exchange.  On March 16, 2010, the Company announced that it had made an offer to acquire all of the noncontrolling interest in Corporate Express Australia for cash consideration of AUD$5.60 per share (the “Offer”), representing a total enterprise value of AUD$1.0 billion (approximately $930 million based on foreign exchange rates at May 1, 2010).  The Offer is subject to a 90% minimum acceptance condition and there being no significant movements in the Australian stock market.  Corporate Express Australia’s Board has unanimously recommended the Offer subject to no superior proposal emerging.

Note L — Subsequent Events

Subsequent events have been evaluated through the date the financial statements were issued and no events or transactions have occurred that require disclosure or adjustment to these condensed consolidated financial statements.

17

STAPLES, INC. AND SUBSIDIARIES

Management’s Discussion and Analysis

of Financial Condition and Results of Operations

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward Looking Statements

This Quarterly Report on Form 10-Q and, in particular, this management’s discussion and analysis contain or incorporate a number of forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”).  Any statements contained in or incorporated by reference into this report that are not statements of historical fact should be considered forward-looking statements.  You can identify these forward-looking statements by the use of the words “believes”, “expects”, “anticipates”, “plans”, “may”, “will”, “would”, “intends”, “estimates” and other similar expressions, whether in the negative or affirmative.  These forward-looking statements are based on current expectations, estimates, forecasts and projections about the industry and markets in which we operate and management’s beliefs and assumptions, and should be read in conjunction with our condensed consolidated financial statements and notes to condensed consolidated financial statements included in this report.  We cannot guarantee that we actually will achieve the plans, intentions or expectations disclosed in the forward-looking statements made.  There are a number of important risks and uncertainties that could cause our actual results to differ materially from those indicated by such forward-looking statements.  These risks and uncertainties include, without limitation, those set forth under the heading “Risk Factors” of this Quarterly Report on Form 10-Q.  We do not intend to update publicly any forward-looking statements whether as a result of new information, future events or otherwise.

Results of Operations

We have provided below an overview of our operating results as well as a summary of our consolidated performance and details of our segment performance.  Net income is presented in our Consolidated Performance, in accordance with accounting principles generally accepted in the United States (“US GAAP”) and as adjusted for certain items as noted in the reconciliation tables below.  Management uses adjusted net income, among other standards, to measure operating performance.  We have added this information because we believe it helps in understanding the results of our operations on a comparative basis.  This adjusted information supplements and is not intended to replace performance measures required by US GAAP disclosure.

Overview

Major contributors to our results for the first quarter of 2010 compared to our results for the first quarter of 2009 are reviewed in detail in the Consolidated Performance and Segment Performance discussions and are summarized below:

·On a consolidated basis, we generated $6.1 billion in sales, with sales growth of 4.1% driven by the positive impact of foreign exchange rates.

·North American Delivery’s sales increased 1.8% for the quarter and business unit income rate increased to 8.3% from 6.6%.

·North American Retail’s sales increased 5.7% and comparable store sales increased by 1%.  North America Retail’s business unit income rate increased to 7.6% from 7.3%.

·International Operations’ sales increased 6.0% in US dollars and decreased 4.4% in local currency.  International Operations’ business unit income rate increased to 2.9% from 1.7%.

·We now operate 2,257 stores worldwide, with a net addition of 14 stores during the first quarter of 2010.

While maintaining our focus on customer service and expense control, we are also continuing to invest in strategic growth initiatives to drive our long-term success, including technology products and services, copy and print services, and facility and break room supplies.

Outlook

Our expectations for 2010 assume a gradual economic recovery extending throughout the year.  For the second quarter of 2010 and the full year 2010, we expect sales to increase in the low single-digits compared to the same periods in 2009.   We expect to achieve diluted earnings per share, on a GAAP basis and an adjusted diluted earnings per share for the second quarter and full year 2010 as follows:

18

	Second Quarter 2010	Full Year 2010
Diluted earnings per share, on a GAAP basis	$0.16 to $0.18	$1.20 to $1.28
Impact of integration and restructuring costs per share	0.02	0.05
Adjusted earnings per share	$0.18 to $0.20	$1.25 to $1.33

Our earnings per share expectations for the second quarter assume that the U.S. Congress will not extend the provisions that allow for the deferral of income tax on certain unremitted foreign earnings prior to the end of the second quarter of 2010; as a result we expect our tax rate for the second quarter will be 37.5%.  Our full year earnings per share expectations assume that these provisions will be extended prior to the end of 2010, and that our tax rate for the full year will be 34.5%.

We expect to incur the following expenses during the second quarter and full year 2010:

	Second Quarter 2010	Full Year 2010
Depreciation expense	$120 million to $130 million	$470 million to $490 million
Net interest expense	$50 million to $55 million	$215 million to $225 million
Amortization of intangibles	$15 million to $20 million	$65 million to $75 million
Integration and restructuring costs	$15 million to $20 million	$45 million to $55 million

Consolidated Performance

Net income attributed to Staples, Inc. for the first quarter of 2010 was $188.8 million or $0.26 per diluted share compared to $143.0 million or $0.20 per diluted share for the first quarter of 2009.  Our results for the first quarter of 2010 and 2009 include integration and restructuring costs.  A reconciliation of net income adjusted to remove the integration and restructuring costs, net of taxes, is shown below (amounts in thousands, except per share data):

	First Quarter 2010				First Quarter 2009
	Net income		Per Diluted Share		Net income		Per Diluted Share
Net income as reported	$	188,770	$	0.26	$	142,964	$	0.20
Adjustments, net of taxes: (1)
Integration and restructuring costs (2)	13,051		0.02		12,443		0.02
Adjusted net income	$	201,821	$	0.28	$	155,407	$	0.22

(1) The tax effect of all adjustments is based on our effective tax rate 37.5% for the first quarter of 2010 and 34.5% for the first quarter of 2009.

(2) See Note C to the Notes to the Condensed Consolidated Financial Statements.

Sales: Sales for the first quarter of 2010 were $6.1 billion, an increase of 4.1% from the first quarter of 2009.  Our sales growth for the first quarter of 2010 reflects the positive impact of foreign exchange rates of $248.0 million and to a lesser extent an increase in non-comparable sales for new stores opened in the last twelve months, partially offset by lower sales in our European printing systems business.

Gross Profit:  Gross profit as a percentage of sales was 26.7% for the first quarter of 2010 compared to 26.2% for the first quarter of 2009.  The increase in gross profit rate for 2010 was primarily driven by better buying and improvements in supply chain productivity.

Selling, General and Administrative Expenses:  Selling, general and administrative expenses were 20.1% of sales for the first quarter of 2010 compared to 20.6% for the first quarter of 2009.  This decrease reflects reduced marketing expenses, leverage in labor, and lower depreciation expense.

Integration and Restructuring Costs: Integration and restructuring costs represent the costs associated with the integration of Corporate Express N.V. (“Corporate Express”) with our pre-existing business and the consolidation of certain operations of the combined company.  Integration and restructuring costs were $20.9 million for the first quarter of 2010 and $19.0 million for the first quarter of 2009.   Integration and restructuring costs for the first quarter of 2010 included $8.9 million of consulting and other costs, $6.7 million for severance and retention, and $5.3 million for facility closures and other asset write-downs.   Integration and restructuring costs for the first quarter of 2009 included $11.7 million for facility closures and other asset write-downs, $5.1 million of consulting and other costs, and $2.2 million for severance and retention.

19

Amortization of Intangibles: Amortization of intangibles was $15.4 million for the first quarter of 2010 compared to $21.9 million for the first quarter of 2009, reflecting the amortization of certain tradenames, customer relationships and noncompetition agreements.  Amortization expense relating to intangibles resulting from our acquisition of Corporate Express was $12.7 million for the first quarter of 2010 and $14.1 million for the first quarter of 2009.

Interest Income: Interest income was $1.8 million for the first quarter of 2010 compared to $1.7 million for the first quarter of 2009.  The increase in interest income for the first quarter of 2010 was primarily due to an increase in our average cash balance, partially offset by a reduction in interest rates.

Interest Expense: Interest expense decreased to $55.5 million for the first quarter of 2010 from $60.5 million for the first quarter of 2009.  The decrease in interest expense from the first quarter of 2009 to the first quarter of 2010 was primarily due to the inclusion, in 2009, of fees associated with borrowings used to fund the acquisition of Corporate Express, partially offset by the inclusion of interest on our $500 million, 7.75% notes due April 1, 2011 (the “April 2011 Notes”) for the entire first quarter of 2010.  We use interest rate swap agreements to convert a portion of our fixed rate debt obligations into variable rate obligations and a portion of our variable rate obligations into fixed rate obligations.  Excluding the impact of our interest rate swap agreements, interest expense would have been $60.5 million for the first quarter of 2010 compared to $61.5 million for the first quarter of 2009.

Other Expense: Other expense was $0.6 million for the first quarter of 2010 compared to $3.6 million for the first quarter of 2009.  These amounts primarily reflect foreign exchange gains and losses recorded in the respective periods.

Income Taxes:  Our effective tax rate was 37.5% for the first quarter of 2010 compared to 34.5% for the first quarter of 2009.  The increase in the effective tax rate from the first quarter of 2009 to the first quarter of 2010 was due to the expiration of provisions in the Internal Revenue Code which allow for the deferral of United States income tax on certain unremitted foreign earnings.

Segment Performance

We have three reportable segments: North American Delivery, North American Retail and International Operations. Staples’ North American Delivery segment consists of the U.S. and Canadian business units that sell and deliver office products and services directly to customers, and includes Contract, Staples Business Delivery and Quill.  The North American Retail segment consists of the U.S. and Canadian business units that operate office products stores. The International Operations segment consists of business units that sell and deliver office products and services directly to customers and businesses and that operate office products stores in 23 countries in Europe, Asia, Australia and South America.

The following tables provide a summary of our sales and business unit income by reportable segment.    Business unit income excludes integration and restructuring costs, stock-based compensation, interest and other expense, non-recurring items and the impact of changes in accounting principles (see reconciliation of total segment income to consolidated income before taxes in Note I in the Notes to the Condensed Consolidated Financial Statements):

	(Amounts in thousands)13 Weeks Ended				May 1, 2010		May 2, 2009
					Increase		Increase (Decrease)
					From		From
	May 1, 2010		May 2, 2009		Prior Year		Prior Year
Sales:
North American Delivery	$	2,462,654	$	2,418,358	1.8	%	40.6	%
North American Retail	2,312,210		2,188,335		5.7	%	(9.1	)%
International Operations	1,282,931		1,210,866		6.0	%	60.3	%
Total segment sales	$	6,057,795	$	5,817,559	4.1	%	19.1	%

20

	(Amounts in thousands)13 Weeks Ended						May 1, 2010		May 2, 2009
	May 1, 2010			May 2, 2009			% of Sales		% of Sales
Business Unit Income:
North American Delivery	$	203,516		$	160,629		8.3	%	6.6	%
North American Retail	176,549			160,451			7.6	%	7.3	%
International Operations	36,888			20,118			2.9	%	1.7	%
Business unit income	416,953			341,198			6.9	%	5.9	%
Stock-based compensation	(33,765		)	(35,337		)	(0.6	)%	(0.6	)%
Segment income	$	383,188		$	305,861		6.3	%	5.3	%

North American Delivery: Sales increased 1.8% for the first quarter of 2010.  This increase was the result of the positive impact of foreign exchange rates of $33.7 million and to a lesser extent the impact of our customer acquisition efforts partially offset by reduced sales to existing customers.

Business unit income as a percentage of sales increased to 8.3% for the first quarter of 2010 from 6.6% for the first quarter of 2009. The increase in business unit income as a percentage of sales for the first quarter of 2010 was primarily due to integration related purchasing, sales force and supply chain improvements, reduced amortization expense and favorable product mix as customers purchased more discretionary products with higher margins.

North American Retail:  Sales increased 5.7% for the first quarter of 2010.  This increase was the result of the positive impact of foreign exchange rates of $88.9 million, and to a lesser extent, a 1% increase in comparable store sales and an increase in non-comparable sales for new stores opened in the past twelve months.  Our comparable store sales increase for the first quarter of 2010 reflects an increase in customer traffic partially offset by lower average order size.

Business unit income as a percentage of sales increased to 7.6% for 2010 from 7.3% for the first quarter of 2009.   The increase for the first quarter of 2010 primarily reflects reduced marketing expense and lower depreciation expense, partially offset by unfavorable product mix.

International Operations: Sales increased 6.0% for the first quarter of 2010.  This increase was the result of the positive impact of foreign exchange rates of $125.4 million, offset by lower sales in our European printing systems business and, to a lesser extent, a 5% decrease in comparable store sales in Europe.

Business unit income as a percentage of sales increased to 2.9% for the first quarter of 2010 from 1.7% for the first quarter of 2009.  The increase for the first quarter of 2010 is driven by integration related purchasing and supply chain improvements, and reduced marketing and amortization expense, partially offset by losses in our European printing systems business and deleverage in fixed occupancy costs.

Stock-Based Compensation: Stock-based compensation decreased to $33.8 million for the first quarter of 2010 from $35.3 million for the first quarter of 2009.  Stock-based compensation includes expenses associated with our employee stock purchase plans and the issuance of stock options, restricted shares and performance share awards.

Critical Accounting Policies and Significant Estimates

Our condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America. Preparation of these statements requires management to make significant judgments and estimates. Some accounting policies have a significant impact on amounts reported in these financial statements. A summary of significant accounting policies and a description of accounting policies that are considered critical may be found in our 2009 Annual Report on Form 10-K, filed on March 2, 2010, in Note A of the Notes to the Consolidated Financial Statements and in the Critical Accounting Policies section of Management’s Discussion and Analysis of Financial Condition and Results of Operations.   There have been no material changes to the Accounting Policies or our application of the Accounting Policies, as disclosed in our 2009 Annual Report on Form 10-K filed on March 2, 2010.

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Liquidity and Capital Resources

Cash Flows

Cash provided by operations was $192.8 million for the first quarter of 2010 compared to $438.2 million for the first quarter of 2009.  The decrease in operating cash flow from 2009 to 2010 is primarily due to changes in working capital, partially offset by an increase in net income adjusted for non-cash expenses.

Cash used in investing activities was $49.0 million for the first quarter of 2010 compared to $53.7 million for the first quarter of 2009.  The decrease in cash used in investing activities from 2009 to 2010 is due to a reduction in capital expenditures during the first quarter of 2010, driven by lower spending on new stores and information systems.

Cash used in financing activities was $25.4 million for the first quarter of 2010 compared to $289.0 million for the first quarter of 2009.  The change in cash used in financing activities from 2009 to 2010 is primarily related to the repayment and refinancing of the debt we entered into or assumed in connection with the Corporate Express acquisition.   In the first quarter of 2009, our financing activities primarily consisted of repayments made on commercial paper and the Corporate Express U.S and European securitization programs, offset by the proceeds from the April 2011 Notes.

Sources of Liquidity

We utilize cash generated from operations, short-term investments and our Revolving Credit Facility, to cover seasonal fluctuations in cash flows and to support our various growth initiatives.  At May 1, 2010, we had approximately $2.72 billion in total cash and funds available through credit agreements, which consisted of $1.19 billion of available credit and $1.53 billion of cash and cash equivalents.

A summary, as of May 1, 2010, of balances available under our credit agreements and debt outstanding is presented below (amounts in thousands):

	May 1, 2010
	Available		Debt
	Credit		Outstanding
April 2011 Notes	$	—	$	500,000
Revolving Credit Facility	750,000		—
$325 million, 7.375% notes due October 1, 2012 (the “October 2012 Notes”)	—		325,000
$1.5 billion 9.75% notes due January 1, 2014 (the “January 2014 Notes”)	—		1,500,000
Commercial paper program (1)	—		—
$300 million May 2009 securitization program	300,000		—
Lines of credit	143,524		59,163
Other notes and capital leases	—		188,301
Total	$	1,193,524	$	2,572,464

(1) At May 1, 2010, the obligations under our commercial paper program were backstopped by, and utilize borrowing capacity available under, our Revolving Credit Facility.

At May 1, 2010, there had not been a material net change to the information regarding the maturity of contractual obligations disclosed in the subsection entitled “Sources of Liquidity” of the Management’s Discussion and Analysis of Financial Condition and Results of Operations on page B-13 of our 2009 Annual Report on Form 10-K.

We expect that our cash generated from operations, together with our current cash, funds available under our existing credit agreements and other alternative sources of financing, will be sufficient to fund our planned store openings and other operating cash needs for at least the next twelve months.

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Uses of Capital

As a result of our financial position, in addition to investing in our existing businesses and pursuing strategic acquisitions, such as our offer announced on March 16, 2010 to acquire all of the noncontrolling interest in Corporate Express Australia Limited, we also expect to continue to return capital to our shareholders through a cash dividend program.   Depending on our credit metrics and our liquidity position, from time to time, we may repurchase our outstanding shares or our public notes through repurchase programs.

We currently plan to spend approximately $400 million on capital expenditures during the last three quarters of 2010, primarily related to continued investments in information systems, the integration of our distribution networks in North America and Europe, new store openings and remodels of existing stores, and growth initiatives.  We expect to open approximately 30 new stores in North America, Europe and Asia during the last three quarters of 2010.

While we have primarily grown organically, we may use capital to engage in strategic acquisitions or joint ventures in markets where we currently have a presence and in new geographic markets that could become significant to our business in future years.  We do not expect to rely on acquisitions to achieve our targeted growth plans.   We consider many types of acquisitions for their strategic and other benefits, such as our 2008 acquisition of Corporate Express.   In the past, excluding the Corporate Express acquisition, we have focused on smaller acquisitions designed to align with our existing businesses to drive long-term growth.  We expect to continue this strategy and target such acquisitions when opportunities are presented and fit within our financial structure.

We paid a first quarter 2010 cash dividend of $0.09 per share on April 15, 2010 to stockholders of record on March 26, 2010.  We expect the total value of quarterly cash dividend payments for fiscal 2010 to be $0.36 per share.   While it is our intention to continue to pay quarterly cash dividends for the remainder of 2010 and beyond, any decision to pay future cash dividends will be made by our Board of Directors and will depend upon our earnings, financial condition and other factors.

Inflation and Seasonality

While neither inflation nor deflation has had, and we do not expect either to have, a material impact upon our operating results, there can be no assurance that our business will not be affected by inflation or deflation in the future.  Our business is somewhat seasonal, with sales and profitability slightly lower during the first and second quarters of our fiscal year.

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Item 3. Quantitative and Qualitative Disclosures about Market Risk

At May 1, 2010, there had not been a material change in the interest rate risk information and foreign exchange risk information disclosed in the “Quantitative and Qualitative Disclosures about Market Risks” subsection of the Management’s Discussion and Analysis of Financial Condition and Results of Operations on page B-18 of our 2009 Annual Report on Form 10-K.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

The Company’s management, with the participation of the Company’s chief executive officer and chief financial officer, evaluated, as of May 1, 2010, the effectiveness of the Company’s disclosure controls and procedures, which were designed to be effective at the reasonable assurance level.  The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms.  Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.  Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.  Based on the evaluation of the Company’s disclosure controls and procedures as of May 1, 2010, management, the chief executive officer and the chief financial officer concluded that the Company’s disclosure controls and procedures were effective at the reasonable assurance level at that date.

Changes in Internal Control over Financial Reporting

No change in the Company’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the fiscal quarter ended May 1, 2010 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

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STAPLES, INC. AND SUBSIDIARIES

PART II — OTHER INFORMATION

Item 1A.  Risk Factors

Global economic conditions may continue to cause a decline in business and consumer spending which could adversely affect our business and financial performance.

Our operating results and performance depend significantly on worldwide economic conditions and their impact on business and consumer spending.  Increases in the levels of unemployment, energy costs, healthcare costs, higher interest rates and taxes, combined with tighter credit markets, reduced consumer confidence and other factors, contribute to the decline in business and consumer spending.  Although there has been some recent improvement in some of these measures, the level of business and consumer spending is not where it was prior to the global recession.  We have also seen a decline in average sales per customer in both our delivery and retail businesses. Our business and financial performance may continue to be adversely affected by current and future economic conditions if there is a continued decline in business and consumer spending.

Our market is highly competitive and we may not be able to continue to compete successfully.

The office products market is highly competitive. We compete with a variety of local, regional, national and international retailers, dealers and distributors for customers, associates, locations, products, services, and other important aspects of our business. In most of our geographic markets, we compete with other high-volume office supply providers such as Office Depot, OfficeMax and Lyreco, as well as mass merchants such as Wal-Mart and Tesco, warehouse clubs such as Costco, computer and electronics superstores such as Best Buy, copy and print businesses such as FedEx Office, online retailers such as Amazon.com, ink cartridge specialty stores, and other discount retailers. Our retail stores and delivery operations also compete with numerous mail order firms, contract stationer businesses, electronic commerce distributors, regional and local dealers and direct manufacturers.

We strive to differentiate ourselves from our competitors in part by executing our brand promise: we make buying office products easy. This involves, among other things, offering our customers a broad selection of products, convenient store locations, and reliable and fast order delivery. Many of our competitors, however, have increased their presence in our markets in recent years by expanding their assortment of office products and services, opening new stores near our existing stores, and offering direct delivery of office products. Some of our current and potential competitors are larger than we are and have substantially greater financial resources that may be devoted to sourcing, promoting and selling their products. If we fail to execute on our brand promise or are otherwise unable to differentiate ourselves from our competitors, we may be unable to attract and retain customers.

Our growth may strain our operations and we may not successfully integrate acquisitions to realize anticipated benefits.

Our business has grown dramatically over the years.  Although we expect our business to continue to grow organically and through strategic acquisitions, it will likely not grow at the rate experienced when we acquired Corporate Express N.V. (“Corporate Express”).  Sales of our products and services, the types of our customers, the nature of our contracts, the mix of our businesses, the number of countries in which we conduct business, the number of stores that we operate and the number of our associates  have grown and changed, and we expect they will continue to grow and change over the long-term.  This growth places significant demands on management and operational systems.  If we cannot effectively manage our growth, it is likely to result in operational inefficiencies and ineffective management of our business. In addition, as we grow, our business is subject to a wider array of complex state, federal and international regulations, and may be increasingly the target of private actions alleging violations of such regulations. This increases the cost of doing business and the risk that our business practices could unknowingly result in liabilities that may adversely affect our business and financial performance.

In addition, our long term strategy for growth, productivity and profitability depends on our ability to make appropriate strategic acquisitions, and integrate such acquisitions quickly and effectively.  We must also operate to realize or achieve any expected synergies and cost savings related to such acquisitions.  For example, we have not fully completed the integration of the Corporate Express acquisition.  This integration has been and continues to be complex and time consuming.  While we currently expect to realize the synergies and cost savings of the Corporate Express acquisition, if we fail to successfully integrate our past or future acquisitions or fail to realize the intended benefits of such acquisitions, our business may be adversely affected.

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We may be unable to continue to enter new markets successfully.

An important part of our business plan is to increase our presence in new markets, which could include adding delivery operations or stores in new geographic markets or selling new products and services.  For example, we plan to open approximately 50 new stores in 2010.  For our strategy to be successful, we must identify favorable store sites, negotiate leases on acceptable terms, hire and train qualified associates and adapt management and operational systems to meet the needs of our expanded operations. These tasks may be difficult to accomplish, especially as we allocate time and resources to managing the profitability of our large existing portfolio of stores and renewing our existing store leases with acceptable terms. In addition, local zoning and other land use regulations may prevent or delay the opening of new stores in some markets. If we are unable to open new stores as efficiently as we planned, our future sales and profits may be adversely affected.

Our expansion strategy also includes providing new products and service offerings.  We may have limited experience in these newer markets such as technology services and such offerings may present new and difficult challenges.  In addition, customers may not be familiar with our brand, we may not be familiar with local customer preferences or our competitors may have a larger, more established market presence.  Even if we succeed in entering new markets, our sales or profit levels in newer activities may not be successful enough to recoup our investments in them and may reduce our overall profitability.

Our expanding international operations expose us to risks inherent in foreign operations.

We currently operate in 24 different countries outside the United States and plan to continue to grow internationally.  Operating in multiple countries requires that we comply with multiple foreign laws and regulations that may differ substantially from country to country and may conflict with corresponding U.S. laws and regulations.  Cultural differences abroad and local practices of conducting business may conflict with our own business practices and ethics standards. Ensuring compliance to foreign and U.S. laws and our own policies may require that we implement new operational systems and financial controls, conduct audits or internal investigations, train our associates and third parties on our existing compliance methods, and take other actions, all of which may be expensive, divert management’s time and impact our operations.  There are also different employee/employer relationships and in some cases the existence of workers’ councils that may delay or impact the implementation of some of these operational systems.  In addition, differences in business practices in our international markets may cause customers to be less receptive to our business model than we expect.

Risks inherent in international operations also include, among others, the costs and difficulties of managing international operations, adverse tax consequences, and greater difficulty in enforcing intellectual property rights.  Other factors that may also have an adverse impact on our international operations include limitations on the repatriation and investment of funds and foreign currency exchange restrictions, complex import and export schemes, increased local competition, unfavorable foreign trade policies, unstable political or economic conditions, and geopolitical events, including war and terrorism.

Fluctuations in foreign exchange rates could lead to lower earnings.

As we have expanded our international operations, our exposure to exchange rate fluctuations has increased, particularly with Euros and Canadian dollars.  Sales from our delivery operations and stores outside the U.S. are denominated in the currency of the country in which these operations or stores are located and changes in foreign exchange rates affect the translation of the sales and earnings of these businesses into U.S. dollars for financial reporting purposes.  Additionally, merchandising agreements may also be denominated in the currency of the country where the vendor resides.  Although we attempt to mitigate such risks, we may not be entirely successful in our strategy.

We may be unable to attract and retain qualified associates.

Our customers value courteous and knowledgeable associates, and an important part of our “Easy” brand strategy is a positive customer service experience. Accordingly, our performance depends on attracting and retaining a large number of qualified associates. We face intense competition for qualified associates. We face even tighter labor markets as we expand into emerging markets such as India and China. Many of our associates are in entry-level or part-time positions with historically high rates of turnover. Our ability to meet our labor needs while controlling our labor costs is subject to numerous external factors, including the availability of a sufficient number of qualified persons in the workforce, unemployment levels, prevailing wage rates, changing demographics, health and other insurance costs and the cost of compliance with local labor laws and regulations. If we are unable to attract and retain a sufficient number of qualified associates, our business and financial performance may be adversely affected.

Our quarterly operating results are subject to significant fluctuation.

Our operating results have fluctuated from quarter to quarter in the past, and we expect that they will continue to do so in the future.  Historically, sales and profitability are generally stronger in the second half of our fiscal year with back-to-school, holiday, and back-to-business seasons when compared to the first half of our fiscal year.  Factors that could also cause these quarterly

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fluctuations include: the mix of products sold; pricing actions of competitors; the level of advertising and promotional expenses; the outcome of legal proceedings; severe weather; and the other risk factors described in this section. Most of our operating expenses, such as occupancy costs and associate salaries, do not vary directly with the amount of sales and are difficult to adjust in the short term.  As a result, if sales in a particular quarter are below expectations, we may not proportionately reduce operating expenses for that quarter, and therefore such a sales shortfall would have a disproportionate effect on our net income for the quarter.

Our effective tax rate may fluctuate.

We are a multi-national, multi-channel provider of office products and services. As a result, our effective tax rate is derived from a combination of applicable tax rates in the various countries, states and other jurisdictions in which we operate.  Our effective tax rate may be lower or higher than our tax rates have been in the past due to numerous factors, including the sources of our income, any agreements we may have with taxing authorities in various jurisdictions, and the tax filing positions we take in various jurisdictions. We base our estimate of an effective tax rate at any given point in time upon a calculated mix of the tax rates applicable to our company and to estimates of the amount of business likely to be done in any given jurisdiction. The loss of one or more agreements with taxing jurisdictions, a change in the mix of our business from year to year and from country to country, changes in rules related to accounting for income taxes, adverse outcomes from tax audits that we may be subject to in any of the jurisdictions in which we operate, or changes in tax laws in any of the multiple jurisdictions in which we operate could result in an unfavorable change in our effective tax rate which could have an adverse effect on our business and results of our operations.

For instance, the U.S. Congress has allowed certain Internal Revenue Code provisions to expire, including provisions that allow for the deferral of United States income tax on certain unremitted foreign earnings.  If any of these provisions are not enacted into law we could have an adverse impact on our financial position and results of operations.  However, if the extensions of certain provisions of the tax code are later enacted, they will have a favorable impact on our results of operation and financial position.

If we are unable to manage our debt, it could materially harm our business and financial condition and restrict our operating flexibility.

We have long-term debt and debt service requirements, with $1.5 billion 9.75% notes due in January 2014, $500 million 7.75% notes due in April 2011 and $325 million 7.375% notes due in October 2012. Our consolidated outstanding debt as of May 1, 2010 was $2.57 billion.  If we are unable to satisfy our debt service requirements, we may default under one or more of our credit facilities or the indentures governing our notes. If we default or breach our obligations, we could be required to pay a higher rate of interest or lenders could require us to accelerate our repayment obligations, and such a default could materially harm our business and financial condition.

Our level of indebtedness combined with volatile financial markets may have significant consequences, including: restricting our growth; making us more vulnerable to a downturn in our business; making it more expensive to obtain future financing; limiting our ability to borrow additional amounts for working capital, capital expenditures, debt service requirements, future acquisitions or other corporate purposes; restricting our flexibility to respond to changing market conditions; and limiting our ability to use operating cash flow in other areas of our business. As a result of our debt, we may also be placed at a competitive disadvantage against less leveraged competitors.

Our business may be adversely affected by the actions of and risks associated with our third-party vendors.

The products we sell are sourced from a wide variety of third-party vendors. We derive benefits from vendor allowances and promotional incentives which may not be offered in the future. We also cannot control the supply, design, function or cost of many of the products that we offer for sale and are dependent on the availability and pricing of key products, including paper, ink, toner, technology and printing equipment. Some of the products we offer are supplied to us on an exclusive basis and may be difficult to replace in a timely manner. Disruptions in the availability of raw materials used in the production of these products may also adversely affect our sales and result in customer dissatisfaction.

Global sourcing of many of the products we sell is an important factor in our financial performance. Our ability to find qualified vendors and access products in a timely and efficient manner is a significant challenge, especially with respect to goods sourced outside the United States. Political instability, the financial instability of suppliers, trade restrictions, tariffs, foreign currency exchange rates, transport capacity and costs, inflation and other factors relating to foreign trade are beyond our control. In addition, merchandise quality issues could cause us to initiate voluntary or mandatory recalls for our proprietary branded products or other products we sell which may then damage our reputation.  These and other issues affecting our vendors could adversely affect our business and financial performance.

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Our expanded offering of proprietary branded products may not improve our financial performance and may expose us to intellectual property and product liability claims.

Our product offering includes Staples, Quill and other proprietary branded products, which represented approximately 23% of our sales in fiscal 2009.  Our proprietary branded products compete with other manufacturers’ branded items that we offer. An increase in our proprietary branded product offerings also expose us to risk that third parties will assert infringement claims against us with respect to such products.  The more proprietary brand product offerings we sell, the more this risk increases.  In addition, if any of our customers are harmed by our proprietary branded products, they may bring product liability and other claims against us or we may have to issue voluntary or mandatory recalls.  Any of these circumstances could damage our reputation and have an adverse effect on our business and financial performance.

Technological problems may impact our operations.

We rely heavily on technology to sell and deliver our office products.  Our ability to attract and retain customers, compete and operate effectively depends in part on a reliable and easy to use technology infrastructure.  Any disruption to the Internet or our technology infrastructure, including those affecting our Web sites and computer systems, may cause a decline in our customer satisfaction, impact our sales volumes or result in increased costs.  Although we continue to invest in our technology, if we are unable to continually add software and hardware, effectively manage and upgrade our systems and network infrastructure, and develop effective system availability, disaster recovery plans and protection solutions, our business may be adversely affected.

Our information security may be compromised.

Through our sales and marketing activities, we collect and store certain personal information that our customers provide to purchase products or services, enroll in promotional programs, register on our web site, or otherwise communicate and interact with us. We also gather and retain information about our associates in the normal course of business. We may share information about such persons with vendors that assist with certain aspects of our business. Despite instituted safeguards for the protection of such information, we cannot be certain that all of our systems are entirely free from vulnerability to attack. Computer hackers may attempt to penetrate our or our vendors’ network security and, if successful, misappropriate confidential customer or business information. In addition, a Staples associate, contractor or other third party with whom we do business may attempt to circumvent our security measures in order to obtain such information or inadvertently cause a breach involving such information. Loss of customer or business information could disrupt our operations, damage our reputation, and expose us to claims from customers, financial institutions, regulators, payment card associations and other persons, any of which could have an adverse effect on our business, financial condition and results of operations. In addition, compliance with tougher privacy and information security laws and standards may result in significant expense due to increased investment in technology and the development of new operational processes.

Various legal proceedings, third party claims, investigations or audits may adversely affect our business and financial performance.

We are involved in various private legal proceedings, which include consumer, employment, intellectual property, tort and other litigation.  As our workforce expands, we are subject to potentially increasing challenges by private litigants regarding compliance with local, state and national labor regulations, whether meritorious or not.  For example, in January 2010, we entered into a national settlement for several class action lawsuits related to “wage and hour” claims.

As our operations grow, we are subject to claims that the technology we use or the products we sell infringe intellectual property rights of third parties.  Such claims, whether meritorious or not, involve significant managerial resources and can become costly.  Generally, we have indemnification protections in our agreements which our vendors or licensors have historically honored; however, there are no assurances that such vendors or licensors will continue to do so in the future.

In addition, we may be subject to investigations or audits by governmental authorities and regulatory agencies, which can occur in the ordinary course of business or which can result from increased scrutiny from a particular agency towards an industry, country or practice. The resolution of these legal proceedings, third party claims, investigations or audits could require us to pay substantial amounts of money or take actions that adversely affect our operations. In addition, defending against these claims may involve significant time and expense. Given the large size of our operations and workforce, the visibility of our brand and our position as an industry leader, we may regularly be involved in legal proceedings, third party claims, investigations or audits that could adversely affect our business and financial performance.

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Changes in federal, state or local regulations may increase our cost of doing business.

We are subject to federal, state and local regulations.  Last year in the U.S. there were a large number of new legislative and regulatory initiatives and reforms, and if such legislation is enacted, we may experience an increase in costs.  Changes affecting our workforce such as raising the local minimum wage, laws encouraging unionization efforts among our associates, healthcare mandates, environmental regulations, and other wage or workplace regulations could increase our costs.  In addition, proposed changes in tax regulations may also change our effective tax rate as our business is subject to a combination of applicable tax rates in the various countries, states and other jurisdictions in which we operate as described in more detail above.

Item 6.  Exhibits

The exhibits listed on the Exhibit Index immediately preceding such exhibits, which is incorporated herein by reference, are filed or furnished as part of this Quarterly Report on Form 10-Q.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		STAPLES, INC.
Date: May 19, 2010	By:	/s/ JOHN J. MAHONEY
		John J. Mahoney
		Vice Chairman and
		Chief Financial Officer
		(Principal Financial Officer)
	By:	/s/ CHRISTINE T. KOMOLA
		Christine T. Komola
		Senior Vice President, Corporate Controller
		(Principal Accounting Officer)

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EXHIBIT INDEX

Exhibit No.	Description
10.1+	Amended and Restated Supplemental Executive Retirement Plan.
10.2+	Form of Restricted Stock Award Agreement under the Amended and Restated 2004 Stock Incentive Plan.
10.3+	Form of Non-Qualified Stock Option Agreement under the Amended and Restated 2004 Stock Incentive Plan.
10.4+	Amendment to Executive Officer Incentive Plan.
31.1+	Principal Executive Officer — Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2+	Principal Financial Officer — Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1++	Principal Executive Officer — Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2++	Principal Financial Officer — Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS++	XBRL Instance Document.
101.SCH++	XBRL Taxonomy Extension Schema Document.
101.CAL++	XBRL Taxonomy Calculation Linkbase Document.
101.DEF++	XBRL Taxonomy Definition Linkbase Document.
101.LAB++	XBRL Taxonomy Label Linkbase Document.
101.PRE++	XBRL Taxonomy Presentation Linkbase Document.

+Filed herewith.

++Furnished herewith.

Attached as Exhibits 101 to this report are the following financial statements from the Company’s Quarterly Report on Form 10-Q for the quarter ended May 1, 2010 formatted in XBRL (eXtensible Business Reporting Language): (i) the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Income, (iii) the Condensed Consolidated Statements of Cash Flows, and (iv) related notes to these financial statements tagged as blocks of text.

The XBRL related information in Exhibits 101 to this Quarterly Report on Form 10-Q shall not be deemed “filed” or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended (“Securities Act”) and is not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (“Exchange Act”), or otherwise subject to the liabilities of those sections.

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EX-10.1

Exhibit 10.1

STAPLES, INC.

Amended and Restated
Supplemental Executive Retirement Plan

(as amended through March 31, 2010)

WHEREAS, Staples, Inc. (the “Company”) heretofore adopted the Staples, Inc. Supplemental Executive Retirement Plan (the “Plan”), an unfunded plan maintained for the purpose of providing deferred compensation for a select group of management or highly compensated employees within the meaning of the United States Code of Federal Regulations Section 2520.104-23 and Sections 201(2), 301(a)(3) and 401(a)(1) of the Employee Retirement Income Security Act of 1974 (“ERISA”); and

WHEREAS, the Company desires to amend the Plan to satisfy the requirements of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code);

NOW, THEREFORE, effective January 1, 2008, the Plan is amended and restated to comply with Section 409A of the Code, with the Plan being operated in good faith compliance with Code Section 409A for the period January 1, 2005 to December 31, 2007.

Section 1.  Purpose of Plan

The purpose of the Plan is to permit certain executives of the Company to elect to defer receipt of a portion of their annual compensation in supplement to their pre-tax contributions made to the Staples, Inc. Employees’ 401(k) Savings Plan (the “401(k) Plan”).

The Plan is intended to qualify as an unfunded, deferred compensation plan for a select group of management or highly compensated employees under ERISA.

The obligation of the Company to make payments under the Plan constitutes solely an unsecured (but legally enforceable) promise of the Company to make such payments, and no person, including any employee, shall have any lien, prior claim or other security interest in any property of the Company as a result of this Plan.  Rather, any employee participating in the Plan shall have the status of a general unsecured creditor of the Company.  It is the intention of the parties hereunder that the Plan be unfunded for tax purposes and for purposes of Title I of ERISA.  The Company shall be the sole owner and beneficiary of any account provided for herein below and any property used to measure such account shall remain the sole and exclusive property of the Company.

Section 2.  Definitions

2.1“Administrator” means the Committee on Employee Benefit Plans as described in Section 15.

2.2“Beneficiary” means the person or entity determined to be a Participant’s beneficiary pursuant to Section 12.

2.3“Board” means the board of directors of the Company.

2.4“Change in Control” means a “change in ownership” of the Company, a “change in effective control” of the Company, or a “change in the ownership of a substantial portion of the assets” of the Company (within the meaning of Section 409A of the Code).

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2.5“Code” means the Internal Revenue Code of 1986, as amended from time to time.

2.6“Company” means Staples, Inc.

2.7“Compensation” means the annual compensation paid to a Participant in cash by the Company for the calendar year (after any requisite tax withholding and payroll deductions), including base pay, other regular earnings, overtime, shift differentials, commissions, any amounts deferred under a salary reduction agreement pursuant to the 401(k) Plan or under a “cafeteria plan” (within the meaning of Section 125 of the Code) maintained by the Company, but exclusive of severance pay, expense reimbursements, awards, any moving expenses paid by the Company, car allowance, taxable fringe benefits, group term life insurance over $50,000, expatriate compensation, exercised stock options and short and long-term disability paid by a third party.

Effective the date of stockholder approval of the Long Term Cash Incentive Plan, the following  definition will be used:

“Compensation” means the annual compensation paid to a Participant in cash by the Company for the calendar year (after any requisite tax withholding and payroll deductions), including base pay, other regular earnings, overtime, shift differentials, commissions, any amounts deferred under a salary reduction agreement pursuant to the 401(k) Plan or under a “cafeteria plan” (within the meaning of Section 125 of the Code) maintained by the Company, but exclusive of payments from the Executive Officer Incentive Plan, the Key Management Bonus Plan, the Retail Management Bonus Plan and the Long Term Cash Incentive Plan or any other bonus payments, severance pay, expense reimbursements, awards, any moving expenses paid by the Company, car allowance, taxable fringe benefits, group term life insurance over $50,000, expatriate compensation, exercised stock options and short and long-term disability paid by a third party.

2.8“ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to time.

2.9“401(k) Plan” means the Staples, Inc. Employees’ 401(k) Savings Plan, as amended from time to time.

2.10“Participant” means an employee of the Company who is eligible to participate in the Plan pursuant to Section 2.

2.11“Plan” means the Staples, Inc. Supplemental Executive Retirement Plan, as set forth herein and as amended from time to time.

2.12“Plan Year” means the calendar year.

Section 3.  Eligible Employees

The employees eligible to participate in the Plan shall be those individuals who qualify under the criteria set forth on Schedule A and who have both attained age twenty-one (21) and completed “six (6) Months of Service” (as defined, for purposes of eligibility to participate, under the 401(k) Plan, the terms of which are incorporated herein by this reference).

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Section 4.  Election to Defer Compensation

An eligible employee may begin participating in the Plan, as of the first day of the calendar quarter (October 1, January 1, April 1 or July 1, the “entry date”) coinciding with or next following the date on which the eligibility requirements (set forth under Section 3) are first satisfied, by making a deferral election during the thirty (30) day period immediately preceding such entry date.  Any such deferral election shall be made in accordance with the provision of Section 409A of the Code and shall apply only to Compensation earned after the applicable entry date. In this regard, a Participant may elect to defer one percent (1%) to one hundred percent (100%) of his Compensation, less any requisite tax withholding and payroll deductions, for the balance of the Plan Year.  Any election so made shall be binding for each following Plan Year, provided that it may be revised or revoked on or before December 31 for any subsequent Plan Year, or such earlier date as the Administrator may specify.

A Participant may elect to defer a specified percentage (from one percent (1%) to one hundred percent (100%) of any key man bonus and/or retail management bonus (which are intended to qualify as “performance-based compensation” within the meaning of Section 409A of the Code) to be paid on his behalf for a fiscal year by filing an election with the Administrator (pursuant to Section 5) on or prior to July 31 of such fiscal year.

Effective the date of stockholder approval of the Long Term Cash Incentive Plan, the second paragraph of this section will be replaced by the following paragraph and the additional below paragraph will be added:

A Participant may elect to defer a specified percentage  (from one percent (1%) to one hundred percent (100%)) of any payments from the Executive Officer Incentive Plan, the Key Management Bonus Plan and the Retail Management Bonus Plan (which are intended to qualify as “performance-based compensation” within the meaning of Section 409(A) of the Code) to be paid on behalf of the Participant for a fiscal year by filing an election with the Administrator (pursuant to Section 5) on or prior to the last day of the sixth month of such fiscal year.

A Participant may elect to defer a specified percentage (from one percent (1%) to one hundred percent (100%)) of any payments from the Long Term Cash Incentive Plan, which are intended to qualify as “performance-based compensation” within the meaning of Section 409A of the Code, to be paid on behalf of the Participant upon the conclusion of a three (3) fiscal year period, by filing an election with the Administrator (pursuant to Section 5) on or prior to the last day of the sixth month of the first fiscal year of the three (3) fiscal year period.

An otherwise eligible employee who fails to begin participating in the Plan as of the first possible entry date may not begin participating until the first day of any following Plan Year.

Section 5.  Accounts

Each Participant may elect to establish a separate “in-service withdrawal account” for each year of participation, such account to be established and maintained on the Company’s books and shall record (a) any Compensation deferred by the Participant under the Plan which the Participant has elected to be credited into such account, and (b) the allocation of any hypothetical investment experience. There shall also be established for each Participant a separate “retirement account” which shall record (a) any Compensation deferred by the Participant, under the Plan which the Participant has not elected to be credited to the “in-service withdrawal account” and any Company contributions made on his behalf under the Plan and (b) the allocation of any hypothetical investment experience.  Each Participant’s account hereunder shall be reduced by any distributions made plus any federal, state and/or local tax withholding

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and any social security withholding tax as may be required by law.

Section 6.  Manner of Election

Any election(s) made by a Participant pursuant to this Plan shall be made at the time(s) and in the manner as the Administrator shall from time to time prescribe.

Section 7.  Company Contributions

Each year, the Company shall contribute to the Plan on behalf of each Participant, a matching contribution equal to one hundred percent (100%) of the first four percent (4%) of the Participant’s Compensation (excluding any bonuses) deferred under the Plan, and with respect to any key man bonuses and/or retail management bonuses deferred under the Plan for the fiscal year, a matching contribution in an amount equal to one hundred percent (100%) of the first four percent (4%) of any such bonus so deferred.

Effective the date of stockholder approval of the Long Term Cash Incentive Plan, the first paragraph of this section will be replaced by the following:

Each year, the Company shall contribute to the Plan on behalf of each Participant, a matching contribution equal to one hundred percent (100%) of the first four percent (4%) of the Participant’s Compensation (excluding any bonuses) deferred under the Plan, and with respect to any bonus payments from the Executive Officer Incentive Plan, Key Management Bonus Plan and the Retail Management Bonus Plan deferred under the Plan for the fiscal year, a matching contribution in an amount equal to one hundred percent (100%) of the first four percent (4%) of any such bonuses deferred.

The Company reserves the right to make a supplemental matching contribution for any Participant at the end of the year to ensure the full matching contribution is received.

In addition to the matching contribution described above, for any Plan Year, the Company may elect to allocate an additional discretionary contribution to the account of any Participant, or any group of Participants, as selected by the Board, in any amount and manner as determined by the Board.

Section 8.  Investment of Accounts

The Administrator, in its discretion, may from time to time designate one or more investment media in which the portion of a Participant’s account representing his deferrals shall be hypothetically invested.  The Administrator shall provide the Participant the opportunity to determine how such portion of the Participant’s account shall be deemed to be hypothetically invested from among the available investment options, and may permit changes in those investment directions at whatever frequency it deems appropriate and within whatever limitations are applicable to any investment option.  As of January 1, 2008, a Participant may also direct the hypothetical investment of the portion of his account attributable to any Company contributions made on his behalf, after September 30, 2004.  If a Participant makes an investment selection, the Administrator may follow such investment selection but shall not be legally bound to do so.

Any Company contributions made on behalf of a Participant beginning October 1, 2004 through December 31, 2007 were hypothetically invested in insurance contracts designated by the Administrator. Such rate of interest for each calendar year was the insurer’s declared crediting rate on such insurance policies, as of December 1 of the preceding year, plus 125 basis points, with the rate being rounded to the

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nearest one tenth of a percent.

The portion, if any, of a Participant’s account derived from Company matching contributions made prior to October 1, 2004 shall be credited with gains and losses as if it had been invested in Staples, Inc. common stock, provided however, that a Participant shall have the same investment diversification rights (except with respect to the available investment options), as exist under the 401(k) Plan.

Beginning with the Plan Year 2011, the portion of any Participant’s account that is hypothetically invested in an insurance contract’s fixed account shall be credited with a rate of interest announced by the Administrator at the beginning of the Plan Year.  The Administrator shall choose the rate that is the higher of (1) the insurance carrier’s fixed account crediting rate at the beginning of the Plan Year; or (2) the Internal Revenue Service’s mid-term Applicable Federal Rate (AFR) for January 1 of the Plan Year, compounded annually.

Section 9.  Vested Status of a Participant’s Account

A Participant shall at all times have a nonforfeitable (“vested”) right to the fair market value of any in-service withdrawal account(s) established under Section 5.

Subject to the following provisions of this Section, if a Participant separates from service with the Company (within the meaning of Section 409A of the Code) for any reason on or after his Normal Retirement Age (within the meaning of the 401(k) Plan), or prior to that date as a result of the Participant’s “disability”, or as a result of the Participant’s death, such Participant shall have a nonforfeitable (vested) right to the fair market value of the Participant’s retirement account.  For this purpose, a Participant shall be considered “disabled” if he is determined to be “permanently and totally disabled” by the Social Security Administration.

Except as otherwise provided herein below, if a Participant separates from service with the Company for any other reason other than Normal Retirement, death, or disability, such Participant shall be entitled to receive the vested value of his retirement account.  For this purpose, each Participant shall at all times have a nonforfeitable (vested) right to his retirement account derived from any Compensation deferred pursuant to Section 4.  However, with respect to any Company matching contributions made on the Participant’s behalf pursuant to Section 7, the Participant shall have a nonforfeitable (vested) right to a percentage of the fair market value of such portion of his retirement account as follows:

Years of Service	Vested Percentage
Less than 1 year	0	%
1 year but less than 2 years	20	%
2 years but less than 3 years	40	%
3 years but less than 4 years	60	%
4 years but less than 5 years	80	%
5 years or more	100	%

For this purpose, a Participant shall be credited with Year(s) of Service in accordance with the terms of the 401(k) Plan as then in effect (as it pertains to vesting purposes).  Provided, however, that any member of the Company’s board of directors who is not an employee of the Company, who subsequently becomes

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an eligible employee and then a Participant, shall be credited with any prior service as a director in determining said Participant’s Year(s) of Service.

With respect to any additional discretionary contributions made on the Participant’s behalf pursuant to Section 7, the Participant shall have a nonforfeitable (vested) right to a percentage of the fair market value of such portion of his retirement account in accordance with the vesting schedule established by the Administrator at the time such additional discretionary contribution is made by the Company.

The nonvested portion of a Participant’s retirement account, as determined above, shall be forfeited as of the Participant’s separation from service.  If any contributions have been made to a trust with respect to such account, the forfeited portion shall remain in such trust and be used to fund future contributions by the Company and/or used to pay Plan administrative expenses

Section 10.  Payment of a Participant’s Account

Each Participant may also elect, on the election form used to make his or her initial deferral election hereunder, or through such other method acceptable to the Administrator, either of the following modes of distribution for his retirement account:

(a)a single lump sum payment; or

(b)annual installments over a period of up to fifteen (15) years, the amount of each installment to equal the balance of the Participant’s vested retirement account as of the date of the distribution divided by the number of installments remaining to be paid.  Each subsequent installment shall be made in the calendar month containing the one (1) year anniversary of the prior payment.   Such installment election however, shall be given effect only if the Participant separates from service after having both attained age fifty-five (55) and completed five (5) years of service (as measured from date of hire and each anniversary date, without regard to hours).

If a Participant does not otherwise have a valid distribution election on file, or if the balance of the Participant’s retirement account does not exceed the amount in effect for the applicable year under Code Section 402(g)(1)(B) as of the date of the Participant’s separation from service, the Participant’s vested retirement account shall be distributed in a lump sum payment.

Any Participant, who on or before December 31, 2003 elected annual cash installments over a period not exceeding five (5) years, shall retain the right to have his vested retirement account distributed in the manner so elected, without regard to age or service.

Upon a Participant’s separation from service with the Company  (within the meaning of Section 409A of the Code), distribution of the Participant’s vested retirement account shall normally be made or commence in the calendar month following the month in which the separation from service occurs; provided, however, that, to the extent permitted under Section 409A of the Code, in the event that it is not administratively feasible to have payment made at that time, distribution can be made at a later date within the same calendar year; and provided further that, if the Company is subject to the provisions of Section 409A(2)(B)(i) of the Code, and if the Participant is a “specified employee” of the Company (as determined under said Section 409A), distribution shall be made or commence in the seventh (7th) calendar month following the month in which the  separation from service occurs; provided, however, that, to the extent permitted under Section 409A of the Code, in the event that it is not administratively feasible to have payment made at that time, distribution can be made at a later date within the same calendar year. For purposes of identifying a “specified employee,” the definition of compensation under

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Section 1.415(c)-2(d)(2) of the Income Tax Regulations shall apply, the specified employee identification date shall be December 31, and the specified employee effective date shall be the first day of the fourth month following such identification date.

Subject to the following provisions of this Section, a Participant may elect to change the mode of distribution for his retirement account, subject to the following conditions: (i) any such election may not take effect until twelve (12) months after the date on which the election is made; and (ii) the payment with respect to such election must be deferred for a period of at least five (5) years from the date on which payment would otherwise have been made or commenced; and (iii) in the event of an installment election, the election shall be given effect only if the Participant separates from service after having both attained age fifty-five (55) and completed five (5) years of service (as measured from the Participant’s date of hire and each anniversary date, without regard to hours).

Subject to the following provisions of this Section, any “in-service” withdrawal account(s) established for a Participant under Section 5 shall be distributed in a lump sum payment on the date designated by the Participant as part of his annual deferral election with respect to which the in-service withdrawal account was established under the Plan, which date may not be earlier than five years following the year of the deferral election. However, a Participant may elect to extend any in-service withdrawal date for a period of not less than 5 years; provided such election was made at least 12 months prior to the date on which the payment would otherwise have been made.

Provided, however, that a Participant shall be permitted to make withdrawal and/or distribution elections in 2006 and 2007 subject to the provisions of IRS Notice 2006-79 and withdrawal and/or distribution elections in 2008 subject to the provisions of IRS Notice 2007-86 or any subsequent guidance.

Notwithstanding the foregoing provisions of this Section 10, if distribution of a Participant’s vested retirement account is to be made or commence prior to the selected distribution date of any in-service withdrawal account, any remaining in-service withdrawal account(s) shall be distributed at the same time and in the same manner as the Participant’s retirement account.

Section 11.  Death Benefit

In the event of the death of a Participant while in the employ of the Company or any “affiliate” thereof, vesting in the Participant’s retirement account shall be one hundred percent (100%), if not otherwise one hundred percent (100%) vested under Section 9, with the fair market value of the Participant’s retirement account, (and any outstanding in-service withdrawal account(s)), being distributed to the Participant’s Beneficiary in a lump-sum cash payment. In the event of the death of a Participant after termination of employment, but prior to the complete distribution of his vested account under the Plan, the balance of the Participant’s vested retirement account (and any remaining in-service withdrawal account(s)) shall be distributed to the Participant’s Beneficiary in a lump-sum payment.

Any such lump sum death benefit shall be distributed in the calendar month following the calendar month of the Participants death; provided, however, that, to the extent permitted under Section 409A of the Code, in the event that it is not administratively feasible to have payment made at that time, distribution can be made at a later date within the same calendar year.

Section 12.  Beneficiary Designation

A Participant’s Beneficiary hereunder shall be the same person or persons designated by the Participant under the 401(k) Plan unless a separate Beneficiary designation has been established under the Plan in the manner prescribed by the Administrator.

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In the absence of any such designation, or if no designated Beneficiary survives the Participant, any amounts payable following the Participant’s death shall be paid to the Participant’s surviving spouse, or if none, to the Participant’s estate.

Section 13.  Domestic Relations Orders

If a domestic relations order issued by any court of proper authority directs assignment of all or any portion of a Participant’s vested account(s) to the Participant’s spouse or former spouse as part of a divorce settlement, the portion so assigned shall be distributed, in a lump-sum, to the spouse or former spouse within ninety (90) days following the close of the Plan Year in which the order was received by the Administrator or, if later, following the close of the Plan Year in which the order clearly specifies the amount to be assigned and any other terms necessary to comply with such order and with the provisions of Code Section 409A.

Section 14.  Distribution in the event of Unforeseeable Emergency

In the event of an “unforeseeable emergency” (within the meaning of Section 409A of the Code), a Participant may, by filing a written election with the Administrator, elect to receive a distribution from the Plan in an amount not to exceed the lesser of (i) the fair market value of the Participant’s vested retirement account or (ii) the amount necessary to satisfy the unforeseeable emergency, subject to ordinary income tax withholding.

Section 15.  Administration

The Committee on Employee Benefit Plans, as constituted pursuant to the terms of the 401(k) Plan (the “Administrator”), shall have the general authority to control and manage the operation and administration of the Plan.  In connection herewith, the Administrator shall also have the following powers and duties:  (1) to adopt rules and regulations necessary for the performance of its duties under the Plan; (2) to construe the Plan and to decide all questions arising under the Plan; (3) to act for the Company in connection with any administrative or judicial proceeding affecting the Plan; (4) to employ, subject to the requirements of the financial officers of the Company, persons to render accounting, actuarial, legal, investment or insurance advice and to rely on such advice; (5) to determine the eligibility of Participants to receive benefits and the amount of benefits to which any Participant or Beneficiary may be entitled under the Plan and to enforce the claims procedure set forth in Section 16; and (6) such other responsibilities as are provided for under the terms of this Plan.

In connection with the administration of the Plan, any two of the Chief Executive Officer, President, Chief Financial Officer, Treasurer, Secretary or Executive Vice President — Human Resources of Staples, Inc., acting jointly, by and on behalf of the Company, are hereby authorized:

(1)to negotiate, fix and vary the terms of, and to execute and deliver, contracts, agreements, indentures, trusts, assignments, concessions, licenses, options, and all other similar instruments;

(2)to appoint trustees and to engage any agents or contractors, including banks, insurance brokers, and attorneys;

(3)to amend or terminate the Plan;

(4)to otherwise do all acts and things necessary or suitable in connection with the exercise of any of the aforementioned powers;

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provided, however, that no such authorization shall extend to any implementation, amendment, approval, or modification of the Plan which is reserved to the Board or stockholders of the Company by the Plan, statute, rule or regulation, including without limitation, rules promulgated under Section 16 of the Securities and Exchange Act of 1934.

Section 16.  Claims Procedure

(a)Application for Benefits.  The Administrator shall furnish to each Participant information about the benefits to which he or she is entitled under the Plan.  The Administrator may require any person claiming benefits under the Plan to submit a written application, together with such documents, evidence, and information as it considers necessary to process the claim.

(b)Action on Application.  Within ninety (90) days after receipt of an application and all necessary documents and information, the Administrator shall furnish the claimant with a written notice of its decision.  If the Administrator denies the claim in whole or in part, the notice will set forth (1) specific reasons for the denial, with specific reference to Plan provisions upon which the denial is based; (2) a description of any additional information or material necessary to process the application with an explanation why such material or information is necessary; and (3) an explanation of the Plan’s claim review procedure.

If special circumstances require an extension of time for processing the claim, the Administrator shall furnish the claimant written notice of the extension before the end of the initial ninety (90)-day period.  In no event shall the extension exceed a period of ninety (90) days from the end of the initial period.  The notice shall explain the circumstances requiring an extension of time and the date by which the Administrator expects to render a decision.

(c)Claim Review.  The claimant who does not agree with the decision rendered on his application may request that the Administrator review the decision.  The request must be made within sixty (60) days after the claimant receives the decision, or if the application has neither been approved nor denied within the ninety (90)-day period specified in subsection (b), then the request must be made within sixty (60) days after expiration of the ninety (90)-day period.

Each request for review must be in writing and addressed to the Administrator.  Concurrently with filing the request for review, or within the sixty (60) days request period, the claimant may submit in writing to the Administrator a statement of the issues raised by his appeal and supporting arguments and comments.

During the pendency of his appeal, the claimant may inspect all documents which are reasonably pertinent to his case, upon reasonable notice to the Administrator.  However, under no circumstance shall the Administrator be required to disclose to any claimant information concerning any person other than the Participant whose benefit is being claimed, to the extent such information is normally treated as confidential.

Where the Administrator believes that the issues raised by the claimant’s appeal may be more efficiently or fairly processed by taking testimony of the claimant or others, it shall set the matter for oral hearing and give the claimant reasonable notice of the time and place.  Whether or not an oral hearing is scheduled, the Administrator shall proceed promptly to resolve all issues raised by the claimant’s appeal and shall render a written decision on the merits, with a statement of the reasons and references to the pertinent supporting provisions of the Plan, within sixty (60) days following receipt of the claimant’s request for review.

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If special circumstances require an extension of time, the Administrator shall render a decision as soon as possible, but not later than one hundred and twenty (120) days after receipt of the request for review.  If an extension is required, the Administrator shall furnish to the claimant written notice of the extension, including an explanation of the circumstances requiring the extension, before the extension period begins.

Section 17.  Securing Payment of Plan Benefits

The Plan shall be operated at all times as an unfunded plan as required under ERISA.  However, the Company reserves the right to take reasonable steps to secure the payment of Plan benefits to the greatest extent possible without compromising the unfunded status of the Plan.  Those steps may include, but is not limited to, the establishment of an irrevocable nonqualified grantor trust (within the meaning of subpart E, part I, subchapter J, chapter 1, subtitle A of the Code).

Section 18.  Amendment

The Company, by resolution of the Board, shall have the right to amend, suspend or terminate the Plan at any time subject to the provisions of Section 409A of the Code; provided, however, that, subject to the provisions of Section 15, any two of the Chief Executive Officer, President, Chief Financial Officer, Treasurer, Secretary or Executive Vice President — Human Resources of Staples, Inc., acting jointly, by and on behalf of the Company shall have such right. Provided however, that any termination of the Plan, with respect to some or all of the Participants, and any resulting distribution of the account balances of such affected Participants, shall be made in accordance with the provisions of Section 409A of the Code and shall not constitute the impairment of such Participant’s rights hereunder.

Section 19.  No Liability

No member of the Board or of the committee serving as the Administrator, and no officer or employee of the Company shall be liable to any person for any action taken or omitted in connection with the administration of the Plan unless attributable to his own fraud or willful misconduct; nor shall the Company be liable to any person for any such action unless attributable to fraud or willful misconduct on the part of the Administrator or a director, officer or employee of the Company.

Section 20.  No Assignment

Except as otherwise provided herein, a Participant’s right to the amount credited to his or her account(s) under the Plan shall not be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment or garnishment by creditors of the Participant or the Participant’s Beneficiary.  Provided, however, that the Company shall have the unrestricted right to set off against or recover out of any payments or benefits becoming payable to or for the benefit of a Participant, at the time such payments or benefits otherwise become payable hereunder, any amounts owed or owing to the Company by such Participant.

Section 21.  Successors and Assigns

The provisions of this Plan shall be binding upon and inure to the benefit of the Company, its successors and assigns, and the Participant, his beneficiaries, heirs, legal representatives and assigns.

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Section 22.  No Contract of Employment

Nothing contained herein shall be construed as a contract of employment between a Participant and the Company, or as a right of the Participant to continue in employment with the Company, or as a limitation of the right of the Company to discharge the Participant at any time, with or without cause.

Section 23.  Termination of Plan Upon Change in Control

The Company may elect to terminate the Plan within thirty (30) days preceding or the twelve (12) months following a Change in Control, subject to the provisions of Section 409A of the Code).  For this purpose, the Plan shall be treated as terminated only if substantially similar arrangements sponsored by the Company are terminated, so that all Participants in the Plan and all participants under substantially similar arrangements are required to receive all amounts deferred under the terminated arrangements within twelve (12) months of the date of termination of the arrangements.

Section 24.  Governing Law

This Plan shall be interpreted in a manner consistent with Code Section 409A and the guidance issued thereunder by the Department of the Treasury and the Internal Revenue Service and shall also be subject to and construed in accordance with the provisions of ERISA, where applicable, and otherwise by the laws of the Commonwealth of Massachusetts, without regard to the conflict of law provisions of any jurisdiction.

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SCHEDULE A

Any employee at Grade Level of 41 and above, except as otherwise specified by the Board.  However,  as of September 1, 2009, any participating employee or any employee who at the time of a grade level change to an ineligible grade is participating in the Plan shall remain an eligible participant until such time as they terminate employment with the Company.

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EX-10.2

Exhibit 10.2

Restricted Stock Award Agreement

Staples, Inc.

Employer ID: 04-2896127

500 Staples Drive

Framingham, MA 01702

	ACCOUNT ID:
«FirstName» «MiddleName» «LastName»	LOCATION:
«Address1»
«Address2»
«Address3»
«City», «State» «Zip»
«Country»

In consideration of services rendered to Staples, Inc., you have been awarded restricted shares of Staples’ Common Stock under Staples, Inc.’s Amended and Restated 2004 Stock Incentive Plan, as follows:

Award No.:
Stock Option Plan:	2004RS
Date of Grant:
Total Number of Shares:
Fair Market Value per Share:	$
Total Value of Shares Granted:	$

Vesting Date Number of Shares
Vesting on Vesting Date

By your acceptance of this Restricted Stock Award, you acknowledge that this award is granted under and governed by the terms and conditions of Staples, Inc.’s Amended and Restated 2004 Stock Incentive Plan (as further amended or restated from time to time) and by the terms and conditions of Staples, Inc.’s Restricted Stock Award Agreement as attached.

You understand and agree that this Restricted Stock Award is being granted to you in exchange for your execution of a Non-Compete and Non-Solicitation Agreement in a form approved by Staples.

Staples, Inc.

Ronald L. Sargent

Chairman and Chief Executive Officer

Attachment:  Staples, Inc. Restricted Stock Award Agreement

Restricted Stock Award Agreement

1.Award.  In consideration of services rendered, Staples, Inc., a Delaware corporation (“Staples”), hereby awards to the Associate named in the accompanying Notice of Award of Restricted Stock (the “Notice”), pursuant to Staples’ Amended and Restated 2004 Stock Incentive Plan (the “Plan”), the Total Number of Shares of Common Stock of Staples stated in the Notice (the “Shares”) subject to the terms and conditions of this Restricted Stock Award Agreement and the Plan.  Except where the context otherwise requires, the term “Staples” shall include any parent and all present and future subsidiaries of Staples as defined in Sections 424(e) and 424(f) of the Internal Revenue Code of 1986, as amended or replaced from time to time (the “Code”).

2.Transferability of Shares.  Until the Vesting Date described below, the Shares may not be sold, assigned, transferred, pledged, hypothecated or otherwise disposed of (whether by operation of law or otherwise) nor shall the Shares be subject to execution, attachment or similar process, except that the Shares may be transferred by will or the laws of descent and distribution or, upon notice to Staples, for estate planning purposes to entities that are beneficially owned entirely by family members.  All transferees of the Shares must agree to be governed by all of the terms and conditions of this Agreement.  Upon any sale, transfer, assignment, pledge, hypothecation or other disposition, or any attempt to sell, assign, transfer, pledge, hypothecate or otherwise dispose, of the Shares contrary to the provisions hereof, or upon the levy of any execution, attachment or similar process upon the Shares or such rights, the Shares shall, at the election of Staples, be deemed repurchased by Staples at a repurchase price of zero and all rights with respect to the Shares shall be forfeited to Staples.  In addition, Staples may seek any other legal or equitable remedies available to it, including rights of specific performance.  Staples may refuse to recognize as a shareholder of Staples any purported transferee of or holder of any rights with respect to the Shares and may retain and/or recover all dividends payable or paid with respect to such Shares.

3.Vesting of Shares.  Except as otherwise provided in this Agreement, the transfer restrictions on the Shares shall lapse, and the Shares shall be considered to “vest”, on the Vesting Date set forth in the Notice.

4.Vesting Date.

(a)  Continuous Relationship with Staples Required.  Except as otherwise provided in this Section 4, the Shares shall not vest unless the Associate is, and has been at all times since the Date of Award set forth in the Notice, an employee of, or a consultant to, Staples (an “Eligible Associate”).  In addition, the Shares shall not vest during any period that the Associate is suspended for an offense which could lead to a termination by Staples for “cause” (as defined below).

(b)  Termination of Relationship with Staples.  If the Associate ceases to be an Eligible Associate for any reason prior to the Vesting Date, then, except as provided in paragraph (c) below or in Section 10, the Shares shall be deemed repurchased by Staples at a repurchase price of zero and ownership of all right, title and interest in and

to the Shares shall be forfeited and revert to Staples on the date such Associate ceases to be an Eligible Associate.  If the Associate is an employee on an approved leave of absence, then the Shares shall not be forfeited as a result of such leave of absence unless and until the Associate’s employment relationship is ultimately terminated

(c)  Vesting Upon Death or Disability or Retirement.  If the Associate (i) dies; (ii) becomes disabled (within the meaning of Section 22(e)(3) of the Code); or (iii) terminates employment on or after the Retirement Age Qualification Date (defined below), in each case prior to the Vesting Date while he or she is an Eligible Associate, then the Shares shall vest in full.  For purposes of this Section 4(c), the “Retirement Age Qualification Date” shall mean the first Quarterly Measurement Date (defined below) to occur on or after both (A) the Date of Award and (B) the date that the Associate has attained age 65.  For purposes of this Section 4(c), the “Quarterly Measurement Date” means the sixth Thursday following the end of each fiscal quarter.  In addition and subject to Section 11 of this Agreement, on the Eligible Associate’s Retirement Age Qualification Date, a number of unvested Shares that is sufficient to satisfy the Eligible Associate’s federal, state or local income and employment tax obligations with respect to the Shares that are triggered by virtue of the Eligible Associate satisfying the conditions of the Retirement Age Qualification Date shall vest in full, provided that Staples may only withhold a number of such vested Shares that is necessary to meet the minimum federal, state or local income and employment tax withholding requirements.

(d)  Repurchase/Forfeiture. Upon repurchase/forfeiture of the Shares for any reason hereunder, the Associate shall cease to have any rights or privileges as a stockholder of Staples with respect to the Shares repurchased/forfeited and such Shares shall again be available for subsequent option grants or awards under the Plan.

5.Delivery of Shares.  Staples shall, upon the Date of Award, effect issuance of the Shares by registering the Shares in book entry form with Staples’ transfer agent in the name of the Associate.  No certificate(s) representing all or a part of the Shares shall be issued until vesting.

6.No Special Employment or Similar Rights.  Nothing contained in the Plan or this Agreement shall be construed or deemed by any person under any circumstances to bind Staples to continue the employment or other relationship of the Associate with Staples for the period prior to or after vesting.

7.Rights as a Shareholder.  Except as otherwise provided herein, the Associate (a) shall have the right to vote the Shares and act in respect of the Shares at any meeting of shareholders, but (b) shall not have any rights to receive cash dividends with respect to the Shares until vesting.

8.Adjustment Provisions.

(a)  General.   In the event of any recapitalization, reclassification of shares, combination of shares, stock dividend, stock split, reverse stock split, spin-off or other similar change in capitalization or event or any distribution to holders of Common Stock other than an ordinary cash dividend, the Associate shall, with respect to the Shares, be

entitled to the rights and benefits, and be subject to the limitations, set forth in Section 9(a) of the Plan.

(b)  Board Authority to Make Adjustments.  Any adjustments under this Section 8 will be made by the Board of Directors, whose determination as to what adjustments, if any, will be made and the extent thereof will be final, binding and conclusive.  No fractional shares will be issued with respect to Shares on account of any such adjustments.

9.Mergers, Consolidations, Distributions, Liquidations, Etc.  In the event of a merger or consolidation or any share exchange transaction in which outstanding shares of Common Stock are exchanged for securities, cash or other property of any other corporation or business entity, or in the event of a liquidation of Staples, the Associate shall, with respect to this Agreement, be entitled to the rights and benefits, and be subject to the limitations, set forth in Section 9 of the Plan.

10.Vesting Following a Change in Control.

(a)  Definitions.  For purposes of this Agreement, the following terms shall have the following meanings:

(i)  A “Change in Control” shall be deemed to have occurred if (A) any “person”, as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934 (the “Exchange Act”) (other than Staples, any trustee or other fiduciary holding securities under an employee benefit plan of Staples, or any corporation owned directly or indirectly by the stockholders of Staples in substantially the same proportion as their ownership of stock of Staples), is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of Staples representing 30% or more of the combined voting power of Staples’ then outstanding securities (other than pursuant to a merger or consolidation described in clause (1) or (2) of subsection (C) below); (B) individuals who, as of the date hereof, constitute the Board of Directors of Staples (as of the date hereof, the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board of Directors, provided that any person becoming a director subsequent to the date hereof whose election, or nomination for election by Staples’ stockholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board (other than an election or nomination of an individual whose initial assumption of office is in connection with an actual or threatened election contest relating to the election of the directors of Staples, as such terms are used in Rule 14a-11 of Regulation 14A under the Exchange Act) shall be, for purposes of this Agreement, considered as though such person were a member of the Incumbent Board; (C) the stockholders of Staples approve a merger or consolidation of Staples with any other corporation, and such merger or consolidation is consummated, other than (1) a merger or consolidation which would result in the voting securities of Staples outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than 75% of the combined voting power of the voting securities of Staples or such surviving entity outstanding immediately after such merger or consolidation, or (2) a merger or consolidation effected to implement a

recapitalization of Staples (or similar transaction) in which no “person” (as defined above) acquires more than 30% of the combined voting power of Staples’ then outstanding securities; or (D) the stockholders of Staples approve an agreement for the sale or disposition by Staples of all or substantially all of Staples’ assets, and such sale or disposition is consummated.

(ii) “Surviving Corporation” shall mean (x) in the case of a Change in Control pursuant to clause (A) or clause (B) of Section 10(a)(i), Staples; (y) in the case of a Change in Control pursuant to clause (C) of Section 10(a)(i), the surviving or resulting corporation in such merger or consolidation; and (z) in the case of a Change in Control pursuant to Clause (D) of Section 10(a)(i), the entity acquiring the majority of the assets being sold or disposed of by Staples.

(iii)“Cause,” as determined by Staples or the Surviving Corporation (which determination shall be conclusive), shall mean:

(A)Willful failure by the Associate to substantially perform his or her duties with Staples (other than any failure resulting from incapacity due to physical or mental illness); provided, however, that Staples has given the Associate a written demand for substantial performance, which specifically identifies the areas in which the Associate’s performance is substandard, and the Associate has not cured such failure within 30 days after delivery of the demand.  No act or failure to act on the Associate’s part will be deemed “willful” unless the Associate acted or failed to act without a good faith or reasonable belief that his or her conduct was in Staples’ best interest; or

(B)Breach by the Associate of any provision of any employment, consulting, advisory, proprietary information, non-disclosure, non-competition, non-solicitation or other similar agreement between the Associate and Staples, including, without limitation, the Proprietary and Confidential Information Agreement and/or the Non-Compete and Non-Solicitation Agreement; or

(C)Violation by the Associate of the Code of Ethics; or

(D)The Associate’s engagement in intentional deceitful act(s) that results in (1) an improper personal benefit, or (2) injury to Staples; or

(E)The Associate’s engagement in fraud or willful misconduct (not acting in good faith or with reasonable belief that conduct was in the best interests of Staples) that significantly contributes to Staples preparing a material financial restatement, other than a restatement of financial statements that became materially inaccurate because of revisions to generally accepted accounting principles; or

(F)Failure by the Associate to devote his or her full working time to the affairs of Staples except as may be authorized in writing by Staples’ CEO or other authorized Staples official; or

(G)The Associate’s engagement in business other than the business of Staples except as may be authorized in writing by Staples’ CEO or other authorized Staples official; or

(H)The Associate’s engagement in misconduct, which is demonstrably and materially injurious to Staples.

For purposes of the definition of Cause contained in this Section 10(a) and for purposes of Section 12 regarding forfeiture and recovery for Misconduct, any reference therein to Staples (other than with respect to defining the Board of Directors) shall also include any entity that Staples directly or indirectly controls.

(b)  Effect of Change in Control.  If a Change in Control of Staples occurs, the Shares shall become vested as follows:

(i)  If, upon the Change in Control, the Associate

(A) is not offered employment with the Surviving Corporation (or is not allowed to continue his or her employment, if the Surviving Corporation is Staples) in a position (1) in which the title, employment duties and responsibilities, conditions of employment, and the level of compensation and benefits are at least equivalent to those in effect during the 90-day period immediately preceding the Change in Control and (2) that does not involve a relocation of the Associate’s principal place of employment of more than an additional 50 miles from his or her primary residence at the time of the Change in Control, and

(B) does not accept (or continue) employment with the Surviving Corporation (regardless of position, compensation or location) (other than as a result of retirement), or

(ii) If, within one year following the date of the Change in Control, the Associate either

(A) is discharged without cause (as defined in Section 10(a) above) or

(B) resigns or retires because his or her title or employment duties and responsibilities are diminished, his or her conditions of employment are adversely changed, the level of his or her compensation and benefits are reduced, or his or her principal place of employment is relocated by more than an additional 50 miles from his or her primary residence at the time of the Change in Control, then the vesting of Shares shall be accelerated such that all of Shares shall vest effective upon the date of such discharge, resignation or retirement (which shall be considered a Vesting Date hereunder).

11.Withholding Taxes.  Staples’ obligation to vest the Shares shall be subject to the Associate’s satisfaction of all applicable federal, state and local income and employment tax withholding requirements.  Staples may deduct any such tax obligations from any payment of any kind otherwise due to the Associate, including salary and bonus payments, and may withhold or sell a sufficient number of Shares on behalf of the Associate to satisfy such tax obligations.

12.Forfeiture and Recovery for Misconduct.

(a)Right of Recovery.

Notwithstanding any other provision of the Plan, the Notice or this Agreement to the contrary, if the Board of Directors of Staples (or its authorized designee, the “Board”) determines during the Recovery Period (as defined in Section 12(a) below) that an Associate has engaged in any of the conduct set forth in clauses (B) through (E) of Section 10(a)(iii) (which determination shall be conclusive, “Misconduct”), the Board, subject to the limitations set forth in this Section 12, may in its sole discretion (1) terminate such Associate’s participation in the Plan, and/or (2) treat any outstanding unvested Shares granted under the Plan as forfeited, and/or (3) demand that the Associate pay in cash or transfer in Shares the amount described in Section 12(b); provided, however, that in the event the Board determines during the Recovery Period that the Associate engaged in Misconduct as described in clause (E) of Section 10(a)(iii) (“Restatement Misconduct”), the Board shall in all circumstances, in addition to any other recovery action taken, require forfeiture and demand repayment pursuant hereto.

“Recovery Period” means (1) if the Misconduct relates to Restatement Misconduct, or the Misconduct consists of acts or omissions relating to Staples’ financial matters that in the discretion of the Board are reasonably unlikely to be discovered prior to the end of the fiscal year in which the Misconduct occurred and the completion of the outside audit of Staples’ annual financial statements, the period during which the Associate is employed by Staples and the period ending 18 months after the Associate’s last day of employment; (2) if the Misconduct relates to the breach of any agreement between the Associate and Staples, the term of the agreement and the period ending six months following the expiration of the agreement, and (3) in all other cases, the period during which the Associate is employed by Staples and the period ending six months after the Associate’s last day of employment.  If during the Recovery Period the Board gives written notice to the Associate of potential Misconduct, the Recovery Period shall be extended for such reasonable time as the Board may specify is appropriate for it to make a final determination of Misconduct and seek enforcement of any of its remedies described above.  Staples’ rights pursuant to this Section 12 shall terminate on the effective date of a Change in Control and no Recovery Period shall extend beyond that date except with respect to any Associate for which the Board prior to such Change in Control gave written notice to such Associate of potential Misconduct.

For purposes of administratively enforcing its rights under this Section 12, during any period for which potential Misconduct has been identified by Staples, the Board may (1) suspend such Associate’s participation in the Plan, or with respect to any award under the Plan, or (2) temporarily withhold, in whole or in part, the vesting of any award or the transfer of any Shares relating to any award made under the Plan.

(b)Amount of Recovery.

With respect to Misconduct described in Section 10(a)(iii)(B) (breach of agreement) and Section 10(a)(iii)(C) (violation of Code of Ethics), and in addition to its right to effect a termination of participation and a forfeiture of outstanding unvested

Shares under the Plan, at the Board’s discretion, vested Shares shall be deemed repurchased by Staples at a repurchase price of zero and ownership of all right, title and interest in and to the Shares shall be forfeited and revert to Staples as of the date of such termination; or, if the Associate at such time no longer owns such Shares, Staples shall be entitled to recover from the Associate the gross profit earned by the Associate upon the disposition (whether by sale, gift, donation or otherwise) of such Shares.

With respect to Misconduct described in Section 10(a)(iii)(D) (intentional deceitful acts), and in addition to its right to effect a termination of participation and a forfeiture of outstanding unvested Shares under the Plan, the Board may recover from the Associate the amount (in cash or Shares) determined by the Board in its sole discretion to represent the financial impact of the Misconduct upon Staples; provided, however, that such recovery amount shall be reduced by the grant date fair market value of any forfeited unvested Shares and any amounts recovered from the Associate under Staples’ cash bonus plans and other short term or long term incentive plans as a result of such Misconduct.

With respect to Restatement Misconduct, and in addition to its right to effect a termination of participation and a forfeiture of outstanding unvested Shares under the Plan, vested Shares granted under the Plan to or for the benefit of the Associate during the twenty-four (24) month period following the first public issuance of the financial statements that are the subject of an accounting restatement shall be deemed repurchased by Staples at a repurchase price of zero and ownership of all right, title and interest in and to such Shares shall be forfeited and revert to Staples as of the date of such termination; or, if the Associate at such time no longer owns such Shares, Staples shall be entitled to recover from the Associate (1) the gross profit earned by the Associate upon the disposition (whether by sale, gift, donation or otherwise) of such Shares and (2) the gross profit earned by the Associate upon the disposition (whether by sale, gift, donation or otherwise) of any securities of Staples during such twenty-four (24) month period.

The term “recover” or “recovered” shall include, but shall not be limited to, any right of set-off, reduction, recoupment, off-set, forfeiture, or other attempt by Staples to withhold or claim payment of an award or any proceeds thereof (including any proceeds from the sale or other disposition of Shares).  For purposes of any recovery of Shares, Staples may treat Shares as fungible and shall not be required to identify, trace, or recover specific Shares.  Staples’ right of forfeiture and recovery of awards shall not limit any other right or remedy available to Staples for an Associate’s Misconduct, whether in law or equity, including but not limited to injunctive relief, terminating the Associate’s employment with Staples, or taking other legal action against the Associate.

The amount that may be recovered under this Section 12 shall be determined on a gross basis without reduction for taxes paid or payable by an Associate.

13.Miscellaneous.

(a)  Except as provided herein, this Agreement may not be amended or otherwise modified unless evidenced in writing and signed by Staples and the Associate unless the Board of Directors determines that the amendment or modification, taking into account any related action, would not materially and adversely affect the Associate.

(b)  All notices under this Agreement shall be mailed or delivered by hand to Staples at its main office, Attn: Secretary, and to the Associate to his or her last known address on the employment records of Staples or at such other address as may be designated in writing by either of the parties to one another.

(c)  This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware.

EX-10.3

Exhibit 10.3

Stock Option Grant

Staples, Inc.

Employer ID: 04-2896127

500 Staples Drive

Framingham, MA 01702

	ACCOUNT ID:
«FirstName» «MiddleName» «LastName»	LOCATION:
«Address1»
«Address2»
«Address3»
«City», «State» «Zip»
«Country»

You have been granted an option to purchase Staples, Inc. Common Stock as follows:

Type of Option:	Non-Qualified Stock Option
Grant No.:
Stock Option Plan:	2004
Date of Grant:
Total Number of Option Shares:
Option Price per Share:	US$
Total Exercise Price of Option Shares:	US$

Vesting Date Number of Shares
Vesting on Vesting Date

By your acceptance of this Stock Option Grant, you agree that this option is granted under and governed by the terms and conditions of Staples, Inc.’s Amended and Restated 2004 Stock Incentive Plan (as further amended or restated from time to time) and by the terms and conditions of Staples, Inc.’s Non-Qualified Stock Option Agreement (NQS42004), which is attached hereto.

You understand and agree that this Stock Option Grant is being awarded to you in exchange for your execution of a Non-Compete and Non-Solicitation Agreement in a form approved by Staples.

Staples, Inc.

Ronald L. Sargent

Chairman and Chief Executive Officer

Attachment:  Staples, Inc. Non-Qualified Stock Option Agreement

NON-QUALIFIED STOCK OPTION AGREEMENT

1.             Grant of Option.  Staples, Inc., a Delaware corporation (“Staples”), hereby grants to the Optionee named in the accompanying Stock Option Grant (the “Option Grant”) the option, pursuant to Staples’ Amended and Restated 2004 Stock Incentive Plan noted in the Option Grant (the “Plan”), to purchase an aggregate of the Total Number of Option Shares of Common Stock of Staples stated in the Option Grant at a price per share equal to the Option Price per Share stated in the Option Grant, purchasable as set forth in and subject to the terms and conditions of this Option Agreement and the Plan.  Except where the context otherwise requires, the term “Staples” shall include the parent and all present and future subsidiaries of Staples as defined in Sections 424(e) and 424(f) of the Internal Revenue Code of 1986, as amended or replaced from time to time (the “Code”).

2.             Non-Qualified Stock Option.  This option is not intended to qualify as an incentive stock option within the meaning of Section 422 of the Code.

3.Exercise of Option and Provisions for Termination.

(a)  Vesting Schedule.  Except as otherwise provided in this Agreement, this option may be exercised up to and including the tenth anniversary of the Date of Grant stated in the Option Grant (hereinafter the “Expiration Date”).  This option shall become exercisable (or “vest”) in installments for the number of shares set forth in the table in the Option Grant commencing on each of the respective Vesting Dates noted (each a “Vesting Date”).  The right of exercise shall be cumulative so that if the option is not exercised to the maximum extent permissible during any exercise period, it shall be exercisable, in whole or in part, with respect to all shares not so purchased at any time prior to the Expiration Date or the earlier termination of this option.  This option may not be exercised at any time after the Expiration Date.

(b)  Exercise Procedure.  Subject to the conditions set forth in this Agreement, this option shall be exercised by the Optionee’s delivery of written notice of exercise to the Secretary of Staples, specifying the Date of Grant of this Option Agreement, the number of shares to be purchased and the purchase price to be paid therefor, and accompanied by payment in full in accordance with Section 4.  Such exercise shall be effective upon receipt by the Secretary of Staples of such written notice together with the required payment.  The Optionee may purchase less than the number of shares covered hereby, provided that no partial exercise of this option may be for any fractional share.

(c)  Continuous Relationship with Staples Required.  Except as otherwise provided in this Section 3, this option may not be exercised unless the Optionee, at the time he or she exercises this option, is, and has been at all times since the Date of Grant of this option, an employee or director of, or a consultant, advisor or service provider to, Staples (an “Eligible Optionee”).  In addition, this option may not be exercised while the Optionee is suspended for an offense which could lead to a termination by Staples for “cause” (as defined below).

(d)  Termination of Relationship with Staples.  If the Optionee ceases to be an Eligible Optionee for any reason, then, except as provided in this paragraph (d),  in paragraph (e) below or for Cause (as defined in Section 11), the right to exercise this option shall terminate six (6) months after such cessation (but in no event after the Expiration Date), provided that this option shall be exercisable only to the extent

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that the Optionee was entitled to exercise this option on the date of such cessation.  Notwithstanding the foregoing sentence or the vesting schedule set forth in Section 3(a) above, if the Optionee terminates employment after attaining age 55 and if at the time of such termination of employment the sum of the years of service (as determined by the Board of Directors of Staples) completed by the Optionee plus the Optionee’s age is greater than or equal to 65, this option shall be exercisable for the Total Number of Option Shares for a period of three (3) years after the date of the Optionee’s termination (but in no event after the Expiration Date).  In addition, if the Optionee is an employee on an approved leave of absence, then this option shall not terminate as a result of such leave of absence unless and until the Optionee’s employment relationship is ultimately terminated.  If the Optionee ceases to be an Eligible Optionee under circumstances where Section 12 below does not apply, and the Optionee becomes an Eligible Optionee within six (6) months after he or she ceased to be an Eligible Optionee, then this option shall not terminate and shall be reinstated.

(e)  Exercise Period Upon Death or Disability.  If the Optionee dies or becomes disabled (within the meaning of Section 22(e)(3) of the Code) prior to the Expiration Date while he or she is an Eligible Optionee, or if the Optionee dies within six (6) months after the Optionee ceases to be an Eligible Optionee (other than as a result of a termination of such relationship by Staples for Cause) this option (i) shall be exercisable, within the period of 12 months following the date of death or disability of the Optionee (but in no event after the Expiration Date), by the Optionee or by the person to whom this option is transferred by will or the laws of descent and distribution, and (ii) notwithstanding the vesting schedule set forth in Section 3(a) above, shall be exercisable for 100% of the Total Number of Option Shares.  Except as otherwise indicated by the context, the term “Optionee,” as used in this option, shall be deemed to include the estate of the Optionee or any person who acquires the right to exercise this option by bequest or inheritance or otherwise by reason of the death of the Optionee.

4.Payment of Purchase Price.

(a)  Method of Payment.  Payment of the purchase price for shares purchased upon exercise of this option shall be made (i) by delivery to Staples of cash or a check to the order of Staples in an amount equal to the purchase price of such shares, (ii) subject to the consent of Staples, by delivery to Staples of shares of Common Stock of Staples then owned by the Optionee having a fair market value equal in amount to the purchase price of such shares, (iii) by any other means which the Board of Directors determines are consistent with the purpose of the Plan and with applicable laws and regulations (including, without limitation, the provisions of Rule 16b-3 under the Securities Exchange Act of 1934 and Regulation T promulgated by the Federal Reserve Board), or (iv) by any combination of such methods of payment. Notwithstanding the prior sentence, under no circumstance may payment for shares be made by a promissory note.

(b)  Valuation of Shares or Other Non-Cash Consideration Tendered in Payment of Purchase Price.  For the purposes hereof, the fair market value of any share of Staples’ Common Stock or other non-cash consideration which may be delivered to Staples in exercise of this option shall be determined in good faith by the Board of Directors of Staples.

(c)  Delivery of Shares Tendered in Payment of Purchase Price.  If the Optionee exercises this option by delivery of shares of Common Stock of Staples, the certificate or certificates representing the shares of Common Stock of Staples to be delivered shall be duly executed in blank by the Optionee or shall be accompanied by a stock power duly executed in blank suitable for purposes of transferring such shares to Staples, and the Common Stock delivered may not be subject to any repurchase, forfeiture, unfulfilled vesting or other similar requirement and must have been held for at least six months if such

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Common Stock was previously issued to the Optionee through a Staples compensation plan.  Fractional shares of Common Stock of Staples will not be accepted in payment of the purchase price of shares acquired upon exercise of this option.

5.Delivery of Shares; Compliance With Securities Laws, Etc.

(a)  General.  Staples shall, upon payment of the option price for the number of shares purchased and paid for, make prompt delivery of such shares to the Optionee, provided that if any law or regulation requires Staples to take any action with respect to such shares before the issuance thereof, then the date of delivery of such shares shall be extended for the period necessary to complete such action.

(b)  Listing, Qualification, Etc.  This option shall be subject to the requirement that if, at any time, counsel to Staples shall determine that the listing, registration or qualification of the shares subject hereto upon any securities exchange or under any state or federal law, or the consent or approval of any governmental or regulatory body, or that the disclosure of non-public information or the satisfaction of any other condition is necessary as a condition of, or in connection with, the issuance or purchase of shares hereunder, this option may not be exercised, in whole or in part, unless such listing, registration, qualification, consent or approval, disclosure or satisfaction of such other condition shall have been effected or obtained on terms acceptable to the Board of Directors.  Nothing herein shall be deemed to require Staples to apply for, effect or obtain such listing, registration, qualification or disclosure, or to satisfy such other condition.

6.             Transferability of Option.  This option is personal and no rights granted hereunder may be transferred, assigned, pledged or hypothecated in any way (whether by operation of law or otherwise) nor shall any such rights be subject to execution, attachment or similar process, except that this option may be transferred by will or the laws of descent and distribution or, upon notice to Staples, for estate planning purposes to entities that are beneficially owned entirely by family members.  All transferees of this option must agree to be governed by all of the terms and conditions of this Agreement.  Upon any attempt to transfer, assign, pledge, hypothecate or otherwise dispose of this option or of such rights contrary to the provisions hereof, or upon the levy of any attachment or similar process upon this option or such rights, this option and such rights shall, at the election of Staples, become null and void.

7.             No Special Employment or Similar Rights.  Nothing contained in the Plan or this option shall be construed or deemed by any person under any circumstances to bind Staples to continue the employment or other relationship of the Optionee with Staples for the period within which this option may be exercised.

8.             Rights as a Shareholder.  The Optionee shall have no rights as a shareholder with respect to any shares which may be purchased by exercise of this option (including, without limitation, any rights to receive dividends or non-cash distributions with respect to such shares) unless and until a certificate representing such shares is duly issued and delivered to the Optionee.  No adjustment shall be made for dividends or other rights for which the record date is prior to the date such stock certificate is issued.

9.Adjustment Provisions.

(a)  General.  In the event of any recapitalization, reclassification of shares, combination of shares, stock dividend, stock split, reverse stock split, spin-off or other similar change in capitalization or event or any distribution to holders of Common Stock other than an ordinary cash dividend, the Optionee

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shall, with respect to this option or any unexercised portion hereof, be entitled to the rights and benefits, and be subject to the limitations, set forth in Section 9(a) of the Plan.

(b)  Board Authority to Make Adjustments.  Any adjustments under this Section 9 will be made by the Board of Directors, whose determination as to what adjustments, if any, will be made and the extent thereof will be final, binding and conclusive.  No fractional shares will be issued pursuant to this option on account of any such adjustments.

10.          Mergers, Consolidations, Distributions, Liquidations, Etc.  In the event of a merger or consolidation or any share exchange transaction in which outstanding shares of Common Stock are exchanged for securities, cash or other property of any other corporation or business entity, or in the event of a liquidation of Staples, prior to the Expiration Date or termination of this option, the Optionee shall, with respect to this option or any unexercised portion hereof, be entitled to the rights and benefits, and be subject to the limitations, set forth in Section 9 of the Plan.

11.Exercisability and Vesting Following a Change in Control.

(a)  Definitions.  For purposes of this Agreement, the following terms shall have the following meanings:

(i)  A “Change in Control” shall be deemed to have occurred if (A) any “person”, as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934 (the “Exchange Act”) (other than Staples, any trustee or other fiduciary holding securities under an employee benefit plan of Staples, or any corporation owned directly or indirectly by the stockholders of Staples in substantially the same proportion as their ownership of stock of Staples), is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of Staples representing 30% or more of the combined voting power of Staples’ then outstanding securities(other than pursuant to a merger or consolidation described in clause (1) or (2) of subsection (C) below); (B) individuals who, as of the date hereof, constitute the Board of Directors of Staples (as of the date hereof, the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board of Directors, provided that any person becoming a director subsequent to the date hereof whose election, or nomination for election by Staples’ stockholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board (other than an election or nomination of an individual whose initial assumption of office is in connection with an actual or threatened election contest relating to the election of the directors of Staples, as such terms are used in Rule 14a-11 of Regulation 14A under the Exchange Act) shall be, for purposes of this Agreement, considered as though such person were a member of the Incumbent Board; (C) the stockholders of Staples approve a merger or consolidation of Staples with any other corporation, and such merger or consolidation is consummated, other than (1) a merger or consolidation which would result in the voting securities of Staples outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than 75% of the combined voting power of the voting securities of Staples or such surviving entity outstanding immediately after such merger or consolidation, or (2) a merger or consolidation effected to implement a recapitalization of Staples (or similar transaction) in which no “person” (as defined above) acquires more than 30% of the combined voting power of Staples’ then outstanding securities; or (D) the stockholders of Staples approve an agreement for the sale or disposition by Staples of all or substantially all of Staples’ assets, and such sale or disposition is consummated.

(ii) “Surviving Corporation” shall mean (x) in the case of a Change in Control pursuant to clause (A) or clause (B) of Section 11(a)(i), Staples; (y) in the case of a Change in Control pursuant to clause (C) of Section 11(a)(i), the surviving or resulting corporation in such merger or consolidation; and

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(z) in the case of a Change in Control pursuant to Clause (D) of Section 11(a)(i), the entity acquiring the majority of the assets being sold or disposed of by Staples.

(iii) “Cause,” as determined by Staples (which determination shall be conclusive), shall mean:

(A) willful failure by the Optionee to substantially perform his or her duties with Staples (other than any failure resulting from incapacity due to physical or mental illness).  No act or failure to act on the Optionee’s part will be deemed “willful” unless the Optionee acted or failed to act without a good faith or reasonable belief that his or her conduct was in Staples’ best interest; or

(B) breach by the Optionee of any provision of any employment, consulting, advisory, proprietary information, non-disclosure, non-competition, non-solicitation or other similar agreement between the Optionee and Staples, including, without limitation, the Proprietary and Confidential Information Agreement and/or the Non-Compete and Non-Solicitation Agreement; or

(C) violation by the Optionee of the Code of Ethics; or

(D) The Optionee’s engagement in intentional deceitful act(s) that results in (1) an improper personal benefit or (2) injury to Staples; or

(E) The Optionee’s engagement in fraud or willful misconduct (not acting in good faith or with reasonable belief that conduct was in the best interests of Staples) that significantly contributes to Staples preparing a material financial restatement, other than a restatement of financial statements that became materially inaccurate because of revisions to generally accepted accounting principles; or

(F) failure by the Optionee to devote his or her full working time to the affairs of Staples except as may be authorized in writing by Staples’ CEO or other authorized Company official; or

(G) the Optionee’s engagement in business other than the business of Staples except as may be authorized in writing by Staples’ CEO or other authorized Company official; or

(H) the Optionee’s engagement in misconduct, which is demonstrably and materially injurious to Staples.

For purposes of the definition of Cause contained in this Section 11(a) and for purposes of Section 12 regarding forfeiture and recovery for Misconduct, any reference therein to Staples (other than with respect to defining the Board of Directors) shall also include any entity that Staples directly or indirectly controls.

(b)  Effect of Change in Control.  Notwithstanding the provisions of Section 3(a), if a Change in Control of Staples occurs, this option shall become exercisable for additional shares of Common Stock as follows:

(i)  If, upon the Change in Control, the Optionee

(A) is offered employment with the Surviving Corporation (or is allowed to continue his or her employment, if the Surviving Corporation is Staples) in a position (1) in which the title, employment duties and responsibilities, conditions of employment, and the level of compensation and benefits are at least equivalent to those in effect during the 90-day period immediately preceding the Change in Control and (2) that does not involve a relocation of the Optionee’s principal place of

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employment of more than an additional 50 miles from the Optionee’s primary residence at the time of the Change in Control, or

(B) accepts (or elects to continue) employment with the Surviving Corporation (regardless of position, compensation or location), then (x) effective immediately prior to the Change in Control, the vesting schedule of this option stated in Section 3(a) above shall accelerate such that an additional 25% of the Total Number of Option Shares shall become immediately exerciseable, and (y) on each Vesting Date which had not yet occurred as of the date of the Change in Control, this option shall become exercisable for such number of additional shares of Common Stock as is determined by dividing the balance of the Total Number of Option Shares remaining unvested following the acceleration of vesting referred to in clause (x) above, by the number of Vesting Dates which had not occurred as of the date of the Change in Control.

(ii)  If, upon the Change in Control,

(A) the Optionee is either offered employment in accordance with clause (A) of Section 11(b)(i) or accepts employment in accordance with clause (B) of Section 11(b)(i), and

(B) within one year following the date of the Change in Control, the Optionee either (1) is discharged without cause (as defined in Section 11(a)) or (2) resigns or retires because his or her title or employment duties and responsibilities are diminished, his or her conditions of employment are adversely changed, the level of his or her compensation and benefits are reduced, or his or her principal place of employment is relocated by more than an additional 50 miles from his or her primary residence at the time of the Change in Control,

then the vesting of this option shall be accelerated such that this option shall become exercisable in full effective upon the date of such discharge or resignation (and this option shall remain exercisable following such discharge or resignation for such period, if any, as is provided in Section 3).

(iii) If the Optionee is not offered employment in accordance with clause (A) of Section 11(b)(i) and does not accept employment in accordance with clause (B) of Section 11(b)(i) (other than as a result of retirement), then the vesting of this option shall be accelerated such that this option shall become exercisable in full effective immediately prior to the Change in Control.

12.Forfeiture and Recovery for Misconduct.

(a)           Right of Recovery.

Notwithstanding any other provision of the Plan, the Notice or this Agreement to the contrary, if the Board of Directors of Staples (or its authorized designee, the “Board”) determines during the Recovery Period (as defined in Section 12(a) below) that an Optionee has engaged in any of the conduct set forth in clauses (B) through (E) of Section 11(a)(iii) (which determination shall be conclusive, “Misconduct”), the Board, subject to the limitations set forth in this Section 12, may in its sole discretion (1) terminate such Optionee’s participation in the Plan, and/or (2) terminate the right to exercise any options granted under the Plan not previously exercised, and/or (3) demand that the Optionee pay in cash or transfer in Shares the amount described in Section 12(b); provided, however, that in the event the Board determines during the Recovery Period that the Optionee engaged in Misconduct as described in clause (E) of Section 11(a)(iii) (“Restatement Misconduct”), the Board shall in all circumstances, in addition to any other recovery action taken, require forfeiture and demand repayment pursuant hereto.

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“Recovery Period” means (1) if the Misconduct relates to Restatement Misconduct, or the Misconduct consists of acts or omissions relating to Staples’ financial matters that in the discretion of the Board are reasonably unlikely to be discovered prior to the end of the fiscal year in which the Misconduct occurred and the completion of the outside audit of Staples’ annual financial statements, the period during which the Optionee is employed by Staples and the period ending 18 months after the Optionee’s last day of employment; (2) if the Misconduct relates to the breach of any agreement between the Optionee and Staples, the term of the agreement and the period ending six months following the expiration of the agreement, and (3) in all other cases, the period during which the Optionee is employed by Staples and the period ending six months after the Optionee’s last day of employment.  If during the Recovery Period the Board gives written notice to the Optionee of potential Misconduct, the Recovery Period shall be extended for such reasonable time as the Board may specify is appropriate for it to make a final determination of Misconduct and seek enforcement of any of its remedies described above.  Staples’ rights pursuant to this Section 12 shall terminate on the effective date of a Change in Control and no Recovery Period shall extend beyond that date except with respect to any Optionee for which the Board prior to such Change in Control gave written notice to such Optionee of potential Misconduct.

For purposes of administratively enforcing its rights under this Section 12, during any period for which potential Misconduct has been identified by Staples, the Board may (1) suspend such Optionee’s participation in the Plan, or with respect to any award under the Plan, or (2) temporarily withhold, in whole or in part, the vesting of any award or the transfer of any Shares relating to any award made under the Plan.

(b)          Amount of Recovery.

With respect to Misconduct described in Section 11(a)(iii)(B) (breach of agreement) and Section 11(a)(iii)(C) (violation of Code of Ethics), and in addition to its right to effect a termination of participation and terminate the right to exercise any options granted under the Plan not previously exercised, at the Board’s discretion, Staples shall be entitled to repurchase from the Optionee at the Exercise Price the shares of Common Stock previously purchased by the Optionee hereunder, or, if the Optionee at such time no longer owns such shares, Staples shall be entitled to recover from the Optionee the gross profit earned by the Optionee upon the purchase and disposition (whether by sale, gift, donation or otherwise) of such shares.

With respect to Misconduct described in Section 11(a)(iii)(D) (intentional deceitful acts), and in addition to its right to effect a termination of participation and terminate the right to exercise any options granted under the Plan not previously exercised, the Board may recover from the Optionee the amount (in cash or shares) determined by the Board in its sole discretion to represent the financial impact of the Misconduct upon Staples; provided, however, that such recovery amount shall be reduced by the grant date fair market value of terminated unexercised options and any amounts recovered from the Optionee under Staples’ cash bonus plans and other short term or long term incentive plans as a result of such Misconduct.

With respect to Restatement Misconduct, and in addition to its right to effect a termination of participation and terminate the right to exercise any options granted under the Plan not previously exercised, the Board shall recover from the Optionee at the Exercise Price the shares of Common Stock previously purchased by the Optionee pursuant to options granted under the Plan to or for the benefit of the Optionee during the twenty-four (24) month period following the first public issuance of the financial statements that are the subject of an accounting restatement, or, if the Optionee at such time no longer owns such shares, Staples shall be entitled to recover from the Optionee (1) the gross profit earned by the Optionee upon the disposition (whether by sale, gift, donation or otherwise) of such shares, and (2) the

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gross profit earned by the Optionee upon the disposition (whether by sale, gift, donation or otherwise) of any securities of Staples during such twenty-four (24) month period.

The term “recover” or “recovered” shall include, but shall not be limited to, any right of set-off, reduction, recoupment, off-set, forfeiture, or other attempt by Staples to withhold or claim payment of an award or any proceeds thereof (including any proceeds from the sale or other disposition of Shares).  For purposes of any recovery of shares, Staples may treat shares as fungible and shall not be required to identify, trace, or recover specific Shares.  Staples’ right of forfeiture and recovery of awards shall not limit any other right or remedy available to Staples for an Optionee’s Misconduct, whether in law or equity, including but not limited to injunctive relief, terminating the Optionee’s employment with Staples, or taking other legal action against the Optionee.

13.          Withholding Taxes.  Staples’ obligation to deliver shares upon the exercise of this option shall be subject to the Optionee’s satisfaction of all applicable federal, state and local income and employment tax withholding requirements.  Staples may deduct any such tax obligations from any payment of any kind otherwise due to the Optionee, including salary and bonus payments, and may withhold or sell a sufficient number of shares otherwise issuable pursuant to the exercise of this option on behalf of the Optionee to satisfy such tax obligations.

14.Miscellaneous.

(a)  Except as provided herein, this option may not be amended or otherwise modified unless evidenced in writing and signed by Staples and the Optionee unless the Board of Directors of Staples determines that the amendment or modification, taking into account any related action, would not materially and adversely affect the Optionee.  However, in no event may this Option be converted into a stock appreciation right.  This Option Agreement may be executed in multiple counterparts, each of which shall represent the same option agreement.

(b)  All notices under this option shall be mailed or delivered by hand to Staples at its main office, Attn: Secretary, and to the Optionee to his or her last known address on the employment records of Staples or at such other address as may be designated in writing by either of the parties to one another.

(c)  This option shall be governed by and construed in accordance with the laws of the State of Delaware.

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EX-10.4

Exhibit 10.4

Amendment to Executive Officer Incentive Plan

WHEREAS, Staples, Inc. (“Staples”) heretofore adopted the Staples, Inc. Executive Officer Incentive Plan (the “Incentive Plan”); and

WHEREAS, Staples reserved the right to amend the Incentive Plan; and

WHEREAS, Staples desires to amend the Incentive Plan to reflect Staples’ recoupment policy.

NOW, THEREFORE, the Incentive Plan is hereby amended, effective January 1, 2010, as follows:

A new Section VII. shall be added to the Incentive Plan:

VII.Forfeiture and Recovery for Misconduct

A.Right of Recovery

Notwithstanding any other provision of this Incentive Plan to the contrary, if the Board of Directors of Staples (or its authorized designee, the “Board”) determines during the Recovery Period (as defined below) that a Plan Participant has engaged in Misconduct (as defined below), the Board, subject to the limitations set forth in this Section VII., may in its sole discretion (1) terminate such Plan Participant’s participation in the Incentive Plan, or with respect to any award under the Incentive Plan, and treat any outstanding award as forfeited, (2) require forfeiture, in whole or in part, of payment of any award that has been previously approved for payment under this Incentive Plan which remains in whole or in part unpaid, and/or (3) demand that the Plan Participant pay to Staples in cash the amount described in Section VII.B.; provided, however, that in the event the Board determines during the Recovery Period that the Plan Participant engaged in Misconduct as described in clause (D) of the definition of Misconduct) (“Restatement Misconduct”), the Board shall in all circumstances, in addition to any other recovery action taken, require forfeiture and demand repayment pursuant hereto.

“Recovery Period” means (1) if the Misconduct relates to Restatement Misconduct, or the Misconduct consists of acts or omissions relating to Staples’ financial matters that in the discretion of the Board are reasonably unlikely to be discovered prior to the end of the fiscal year in which the Misconduct occurred and the completion of the outside audit of Staples’ annual financial statements, the period during which the Plan Participant is employed by Staples and the period ending 18 months after the Plan Participant’s last day of employment; (2) if the Misconduct relates

to the breach of any agreement between the Plan Participant and Staples, the term of the agreement and the period ending six months following the expiration of the agreement, and (3) in all other cases, the period during which the Plan Participant is employed by Staples and the period ending six months after the Plan Participant’s last day of employment.  If during the Recovery Period the Board gives written notice to the Plan Participant of potential Misconduct, the Recovery Period shall be extended for such reasonable time as the Board may specify is appropriate for it to make a final determination of Misconduct and seek enforcement of any of its remedies described above.  Staples’ rights pursuant to this Section VII. shall terminate on the effective date of a Change in Control (as defined in the Staples, Inc. 2010 Long-Term Cash Incentive Plan) and no Recovery Period shall extend beyond that date except with respect to any Plan Participant for which the Board prior to such Change in Control gave written notice to such Plan Participant of potential Misconduct.

For purposes of administratively enforcing its rights under this Section VII., during any period for which potential Misconduct has been identified by Staples, the Board may (1) suspend such Plan Participant’s participation in the Incentive Plan, or with respect to any award under the Incentive Plan, or (2) temporarily withhold, in whole or in part, payment of any award that has been previously approved by the Board for payment under this Incentive Plan which remains in whole or in part unpaid.

B.Amount of Recovery

With respect to Misconduct described in clause (A) of the definition of Misconduct (breach of agreement) and clause (B) of such definition (violation of Code of Ethics), and in addition to its right to effect a termination of participation and a forfeiture of outstanding awards under this Incentive Plan, the Board may recover from the Plan Participant the amount of any payments made to the Plan Participant under this Incentive Plan during the last 12 months of employment with Staples.

With respect to Misconduct described in clause (C) of the definition of Misconduct (intentional deceitful acts), and in addition to its right to effect a termination of participation and a forfeiture of outstanding awards under this Incentive Plan, the Board may recover from the Plan Participant the greater of (1) the amount paid to the Plan Participant with respect to any award made under this Incentive Plan with a fiscal year that includes any period during which the Misconduct occurred, or with a fiscal year which was directly impacted by the Misconduct, or (2) the amount determined by the Board in its sole discretion to represent the financial

impact of the Misconduct upon Staples; provided, however, that such recovery amount shall be reduced by the value of any forfeited outstanding awards under this Incentive Plan (value to be determined by the Target Award for such awards) and any amounts recovered from the Plan Participant under Staples’ cash bonus plans and other short term or long term incentive plans as a result of such Misconduct.

With respect to Restatement Misconduct, and in addition to its right to effect a termination of participation and a forfeiture of outstanding awards under this Incentive Plan, the Board shall seek to recover the entire amount paid to the Plan Participant with respect to any award made under this Incentive Plan in the twenty-four (24) month period following the first public issuance of the financial statements that are the subject of an accounting restatement relating to the Misconduct.

The term “recover” or “recovered” shall include, but shall not be limited to, any right of set-off, reduction, recoupment, off-set, forfeiture, or other attempt by Staples to withhold or claim payment of an award or any proceeds thereof.  Staples’ right of forfeiture and recovery of awards shall not limit any other right or remedy available to Staples for a Plan Participant’s Misconduct, whether in law or equity, including but not limited to injunctive relief, terminating the Plan Participant’s employment with Staples, or taking other legal action against the Plan Participant.

The amount that may be recovered under this Section VII. shall be determined on a gross basis without reduction for taxes paid or payable by a Plan Participant.

C.Definition of Misconduct

“Misconduct,” as determined by Staples (which determination shall be conclusive), shall mean:

(A)Breach by the Plan Participant of any provision of any employment, consulting, advisory, proprietary information, non-disclosure, non-competition, non-solicitation or other similar agreement between the Plan Participant and Staples, including, without limitation, the Proprietary and Confidential Information Agreement and/or the Non-Compete and Non-Solicitation Agreement; or

(B)Violation by the Plan Participant of the Code of Ethics; or

(C)The Plan Participant’s engagement in intentional deceitful act(s) that results in (i) an improper personal benefit, or (ii) injury to Staples; or

(D)The Plan Participant’s engagement in fraud or willful misconduct (not acting in good faith or with reasonable belief that conduct was in the best interests of Staples) that significantly contributes to Staples preparing a material financial restatement, other than a restatement of financial statements that became materially inaccurate because of revisions to generally accepted accounting principles.

For purposes of this Section VII. regarding forfeiture and recovery for Misconduct, any reference therein to Staples (other than with respect to defining the Board of Directors) shall also include any entity that Staples directly or indirectly controls.

Except as hereinabove amended, the provisions of the Incentive Plan shall continue in full force and effect.

IN WITNESS WHEREOF, the Employer, by its duly authorized officer, has caused this Amendment to be executed on the 18th day of May, 2010.

STAPLES, INC.
By:	/s/ Shira D. Goodman

EX-31.1

Exhibit 31.1

Principal Executive Officer Certification

I, Ronald L. Sargent, certify that:

1.I have reviewed this Quarterly Report on Form 10-Q of Staples, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:	May 19, 2010	/s/ Ronald L. Sargent
		Ronald L. Sargent
		Chairman and Chief Executive Officer
		(Principal Executive Officer)

EX-31.2

Exhibit 31.2

Principal Financial Officer Certification

I, John J. Mahoney, certify that:

1.I have reviewed this Quarterly Report on Form 10-Q of Staples, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:	May 19, 2010	/s/ John J. Mahoney
		John J. Mahoney
		Vice Chairman and Chief Financial Officer
		(Principal Financial Officer)

EX-32.1

Exhibit 32.1

Principal Executive Officer Certification

In connection with the quarterly report on Form 10-Q of Staples, Inc. (the “Company”) for the period ended May 1, 2010 as filed with the Securities and Exchange Commission on or about the date hereof (the “Report”), the undersigned, Ronald L. Sargent, Chief Executive Officer of the Company, hereby certifies, pursuant to 18 U.S.C. Section 1350, that:

(1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

	/s/ Ronald L. Sargent
Dated:  May 19, 2010	Ronald L. Sargent
	Chairman and Chief Executive Officer
	(Principal Executive Officer)

EX-32.2

Exhibit 32.2

Principal Financial Officer Certification

In connection with the quarterly report on Form 10-Q of Staples, Inc. (the “Company”) for the period ended May 1, 2010 as filed with the Securities and Exchange Commission on or about the date hereof (the “Report”), the undersigned, John J. Mahoney, Chief Financial Officer of the Company, hereby certifies, pursuant to 18 U.S.C. Section 1350, that:

(1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

	/s/ John J. Mahoney
Dated: May 19, 2010	John J. Mahoney
	Vice Chairman and Chief Financial Officer
	(Principal Financial Officer)